-----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, O4t9cnAhnaT779Ub1mU3spt125ioWfN4y6IjZ7kcLq53WLhxLBDxX+HcFUSnfgV7 WXDoP6ZbfFhtiIQpCape9A== 0000276326-99-000005.txt : 19990519 0000276326-99-000005.hdr.sgml : 19990519 ACCESSION NUMBER: 0000276326-99-000005 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990518 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/A SEC ACT: SEC FILE NUMBER: 000-09026 FILM NUMBER: 99629394 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/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 ------------------------------------------ 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)
March 31, December 31, 1999 1998 ------------- ------------- ASSETS - ------ Real estate investments: Land ........................................................ $ 6,074,303 $ 6,074,303 Buildings and improvements .................................. 78,644,829 78,522,699 ------------ ------------ 84,719,132 84,597,002 Less: Accumulated depreciation ............................. (54,315,306) (53,347,242) ------------ ------------ 30,403,826 31,249,760 Asset held for sale ............................................ 3,142,720 3,140,461 Cash and cash equivalents ...................................... 3,177,607 3,166,577 Cash segregated for security deposits .......................... 644,455 627,813 Cash restricted for mortgage payments .......................... 401,969 545,624 Accounts receivable ............................................ 54,775 46,633 Prepaid expenses and other assets .............................. 145,244 150,907 Escrow deposits ................................................ 1,442,085 1,126,898 Deferred borrowing costs, net of accumulated amortization of $952,409 and $899,576 at March 31, 1999 and December 31, 1998, respectively ................................................ 1,265,800 1,318,633 ------------ ------------ $ 40,678,481 $ 41,373,306 ============ ============ LIABILITIES AND PARTNERS' DEFICIT - --------------------------------- Mortgage notes payable, net .................................... $ 48,716,934 $ 49,189,188 Accounts payable ............................................... 41,586 110 Accrued interest ............................................... 253,736 333,927 Accrued property taxes ......................................... 1,172,726 989,317 Other accrued expenses ......................................... 278,223 357,506 Payable to affiliates - General Partner ........................ 2,334,632 2,042,507 Security deposits and deferred rental revenue .................. 620,545 585,356 ------------ ------------ 53,418,382 53,497,911 ------------ ------------ Partners' deficit: Limited partners - 110,200 limited partnership units authorized; 110,170 limited partnership units out- standing at March 31, 1999 and December 31, 1998 .......... (8,090,180) (7,734,963) General Partner ............................................. (4,649,721) (4,389,642) ------------ ------------ (12,739,901) (12,124,605) $ 40,678,481 $ 41,373,306 ============ ============
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 March 31, ---------------------------- 1999 1998 ---------- ---------- Revenue: Rental revenue ................................... $5,214,238 $5,086,709 Interest ......................................... 41,135 43,409 ---------- ---------- Total revenue .................................. 5,255,373 5,130,118 ---------- ---------- Expenses: Interest ......................................... 1,063,110 1,166,525 Depreciation ..................................... 968,064 961,125 Property taxes ................................... 400,896 395,283 Personnel expenses ............................... 628,576 693,435 Repair and maintenance ........................... 525,513 516,425 Property management fees - affiliates ............ 261,112 254,458 Utilities ........................................ 471,280 449,533 Other property operating expenses ................ 242,538 292,938 General and administrative ....................... 123,789 184,641 General and administrative - affiliates .......... 123,712 121,570 ---------- ---------- Total expenses ................................. 4,808,590 5,035,933 ---------- ---------- Net income .......................................... $ 446,783 $ 94,185 ========== ========== Net income allocated to limited partners ............ $ 393,939 $ 89,476 Net income allocated to General Partner ............. 52,844 4,709 ---------- ---------- Net income .......................................... $ 446,783 $ 94,185 ========== ========== Net income per limited partnership unit ............. $ 3.58 $ .81 ========== ========== Distributions per limited partnership unit .......... $ 6.80 $ 20.88 ========== ==========
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 Three Months Ended March 31, 1999 and 1998
