-----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, E3gyidmfcENI0z3nf9N15WFXuKiECzeb6Rer07exfOATQ6AWye6akuAKKkei8KSB 2LW41vXW0KkPsjuhTXdFQA== 0000312812-95-000012.txt : 19951119 0000312812-95-000012.hdr.sgml : 19951119 ACCESSION NUMBER: 0000312812-95-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND X LTD CENTRAL INDEX KEY: 0000312812 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 942577781 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09325 FILM NUMBER: 95591553 BUSINESS ADDRESS: STREET 1: 13760 NOEL ROAD 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, 1995 --------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to_____________ Commission file number 0-9325 MCNEIL REAL ESTATE FUND X, LTD. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 94-2577781 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (214) 448-5800 --------------------------- 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 X, LTD. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- BALANCE SHEETS (Unaudited)
September 30, December 31, 1995 1994 ------------ ------------ ASSETS - ------ Real estate investments: Land..................................................... $ 10,464,914 $ 10,449,117 Buildings and improvements............................... 77,648,452 76,026,423 ----------- ----------- 88,113,366 86,475,540 Less: Accumulated depreciation.......................... (51,912,372) (49,450,647) ----------- ----------- 36,200,994 37,024,893 Assets held for sale, net................................... 2,270,965 7,215,032 Cash and cash equivalents................................... 2,420,627 574,589 Cash segregated for security deposits....................... 414,056 411,045 Accounts receivable, net of allowance for doubtful accounts of $7,428....................................... 522,023 490,391 Prepaid expenses and other assets........................... 346,569 365,292 Escrow deposits............................................. 954,653 990,453 Deferred borrowing costs, net of accumulated amorti- zation of $267,578 and $319,020 at September 30, 1995 and December 31, 1994, respectively................. 1,177,260 1,308,238 ---------- ---------- $44,307,147 $48,379,933 ========== ========== LIABILITIES AND PARTNERS' DEFICIT Mortgage notes payable, net................................. $44,675,325 $52,078,850 Mortgage note payable - affiliates.......................... 800,000 800,000 Accounts payable............................................ 156,816 130,856 Accrued property taxes...................................... 1,025,446 573,451 Accrued interest............................................ 342,849 304,600 Accrued interest - affiliates............................... 6,411 5,206 Other accrued expenses...................................... 459,199 307,295 Payable to affiliates - General Partner..................... 2,487,234 1,172,267 Security deposits and deferred rental revenue............... 412,246 449,682 ---------- ---------- 50,365,526 55,822,207 ---------- ---------- Partners' deficit: Limited partners - 135,200 limited partnership units authorized; 135,030 and 135,090 limited partnership units outstanding at September 30, 1995 and December 31, 1994, respectively................................. (1,788,083) (3,872,434) General Partner.......................................... (4,270,296) (3,569,840) ---------- ---------- (6,058,379) (7,442,274) ---------- ---------- $44,307,147 $48,379,933 ========== ==========
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 X, LTD. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ----------------------------- ------------------------------ 1995 1994 1995 1994 ---------- ---------- ----------- ----------- Revenue: Rental revenue................ $4,295,445 $4,424,256 $12,994,603 $12,945,807 Interest...................... 22,668 11,486 87,793 41,961 Gain on legal settlement...... - - 91,517 - Gain on disposition of real estate...................... 3,183,698 - 3,183,698 - --------- --------- ---------- ---------- Total revenue............... 7,501,811 4,435,742 16,357,611 12,987,768 --------- --------- ---------- ---------- Expenses: Interest...................... 1,269,547 1,335,543 3,881,412 4,035,894 Interest - affiliates......... 21,201 - 59,162 - Depreciation and amortization................ 934,260 898,059 2,791,758 2,705,692 Property taxes................ 287,406 298,974 878,453 896,922 Personnel expenses............ 539,390 518,826 1,572,907 1,473,721 Utilities..................... 357,228 360,596 1,043,367 1,110,151 Repair and maintenance........ 624,105 484,073 1,637,040 1,730,199 Property management fees - affiliates........... 214,259 224,621 650,583 647,398 Other property operating expenses.................... 289,319 282,886 842,299 795,498 General and administrative.... 229,726 36,016 309,738 118,674 General and administrative - affiliates.................. 162,549 184,918 496,838 483,057 --------- --------- ---------- ---------- Total expenses.............. 4,928,990 4,624,512 14,163,557 13,997,206 --------- --------- ---------- ---------- Net income (loss) before extraordinary item............ 2,572,821 (188,770) 2,194,054 (1,009,438) Extraordinary gain on extinguishment of debt........ - - - 292,539 --------- --------- ---------- ---------- Net income (loss)................ $2,572,821 $ (188,770) $ 2,194,054 $ (716,899) ========= ========= ========== ========== Net income (loss) allocated to limited partners.............. $2,444,180 $ (179,332) $ 2,084,351 $ (681,054) Net income (loss) allocated to General Partner............... 128,641 (9,438) 109,703 (35,845) --------- --------- ---------- ---------- Net income (loss)................ $2,572,821 $ (188,770) $ 2,194,054 $ (716,899) ========= ========= ========= ========== Net income (loss) per limited partnership unit: Net income (loss) before extraordinary item.......... $ 18.10 $ (1.33) $ 15.44 $ (7.21) Extraordinary gain on extinguishment of debt...... - - - 2.17 --------- --------- ---------- --------- Net income (loss)................ $ 18.10 $ (1.33) $ 15.44 $ (5.04) ========= ========= ========== =========
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 X, LTD. STATEMENTS OF PARTNERS' DEFICIT (Unaudited) For the Nine Months Ended September 30, 1995 and 1994
Total General Limited Partners' Partner Partners Deficit ------------- ----------- ------------ Balance at December 31, 1993.............. $(3,134,201) $(2,765,906) $(5,900,107) Net loss.................................. (35,845) (681,054) (716,899) Contingent Management Incentive Distribution........................... (201,099) - (201,099) ---------- ---------- ---------- Balance at September 30, 1994............. $(3,371,145) $(3,446,960) $(6,818,105) ========== ========== ========== Balance at December 31, 1994.............. $(3,569,840) $(3,872,434) $(7,442,274) Net income................................ 109,703 2,084,351 2,194,054 Contingent Management Incentive Distribution........................... (810,159) - (810,159) ---------- ---------- --------- Balance at September 30, 1995............. $(4,270,296) $(1,788,083) $(6,058,379) ========== ========== ==========
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 X, LTD. STATEMENTS OF CASH FLOWS (Unaudited) Increase (Decrease) in Cash and Cash Equivalents
Nine Months Ended September 30, ----------------------------------- 1995 1994 ----------- ----------- Cash flows from operating activities: Cash received from tenants........................ $12,904,628 $12,912,017 Cash paid to suppliers............................ (4,989,477) (5,247,252) Cash paid to affiliates........................... (642,613) (794,251) Interest received................................. 87,793 41,961 Cash received from legal settlement............... 91,517 - Interest paid..................................... (3,595,770) (3,796,081) Interest paid to affiliates....................... (57,957) - Deferred borrowing costs paid..................... (24,613) (40,722) Property taxes paid and escrowed.................. (592,049) (842,778) ---------- ---------- Net cash provided by operating activities............ 3,181,459 2,232,894 ---------- ---------- Cash flows from investing activities: Additions to real estate investments.............. (1,697,590) (1,340,084) Proceeds from sale of real estate investment...... 7,905,804 - ---------- ---------- Net cash provided by (used in) investing activities........................................ 6,208,214 (1,340,084) ---------- ---------- Cash flows from financing activities: Principal payments on mortgage notes payable......................................... (927,403) (1,138,379) Retirement of mortgage notes payable.............. (6,616,232) (101,105) ---------- ---------- Net cash used in financing activities................ (7,543,635) (1,239,484) ---------- ---------- Net increase (decrease) in cash and cash equivalents.................................. 1,846,038 (346,674) Cash and cash equivalents at beginning of period............................................ 574,589 1,477,278 ---------- ---------- Cash and cash equivalents at end of period........... $ 2,420,627 $ 1,130,604 ========== ==========
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 X, LTD. STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Income (Loss) to Net Cash Provided By Operating Activities
Nine Months Ended September 30, ------------------------------------ 1995 1994 ----------- ----------- Net income (loss).................................... $ 2,194,054 $ (716,899) ---------- --------- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization..................... 2,791,758 2,705,692 Amortization of discounts on mortgage notes payable................................... 140,110 137,724 Amortization of deferred borrowing costs.......... 107,283 109,973 Gain on disposition of real estate................ (3,183,698) - Extraordinary gain on extinguishment of debt......................................... - (292,539) Changes in assets and liabilities: Cash segregated for security deposits........... (3,011) (90,577) Accounts receivable............................. (31,632) (57,766) Prepaid expenses and other assets............... 18,723 (14,519) Escrow deposits................................. 35,800 (154,717) Deferred borrowing costs........................ (24,613) (40,722) Accounts payable................................ 25,960 (136,376) Accrued property taxes.......................... 451,995 360,768 Accrued interest................................ 38,249 (7,884) Accrued interest - affiliates................... 1,205 - Other accrued expenses.......................... 151,904 92,204 Payable to affiliates - General Partner......... 504,808 336,203 Security deposits and deferred rental revenue....................................... (37,436) 2,329 --------- --------- Total adjustments............................. 987,405 2,949,793 --------- --------- Net cash provided by operating activities............ $3,181,459 $2,232,894 ========= =========
