WNC HOUSING TAX CREDIT FUND VI, L.P.,
SERIES 5
Supplement Dated October 6, 1997
To Prospectus Dated June 23, 1997
This Supplement is part of, and should be read in conjunction with, the
Prospectus of WNC Housing Tax Credit Fund VI, L.P., Series 5 ("Series 5") dated
June 23, 1997 (the "Prospectus"). Capitalized terms used but not defined in this
Supplement have the meanings given to them in the Prospectus.
TABLE OF CONTENTS
Page
Status of Series 5 Offering................................................1
Local Limited Partnership Investments........................................1
Federal Income Tax Considerations............................................7
Management...................................................................8
As indicated in the chart which follows, the information presented
herein either adds to or supersedes similar information included in the
Prospectus, or constitutes information which has no corresponding information in
the Prospectus.
Supplement Presentation Relationship to Prospectus Presentation
Status of Series 5 Offering New Information
Local Limited Partnership Investments New Information
Federal Income Tax Considerations Adds to or supersedes "Federal Income
Tax Considerations"
Management Adds to "Management"
STATUS OF SERIES 5 OFFERING
As of the date hereof, Series 5 has received subscriptions in the amount of
$3,118,00 (3,118 Units), of which $30,700 currently is represented by Promissory
Notes.
LOCAL LIMITED PARTNERSHIP INVESTMENTS
Included herein is a discussion of six Local Limited Partnership Interests
identified for acquisition by Series 5. The Apartment Complexes owned by these
Local Limited Partnerships are located in four states and are being developed
and constructed by four different development teams. Each of the Apartment
Complexes has received a reservation of Low Income Housing Credits. While the
Fund Manager believes that Series 5 is reasonably likely to acquire an interest
in each of these Local Limited Partnerships, Series 5 may not do so as a result
of the failure by a Local Limited Partnership to satisfy one or more conditions
precedent to the payment of each installment payment, the inability of Series 5
to raise additional capital necessary to complete the purchase of the Local
Limited Partnership Interests identified herein, the purchase of Local Limited
Partnership Interests other than those identified herein, or other factors.
Moreover, the terms of any acquisition may differ from those as described.
Accordingly, investors should not rely on the ability of Series 5 to acquire an
investment in all these Local Limited Partnerships on the indicated terms in
deciding whether to invest in Series 5.
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Series 5 expects to acquire a Local Limited Partnership Interest in
Apartment Housing of Theodore, Ltd., an Alabama limited partnership ("APT.
HOUSING"); Bradley Villas, Limited Partnership, an Arkansas limited partnership
("BRADLEY"); Chillicothe Plaza Apartments, L.P., a Missouri limited partnership
("CHILLICOTHE"); Hughes Villas, L.P., an Arkansas limited partnership
("HUGHES"); Murfreesboro Villas, L.P., an Arkansas limited partnership
("MURFREESBORO"); and Tulsa-Crestview Housing Partners, Ltd., a Texas limited
partnership qualified to do business in Oklahoma ("TULSA-CRESTVIEW").
APT. HOUSING owns the Harbor Run Apartments in Theodore, Alabama; BRADLEY
owns the Bradley Villas Apartments in Bradley, Arkansas; CHILLICOTHE owns the
Chillicothe Plaza Apartments in Chillicothe, Missouri; HUGHES owns the Hughes
Villas Apartments in Hughes, Arkansas; MURFREESBORO owns the Murfreesboro Villas
Apartments in Murfreesboro, Arkansas; and TULSA-CRESTVIEW owns the Crestview
Duplexes in Tulsa, Oklahoma.
