-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LvespuRXfbLXM5Z+H0pKcBz4wVE60/N1LnlW27XWDyHllgE3c7vUVMW0KVVglPaZ 0zFQK3xQUQymizn9xFekrQ== 0000276326-96-000002.txt : 19960401 0000276326-96-000002.hdr.sgml : 19960401 ACCESSION NUMBER: 0000276326-96-000002 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND IX LTD CENTRAL INDEX KEY: 0000276326 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 942491437 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-09026 FILM NUMBER: 96541540 BUSINESS ADDRESS: STREET 1: 13760 NOEL RD STE 700 STREET 2: LB70 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144485800 MAIL ADDRESS: STREET 1: 13760 NOEL ROAD SUITE 700 LB 70 CITY: DALLAS STATE: TX ZIP: 75240 10-K405 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K405 [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 ------------------------------------------------- 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 0-9026 --------- McNEIL REAL ESTATE FUND IX, LTD. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 94-2491437 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (214) 448-5800 ----------------------------- Securities registered pursuant to Section 12(b) of the Act: None - ---------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: Limited partnership units - ---------------------------------------------------------- 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] 104,455 of the registrant's 110,170 limited partnership units are held by non-affiliates of this registrant. The aggregate market value of units held by non-affiliates is not determinable since there is no public trading market for limited partnership units and transfers of units are subject to certain restrictions. Documents Incorporated by Reference: See Item 14, Page 42 TOTAL OF 47 PAGES PART I ITEM 1. BUSINESS - ------- -------- ORGANIZATION - ------------ McNeil Real Estate Fund IX, Ltd., (the "Partnership") was organized May 1, 1978, as a limited partnership under provisions of the California Uniform Limited Partnership Act. The general partner of the Partnership is McNeil Partners L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil ("McNeil"). The Partnership is governed by an amended and restated partnership agreement of limited partnership dated November 12, 1991, as amended (the "Amended Partnership Agreement"). Prior to November 12, 1991, Pacific Investors Corporation (the prior "Corporate General Partner"), a wholly-owned subsidiary of Southmark Corporation ("Southmark"), and McNeil were the general partners of the Partnership, which was governed by an agreement of limited partnership dated May 1, 1978 (the "Original Partnership Agreement"). The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240. On January 10, 1979, a Registration Statement on Form S-11 was declared effective by the Securities and Exchange Commission whereby the Partnership offered for sale $55,000,000 of limited partnership units ("Units"). The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The sale of Units closed on September 7, 1979, with 110,000 Units sold at $500 each, or gross proceeds of $55,000,000 to the Partnership. In addition, the original general partners purchased an additional 200 Units for $100,000. In 1993, 30 Units were relinquished leaving 110,170 Units outstanding at December 31, 1995. SOUTHMARK BANKRUPTCY AND ASSET PURCHASE AGREEMENT - ------------------------------------------------- On July 14, 1989, Southmark filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Neither the Partnership, McNeil nor the Corporate General Partner were included in the filing. Southmark's reorganization plan became effective August 10, 1990. Under the plan, most of Southmark's assets, which included Southmark's interests in the Corporate General Partner, are being sold or liquidated for the benefit of creditors. In accordance with Southmark's reorganization plan, Southmark, McNeil and various of their affiliates entered into an asset purchase agreement on October 12, 1990 providing for, among other things, the transfer of control to McNeil or his affiliates of 34 limited partnerships (including the Partnership) in the Southmark portfolio. On February 14, 1991, pursuant to the asset purchase agreement as amended on that date: (a) an affiliate of McNeil purchased the Corporate General Partner's economic interest in the Partnership; (b) McNeil became the managing general partner of the Partnership pursuant to an agreement with the Corporate General Partner that delegated management authority to McNeil; and (c) McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of McNeil, acquired the assets relating to the property management and partnership administrative business of Southmark and its affiliates and commenced management of the Partnership's properties pursuant to an assignment of the existing property management agreements from the Southmark affiliates. On November 12, 1991, the limited partners approved a restructuring proposal that provided for (i) the replacement of the Corporate General Partner and McNeil with the General Partner; (ii) the adoption of the Amended Partnership Agreement, which substantially alters the provisions of the Original Partnership Agreement relating to, among other things, compensation, reimbursement of expenses, and voting rights; and (iii) the approval of a new property management agreement with McREMI, the Partnership's property manager. The Amended Partnership Agreement provides for a Management Incentive Distribution ("MID") to replace all other forms of general partner compensation other than property management fees and reimbursements of certain costs. Additional Units may be issued in connection with the payment of the MID pursuant to the Amended Partnership Agreement. See Item 8 - Note 2 - "Transactions with Affiliates." For a discussion of the methodology for calculating and distributing MID, see Item 13 - Certain Relationships and Related Transactions. Settlement of Claims: The Partnership filed claims with the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court") against Southmark for damages relating to improper overcharges, breach of contract and breach of fiduciary duty. The Partnership settled these claims in 1991, and such settlement was approved by the Bankruptcy Court. An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April 14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in May 1995, the Partnership received in full satisfaction of its claims, $53,573 in cash, and common and preferred stock in the reorganized Southmark. The cash and stock represent the Partnership's pro-rata share of Southmark assets available for Class 8 claimants. The Partnership sold the Southmark common and preferred stock in May 1995 for $17,244 which, when combined with the cash proceeds from Southmark, resulted in a gain on settlement of litigation of $70,817. CURRENT OPERATIONS - ------------------ General: The Partnership is engaged in real estate activities, including the ownership, operation and management of residential real estate and other real estate related assets. At December 31, 1995, the Partnership owned fourteen income-producing properties as described in Item 2 - Properties. The Partnership does not directly employ any personnel. The General Partner conducts the business of the Partnership directly and through its affiliates. The Partnership is managed by the General Partner. The Partnership has reimbursed affiliates of the General Partner for certain expenses incurred by the affiliates in connection with the management of the Partnership. See Item 8 - - Note 2 - "Transactions With Affiliates." The business of the Partnership to date has involved only one industry segment. See Item 8 - Financial Statements and Supplementary Data. The Partnership has no foreign operations. The business of the Partnership is not seasonal. Business Plan: The Partnership's anticipated plan of operations for 1996 is to preserve or increase the net operating income of its properties whenever possible, while at the same time making whatever capital expenditures are reasonable under the circumstances in order to preserve and enhance the value of the Partnership's properties. The General Partner is evaluating market and other economic conditions to determine the optimum time to commence an orderly liquidation of the Partnership's properties in accordance with the terms of the Amended Partnership Agreement. In conjunction therewith, the General Partner will continue to explore potential avenues to enhance the value of the limited partners' Units, which may include, among other things, asset sales or refinancings of the Partnership's properties followed by distributions. See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. Competitive Conditions: Since the principal business of the Partnership is to own and operate real estate, the Partnership is subject to all of the risks incident to ownership of real estate and interests therein, many of which relate to the illiquidity of this type of investment. These risks include changes in general or local economic conditions, changes in supply or demand for competing properties in an area, changes in interest rates and availability of permanent mortgage funds which may render the sale or refinancing of a property difficult or unattractive, changes in real estate and zoning laws, increases in real property tax rates and Federal or local economic or rent controls. The illiquidity of real estate investments generally impairs the ability of the Partnership to respond promptly to changed circumstances. The Partnership competes with numerous established companies, private investors (including foreign investors), real estate investment trusts, limited partnerships and other entities (many of which have greater resources than the Partnership) in connection with the sale, financing and leasing of properties. The impact of these risks on the Partnership, including losses from operations and foreclosures of the Partnership's properties, is described in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. See Item 2 - Properties for discussion of competitive conditions at the Partnership's properties. Other information: The environmental laws of the Federal government and of certain state and local governments impose liability on current property owners for the clean-up of hazardous and toxic substances discharged on the property. This liability may be imposed without regard to the timing, cause or person responsible for the release of such substances onto the property. The Partnership could be subject to such liability in the event that it owns properties having such environmental problems. The Partnership has no knowledge of any pending claims or proceedings regarding such environmental problems. In August 1995, High River Limited Partnership, a Delaware limited partnership controlled by Carl C. Icahn ("High River") made an unsolicited tender offer (the "HR Offer") to purchase from holders of Units up to approximately 45% of the outstanding Units of the Partnership for a purchase price of $143 per Unit. In addition, High River made unsolicited tender offers for certain other partnerships controlled by the General Partner. The Partnership recommended that the limited partners reject the HR Offer made with respect to the Partnership and not tender their Units pursuant to the HR Offer. The HR Offer terminated, after numerous extensions, on October 6, 1995. The General Partner believes that as of February 29, 1996, High River has purchased approximately 7.23% of the outstanding Units pursuant to the HR Offer. In addition, all litigation filed by High River, Mr. Icahn and his affiliates in connection with the HR Offer has been dismissed without prejudice. ITEM 2. PROPERTIES - ------- ---------- The following table sets forth the real estate investment portfolio of the Partnership at December 31, 1995. The buildings and the land on which they are located are owned by the Partnership in fee, subject in each case (with the exception of Westridge, which is unencumbered by mortgage indebtedness) to a first lien deed of trust as set forth more fully in Item 8 - Note 5 - "Mortgage Notes Payable." See also Item 8 - Note 4 - "Real Estate Investments" and Schedule III - "Real Estate Investments and Accumulated Depreciation." In the opinion of management, the properties are adequately covered by insurance.
