-----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, EbIteTz6/x55584jrFjfpQq6hxG27ce4Ys6C6FEsXHlJg+l0D/9e0v+HBKb7L9y3 bBa/Uy8+Cirz302pq6MYEQ== 0000276326-97-000009.txt : 19971113 0000276326-97-000009.hdr.sgml : 19971113 ACCESSION NUMBER: 0000276326-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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-Q SEC ACT: SEC FILE NUMBER: 000-09026 FILM NUMBER: 97715792 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-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended September 30, 1997 ------------------------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to_____________ Commission file number 0-9026 -------- 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 600, LB70, Dallas, Texas 75240 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (972) 448-5800 ----------------------------- 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 --- --- McNEIL REAL ESTATE FUND IX, LTD. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- BALANCE SHEETS (Unaudited)
September 30, December 31, 1997 1996 ---------------- ---------------- ASSETS - ------ Real estate investments: Land..................................................... $ 6,074,303 $ 6,370,834 Buildings and improvements............................... 76,088,948 81,666,317 -------------- -------------- 82,163,251 88,037,151 Less: Accumulated depreciation.......................... (48,673,308) (49,728,546) -------------- -------------- 33,489,943 38,308,605 Asset held for sale 2,936,204 - Cash and cash equivalents................................... 2,593,684 3,001,521 Cash segregated for security deposits....................... 603,747 571,749 Accounts receivable......................................... 51,291 59,871 Insurance proceeds receivable............................... 70,211 562,560 Prepaid expenses and other assets........................... 133,760 214,497 Escrow deposits............................................. 1,650,767 1,401,648 Mortgage note receivable.................................... - 1,550,000 Deferred borrowing costs, net of accumulated amortization of $1,067,926 and $895,853 at September 30, 1997 and December 31, 1996, respectively............................................. 1,807,585 1,979,658 -------------- -------------- $ 43,337,192 $ 47,650,109 ============== ============== LIABILITIES AND PARTNERS' DEFICIT - --------------------------------- Mortgage notes payable, net................................. $ 49,963,591 $ 50,600,006 Accrued interest............................................ 363,140 368,556 Accrued property taxes...................................... 1,114,032 928,103 Other accrued expenses...................................... 218,311 271,227 Payable to affiliates - General Partner..................... 147,003 279,716 Deferred gain on involuntary conversion..................... 57,352 474,376 Security deposits and deferred rental revenue............... 606,275 556,428 -------------- -------------- 52,469,704 53,478,412 -------------- -------------- Partners' deficit: Limited partners - 110,200 limited partnership units authorized; 110,170 limited partnership units outstanding............................................ (6,266,192) (3,029,682) General Partner.......................................... (2,866,320) (2,798,621) -------------- -------------- (9,132,512) (5,828,303) -------------- -------------- $ 43,337,192 $ 47,650,109 ============== ==============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND IX, LTD. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------- --------------------------------- 1997 1996 1997 1996 -------------- --------------- -------------- -------------- Revenue: Rental revenue................ $ 5,036,799 $ 4,954,103 $ 14,871,476 $ 14,780,033 Interest on mortgage note receivable............. - 26,264 15,500 26,264 Other interest................ 44,424 55,068 120,143 123,978 Gain on involuntary conversion.................. - - 417,024 - ------------- ------------- ------------- ------------- Total revenue............... 5,081,223 5,035,435 15,424,143 14,930,275 ------------- ------------- ------------- ------------- Expenses: Interest...................... 1,184,804 1,198,085 3,573,365 3,612,711 Depreciation.................. 1,075,547 1,036,344 3,205,677 3,147,117 Property taxes................ 362,454 373,574 1,078,211 1,139,074 Personnel expense............. 677,780 652,542 1,901,753 1,902,232 Repair and maintenance........ 782,963 639,013 2,147,511 1,877,673 Property management fees - affiliates........... 249,934 246,027 740,691 733,862 Utilities..................... 385,963 377,055 1,244,277 1,266,188 Other property operating expenses.................... 306,895 280,150 806,324 882,770 General and administrative.... 42,451 75,952 134,084 156,131 General and administrative - affiliates.................. 108,609 120,293 335,237 421,426 Loss on sale of real estate... - - - 220,157 ------------- ------------- ------------- ------------- Total expenses.............. 