Total General Limited Partners' Partner Partners Deficit -------------- ------------- ------------- Balance at December 31, 1997 .............. $ (3,229,030) $ (5,509,025) $ (8,738,055) Net income ................................ 4,709 89,476 94,185 Management Incentive Distribution ......... (285,876) -- (285,876) Distributions to limited partners ......... -- (2,300,008) (2,300,008) -------------- ------------ ------------ Balance at March 31, 1998 ................. $ (3,510,197) $ (7,719,557) $(11,229,754) ============== ============ ============ Balance at December 31, 1998 .............. $ (4,389,642) $ (7,734,963) $(12,124,605) Net income ................................ 52,844 393,939 446,783 Management Incentive Distribution ......... (312,923) -- (312,923) Distribution to limited partners .......... -- (749,156) (749,156) -------------- ------------ ------------ Balance at March 31, 1999 ................. $ (4,649,721) $ (8,090,180) $(12,739,901) ============== ============ ============
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
Three Months Ended March 31, -------------------------------- 1999 1998 ------------ ------------ Cash flows from operating activities: Cash received from tenants .............................. $ 5,212,953 $ 5,141,699 Cash paid to suppliers .................................. (2,031,147) (2,236,320) Cash paid to affiliates ................................. (304,375) (254,434) Interest received ....................................... 41,135 43,409 Interest paid ........................................... (1,078,312) (1,137,238) Property taxes paid and escrowed ........................ (513,677) (356,394) ----------- ----------- Net cash provided by operating activities .................. 1,326,577 1,200,722 ----------- ----------- Cash flows from investing activities: Additions to real estate investments .................... (124,389) (232,202) ----------- ----------- Cash flows from financing activities: Principal payments on mortgage notes payable ............ (484,410) (223,345) Cash restricted for mortgage payments ................... 143,655 -- Retirement of mortgage note payable ..................... -- (5,830,964) Proceeds from mortgage note payable ..................... -- 5,925,000 Additions to deferred borrowing costs ................... -- (71,805) Management Incentive Distribution ....................... (101,247) -- Distributions to limited partners ....................... (749,156) (2,300,008) ----------- ----------- Net cash used in financing activities ...................... (1,191,158) (2,501,122) ----------- ----------- Increase (decrease) in cash and cash equivalents ........... 11,030 (1,532,602) Cash and cash equivalents at beginning of period ........... 3,166,577 3,330,836 ----------- ----------- Cash and cash equivalents at end of period ................. $ 3,177,607 $ 1,798,234 =========== ===========
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
Three Months Ended March 31, ------------------------------- 1999 1998 ----------- ----------- Net income .................................................... $ 446,783 $ 94,185 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ............................................... 968,064 961,125 Amortization of deferred borrowing costs ................... 52,833 48,784 Amortization of mortgage discounts ......................... 12,156 11,773 Changes in assets and liabilities: Cash segregated for security deposits .................... (16,642) (17,473) Accounts receivable ...................................... (8,142) 63,484 Prepaid expenses and other assets ........................ 5,663 13,934 Escrow deposits .......................................... (315,187) 376,423 Accounts payable ......................................... 41,476 (43,493) Accrued interest ......................................... (80,191) (31,270) Accrued property taxes ................................... 183,409 (370,144) Other accrued expenses ................................... (79,283) (41,641) Payable to affiliates - General Partner .................. 80,449 121,594 Security deposits and deferred rental revenue ................................................ 35,189 13,441 ----------- ----------- Total adjustments ...................................... 879,794 1,106,537 ----------- ----------- Net cash provided by operating activities ..................... $ 1,326,577 $ 1,200,722 =========== ===========
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) March 31, 1999 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 three months ended March 31, 1999 are not necessarily indicative of the results to be expected for the year ending December 31, 1999. 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, 1998, 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. 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. The maximum MID percentage decreases to .75% in 2000, .50% in 2001 and .25% thereafter. 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, 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: Three Months Ended March 31, ----------------------- 1999 1998 ---------- ---------- Property management fees - affiliates............ $ 261,112 $ 254,458 Charged to general and administrative - affiliates: Partnership administration..................... 