SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(Name of Subject Company)
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(Name of Person(s) Filing Statement)
Units of Limited Partnership Interest
(Title of Class of Securities)
None
(CUSIP Number of Class of Securities)
David N. Shafer, Esq.
WNC & Associates, Inc.
3158 Redhill Avenue, Suite 120
Costa Mesa, California 92626-3416
714-662-5565
(Name, Address and Telephone Number of
Persons Authorized to Receive Notices and Communications on
Behalf of the Person(s) Filing Statement)
Copies to:
Paul G. Dannhauser
Derenthal & Dannhauser
455 Market Street, Suite 1600
San Francisco, California 94105
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Item 1. Security and Subject Company.
The name of the subject company is WNC California Housing Tax Credits,
L.P., a California limited partnership (the "Partnership"), which has its
principal executive offices at 3158 Redhill Avenue, Suite 120, Costa Mesa,
California 92626-3416. The General Partner of the Partnership is WNC &
Associates, Inc., a California corporation with principal executive offices at
3158 Redhill Avenue, Suite 120, Costa Mesa, California 92626-3416 (the "General
Partner").
The title of the class of equity securities to which this statement
relates is the units of limited partnership interest in the Partnership
("Units").
Item 2. Tender Offer of the Bidders.
This Schedule 14D-9 relates to a tender offer by Everest Tax Credit
Investors, LLC, a California limited liability company ("Everest") as disclosed
in a Tender Offer Statement on Schedule 14D-1 dated May 12, 1998 (the "Everest
Schedule 14D-1"), to purchase up to 745 issued and outstanding Units at a
purchase price of $100 per Unit in cash (the "Everest Purchase Price"), without
interest thereon, reduced by transfer costs, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 12, 1998 and the related
Letter of Transmittal, as each may be supplemented, modified or amended from
time to time (which collectively constitute the "Everest Offer" and are
contained within the Everest Schedule 14D-1).
The address of Everest's principal executive offices is 199 S. Los
Robles Avenue, Suite 440, Pasadena, California 91101.
Item 3. Identity and Background.
(a) The name and business address of the Partnership, which is the
person filing this statement, are set forth in Item 1 above.
(b) (1) The Partnership does not have any employees, directors or
executive officers. All decisions with respect to the management of the
Partnership and its affairs are made by the General Partner. Set forth below is
a description of material contracts, agreements, arrangements or understandings
or any actual or potential conflicts of interest between the General Partner or
its affiliates and the Partnership and its affiliates.
The General Partner and its affiliates have received or will receive
certain types of compensation, fees, reimbursements and allocations of
distributions, income loss and tax credits
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in connection with the operations of the Partnership. The arrangements for
payment of compensation and fees, as set forth in the Partnership's Agreement of
Limited Partnership, dated as of September 15, 1988, as amended to date (the
"Partnership Agreement"), the Partnership's prospectus and other publicly filed
documents, were not determined in arm's-length negotiations with the
Partnership.
The General Partner or an affiliate of the General Partner is entitled
to an asset management fee equal to 0.5% of Invested Assets in Local Limited
Partnerships (as defined in the Partnership Agreement) and, subject to certain
restrictions included in the Partnership Agreement is entitled to reimbursement
of Operating Cash Expenses (as defined in the Partnership Agreement). To the
extent that the General Partner or an affiliate of the General Partner provides
property management services to a Local Limited Partnership (as defined in the
Partnership Agreement) such person would be entitled to a property management
fee in an amount not to exceed 5% of the gross revenues from the property.
Additionally, subject to certain special allocations, the General Partner has an
interest in 1% of Partnership distributions and allocations. Further, the
General Partner and its affiliates are entitled to indemnification from the
Partnership under certain circumstances described in the Partnership Agreement.
(2) There are no material contracts, agreements, arrangements or
understandings or any actual or potential conflicts of interest between the
General Partner or its affiliates and Everest, its members, executive officers,
directors or affiliates.
Item 4. The Solicitation or Recommendation.
(a) Following receipt of the terms of the Everest Offer, the General
Partner reviewed and considered the Everest Offer. The General Partner
recommends that Unit Holders reject the Everest Offer for the reasons set forth
in Item 4(b).
(b) The General Partner believes that Unit Holders should reject the
Everest Offer for the following reasons:
(i) The Everest Offer is for only $100 per Unit, less transfer costs.