5,177,400 4,999,035 15,167,130 15,359,341 ------------- ------------- ------------- ------------- Net income (loss)................ $ (96,177) $ 36,400 $ 257,013 $ (429,066) ============= ============= ============= ============= Net loss allocated to limited partners.............. $ (315,553) $ (183,014) $ (486,518) $ (1,429,554) Net income allocated to General Partner............... 219,376 219,414 743,531 1,000,488 ------------- ------------- ------------- ------------- Net income (loss)................ $ (96,177) $ 36,400 $ 257,013 $ (429,066) ============= ============= ============= ============= Net loss per limited partnership unit.............. $ (2.87) $ (1.67) $ (4.42) $ (12.98) ============= ============= ============= ============= Distributions per limited partnership unit.............. $ 4.54 $ - $ 24.96 $ - ============= ============= ============= =============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND IX, LTD. STATEMENTS OF PARTNERS' DEFICIT (Unaudited) For the Nine Months Ended September 30, 1997 and 1996
Total General Limited Partners' Partner Partners Deficit -------------- --------------- --------------- Balance at December 31, 1995.............. $ (2,826,757) $ (1,574,003) $ (4,400,760) Net income (loss)......................... 1,000,488 (1,429,554) (429,066) Management Incentive Distribution......... (828,489) - (828,489) ------------- ------------- ------------- Balance at September 30, 1996............. $ (2,654,758) $ (3,003,557) $ (5,658,315) ============= ============= ============= Balance at December 31, 1996.............. $ (2,798,621) $ (3,029,682) $ (5,828,303) Net income (loss)......................... 743,531 (486,518) 257,013 Management Incentive Distribution......... (811,230) - (811,230) Distributions to limited partners......... - (2,749,992) (2,749,992) ------------- ------------- ------------- Balance at September 30, 1997............. $ (2,866,320) $ (6,266,192) $ (9,132,512) ============= ============= =============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND IX, LTD. STATEMENTS OF CASH FLOWS (Unaudited) Increase in Cash and Cash Equivalents
Nine Months Ended September 30, ------------------------------------ 1997 1996 ---------------- ---------------- Cash flows from operating activities: Cash received from tenants............................... $ 14,898,716 $ 14,807,554 Cash paid to suppliers................................... (6,250,288) (6,427,926) Cash paid to affiliates.................................. (1,116,056) (1,173,619) Interest received........................................ 135,643 150,242 Interest paid............................................ (3,372,995) (3,424,660) Property taxes paid and escrowed......................... (1,100,250) (1,153,450) -------------- -------------- Net cash provided by operating activities................... 3,194,770 2,778,141 -------------- -------------- Cash flows from investing activities: Additions to real estate investments..................... (1,323,219) (1,761,948) Proceeds from sale of real estate........................ - 2,042,384 Proceeds from sale of real estate invested in mortgage note receivable............................ - (1,550,000) Proceeds from mortgage note receivable................... 1,550,000 - Insurance proceeds for fire damage....................... 494,547 - -------------- -------------- Net cash provided by (used in) investing activities............................................... 721,328 (1,269,564) -------------- -------------- Cash flows from financing activities: Principal payments on mortgage notes payable................................................ (670,128) (615,734) Management Incentive Distribution........................ (903,815) (1,157,844) Distributions to limited partners........................ (2,749,992) - -------------- -------------- Net cash used in financing activities....................... (4,323,935) (1,773,578) -------------- -------------- Decrease in cash and cash equivalents....................... (407,837) (265,001) Cash and cash equivalents at beginning of period................................................... 3,001,521 3,059,582 -------------- -------------- Cash and cash equivalents at end of period.................. $ 2,593,684 $ 2,794,581 ============== ==============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND IX, LTD. STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities
Nine Months Ended September 30, ------------------------------------ 1997 1996 --------------- ---------------- Net income (loss)........................................... $ 257,013 $ (429,066) -------------- -------------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation............................................. 3,205,677 3,147,117 Amortization of deferred borrowing costs................. 172,073 160,722 Amortization of mortgage discounts....................... 33,713 31,806 Gain on involuntary conversion........................... (417,024) - Loss on sale of real estate.............................. - 220,157 Changes in assets and liabilities: Cash segregated for security deposits.................. (31,998) (30,088) Accounts receivable.................................... 8,580 50,995 Insurance proceeds receivable.......................... (2,198) - Prepaid expenses and other assets...................... 80,737 1,240 Escrow deposits........................................ (249,119) (96,204) Accounts payable....................................... - (251,744) Accrued interest....................................... (5,416) (4,477) Accrued property taxes................................. 185,929 57,474 Other accrued expenses................................. (52,916) (98,086) Payable to affiliates - General Partner................ (40,128) (18,331) Security deposits and deferred rental revenue.............................................. 49,847 36,626 -------------- -------------- Total adjustments.................................... 2,937,757 3,207,207 -------------- -------------- Net cash provided by operating activities................... $ 3,194,770 $ 2,778,141 ============== ==============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND IX, LTD. Notes to Financial Statements (Unaudited) September 30, 1997 NOTE 1. - ------- McNeil Real Estate Fund IX, Ltd. (the "Partnership") is a limited partnership organized under the laws of the State of California to invest in real property. 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 limited partnership agreement ("Amended Partnership Agreement") that was adopted September 20, 1991. The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240. In the opinion of management, the financial statements reflect all adjustments necessary for a fair presentation of the Partnership's financial position and results of operations. All adjustments were of a normal recurring nature. However, the results of operations for the nine months ended September 30, 1997 are not necessarily indicative of the results to be expected for the year ending December 31, 1997. NOTE 2. - ------- The financial statements should be read in conjunction with the financial statements contained in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1996, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Real Estate Fund IX, Ltd., c/o The Herman Group, 2121 San Jacinto St., 26th Floor, Dallas, Texas 75201. NOTE 3. - ------- 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. 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. MID will be paid to the extent of the lesser of the Partnership's excess cash flow, as defined, or net operating income, as defined ("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. Any amount of the MID that 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 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, reimbursements and distributions paid to or accrued for the benefit of the General Partner and its affiliates are as follows: Nine Months Ended September 30, ------------------------- 1997 1996 ----------- ----------- Property management fees - affiliates........... $ 740,691 $ 733,862 Charged to general and administrative - affiliates: Partnership administration................... 335,237 421,426 ---------- --------- $ 1,075,928 $ 1,155,288 ========== ========== Charged to General Partner's deficit: Management Incentive Distribution............ $ 811,230 $ 828,489 ========== ========== NOTE 4. - ------- On April 24, 1996, a fire destroyed or damaged 12 units at Sheraton Hills Apartments. The cost to repair the fire damage was $562,560. Insurance proceeds will reimburse the Partnership for all costs incurred as a result of the fire. As a result of the fire damage and the expected insurance reimbursements, the Partnership recorded a $474,376 deferred gain on involuntary conversion on the Partnership's December 31, 1996 balance sheet. The deferred gain on involuntary conversion equals the insurance proceeds receivable less the adjusted basis of the property destroyed or damaged by the fire. The gain on involuntary conversion is deferred pending receipt of the insurance proceeds. As insurance proceeds are received, the Partnership will recognize the deferred gain. In July 1997, the Partnership received $494,547 of insurance reimbursements. Consequently, $417,024 of the deferred gain was recognized for the quarter ending September 30, 1997 in the accompanying financial statements. The remaining $57,352 of deferred gain will be recognized when the remainder of the insurance proceeds are received. Reconstruction of the destroyed or damaged units was completed during the third quarter of 1996. NOTE 5. - ------- On August 1, 1997, the Partnership placed Sheraton Hills Apartments on the market for sale. In accordance with the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Partnership will cease recording depreciation charges on Sheraton Hills Apartments effective August 1, 1997. NOTE 