10-Q 1 wnc_10q.htm QUARTERLY REPORT wnc_10q.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2015

OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ___________

Commission file number: 0-26869

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

California
33-0761578
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
   
17782 Sky Park Circle
 
Irvine, CA
92614-6404
(Address of principal executive offices)
(Zip Code)

(714) 662-5565
(Telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  X        No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  X          No   __


 
 
 
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer___    Accelerated filer___

Non-accelerated filer___X__    Smaller reporting company  ___

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ___  No _X__
 
 
 

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

INDEX TO FORM 10 – Q

For the Quarterly Period Ended December 31, 2015
 
PART I. FINANCIAL INFORMATION
 
   
Item 1. Financial Statements
 
   
    Condensed Balance Sheets
 
              As of December 31, 2015 and March 31, 2015
4
   
    Condensed Statements of Operations
 
              For the Three and Nine Months Ended December 31, 2015 and 2014
5
   
    Condensed Statement of Partners' Deficit
 
              For the Nine Months Ended December 31, 2015
6
 
 
    Condensed Statements of Cash Flows
 
              For the Nine Months Ended December 31, 2015 and 2014
7
   
    Notes to Condensed Financial Statements
8
   
Item 2. Management's Discussion and Analysis of Financial
 
             Condition and Results of Operations
18
   
Item 3. Quantitative and Qualitative Disclosures about Market Risks
20
   
Item 4. Controls and Procedures
20
   
PART II. OTHER INFORMATION
 
   
Item 1. Legal Proceedings
21
   
Item 1a. Risk Factors
21
   
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
21
   
Item 3.  Defaults Upon Senior Securities
21
   
Item 4.  Mine Safety Disclosures
21
   
Item 5.  Other Information
21
   
Item 6.  Exhibits
21
   
Signatures
22
 
 
3

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

CONDENSED BALANCE SHEETS
(Unaudited)
 
   
December 31, 2015
   
March 31, 2015
 
             
ASSETS
 
             
Cash and cash equivalents
  $ 38,153     $ 22,348  
Investments in Local Limited Partnerships, net (Notes 2)
    -       -  
Other assets
    2,353       -  
                 
     Total Assets
  $ 40,506     $ 22,348  
                 
                 
LIABILITIES AND PARTNERS' DEFICIT
 
                 
Liabilities:
               
 Accrued fees and expenses due to
               
General Partner and affiliates (Note 3)
  $
414,910
    $ 425,881  
Prepaid disposition proceeds
   
15,000
      -  
                 
     Total Liabilities
    429,910       425,881  
                 
Partners’ Deficit:
               
  General Partner
    (173,724 )     (173,865 )
  Limited Partners (25,000 Partnership Units authorized;
               
   20,361 and 20,460 Partnership Units issued and outstanding,  respectively)
    (215,680 )     (229,668 )
                 
     Total Partners’ Deficit
    (389,404 )     (403,533 )
                 
     Total Liabilities and Partners’ Deficit
  $ 40,506     $ 22,348  
 
See accompanying notes to condensed financial statements
 
 
4

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

CONDENSED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended December 31, 2015 and 2014
(Unaudited)
 
   
2015
   
2014
 
 
 
Three Months
   
Nine Months
   
Three Months
   
Nine Months
 
                         
Reporting fees
  $ -     $ 10,500     $ -     $ 15,055  
Distribution income
    -       303       -       -  
      Total operating income
    -       10,803       -       15,055  
                                 
 Operating expenses:
                               
    Asset management fees (Note 3)
    5,116       17,179       8,946       28,701  
    Legal and accounting fees
    4,500       29,770       7,087       32,161  
    Write off of other assets
    -       -       17,738       17,738  
    Other
    1,091       6,308       1,330       9,449  
      Total operating expenses
    10,707       53,257       35,101       88,049  
                                 
 Loss from operations
    (10,707 )     (42,454 )     (35,101 )     (72,994 )
                                 
 Gain (loss) on sale of Local Limited Partnerships
    (350 )     56,581       12,040       375,923  
                                 
 Interest income
    1       2       2       5  
                                 
 Net income (loss)
  $ (11,056 )   $ 14,129     $ (23,059 )   $ 302,934  
                                 
 Net income (loss) allocated to:
                               