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 X, LTD. Notes to Financial Statements (Unaudited) September 30, 1995 NOTE 1. - ------- McNeil Real Estate Fund X, Ltd. ("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. ("General Partner"), a Delaware limited partnership affiliated with Robert A. McNeil. The Partnership is governed by an agreement of limited partnership ("Amended Partnership Agreement") that was adopted October 9, 1991. The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 700, 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, 1995, are not necessarily indicative of the results to be expected for the year ending December 31, 1995. 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, 1994, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Real Estate Fund X, Ltd., c/o McNeil Real Estate Management, Inc., Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240. NOTE 3. - ------- Certain prior period amounts within the accompanying financial statements have been reclassified to conform with current year presentation. NOTE 4. - ------- 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 services for the Partnership's residential and commercial properties and leasing services for its residential properties. McREMI may also choose to provide leasing services for the Partnership's commercial properties, in which case McREMI will receive property management fees from such commercial properties equal to 3% of the property's gross rental receipts plus leasing commissions based on the prevailing market rate for such services where the property is located. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. Under the 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 for residential property and $50 per gross square foot for commercial property 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 assets. Prior to July 1, 1993, the MID consisted of two components: (i) a fixed portion which was payable without respect to the net income of the Partnership and is equal to 25% of the maximum MID (the "Fixed MID") and (ii) a contingent portion which is payable only to the extent of the lesser of the Partnership's excess cash flow, as defined, or net operating income (the "Entitlement Amount") and was equal to up to 75% of the maximum MID (the "Contingent MID"). The maximum MID percentage decreases subsequent to 1999. The General Partner amended the Amended Partnership Agreement as a settlement to a class action complaint. This amendment eliminated the Fixed MID and makes the entire MID payable to the extent of the Entitlement Amount. In all other respects, the calculation and payment of the MID will remain the same. This modified MID became effective July 1, 1993. Fixed MID was payable in limited partnership units ("Units") unless the Entitlement Amount exceeded the amount necessary to pay the Contingent MID, in which case, at the General Partner's option, the Fixed MID could have been paid in cash to the extent of such excess. Contingent MID will be paid to the extent of the Entitlement Amount, and may be paid (i) in cash, unless there is insufficient cash to pay the distribution in which event any unpaid portion not taken in Units will be deferred and is payable, without interest, from the first available cash and/or (ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of Units issued in payment of the MID is based on the greater of $50 per Unit or the net tangible asset value, as defined, per Unit. Any amount of the MID that is paid to the General Partner in Units will be treated as if cash was distributed to the General Partner. The Fixed MID was treated as a fee payable to the General Partner by the Partnership for services rendered. The Contingent MID represents a return of equity to the General Partner for increasing cash flow, as defined, and accordingly is treated as a distribution to the General Partner. 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, ---------------------------------- 1995 1994 ---------- ---------- Property management fees - affiliates................ $ 650,583 $ 647,398 Charged to general and administrative - affiliates: Partnership administration........................ 496,838 483,057 --------- --------- $1,147,421 $1,130,455 ========= ========= Charged to General Partner's deficit: Contingent Management Incentive Distribution.................................... $ 810,159 $ 201,099 ========= =========
NOTE 5. - ------- On May 18, 1994, the Partnership paid off the second mortgage note encumbering Iberia Plaza Shopping Center. The mortgage note, in the amount of $477,016, was paid off at a discount that resulted in a $292,539 extraordinary gain on extinguishment of debt as shown below.