The following tables contain information concerning the Apartment Complexes
and the Local Limited Partnerships identified herein:
<TABLE>
LOCAL
ACTUAL OR LIMITED
ESTIMATED ESTIMATED PERMANENT PARTNER- YEAR
PROJECT CONSTRUC- DEVELOP- MORTGAGE SHIP'S CREDITS
LOCAL NAME AND TION MENT COST NUMBER OF BASIC LOAN ANTICIPATED TO BE
LIMITED NUMBER LOCATION COMPLETION (INCLUDING APARTMENT MONTHLY PRINCIPAL TAX CREDITS FIRST
PARTNERSHIP OF BUILDINGS OF PROPERTY DATE LAND COST) UNITS RENTS AMOUNT (1) AVAILABLE
<S> <C> <C> <C> <C> <C> <C>
APT. HOUSING Harbor Run Theodore April 1998 $2,320,000 4 1BR units $226 $341,000 $2,072,153 1998
Apartments (Mobile 24 2BR units $284 CB (2)
County), 12 3BR units $319
5 buildings Alabama $815,000
AHFA
(3)
BRADLEY Bradley Bradley January 1998 $1,013,574 8 2BR units $331 $110,685 $867,500 1998
Villas (Lafayette 20 2 BR units $348 HB (4)
Apartments County),
Arkansas $400,000
4 buildings ADFA (5)
CHILLICOTHE Chillicothe Chillicothe June 1998 $1,900,000 24 2BR units $300 $775,000 $1,554,768 1998
Plaza (Livingston 4 3BR units $335 MHDC (6)
Apartments County),
Missouri
7 buildings
HUGHES Hughes Hughes September $1,000,021 20 2BR units $398 $384,000 $395,600 1997
Villas (St. 1996 ADFA (7)
Apartments Francis
County), $384,015
4 buildings Arkansas RD (8)
MURFREESBORO Murfreesboro Murfreesboro March 1998 $1,279,746 10 2BR units $258 $232,019 $1,116,770 1998
Villas (Pike 14 2BR units $294 HB (9)
Apartments County),
Arkansas $400,000
6 buildings ADFA (5)
TULSA- Crestview Tulsa September $3,709,000 32 1BR units $379 $1,070,000 $1,874,440 1998
CRESTVIEW Duplexes (Tulsa 1998 24 2BR units $463 MFCM (11)
County),
29 Oklahoma
buildings
(10)
</TABLE>
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(1) Low Income Housing Credits are available over a 10-year period. For the
year in which the credit first becomes available, Series 5 will receive
only that percentage of the annual credit which corresponds to the
number of months during which Series 5 was a limited partner of the
Local Limited Partnership, and during which the Apartment Complex was
completed and in service. See the discussion under "The Low Income
Housing Credit" in the Prospectus.
(2) Colonial Bank ("CB") will provide the first mortgage loan for a term of
20 years at an annual interest rate of 9.5%. Principal and interest
will be payable monthly, based on a 40-year amortization schedule.
Outstanding principal will be due upon maturity.
(3) Alabama Housing Finance Authority ("AHFA"), using HOME funds, will
provide the second mortgage loan for a term of 40 years at an annual
interest rate of 0.5%. Principal and interest will be payable monthly,
based on a 40-year amortization schedule.
(4) Horizon Bank ("HB") will provide the first mortgage loan for a term of
15 years at an annual interest rate of 9%. Principal and interest will
be payable monthly, based on a 15-year amortization schedule.
(5) Arkansas Development Finance Authority ("ADFA"), using HOME funds, will
provide the second mortgage loan for a term of 35 years at an annual
interest rate of 1%. Principal and interest will be payable annually,
based on a 35-year amortization schedule.
(6) Missouri Housing Development Commission ("MHDC") will provide the
mortgage loan for a term of 35 years at an annual interest rate of 1%.
Principal and interest will be payable monthly, based on a 35-year
amortization schedule.
(7) ADFA will provide the first mortgage loan for a term of 30 years at an
annual interest rate of 6%. Principal and interest will be payable
monthly, based on a 30-year amortization schedule.
(8) Rural Development ("RD") will provide the second mortgage loan for a
term of 50 years at an annual interest rate of 1%. Principal and
interest will be payable monthly, based on a 50-year amortization
schedule.
(9) Horizon Bank ("HB") will provide the first mortgage loan for a term of
15 years at an annual interest rate of 10%. Principal and interest will
be payable monthly, based on a 15-year amortization schedule.
(10) Property designed for senior citizens.
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(11) Multi Family Capital Markets ("MFCM") will provide the mortgage loan
for a term of 18 years at an annual interest rate of 8.3%. Principal
and interest will be payable monthly, based on a 30-year amortization
schedule. Outstanding principal will be due upon maturity.
Theodore (THEODORE): Theodore (population 6,500) is in Mobile County, in
southern Alabama near the Gulf of Mexico, near the intersection of Interstate
Highway 10 and U.S. Highway 90, approximately 20 miles southwest of Mobile. The
major employers for Theodore residents are Mobile County School System,
University of South Alabama and University of South Alabama Medical Facilities.
Bradley (BRADLEY): Bradley (population 600) is in Lafayette County, in
southwestern Arkansas, near the Louisiana and Texas borders, at the intersection
of State Highways 29 and 160, approximately 25 miles southeast of Texarkana. The
major employers for Bradley residents are Falcon Products (chairs for hotels and
restaurants) and Pilgrim's Pride (chicken feed).
