-----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, SsBzUVdUgC49KHQyI5rkb3V9/8/4OJrUgmAQhZeMpztthsYqtnvXw8fdNwcXaX6j Qy55mvhZWNzdDHu0b5LCqw== 0000276326-98-000006.txt : 19980817 0000276326-98-000006.hdr.sgml : 19980817 ACCESSION NUMBER: 0000276326-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 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: 98688126 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 quarterly period ended June 30, 1998 -------------------------------------------- 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 --- --- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- McNEIL REAL ESTATE FUND IX, LTD. BALANCE SHEETS (Unaudited)
June 30, December 31, 1998 1997 ------------- ------------ ASSETS - ------- Real estate investments: Land ............................................................... $ 6,074,303 $ 6,074,303 Buildings and improvements ......................................... 77,596,695 76,812,085 ------------ ------------ 83,670,998 82,886,388 Less: Accumulated depreciation .................................... (51,404,579) (49,466,952) ------------ ------------ 32,266,419 33,419,436 Asset held for sale ................................................... 3,096,704 3,009,553 Cash and cash equivalents ............................................. 2,037,420 3,330,836 Cash segregated for security deposits ................................. 611,818 622,602 Accounts receivable ................................................... 47,346 92,135 Prepaid expenses and other assets ..................................... 153,984 181,856 Escrow deposits ....................................................... 1,504,529 1,663,701 Deferred borrowing costs, net of accumulated amortization of $1,240,585 and $1,144,486 at June 30, 1998 and December 31, 1997, respectively ....................................................... 1,731,448 1,731,025 ------------ ------------ $ 41,449,668 $ 44,051,144 ============ ============ LIABILITIES AND PARTNERS' DEFICIT - --------------------------------- Mortgage notes payable, net ........................................... $ 49,442,784 $ 49,745,307 Accounts payable ...................................................... 29,626 99,710 Accrued interest ...................................................... 350,536 361,422 Accrued property taxes ................................................ 984,563 1,136,213 Other accrued expenses ................................................ 204,349 251,555 Payable to affiliates - General Partner ............................... 1,223,336 591,289 Security deposits and deferred rental revenue ......................... 618,157 603,703 ------------ ------------ 52,853,351 52,789,199 ------------ ------------ Partners' deficit: Limited partners - 110,200 limited partnership units authorized; 110,170 limited partnership units outstanding at June 30, 1998 and December 31, 1997............................................. (7,600,764) (5,509,025) General Partner .................................................... (3,802,919) (3,229,030) ------------ ------------ (11,403,683) (8,738,055) ----------- ------------ $ 41,449,668 $ 44,051,144 ============ ============
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 Six Months Ended June 30, June 30, -------------------------- --------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Revenue: Rental revenue ............. $ 5,113,827 $ 4,965,754 $ 10,200,536 $ 9,834,677 Interest ................... 27,321 32,738 70,730 91,219 Gain on involuntary conversion ............... - 417,024 - 417,024 ------------ ------------ ------------ ------------ Total revenue ............ 5,141,148 5,415,516 10,271,266 10,342,920 ------------ ------------ ------------ ------------ Expenses: Interest ................... 1,138,818 1,189,734 2,305,343 2,388,561 Depreciation ............... 976,502 1,089,565 1,937,627 2,130,130 Property taxes ............. 395,283 362,454 790,566 715,757 Personnel expense .......... 605,381 555,388 1,298,816 1,223,973 Repair and maintenance ..... 696,961 706,491 1,213,386 1,364,548 Property management fees - affiliates ........ 253,160 248,578 507,618 490,757 Utilities .................. 366,137 365,045 815,670 858,314 Other property operating expenses ................. 213,724 230,165 506,662 499,429 General and administrative . 236,719 38,421 421,360 91,633 General and administrative - affiliates ............... 133,417 119,404 254,987 226,628 ------------ ------------ ------------ ------------ Total expenses ........... 5,016,102 4,905,245 10,052,035 9,989,730 ------------ ------------ ------------ ------------ Net income .................... $ 125,046 $ 510,271 $ 219,231 $ 353,190 ============ ============ ============ ============ Net income (loss) allocated to limited partners ........... $ 118,794 $ 243,979 $ 208,269 $ (170,965) Net income allocated to General Partner ............ 6,252 266,292 10,962 524,155 ------------ ------------ ------------ ------------ Net income .................... $ 125,046 $ 510,271 $ 219,231 $ 353,190 ============ ============ ============ ============ Net income (loss) per limited partnership unit ........... $ 1.08 $ 2.22 $ 1.89 $ (1.55) ============ ============ ============ ============ Distributions per limited partnership unit ........... $ - $ - $ 20.88 $ 20.42 ============ ============ ============ ============
