FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
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: 0-21895
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
California 33-6163848
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 622-5565
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 ____
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, September 30, 1997 and December 31, 1996................3
Statement of Operations
For the nine and three months ended September 30, 1997 and 1996.....4
Statement of Partners' Equity
For the nine months ended September 30, 1997 and 1996...............5
Statement of Cash Flows
For the nine months ended September 30, 1997 and 1996...............6
Notes to Financial Statements...........................................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................16
Signatures...............................................................17
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
BALANCE SHEETS
September 30, 1997 and December 31, 1996
1997 1996
---- ----
ASSETS
Cash and cash equivalents $ 2,293,311 $ 2,567,217
Subscriptions receivable
(Note 7) - 2,195,000
- 522,190
Loans Receivable (Note 2)
Investment in limited
partnerships (Note 3) 14,407,820 12,782,751
Other assets 14,188 105,998
---------- ----------
$ 16,715,319 $ 18,173,156
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Payable to limited partnerships
(Note 5) $ 1,569,878 $ 2,822,885
Accrued fees and expenses due to
general partner and affiliates
(Note 4) 29,803 43,807
--------- ---------
1,599,681 2,866,692
--------- ---------
Commitments and contingencies (Note 8)
Partners' equity (deficit):
General partner (24,334) (21,876)
Limited partners (25,000 units
authorized, 18,000 units issued
and outstanding) 15,139,972 15,328,340
---------- ----------
Total partners' equity 15,115,638 15,306,464
---------- ----------
$ 16,715,319 $ 18,173,156
========== ==========
UNAUDITED
See Accompanying Notes to Financial Statements
3
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
STATEMENT OF OPERATIONS
For the Three and Nine Months Ended September 30, 1997 and 1996
1997 1996
---- ----
Three Nine Three Nine
Months Months Months Months
Interest income $ 30,923 $ 101,634 $ 103,100 $ 139,604
-------- -------- -------- --------
Operating expenses:
Amortization 9,008 26,986 6,701 14,856
Asset management
fees (Note 3) 12,374 37,125 12,375 37,125
Legal and accounting 1,251 3,751 3,492 5,356
Other 2,285 11,069 - 3,247
-------- -------- -------- --------
Total operating expenses 24,918 78,931 22,568 60,584
-------- -------- -------- --------
Income from operations 6,005 22,703 80,532 79,020
Equity in loss from
limited partnerships (43,600) (267,000) (62,300) (107,500)
-------- -------- -------- --------
Net income (loss) $ (37,595) $ (244,297) $ 18,232 $ (28,480)
======== ======== ======== ========
Net income (loss) allocated to:
General partner $ (376) $ (2,443) $ 182 $ (285)
======== ======== ======== ========
Limited partners $ (37,219) $ (241,854) $ 18,050 $ (28,195)
======== ======== ======== ========
Net income (loss) per weighted
limited partner unit (18,000 and
17,998 units issued and
outstanding) $ (2.07) $ (13.44) $ 1.00 $ (2.35)
======== ======== ======== ========
UNAUDITED
See Accompanying Notes to Financial Statements
4
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
For the Nine Months Ended September 30, 1997 and 1996
For the Nine Months Ended September 30, 1997
- --------------------------------------------
General Limited
Partner Partner Total
Equity (deficit), December 31, 1996 $ (21,876) $ 15,328,340 $ 15,306,464
Offering expenses (15) (1,514) (1,529)
Collection of investor notes receivable 55,000 55,000
Net loss for the nine months ended
September 30, 1997 (2,443) (241,854) (244,297)
-------- ---------- -----------
Equity (deficit), September 30, 1997 $ (24,334) $ 15,139,972 $ 15,115,638
======== ========== ==========
For the Nine Months Ended September 30, 1996
- --------------------------------------------
Equity (deficit), December 31, 1995 $ (6,029) $ 3,852,212 $ 3,846,183
Capital contributions 13,064,985 13,064,985
Offering expenses (15,161) (1,500,957) (1,516,118)
Capital issued for notes receivable (2,220,000) (2,220,000)
Net loss for the nine months ended
September 30, 1996 (285) (28,195) (28,480)
-------- ---------- ----------
Equity (deficit), September 30, 1996 $ (21,475) $ 13,168,045 $ 13,146,570
======== ========== ==========
UNAUDITED
See Accompanying Notes to Financial Statements
5
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
1997 1996
---- ----
Cash flows used by operating activities:
Net loss $ (244,297) $ (28,480)
Adjustments to reconcile net loss to