Chillicothe (CHILLICOTHE): Chillicothe (population 9,000) is the county seat of
Livingston County, and is in north-central Missouri at the intersection of U.S.
Highways 36 and 65, approximately 75 miles northeast of Kansas City. The major
employers for Chillicothe residents are Hendrick Medical Center, Chillicothe
School District, Donaldson Company (air filter manufacturing), and Lambert
Manufacturing (gloves/hats).
Hughes (HUGHES): Hughes (population 1,800) is in St. Francis County, in
east-central Arkansas, at the intersection of U.S. Highway 79 and State Highway
38, approximately 25 miles southwest of Memphis, Tennessee. The major employers
for Hughes residents are Arkansas Sock and Rag and Bill's Dollar Store.
Murfreesboro (MURFREESBORO): Murfreesboro (population 1,500) is in Pike County,
in southwest Arkansas, at the intersection of State Highways 19 and 26,
approximately 60 miles southwest of Little Rock. The major employers for
Murfreesboro residents are Murfreesboro Diamond (newspaper) and Aalf's
Manufacturing Inc. (denim jeans).
Tulsa (TULSA-CRESTVIEW): Tulsa (population 500,000) is the county seat of Tulsa
County, and is in eastern Oklahoma, at the intersection of Interstate Highway 44
and U.S. Highway 75. The major employers for Tulsa residents are American
Airlines, Southwestern Bell, and Boeing North American.
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<TABLE>
LOCAL ESTIMATED
GENERAL SHARING RATIOS: ACQUISITION
LOCAL LOCAL PARTNER(S) ALLOCATIONS (4) AND FEES PAYABLE
LIMITED GENERAL PROPERTY DEVELOPMENT SHARING RATIOS: SALE OR REFINANCING SERIES 5'S CAPITAL TO FUND
PARTNER PARTNERS MANAGER (1) FEE (2) CASH FLOW (3) PROCEEDS (5) CONTRIBUTION (6) MANAGER
<S> <C> <C> <C> <C> <C> <C>
APT. Thomas H. Apartment $300,700 WNC: Greater 98.99/.01/1 $1,312,916 $122,000
HOUSING Cooksey (7) Services of 15% or $250 50/50
and LGP: 40% of
Apartment Management the balance
Developers, Co. The balance:
Inc. (7) (8) 50/50
BRADLEY Billy Bunn Bunn Real $144,920 WNC: $500 99/1 $532,196 $49,000
(9) Estate and GP: $1,000 50/50
Property The balance:
Management 50/50
Co. (10)
CHILLI- MBL The Remas $231,000 WNC: Greater 98.99/.01/1 $981,253 $91,000
COTHE Development, Company of 50/50
Co. (11) (12) 15% or $500
LGP: 40% of
the balance
The balance:
50/50
HUGHES Billy Bunn Southland $161,000 WNC: $500 99/1 $235,110 $22,000
(9) Management GP: $1,000 50/50
Co. The balance:
(13) 50/50
MURFREES- MIDC Bunn Real $184,946 WNC: $500 99/1 $684,474 $63,000
BORO (14) Estate and GP: $1,000 50/50
Property The balance:
Management 50/50
Co. (10)
TULSA- Grace Barnes Real $512,108 WNC: Greater 98.99/.01/1 $2,523, 437 $234,000
CRESTVIEW Housing Estate of 20/80
Partners, Services, 15% or $1,500
Ltd. Inc. LGP: 40%
(15) (16) The balance:
50/50
Barnes
Affordable
Properties
(15)
New Faith
Baptist
Church
(15)
</TABLE>
(1) The maximum annual management fee payable to the property manager generally
is determined pursuant to lender regulations. Each Local General Partner is
authorized to employ either itself or one of its Affiliates, or a third party,
as property manager for leasing and management of the Apartment Complex so long
as the fee therefore does not exceed the amount authorized and approved by the
lender for the Apartment Complex.
(2) Each Local Limited Partnership will pay its Local General Partner(s) or an
Affiliate of its Local General Partner(s) a development fee in the amount set
forth, for services incident to the development and construction of the
Apartment Complex, which services include: negotiating the financing commitments
for the Apartment Complex; securing necessary approvals and permits for the
development and construction of the Apartment Complex; and obtaining allocations
of Low Income Housing Credits. This payment will be made in installments after
receipt of each installment of the capital contributions made by Series 5.