    General Partner
  $ 11     $ 141     $ (231 )   $ 3,030  
                                 
    Limited Partners
  $ 11,045     $ 13,988     $ (22,828 )   $ 299,904  
                                 
 Net income (loss) per Partnership Unit
  $ -     $ 1     $ (1 )   $ 15  
                                 
Outstanding weighted                                
Partnership Units
    20,361       20,361       20,460       20,460  
 
See accompanying notes to condensed financial statements
 
 
5

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

CONDENSED STATEMENT OF PARTNERS’ DEFICIT

For the Nine Months Ended December 31, 2015
(Unaudited)
 
   
General
   
Limited
       
   
Partner
   
Partners
   
Total
 
                   
Partners’ deficit at March 31, 2015
  $ (173,865 )   $ (229,668 )   $ (403,533 )
                         
Net income
    141       13,988       14,129  
                         
Partners’ deficit at December 31, 2015
  $ (173,724 )   $ (215,680 )   $ (389,404 )
 
See accompanying notes to condensed financial statements
 
 
6

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

CONDENSED STATEMENTS OF CASH FLOWS

For the Nine Months Ended December 31, 2015 and 2014
(Unaudited)
 
   
2015
   
2014
 
             
Cash flows from operating activities:
           
  Net income
  $ 14,129     $ 302,934  
    Adjustments to reconcile net income to net
               
       cash used in operating activities:
               
         (Increase) decrease in other assets
    (2,353 )     31,843  
Decrease in accrued fees and expenses due to
               
            General Partner and affiliates
    (10,971 )     (334,715 )
Gain on sale of Local Limited Partnerships
    (56,581 )     (375,923 )
                 
             Net cash used in operating activities
    (55,776 )     (375,861 )
                 
Cash flows from investing activities:
               
          Prepaid disposition proceeds
    15,000       -  
          Net proceeds from sale of Local Limited Partnerships
    56,581       375,923  
                 
Net cash provided by investing activities
    71,581       375,923  
                 
Net increase in cash and cash equivalents
    15,805       62  
                 
Cash and cash equivalents, beginning of period
    22,348       32,285  
                 
Cash and cash equivalents, end of period
  $ 38,153     $ 32,347  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
               
                 
  Taxes paid
  $ -     $ -  
 
See accompanying notes to condensed financial statements
 
 
7

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
 (A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS

For the Quarterly Period Ended December 31, 2015
 (Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

The accompanying condensed unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the nine months ended December 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2016.  For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the fiscal year ended March 31, 2015.

Organization

WNC Housing Tax Credit Fund VI, L.P., Series 6, a California Limited Partnership (the “Partnership”) was formed on March 3, 1997 under the laws of the State of California. The Partnership was formed to acquire limited partnership interests in other limited partnerships ("Local Limited Partnerships") which owns multi-family housing complexes (“Housing Complexes”) that are eligible for Federal low income housing tax credits (“Low Income Housing Tax Credits”).  The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complexes. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

The general partner is WNC & Associates, Inc. (“Associates” or the “General Partner”).  The chairman and president of Associates own all the outstanding stock of Associates.  The business of the Partnership is conducted primarily through Associates, as the Partnership has no employees of its own.

The Partnership shall continue in full force and effect until December 31, 2052, unless terminated prior to that date, pursuant to the partnership agreement or law.

The financial statements include only activity relating to the business of the Partnership, and do not give effect to any assets that the partners may have outside of their interests in the Partnership, or to any obligations, including income taxes, of the partners.

The Partnership Agreement authorized the sale of up to 25,000 units of Limited Partnership interest (“Partnership Units”) at $1,000 per Partnership Unit.  The offering of Partnership Units has concluded and 20,500 Partnership Units, representing subscriptions in the amount of $20,456,595, net of discounts of $16,100 for volume purchases and dealer discounts of $27,305 had been accepted.  The General Partner has a 1% interest in operating profits and losses, taxable income and losses, in cash available for distribution from the Partnership and Low Income Housing Tax Credits of the Partnership.  The investors in the Partnership (the “Limited Partners”) will be allocated the remaining 99% of these items in proportion to their respective investments. As of December 31 and March 31, 2015, a total of 20,361 and 20,460 Partnership Units remain outstanding, respectively. The investors in the Partnership (“Limited Partners”) will be allocated the remaining 99% of these items in proportion to their respective investments.
 