Net Basis 1995 Date Property Description of Property Debt Property Tax Acquired - -------- ----------- --------------- -------------- --------------- -------- Berkley Hills (1) Apartments Madison, TN 251 units $ 2,517,754 $ 3,255,924 $ 66,132 6/79 Cherry Hills (2) Apartments Wichita, KS 348 units 4,624,405 4,634,041 80,477 6/80 Forest Park Village (3) Apartments Columbus, OH 376 units 4,056,519 6,192,845 182,342 12/79 Heather Square Apartments Dallas, TX 288 units 4,235,681 3,429,615 153,017 10/79 Lantern Tree (4) Apartments Omaha, NE 110 units 1,523,877 2,404,122 63,486 7/79 Meridian West (5) Apartments Puyallup, WA 181 units 2,553,373 3,352,624 85,691 1/80 Pennbrook (6) Apartments Dallas, TX 216 units 3,447,954 3,187,297 148,613 1/80 Rockborough (7) Apartments Addison, TX 136 units 2,156,550 2,212,544 67,906 1/80 Rolling Hills (8) Apartments Louisville, KY 400 units 4,100,405 6,685,297 80,137 9/79 Ruskin Place (9) Apartments Lincoln, NE 270 units 2,911,102 4,581,309 165,054 12/79 Sheraton Hills Apartments Nashville, TN 272 units 2,597,459 2,838,674 88,191 6/79
Net Basis 1995 Date Property Description of Property Debt Property Tax Acquired - -------- ----------- --------------- -------------- --------------- -------- Westgate (10) Apartments Lansing, MI 264 units $ 2,956,800 $ 5,893,110 $ 145,457 12/79 Westridge Apartments Ft. Worth, TX 176 units 2,311,872 - 50,667 1/80 Williamsburg (11) Apartments Shreveport, LA 194 units 2,440,411 2,723,420 59,283 12/79 -------------- ------------- ------------ $ 42,434,162 $ 51,390,822 $ 1,436,453 ============== ============= ============
- ----------------------------------------- Total: Apartments - 3,482 units (1) Berkley Hills Apartments is owned by Berkley Hills Associates which is wholly-owned by the Partnership and the General Partner. (2) Cherry Hills Apartments is owned by Cherry Hills Fund IX Limited Partnership which is wholly-owned by the Partnership. (3) Forest Park Village Apartments is owned by Forest Park Fund IX Associates Limited Partnership which is wholly-owned by the Partnership and the General Partner. (4) Lantern Tree Apartments is owned by Lantern Tree Fund IX Limited Partnership which is wholly-owned by the Partnership. (5) Meridian West Apartments is owned by Meridian West Fund IX Limited Partnership which is wholly-owned by the Partnership. (6) Pennbrook Apartments is owned by Pennbrook Fund IX Associates, L.P. which is wholly-owned by the Partnership and the General Partner. (7) Rockborough Apartments is owned by Rockborough Fund IX Limited Partnership which is wholly-owned by the Partnership. (8) Rolling Hills Apartments is owned by Rolling Hills Fund IX Associates L.P. which is wholly-owned by the Partnership and the General Partner. (9) Ruskin Place Apartments is owned by Ruskin Place Fund IX Associates which is wholly-owned by the Partnership and the General Partner. (10) Westgate Apartments (formerly known as Sherwood Forest Apartments) is owned by Sherwood Forest Fund IX Associates which is wholly-owned by the Partnership and the General Partner. (11) Williamsburg Apartments is owned by Williamsburg Fund IX Limited Partnership which is wholly-owned by the Partnership. The following table sets forth the properties' occupancy rate and rent per square foot for each of the last five years:
1995 1994 1993 1992 1991 ------------- ------------- -------------- ------------- ----------- Berkley Hills Occupancy Rate............ 98% 98% 98% 94% 87% Rent Per Square Foot...... $5.69 $5.35 $4.87 $4.48 $4.39 Cherry Hills Occupancy Rate............ 89% 89% 81% 85% 92% Rent Per Square Foot...... $5.75 $5.80 $5.05 $5.15 $4.90 Forest Park Village Occupancy Rate............ 85% 92% 91% 91% 92% Rent Per Square Foot...... $5.80 $5.57 $5.51 $5.38 $5.22 Heather Square Occupancy Rate............ 99% 99% 97% 93% 93% Rent Per Square Foot...... $7.00 $6.61 $6.20 $5.75 $5.58 Lantern Tree Occupancy Rate............ 99% 99% 96% 97% 96% Rent Per Square Foot...... $7.58 $7.07 $6.83 $6.41 $6.02 Meridian West Occupancy Rate............ 93% 90% 92% 95% 96% Rent Per Square Foot...... $7.18 $6.99 $7.35 $7.11 $6.89 Pennbrook Occupancy Rate............ 98% 94% 97% 95% 87% Rent Per Square Foot...... $7.62 $7.23 $7.03 $6.62 $6.05
1995 1994 1993 1992 1991 ------------- ------------- -------------- ------------- ------------ Rockborough Occupancy Rate............ 97% 99% 96% 93% 93% Rent Per Square Foot...... $7.80 $7.40 $7.00 $6.67 $6.25 Rolling Hills Occupancy Rate............ 94% 97% 90% 91% 93% Rent Per Square Foot...... $4.66 $4.33 $3.95 $3.79 $3.69 Ruskin Place Occupancy Rate............ 97% 96% 97% 96% 95% Rent Per Square Foot...... $6.78 $6.47 $6.26 $6.10 $5.68 Sheraton Hills Occupancy Rate............ 98% 97% 98% 94% 92% Rent Per Square Foot...... $5.53 $5.14 $4.85 $4.37 $4.25 Westgate Occupancy Rate............ 86% 92% 94% 94% 93% Rent Per Square Foot...... $6.66 $6.51 $6.15 $6.11 $5.91 Westridge Occupancy Rate............ 89% 96% 86% 92% 91% Rent Per Square Foot...... $4.80 $4.64 $4.43 $4.48 $4.26 Williamsburg Occupancy Rate............ 95% 99% 97% 95% 91% Rent Per Square Foot...... $6.22 $5.86 $5.41 $4.98 $4.74
Occupancy rate represents all units leased divided by the total number of units of the property as of December 31 of the given year. Rent per square foot represents all revenue, except interest, derived from the property divided by the leasable square footage of the property. Competitive Conditions at Properties - ------------------------------------ A strong local economy has benefited Berkley Hills Apartments. The property increased rental rates 6% over 1994 levels, in line with averages for the local area. Occupancy rates, too, have been comparable with the property's competition. Capital improvements at Berkley Hills have allowed the property to remain competitive with nearby apartment communities. The strong local economy, and the high occupancy rates are prompting new construction in the area; but to date, the new construction has not been located near Berkley Hills, and has been targeted to upscale single residents while Berkley Hills targets middle class families and singles. Cherry Hills Apartments is one of Wichita's finer apartment communities in terms of interior and exterior appearance. The well-maintained property's occupancy rate is several points above the average occupancy rate of its competitors. Rental rates, also, have typically been higher than the rates charged by the property's competitors. The Wichita area, however, has been a difficult market for apartment communities. Nearby McConnell Air Force Base has constructed new housing facilities for military personnel, upon which Cherry Hills relies for many of its tenants. Cuts in military spending may also impact McConnell Air Force Base and thereby impact Cherry Hills. Forest Park Village Apartments is currently in the midst of a four-year capital improvement program. Exterior renovations are largely complete, and interior upgrades are in process. The capital program is needed to allow the property to compete with numerous other apartment communities in the Northeast Columbus submarket. Forest Park Village represents a common property in the submarket, with no distinguishing characteristics other than basements in all its units. The submarket is very competitive, and many of the competing properties have been renovated in the past few years. The capital program will allow Forest Park Village to maintain its competitiveness. Occupancy rates at Heather Square Apartments typically run 2 or 3 percentage points above the market due to the excellent curb appeal of the property. The property also is able to command rental rates slightly higher than most of its competition. Competition is mixed in the Dallas submarket where Heather Square is located. As long as the local economy remains strong, it is anticipated that the property will do well in competition with both older properties and new construction under development. Annual absorption of apartment units has roughly equaled newly constructed units the past two years. Lantern Tree Apartments has maintained occupancy and rental rates higher than its competition due to spacious and attractive floor plans. The average area occupancy rate is 95%, but Lantern Tree usually exceeds that level. Depending on the size of the unit, rent per square foot at Lantern Tree averages 13% to 30% higher than its competition. The property appeals to single, upper-middle class residents. The principal competitive disadvantage of the property is its location that is set back from the main thoroughfare reducing its drive-by visibility. The economy in Meridian West Apartments' submarket has improved during the past year. The area's major employer, Boeing, has increased its activity in the area. As a result, rental and occupancy rates in the area are on the upswing. Meridian West's occupancy rate improved in 1995 over 1994. Management plans to increase rental rates and eliminate discounts in 1996. Meridian West competes primarily with better quality apartment communities, and thus the Partnership generally expects rental and occupancy rates lower than local market rates. Capital improvements placed in service during 1995 and 1994 were critical to allow the property to compete effectively with its better-quality competition. Occupancy rates at Pennbrook Apartments are in-line with the 95% average of the submarket where the property is located. Extensive capital improvements during 1991-1993 have positioned the property to compete effectively for the middle-class, single residents that dominate its resident profile. The Dallas market is expected to remain strong. For the past two years, new apartment construction has roughly equaled the number of apartment units absorbed by the market. Absorption is expected to lag construction in 1996, but the surplus units will likely be limited to newer, high-quality apartment properties and should have little effect on Pennbrook. Rockborough Apartments boasts excellent curb appeal, which has enabled the property to maintain occupancy levels a few percentage points above the 94% market average. Rockborough compares well to the established apartment communities in the area. New construction is going in the area, but at rental rates substantially higher than the rates charged at Rockborough. The Dallas area economy is expected to remain strong. New apartment construction is expected to exceed absorption in 1996, but the surplus units will likely be limited to newer, high-quality apartment properties and should have little effect on Rockborough. The area surrounding Rolling Hills Apartments is experiencing strong growth. Capital improvements at Rolling Hills the past two years have upgraded the property to compete more effectively with the high-quality apartment communities in the immediate area. Rolling Hills offers the largest floor plans in the area. The interiors of the units are dated, necessitating scheduled 1996 improvements to unit interiors. Occupancy rates are comparable to the market's 96% average, but average rental rates are lower than the market. Rolling Hills is a good quality property competing against even-better quality properties. Ruskin Place Apartments has steadily improved its performance over the past several years despite competitive pressures from newer apartment properties. The newer properties, and new construction in progress, have put upward pressure on local rental rates. Ruskin Place Apartments has been able to offer its units at lower, but still rising rental rates. This trend is expected to continue given the population increases and stable economic conditions in the local area. The Nashville economy is expected to remain strong through 1997, and developers are planning new apartment projects in the area of Sheraton Hills Apartments. Older properties, such as Sheraton Hills, have been able to increase rental rates an average of 6% to 7% since 1993. Although Sheraton Hills will not compete directly with the new construction, the new construction will tend to slow the increases in rental rates that older properties may expect in coming years. The capital improvements placed in service at Sheraton Hills over the past two years allow the property to compete effectively against older properties in the area. Westgate Apartments is in need of extensive capital improvements to compete effectively with other area apartment properties. The exterior and interiors of the units are dated and unattractive. Occupancy rates are averaging four percentage points below competing properties, and rental rates are averaging approximately 85% of the average rental rates charged by competing properties. Nine percent of Westgate's units are three and four bedroom floor plans, which are the only three and four bedroom units in the area. The local economy is doing very well, with unemployment at 2.8%. The property also has a good location in a desirable school district. The economy of the Fort Worth sub-market where Westridge Apartments is located remains weak due to the closing of nearby Carswell Air Force Base and layoffs at Lockheed. Weakness in the area economy has prevented any meaningful rental increases since 1990. Westridge is well maintained and offers attractive floorplans. The occupancy rate has averaged 5 percentage points higher than competitive properties in the area. The physical condition of Williamsburg Apartments is good, with only minor capital improvements needed. The property offers attractive floor plans with interiors that are being upgraded with new fixtures. The Shreveport market has experienced modest improvement over the past three years. Nearby Barksdale Air Force Base and a growing gambling industry provide the employment base for many of the property's tenants. The occupancy rate at Williamsburg usually exceeds market occupancy rates by two percentage points due to its excellent curb appeal. New apartment developments within a mile of the property are a concern. ITEM 3. LEGAL PROCEEDINGS - ------- ----------------- The Partnership is not party to, nor are any of the Partnership's properties the subject of, any material pending legal proceedings, other than ordinary, routine litigation incidental to the Partnership's business, except for the following: 1) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil (L95012) - High River ("HR") filed this action in the United States District Court for the Southern District of New York against McNeil Partners, L.P., McNeil Investors, Inc. and Mr. and Mrs. McNeil (as defined in this Section 1, collectively, the "Defendants") requesting, among other things, names and addresses of the limited partners in the partnerships referenced above (as defined in this Section 1, the "Partnerships"). The District Court issued a preliminary injunction against the Partnerships requiring them to commence mailing materials relating to the HR tender offer on August 14, 1995. On August 18, 1995, the Defendants filed an Answer and Counterclaim. The Counterclaim principally asserts (1) the HR tender offers have been undertaken in violation of the federal securities laws, on the basis of material, non-public, and confidential information, and (2) that the HR offer documents omit and/or misrepresent certain material information about the HR tender offers. The Counterclaim seeks a preliminary and permanent injunction against the continuation of the HR tender offers and, alternatively, ordering corrective disclosure with respect to allegedly false and misleading statements contained in the tender offer documents. This action was dismissed without prejudice in November 1995. 2) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil - United States District Court for the Southern District of New York, (Case No. 95 Civ. 9488) (Second Action). On November 7, 1995, High River filed a second complaint with the District Court which alleges, inter alia, that McNeil Partners, L.P.'s (the "General Partner") Schedule 14D-9 filed in connection with the High River tender offers was materially false and misleading, in violation of Sections 14(d) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(d) and (e), and the SEC Regulations promulgated thereunder; and that High River further alleges that the General Partner has wrongfully refused to admit High River as a limited partner to the ten partnerships referenced above. Additionally, High River purports to assert claims derivatively on behalf of McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund XXV, L.P., for breach of contract and breach of fiduciary duty, asserting that the General Partner has charged these partnerships excessive fees. High River's complaint seeks, inter alia, preliminary injunctive relief requiring the General Partner to admit High River as a limited partner in each of the ten partnerships referenced above and to transfer the tendered units of interest in the partnerships to High River; an unspecified award of damages payable to High River and an additional unspecified award of damages payable to certain of the partnerships; an order that defendants must discharge their fiduciary duties and must account for all fees they have received from certain of the partnerships; and attorneys' fees. On January 31, 1996, this action was dismissed without prejudice. 3) Robert Lewis v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil et al - In the District Court of Dallas County, Texas, A-14th Judicial District, Cause No. 95-08535 (Class Action) - Plaintiff, Robert Lewis, is a limited partner with McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV, Ltd. Plaintiff brings this action on his own behalf and as a class action on behalf of the class of all limited partners of McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund XXV, Ltd. (as defined in this Section 3, the "Partnerships") as of August 4, 1995. Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 3, collectively, the "Defendants") breached their fiduciary duties by, among other things, (1) failing to attempt to sell the properties owned by the Partnerships (as defined in this Section 3, the "Properties") and extending the lives of the Partnerships indefinitely, contrary to the Partnerships' business plans, (2) paying distributions to themselves and generating fees for their affiliates, (3) refusing to make significant distributions to the class members, despite the fact that the Partnerships have positive cash flows and substantial cash balances, and (4) failing to take steps to create an auction market for equity interests of the Partnerships, despite the fact that a third party bidder filed tender offers for approximately forty-five percent (45%) of the outstanding units of each of the Partnerships. Plaintiff also claims that Defendants have breached the partnership agreements of the Partnerships by failing to take steps to liquidate the Properties and by their alteration of the Partnerships' primary purposes, their acts in contravention of these agreements, and their use of the assets of the Partnerships for their own benefit instead of for the benefit of the Partnerships. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 4) James F. Schofield, Gerald C. Gillett and Donna S. Gillett v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. et al - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint) and United States District Court, Southern District of New York, Case No. 95CIV.6711 (Class and Derivative Action Complaint) These are corporate/securities class and derivative actions brought in state and federal court by limited partners of each of the nine (9) limited partnerships that are named as nominal defendants as listed above (as defined in this Section 4, the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and four (4) of their senior officers and/or directors (as defined in this Section 4, collectively, the "Defendants") have breached their fiduciary duties. Specifically, Plaintiffs allege that Defendants have caused the Partnerships to enter into several wasteful transactions that have no business purpose or benefit to the Partnerships and which have rendered such units highly illiquid and artificially depressed the prices that are available for units on the limited resale market. Plaintiffs also allege that Defendants have engaged in a course of conduct to prevent the acquisition of units by Carl Icahn by disseminating false, misleading and inadequate information. Plaintiffs further allege that Defendants have acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders and, thereby, have breached the partnership agreements. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend these actions. 5) Alfred Napoletano v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133849 (Class Action Complaint) Plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above (as defined in this Section 5, the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 5, collectively, the "Defendants") have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River tender offers, (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 6) Warren Heller v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133957 (Class Action Complaint) Plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above (as defined in this Section 6, the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 6, collectively, the "Defendants") have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River tender offers, (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. For a discussion of the Southmark bankruptcy, see Item 1 - Business. See also Item 8 - Note 9 - "Gain on Legal Settlement." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND - ------- ------------------------------------------------------------ RELATED SECURITY HOLDER MATTERS ------------------------------- (A) There is no established public trading market for limited partnership units, nor is one expected to develop. (B) Title of Class Number of Record Unit Holders -------------- ----------------------------- Limited partnership units 4,896 as of February 16, 1996 (C) No distributions were made to the limited partners during 1995 or 1994 and none are anticipated in 1996. The Partnership accrued distributions of $1,070,763 and $973,023 for the benefit of the General Partner for the years ended December 31, 1995 and 1994, respectively, of which $357,763 remains unpaid at December 31, 1995. These distributions relate to the contingent MID pursuant to the Amended Partnership Agreement. Distributions of contingent MID are expected to be paid to the General Partner in 1996. See Item 8 - Note 2 - "Transactions with Affiliates." See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the likelihood that the Partnership will resume distributions to the limited partners. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth a summary of certain financial data for the Partnership. This summary should be read in conjunction with the Partnership's financial statements and notes thereto appearing in Item 8.