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(3) Reflects the amount of the net cash flow from operations, if any, to be
distributed to Series 5 ("WNC") and the Local General Partner(s) ("LGP") of the
Local Limited Partnership for each year of operations. Generally, to the extent
that the specific dollar amounts which are to be paid to WNC are not paid
annually, they will accrue and be paid from sale or refinancing proceeds as an
obligation of the Local Limited Partnership.
(4) Subject to certain special allocations, reflects the respective percentage
interests in profits, losses and Low Income Housing Credits of (a) in the case
of APT. HOUSING, CHILLICOTHE and TULSA-CRESTVIEW (i) Series 5, (ii) WNC Housing,
L.P., an Affiliate of the Sponsor which is the special limited partner, and
(iii) the Local General Partner(s); and (b) in the case of BRADLEY, HUGHES and
MURFREESBORO (i) Series 5 and (ii) the Local General Partner(s).
(5) Reflects the percentage interests of (i) Series 5 and (ii) the Local General
Partner(s), in any net cash proceeds from sale or refinancing of the Apartment
Complex, after payment of the mortgage loan and other Local Limited Partnership
obligations (see, e.g., note 3), and the following, in the order set forth: the
capital contributions of Series 5; and the capital contribution of the Local
General Partner(s).
(6) Series 5 will make its capital contributions to the Local Limited
Partnership in stages, with each contribution due when certain conditions
regarding construction or operations of the Apartment Complex have been
fulfilled. See "Investment Policies" and "Terms of the Local Limited Partnership
Agreements" under "Investment Objectives and Policies" in the Prospectus.
(7) Thomas H. Cooksey has been involved in real estate development and
apartment management since 1980 and, currently, is the general partner of
partnerships that own apartment complexes located in 65 towns, principally in
Alabama. Mr. Cooksey, age 56, has represented to Series 5 that, as of March 1,
1997, he had a net worth in excess of $10,000,000. Apartment Developers, Inc.
was formed in 1993 by Mr. Cooksey, Charles Farrow, Jr. and Kay Wallace to act as
a corporate general partner of the Local Limited Partnership which owns the
Apartment Complex. Mr. Cooksey is the president and owner of the corporation.
Apartment Developers, Inc. has represented to Series 5 that its shareholders'
equity is nominal.
(8) Apartment Services and Management Co. was formed in 1986. Thomas H.
Cooksey is president and owner of 50% of the corporation. Apartment Services and
Management Co. manages in excess of 2,700 apartment units, more than 1,750 of
which are Tax Credit units.
(9) Billy Bunn, age 45, has represented to Series 5 that, as of April 1,
1997, he had a net worth in excess of $2,000,000.
(10) Bunn Real Estate and Property Management Co. manages in excess of 100
apartment units, more than 25 of which are Tax Credit units.
(11) D. Kim Lingle is the president of MBL Development, Co., which has the
primary goal of developing and constructing affordable housing. Ted Scwermer is
vice president of MBL Development, Co. and is also the uncle of Mr. Lingle. Mr.
Lingle and Mr. Scwermer have a background in banking and development. MBL
Development, Co. has represented to the Series 5 that, as of December 31, 1996,
its total shareholder's equity was in excess of $700,000.
(12) The Remas Company is owned by William F. Gillen, who has 26 years'
experience in multi-family and commercial property management. Prior to forming
The Remas Company, Mr. Gillen was vice president of administration and
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operations of Midland Property Management, Inc., a Kansas City-based real estate
development and property management firm, where he was employed for 14 years.
The Remas Company currently manages seven apartment complexes including three
government-subsidized properties.
(13) Southland Management Co. manages in excess of 600 apartment units,
more than 300 of which are Tax Credit units.
(14) Murfreesboro Industrial Development Corp. ("MIDC") has represented to
Series 5 that, as of July 1, 1997, it had a net worth in excess of $200,000.
(15) Grace Housing Partners, Ltd. was formed in 1996 solely for the purpose
of serving as one of the general partners of TULSA-CRESTVIEW. The general
partner of Grace Housing Partners, Ltd. is Aslan Real Estate, Ltd. Barnes
Properties, Inc. dba Barnes Affordable Properties was formed in 1983 to own,
manage, finance, develop and design multi-family and luxury master-planned
communities. Arthur Barnes, chairman of the board, has 36 years' experience in
real estate. New Faith Baptist Church was formed in 1979. Grace Housing
Partners, Ltd., Barnes Affordable Properties and New Faith Baptist Church have
represented to Series 5 that their respective net worths are nominal.