 
8

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

The proceeds from the disposition of any of the Local Limited Partnership properties will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement.  Any remaining proceeds will then be paid to the Partnership.  The sale of a Housing Complex may be subject to other restrictions and obligations.  Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex.  Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership. Should such distributions occur, the Limited Partners will be entitled to receive distributions equal to their capital contributions and their return on investment (as defined in the Partnership Agreement) and the General Partner would then be entitled to receive proceeds equal to its capital contributions from the remainder.  Any additional sale or refinancing proceeds will be distributed 90% to the Limited Partners (in proportion to their respective investments) and 10% to the General Partner.

Risks and Uncertainties

An investment in the Partnership and the Partnership’s investments in Local Limited Partnerships and their Housing Complexes are subject to risks.  These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership’s investments.  Some of those risks include the following:

The Low Income Housing Tax Credits rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Tax Credits and the fractional recapture of Low Income Housing Tax Credits already taken. In most cases the annual amount of Low Income Housing Tax Credits that an individual can use is limited to the tax liability due on the person’s last $25,000 of taxable income. The Local Limited Partnerships may be unable to sell the Housing Complexes at a price which would result in the Partnership realizing cash distributions or proceeds from the transaction. Accordingly, the Partnership may be unable to distribute any cash to its Limited Partners. Low Income Housing Tax Credits may be the only benefit from an investment in the Partnership.

The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership’s ability to satisfy its investment objectives.  Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years (the “Compliance Period”), the loss of any remaining future Low Income Housing Tax Credits, a fractional recapture of prior Low Income Housing Tax Credits, and a loss of the Partnership’s investment in the Housing Complex would occur. The Partnership is a limited partner or a non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership’s investments in Local Limited Partnerships, nor the Local Limited Partnerships’ investments in Housing Complexes, are readily marketable. To the extent the Housing Complexes receive government financing or operating subsidies, they may be subject to one or more of the following risks: difficulties in obtaining tenants for the Housing Complexes; difficulties in obtaining rent increases; limitations on cash distributions; limitations on sales or refinancing of Housing Complexes; limitations on transfers of interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Tax Credits and recapture of Low Income Housing Tax Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar Housing Complexes, and neighborhood conditions, among others.
 
 
9

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

For the Quarterly Period Ended December 31, 2015
(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

All of the Low Income Housing Tax Credits anticipated to be realized from the Local Limited Partnerships have been realized. The Partnership does not anticipate being allocated any Low Income Housing Tax Credits from the Local Limited Partnerships in the future.

The ability of Limited Partners to claim tax losses from the Partnership is limited. The IRS may audit the Partnership or a Local Limited Partnership and challenge the tax treatment of tax items. The amount of Low Income Housing Tax Credits and tax losses allocable to Limited Partners could be reduced if the IRS were successful in such a challenge.  The alternative minimum tax could reduce tax benefits from an investment in the Partnership. Changes in tax laws could also impact the tax benefits from an investment in the Partnership and/or the value of the Housing Complexes.

No trading market for the Partnership Units exists or is expected to develop. Limited Partners may be unable to sell their Partnership Units except at a discount and should consider their Partnership Units to be a long-term investment. Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority of Limited Partners.

The Partnership currently has insufficient working capital to fund its operations.  Associates have agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through February 28, 2017.

Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership. However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason.

Exit Strategy

The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associate was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits.  The initial programs have completed their Compliance Periods.

Upon the sale of a Local Limited Partnership Interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period could result in recapture if certain conditions are not met. Two of the Housing Complexes have completed their 15-year Compliance Period as of December 31, 2015.

With that in mind, the General Partner is continuing its review of the Housing Complexes. The review considers many factors, including extended use requirements (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.
 
 
10

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-syndication, the Partnership expects to proceed with efforts to liquidate them. The objective is to maximize the Limited Partners’ return wherever possible and, ultimately, to wind down the Partnership as Low Income Housing Tax Credits are no longer available. Local Limited Partnership interests may be disposed of any time by the General Partner in its discretion. While liquidation of the Housing Complexes continues to be evaluated, the dissolution of the Partnership was not imminent as of December 31, 2015.