Statements of Years Ended December 31, Operations 1995 1994 1993 1992 1991 - ------------------ ------------- ------------- -------------- ------------- ------------ Rental revenue............... $ 19,123,434 $ 18,202,306 $ 17,215,644 $ 16,487,239 $ 15,808,082 Total revenue................ 19,567,182 18,642,220 17,367,511 16,636,929 16,123,484 Loss before extraordinary items....................... (328,996) (387,787) (1,320,829) (1,613,265) (1,927,436) Extraordinary items.......... - - (31,055) 104,096 - Net loss..................... (328,996) (387,787) (1,351,884) (1,509,169) (1,927,436) Net loss per limited partnership unit: Loss before extraordinary items......... $ (9.19) $ (9.21) $ (19.30) $ (22.05) $ (16.62) Extraordinary items......... - - (.28) .94 - ------------ ------------ ------------ ------------ ----------- Net loss..................... $ (9.19) $ (9.21) $ (19.58) $ (21.11) $ (16.62) ============ ============ ============ =========== =========== December 31, Balance Sheets 1995 1994 1993 1992 1991 - -------------- ------------- ------------- -------------- ------------- ------------- Real estate investments, net... $ 42,434,162 $ 42,830,552 $ 42,133,962 $ 42,478,066 $ 42,764,914 Total assets................... 49,970,886 51,749,891 53,376,263 49,696,209 51,098,910 Mortgage notes payable, net.... 51,390,822 52,098,952 52,610,769 46,917,274 44,846,933 Partners' equity (deficit)..... (4,400,760) (3,001,001) (1,640,191) 519,560 2,700,630
See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - ------- ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- FINANCIAL CONDITION - ------------------- The Partnership was formed to acquire, operate and ultimately dispose of a portfolio of income-producing real properties. At the end of 1995, the Partnership owned fourteen apartment properties. All but one of the Partnership's properties are subject to mortgage notes. RESULTS OF OPERATIONS - --------------------- 1995 compared to 1994 Revenue: Rental revenue for 1995 increased $921,128 or 5.1% over 1994 rental revenues. Rental revenues increased at all of the Partnership's properties, except for a .7% decrease at Cherry Hills. The Partnership raised base rental rates an average of 4.0% at all of its properties. Increases in base rental rates were partially offset by lower average occupancy rates at Berkley Hills, Westgate, Westridge and Williamsburg. Occupancy rates at the remainder of the Partnership's properties increased or remained steady. As discussed in Note 9 - "Gain on Legal Settlement," in 1995 the Partnership received cash and common and preferred stock in the reorganized Southmark in settlement of its bankruptcy claims against Southmark. The Partnership recognized a one-time gain of $70,817 gain as result of this settlement. The Partnership also recorded a $125,967 gain on involuntary conversion in 1995. The gain relates to hail damage incurred at Westridge Apartments on May 5, 1995, and to a fire that destroyed two units at Cherry Hill Apartments on November 3, 1995. The Partnership incurred damages of $150,938 and $55,495 at Westridge Apartments and Cherry Hill Apartments, respectively. The Partnership received a total of $185,094 from its insurance carrier to repair the damage at both properties. The excess of insurance proceeds over the adjusted basis of the property destroyed resulted in gains of $109,006 and $16,961, respectively. Expenses: Partnership expenses increased $866,171 or 4.6% in 1995 compared to 1994. The increased expenses were concentrated in depreciation and general and administrative expenses. Depreciation expense increased $527,010 or 15.5% in 1995 compared to 1994. Increased depreciation expense is the result of depreciation on the $3.6 million of new capital improvements placed in service during 1995. The capital improvements are generally depreciated over lives ranging from five to ten years. General and administrative expenses increased $120,290 or 68% in 1995 compared to 1994. The Partnership incurred $173,497 of costs relating to the evaluation and dissemination of information with regards to an unsolicited tender offer. No such expenses were incurred in 1994. 1994 compared to 1993 Revenue: Rental revenues for 1994 increased $986,662 or 5.7% over 1993 rental revenues. Rental revenues increased at thirteen of the Partnership's fourteen properties. The Partnership raised base rental rates at all of its properties except for Westridge Apartments. Increases in base rental rates were partially offset by lower average occupancy rates at Meridian West Apartments, Pennbrook Apartments, Ruskin Place Apartments, Sheraton Hills Apartments and Westgate Apartments. Average occupancy rates at the remainder of the properties increased or remained the same. Interest revenue increased 66% because of refinancing proceeds invested by the Partnership in interest-bearing accounts. The Partnership recorded a $187,854 gain on involuntary conversion in 1994. The gain relates to freeze damage incurred at Rolling Hills Apartments on January 19, 1994, and to a fire that destroyed eleven units at Rockborough Apartments on April 25, 1994. The Partnership incurred damages of $157,680 and $225,123 at Rolling Hills Apartments and Rockborough Apartments, respectively. The Partnership received a total of $359,878 from its insurance carrier to repair the damage at both properties. The excess of insurance proceeds over the adjusted basis of the property destroyed resulted in gains of $108,522 and $79,332 at Rolling Hills Apartments and Rockborough Apartments, respectively. Expenses: Partnership expenses increased $341,667 or 1.8% in 1994 compared to 1993. Expenses increased at eight of the Partnership's fourteen properties. The increased expenses were concentrated in depreciation, personnel expenses and property management fees - affiliates. Depreciation expense increased $375,961 or 12.5% in 1994 compared to 1993. The increase is due to capital improvements placed in service during the past three years. These improvements generally are being depreciated over lives ranging from five to ten years. Personnel expenses increased $200,579 or 8.8% in 1994 compared to 1993. Personnel expenses have increased and are expected to continue to increase due to the Partnership's effort to increase occupancy rates by the continuous refurbishment of residential units and upgrade of services offered to tenants. Such improvements are partially achieved through higher maintenance standards that require additional personnel and maintenance expenditures. Higher personnel expenses can also be attributed to on-site personnel performing certain maintenance procedures that were formerly contracted to vendors. Property management fees paid to affiliates increased $60,579 or 7.1% in 1994 compared to 1993. The increase is due to the increase of rental receipts of the Partnership, as noted above. Net rental receipts are the figures upon which property management fees are based. General and administrative expense decreased $58,891 or 25% for the year ended December 31, 1994. This decrease was due to savings the Partnership achieved through a new tax processing and reporting system and reduction in legal and professional fees. General and administrative expenses paid to affiliates decreased $17,982 or 2.4% during 1994 compared to 1993. These expenses include the fixed portion of the MID and reimbursement of overhead costs incurred by McREMI in managing the Partnership. Fixed MID decreased $114,720 due to elimination of the fixed MID effective July 1, 1993. Cost reimbursements increased $96,738 due to a reduction in the number of properties managed by McREMI over which such costs are allocated. All other expense items decreased a total of 1.9% in 1994 compared to 1993. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- During the three year period ended December 31, 1995, the Partnership experienced losses totaling $2,068,667. However, during the same three year period, the Partnership generated $10,013,508 of cash flow from operating activities. Cash provided by operating activities increased $71,879 of 1.9% in 1995 compared to 1994. A 17.6% increase in cash paid to suppliers was more than offset by an increase in cash received from tenants and decreases in interest paid and property taxes paid and escrowed. The Partnership continued to invest in capital improvements at its properties during 1995. The Partnership invested $3.4 million for capital improvements during 1995, net of insurance proceeds, a decrease from the $3.9 million invested by the Partnership during 1994. These expenditures are necessary to allow the Partnership's aging properties to maintain their appeal to current and prospective tenants. The Partnership has budgeted an additional $1.6 million for capital improvements for 1996. During 1994 and 1993, the Partnership refinanced or modified nine of its thirteen mortgage notes. These transactions added $5,055,199 to the Partnership's cash reserves, after payment of related deferred borrowing costs, and have reduced the weighted average interest rate of the Partnership's mortgage indebtedness to 8.61% from 9.79%. Cash proceeds from these transactions decreased to $161,809 in 1994 compared to $6,282,227 in 1993. As a result of these transactions, the Partnership's next maturing mortgage does not come due until January 1998. Short-term liquidity: Due to the refinancing transactions, the Partnership enters 1996 with substantial cash reserves. These reserves will be needed to address continuing capital improvement needs in light of the aging condition of the Partnership's properties. The Partnership has budgeted $1,600,000 for capital improvements for 1996 in addition to the $10.5 million of capital improvements made during the past three years. The General Partner believes these capital improvements are necessary to allow the Partnership to increase its rental revenues in the competitive markets in which the Partnership's properties operate. These expenditures also allow the Partnership to reduce certain repairs and maintenance expenses from amounts that would otherwise be incurred. At December 31, 1995, the Partnership held $3,059,582 of cash and cash equivalents, down $1,140,262 from the balance at the end of 1994. The General Partner anticipates that cash generated from operations in 1996 will be sufficient to fund the Partnership's budgeted capital improvements and to repay the current portion of the Partnership's mortgage notes. The Partnership's next maturing mortgage note does not come due until January 1998. However, 1996 cash flow from operations likely will not be adequate to pay administrative costs and MID obligations due to affiliates. The Partnership will use its cash reserves for these expenditures. The General Partner considers the Partnership's cash reserves adequate for anticipated operations for 1996. The General Partner has established a revolving credit facility, not to exceed $5,000,000 in the aggregate, which will be available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. There is no assurance that the Partnership will receive additional funds from the facility because no amount will be reserved for any particular partnership. As of December 31, 1995, $2,662,819 remained available from the facility; however, additional funds could become available as other partnerships repay borrowings. This commitment will terminate on November 12, 1996. Long-term liquidity: For the long term, property operations will remain the primary source of funds. In this regard, the General Partner expects that the $10.5 million of capital improvements made by the Partnership during the past three years will yield improved cash flow from property operations in 1996. Furthermore, the General Partner has budgeted an additional $1,600,000 of capital improvements for 1996. If the Partnership's cash position deteriorates, the General Partner may elect to defer certain of the capital improvements, except where such improvements are expected to increase the competitiveness or marketability of the Partnership's properties. As an additional source of liquidity, the General Partner may attempt to sell Partnership properties judged to be mature considering the circumstances of the market where the properties are located, as well as the Partnership's need for liquidity. However, there can be no guarantee that the Partnership will be able to sell any of its properties for an amount sufficient to retire the related mortgage note and still provide cash proceeds to the Partnership, or that such cash proceeds could be timed to coincide with the liquidity needs of the Partnership. Currently, no Partnership properties are being marketed for sale. Income Allocations and Distributions: Terms of the Amended Partnership Agreement specify that income before depreciation is allocated to the General Partner to the extent of contingent MID paid in cash. Depreciation is allocated in the ratio of 95:5 to the limited partners and the General Partner, respectively. Therefore for the three year period ended December 31, 1995, $684,002, $627,358, and $804,977, respectively, was allocated to the General Partner. The limited partners received allocations of net loss of ($1,012,998), ($1,015,145), and ($2,156,861) for the three year period ended December 31, 1995, respectively. With the exception of the contingent MID, distributions to partners have been suspended since 1986 as part of the General Partner's policy of maintaining adequate cash reserves. Distributions to Unit holders will remain suspended for the foreseeable future. The General Partner will continue to monitor the cash reserves and working capital needs of the Partnership to determine when cash flows will support distributions to the Unit holders. During 1995, the Partnership recorded contingent MID of $1,070,763. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------- -------------------------------------------