Principal amount of mortgage note retired...................................... $477,016 Discount on mortgage note retired.................... (83,372) Costs incurred to retire mortgage note............... (1,105) Discounted cash payment required to retire mortgage note.............................. (100,000) -------- Extraordinary gain on extinguishment of debt............................ $292,539 =======
NOTE 6. - ------- The Partnership filed claims with the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court") against Southmark for damages relating to improper overcharges, breach of contract and breach of fiduciary duty. The Partnership settled these claims in 1991, and such settlement was approved by the Bankruptcy Court. An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April 14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in May 1995, the Partnership received in full satisfaction of its claims, $69,234 in cash, and common and preferred stock in the reorganized Southmark. The cash and stock represent the Partnership's pro-rata share of Southmark assets available for Class 8 Claimants. The Partnership sold the Southmark common and preferred stock in May, 1995 for $22,283 which, when combined with the cash proceeds from Southmark, resulted in a gain on settlement of litigation of $91,517. NOTE 7. - ------- On September 14, 1995, the Partnership sold its investment in The Courts Apartments to an unaffiliated buyer for a cash sales price of $8,050,000. Cash proceeds from this transaction, as well as the gain on sale of The Courts Apartments are detailed below.
Gain on Sale Cash Proceeds ------------ ------------- Cash sales price........................................... $ 8,050,000 $ 8,050,000 Improvement district liens assumed by buyer................ 140,358 140,358 ---------- ---------- Total sales price.......................................... 8,190,358 8,190,358 Selling costs.............................................. (284,554) (284,554) Basis of deferred borrowing costs written off.............. (48,308) Basis of real estate sold.................................. (4,673,798) ---------- Gain on sale............................................... $ 3,183,698 ========= --------- Proceeds from sale of real estate investment............... 7,905,804 Retirement of mortgage note and improvement district liens.......................................... (6,616,232) ---------- Net cash proceeds.......................................... $ 1,289,572 ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- The Partnership was formed to acquire, operate and ultimately dispose a portfolio of income-producing real properties. At September 30, 1995, the Partnership owned seven apartment properties, one office building and four shopping centers. All of the Partnership's properties are subject to mortgage notes. On September 14, 1995, the Partnership sold The Courts Apartments to an unaffiliated purchaser. The Partnership recognized a $3,183,698 gain on the disposition. Cash proceeds to the Partnership amounted to $1,289,572. The Partnership is marketing one of its properties, Parkway Plaza, for sale. The Partnership and a potential buyer have negotiated the terms of a potential sale of the property. Terms of the potential sale would yield cash proceeds of approximately $500,000 above the mortgage debt encumbering the property. There can be no assurance, however, that the sale of Parkway Plaza will be consummated. The General Partner has elected to postpone certain payments to affiliates of the General Partner in an attempt to increase the Partnership's level of cash reserves. The postponed payments include the Management Incentive Distribution ("MID") and reimbursable administrative costs. These payments have been postponed since the beginning of 1994, and are expected to continue to be postponed through 1995. RESULTS OF OPERATIONS - --------------------- Due to the sale of The Courts Apartments on September 14, 1995, the Partnership reported net income for the nine months ended September 30, 1995 of $2,194,054. Reported net income includes a $3,183,698 gain on disposition of property and a $91,517 gain on legal settlement. For the nine months ended September 30, 1994, the Partnership reported a net loss of $716,899. Last year's net loss included a $292,539 extraordinary gain on extinguishment of debt. Revenues: Rental revenue increased $48,796 for the first nine months of 1995 compared to the first nine months of 1994. The small increase in rental revenue consists of small to moderate increases (all between 2% and 4%, except for a 9% increase at Regency Park) in rental revenues at ten of the Partnership's properties, unchanged rental revenue at Parkway Plaza, and a 26% and 9% decrease in rental revenue at La Plaza and Lakeview Plaza, respectively. Decreased expense reimbursements caused the 9% decrease in rental revenue at Lakeview Plaza. The decrease at La Plaza was caused by decreased occupancy. A major tenant vacated its space at La Plaza Office Building in March of 1995, leading to a 26% decrease in rental revenue at the Las Vegas property. On a quarter by quarter comparison, Partnership rental revenue decreased $128,811 or 2.9% in the third quarter of 1995 compared to 1994. Rental revenue was unchanged in the quarter at Briarwood, Iberia Plaza, Parkway Plaza and Quail Meadows. Lakeview Plaza and La Plaza showed decreases mirroring those reported for the year-to-date periods. The Courts Apartments