As of March 31, 2015, the Partnership had sold its Local Limited Partnership Interest in Trenton Village Apartments, L.P., Ottawa I Limited Partnership, Preservation Partners I, L.P., Kechel Tower L.P, Country Club Investors L.P, Desloge Associates I, L.P, and Wagner Partnership 99 Limited Partnership. The Partnership had also sold the Housing Complex of United Development Co., L.P-97.0.

During the nine months ended December 31, 2015, the Partnership sold its Local Limited Partnership interest in West Mobile County Housing, LTD (“West Mobile”).West Mobile was appraised for $770,000, and had a mortgage note balance of $1,066,251 as of December 31, 2014. The Partnership received $38,000 in cash proceeds, all of which were used to reimburse the General Partner or affiliates for expenses paid on its behalf. The Partnership incurred $2,046 of sales related which were netted against the proceeds from the sale in calculating the gain on sale. The investment balance was zero at the time of the sale of the Local Limited Partnership; therefore a gain of $35,954 was recorded during the period. The Compliance Period for West Mobile has expired so there is no risk of tax credit recapture to the investors.

During the nine months ended December 31, 2015, the Partnership sold its Local Limited Partnership interest in West Liberty Family Apartments, LTD (“West Liberty”). West Liberty was appraised for $290,000 and had a mortgage note balance of $1,179,176 as of December 31, 2014. The Partnership received $33,000 in cash proceeds, of which $23,000 was used to reimburse the General Partner or affiliates for expenses paid on its behalf, and the remaining $10,000 was used to pay asset management fees. The Partnership incurred $12,023 in sales related expenses during the quarterly period ended September 30, 2015 and an additional $350 of sales related expenses during the quarterly period ended December 31, 2015 which was netted against the proceeds from the sale in calculating the gain on sale. The investment balance was zero at the time of the sale of the Local Limited Partnership; therefore a gain of $20,627 was recorded during the period. The Compliance Period for West Liberty does not expire until 2017. A Recapture Guarantee Surety Bond was obtained by the Purchaser to guarantee that the Local Limited Partnership will stay in compliance with the Low Income Housing Tax Credit code; therefore there is no risk of recapture to the investors of the Partnership.

 
11

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

As of December 31, 2015, the Partnership has identified the following Local Limited Partnerships for possible disposition as listed in the table below.

Local Limited Partnerships
 
Appraisal value
   
Mortgage balance of Local Limited Partnership as of 12/31/2014
   
Estimated sales price
   
Estimated sales related expenses
   
Estimated closing date
 
Cotton Mill Elderly Living Center, L.P.
  $ 125,000     $ 611,837     $ 40,000     $ 1,728    
2/29/2016
 
Brighton Ridge Apartments, L.P.
    1,500,000       312,802       *       *       *  
St. Susanne Associates I, L.P.
    550,000       613,060       5,000 **     250    
1/31/2016 ***
 
Summer Wood Apartments Limited Partnership
    250,000       875,841       10,000 **       250    
2/29/2016
 
Boonville Associates I, L.P
    255,000       486,372       4,000       125    
2/29/2016
 

*As of the date of this report, the sales price, sales related expenses cannot be determined.
** This amount was received during the nine months ended December 31, 2015 and included in prepaid disposition proceeds as of December 31, 2015.
*** Sold subsequent to December 31, 2015 (Note 5)
 
The Compliance Period for Brighton Ridge Apartments, L.P., St. Susanne Associates I, L.P. and Summerwood Apartments Limited Partnership and Cotton Mill Elderly have expired so there is no risk of tax credit recapture to the investors in the Partnerships and investor approval is not required. Boonville Associates I, L.P will complete its Compliance Period in 2016. Different options of guaranty for the Local Limited Partnership to stay in compliance with the Low Income Housing Tax Credit code have been negotiated with potential purchasers by the Partnership. Once the sales are finalized, the Partnership will use the cash proceeds to reimburse the General Partner or an affiliate for expenses paid on its behalf or pay accrued asset management fees. Any remaining proceeds will be placed in the Partnership’s reserves for future operating expenses. Upon the sale of the last remaining Local Limited Partnership, any cash remaining after all Partnership debts are paid would then be distributed to the Limited Partners.
 