To the best of the General Partner's knowledge and belief, the last known price
paid for the Units on the secondary market was $237, which is more than the
proposed Everest Offer. Because secondary market selling prices do not take into
account commissions charged, the net proceeds to a Unit Holder in a secondary
market sale would be reduced by approximately 5% to 8%. In addition, the current
value of a Unit may have been reduced from the last selling date to the extent
remaining Tax Credits are reduced due to the passage of time.
(ii) The Everest Offer contains estimates of potential tax benefits
other than the Tax Credits. Unit Holders are cautioned that their ability to
obtain these non-Tax Credit tax benefits (i.e., tax losses which are not a
dollar-for-dollar reduction in your tax liability) must be
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determined on a case-by-case basis for each taxpayer. These tax losses will not
be available to the extent a Unit Holder has already claimed them. These tax
losses also will not be available if a Unit Holder is unable to sell all his
Units to Everest as a result of proration (as discussed below). For these and
other tax reasons, Unit Holders should consult with their respective tax
advisers about the consequences of the Everest Offer. Unit Holders should note
that a substantial portion of the "total benefits" described in Everest's cover
letter have already been received by the Unit Holders.
(iii) Everest is offering to purchase Units for its own investment
purposes and, accordingly, has established a price that will permit it to make a
profit. There may be a conflict of interest between Everest's desire to purchase
the Units at a low price and the Unit Holders' desire to sell their Units at a
high price. Therefore, Unit Holders might receive greater value if they hold
their Units rather than tender.
(iv) Unit Holders will no longer receive the Tax Credits and/or tax
losses from the Units should they tender pursuant to the Everest Offer. The
remaining amount of Tax Credits to be received by Unit Holders is $224 on an
average per Unit basis, which is more than the estimate set forth in the Everest
Offer.
(v) Unit Holders who sell their Units pursuant to the Everest Offer
will lose the right to receive any future distributions from the Partnership
from any refinancing or sale of the Partnership's properties. Although the
General Partner cannot predict the future value of the Partnership's assets on a
per Unit basis or otherwise, the net amount of the Everest Offer could differ
significantly from the amount that may be realized from the sale or refinancing
of the Partnership's assets. There can be no assurance as to the timing, amount
or occurrence of any future distributions.
(vi) While the Everest Offer will provide Unit Holders with an
immediate opportunity to liquidate their investment in the Partnership (which
investment is otherwise relatively illiquid), Unit Holders who have a present or
future need for the Tax Credits and/or tax losses from the Units may, however,
prefer to retain their Units and not tender them pursuant to the Everest Offer.
(vii) The Everest Offer states that the purchase price will be reduced
by the amount of any transfer fees payable in connection with the transfer by
the Unit Holder to Everest. The Partnership Agreement provides that the
Partnership shall charge a transfer fee of up to $100 per transaction to cover
the actual costs of transfers.
(viii) Unit Holders who tender their Units may not be able to liquidate
all their Units and may suffer proration. The principal tax benefit to selling
Unit Holders described in the Everest Offer (i.e., the use of suspended passive
tax losses) is dependent on Unit Holders selling their entire interest in the
Partnership. A proration would delay realization of those tax benefits.
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Furthermore, a Unit Holder may be motivated to sell, as described in the Everest
Offer, in order to eliminate the requirement to report Partnership tax
information from IRS Form K-1. This benefit is realized only if a Unit Holder's
entire interest in the Partnership were sold. The risk of proration is increased
due to the limitation on transfers discussed in the next paragraph.
The Partnership Agreement directs the General Partner to restrict
transfers of Units to prevent the Partnership from the adverse consequences of
being treated as a "publicly traded partnership" for Federal income tax purposes
under Section 7704 of the Internal Revenue Code. Generally, these adverse
consequences include the inability to use Tax Credits or tax losses against
income tax liability or taxable income, respectively, from sources other than
the Partnership. Accordingly, the General Partner has limited and will continue
to limit the transfer of Units to not more than 5% of Partnership capital or
profits per year unless and until it receives persuasive authority that such a
limitation is not necessary. The Partnership's tax counsel has advised the
Partnership that it cannot render an opinion that the Units transferred in the
Everest Offer would be excluded from calculation of the 5% safe harbor. The
Everest Offer seeks to purchase up to 745 of the outstanding Units. Based on the
limitations in the Partnership Agreement, it is likely that the maximum amount
of Units that Everest could purchase would be 368.
Item 5. Persons Retained, Employed or to Be Compensated.
Neither the Partnership nor any person acting on its behalf has
employed, retained or compensated, or intends to employ, retain or compensate,
any person to make solicitations or recommendations to Unit Holders on their
behalf concerning the Everest Offer.
Item 6. Recent Transactions and Intent With Respect to Securities.