also showed a 12.1% decrease in rental revenue for the quarter because of the sale of the property on September 14. Interest revenue doubled in the first nine months of 1995 compared to the first nine months of 1994. An increased level of cash reserves invested in interest-bearing accounts was the principal factor behind the increase. Besides the $3,183,698 gain on sale The Courts Apartments discussed above, the Partnership also reported a $91,517 gain on legal settlement relating the Partnership's claims in the Southmark bankruptcy case. In 1994, the Partnership recorded an extraordinary gain of $292,539 relating to the discounted payoff of the Iberia Plaza second mortgage note. Expenses: Partnership expenses increased $166,351 or 1.2% for the first nine months of 1995 compared to the first nine months of 1994. Increased expenses were concentrated in the general and administrative, personnel, and depreciation categories. The increases were offset by a 5.4% decrease in repair and maintenance expense. General and administrative increased $191,064 and $193,710, respectively, for the nine and the three months ended September 30, 1995 as compared to the same period in 1994. The increase was due to $197,349 of costs relating to evaluation and dissemination of information with regards to an unsolicited tender offer. See Item 5 - Other Information. Personnel expenses increased $99,186 or 6.7% for the nine months ended September 30, 1995 compared to the same period for 1994. The percentage increase was 4.0% for the third quarter. The Partnership continues its efforts to increase occupancy rates by continuing the renovation of apartment units and upgrades in services offered to tenants. Such improvements are partially achieved through higher maintenance standards that require additional personnel. Depreciation and amortization increased $86,066 and $36,201 for the nine month and three month periods ended September 30, 1995 compared to the same periods of 1994. Depreciation and amortization continues to increase because of the capital improvements put in place at the Partnership's properties over the past year. The $2.5 million of capital improvements put in place by the Partnership over the past year will generally be depreciated over lives ranging from 5 to 10 years. Repair and maintenance expenses decreased $93,159 or 5.4% for the nine months ended September 30, 1995, compared to the same period for 1994. Expenditures for floor, window, and appliance replacement decreased substantially at the Partnership's residential properties. Also, Briarwood Apartments incurred a large expense during 1994 to remove an underground storage tank. Several properties incurred severe-weather related expenses during the first half of 1994 that were not incurred during the first half of 1995. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash flow generated by operating activities improved to $3,181,459 from $2,232,894 for the first nine months of 1995 compared to 1994. Operating cash flow continues to benefit from the General Partner's decision to postpone payment of MID and reimbursable administrative expenses. The General Partner anticipates the cash generated from operations will be sufficient to pay the Partnership's operating expenses, debt service requirements and a portion of capital improvements scheduled for the remainder of 1995. Short Term Liquidity: Despite the large amounts of funds invested in capital improvements over the past three years, the Partnership's properties still face challenges funding the improvements still needed. The Partnership has budgeted $2.7 million of capital improvements for the Partnership's properties during 1995, of which approximately $1.7 million was expended during the first three quarters of the year. In particular, the Partnership has identified two properties, Iberia Plaza Shopping Center and La Plaza Office Building that will require approximately $1.5 million of capital or tenant improvements during 1995. The Partnership recently signed a long-term lease with a grocery store company to lease the anchor tenant space at Iberia Plaza. The lease obligates the Partnership to invest approximately $500,000 of capital and tenant improvements in the property. As of September 30, 1995, the Partnership has paid approximately $338,000 toward the capital improvement commitment. The two largest tenants at La Plaza Office Building are vacating their space during 1995. To make the building attractive to other tenants and to update the facility, the Partnership will need to invest approximately $1 million into La Plaza. In both cases, the General Partner believes that the increased value of the properties after the improvements are made will provide a strong return on the Partnership's investment. At September 30, 1995, the Partnership held cash reserves of $2,420,627, an increase of $1,846,038 from the balance at the end of 1994. Although the cash reserves of the Partnership have increased significantly from depressed levels at the end of 1994, additional steps need to be taken to improve the Partnership's liquidity in light of the need for additional capital improvements discussed in the preceding paragraph. These steps are discussed in the following paragraphs. In late 1994, the General Partner placed The Courts Apartments and Parkway Plaza on the market for sale. As discussed above, The Courts Apartments was sold September 14, 1995. Negotiations concerning the sale of Parkway Plaza are continuing, and