Page Number ------ INDEX TO FINANCIAL STATEMENTS - ----------------------------- Financial Statements: Report of Independent Public Accountants............. 18 Balance Sheets at December 31, 1995 and 1994......... 19 Statements of Operations for each of the three years in the period ended December 31, 1995........ 20 Statements of Partners' Equity (Deficit) for each of the three years in the period ended December 31, 1995.................................. 21 Statements of Cash Flows for each of the three years in the period ended December 31, 1995........ 22 Notes to Financial Statements........................ 24 Financial Statement Schedule: Schedule III - Real Estate Investments and Accumulated Depreciation....................... 37
All other schedules are omitted because they are not applicable or the financial information required is included in the financial statements or the notes thereto. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of McNeil Real Estate Fund IX, Ltd.: We have audited the accompanying balance sheets of McNeil Real Estate Fund IX, Ltd. (a California limited partnership) as of December 31, 1995 and 1994, and the related statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1995. These financial statements and the schedule referred to below are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of McNeil Real Estate Fund IX, Ltd. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Dallas, Texas March 6, 1996 McNEIL REAL ESTATE FUND IX, LTD. BALANCE SHEETS
December 31, ----------------------------------- 1995 1994 --------------- -------------- ASSETS - ------ Real estate investments: Land..................................................... $ 6,716,099 $ 6,716,099 Buildings and improvements............................... 83,847,294 80,388,616 -------------- ------------- 90,563,393 87,104,715 Less: Accumulated depreciation.......................... (48,129,231) (44,274,163) -------------- ------------- 42,434,162 42,830,552 Cash and cash equivalents................................... 3,059,582 4,199,844 Cash segregated for security deposits....................... 534,609 494,801 Accounts receivable......................................... 114,367 64,464 Prepaid expenses and other assets........................... 223,959 211,266 Escrow deposits............................................. 1,418,389 1,561,384 Deferred borrowing costs, net of accumulated amortization of $689,693 and $487,931 at December 31, 1995 and 1994, respectively................. 2,185,818 2,387,580 -------------- ------------- $ 49,970,886 $ 51,749,891 ============== ============= LIABILITIES AND PARTNERS' DEFICIT - --------------------------------- Mortgage notes payable, net................................. $ 51,390,822 $ 52,098,952 Accounts payable............................................ 266,777 413,894 Accrued property taxes...................................... 962,251 934,733 Accrued interest............................................ 374,740 303,521 Other accrued expenses...................................... 306,022 192,952 Payable to affiliates - General Partner..................... 508,369 308,131 Security deposits and deferred rental revenue............... 562,665 498,709 -------------- ------------- 54,371,646 54,750,892 -------------- ------------- Partners' deficit: Limited partners - 110,200 limited partnership units authorized, 110,170 limited partnership units issued and outstanding........................... (1,574,003) (561,005) General Partner.......................................... (2,826,757) (2,439,996) -------------- ------------- (4,400,760) (3,001,001) -------------- ------------- $ 49,970,886 $ 51,749,891 ============== =============
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND IX, LTD. STATEMENTS OF OPERATIONS
For the Years Ended December 31, ---------------------------------------------------- 1995 1994 1993 -------------- -------------- --------------- Revenue: Rental revenue.......................... $ 19,123,434 $ 18,202,306 $ 17,215,644 Interest................................ 246,964 252,060 151,867 Gain on legal settlement................ 70,817 - - Gain on involuntary conversions......... 125,967 187,854 - ------------- ------------- -------------- Total revenue......................... 19,567,182 18,642,220 17,367,511 ------------- ------------- -------------- Expenses: Interest................................ 4,856,024 4,884,548 4,881,418 Depreciation............................ 3,919,845 3,392,835 3,016,874 Property taxes.......................... 1,436,453 1,341,960 1,360,979 Personnel expenses...................... 2,511,799 2,472,613 2,272,034 Repairs and maintenance................. 2,377,270 2,423,640 2,577,210 Property management fees - affiliates............................ 946,627 915,989 855,410 Utilities............................... 1,556,159 1,527,997 1,535,302 Other property operating expenses....... 1,261,940 1,174,837 1,216,652 General and administrative.............. 296,175 175,885 234,776 General and administrative - affiliates............................ 733,886 719,703 737,685 ------------- ------------- -------------- Total expenses........................ 19,896,178 19,030,007 18,688,340 ------------- ------------- -------------- Loss before extraordinary items............ (328,996) (387,787) (1,320,829) Extraordinary items........................ - - (31,055) ------------- ------------- -------------- Net loss................................... $ (328,996) $ (387,787) $ (1,351,884) ============= ============= ============== Net loss allocated to limited partners................................ $ (1,012,998) $ (1,015,145) $ (2,156,861) Net income allocated to the General Partner......................... 684,002 627,358 804,977 ------------- ------------- -------------- Net loss................................... $ (328,996) $ (387,787) $ (1,351,884) ============= ============= ============== Net loss per limited partnership unit: Loss before extraordinary items......... $ (9.19) $ (9.21) $ (19.30) Extraordinary items..................... - - (.28) ------------- ------------- ------------- Net loss per limited partnership unit.................................. $ (9.19) $ (9.21) $ (19.58) ============= ============= =============
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND IX, LTD. STATEMENTS OF PARTNERS' EQUITY (DEFICIT) For the Years Ended December 31, 1995, 1994 and 1993
Total Partners' General Limited Equity Partner Partners (Deficit) Balance at December 31, 1992.............. $ (2,091,441) $ 2,611,001 $ 519,560 Net income (loss)......................... 804,977 (2,156,861) (1,351,884) Contingent Management Incentive Distribution........................... (807,867) - (807,867) -------------- -------------- -------------- Balance at December 31, 1993.............. (2,094,331) 454,140 (1,640,191) Net income (loss)......................... 627,358 (1,015,145) (387,787) Contingent Management Incentive Distribution........................... (973,023) - (973,023) -------------- -------------- -------------- Balance at December 31, 1994.............. (2,439,996) (561,005) (3,001,001) Net income (loss)......................... 684,002 (1,012,998) (328,996) Contingent Management Incentive Distribution........................... (1,070,763) - (1,070,763) -------------- -------------- -------------- Balance at December 31, 1995.............. $ (2,826,757) $ (1,574,003) $ (4,400,760) ============== ============== ==============
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND IX, LTD. STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash and Cash Equivalents
For the Years Ended December 31, ---------------------------------------------------- 1995 1994 1993 -------------- -------------- --------------- Cash flows from operating activities: Cash received from tenants.............. $ 19,040,536 $ 18,213,413 $ 17,136,777 Cash received from legal settlement..... 70,817 - - Cash paid to suppliers.................. (7,922,261) (6,737,217) (7,410,556) Cash paid to affiliates................. (1,671,044) (1,623,756) (1,598,588) Interest received....................... 246,964 252,060 151,867 Interest paid........................... (4,542,671) (4,851,901) (4,502,322) Property taxes paid and escrowed........ (1,336,619) (1,438,756) (1,463,235) ------------- ------------- -------------- Net cash provided by operating activities.............................. 3,885,722 3,813,843 2,313,943 ------------- ------------- -------------- Cash flows from investing activities: Additions to real estate investments........................... (3,582,582) (4,261,449) (2,672,770) Insurance proceeds from fire/freeze damage................................ 185,094 359,878 - ------------- ------------- -------------- Net cash used in investing activities.............................. (3,397,488) (3,901,571) (2,672,770) ------------- ------------- -------------- Cash flows from financing activities: Principal payments on mortgage notes payable......................... (748,502) (711,658) (632,553) Deferred borrowing costs paid........... - (120,486) (1,268,351) Contingent Management Incentive Distribution.......................... (879,994) (797,000) (955,821) Net cash proceeds from refinancing/ modification of mortgage notes payable......................... - 161,809 6,282,227 ------------- ------------- -------------- Net cash provided by (used in) financing activities.................... (1,628,496) (1,467,335) 3,425,502 ------------- ------------- -------------- Net increase (decrease) in cash and cash equivalents........................ (1,140,262) (1,555,063) 3,066,675 Cash and cash equivalents at beginning of year....................... 4,199,844 5,754,907 2,688,232 ------------- ------------- -------------- Cash and cash equivalents at end of year................................. $ 3,059,582 $ 4,199,844 $ 5,754,907 ============= ============= =============
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND IX, LTD. STATEMENTS OF CASH FLOWS Reconciliation of Net Loss to Net Cash Provided by Operating Activities
For the Years Ended December 31, ----------------------------------------------------- 1995 1994 1993 --------------- --------------- ---------------- Net loss................................... $ (328,996) $ (387,787) $ (1,351,884) ------------- ------------- -------------- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation............................ 3,919,845 3,392,835 3,016,874 Amortization of discounts on mortgage notes payable................ 40,372 38,032 18,241 Amortization of deferred borrowing costs................................. 201,762 159,019 173,538 Extraordinary items..................... - - 31,055 Gain on involuntary conversions......... (125,967) (187,854) - Changes in assets and liabilities: Cash segregated for security deposits............................ (39,808) (11,032) (56,623) Accounts receivable................... (49,903) 40,537 66,724 Prepaid expenses and other assets.............................. (12,693) 19,334 234,713 Escrow deposits....................... 142,995 680,527 (112,959) Accounts payable...................... (147,117) 158,350 141,302 Accrued property taxes................ 27,518 6,890 (71,809) Accrued interest...................... 71,219 (164,404) 187,317 Other accrued expenses................ 113,070 32,114 31,076 Payable to affiliates - General Partner............................. 9,469 11,936 (5,493) Security deposits and deferred rental revenue...................... 63,956 25,346 11,871 ------------- ------------- -------------- Total adjustments................. 4,214,718 4,201,630 3,665,827 ------------- ------------- -------------- Net cash provided by operating activities............................ $ 3,885,722 $ 3,813,843 $ 2,313,943 ============= ============= =============
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND IX, LTD. NOTES TO FINANCIAL STATEMENTS December 31, 1995 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------- Organization - ------------ McNeil Real Estate Fund IX, Ltd., (the "Partnership") was organized May 1, 1978, as a limited partnership under provisions of the California Uniform Limited Partnership Act. The general partner of the Partnership is McNeil Partners L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil ("McNeil"). The Partnership is governed by an amended and restated partnership agreement of limited partnership dated November 12, 1991, as amended (the "Amended Partnership Agreement"). The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240. The Partnership is engaged in real estate activities, including the ownership, operation and management of residential real estate and other real estate related assets. At December 31, 1995, the Partnership owned 14 income-producing properties as described in Note 4 - Real Estate Investments. Basis of Presentation - --------------------- The accompanying financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP"). The preparation of financial statements in conformity with GAAP 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 differ from those estimates. The Partnership's financial statements include the accounts of the following listed tier partnerships for the years ended December 31, 1995, 1994 and 1993. These single asset tier partnerships were formed to accommodate the refinancings of the related properties. The ownership interest of the Partnership and the General Partner in each tier partnership is detailed below. The Partnership retains effective control of each tier partnership. The General Partner's minority interest is not presented because it is either negative or immaterial.