Construction completion and operating deficit guarantees will be provided by
Bruce A. Hall, Robert Voelker, and Aslan Real Estate, Ltd. Mr. Hall, age 41, has
represented to Series 5 that, as of July 31, 1997, he had a net worth in excess
of $800,000. Mr. Voelker, age 39, has represented to Series 5 that, as of
September 3, 1997, he had a net worth in excess of $700,000. Aslan Real Estate,
Ltd. has represented to Series 5 that, as of March 31, 1997, it had a net worth
in excess of $2,000,000.
(16) Barnes Real Estate Services, Inc. was formed as DMB Investments, Inc.
in 1990 to provide management for all phases of multi-family developments.
Barnes Real Estate Services, Inc. currently manages in excess of 2,250 apartment
units, more than 1,260 of which are Tax Credit units.
FEDERAL INCOME TAX CONSIDERATIONS
Tax Legislation
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). The 1997 Act includes many provisions, only
a few of which are directly applicable to an investment in the Partnership. The
provisions of the 1997 Act that are material to an investment in the Partnership
are summarized below.
Tax Rates. The 1997 Act includes provisions that reduce the tax imposed
on most net capital gains. See "Federal Income Tax Considerations - Other
Important Tax Considerations - Tax Rates" in the Prospectus. These provisions
utilize a two-tier approach to taxation of net capital gains.
In the first tier, the maximum tax rate on net capital gains for
individuals is reduced from 28% to 20%; the rate for individuals who would pay a
15% tax on net capital gains is reduced to 10%. Effective July 29, 1997, these
new rates apply to assets held for more than 18 months. Assets held for more
than 12 but less that 18 months may qualify for the maximum tax rate of 28%.
In the second tier, which is effective for any taxable year beginning
after December 31, 2000, the 20% rate is reduced to 18% for assets held more
than five years; the 10% rate is reduced to 8% for assets held more than five
years whenever acquired.
These preferential rates do not apply to collectibles (e.g., fine art
and jewelry), certain qualified small business stock, and certain gains on the
sale of depreciable real property. In the case of a sale of depreciable real
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property, the taxation scheme is as follows: (i) the excess of accelerated
depreciation over straight-line depreciation is taxed at ordinary income rates
(there will be no such excess in the case of the sale of an Apartment Complex),
(ii) the balance of the depreciation is taxed at a top rate of 25%, and (iii)
the balance of the gain is subject to the net capital gains rates described in
the preceding paragraphs.
The rates described above generally apply for purposes of both the
regular tax and the alternative minimum tax.
Alternative Minimum Tax. The corporate alternative minimum tax (see
"Federal Income Tax Considerations - Other Important Tax Considerations -
Alternative Minimum Tax" in the Prospectus) is repealed for small business
corporations for taxable years ending after December 31, 1997. A corporation is
a small business corporation in 1998 if its average gross receipts for the prior
three years was less than $5,000,000. A corporation that meets the $5,000,000
test initially will be treated as a small business corporation in future years
if its average gross receipts does not exceed $7,500,000.
Another amendment made by the 1997 Act will reduce the impact of the
alternative minimum tax. For assets placed in service after December 31, 1998,
depreciation lives for regular tax purposes will also be used for alternative
minimum tax purposes. See "Federal Income Tax Considerations - Other Important
Tax Considerations - Alternative Minimum Tax" in the Prospectus.
General Business Tax Credit Limitations. As set forth in the
Prospectus, the ability of taxpayers to use Tax Credits is subject to an annual
limitation on the allowance of aggregate general business tax credits (which
includes Tax Credits). See "Federal Income Tax Considerations - General Business
Tax Credit Limitations" in the Prospectus. Effective for business tax credits
arising in taxable years beginning after December 31, 1997, business tax credits
limited by this rule are first carried back one year and then forward 20 years.
Under prior law, such credits were first carried back three years and then
forward 15 years.
Tax Shelter Registration Number
The taxpayer identification number and tax shelter registration number
of Series 5 are 33-0745418 and 97175000054, respectively. See "Federal Income
Tax Considerations - Tax Shelter Registration" in the Prospectus.
MANAGEMENT
WNC Management Inc.
WNC Management Inc., a California corporation which is wholly-owned by WNC
& Associates, Inc., was organized in 1997 to manage certain of the properties
invested in by partnerships sponsored by WNC & Associates, Inc. (including
Series 5 and Series 6). The officers and directors of WNC Management Inc. are as
follows: Thomas J. Riha (Chief Executive Officer/Director), David N. Shafer
(Secretary/Director), Theodore M. Paul (Chief Financial Officer/Director), and
Wilfred N. Cooper, Jr. (Director).
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