net cash used in operating activities:
Equity in loss of limited partnerships 267,000 107,500
Amortization 26,986 14,856
Increase (decrease) in
asset management fee payable (72,875) 37,125
Change in other assets 91,810 (76,852)
Accrued fees and expense due
to general partner and affiliates 3,386 (11,364)
-------- --------
Net cash provided by operating activities 72,010 42,785
-------- --------
Cash flows used by investing activities:
Investment in limited partnerships (2,653,888) (5,797,296)
Distribution from local limited partnerships 8,340
Acquisition fees (4,324) (1,017,913)
---------- -----------
Net cash used by investing activities (2,649,872) (6,815,209)
---------- -----------
Cash flows provide by financing activities:
Capital contributions from partners 2,250,000 11,328,985
Offering costs and sales commissions (14,554) (1,725,136)
Receipts/(payment) of advances from affiliates 68,510 -
--------- ----------
Net cash provided by financing activities 2,303,956 9,603,849
--------- ---------
Net increase (decrease) in cash and
cash equivalents (273,906) 2,831,425
Cash and cash equivalents, beginning of period 2,567,217 660,999
--------- ----------
Cash and cash equivalent, end of period $ 2,293,311 $ 3,492,424
========= =========
UNAUDITED
See Accompanying Notes to Financial Statements
6
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
STATEMENT OF CASH FLOWS(CONTINUED)
For the Nine months Ended September 30, 1997 and 1996
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
During the nine months ended September 30,1997, the Partnership's payables to
limited partnerships; (in connection with its investments in limited
partnerships) (see Note 3) had non-cash transactions as follows:
Increases due to acquisition of limited partnership interests $2,272,426
Application of loans receivable to acquisitions (522,190)
Decreases due to various price adjuster provisions in the
respective limited partnership agreements (349,355)
Net non-cash adjustments to the Partnership's ---------
payable to limited partnerships $1,400,881
=========
- -------------------------------------------------------------------------------
During the nine months ended September 30,1996, the Partnership's payables to
limited partnerships; (in connection with its investments in limited
partnerships) (see Note 3) had non-cash transactions as follows:
Increases due to acquisition of limited partnership interests $11,292,434
Application of loans receivable to acquisitions (661,306)
Decreases due to various price adjuster provisions in the
respective limited partnership agreements (36,551)
Application of cash in escrow (1,873,262)
Application of advance from affiliate (60,456)
Net non-cash adjustments to the Partnership's ---------
payable to limited partnerships $8,660,858
=========
During the nine months ended September 30, 1996, the Partnership incurred, but
did not pay, $37,125 in management fees.
UNAUDITED
See Accompanying Notes to Financial Statements
7
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Organization
WNC Housing Tax Credit Fund, V, L.P., Series 3 (the "Partnership") was formed
under the California Revised Limited Partnership Act on March 28, 1995 and
commenced operations on October 23, 1995. The Partnership was formed to invest
primarily in other limited partnerships which will own and operate multi-family
housing complexes that will qualify for low income housing credits.
The information contained in the following notes to the financial statements is
condensed from that which would appear in the annual financial statements;
accordingly, the financial statements included herein should be reviewed in
conjunction with the financial statements and related notes thereto contained in
the Partnership's Annual Report for the year ended December 31, 1996.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of September 30,
1997, the results of operations and changes in cash flows for the nine months
ended September 30, 1997 and 1996. Accounting measurements at interim dates
inherently involve greater reliance on estimates than at year end. The results
of operations for the interim period presented are not necessarily indicative of
the results for the entire year.
The general partner of the Partnership is WNC Tax Credit Partners V, L.P. (the
"General Partner"), a California limited partnership. WNC & Associates, Inc. is
the general partner of the General Partner. Wilfred N. Cooper, Sr., through the
Cooper Revocable Trust, owns 70% of the outstanding stock of WNC & Associates,
Inc. John B. Lester, Jr. is the original limited partner of the Partnership and
owns, through the Lester Family Trust, 30% of the outstanding stock of WNC &
Associates, Inc.