% of Ownership Interest Tier Partnership Partnership General Partner ---------------- ----------- --------------- Limited partnerships: Cherry Hills Fund IX Limited Partnership (a) ................ 100 - Forest Park Fund IX Associates Limited Partnership (b)....... 99 1 Lantern Tree Fund IX Limited Partnership (a) ................ 100 - Meridian West Fund IX Limited Partnership (a)................ 100 - Pennbrook Fund IX Associates, L.P............................ 99 1 Rockborough Fund IX Limited Partnership (a).................. 100 - Rolling Hills Fund IX Associates, L.P........................ 99 1 Williamsburg Fund IX Limited Partnership (a)................. 100 - General partnerships: Berkley Hills Associates..................................... 99 1 Ruskin Place Fund IX Associates.............................. 99 1 Sherwood Forest Fund IX Associates........................... 99 1
(a) The general partner of these partnerships is a corporation whose stock is 100% owned by the Partnership. (b) Forest Park Fund IX Associates has assigned all interest and rights to the Partnership. Real Estate Investments - ----------------------- Real estate investments are generally stated at the lower of cost or net realizable value. Real estate investments are monitored on an ongoing basis to determine if the property has sustained a permanent impairment in value. At such time, a write-down is recorded to reduce the basis of the property to its net realizable value. A permanent impairment is determined to have occurred when a decline in property value is considered to be other than temporary based upon management's expectations with respect to projected cash flows and prevailing economic conditions. Improvements and betterments are capitalized and expensed through depreciation charges. Repairs and maintenance are charged to operations as incurred. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This statement is effective for financial statements for fiscal years beginning after December 15, 1995. The Partnership has not adopted the principles of this statement within the accompanying financial statements; however, it is not anticipated that adoption will have a material effect on the carrying value of the Partnership's long-lived assets. Depreciation - ------------ Buildings and improvements are depreciated using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 32 years. Cash and Cash Equivalents - ------------------------- Cash and cash equivalents include cash on hand and cash on deposit with financial institutions with original maturities of three months or less. Carrying amounts for cash and cash equivalents approximate fair value. Escrow Deposits - --------------- The Partnership is required to maintain escrow accounts in accordance with the terms of various mortgage agreements. These escrow accounts are controlled by the mortgagee and are used for payment of property taxes, hazard insurance, capital improvements and/or property replacements. Carrying amounts for escrow deposits approximate fair value. Deferred Borrowing Costs - ------------------------ Loan fees and other related costs incurred to obtain long-term financing on real property are capitalized and amortized using a method that approximates the effective interest method over the terms of the related mortgage notes payable. Amortization of deferred borrowing costs is included in interest expense on the Statements of Operations. Discounts on Mortgage Notes Payable - ----------------------------------- Discounts on mortgage notes payable are amortized over the remaining terms of the related mortgage notes using the effective interest method. Amortization of discounts on mortgage notes payable is included in interest expense on the Statements of Operations. Rental Revenue - -------------- The Partnership leases its properties under short-term operating leases. Lease terms generally are less than one year in duration. Rental revenue is recognized as earned. Income Taxes - ------------ No provision for Federal income taxes is necessary in the financial statements of the Partnership because, as a partnership, it is not subject to Federal income tax and the tax effect of its activities accrues to the partners. Allocation of Net Income and Net Loss - ------------------------------------- The Amended Partnership Agreement provides for net income or net loss of the Partnership for both financial statement and income tax reporting purposes to be allocated as indicated below. For allocation purposes, net income and net loss of the Partnership are determined prior to deductions for depreciation. (a) First, 5% of all deductions for depreciation shall be allocated to the General Partner, and 95% of all deductions for depreciation shall be allocated to the limited partners; (b) then, an amount of net income equal to the cumulative amount of Contingent Management Incentive Distribution ("Contingent MID") paid to the General Partner for which no income has previously been allocated (see Note 2 - "Transactions with Affiliates") shall be allocated to the General Partner; however, if all or a portion of the Contingent MID consists of limited partnership units ("Units"), the amount of net income so allocated to the General Partner shall be equal to the amount of cash the General Partner would have otherwise received; (c) then, any remaining net income shall be allocated to the General Partner and to the limited partners so that the total amount of net income allocated to the General Partner pursuant to paragraph (b) above and this paragraph (c), and to the limited partners pursuant to this paragraph (c), shall be in the ratio of 5% to the General Partner and 95% to the limited partners. (d) Net loss shall be allocated 95% percent to the limited partners and 5% to the General Partner. Federal income tax law provides that the allocation of loss to a partner will not be recognized unless the allocation is in accordance with a partner's interest in the partnership or the allocation has substantial economic effect. Internal Revenue Code Section 704(b) and accompanying Treasury Regulations establish criteria for allocations of Partnership deductions attributable to debt. The Partnership's tax allocations for 1995, 1994 and 1993 have been made in accordance with these provisions. Distributions - ------------- Pursuant to the Amended Partnership Agreement and at the sole discretion of the General Partner, distributions during each taxable year shall be made as follows: (a) first, to the General Partner, an amount equal to the Contingent MID; and (b) any remaining distributable cash, as defined, shall be distributed 100% to the limited partners. No distributions were made to the limited partners in 1995, 1994 or 1993. The Partnership accrued distributions of $1,070,763, $973,023 and $807,867 for the benefit of the General Partner for the years ended December 31, 1995, 1994 and 1993, respectively. These distributions are the Contingent MID pursuant to the Amended Partnership Agreement. Net Loss Per Limited Partnership Unit - ------------------------------------- Net loss per limited partnership unit is computed by dividing net loss allocated to the limited partners by the weighted average number of Units outstanding. Per Unit information has been computed based on 110,170 Units outstanding in 1995 and 1994, and 110,200 Units outstanding in 1993. Reclassifications - ----------------- Certain reclassifications have been made to prior period amounts to conform with the current year presentation. NOTE 2 - TRANSACTIONS WITH AFFILIATES - ------------------------------------- The Partnership pays property management fees equal to 5% of the gross rental receipts of the Partnership's properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management and leasing services for the Partnership's properties. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. The Partnership reimbursed an affiliate of the General Partner for costs incurred in connection with refinancing and modification of mortgage notes payable. These costs are capitalized as deferred borrowing costs and amortized over the remaining term of the related mortgage notes. Under terms of the Amended Partnership Agreement, the Partnership is paying a Management Incentive Distribution ("MID") to the General Partner. The maximum MID is calculated as 1% of the tangible asset value of the Partnership. The maximum MID percentage decreases subsequent to 1999. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $10,000 per apartment unit to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible items. Prior to July 1, 1993, the MID consisted of two components: (i) the fixed portion which was payable without respect to the net income of the Partnership and was equal to 25% of the maximum MID (the "Fixed MID") and (ii) a contingent portion which was payable only to the extent of the lesser of the Partnership's excess cash flow, as defined, or net operating income (the "Entitlement Amount") and is equal to up to 75% of the maximum MID (the "Contingent MID"). Effective July 1, 1993, the General Partner amended the Amended Partnership Agreement as a settlement to a class action complaint. This amendment eliminates the Fixed MID and makes the entire MID payable to the extent of the Entitlement Amount. In all other respects, the calculation and payment of the MID remain the same. Fixed MID was payable in Units unless the Entitlement Amount exceeded the amount necessary to pay the Contingent MID in which case, at the General Partner's option, the Fixed MID was paid in cash to the extent of such excess. Contingent MID will be paid to the extent of the Entitlement Amount, and may be paid (i) in cash, unless there is insufficient cash to pay the distribution in which event any unpaid portion not taken in Units will be deferred and is payable, without interest, from the first available cash and/or (ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of Units issued in payment of the MID is based on the greater of $50 per Unit or the net tangible asset value, as defined, per Unit. During 1995, 1994 and 1993, no Units were issued as payment for the MID. During 1991, the Partnership amended its capitalization policy and began capitalizing certain costs of improvements and betterments which under policies of prior management had been expensed when incurred. The purpose of the amendment was to more properly recognize items which were capital in nature. The effect of the amendment standing alone was evaluated at the time the change was made and determined not to be material to the financial statements of the Partnership in 1991, nor was it expected to be material in any future year. However, the amendment can have a material effect on the calculation of the Entitlement Amount which determines the amount of Contingent MID earned and the amount of Fixed MID payable in cash. Capital improvements are excluded from cash flow, as defined. The majority of base period cash flow was measured under the previous capitalization policy, while incentive period cash flow is determined using the amended policy. Under the amended policy, more items are capitalized, and cash flow increases. Had base period cash flow been measured on a basis comparable with incentive period cash flow, Contingent MID for the years ended December 31, 1995 and 1994, would have been reduced by $111,248 and 169,741, respectively. The amendment of the capitalization policy did not materially affect the MID for 1993 because the Entitlement Amount was sufficient to pay Contingent MID notwithstanding the amendment to the capitalization policy. Any amount of the MID which is paid to the General Partner in Units will be treated as if cash is distributed to the General Partner and is then contributed to the Partnership by the General Partner. The Fixed MID was treated as a fee payable to the General Partner by the Partnership for services rendered. The Contingent MID represents a return of equity to the General Partner for increasing cash flow, as defined, and accordingly is treated as a distribution. Compensation and reimbursements paid or accrued for the benefit of the General Partner or its affiliates are as follows:
For the Years Ended December 31, ---------------------------------------------------- 1995 1994 1993 -------------- -------------- --------------- Deferred borrowing costs................... $ - $ - $ 45,418 Property management fees - affiliates.............................. 946,627 915,989 855,410 Charged to general and administrative - affiliates: Partnership administration.............. 733,886 719,703 622,965 Fixed MID............................... - - 114,720 ------------- ------------- -------------- $ 1,680,513 $ 1,635,692 $ 1,638,513 ============= ============= ============== Charged to General Partner's deficit: Contingent Management Incentive Distribution $ 1,070,763 $ 973,023 $ 807,867 ============= ============= ==============
Payable to affiliates - General Partner at December 31, 1995 and 1994 consists of Contingent MID, reimbursable costs and property management fees which are due and payable from current operations. NOTE 3 - TAXABLE LOSS - --------------------- McNeil Real Estate Fund IX, Ltd. is a partnership and is not subject to Federal and state income taxes. Accordingly, no recognition has been given to income taxes in the accompanying financial statements of the Partnership since the income or loss of the Partnership is to be included in the tax returns of the individual partners. The tax returns of the Partnership are subject to examination by Federal and state taxing authorities. If such examinations result in adjustments to distributive shares of taxable income or loss, the tax liability of the partners could be adjusted accordingly. The Partnership's net assets and liabilities for tax purposes exceeded the net assets and liabilities for financial reporting purposes by $9,613,062 in 1995, $8,983,358 in 1994 and $8,766,818 in 1993. NOTE 4 - REAL ESTATE INVESTMENTS - -------------------------------- The basis and accumulated depreciation of the Partnership's real estate investments at December 31, 1995 and 1994 are set forth in the following tables:
Buildings and Accumulated Net Book 1995 Land Improvements Depreciation Value ---- -------------- -------------- --------------- -------------- Berkley Hills Madison, TN $ 246,988 $ 5,914,125 $ (3,643,359) $ 2,517,754 Cherry Hills Wichita, KS 514,205 8,771,156 (4,660,956) 4,624,405 Forest Park Village Columbus, OH 716,395 8,891,627 (5,551,503) 4,056,519 Heather Square Dallas, TX 853,746 7,294,403 (3,912,468) 4,235,681 Lantern Tree Omaha, NE 217,809 3,245,613 (1,939,545) 1,523,877 Meridian West Puyallup, WA 253,167 4,838,970 (2,538,764) 2,553,373 Pennbrook Dallas, TX 692,515 6,068,091 (3,312,652) 3,447,954 Rockborough Addison, TX 427,932 3,595,458 (1,866,840) 2,156,550 Rolling Hills Louisville, KY 557,249 8,594,002 (5,050,846) 4,100,405 Ruskin Place Lincoln, NE 920,061 4,975,901 (2,984,860) 2,911,102 Sheraton Hills Nashville, TN 296,531 6,211,692 (3,910,764) 2,597,459 Westgate Lansing, MI 390,482 6,093,518 (3,527,200) 2,956,800 Westridge Ft. Worth, TX 345,265 4,269,089 (2,302,482) 2,311,872 Williamsburg Shreveport, LA 283,754 5,083,649 (2,926,992) 2,440,411 ------------- ------------- ------------- ------------- $ 6,716,099 $ 83,847,294 $ (48,129,231) $ 42,434,162 ============= ============= ============= =============
Buildings and Accumulated Net Book 1994 Land Improvements Depreciation Value ---- -------------- -------------- --------------- -------------- Berkley Hills $ 246,988 $ 5,617,461 $ (3,347,169) $ 2,517,280 Cherry Hills 514,205 8,589,653 (4,318,464) 4,785,394 Forest Park Village 716,395 8,446,693 (5,116,033) 4,047,055 Heather Square 853,746 7,097,310 (3,600,447) 4,350,609 Lantern Tree 217,809 3,133,808 (1,791,815) 1,559,802 Meridian West 253,167 4,755,163 (2,290,739) 2,717,591 Pennbrook 692,515 5,910,773 (3,018,815) 3,584,473 Rockborough 427,932 3,527,790 (1,685,438) 2,270,284 Rolling Hills 557,249 8,052,914 (4,599,161) 4,011,002 Ruskin Place 920,061 4,771,531 (2,747,650) 2,943,942 Sheraton Hills 296,531 5,887,264 (3,605,483) 2,578,312 Westgate 390,482 5,616,778 (3,282,595) 2,724,665 Westridge 345,265 4,060,462 (2,164,643) 2,241,084 Williamsburg 283,754 4,921,016 (2,705,711) 2,499,059 ------------- ------------- ------------- ------------- $ 6,716,099 $ 80,388,616 $ (44,274,163) $ 42,830,552 ============= ============= ============= =============
NOTE 5 - MORTGAGE NOTES PAYABLE - ------------------------------- The table below sets forth the mortgage notes payable of the Partnership at December 31, 1995 and 1994. All mortgage notes are secured by real estate investments.