 
12

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Method of Accounting for Investments in Local Limited Partnerships

The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable.  Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the sum of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and any estimated residual value to the Partnership. If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership.  The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments are capitalized as part of the investment account and were being amortized over 30 years (see Note 2).

“Equity in losses of Local Limited Partnerships” for the periods ended December 31, 2015 and 2014 has been recorded by the Partnership. Management’s estimate for the three and nine-month periods is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses of Local Limited Partnerships allocated to the Partnership is not recognized to the extent that the investment balance would be adjusted below zero.  If the Local Limited Partnerships reports net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended (see Note 2).

In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE.

Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership's interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited Partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership's balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership's exposure to loss on these Local Limited Partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the Local General Partners and their guarantee against credit recapture to the investors in the Partnership.

Distributions received by the Partnership are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as income. As of December 31, 2015, all of the investment balances had reached zero.
 
 
13

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

For the Quarterly Period Ended December 31, 2015
(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could materially differ from those estimates.

Cash and Cash Equivalents

The Partnership considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. As of December 31, 2015 and March 31, 2015, the Partnership had $38,153 and $22,348 in cash equivalents, respectively.

Reporting Comprehensive Income

The Partnership had no items of other comprehensive income for all periods presented.

Income Taxes

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns.  The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure. Income tax returns filed by the Partnership are subject to examination by the Internal Revenue Service for a period of three years. While no income tax returns are currently being examined by the Internal Revenue Service, tax years since 2012 remain open.

Net Income (Loss) Per Partnership Unit

Net income (loss) per Partnership Unit includes no dilution and is computed by dividing income (loss) allocated to Limited Partners by the weighted average number of Partnership Units outstanding during the period. Calculation of diluted net income (loss) per Partnership Unit is not required.

Revenue Recognition

The Partnership is entitled to receive reporting fees from the Local Limited Partnerships.  The intent of the reporting fees is to offset (in part) administrative costs incurred by the Partnership in corresponding with the Local Limited Partnerships. Due to the uncertainty of the collection of these fees, the Partnership recognizes reporting fees as collections are made.
 
 
14

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS

As of December 31, 2015 and March 31, 2015, the Partnership owns Local Limited Partnership interests in five and seven Local Limited Partnerships, each of which owns one Housing Complex, consisting of an aggregate of 171 and 246 apartment units, respectively. The Local General Partners of the Local Limited Partnerships manage the day to day operations of the entities. Significant Local Limited Partnership business decisions require approval from the Partnership.  The Partnership, as a Limited Partner, is generally entitled to 99.98%, as specified in the Local Limited Partnership Agreements, of the operating profits and losses, taxable income and losses, and Low Income Housing Tax Credits of the Local Limited Partnerships.

Selected financial information for the nine months ended December 31, 2015 and 2014 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:

COMBINED CONDENSED STATEMENTS OF OPERATIONS
 
   
2015
   
2014
 
             
Revenues
  $ 736,000     $ 1,311,000  
                 
Expenses:
               
  Interest expense
    95,000       141,000  
  Depreciation and amortization
    264,000       450,000  
  Operating expenses
    547,000       1,055,000  
      Total expenses
    906,000       1,646,000  
                 
Net loss
  $ (170,000 )   $ (335,000 )
Net loss allocable to the Partnership
  $ (169,000 )   $ (331,000 )
Net loss recorded by the Partnership
  $ -     $ -  

Certain Local Limited Partnerships have incurred significant operating losses and/or have working capital deficiencies.  In the event these Local Limited Partnerships continue to incur significant operating losses, additional capital contributions by the Partnership may be required to sustain operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership's investments in certain of such Local Limited Partnerships could be impaired, and the loss and recapture of the related Low Income Housing Tax Credits could occur.
 
 
15

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 3 - RELATED PARTY TRANSACTIONS

Under the terms of the Partnership Agreement, the Partnership has paid or is obligated to the General Partner or its affiliates the following fees:

(a)  
An annual asset management fee equal to 0.2% of the invested assets of the Partnership, as defined.  “Invested Assets” means the sum of the Partnership’s investment in Local Limited Partnership interests and the Partnership’s Allocable share of mortgage loans on and other debts related to the Housing Complexes owned by such Local Limited Partnerships. Asset management fees of $17,179 and $28,701 were incurred during the nine months ended December 31, 2015 and 2014, respectively, of which $10,000 and $200,000 were paid during the nine months ended December 31, 2015 and 2014, respectively.