Allocations Under the Terms of the Partnership Agreement
The General Partner has a 1% interest in operating profits and losses, taxable
income and loss and in cash available for distribution from the Partnership. The
limited partners will be allocated the remaining 99% of these items in
proportion to their respective investments.
After the limited partners have received sale or refinancing proceeds equal to
their capital contributions and their preferred return (as defined in the
Partnership's Agreement of Limited Partnership) and the general partner has
received a subordinated disposition fee 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.
8
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ---------------------------------------------------------------
Method of Accounting For Investment in Limited Partnerships
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of each limited partnership's results of operations and
for any distributions received. Costs incurred by the Partnership in acquiring
the investments in limited partnerships are capitalized as part of the
investment.
Losses from the limited partnerships will not be recognized to the extent that
the individual investment balance would be adjusted below zero.
Cash and Cash Equivalents
The Partnership considers all bank certificates of deposit with a maturity of
less than three months to be cash equivalents.
Offering Expenses
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. The General Partner is obligated to
pay all offering and organization costs in excess of 15% (including sales
commissions) of the total offering proceeds. Offering expenses are reflected as
a reduction of partners' capital.
Organization Costs
Organization costs will be amortized on the straight-line method over 60 months.
NOTE 2 - LOANS RECEIVABLE
- -------------------------
Loans receivable represent amounts loaned by the Partnership to certain limited
partnerships in which the Partnership may invest. These loans will be applied
against the first capital contribution due if the Partnership ultimately
acquires a limited partnership interest. In the event that the Partnership does
not acquire a limited partnership interest, the loans are to be repaid with
interest with at a rate of prime plus 1% per annum (10.5 % at March 31,1997).
Loans receivable of $245,581 and $276,609 at December 31, 1996 were applied to
capital contributions due for limited partnership interests acquired in January
1997 and April 1997, respectively (see Note 8).
9
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 3 - INVESTMENT IN LIMITED PARTNERSHIPS
- -------------------------------------------
As of September 30, 1997, the Partnership had acquired limited partnership
interests in eighteen limited partnerships each of which owns one apartment
complex. As of September 30, 1997, construction and rehabilitation of 16 of the
apartment complexes had been completed. The remaining two have started
construction. The Partnership, as a limited partner, is a 99% owner and is
entitled to 99% of the operating profits and losses of the limited partnerships.
The following is a summary of the investment in limited partnerships and
reconciliation to the limited partnership accounts as of September 30 1997 and
December 31, 1996:
1997 1996
---- ----
Investment Balance - Beginning of period $ 12,782,751 $ 1,046,532
Capital contributions to limited partnerships 1,116,900 8,693,189
Distributions from limited partnerships (8,340)
Capital contributions payable to
limited partnerships 806,171 2,513,033
Capitalized acquisition fees and costs 4,324 738,504
Equity in loss of limited partnership (267,000) (185,071)
Amortization of capitalized acquisition costs (26,986) (23,436)
---------- ----------
Investment Balance - end of period $ 14,407,820 $ 12,782,751
========== ==========
Selected financial information for the nine months ended September 30, 1997 and
1996 from the combined financial statements of the limited partnerships in which
the partnership has invested is as follows:
1997 1996
---- ----
Total revenue $ 3,563,000 $ 466,000
--------- -------
Interest expense 1,165,000 130,000
Depreciation 633,000 136,000
Operating expenses 2,035,000 308,000
--------- -------
Total expenses 3,833,000 574,000
--------- -------
Net loss $ (270,000) $ (108,000)
========= ========
Net loss allocable to
the Partnership $ (267,000) $ (107,500)
========= ========
10
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 4 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Under the terms of its Agreement of Limited Partnership, the Partnership is
obligated to the General Partner or its affiliates for the following items:
Acquisition fees up to 7.5% of the gross proceeds from the sale of
Partnership units. No acquisition fees were incurred for the nine months
ended September 31,1997.
Reimbursement for organizational, offering and selling expenses
advanced by the General Partner or affiliates on behalf of the Partnership.
These reimbursements plus all other organizational and offering expenses
inclusive of sales commissions will not exceed 14.5% of the gross proceeds.
During the nine months ended September 30,1997 the Partnership incurred
organizational, offering and selling expenses of $0, $1,904, and $5,775,
respectively.