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 Six Months Ended June 30, 1998 and 1997
Total General Limited Partners' Partner Partners Deficit --------------- ------------ ------------- Balance at December 31, 1996 .... $ (2,798,621) $(3,029,682) $ (5,828,303) Net income (loss) ............... 524,155 (170,965) 353,190 Management Incentive Distribution (546,307) - (546,307) Distribution to limited partners - (2,250,003) (2,250,003) -------------- ------------ ------------ Balance at June 30, 1997 ........ $ (2,820,773) $ (5,450,650) $ (8,271,423) ============== ============ ============ Balance at December 31, 1997 .... $ (3,229,030) $ (5,509,025) $ (8,738,055) Net income ...................... 10,962 208,269 219,231 Management Incentive Distribution (584,851) - (584,851) Distribution to limited partners - (2,300,008) (2,300,008) -------------- ------------ ------------ Balance at June 30, 1998 ........ $ (3,802,919) $ (7,600,764) $(11,403,683) ============== ============ ============
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 (Decrease) in Cash and Cash Equivalents
Six Months Ended June 30, ----------------------------- 1998 1997 ------------- ------------- Cash flows from operating activities: Cash received from tenants ..................... $ 10,300,637 $ 9,823,848 Cash paid to suppliers ......................... (4,381,859) (4,123,817) Cash paid to affiliates ........................ (715,409) (745,790) Interest received .............................. 70,730 91,219 Interest paid .................................. (2,196,582) (2,255,144) Property taxes paid and escrowed ............... (776,571) (840,489) ------------ ------------ Net cash provided by operating activities ......... 2,300,946 1,949,827 ------------ ------------ Cash flows from investing activities: Additions to real estate investments ........... (871,761) (891,126) Proceeds from mortgage note receivable ......... - 1,550,000 ------------ ------------ Net cash provided by (used in) investing activities (871,761) 658,874 ------------ ------------ Cash flows from financing activities: Net proceeds from refinancing mortgage note payable ................................. 94,036 - Principal payments on mortgage notes payable ...................................... (420,107) (441,707) Additions to deferred borrowing costs .......... (96,522) - Management Incentive Distribution .............. - (630,662) Distributions to limited partners .............. (2,300,008) (2,250,003) ------------ ------------ Net cash used in financing activities ............. (2,722,601) (3,322,372) ------------ ------------ Decrease in cash and cash equivalents ............. (1,293,416) (713,671) Cash and cash equivalents at beginning of period ......................................... 3,330,836 3,001,521 ------------ ------------ Cash and cash equivalents at end of period ........ $ 2,037,420 $ 2,287,850 ============ ============
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 to Net Cash Provided by Operating Activities
Six Months Ended June 30, --------------------------- 1998 1997 ----------- ------------ Net income ................................. $ 219,231 $ 353,190 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ............................ 1,937,627 2,130,130 Amortization of deferred borrowing costs 96,099 114,715 Amortization of mortgage discounts ...... 23,548 22,475 Gain on involuntary conversion .......... - (417,024) Changes in assets and liabilities: Cash segregated for security deposits . 10,784 (45,989) Accounts receivable ................... 44,789 (13,103) Prepaid expenses and other assets ..... 27,872 44,974 Escrow deposits ....................... 159,172 (106,989) Accounts payable ...................... (70,084) - Accrued interest ...................... (10,886) (3,773) Accrued property taxes ................ (151,650) (39,526) Other accrued expenses ................ (47,206) (102,953) Payable to affiliates - General Partner 47,196 (28,405) Security deposits and deferred rental revenue ............................. 14,454 42,105 ----------- ----------- Total adjustments ................... 2,081,715 1,596,637 ----------- ----------- Net cash provided by operating activities .. $ 2,300,946 $ 1,949,827 =========== ===========