Mortgage Annual Monthly Lien Interest Payments/ December 31, Property Position (a) Rates % Maturity Date(e) 1995 1994 - -------- --------------- -------- ---------------- -------------- -------------- Berkley Hills First 8.750 $26,005 12/23 $ 3,255,924 $ 3,281,849 ------------- ------------- Cherry Hills First 8.150 39,353 07/03 4,748,209 4,829,752 Discount (b) (114,168) (126,376) ------------- ------------- 4,634,041 4,703,376 ------------- -------------
Mortgage Annual Monthly Lien Interest Payments/ December 31, Property Position (a) Rates % Maturity Date(e) 1995 1994 - -------- --------------- -------- ---------------- ------------- -------------- Forest Park Village First 9.125 $59,732 01/98 $ 6,192,845 $ 6,325,750 ------------- ------------- Heather Square First 9.625 38,250 03/09 3,429,615 3,552,038 ------------- ------------- Lantern Tree First 8.150 20,416 07/03 2,463,353 2,505,657 Discount (b) (59,231) (65,563) -------------- ------------- 2,404,122 2,440,094 ------------- ------------- Meridian West First 8.150 28,471 07/03 3,435,223 3,494,217 Discount (b) (82,599) (91,430) ------------- ------------- 3,352,624 3,402,787 ------------- ------------- Pennbrook First 9.450 27,209 02/00 3,187,297 3,209,439 ------------- ------------- Rockborough First 8.150 18,789 07/03 2,267,055 2,305,987 Discount (b) (54,511) (60,339) ------------- ------------- 2,212,544 2,245,648 ------------- ------------- Rolling Hills First 9.250 55,389 11/24 6,685,297 6,729,342 ------------- ------------- Ruskin Place First 8.750 36,348 10/24 4,581,309 4,615,005 ------------- ------------- Sheraton Hills First (c) (d) (d) 10/98 2,838,674 2,880,859 ------------- ------------- Westgate First 8.000 44,114 09/23 5,893,110 5,948,596 ------------- ------------- Williamsburg First 8.150 23,128 07/03 2,790,518 2,838,440 Discount (b) (67,098) (74,271) ------------- ------------- 2,723,420 2,764,169 ------------- ------------- Total $ 51,390,822 $ 52,098,952 ============= =============
(a) The debt is non-recourse to the Partnership. (b) Mortgage discounts are based on an effective interest rate of 8.62%. (c) The mortgage encumbering Sheraton Hills Apartments contains provisions which may give the lender the right to accelerate the mortgage debt as a result of the November 12, 1991, restructuring of the Partnership. The General Partner has requested that the lender waive its right to accelerate the mortgage debt. The lender may require the payment of fees or additional interest as a condition to granting such a waiver. In the event the waiver is not obtained and the mortgage debt is accelerated, the Partnership would be required to satisfy the outstanding mortgage debt, which totaled $2,838,674 at December 31, 1995. In such event, the Partnership will attempt to arrange alternative sources of mortgage financing. However, such refinancing may be at an interest rate which is higher or is otherwise on terms which are less favorable than those provided for by the current mortgage. Furthermore, if alternative financing cannot be obtained, the lender could foreclose on Sheraton Hills Apartments. Management believes the likelihood of this outcome is remote and accordingly has not reflected this balance as currently due. (d) The Sheraton Hills mortgage note bears interest at a variable rate, adjusted at six-month intervals equal to the six-month treasury bill weekly average rate plus 3.0% per annum, not to exceed 12.75% per annum. The monthly payment is also adjusted each six months so that the mortgage note will fully amortize over a period of 30 years. At December 31, 1995, the interest rate was 8.63%, and the monthly payment was $23,748. (e) Balloon payments on the Partnership's mortgage notes are due as follows:
Property Balloon Payment Date -------- --------------- ---- Forest Park Village .................... $ 5,831,000 01/98 Sheraton Hills .................... 2,661,000 10/98 Pennbrook .................... 3,059,000 02/00 Cherry Hills .................... 3,875,000 07/03 Lantern Tree .................... 2,010,000 07/03 Meridian West .................... 2,804,000 07/03 Rockborough .................... 1,850,000 07/03 Williamsburg .................... 2,278,000 07/03
Scheduled principal maturities of the mortgage notes payable under existing agreements, before consideration of discounts of $377,607, are shown below.
1996.................................... $ 826,951 1997.................................... 902,235 1998.................................... 9,358,326 1999.................................... 812,434 2000.................................... 3,912,038 Thereafter.............................. 35,956,445 ---------- $51,768,429 ==========
Based on borrowing rates currently available to the Partnership for mortgage loans with similar terms and average maturities, the fair value of the mortgage notes payable was approximately $52,256,304 at December 31, 1995. NOTE 6 - REFINANCING AND MODIFICATION OF MORTGAGE NOTES PAYABLE - --------------------------------------------------------------- On July 28, 1994, the Partnership and the holder of the Berkley Hills mortgage note agreed to modify the terms of the Berkley Hills mortgage note. The interest rate was reduced to 8.75% from 10%, and the monthly debt service payment was reduced to $26,005 from $28,283. In addition, the Partnership agreed to increase the principal balance of the mortgage note $74,108 to $3,290,000, the mortgage note's original balance. The Partnership incurred $46,254 of deferred borrowing costs in connection with the modification, and the default that existed on the mortgage note was removed. On July 28, 1994, the Partnership and the holder of the Ruskin Place mortgage note agreed to modify the terms of the Ruskin Place mortgage note. The interest rate was reduced to 8.75% from 9.75%, and the monthly debt service payment was reduced to $36,348 from $38,882. In addition, the Partnership agreed to increase the principal balance of the mortgage note $87,701 to $4,625,600, the mortgage note's original balance. The Partnership incurred $66,734 of deferred borrowing costs in connection with the modification, and the default that existed on the mortgage note was removed. On June 30, 1993, the Partnership and the holder of the Westgate mortgage note agreed to modify the terms of the Westgate mortgage note. The interest rate was reduced to 8% from 10.5%, and the monthly debt service payment was reduced to $44,114 from $54,068. In addition, the Partnership agreed to increase the principal balance of the mortgage note $102,356 to $6,020,000, the mortgage note's original balance. The Partnership incurred $109,473 of deferred borrowing costs in connection with the modification, and the default that existed on the mortgage note was removed. On June 24, 1993, the General Partner refinanced a portfolio of properties via a Real Estate Mortgage Investment Conduit ("REMIC"). This REMIC consists of a pool of properties from various partnerships affiliated with the General Partner. Five of the Partnership's properties, Cherry Hills, Lantern Tree, Meridian West, Rockborough and Williamsburg, were included in the REMIC. The properties in the REMIC are not cross-collateralized across the partnerships, but are cross-collateralized within the same partnership. The new mortgage notes bear an interest rate of 8.15% that was discounted to yield an effective interest rate of 8.62%. The maturity date for the new mortgage notes is July 2003. Following is a summary of the cash proceeds relating to the REMIC refinancings:
Cherry Hills Lantern Tree Meridian West ------------------ ----------------- ------------------ New loan proceeds $ 4,934,500 $ 2,560,000 $ 3,570,000 Existing debt retired (3,003,554) (1,587,353) (2,103,963) Mortgage discount (143,390) (74,390) (103,739) Prepayment penalties - - (21,040) ---------------- --------------- ---------------- Cash proceeds from refinancing $ 1,787,556 $ 898,257 $ 1,341,258 ================ =============== ================ Rockborough Williamsburg Total ------------------ ----------------- ------------------ New loan proceeds $ 2,356,000 $ 2,900,000 $ 16,320,500 Existing debt retired (1,487,544) (2,208,551) (10,390,965) Mortgage discount (68,462) (84,270) (474,251) Prepayment penalties (44,626) - (65,666) ---------------- --------------- ---------------- Cash proceeds from refinancing $ 755,368 $ 607,179 $ 5,389,618 ================ =============== ================
As part of the REMIC refinancing, the Partnership negotiated a discounted payoff on the Williamsburg second mortgage note, resulting in a $34,611 extraordinary gain on extinguishment of debt. The Partnership incurred extraordinary losses due to prepayment penalties of $21,040 and $44,626 on the Meridian West and Rockborough mortgage notes, respectively. The Partnership incurred $892,580 of deferred borrowing costs in connection with the REMIC refinancing. Additionally, the Partnership was required to use $534,018 of its loan proceeds to fund various escrow accounts for specified capital repairs, property taxes and insurance. On January 29, 1993, the Partnership refinanced the Pennbrook mortgage note. The new Pennbrook mortgage note, in the amount of $3,250,000, bears interest at an annual rate of 9.45%, requires monthly debt service payments of $27,209, and will mature in February 2000. Proceeds from the refinancing of the Pennbrook mortgage note are as follows:
New mortgage note........................... $ 3,250,000 Existing debt retired....................... (2,459,747) -------------- Cash proceeds from refinancing.............. $ 790,253 ==============
The Partnership incurred $201,439 of deferred borrowing costs in connection with the refinancing of the Pennbrook mortgage note. The Partnership was also required to use $266,715 of its loan proceeds to fund escrow accounts for property taxes, insurance, repairs and replacements. NOTE 7 - GAIN ON INVOLUNTARY CONVERSIONS - ---------------------------------------- On May 5, 1995, Westridge Apartments incurred hail damage of $150,938. The Partnership received $144,666 in insurance reimbursements to cover the cost to repair Westridge. Insurance reimbursements received in excess of the basis of the property damaged were recorded as a $109,006 gain on involuntary conversion. On November 3, 1995, two units at Cherry Hill Apartments were damaged by a fire that caused $55,495 in damages. The Partnership received $40,428 in insurance reimbursements to cover the cost to repair Cherry Hill. Insurance reimbursements received in excess of the basis of the property damage were recorded as a $16,961 gain on involuntary conversion. On January 19, 1994, freezing weather caused $157,680 of damage to Rolling Hills Apartments. The Partnership received $140,496 in insurance reimbursements to cover the cost to repair Rolling Hills. Insurance reimbursements received in excess of the basis of the property damaged were recorded as a $108,522 gain on involuntary conversion. On April 25, 1994, eleven units at Rockborough Apartments were damaged by a fire that caused $225,123 in damages. The Partnership received $219,382 in insurance reimbursements to cover the cost to repair Rockborough. Insurance reimbursements received in excess of the basis of the property damage were recorded as a $79,332 gain on involuntary conversion. NOTE 8 - LEGAL PROCEEDINGS - -------------------------- The Partnership is not party to, nor are any of the Partnership's properties the subject of, any material pending legal proceedings, other than ordinary, routine litigation incidental to the Partnership's business, except for the following: 1) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil (L95012) - High River ("HR") filed this action in the United States District Court for the Southern District of New York against McNeil Partners, L.P., McNeil Investors, Inc. and Mr. and Mrs. McNeil (as defined in this Section 1, collectively, the "Defendants") requesting, among other things, names and addresses of the limited partners in the partnerships referenced above (as defined in this Section 1, the "Partnerships"). The District Court issued a preliminary injunction against the Partnerships requiring them to commence mailing materials relating to the HR tender offer on August 14, 1995. On August 18, 1995, the Defendants filed an Answer and Counterclaim. The Counterclaim principally asserts (1) the HR tender offers have been undertaken in violation of the federal securities laws, on the basis of material, non-public, and confidential information, and (2) that the HR offer documents omit and/or misrepresent certain material information about the HR tender offers. The Counterclaim seeks a preliminary and permanent injunction against the continuation of the HR tender offers and, alternatively, ordering corrective disclosure with respect to allegedly false and misleading statements contained in the tender offer documents. This action was dismissed without prejudice in November 1995. 2) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil - United States District Court for the Southern District of New York, (Case No. 95 Civ. 9488) (Second Action). On November 7, 1995, High River filed a second complaint with the District Court which alleges, inter alia, that McNeil Partners, L.P.'s (the "General Partner") Schedule 14D-9 filed in connection with the High River tender offers was materially false and misleading, in violation of Sections 14(d) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(d) and (e), and the SEC Regulations promulgated thereunder; and that High River further alleges that the General Partner has wrongfully refused to admit High River as a limited partner to the ten partnerships referenced above. Additionally, High River purports to assert claims derivatively on behalf of McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund XXV, L.P., for breach of contract and breach of fiduciary duty, asserting that the General Partner has charged these partnerships excessive fees. High River's complaint seeks, inter alia, preliminary injunctive relief requiring the General Partner to admit High River as a limited partner in each of the ten partnerships referenced above and to transfer the tendered units of interest in the partnerships to High River; an unspecified award of damages payable to High River and an additional unspecified award of damages payable to certain of the partnerships; an order that defendants must discharge their fiduciary duties and must account for all fees they have received from certain of the partnerships; and attorneys' fees. On January 31, 1996, this action was dismissed without prejudice. 3) Robert Lewis v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil et al - In the District Court of Dallas County, Texas, A-14th Judicial District, Cause No. 95-08535 (Class Action) - Plaintiff, Robert Lewis, is a limited partner with McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV, Ltd. Plaintiff brings this action on his own behalf and as a class action on behalf of the class of all limited partners of McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund XXV, Ltd. (as defined in this Section 3, the "Partnerships") as of August 4, 1995. Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 3, collectively, the "Defendants") breached their fiduciary duties by, among other things, (1) failing to attempt to sell the properties owned by the Partnerships (as defined in this Section 3, the "Properties") and extending the lives of the Partnerships indefinitely, contrary to the Partnerships' business plans, (2) paying distributions to themselves and generating fees for their affiliates, (3) refusing to make significant distributions to the class members, despite the fact that the Partnerships have positive cash flows and substantial cash balances, and (4) failing to take steps to create an auction market for equity interests of the Partnerships, despite the fact that a third party bidder filed tender offers for approximately forty-five percent (45%) of the outstanding units of each of the Partnerships. Plaintiff also claims that Defendants have breached the partnership agreements of the Partnerships by failing to take steps to liquidate the Properties and by their alteration of the Partnerships' primary purposes, their acts in contravention of these agreements, and their use of the assets of the Partnerships for their own benefit instead of for the benefit of the Partnerships. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 4) James F. Schofield, Gerald C. Gillett and Donna S. Gillett v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. et al - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint) and United States District Court, Southern District of New York, Case No. 95CIV.6711 (Class and Derivative Action Complaint) These are corporate/securities class and derivative actions brought in state and federal court by limited partners of each of the nine (9) limited partnerships that are named as nominal defendants as listed above (as defined in this Section 4, the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and four (4) of their senior officers and/or directors (as defined in this Section 4, collectively, the "Defendants") have breached their fiduciary duties. Specifically, Plaintiffs allege that Defendants have caused the Partnerships to enter into several wasteful transactions that have no business purpose or benefit to the Partnerships and which have rendered such units highly illiquid and artificially depressed the prices that are available for units on the limited resale market. Plaintiffs also allege that Defendants have engaged in a course of conduct to prevent the acquisition of units by Carl Icahn by disseminating false, misleading and inadequate information. Plaintiffs further allege that Defendants have acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders and, thereby, have breached the partnership agreements. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend these actions. 5) Alfred Napoletano v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133849 (Class Action Complaint) Plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above (as defined in this Section 5, the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 5, collectively, the "Defendants") have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River tender offers, (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 6) Warren Heller v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133957 (Class Action Complaint) Plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above (as defined in this Section 6, the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 6, collectively, the "Defendants") have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River tender offers, (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 7) HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young , BDO Seidman et al (Case #92-06560-A). This suit was filed on behalf of the Partnership and other affiliated partnerships (the "Affiliated Partnerships") on May 26, 1992, in the 14th Judicial District Court of Dallas County. The petition sought recovery against the Partnership's former auditors, BDO Seidman, for negligence and fraud in failing to detect and/or report overcharges of fees/expenses by Southmark, the former general partner. The former auditors asserted counterclaims against the Affiliated Partnerships based on alleged fraudulent misrepresentations made to the auditors by the former management of the Affiliated Partnerships (Southmark) in the form of client representation letters executed and delivered to the auditors by Southmark management. The counterclaims sought recovery of attorneys' fees and costs incurred in defending this action. The original petition also alleged causes of action against certain former officers and directors of the Partnership's original general partner for breach of fiduciary duty, fraud and conspiracy relating to the improper assessment and payment of certain administrative fees/expenses. On January 11, 1994 the allegations against the former officers and directors were dismissed. The trial court granted summary judgment in favor of Ernst & Young and BDO Seidman on the fraud and negligence claims based on the statute of limitations. The Affiliated Partnerships appealed the summary judgment to the Dallas Court of Appeals. In August 1995, the Appeals Court upheld all of the summary judgments in favor of BDO Seidman. In exchange for the plaintiff's agreement not to file any motions for rehearing or further appeals, BDO Seidman agreed that it will not pursue the counterclaims against the Partnership. NOTE 9 - GAIN ON LEGAL SETTLEMENT - --------------------------------- The Partnership filed claims with the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court") against Southmark Corporation ("Southmark"), an affiliate of a previous general partner, for damages relating to improper overcharges, breach of contract and breach of fiduciary duty. The Partnership settled these claims in 1991, and such settlement was approved by the Bankruptcy Court. An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April 14, 1995, was issued by the Bankruptcy Court. In accordance with the Order, in May 1995, the Partnership received in full satisfaction of its claims, $53,573 in cash, and common and preferred stock in the reorganized Southmark. The cash and stock represent the Partnership's pro-rata share of Southmark assets available for Class 8 claimants. The Partnership sold the Southmark common and preferred stock in May 1995, for $17,244 which, when combined with the cash proceeds from Southmark, resulted in a gain on legal settlement of $70,817. McNEIL REAL ESTATE FUND IX, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1995
Cumulative Costs Initial Cost (b) Write-down Capitalized Related (b) Buildings and and Permanent Subsequent Description Encumbrances Land Improvements Impairment To Acquisition - ----------- --------------- -------------- --------------- -------------- ---------------- APARTMENTS: Berkley Hills Madison, TN $ 3,255,924 $ 246,988 $ 4,779,121 $ - $ 1,135,004 Cherry Hills Wichita, KS 4,634,041 514,205 7,373,589 - 1,397,567 Forest Park Village Columbus, OH 6,192,845 716,395 7,095,131 - 1,796,496 Heather Square Dallas, TX 3,429,615 853,746 6,087,281 - 1,207,122 Lantern Tree Omaha, NE 2,404,122 217,809 2,467,872 - 777,741 Meridian West Puyallup, WA 3,352,624 253,167 3,787,807 - 1,051,163 Pennbrook Dallas, TX 3,187,297 692,515 4,708,479 - 1,359,612 Rockborough Addison, TX 2,212,544 427,932 2,924,451 - 671,007 Rolling Hills Louisville, KY 6,685,297 557,249 6,156,595 - 2,437,407 Ruskin Place Lincoln, NE 4,581,309 899,372 3,792,676 - 1,203,914 Sheraton Hills Nashville, TX 2,838,674 296,531 4,819,251 - 1,392,441 Westgate Lansing, MI 5,893,110 390,482 4,963,710 - 1,129,808 Westridge Fort Worth, TX - 345,265 3,736,843 (200,000) 732,246 Williamsburg Shreveport, LA 2,723,420 283,754 4,203,172 - 880,477 -------------- -------------- -------------- ------------ ------------- $ 51,390,822 $ 6,695,410 $ 66,895,978 $ (200,000) $ 17,172,005 ============== ============== ============== ============ =============
(b) The initial cost and encumbrances reflect the present value of future loan payments discounted, if appropriate, at a rate estimated to be the prevailing interest rate at the date of acquisition or refinancing. See accompanying notes to Schedule III. McNEIL REAL ESTATE FUND IX, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1995
Gross Amount at Which Carried at Close of Period Accumulated Buildings and Depreciation Description Land Improvements Total (a) and Amortization - ----------- --------------- --------------- ----------------- ---------------- APARTMENTS: Berkley Hills Madison, TX $ 246,988 $ 5,914,125 $ 6,161,113 $ (3,643,359) Cherry Hills Wichita, KS 514,205 8,771,156 9,285,361 (4,660,956) Forest Park Village Columbus, OH 716,395 8,891,627 9,608,022 (5,551,503) Heather Square Dallas, TX 853,746 7,294,403 8,148,149 (3,912,468) Lantern Tree Omaha, NE 217,809 3,245,613 3,463,422 (1,939,545) Meridian West Puyallup, WA 253,167 4,838,970 5,092,137 (2,538,764) Pennbrook Dallas, TX 692,515 6,068,091 6,760,606 (3,312,652) Rockborough Addison, TX 427,932 3,595,458 4,023,390 (1,866,840) Rolling Hills Louisville, KY 557,249 8,594,002 9,151,251 (5,050,846) Ruskin Place Lincoln, NE 920,061 4,975,901 5,895,962 (2,984,860) Sheraton Hills Nashville, TN 296,531 6,211,692 6,508,223 (3,910,764) Westgate Lansing, MI 390,482 6,093,518 6,484,000 (3,527,200) Westridge Fort Worth, TX 345,265 4,269,089 4,614,354 (2,302,482) Williamsburg Shreveport, LA 283,754 5,083,649 5,367,403 (2,926,992) -------------- -------------- ---------------- ------------- $ 6,716,099 $ 83,847,294 $ 90,563,393 $ (48,129,231) ============== ============== ================ =============
(a) For Federal income tax purposes, the properties are depreciated over lives ranging from 15-25 years using ACRS or MACRS methods. The aggregate cost of real estate investments for Federal income tax purposes was approximately $94,274,869 and accumulated depreciation was $49,976,438 December 31, 1995. See accompanying notes to Schedule III. McNEIL REAL ESTATE FUND IX, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1995
Date of Date Depreciable Description Construction Acquired lives (years) - ----------- ------------ -------- ------------- APARTMENTS: Berkley Hills Madison, TN 1970 06/79 3-25 Cherry Hills Wichita, KS 1974 06/80 3-32 Forest Park Village Columbus, OH 1970 12/79 3-25 Heather Square Dallas, TX 1978 10/79 4-32 Lantern Tree Omaha, NE 1974 07/79 3-28 Meridian West Puyallup, WA 1977 01/80 3-31 Pennbrook Dallas, TX 1978 01/80 3-31 Rockborough Addison, TX 1978 01/80 3-32 Rolling Hills Louisville, KY 1974 09/79 3-25 Ruskin Place Lincoln, NE 1973 12/79 3-27 Sheraton Hills Nashville, TN 1971 06/79 3-25 Westgate Lansing, MI 1974 12/79 3-28 Westridge Fort Worth, TX 1979 01/80 4-32 Williamsburg Shreveport, LA 1975 12/79 3-29
See accompanying notes to Schedule III. McNEIL REAL ESTATE FUND IX, LTD. Notes to Schedule III Real Estate Investments and Accumulated Depreciation A summary of activity for the Partnership's real estate investments and accumulated depreciation is as follows:
For the Years Ended December 31, ---------------------------------------------------- 1995 1994 1993 -------------- -------------- -------------- Real estate investments: - ------------------------ Balance at beginning of year............... $ 87,104,715 $ 83,199,845 $ 80,527,075 Improvements............................... 3,582,582 4,261,449 2,672,770 Assets replaced............................ (123,904) (356,579) - ------------- ------------- -------------- Balance at end of year..................... $ 90,563,393 $ 87,104,715 $ 83,199,845 ============= ============== ============== Accumulated depreciation: - ------------------------- Balance at beginning of year............... $ 44,274,163 $ 41,065,883 $ 38,049,009 Depreciation............................... 3,919,845 3,392,835 3,016,874 Assets replaced............................ (64,777) (184,555) - ------------- ------------- -------------- Balance at end of year..................... $ 48,129,231 $ 44,274,163 $ 41,065,883 ============= ============= ==============
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------- --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- -------------------------------------------------- Neither the Partnership nor the General Partner has any directors or executive officers. The names and ages of, as well as the positions held by, the officers and directors of McNeil Investors, Inc., the general partner of the General Partner, are as follows:
Other Principal Occupations and Other Name and Position Age Directorships During the Past 5 Years - ----------------- --- ------------------------------------- Robert A. McNeil, 75 Mr. McNeil is also Chairman of the Board and Director of McNeil Real Chairman of the Estate Management, Inc. ("McREMI") which is an affiliate of the General Board and Director Partner. He has held the foregoing positions since the formation of such entity in 1990. Mr. McNeil received his B.A. degree from Stanford University in 1942 and his L.L.B. degree from Stanford Law School in 1948. He is a member of the State Bar of California and has been involved in real estate financing since the late 1940's and in real estate acquisitions, syndications and dispositions since 1960. From 1986 until active operations of McREMI and McNeil Partners, L.P. began in February 1991, Mr. McNeil was a private investor. Mr. McNeil is a member of the International Board of Directors of the Salk Institute, which promotes research in improvements in health care. Carole J. McNeil 52 Mrs. McNeil is Co-Chairman, with husband Robert A. McNeil, of McNeil Co-Chairman of the Investors, Inc. Mrs. McNeil has twenty years of real estate experience, Board most recently as a private investor from 1986 to 1993. In 1982, she founded Ivory & Associates, a commercial real estate brokerage firm in San Francisco, CA. Prior to that, she was a commercial real estate associate with the Madison Company and, earlier, a commercial sales associate and analyst with Marcus and Millichap in San Francisco. In 1978, Mrs. McNeil established Escrow Training Centers, California's first accredited commercial training program for title company escrow officers and real estate agents needing college credits to qualify for brokerage licenses. She began in real estate as Manager and Marketing Director of Title Insurance and Trust in Marin County, CA. Mrs. McNeil serves on the International Board of Directors of the Salk Institute.
Other Principal Occupations and Other Name and Position Age Directorships During the Past 5 Years - ----------------- --- ------------------------------------- Donald K. Reed, 50 Mr. Reed is President, Chief Executive Officer and Director of McREMI Director, President, which is an affiliate of the General Partner. Prior to joining McREMI in and Chief Executive March 1993, Mr. Reed was President, Chief Operating Officer and Director Officer of Duddlesten Management Corporation and Duddlesten Realty Advisors, Inc., with responsibility for a management portfolio of office, retail, multi-family and mixed-use land projects representing $2 billion in asset value. He was also Chief Operating Officer, Director and member of the Executive Committee of all Duddlesten affiliates. Mr. Reed started with the Duddlesten companies in 1976 and served as Senior Vice President and Chief Financial Officer and as Executive Vice President and Chief Operating Officer of Duddlesten Management Corporation before his promotion to President in 1982. He was President and Chief Operating Officer of Duddlesten Realty Advisors, Inc., which has been engaged in real estate acquisitions, marketing and dispositions, since its formation in 1989. Ron K. Taylor 38 Mr. Taylor is a Senior Vice President of McREMI and has been in this Vice President capacity since McREMI commenced active operations in 1991. He also serves as Acting Chief Financial Officer of McREMI since the resignation of Robert C. Irvine on January 31, 1996. Mr. Taylor is primarily responsible for Asset Management functions at McREMI, including property dispositions, commercial leasing, real estate finance and portfolio management. Prior to joining McREMI, Mr. Taylor served as an Executive Vice President for a national syndication/property management company. Mr. Taylor has been involved in the real estate industry since 1983.