An annual management fee equal to the greater of (i) $2,000 for each
apartment complex or (ii) .275% of the gross proceeds, in either case
increased or decreased based on annual changes in the Consumer Price Index.
However, the maximum fee may not exceed .2% of the invested assets (defined
as the Partnership's capital contributions plus its allocable percentage of
the permanent financing) of the local limited partnerships. The Partnership
has incurred fees of $37,125 for each nine month period ended September
30, 1997 and 1996.
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 return on investment (as defined in the
Partnership's Agreement of Limited Partnership) and is payable only if
services are rendered in the sales effort.
Accrued fees and advances due to affiliates of the General Partner included in
the accompanying balance sheet consists of the following at September 30,1997
and December 31, 1996:
1997 1996
---- ----
Acquisition fees $ 42,551 $ 42,551
Advances made for acquisition costs,
organizational, offering and
selling expenses (1,740) 7,899
Asset management fees (11,008) 61,867
Advance for acquisition of property 0 (68,510)
------- -------
$ 29,803 $ 43,807
======= =======
11
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 5 - PAYABLE TO LIMITED PARTNERSHIPS
- ----------------------------------------
Payable to limited partnerships at September 30, 1997 represents amounts which
are due at various times based on conditions specified in the respective local
limited partnership agreements. These contributions are payable in installments,
generally due upon the local limited partnership achieving certain operating
benchmarks, and are generally expected to be paid within two years of the
Partnership's initial investment.
NOTE 6 - INCOME TAXES
- ---------------------
The Partnership will not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their respective
returns.
NOTE 7 - SUBSCRIPTION AND INVESTOR NOTES RECEIVABLE
- ---------------------------------------------------
During the nine months ended September 31, 1997, the Partnership collected the
$2,195,000 in subscriptions receivable at December 31, 1996.
Limited partners who subscribe for ten or more units of limited partnership
interest ($10,000) may elect to pay 50% of such purchase price in cash upon
subscription and the remaining 50% by the delivery of a promissory note payable
bearing interest at the rate of 8% per annum. Principal and interest are due (i)
January 31, 1997 if the investor subscribes between January 1, 1996 and June 1,
1996 or (ii) the later of the date of subscription or September 30,1997 if the
investor subscribes after June 1, 1996. This amount is presented as a reduction
in partners' equity.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
Subsequent to December 31, 1996, the Partnership acquired two limited
partnership interests which require capital contributions totaling approximately
$2,272,426, of which $522,190 had been made and are reflected as loans
receivable in the accompanying balance sheet as of December 31, 1996 (see Note
2).
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
WNC Housing Tax Credit Fund V, L.P., Series 3 ("the Partnership") is a
California Limited Partnership formed under the laws of the State of California
on March 28, 1995, and commenced operations on October 24, 1995 to acquire
limited partnership interests in limited partnerships ("Limited Partnerships")
which own multifamily apartment complexes that are eligible for low-income
housing federal income tax credits (the "Low Income Housing Credit").
The Partnership had received subscriptions for 18,000 Units for cash of
$17,558,985 and terminated its offering of units on July 1, 1996.
Liquidity and Capital Resources
- -------------------------------
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $274,000 for the nine
months ended September 30, 1997. This decrease in cash consists of cash used by
investing and cash provided by investing and operating activities. Cash was used
by the investing activities of the Partnership during such period in the
aggregate amount of approximately $2,650,000, which consisted of cash used in
capital contributions to Limited Partnerships and acquisition fees and expense
of approximately $2,654,000 and $4,000, respectively and cash provided by
distributions of approximately $8,000. Cash provided from operations consisted
primarily of interest received on cash deposits, and cash used in operations
consisted primarily of payments for operating fees and expenses. The major
components of all these activities are discussed in greater detail below.
Overall, as reflected in its Statement of Cash Flows, Series 3 had a net
increase in cash and cash equivalents of approximately $2,831,000 for the nine
months ended September 30, 1996. This increase in cash was provided by Series
3's financing activities, including the proceeds from the offering. Cash from
financing activities for the period ended September 30, 1996 of approximately
$9,604,000 was sufficient to fund the investing activities of Series 3 during
such period in the aggregate amount of approximately $6,815,000, which consisted
primarily of capital contributions to Limited Partnerships. Cash provided and
used by the operating activities of Series 3 was minimal compared to its other
activities. Cash provided from operations consisted primarily of interest
received on cash deposits, and cash used in operations consisted primarily of
payments for operating fees and expenses. The major components of all these
activities are discussed in greater detail below.