the Partnership and a prospective buyer have tentatively agreed to sales terms. The just completed sale of The Courts Apartments and the anticipated sale of Parkway Plaza should together provide approximately $1.7 million of additional funds for the Partnership, after retiring the related mortgage obligations. The General Partner believes that the appreciation potential of both properties is limited, while extensive capital improvement funds will be required to maintain cash from operations at current levels. Two of the Partnership's mortgage notes mature in 1995, Spanish Oaks Apartments and Parkway Plaza. The refinance the Spanish Oaks mortgage note, that matured in August, has been delayed, but is expected to close before the end of 1995. Cash proceeds from the refinancing are expected to be limited. The Parkway Plaza mortgage note may be called, upon nine months notice by the lender, beginning in December 1995. However, the General Partner intends to resolve this contingent maturity by selling Parkway Plaza. As a further source of funds, the Partnership may obtain secondary mortgage financing from an affiliated partnership secured by La Plaza Office Building. Placing a second lien on La Plaza would require the approval of the current first lien holder, and must also comply with loan criteria of the affiliated partnership. Proceeds from such a mortgage loan could range from $1 million to $1.5 million, if approvals are obtained from the first lien holder and the affiliated partnership. For the balance of 1995, as in 1994, the General Partner intends to defer collection of Contingent MID and reimbursements of administrative costs incurred by affiliates of the General Partner. For the first nine months of 1995, these deferrals postponed payments totaling $1,306,997 to the General Partner and its affiliates. 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 $8.8 million of capital improvements made by the Partnership during the past three years will yield improved cash flow from property operations in the future. Furthermore, the General Partner has budgeted $2.7 million of capital improvements for 1995. If the Partnership's cash position deteriorates due to reverses in property operations, failure to sell properties currently held for sale, or failure to obtain refinancing or secondary financing as discussed above, the General Partner may elect to defer certain of the capital improvements, except where such improvements are expected to increase the competitiveness or marketability of the Partnership's properties. The General Partner has established a revolving credit facility, not to exceed $5,000,000 in the aggregate, which will be available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. There is no assurance that the Partnership will receive any funds from the facility because no amount will be reserved for any particular partnership. As of September 30, 1995, $2,362,004 remained available for borrowing under the facility; however, additional funds could become available as other partnerships repay existing borrowings. As a further source of liquidity, the General Partner may, from time to time, attempt to sell Partnership properties judged to be mature considering the circumstances of the market where the properties are located, as well as the Partnership's need for liquidity. However, there can be no guarantee that the Partnership will be able to sell any of its properties for an amount sufficient to retire the related mortgage note and still provide cash proceeds to the Partnership, or that such cash proceeds could be timed to coincide with the liquidity needs of the Partnership. Currently, Parkway Plaza is the only Partnership properties being marketed for sale. Distributions: With the exception of the MID, distributions to partners have been suspended since 1986 as part of the General Partner's policy of maintaining adequate cash reserves. Distributions to Unit holders will remain suspended for the foreseeable future. The General Partner will continue to monitor the cash reserves and working capital needs of the Partnership to determine when cash flows will support distributions to the Unit holders. Payments of MID to the General Partner were suspended at the beginning of 1994; it is not presently anticipated that such payments will be resumed during 1995. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- 1) HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young BDO Seidman et al (Case #92-06560-A). This suit was filed on behalf of the Partnership and other affiliated partnerships (the "Affiliated Partnerships") on May 26, 1992, in the 14th Judicial District Court of Dallas County. The petition sought recovery against the Partnership's former auditors, BDO Seidman, for negligence and fraud in failing to detect and/or report overcharges of fees/expenses by Southmark, the former general partner. The former auditors asserted counterclaims against the Affiliated Partnerships based on alleged fraudulent misrepresentations made to the auditors by the former management of the Affiliated Partnerships (Southmark) in the form of client representation letters executed and delivered to the auditors by Southmark management. The counterclaims sought recovery of attorneys' fees and costs incurred in defending this action. The original petition also alleged causes of action against certain former officers and directors of the Partnership's original general partner for breach of fiduciary duty, fraud and conspiracy relating to the improper assessment and payment of certain administrative fees/expenses. On January 11, 1994 the allegations against the former officers and directors were dismissed. The trial court granted summary judgment in favor of Ernst & Young and BDO Seidman on the fraud and negligence claims based on the statute of limitations. The Affiliated Partnerships appealed the summary judgment to the Dallas Court of Appeals. In August 1995, the Appeals Court upheld all of the summary judgments in favor of BDO Seidman. In exchange for the plaintiff's agreement not to file any motions for rehearing or further appeals, BDO Seidman agreed that it will not pursue the counterclaims against the Partnership. 