Each director shall serve until his successor shall have been duly elected and qualified. ITEM 11. EXECUTIVE COMPENSATION - -------- ---------------------- No direct compensation was paid or payable by the Partnership to directors or officers (since it does not have any directors or officers) for the year ended December 31, 1995, nor was any direct compensation paid or payable by the Partnership to directors or officers of the general partner of the General Partner for the year ended December 31, 1995. The Partnership has no plans to pay any such remuneration to any directors or officers of the general partner of the General Partner in the future. See Item 13 - Certain Relationships and Related Transactions for amounts of compensation and reimbursements paid by the Partnership to the General Partner and its affiliates. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------- -------------------------------------------------------------- (A) Security ownership of certain beneficial owners. No individual or group, as defined by Section 13(d)(3) of the Securities Exchange Act of 1934, known to the Partnership is the beneficial owner of more than 5% of the Partnership's securities, except as noted in below: 1. A group of limited partnerships affiliated with Liquidity Financial Corporation, all of whose outstanding stock is owned by Richard G. Wollack and Brent R. Donaldson, 2200 Powell Street, Suite 700, Emeryville, California, 94608, collectively own 6,389 Units (5.80%) as of February 29, 1996. 2. High River Limited Partnership, 100 S. Bedford Road, Mount Kisco, New York, 10549, owns 7,976 Units (7.24%) as of February 29, 1996. (B) Security ownership of management. The General Partner and the officers and directors of its general partner, collectively, own 5,715 Units (5.19%) as of February 29, 1996. (C) Change in control. None. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ---------------------------------------------- Under the terms of the Amended Partnership Agreement, the Partnership is paying the MID to the General Partner. The maximum MID is calculated as 1% of the tangible asset value of the Partnership. The maximum MID percentage decreases subsequent to 1999. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $10,000 per apartment unit to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible items. Prior to July 1, 1993, the MID consisted of two components: (i) the fixed portion which was payable without respect to the net income of the Partnership and was equal to 25% of the maximum MID (the "Fixed MID") and (ii) a contingent portion which was payable only to the extent of the lesser of the Partnership's excess cash flow, as defined, or net operating income (the "Entitlement Amount") and is equal to up to 75% of the maximum MID (the "Contingent MID"). Effective July 1, 1993, the General Partner amended the Amended Partnership Agreement as a settlement to a class action complaint. This amendment eliminates the Fixed MID and makes the entire MID payable to the extent of the Entitlement Amount. In all other respects, the calculation and payment of the MID remain the same. Contingent MID will be paid to the extent of the Entitlement Amount, and may be paid in (i) cash, unless there is insufficient cash to pay the distribution, in which event any unpaid portion not taken in Units will be deferred and is payable, without interest, from the first available cash and/or (ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of Units issued in payment of the MID is based on the greater of $50 per Unit or the net tangible asset value, as defined, per Unit. For the year ended December 31, 1995, the Partnership paid or accrued for the General Partner Contingent MID in the amount of $1,070,763. During 1991, the Partnership amended its capitalization policy and began capitalizing certain costs of improvements and betterments which under policies of prior management had been expensed when incurred. The purpose of the amendment was to more properly recognize items which were capital in nature. The effect of the amendment standing alone was evaluated at the time the change was made and determined not to be material to the financial statements of the Partnership in 1991, nor was it expected to be material in any future year. However, the amendment can have a material effect on the calculation of the Entitlement Amount which determines the amount of Contingent MID earned and the amount of Fixed MID payable in cash. Capital improvements are excluded from cash flow, as defined. The majority of base period cash flow was measured under the previous capitalization policy, while incentive period cash flow is determined using the amended policy. Under the amended policy, more items are capitalized, and cash flow increases. Had base period cash flow been measured on a basis comparable with incentive period cash flow, Contingent MID for the years ended December 31, 1995 and 1994, would have been reduced by $111,248 and 169,741, respectively. The amendment of the capitalization policy did not materially affect the MID for 1993 as the Entitlement Amount was sufficient to pay Contingent MID notwithstanding the amendment to the capitalization policy. The Partnership pays property management fees equal to 5% of gross rental receipts of the Partnership's properties to McREMI for providing property management and leasing services for the Partnership's properties. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. For the year ended December 31, 1995, the Partnership paid or accrued $1,680,513 in property management fees and reimbursements. See Item 1 - Business, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 8 - Note 2 - "Transactions with Affiliates." PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - -------- --------------------------------------------------------------- See accompanying Index to Financial Statements at Item 8. (A) The following exhibits are incorporated by reference and are an integral part of this Form 10-K. Exhibits
Exhibit Number Description ------- ----------- 3. Limited Partnership Agreement (Incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended September 30, 1987). 3.1 Amended and Restated Limited Partnership Agreement dated November 12, 1991 (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter year ended September 30, 1991). 3.2 Amendment No. 1 to the Amended and Restated Partnership Agreement of McNeil Real Estate Fund IX, Ltd., dated to be effective as of July 31, 1993. (5) 3.3 Amendment No. 2 to the Amended and Restated Partnership Agreement of McNeil Real Estate Fund IX, Ltd., dated March 28, 1994. (5) 10.1 Mortgage Note, dated September 26, 1989, between Rolling Hills Fund IX Associates L.P. and Newport Mortgage Corporation. (1) 10.2 Mortgage Note, dated August 11, 1988, between Sherwood Forest Fund IX Associates and American Mortgages, Inc. (1) 10.3 Assignment and Assumption Agreement, dated as of November 12, 1991, between Pacific Investors Corporation and McNeil Partners, L.P. regarding Sherwood Forest Fund IX Associates. (2) 10.4 Assignment and Assumption Agreement, dated as of November 12, 1991, between Pacific Investors Corporation and McNeil Partners, L.P. regarding Berkley Hills Associates. (2) 10.5 Assignment and Assumption Agreement, dated as of November 12, 1991, between Pacific Investors Corporation and McNeil Partners, L.P. regarding Ruskin Place Fund IX Associates. (2)
Exhibit Number Description ------- ----------- 10.6 Assignment and Assumption Agreement, dated as of November 12, 1991, between Rolling Hills Apartment Corp. and McNeil Partners, L.P. regarding Rolling Hills Fund IX Associates, L.P. (2) 10.7 Assignment and Assumption Agreement, dated as of November 12, 1991, between Pacific Investors Corporation, Robert A. McNeil and McNeil Partners, L.P. regarding McNeil Real Estate Fund IX, Ltd. (2) 10.8 Termination Agreement, dated as of November 12, 1991, between Ruskin Place Fund IX Associates and McNeil Real Estate Management, Inc. (2) 10.9 Termination Agreement, dated as of November 12, 1991. (2) between Rolling Hills Fund IX Associates, L.P. and McNeil Real Estate Management, Inc. 10.10 Termination Agreement, dated as of November 12, 1991, between Sherwood Forest Fund IX Associates and McNeil Real Estate Management, Inc. (2) 10.11 Termination Agreement, dated as of November 12, 1991, between Berkley Hills Associates and McNeil Real Estate Management, Inc. (2) 10.12 Property Management Agreement, dated as of November 12, 1991, between McNeil Real Estate Fund IX, Ltd. and McNeil Real Estate Management, Inc. (2) 10.13 Property Management Agreement, dated as of November 12, 1991, between Ruskin Place Fund IX Associates and McNeil Real Estate Management, Inc. (2) 10.14 Property Management Agreement, dated as of November 12, 1991, between Rolling Hills Fund IX Associates, L.P. and McNeil Real Estate Management, Inc. (2) 10.15 Property Management Agreement, dated as of November 12, 1991, between Sherwood Forest Fund IX Associates, L.P. and McNeil Real Estate Management, Inc. (2) 10.16 Property Management Agreement, dated as of November 12, 1991, between Berkley Hills Associates and McNeil Real Estate Management, Inc. (2)
Exhibit Number Description ------- ----------- 10.17 Asset Management Agreement, dated as of November 12, 1991, between McNeil Real Estate Fund IX, Ltd. and McNeil Partners, L.P. (2) 10.18 Revolving Credit Agreement, dated August 6, 1991, between McNeil Real Estate Fund IX, Ltd. and McNeil Partners, L.P.(2) 10.19 Amendment of Property Management Agreement dated March 5, 1993 between the Partnership and McNeil Real Estate Management, Inc. (3) 10.20 Property management agreement, dated as of January 28, 1993, between Pennbrook Fund IX, L.P. and McNeil Real Estate Management, Inc. (3) 10.21 Amendment of Property Management Agreement dated March 5, 1993 between Pennbrook Fund IX Associates, L.P. and McNeil Real Estate Management, Inc. (3) 10.22 Loan Agreement dated June 24, 1993 between Lexington Mortgage Company and McNeil Real Estate Fund IX, Ltd., et. al. (4) 10.23 Master Property Management Agreement, dated as of June 24, 1993, between McNeil Real Estate Management, Inc. and McNeil Real Estate Fund IX, Ltd. (5) 10.24 Mortgage Note, dated September 28, 1989, between Ruskin Place Fund IX Associates and American Mortgages, Inc. (6) 10.25 Modification of Mortgage Note, dated July 28, 1994, between Ruskin Place Fund IX Associates and American Mortgages, Inc. (6) 10.26 Deed of Trust Note, dated November 3, 1988, between Berkley Hills Associates and American Mortgages, Inc. (6) 10.27 Modification of Deed of Trust Note, dated July 28, 1994, between Berkley Hills Associates and American Mortgages, Inc. (6) 10.28 Loan Agreement, dated December 30, 1992, between Forest Park Fund IX Associates Limited Partnership, McNeil Partners, L.P., McNeil Real Estate Fund IX, Ltd. and Collateral Mortgage, Ltd. (6)
Exhibit Number Description ------- ----------- 10.29 Promissory Note, dated February 5, 1979, between Summers-The Heather Apartments Company and The Mutual Benefit Life Insurance Company. (6) 10.30 Promissory Note, dated September 2, 1988, between McNeil Real Estate Fund IX, Ltd. and FNB Mortgage Corp. (6) 10.31 Multifamily Note, dated January 29, 1993, between Pennbrook Fund IX Associates, L.P. and Washington Mortgage Financial Group, Ltd. (6) 10.32 Modification of Mortgage Note, dated June 30, 1993, between Sherwood Forest Fund IX Associates and American Mortgages, Inc. (6) 11. Statement regarding computation of Net Income (Loss) per Limited Partnership Unit (see Note 1 to Financial Statements). 22. Following is a list of subsidiaries of the Partnership: Names Under Jurisdiction Which It Is Name of Subsidiary of Incorporation Doing Business ------------------ ---------------- -------------- Berkley Hills Associates Tennessee None Cherry Hills Fund IX Limited Partnership Delaware None Forest Park Fund IX Associates Limited Partnership Ohio None Lantern Tree Fund IX Limited Partnership Delaware None Meridian West Fund IX Limited Partnership Delaware None Pennbrook Fund XI Associates, L.P. Texas None Rockborough Fund IX Limited Partnership Delaware None Rolling Hills Fund IX Associates, L.P. Kentucky None Ruskin Place Fund IX Associates Nebraska None Sherwood Forest Fund IX Associates Michigan None Williamsburg Fund IX Limited Partnership Delaware None
The Partnership has omitted instruments with respect to long-term debt where the total amount of the securities authorized thereunder does not exceed 10% of the total assets of the Partnership. The Partnership agrees to furnish a copy of each such instrument to the Commission upon request. (1) Incorporated by reference to the Annual Report of McNeil Real Estate Fund IX, Ltd. (File No. 0-9026) on Form 10-K for the period ended December 31, 1990, as filed with the Securities and Exchange Commission on March 29, 1991. (2) Incorporated by reference to the Annual Report of McNeil Real Estate Fund IX, Ltd. (File No. 0-9026), on Form 10-K for the period ended December 31, 1991, as filed with the Securities and Exchange Commission on March 30, 1992. (3) Incorporated by reference to the Annual Report of McNeil Real Estate Fund IX, Ltd. (File No. 0-9026), on Form 10-K for the period ended December 31, 1992, as filed with the Securities and Exchange Commission on March 30, 1993. (4) Incorporated by reference to the Annual Report of McNeil Real Estate Fund XI, Ltd. (File No. 0-9783), on Form 10-K for the period ended December 31, 1993, as filed with the Securities and Exchange Commission on March 30, 1994. (5) Incorporated by reference to the Annual Report of McNeil Real Estate Fund IX, Ltd. (File No. 0-9026), on Form 10-K for the period ended December 31, 1993, as filed with the Securities and Exchange Commission on March 30, 1994. (6) Incorporated by reference to the Annual Report of McNeil Real Estate Fund IX, Ltd. (File No. 0-9026), on Form 10-K for the period ended December 31, 1995, as filed with the Securities and Exchange Commission on March 30, 1995. 27. Financial Data Schedule for the year ended December 31, 1995. (B) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended December 31, 1995. McNEIL REAL ESTATE FUND IX, LTD. A Limited Partnership SIGNATURE PAGE Pursuant to the requirements of Section 13 or 15(d) 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.
McNEIL REAL ESTATE FUND IX, LTD. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner March 29, 1996 By: /s/ Robert A. McNeil - ------------------ ------------------------------------------------ Date Robert A. McNeil Chairman of the Board and Director (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. March 29, 1996 By: /s/ Donald K. Reed - ----------------- ------------------------------------------------ Date Donald K. Reed President and Director of McNeil Investors, Inc. March 29, 1996 By: /s/ Ron K. Taylor - ----------------- ------------------------------------------------ Date Ron K. Taylor Acting Chief Financial Officer of McNeil Investors, Inc. March 29, 1996 By: /s/ Brandon K. Flaming - ----------------- ------------------------------------------------ Date Brandon K. Flaming Chief Accounting Officer of McNeil Real Estate Management, Inc.
EX-27 2
5 12-MOS DEC-31-1995 DEC-31-1995 3,059,582 0 114,367 0 0 0 90,563,393 (48,129,231) 49,970,886 0 51,390,822 0 0 0 0 49,970,886 19,123,434 19,567,182 0 0 15,040,154 0 4,856,024 0 0 (328,996) 0 0 0 (328,996) 0 0
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