(b)  
The Partnership reimbursed the General Partner or its affiliates for operating expenses incurred by the Partnership and paid for by the General Partner or its affiliates on behalf of the Partnership.  Operating expense reimbursements were $71,000 and $219,574 during the nine months ended December 31, 2015 and 2014, respectively.

(c)  
A subordinated disposition fee in an amount equal to 1% of the sales price of real estate sold. Payment of this fee is subordinated to the limited partners receiving a preferred return of 12% through December 31, 2008 and 6% thereafter (as defined in the Partnership Agreement) and is payable only if the General Partner or its affiliates render services in the sales effort. No such fee was incurred for all periods presented.

The accrued fees and expenses due to the General Partner and affiliates consist of the following at:

   
December 31, 2015
   
March 31, 2015
 
             
Expenses paid by the General Partner or affiliates on behalf of the Partnership
  $ 174,801     $ 192,951  
Asset management fee payable
    240,109       232,930  
                 
Total
  $ 414,910     $ 425,881  

The General Partner and its affiliates do not anticipate that these accrued fees will be paid until such time as capital reserves are in excess of future foreseeable working capital requirements of the Partnership.

NOTE 4 - DUE FROM AFFILIATES, NET

As of both December 31, 2015 and March 31, 2015, the Partnership advanced $93,488 to Cotton Mill Elderly Living Center, L.P. in which the Partnership is a limited partner. All advances were reserved in full in the year they were advanced.

As of both December 31, 2015 and March 31, 2015, the Partnership advanced $11,416 to Summer Wood Apartments Limited Partnership in which the Partnership is a limited partner. All advances were reserved in full in the year they were advanced.

As of March 31, 2015, the Partnership advanced $33,271 to West Liberty Family Apartments, Ltd. in which the Partnership is a limited partner. All advances were reserved in full in the year they were advanced. The advances were written off during the nine months ended December 31, 2015 as the Local Limited Partnership interest was sold.

 
16

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 5 - SUBSEQUENT EVENTS

Subsequent to December 30, 2015, the Partnership sold its Local Limited Partnership interest in St. Susanne Associates (“St. Susanne”). St. Susanne was appraised for $550,000 and had a mortgage balance of $613,060 as of December 31, 2014. The Partnership received $5,000 in cash proceeds, of which $3,650 was used to reimburse the General Partner or affiliates for expenses paid on its behalf, and $1,350 was placed in the Partnership’s reserves for future operating expenses. The Partnership incurred $250 in sale related expenses which was netted against the proceeds from the sale in calculating the gain on sale. The Partnership’s investment balance is zero; therefore a gain of $4,750 was recorded. The Compliance Period has been completed therefore there is no risk of recapture and investor approval was not required.
 
 
17

 
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

With the exception of the discussion regarding historical information, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other discussions elsewhere in this Form 10-Q contain forward looking statements.  Such statements are based on current expectations subject to uncertainties and other factors which may involve known and unknown risks that could cause actual results of operations to differ materially from those projected or implied.  Further, certain forward-looking statements are based upon assumptions about future events which may not prove to be accurate.

Risks and uncertainties inherent in forward looking statements include, but are not limited to, the Partnership’s future cash flows and ability to obtain sufficient financing, level of operating expenses, conditions in the Low Income Housing Tax Credit property market and the economy in general, as well as legal proceedings.  Historical results are not necessarily indicative of the operating results for any future period.

Subsequent written and oral forward looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by cautionary statements in this Form 10-Q and in other reports filed with the Securities and Exchange Commission.

The following discussion and analysis compares the results of operations for the three and nine months ended December 31, 2015 and 2014, and should be read in conjunction with the condensed unaudited financial statements and accompanying notes included within this report.

Financial Condition

The Partnership’s assets at December 31, 2015 consisted of $38,000 in cash and cash equivalents and $2,000 in other assets. Liabilities at December 31, 2015 consisted of $415,000 of accrued fees and expenses payable to the General Partner and its affiliates and $15,000 of prepaid disposition proceeds.