123,712 121,570 --------- --------- $ 384,824 $ 376,028 ========= ========= Charged to General Partner's deficit: Management Incentive Distribution.............. $ 312,923 $ 285,876 ========= ========= 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 ("LIBOR") per annum. The new mortgage note requires monthly interest-only debt service payments and annual principal payments equal to 5% of the outstanding principal balance of the note. Terms of the new mortgage note require the Partnership to deposit funds into a restricted cash account on a quarterly basis. The restricted funds will be used to pay the annual principal payment and are included in "cash restricted for mortgage payments" on the Balance Sheets. The new mortgage note matures on March 20, 2001. Proceeds from the refinancing of the Forest Park Village mortgage note are as follows: New mortgage note.................................... $ 5,925,000 Existing debt retired................................ (5,830,964) ------------ Cash proceeds from refinancing....................... $ 94,036 ============ The Partnership incurred $82,148 of deferred borrowing costs in connection with the refinancing of the Forest Park Village mortgage note. On August 31, 1998, the Partnership refinanced the Rolling Hills mortgage note. The new mortgage note, in the amount of $6,650,000, bears interest at a variable rate equal to 1.75% plus the LIBOR per annum. The new mortgage note requires monthly interest-only debt service payments and annual principal payments equal to 5% of the outstanding principal balance of the note. Terms of the new mortgage note require the Partnership to deposit funds into a restricted cash account on a quarterly basis. The restricted funds will be used to pay the annual principal payment and are included in "cash restricted for mortgage payments" on the Balance Sheets. The new mortgage note matures on September 1, 2001. Proceeds from the refinancing of the Rolling Hills mortgage note are as follows: New mortgage note.................................... $ 6,650,000 Existing debt retired................................ (6,545,929) ------------ Cash proceeds from refinancing....................... $ 104,071 ============ The Partnership incurred $77,366 of deferred borrowing costs in connection with the refinancing of the Rolling Hills mortgage note. On September 1, 1998, the Partnership and the holder of the Sheraton Hills mortgage note agreed to modify the terms of the Sheraton Hills mortgage note. The interest rate was changed from a variable rate to a 6.9% fixed rate. The monthly debt service payments were changed from a variable amount to $17,844. The maturity date of the mortgage note was extended to November 1, 2001. The Partnership incurred $29,535 of deferred borrowing costs in connection with the modification. 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 March 31, 1999, the Partnership owned 13 apartment properties. All of the Partnership's properties are subject to mortgage notes. On March 26, 1999, the Partnership distributed $749,156 ($6.80 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's net income for the first quarter of 1999 amounted to $446,783, an increase over the $94,185 of net income for the first quarter of 1998. Revenue: Rental revenue increased 127,529 or 2.5% for the first quarter of 1999 as compared to the first quarter of 1998. Rental revenues increased at eleven of the Partnership's thirteen properties. On a percentage basis, the largest increases in rental revenues were reported by Meridian West Apartments, Forest Park Village Apartments, Pennbrook Apartments, and Williamsburg Apartments. These properties achieved increased rental revenue ranging from 7.4% to 4.1% by increasing rental rates and by decreasing rental vacancy and other rental losses. Rental revenue was unchanged at Ruskin Place Apartments. Cherry Hills Apartments reported a 2.4% decrease in rental revenue due to increased vacancy losses. The rest of the Partnership's properties reported smaller percentage increases in rental revenue, ranging between 1% and 3%, as increases in base rental rates were partially offset by increased vacancy losses. Expenses: Partnership expenses decreased $227,343 or 4.5% for the first quarter of 1999 as compared to the first quarter of 1998. The Partnership reported decreases in interest, personnel expenses, other property operating expenses, and general and administrative expenses. Interest expense decreased $103,415 or 8.9% for the first quarter of 1999 as compared to the first quarter of 1998. The Partnership refinanced the Forest Park Village and Rolling Hills mortgage notes in 1998. The new mortgage notes bear interest at a variable rate that is currently less than the fixed interest rates the Partnership incurred on the former mortgage notes. Other property operating expenses decreased $50,400 or 17.2% for the first quarter of 1999 as compared to the first quarter of 1998. Decreased insurance expense accounts for most of the decrease in other property operating expenses. The decreased insurance expense for the first quarter is unlikely to persist for the remainder of 1999, however. The Partnership also incurred decreased costs associated with legal, audit, and other professional fees. General and administrative expenses decreased $60,852 or 33% for the first quarter of 1999 as compared to the first quarter of 1998. The Partnership incurred significant costs in 1999 and 1998 to explore alternatives to maximize the value of the Partnership (see Liquidity and Capital Resources). However, the extent of these costs decreased in for the first quarter of 1999 as compared to the first quarter of 1998. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash provided by operating activities increased 10.5% to $1,326,577 for the first quarter of 1999 as compared to the first quarter of 1998. Increased cash received from tenants and decreased cash paid to suppliers and interest paid were partially offset by increases in cash paid to affiliates and property taxes paid and escrowed. The Partnership expended $124,389 for capital improvements during the first quarter of 1999, a decrease from the $232,202 expended during the first quarter of 1998. Budgeted capital improvements for 1999 total $1,601,000, a decrease from the $1,841,522 of capital improvement completed during 1998. 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. The Partnership paid $101,247 of MID to the General Partner during the first quarter of 1999. MID earned by the General Partner amounted to $312,923 for the first quarter of 1999. Beginning in 1998, the General Partner elected to defer payment of most administrative expenses and MID so that the Partnership can pay distributions to the limited partners. On March 26, 1999, the Partnership paid distributions of $749,156 ($6.80 per limited partnership unit) to the limited partners. The distribution was funded from Partnership operations. Short-term liquidity: At March 31, 1999, the Partnership held $3,177,607 of cash and cash equivalents, an increase of $11,030 from the balance at the beginning of 1999. The General Partner anticipates that cash generated from operations for the remainder of 1999 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 1999. The Pennbrook mortgage note matures in February 2000. The General Partner has begun to explore refinancing options for the Pennbrook mortgage note. Although uncertainties exist, the General Partner does not anticipate unusual difficulties in refinancing the Pennbrook mortgage note before its maturity date. The Partnership's next maturing mortgage note does not mature until March 2001. 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 approximately $1,601,000 of additional capital improvements for 1999. 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, 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. During the last full week of March, the Partnership entered into a 45 day exclusivity agreement with a well-financed bidder with whom it had commenced discussions with respect to a sale transaction. The Partnership and such party have made significant progress in negotiating the terms of a proposed transaction and are continuing to have intensive discussions with respect to a transaction. In light on these continuing negotiations, the exclusivity agreement has been extended for an additional 21 days until June 4, 1999. 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 regarding whether any such agreement will be reached nor the terms thereof. The Partnership placed Sheraton Hills Apartments on the market for sale on August 1, 1997. 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 three month periods ended March 31, 1999 and 1998, the Partnership allocated net income of $393,939 and $89,476, respectively, to the limited partners. The Partnership allocated net income of $52,844 and $4,709 to the General Partner for the three month periods ended March 31, 1999 and 1998, respectively. 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. On March 26, 1999, the Partnership distributed $749,156 ($6.80 per limited partnership unit) to the limited partners from the Partnership's cash reserves. For the first three months of 1999, the Partnership recorded MID of $312,923. The Partnership paid $101,247 of MID to the General Partner during the first three months of 1999. The Partnership made no MID payments during 1998. The balance of accrued MID outstanding totaled $1,730,357 at March 31, 1999. 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 March 31, 1999. 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. YEAR 2000 DISCLOSURE - -------------------- State of readiness - ------------------ 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. Management has assessed its information technology ("IT") infrastructure to identify any systems that could be affected by the year 2000 problem. The IT used by the Partnership for financial reporting and significant accounting functions was made year 2000 compliant during recent systems conversions. The software utilized for these functions is licensed by third party vendors who have warranted that their systems are year 2000 compliant. Management is in the process of evaluating the mechanical and embedded technological systems at the various properties. Management has inventoried all such systems and queried suppliers, vendors and manufacturers to determine year 2000 compliance. Based on this review, management believes these systems are substantially compliant. In circumstances of non-compliance management will work with the vendor to remedy the problem or seek alternative suppliers who will be in compliance. 