6. - ------- On July 30, 1996, the Partnership sold Westridge Apartments to an unaffiliated purchaser for a cash sales price of $2,110,500. The Partnership agreed to finance a portion of the sales price by accepting from the purchaser a short-term, $1,550,000 mortgage note. The mortgage note accrued interest at 10.0% per annum and required monthly interest-only payments. On February 5, 1997, the purchaser repaid the $1,550,000 mortgage note to the Partnership together with all accrued interest thereon. Cash proceeds from the sale, as well as the loss on sale of Westridge Apartments are detailed below. Loss on Sale Cash Proceeds ------------ ------------- Cash sales price...................... $ 2,110,500 $ 2,110,500 Selling costs......................... (68,116) (68,116) Basis of real estate sold............. (2,262,541) ---------- Loss on sale of real estate........... $ (220,157) ========== Net cash proceeds received in 1996.... (492,384) ---------- Net cash proceeds received in 1997.... $ 1,550,000 ========== ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - ------- ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- The Partnership was formed to acquire, operate and ultimately dispose of a portfolio of income-producing real properties. At September 30, 1997, the Partnership owned 13 apartment properties. All of the Partnership's properties are subject to mortgage notes. On July 30, 1996, the Partnership sold Westridge Apartments. In February 1997, the Partnership paid a $2,250,000 distribution ($20.42 per limited partnership unit) to the limited partners. The distribution was funded by cash proceeds from the sale of Westridge Apartments, collection of the $1,550,000 mortgage note obtained by the Partnership in connection with the sale of Westridge Apartments, and from cash reserves of the Partnership. The Partnership paid an additional distribution ($4.54 per limited partnership unit) to the limited partners in September 1997. The September distribution was funded with cash reserves of the Partnership. RESULTS OF OPERATIONS - --------------------- The Partnership's net income for the first nine months of 1997 was $257,013, an increase of $686,079 over the $429,066 loss recorded by the Partnership for the first nine months of 1996. For the third quarter, the partnership recorded a loss of $96,177, down $132,577 from the third quarter of 1996. Two non-recurring items affect the comparison between 1997 and 1996. The Partnership recorded a $417,024 gain on involuntary conversion in 1997, and recorded a $220,157 loss on sale of real estate in 1996. Excluding these two items, the Partnership's loss for 1997 was cut from $208,909 in 1996 to $160,011 in 1997. Revenue: Rental revenue increased $82,696 or 1.7% and $91,443 or .6% for the quarter and nine months ended September 30, 1997 as compared to the same periods of 1996. However, 1996 rental revenue includes rental revenue from Westridge Apartments. The Partnership sold Westridge Apartments on July 30, 1996. After excluding the rental revenues from Westridge Apartments from the 1996 figures, rental revenue at the remainder of the Partnership's properties increased $489,989 or 3.4% for the first nine months of 1997 as compared to the same period of 1996. Rental revenues increased at eleven of the Partnership's thirteen properties. The properties reporting the largest increases in rental revenue, on a percentage basis, were Cherry Hills Apartments, Meridian West Apartments, Sheraton Hills Apartments and Westgate Apartments. These properties achieved increased rental revenue ranging from 5% to 9% primarily by improving their occupancy rates. Two of the Partnership's properties, Forest Park Village Apartments and Williamsburg Apartments, reported unchanged rental revenue. The remainder of the Partnership's properties reported small increases in rental revenue due to increased rental rates that were partially offset by decreased occupancy rates. None of the partnership's properties reported decreases in rental revenue. Interest income decreased $14,599 or 9.7% for the first nine months of 1997 as compared to the same period of 1996. Interest income includes $15,500 and $26,264, for the first nine months of 1997 and 1996 respectively, of interest income on the $1,550,000 Westridge mortgage note obtained in connection with the sale of Westridge Apartments. The Westridge mortgage note was collected in full on February 5, 1997. Expenses: Partnership expenses decreased $192,211 or 1.3% for the first nine months of 1997 as compared to the same period of 1996. However, the 1996 figures include expenses related to Westridge Apartments as well as a $220,157 loss on sale of real estate related to Westridge Apartments. Excluding the expenses related to Westridge Apartments, expenses increased $205,022 or 1.4% for the first nine months of 1997 as compared to the same period of 1996. The Partnership incurred increased repair and maintenance expenses and decreases in general and administrative expenses