Results of Operations
 
Three Months Ended December 31, 2015 Compared to Three Months Ended December 31, 2014. The Partnership’s net loss for the three months ended December 31, 2015 was $11,000, reflecting a decrease of $12,000 from the $23,000 net loss experienced for the three months ended December 31, 2014. The change was partially due a $12,000 decrease in gain on sale of Local Limited Partnerships for the three months ended December 31, 2015. The gain on sale in Local Limited Partnerships will vary from period to period depending on the values and sale proceeds of the Local Limited Partnership which were sold. There was a decrease of $2,000 in legal and accounting fees for the three months ended December 31, 2015 compared to the three months ended December 31, 2014 due the timing of the accounting work performed. Asset management fees decreased by $4,000 for the three months ended December 31, 2015. The fees are calculated based on the value of invested assets which decreased due to the sales of the Local Limited Partnerships. Write off of other assets decreased by $18,000 during the three months ended December 31, 2015 compared to December 31, 2014. Capitalized costs from the potential disposition of Local Limited Partnerships were expensed due to the length of time it has taken to dispose of the properties.

 
18

 
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Nine Months Ended December 31, 2015 Compared to Nine Months Ended December 31, 2014. The Partnership’s net income for the nine months ended December 31, 2015 was $14,000, reflecting a decrease of approximately $289,000 from the $303,000 net income experienced for the nine months ended December 31, 2014. The change was mainly due to a $319,000 decrease in gain on sale of Local Limited Partnerships for the nine months ended December 31, 2015. The gain on sale in Local Limited Partnerships will vary from period to period depending on the values and sale proceeds of the Local Limited Partnership which were sold. Asset management fees decreased by $12,000 for the nine months ended December 31, 2015. The fees are calculated based on the value of the invested assets which decreased due to the sales of the Local Limited Partnerships. Legal and accounting fees decreased by $2,000 for the nine months ended December 31, 2015, due to timing of the accounting work performed. Write off of other assets decreased by $18,000 during the nine months ended December 31, 2015 compared to December 31, 2014. Capitalized costs from the potential disposition of Local Limited Partnerships were expensed due to the length of time it has taken to dispose of the properties. Other expenses decreased by $3,000 during the nine months ended December 31, 2015 due to the decrease in outsourcing work performed. Reporting fees decreased by $5,000 for the nine months ended December 31, 2015.  Reporting fees can fluctuate from year to year due to the fact that Local Limited Partnerships pay those fees to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.

Liquidity and Capital Resources

Nine Months Ended December 31, 2015 Compared to Nine Months Ended December 31, 2014. The net increase in cash during the nine months ended December 31, 2015 was $16,000 compared to a net increase in cash for the nine months ended December 31, 2014 of $62. During the nine months ended December 31, 2015, the Partnership received $57,000 in net proceeds from dispositions compared to $376,000 net proceeds received during the nine months ended December 31, 2014. In addition, during the nine months ended December 31, 2015, the Partnership received $15,000 of prepaid disposition proceeds for two of the Local Limited Partnerships. During the nine months ended December 31, 2015, the Partnership paid the General Partner or an affiliate $71,000 in reimbursements of operating expenses that were paid on the Partnership’s behalf  and $10,000 of accrued asset management fees compared to $220,000 and $200,000 paid, during the nine months ended December 31, 2014, respectively. Reimbursement of accrued asset management fees and operating expenses are paid after management reviews the cash position of the Partnership. The Partnership received $11,000 in reporting fees and distribution income from Local Limited Partnerships during the nine months ended December 31, 2015 compared to $15,000 received during the nine months ended December 31, 2014. Reporting fees and distribution income can fluctuate from year to year due to the fact that Local Limited Partnerships pay those fees to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.

During the nine months ended December 31, 2015, accrued payables, which consist primarily of related party asset management fees and advances due to the General Partner, decreased by $11,000. The General Partner does not anticipate that the balance of the accrued fees and advances will be paid until such time as capital reserves are in excess of foreseeable working capital requirements of the Partnership.

The Partnership expects its future cash flows, together with its net available assets as of December 31, 2015, to be insufficient to meet all currently foreseeable future cash requirements. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements through February 28, 2017.