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) June 30, 1998 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 six months ended June 30, 1998 are not necessarily indicative of the results to be expected for the year ending December 31, 1998. 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, 1997, 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 McNeil Real Estate Management, Inc., Investor Services, 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240. 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 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: Six Months Ended June 30, ----------------------- 1998 1997 ---------- ---------- Property management fees - affiliates . $ 507,618 $ 490,757 Charged to general and administrative - affiliates: Partnership administration .......... 254,987 226,628 ---------- --------- $ 762,605 $ 717,385 ========== ========= Charged to General Partner's deficit: Management Incentive Distribution ... $ 584,851 $ 546,307 ========= ========= NOTE 4. - ------- On March 20, 1998, the Partnership refinanced the Forest Park Village mortgage note. The new mortgage note, in the amount of $5,925,000, bears interest at a variable rate equal to 1.75% plus the London Interbank Offered Rate per annum. The new mortgage note requires monthly interest-only payments and quarterly principal payments in an amount necessary to reduce the principal balance of the note by 5% annually. The maturity date of the new mortgage note is March 20, 2001. Cash proceeds from the refinancing transaction are as follows: New mortgage note proceeds........................... $ 5,925,000 Amount required to payoff existing debt.............. 5,830,964 ----------- Cash proceeds from refinancing....................... $ 94,036 =========== The Partnership incurred $75,479 of deferred borrowing costs related to the refinancing of the Forest Park Village mortgage note. NOTE 5. - ------- On July 30, 1996, the Partnership sold Westridge Apartments to an unaffiliated purchaser for a cash sales price of $2,110,500. The Partnership financed a portion of the sales price by accepting 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. Interest revenue earned on the Westridge mortgage note is included in interest on the accompanying financial statements. 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 June 30, 1998, the Partnership owned 13 apartment properties. All of the Partnership's properties are subject to mortgage notes. In March 1998, the Partnership distributed $2,300,008 ($20.88 per limited partnership unit) to the limited partners. The distribution was funded from operations and cash reserves of the Partnership. RESULTS OF OPERATIONS - --------------------- The Partnership reported net income of $125,046 and $219,231 for the three month and six month periods ended June 30, 1998, a decrease from the $510,271 and $353,190 reported for the same periods of 1997. However, the three month and six month periods ended June 30, 1997 included a $417,024 gain on involuntary conversion. Excluding the gain, the Partnership's income increased $31,799 and $283,065 for the three month and six month periods ended June 30, 1998 as compared to the same periods of 1997. Revenue: Rental revenue increased 3.0% and 3.7% for the three month and six month periods ended June 30, 1998 as compared to the same periods of 1997. Rental revenues increased at ten of the Partnership's thirteen properties. Rental revenues increased in excess of 5% at Pennbrook Apartments, Rockborough Apartments, Rolling Hills Apartments, and Ruskin Place Apartments. These properties achieved increased rental revenue through improved rental and occupancy rates. Two of the Partnership's properties, Cherry Hills Apartments and Westgate Apartments, reported rental revenue that was unchanged for the six month period as compared to the same period of 1997. Lantern Tree Apartments reported a 1.9% decrease in rental revenue as the increase in rental rates was not enough to offset increases in vacancy and other rental losses. 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. Interest income decreased 17% and 22% for the three month and six month periods ended June 30, 1998 as compared to the same periods of 1997. Included in interest revenue for 1997 was $15,500 of interest on the Westridge mortgage note receivable. The Westridge mortgage note receivable was repaid in full on February 5, 1997. For the second quarter, interest revenue decreased due to decreased amounts of cash and cash equivalents invested in interest bearing accounts. The Partnership reported a $417,024 gain on involuntary conversion during the second quarter of 1997. No such transaction occurred during 1998. Expenses: Partnership expenses increased $110,857 or 2.3% and $62,305 or 0.6% for the three month and six month periods ended June 30, 1998 as compared to the same periods of 1997. Decreases in repair and maintenance expenses and depreciation were offset by