(a) Neither the Partnership nor the General Partner nor any of their
affiliates have effected any transactions in the Units during the past 60 days.
(b) Neither the General Partner nor, to the knowledge of the General
Partner, any of its partners, executive officers, directors, affiliates or
subsidiaries intend to tender Units owned by them to Everest pursuant to the
Everest Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) No negotiation is being undertaken or is underway by the
Partnership in response to the Everest Offer which relates to or would result
in: (1) an extraordinary transaction such as a merger or reorganization,
involving the Partnership or any subsidiary of the Partnership; (2) a purchase,
sale or transfer of a material amount of assets by the Partnership or any
subsidiary; (3)
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a tender offer for or other acquisition of securities by or of the Partnership;
or (4) any material change in the present capitalization or dividend policy of
the Partnership.
(b) Except as described above or in Item 3(b), there are no
transactions, board resolutions, agreements in principle or signed contracts in
response to the Everest Offer which relate to or would result in one or more of
the matters referred to in Item 7(a).
Item 8. Additional Information to Be Furnished.
None.
Item 9. Material to be Filed as Exhibits.
(a)(1) Letter from WNC California Housing Tax Credits, L.P. to Unit
Holders, dated May 27, 1998.
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: May 27, 1998
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
By: WNC & Associates, Inc.,
its General Partner
By: /s/ JOHN B. LESTER, JR.
John B. Lester, Jr., President
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EXHIBIT INDEX
EXHIBIT NO. TITLE
(a)(1) Letter to Unit Holders dated May 27, 1998
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May 27, 1998
TO ALL UNIT HOLDERS OF UNITS IN
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
Dear Unit Holder:
As you are by now aware, Everest Tax Credit Investors, LLC, a
California limited liability company ("Everest") has made an offer (the "Everest
Offer") to purchase units of limited partnership interest ("Units") in WNC
California Housing Tax Credits, L.P. (the "Partnership") from the holders
thereof ("Unit Holders").
WNC & Associates, Inc. (the "General Partner") recommends that Unit
Holders REJECT the Everest Offer for the following reasons:
The Everest Offer is for $100 per Unit, less transfer costs. To the
best of the General Partner's knowledge and belief, the last known
price paid for the Units on the secondary market was $237, which is
more than the proposed Everest Offer. Because secondary market selling
prices do not take into account commissions charged, the net proceeds
to a Unit Holder in a secondary market sale would be reduced by
approximately 5% to 8%. In addition, the current value of a Unit may
have been reduced from the last selling date because there are fewer
Tax Credits due to the passage of time.
The Everest Offer contains estimates of potential tax benefits other
than the Tax Credits. Unit Holders are cautioned that their ability to
obtain these non-Tax Credit tax benefits (i.e., tax losses which are
not a dollar-for-dollar reduction in your tax liability) must be
determined on a case-by-case basis for each taxpayer. These tax losses
will not be available to the extent a Unit Holder has already claimed
them. These tax losses also will not be available if a Unit Holder is
unable to sell all his Units to Everest as a result of proration. For
these and other tax reasons, Unit Holders should consult with their
respective tax advisers about the consequences of the Everest Offer.
Unit Holders should note that a substantial portion of the "total
benefits" described in Everest's cover letter have already been
received by the Unit Holders.
Everest is offering to purchase Units for its own investment purposes
and, accordingly, has established a price that will permit it to make a
profit.
Unit Holders will no longer receive the Tax Credits and/or tax losses
from the Units should they tender pursuant to the Everest Offer. The
remaining amount of Tax Credits to be received by Unit Holders is $224
on an average per Unit basis.
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Unit Holders who sell their Units pursuant to the Everest Offer will
lose the right to receive any future distributions from the Partnership
from any refinancing or sale of the Partnership's properties. Although
the General Partner cannot predict the future value of the
Partnership's assets on a per Unit basis or otherwise, the net amount
of the Everest Offer could differ significantly from the amount that
may be realized from the sale or refinancing of the Partnership's
assets. There can be no assurance as to the timing, amount or
occurrence of any future distributions.
Enclosed is a copy of the Partnership's Statement on Schedule 14D-9
which has been filed with the Securities and Exchange Commission and sets forth
the Partnership's response to the Everest Offer. Unit Holders are advised to
carefully read the Schedule 14D-9.
Unit Holders should consult with their respective advisers about the
financial, tax, legal and other consequences of the Everest Offer.
Please do not hesitate to call the Partnership at 800-451-7070 for
assistance in any Partnership matter.
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
By: WNC & Associates, Inc.,
its General Partner
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