and general and administrative expenses paid to affiliates. Excluding the effects of the sale of Westridge, repair and maintenance expense increased $348,370 or 19.4% for the nine months ended September 30, 1997 as compared to the same period of 1996. The increase is attributable to the replacement of carpeting and appliances, which met the Partnership's criteria for capitalization based on the magnitude of replacements in 1996, but were expensed in 1997. General and administrative expenses decreased 14.1% for the nine months ended September 30, 1997 as compared to the same period of 1996. Expenses incurred to evaluate and disseminate information regarding an unsolicited tender offer decreased $40,929 in 1997. The decrease was offset by charges for investor services which, beginning in 1997, are provided by a third party vendor instead of by affiliates of the General Partner. General and administrative expenses paid to affiliates decreased 20.45% for the nine months ended September 30, 1997 as compared to the same period of 1996. The decrease is due to the change in investor relation charges discussed in the previous paragraph, as well as reduced charges from affiliates of the General Partner due to the sale of Westridge Apartments. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash provided by operating activities increased $416,629 or 15% for the first nine months of 1997 as compared to the same period of 1996. Increased cash received from tenants and decreases in cash paid to suppliers accounted for most of the increase in cash provided by operating activities. Although the Partnership continues to invest significant resources into capital improvements at its properties, the scope of such investments decreased beginning in 1996. The Partnership had, on average, expended approximately $3 million annually for capital improvements prior to 1996. The Partnership has expended $1,323,219 for capital improvements so far in 1997, a 25% decrease from amounts invested in 1996. The budgeted capital improvements for 1997 total $1.7 million. 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 future repair and maintenance expenses from amounts that would otherwise be incurred. Cash flow from operations, as well as proceeds from the sale of Westridge Apartments in 1996, were used to pay approximately $2.75 million of distributions to the limited partners during the first nine months of 1997. The Partnership also paid $903,815 of Management Incentive Distributions to the General Partner. Short-term liquidity: At September 30, 1997, the Partnership held $2,593,684 of cash and cash equivalents, down $407,837 from the balance at the beginning of 1997. The General Partner anticipates that cash generated from operations for the remainder of 1997 will be sufficient to fund the Partnership's budgeted capital improvements and to repay the current portion of the Partnership's mortgage notes. The General Partner considers the Partnership's cash reserves adequate for anticipated operations for the remainder of 1997. The Forest Park Village mortgage note matures in January 1998. The General Partner intends to refinance the Forest Park Village mortgage note. Although the General Partner does not anticipate unusual difficulties in refinancing the Forest Park Village mortgage note, such refinancing is not assured, and the Partnership's investment in Forest Park Village Apartments could be at risk if suitable financing is not obtained before the maturity date. The Sheraton Hills mortgage note matures in October 1998. The General Partner intends to resolve the Sheraton Hills mortgage maturity by selling Sheraton Hills Apartments. The General Partner placed Sheraton Hills Apartments on the market for sale on August 1, 1997. Initial responses to the Partnership's marketing efforts would seem to indicate that the Partnership will be able to sell Sheraton Hills Apartments for an amount sufficient to retire the Sheraton Hills mortgage note and to provide additional cash reserves for the Partnership. However, the sale of Sheraton Hills Apartments is not assured, and if the Partnership is unable to sell or otherwise refinance the Sheraton Hills mortgage note, the Partnership's investment in Sheraton Hills Apartments could be at risk. Long-term liquidity: While the present outlook for the Partnership's liquidity is favorable, market conditions may change and property operations can deteriorate. In that event, the Partnership would require other sources of working capital. No such other sources have been identified, and the Partnership has no established lines of credit. Other possible actions to resolve working capital deficiencies include refinancing or renegotiating terms of existing loans, deferring major capital expenditures on Partnership properties except where improvements are expected to enhance the competitiveness or marketability of the properties, or arranging working capital support from affiliates. No affiliate support has been required in the past, and there