As of September 30, 1997 and December 31, 1996 the Partnership was indebted to
WNC & Associates, Inc. in the amount of approximately $30,000 and $44,000,
respectively. The component items of such indebtedness were as follows: accrued
acquisition fees of approximately $43,000 and $ 43,000, respectively, advances
to pay front-end fees of approximately ($2,000) and $8,000, respectively,
accrued asset management fees of approximately ($11,000) and $62,000
respectively and due to an affiliate of the general partner approximately $0 and
$(69,000).
As of September 30, 1997, the Partnership has received and accepted
subscriptions funds in the amount of $17,559,000. As of November 1, 1997, as of
September 30, 1997 and as of December 31, 1996, the Partnership had made capital
contributions to Limited Partnerships in the amount of approximately
$12,546,000, $12,267,000 and $9,091,000, respectively, and had commitments for
additional capital contributions of approximately $1,291,000, $1,570,000 and
$2,823,000, respectively. Further, the Partnership had loans outstanding to
Limited Partnerships as of November 1, 1997, as of September 30, 1997 and as of
December 31, 1996, of approximately $0, $0 and $522,200, respectively. Of the
amount outstanding as of December 31, 1996, approximately $245,600 and $277,000
were loaned to ESCATAWPA and BROADWAY, respectively and were applied to the
Partnership's purchase price upon acquisition of those Limited Partnership
Interests in January 1997 and April 1997, respectively.
13
<PAGE>
Prior to sale of the Apartment Complexes, it is not expected that any of the
Limited Partnerships in which the Partnership has invested or will invest will
generate cash from operations sufficient to provide distributions to the Limited
Partners in any material amount. Such cash from operations, if any, would first
be used to meet operating expenses of the Partnership, including payment of the
asset management fee to the General Partner. As a result, it is not anticipated
that the Partnership will provide distributions to the Limited Partners prior to
the sale of the Apartment Complexes.
The Partnership's investments will not be readily marketable and may be affected
by adverse general economic conditions which, in turn, could substantially
increase the risk of operating losses for the Apartment Complexes, the Limited
Partnerships and the Partnership. These problems may result from a number of
factors, many of which cannot be controlled by the General Partner.
Nevertheless, the General Partner anticipates that capital raised from the sale
of the Units will be sufficient to fund the Partnership's investment commitments
and proposed operations.
The Partnership established working capital reserves of approximately 3% of
capital contributions, an amount which is anticipated to be sufficient to
satisfy general working capital and administrative expense requirements of the
Partnership excluding payment of the asset management fee as well as expenses
attendant to the preparation of tax returns and reports to the Limited Partners
and other investor servicing obligations of the Partnerships. Liquidity would,
however, be adversely affected by unanticipated or greater than anticipated
operating costs. The Partnership's liquidity could also be affected by defaults
or delays in payment of the Limited Partners' promissory notes, from which a
portion of the working capital reserves is expected to be funded. To the extent
that working capital reserves are insufficient to satisfy the cash requirements
of the Partnership, it is anticipated that additional funds would be sought
through bank loans or other institutional financing. The General Partner may
also apply any cash distributions received from the Limited Partnerships for
such purposes or to replenish or increase working capital reserves.
Under the Partnership Agreements the Partnerships do not have the ability to
assess the Limited Partners for additional capital contributions to provide
capital if needed by the Partnership or Limited Partnerships. Accordingly, if
circumstances arise that cause the Limited Partnerships to require capital in
addition to that contributed by the Partnership and any equity contributed by
the general partners of the Limited Partnerships, the only sources from which
such capital needs will be able to be satisfied (other than the limited reserves
available at the Partnership level) will be (i) third-party debt financing
(which may not be available, if, as expected, the Apartment Complexes owned by
the Limited Partnerships are already substantially leveraged), (ii) additional
equity contributions or advances of the general partners of the Limited
Partnerships (in this regard, each local general partner is required to fund
operating deficits, but only for a period of two years following construction
completion), (iii) other equity sources (which could adversely affect the
Partnership's interest in Low Income Housing Credits, cash flow and/or proceeds
of sale or refinancing of the Apartment Complexes and result in adverse tax
consequences to the Limited Partners), or (iv) the sale or disposition of the
Apartment Complexes (which could have the same adverse effects as discussed in
(iii) above). There can be no assurance that funds from any of such sources
would be readily available in sufficient amounts to fund the capital requirement
of the Limited Partnerships in question. If such funds are not available, the
Limited Partnerships would risk foreclosure on their Apartment Complexes if they
were unable to re-negotiate the terms of their first mortgages and any other
debt secured by the Apartment Complexes to the extent the capital requirements
of the Limited Partnerships relate to such debt.