increases in property taxes, general and administrative expenses, and general and administrative expenses paid to affiliates. Repair and maintenance expense decreased 1.3% and 11.1% for the three month and six month periods ended June 30, 1998 as compared to the same periods of 1997. The decrease is attributable to the reduction of total dollars spent on the replacement of carpeting and appliances during 1998 as compared to 1997. In addition, because Cherry Hills Apartments no longer rents apartment units to corporate clients, furniture rental expense decreased $51,713. Depreciation expense decreased 10.4% and 9.0% for the three month and six month periods ended June 30, 1998 as compared to the same periods of 1997. In accordance with accounting standards, the Partnership ceased depreciating its investment in Sheraton Hills Apartments beginning August 1, 1997, the date the Partnership placed that property on the market for sale. Property tax expense increased 9.1% and 10.5% for the three month and six month periods ended June 30, 1998 as compared to the same periods of 1997. Local taxing jurisdictions have increased the assessed property values of Berkley Hills Apartments, Heather Square Apartments, Rockborough Apartments, Ruskin Place Apartments, and Sheraton Hills Apartments. General and administrative expenses increased $198,298 to $236,719 and $329,727 to $421,360 for the three month and six month periods ended June 30, 1998. The increase was principally due to costs incurred to explore alternatives to maximize the value of the Partnership (see Liquidity and Capital Resources). The increase was partially offset by decreases attributable to costs incurred for investor services. During 1997, charges for investor services were provided by a third party vendor and were recorded in general and administrative expenses. Beginning in 1998, investor services have been provided by affiliates of the General Partner. As a consequence, general and administrative expenses paid to affiliates increased $28,359 or 12.5% for the six months ended June 30, 1998 as compared to the six months ended June 30, 1997. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash provided by operating activities increased 18% to $2,300,946 for the six months ended June 30, 1998 as compared to the six months ended June 30 1997. Increased cash received from tenants and decreases in property taxes paid accounted for most of the increase in cash provided by operating activities. The Partnership expended $871,761 for capital improvements during the period ended June 30, 1998, a 2.2% decrease from the amount invested in 1997. Budgeted capital improvements for 1998 total $1,579,000. 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. On March 20, 1998, the Partnership refinanced the Forest Park Village mortgage note. The new mortgage note, in the amount of $5,925,000, bears interest at a variable rate equal to 1.75% plus the London Interbank Offered Rate per annum. The new mortgage note requires monthly interest only payments and quarterly principal payments in the amount necessary to reduce the principal balance of the note by 5% annually. The maturity date of the new mortgage note is March 20, 2001. The Partnership realized $94,036 of cash proceeds from the transaction; however, $75,479 of the cash proceeds were used to fund various deferred borrowing costs related to the transaction. The Partnership used its cash flow from operations as well as its cash reserves to distribute $2,300,008 to the limited partners in March 1998. The distribution amounted to $20.88 per limited partnership unit. Short-term liquidity: At June 30, 1998, the Partnership held $2,037,420 of cash and cash equivalents, down $1,293,416 from the balance at the beginning of 1998. The General Partner anticipates that cash generated from operations for the remainder of 1998 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 1998. The Sheraton Hills mortgage note matures October 1, 1998. Although the General Partner placed Sheraton Hills Apartments on the market for sale on August 1, 1997, the General Partner is also negotiating with the holder of the Sheraton Hills mortgage note to extend the maturity date for an additional three years. The General Partner does not expect unusual difficulties in either extending or refinancing the Sheraton Hills mortgage note. However, the sale of Sheraton Hills Apartments is not assured, and if the Partnership is unable to sell or otherwise refinance or extend the Sheraton Hills mortgage note, the Partnership's investment in Sheraton Hills Apartments could be at risk. 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 capital improvements made by the Partnership during the past three years will yield improved cash flow from property operations in 1998. Furthermore, the General Partner has budgeted an additional $707,000 of capital improvements for the remainder of 1998. 