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. However, no estimates can be made as to the potential adverse impact resulting from the failure of third party service providers and vendors to be year 2000 compliant. Cost - ---- The cost of IT and embedded technology systems testing and upgrades is not expected to be material to the Partnership. Because all the IT systems have been upgraded over the last three years, all such systems were compliant, or made compliant at no additional cost by third party vendors. Management anticipates the costs of assessing, testing, and if necessary replacing embedded technology components will be less than $50,000. Such costs will be funded from operations of the Partnership. Risks - ----- Ultimately, the potential impact of the year 2000 issue will depend not only on the corrective measures the Partnership undertakes, but also on the way in which the year 2000 issue is addressed by government agencies and entities that provide services or supplies to the Partnership. Management has not determined the most likely worst case scenario to the Partnership. As management studies the findings of its property systems assessment and testing, management will develop a better understanding of what would be the worst case scenario. Management believes that progress on all areas is proceeding and that the Partnership will experience no adverse effect as a result of the year 2000 issue. However, there is no assurance that this will be the case. Contingency plans - ----------------- Management is developing contingency plans to address potential year 2000 non-compliance of IT and embedded technology systems. Management believes that failure of any IT system could have an adverse impact on operations. However, management believes that alternative systems are available that could be utilized to minimize such impact. Management believes that any failure in the embedded technology systems could have an adverse impact on that property's performance. Management will assess these risks and develop plans to mitigate possible failures by July 1999. 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 XXIII, 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., Hearth Hollow Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P., - 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 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 was stayed pending settlement discussions. A Stipulation of Settlement dated September 15, 1998 has been signed by the parties. Preliminary Court approval was received on October 6, 1998. A hearing for Final Approval of Settlement, initially scheduled for December 17, 1998, has been continued to July 2, 1999. Because McNeil Real Estate Fund XXIII, L.P., Hearth Hollow Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P. would be part of the transaction contemplated in the settlement and Plaintiffs claim that an effort should be made to sell the McNeil Partnerships, Plaintiffs have included allegations with respect to McNeil Real Estate Fund XXIII, L.P., Hearth Hollow Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P. in the third consolidated and amended complaint. Plaintiff's counsel intends to seek an order awarding attorney's fees and reimbursements of their out-of-pocket expenses. The amount of such award is undeterminable until final approval is received from the court. Fees and expenses shall be allocated amongst the Partnerships on a pro rata basis, based upon tangible asset value of each such partnership, less total liabilities, calculated in accordance with the Amended Partnership Agreements for the quarter most recently ended. 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 income per limited partnership unit: Net income per limited partnership unit is computed by dividing net income 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 1999 and 1998. 27. Financial Data Schedule for the quarter ended March 31, 1999. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended March 31, 1999. 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 May 18, 1999 By: /s/ Ron K. Taylor - -------------- --------------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) May 18, 1999 By: /s/ Brandon K. Flaming - -------------- --------------------------------------------- Date Brandon K. Flaming Vice President of McNeil Investors, Inc. (Principal Accounting Officer) EX-27 2
5 3-MOS DEC-31-1999 MAR-31-1999 3,326,441 0 0 0 0 0 84,719,132 (54,315,306) 40,678,481 0 48,716,934 0 0 0 0 40,678,481 5,214,238 5,255,373 0 0 3,745,480 0 1,063,110 446,783 0 0 0 0 0 446,783 0 0
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