2) High River Limited Partnership vs. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil (L95012) - High River ("HR") filed this action in the United States District Court for the Southern District of New York against McNeil Partners, McNeil Investors and Mr. and Mrs. McNeil requesting, among other things, names and addresses of the Partnership's limited partners. The District Court issued a preliminary injunction against the Partnerships requiring them to commence mailing materials relating to High River tender offer materials on August 14, 1995. On August 18, 1995, McNeil Partners, McNeil Investors, the Partnerships, and Mr. and Mrs. McNeil filed an Answer and Counterclaim. The Counterclaim principally asserts (1) the HR tender offers have been undertaken in violation of the federal securities laws, on the basis of material, non-public, and confidential information, and (2) that the HR offer documents omit and/or misrepresent certain material information about the HR tender offers. The counterclaim seeks a preliminary and permanent injunction against the continuation of the HR tender offers and, alternatively, ordering corrective disclosure with respect to allegedly false and misleading statements contained in the tender offer documents. The High River tender offer expired on October 6, 1995. The Defendants believe that the action is moot and expect the matter to be dismissed shortly. 3) Robert Lewis vs. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil et al - In the District Court of Dallas County, Texas, A-14th Judicial District, Cause No. 95-08535 (Class Action) Plaintiff, Robert Lewis, is a limited partner with McNeil Pacific Investors Fund 1972, McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV, Ltd. Plaintiff brings this action on his own behalf and as a class action on behalf of the class of all limited partners of McNeil Pacific Investors Fund 1972, McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund XXV, Ltd. (the "Partnerships") as of August 4, 1995. Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (collectively, the "Defendants") breached their fiduciary duties by, among other things, (1) failing to attempt to sell the properties owned by the Partnerships ("Properties") and extending the lives of the Partnerships indefinitely, contrary to the Partnerships' business plans, (2) paying distributions to themselves and generating fees for their affiliates, (3) refusing to make significant distributions to the class members, despite the fact that the Partnerships have positive cash flows and substantial cash balances, and (4) failing to take steps to create an auction market for Partnership equity interests, despite the fact that a third party bidder filed tender offers for approximately forty-five percent (45%) of the outstanding units of each of the Partnerships. Plaintiff also claims that Defendants have breached the Partnership Agreements by failing to take steps to liquidate the Properties and by their alteration of the Partnerships' primary purposes, their acts in contravention of these agreements, and their use of the Partnership assets for their own benefit instead of for the benefit of the Partnerships. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 4) James F. Schofield, Gerald C. Gillett and Donna S. Gillett vs. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Real Estate Fund V,Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. et al - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint) and United States District Court, Southern District of New York, Case No. 95CIV.6711 (Class and Derivative Action Complaint) These are corporate/securities class and derivative actions brought in state and federal court by limited partners of each of the nine (9) limited partnerships that are named as Nominal Defendants as listed above ("Partnerships"). Plaintiffs allege that Defendants McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and four (4) of their senior officers and/or directors have breached their fiduciary duties. Specifically, Plaintiffs allege that Defendants have caused the Partnerships to enter into several wasteful transactions that have no business purpose or benefit to the Partnerships and which have rendered such units highly illiquid and artificially depressed the prices that are available for units on the limited resale market. Plaintiffs also allege that Defendants have engaged in a course of conduct to prevent the acquisition of units by Carl Icahn by disseminating false, misleading and inadequate information. Plaintiffs further allege that Defendants have acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders and, thereby, have breached the Partnership Agreements. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend these actions. 