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. As previously announced, the Partnership has retained PaineWebber ("PaineWebber"), Incorporated as its exclusive financial advisor to explore alternatives to maximize the value of the Partnership including, without limitation, a transaction in which limited partnership interests in the Partnership are converted into cash. The Partnership, through PaineWebber, has provided financial and other information to interested parties and is currently conducting discussions with one such party in an attempt to reach a definitive agreement with respect to a sale transaction. It is possible that the General Partner and its affiliates will receive non-cash consideration for their ownership interests in connection with any such transaction. There can be no assurance that any such agreement will be reached nor the terms thereof. 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 six month periods ended June 30, 1998 and 1997, the Partnership allocated net income of $10,962 and $524,155, respectively, to the General Partner. The Partnership allocated net income of $208,269 and net loss of $170,965 to the limited partners for the six month periods ended June 30, 1998 and 1997, respectively. On February 28, 1997, the Partnership paid its first distribution, in the amount of $2,250,003, to the limited partners since 1986. An additional $500,000 was distributed to the limited partners on September 16, 1997. Approximately $2,042,000 of the 1997 distributions represents proceeds from the 1996 sale of Westridge Apartments. On March 30, 1998, the Partnership distributed $2,300,008 ($20.88 per limited partnership unit) to the limited partners from the Partnership's cash reserves. In light of the discussions relating to the sale transaction as disclosed, the Partnership is presently deferring any decision with respect to the amount or timing of distributions to limited partners. For the first six months of 1998, the Partnership recorded MID of $584,851. However, the Partnership has not paid MID to the General Partner in 1998. The balance of accrued MID outstanding totaled $939,022 at June 30, 1998. Forward-Looking Information: Within this document, certain statements are made as to the expected occupancy trends, financial condition, results of operations, and cash flows of the Partnership for periods after June 30, 1998. All of these statements are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical and involve risks and uncertainties. The Partnership's actual occupancy trends, financial condition, results of operations, and cash flows for future periods may differ materially due to several factors. These factors include, but are not limited to, the Partnership's ability to control costs, make necessary capital improvements, negotiate sales or refinancings of its properties, and respond to changing economic and competitive factors. Other Information: Management has begun to review its information technology infrastructure to identify any systems that could be affected by the year 2000 problem. The year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in major systems failure or miscalculations. The information systems used by the Partnership for financial reporting and significant accounting functions were made year 2000 compliant during recent systems conversions. The Partnership is in the process of evaluating the computer systems at the various properties. The Partnership also intends to communicate with suppliers, financial institutions and others to coordinate year 2000 issues. Management believes that the remediation of any outstanding year 2000 conversion issues will not have a material or adverse effect on the Partnership's operations. 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. The case has been stayed pending settlement discussions. While actively working toward a final resolution, there can be no assurances regarding settlement. 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 June 30, 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 1998 and 1997. 27. Financial Data Schedule for the quarter ended June 30, 1998. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended June 30, 1998. 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 August 14, 1998 By: /s/ Ron K. Taylor - --------------- --------------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) August 14, 1998 By: /s/ Brandon K. Flaming - --------------- --------------------------------------------- Date Brandon K. Flaming Vice President of McNeil Investors, Inc. (Principal Accounting Officer) EX-27 2
5 6-MOS DEC-31-1998 JUN-30-1998 2,037,420 0 0 0 0 0 83,670,998 (51,404,579) 41,449,668 0 49,442,784 0 0 0 0 41,449,668 10,200,536 10,271,266 0 0 7,746,692 0 2,305,343 219,231 0 0 0 0 0 219,231 0 0
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