Recent Accounting Changes

In January 2014, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting and disclosure requirements for investments in qualified affordable housing projects. The amendments provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received, and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The amendments are effective for interim and annual periods beginning after December 15, 2014 and should be applied retrospectively to all periods presented. Early adoption is permitted. The adoption of this update is not expected to materially affect the Partnership's financial statements.
 
 
19

 

In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis”. This will improve certain areas of consolidation guidance for reporting organizations that are required to evaluate whether to consolidate certain legal entities such as limited partnerships, limited liability corporations and securitization structures. ASU 2015-02 simplifies and improves GAAP by: eliminating the presumption that a general partner should consolidate a limited partnership, eliminating the indefinite deferral of FASB Statement No. 167, thereby reducing the number of Variable Interest Entity (VIE) consolidation models from four to two (including the limited partnership consolidation model) and clarifying when fees paid to a decision maker should be a factor to include in the consolidation of VIEs. ASU 2015-02 will be effective for periods beginning after December 15, 2015. The Partnership is currently evaluating the potential impact of the adoption of this guidance on its financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

NOT APPLICABLE

Item 4.  Controls and Procedures

(a)           Disclosure controls and procedures

As of the end of the period covered by this report, the Partnership’s General Partner, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of Associates, carried out an evaluation of the effectiveness of the Partnership’s “disclosure controls and procedures” as defined in Securities Exchange Act of 1934 Rule 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Partnership’s disclosure controls and procedures were not effective to ensure that material information required to be disclosed in the Partnership’s periodic report filings with SEC is recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms, consistent with the definition of “disclosure controls and procedures” under the Securities Exchange Act of 1934.

The Partnership must rely on the Local Limited Partnerships to provide the Partnership with certain information necessary to the timely filing of the Partnership’s periodic reports. Factors in the accounting at the Local Limited Partnerships have caused delays in the provision of such information during past reporting periods, and resulted in the Partnership’s inability to file its periodic reports in a timely manner.

Once the Partnership has received the necessary information from the Local Limited Partnerships, the Chief Executive Officer and the Chief Financial Officer of Associates believe that the material information required to be disclosed in the Partnership’s periodic report filings with SEC is effectively recorded, processed, summarized and reported, albeit not in a timely manner. Going forward, the Partnership will use the means reasonably within its power to impose procedures designed to obtain from the Local Limited Partnerships the information necessary to the timely filing of the Partnership’s periodic reports.

(b)  
Changes in internal controls

There were no changes in the Partnership’s internal control over financial reporting that occurred during the quarter ended December 31, 2015 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
 
 
20

 

Part II.
Other Information
   
Item 1.
Legal Proceedings
   
 
NONE
   
Item 1A.
Risk Factors
   
 
No material changes in risk factors as previously disclosed in the Partnership’s Form 10-K
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
   
 
NONE
   
Item 3
Defaults Upon Senior Securities
   
 
NONE
   
Item 4.
Mine Safety Disclosures
   
 
NOT APPLICABLE
   
Item 5
Other Information
   
 
NONE
   
Item 6.
Exhibits

Certification of the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.  (filed herewith)

Certification of the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.  (filed herewith)

Section 1350 Certification of the Chief Executive Officer.  (filed herewith)

Section 1350 Certification of the Chief Financial Officer.  (filed herewith)

101
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Balance Sheets at December 31, 2015 and March 31, 2015, (ii) the Condensed Statements of Operations for the three and nine months ended December 31, 2015 and 2014, (iii) the Condensed Statement of Partners' Deficit for the nine months ended December 31, 2015, (iv) the Condensed Statements of Cash Flows for the nine months ended December 31, 2015 and 2014 and (v) the Notes to Condensed Financial Statements.
 
  Exhibits 32.1, 32.2 and 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.
 
 
21

 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WNC HOUSING TAX CREDIT FUND VI, L.P., Series 6


By:  WNC & ASSOCIATES, INC.     General Partner




By: /s/  Wilfred N. Cooper, Jr.

Wilfred N. Cooper, Jr.
President and Chief Executive Officer of WNC & Associates, Inc.

Date: 02/11/2016




By:  /s/ Melanie R. Wenk

Melanie R. Wenk
Senior Vice President – Chief Financial Officer of WNC & Associates, Inc.

Date: 02/11/2016
 
 
 
 
 
 
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