is no assurance that support from affiliates would be provided in the future, since neither the General Partner nor any affiliates have any obligation in this regard. The Partnership has determined to begin an orderly liquidation of all the Partnership's assets. Although there can be no assurance as to the timing of any liquidation, it is anticipated that such liquidation would result in distributions to the limited partners of the cash proceeds from the sale of the Partnership's properties, subject to cash reserve requirements, as they are sold with the last property disposition before December 2001, followed by a dissolution of the Partnership. On August 1, 1997, the Partnership placed Sheraton Hills Apartments on the market 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 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 nine month periods ended September 30, 1997 and 1996, the General Partner received allocations of net income of $743,531, and $1,000,488 respectively. The limited partners received allocations of net loss of $486,518 and $1,429,554 for the nine month periods ended September 30, 1997 and 1996, respectively. On February 28, 1997, the Partnership paid its first distribution to the limited partners since 1986. The $2,250,000 distribution was in large measure funded by proceeds from the 1996 sale of Westridge Apartments. On September 16, 1997, the Partnership distributed an additional $500,000. For the foreseeable future, distributions to limited partners will likely be limited to proceeds from the sale of Partnership properties and cash reserves. The General Partner will continue to monitor the cash reserves and working capital needs of the Partnership to determine when cash flows will support additional distributions to the limited partners. Currently, one Partnership property, Sheraton Hills Apartments, is being marketed for sale. However, there can be no assurance regarding either the timing of any sale of Sheraton Hills Apartments or whether such a sale would generate funds in excess of the balance of the Sheraton Hills mortgage note that would be available for distribution to the limited partners. During the third quarter, the Partnership recorded MID of $811,230. MID payments totaling $903,815 were paid to the General Partner during the third quarter. MID payments to the General Partner are expected to continue in 1997. To the extent that cash flow from operations is not sufficient to fund payments of MID along with other Partnership obligations, the Partnership will use its cash reserves to make such payments. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, 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). The action involves purported class and derivative actions brought by limited partners of each of the fourteen limited partnerships that were named as nominal defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants 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. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. Defendants filed a demurrer to the consolidated and amended complaint and a motion to strike on February 14, 1997, seeking to dismiss the consolidated and amended complaint in all respects. A hearing on Defendant's demurrer and motion to strike was held on May 5, 1997. The Court granted Defendants' demurrer, dismissing the consolidated and amended complaint with leave to amend. On October 31, 1997, the Plaintiffs filed a second consolidated and amended complaint. Defendants intend to file a demurrer to the second consolidated and amended complaint on or before December 1, 1997. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- (a) Exhibits. Exhibit Number Description ------- ----------- 4. Amended and Restated Partnership Agreement, dated November 12, 1991. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1991). 11. Statement regarding computation of 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 number of limited partnership units outstanding. Per unit information has been computed based on 110,170 limited partnership units outstanding in 1997 and 1996. 27. Financial Data Schedule for the quarter ended September 30, 1997. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended September 30, 1997. McNEIL REAL ESTATE FUND IX, LTD. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized: McNEIL REAL ESTATE FUND IX, Ltd. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner November 13, 1997 By: /s/ Ron K. Taylor - ----------------- ------------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) November 13, 1997 By: /s/ Brandon K. Flaming - ----------------- ------------------------------------------- Date Brandon K. Flaming Vice President of McNeil Investors, Inc. (Principal Accounting Officer) EX-27 2
5 9-MOS DEC-31-1997 SEP-30-1997 2,593,684 0 0 0 0 0 82,163,251 (48,673,308) 43,337,192 0 49,963,591 0 0 0 0 43,337,192 14,871,476 15,424,143 0 0 11,593,765 0 3,573,365 257,013 0 0 0 0 0 257,013 0 0
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