The Partnership's capital needs and resources are expected to undergo major
changes during their first several years of operations as a result of the
completion of their offerings of Units and their acquisition of investments.
Thereafter, the Partnership's capital needs and resources are expected to be
relatively stable over the holding periods of the investments except to the
extent of proceeds received in payment of promissory notes and disbursed to fund
the deferred obligations of the Partnership.
14
<PAGE>
Results of Operations
- ---------------------
As of September 30, 1997 and December 31, 1996 the Partnership had acquired 18
and 16 Limited Partnership Interests, respectively. Each of the 18 Limited
Partnerships receives or is expected to receive government assistance and each
of them has received a reservation for Housing Tax Credits. As of September 30,
1997, 14 of the Apartment Complexes in the Partnership had commenced
operations.. Accordingly, the "Equity in losses from limited partnerships" for
the periods ended December 31, 1996 and September 30, 1997 reflected in the
Statement of Operations of the Partnership is not indicative of the amounts to
be reported in future years.
As reflected on its Statements of Operations, the Partnership had a loss of
approximately $244,000 for the nine months ended September 30, 1997. The
component items of revenue and expense are discussed below.
Revenue. The Partnership's revenues consisted entirely of interest earned on
promissory notes and cash deposits held in financial institutions (i) as
reserves, or (ii) pending investment in Limited Partnerships. Interest revenue
in future years will be a function of prevailing interest rates and the amount
of cash balances. It is anticipated that the Partnership will maintain cash
Reserves in an amount not materially in excess of the minimum amount required by
its Partnership Agreement, which is 3% of capital contributions.
Expenses. The most significant component of operating expenses was and is
expected to be the Asset Management Fee. The Asset Management Fee is equal to
the greater of (i) $2,000 for each Apartment Complex or (ii) 0.275% of gross
proceeds, and will be decreased or increased annually based on changes to the
Consumer Price Index.
Amortization expense consist of the amortization over a period of 30 years of
the Acquisition Fee and other expenses attributable to the acquisition of
Limited Partnership Interests.
Because of the amounts of the Asset Management Fee and amortization expense
primarily are determined by the gross proceeds from the offering, the number and
size of Apartment Complexes and the number of investors, until termination of
the Offering and investment of the net proceeds therefrom the Partnership cannot
predict with any accuracy what these amounts will be.
Equity in Losses from Limited Partnership. The Partnership's equity in losses
from Limited Partnerships is equal to 99% of the aggregate net losses of each
Limited Partnership incurred after admission of the Partnership as a limited
partner thereof.
After rent-up all Limited Partnerships are expected to generate losses during
each year of operations; this is so because, although rental income is expected
to exceed cash operating expenses, depreciation and amortization deductions
claimed by the Limited Partnerships are expected to exceed net rental income.
The Partnership accounts for its investments in Local Partnerships using the
equity method of accounting, whereby the Partnership reduces its investment
balance for its share of Local Partnerships' losses and distributions. Losses
are not recognized to the extent that the investment balance would be adjusted
below zero.
15
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
1. None.
No reports on Form 8-K were filed during the quarter ended September
30, 1997.
16
<PAGE>
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 V, L.P., SERIES 3
By: WNC Tax Credit Partners IV, L.P. General Partner
By: WNC & ASSOCIATES, INC. General Partner
By: /s/ John B. Lester, Jr.
- -----------------------------------------------------
John B. Lester, Jr. President
Date: November 10, 1997
By: /s/ Theodore M. Paul
- -----------------------------------------------------
Theodore M. Paul Vice President - Finance
Date: November 10, 1997
17
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
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