5) Alfred Napoletano vs. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133849 (class action complaint) Plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above ("Partnerships"). Plaintiff alleges that Defendants have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River tender offers, (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 6) Warren Heller vs. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133957 (class action complaint) Plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above ("Partnerships"). Plaintiff alleges that Defendants have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River tender offers, (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 7) High River Limited Partnership v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil - United States District Court for the Southern District of New York, (Case No. 95 Civ. 9488) (Second Action). On November 7, 1995, High River commenced a second complaint which alleges, inter alia, that McNeil's Schedule 14D-9 filed in connection with the High River tender offers was materially false and misleading, in violation of Sections 14(d) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(d) and (e), and the SEC Regulations promulgated thereunder; and that High River further alleges that McNeil has wrongfully refused to admit High River as a limited partner to the Funds. Additionally, High River purports to assert claims derivatively on behalf of Funds IX, XI, XV, XXIV and XXV, for breach of contract and breach of fiduciary duty, asserting that McNeil has charged these Partnerships excessive fees. High River's complaint seeks, inter alia, preliminary injunctive relief requiring McNeil to admit High River as a limited partner in each of the ten Partnerships and to transfer the tendered units of interest in the Partnerships to High River; an unspecified award of damages payable to High River and an additional unspecified award of damages payable to certain of the Partnerships; an order that defendants must discharge their fiduciary duties and must account for all fees they have received from certain of the Partnerships; and attorneys' fees. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. ITEM 5. OTHER INFORMATION - ------- ----------------- As previously disclosed, on an unsolicited basis, High River Limited Partnership ("High River"), a partnership controlled by Carl Icahn, announced that it had commenced an offer to purchase 60,791 units of limited partnership interest in the Partnership (approximately 45% of the Partnership's units) at $72 per unit. The tender offer was originally due to expire on August 31, 1995. In connection therewith, the parties entered into certain negotiations and discussions regarding, among other things, possible transactions between the parties and their affiliates, McNeil Partners, McNeil Investors, and McREMI. On September 19, 1995, the parties having not reached any resolution on the terms of the proposed transactions, McNeil Partners terminated the parties' discussion. High River had extended its offer several times until the final expiration date of October 6, 1995. On October 11, 1995 High River announced that based on preliminary information furnished by the depositary for the tender offer, approximately 5,010 units of the Partnership were tendered and not withdrawn prior to the expiration of the tender offer. On October 12, 1995, McNeil Partners announced that it would continue to explore potential avenues to enhance the value of the Partnership units, which may include, among other things, asset sales, refinancings of Partnership properties followed by distributions or tender offers for units of limited partnership. There can be no assurance that any such plans will develop or that any such transactions will be consummated. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits.
Exhibit Number Description 4. Amended and Restated Partnership Agreement, dated October 9, 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 135,090 limited partnership units outstanding in 1995 and 1994. 27. Financial Data Schedule for the quarter ended September 30, 1995.
Registrant has omitted instruments with respect to long-term debt where the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Registrant. Registrant agrees to furnish a copy of each such instruments to the Commission upon request. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended September 30, 1995. McNEIL REAL ESTATE FUND X, 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 X, LTD. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner November 14, 1995 By: /s/ Donald K. Reed - ------------------ ------------------------------------------------- Date Donald K. Reed President and Chief Executive Officer November 14, 1995 By: /s/ Robert C. Irvine - ------------------ ------------------------------------------------- Date Robert C. Irvine Chief Financial Officer of McNeil Investors, Inc. Principal Financial Officer November 14, 1995 By: /s/ Brandon K. Flaming - ------------------ -------------------------------------------------- Date Brandon K. Flaming Chief Accounting Officer of McNeil Real Estate Management, Inc.
EX-27 2
5 9-MOS DEC-31-1995 SEP-30-1995 2,420,965 0 522,023 (7,428) 0 0 88,113,366 (51,912,372) 44,307,147 0 44,675,325 0 0 0 0 44,307,147 12,994,603 16,357,611 0 0 10,282,145 0 3,881,412 2,194,054 0 2,194,054 0 0 0 2,194,054 0 0
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