-----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, Wf+/BNoGGcwK0vLsaoFuxLwBExcEcidVxavG5rX5XIgnyBokTbgyzFFDmoDtDr/4 hB3X7WI9NdAkGzZHEc3PmA== 0000312812-99-000005.txt : 19990519 0000312812-99-000005.hdr.sgml : 19990519 ACCESSION NUMBER: 0000312812-99-000005 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 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/A SEC ACT: SEC FILE NUMBER: 000-09325 FILM NUMBER: 99629412 BUSINESS ADDRESS: STREET 1: 13760 NOEL RD STE 600 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, DC 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 0-9325 ---------- 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 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 X, LTD. BALANCE SHEETS (Unaudited)
March 31, December 31, 1999 1998 ------------ ------------- ASSETS - ------ Real estate investments: Land ........................................................ $ 8,836,046 $ 8,836,046 Buildings and improvements ................................. 74,020,511 73,756,560 ------------ ------------ 82,856,557 82,592,606 Less: Accumulated depreciation ............................. (56,678,393) (55,930,192) ------------ ------------ 26,178,164 26,662,414 Cash and cash equivalents ...................................... 2,697,036 2,680,102 Cash segregated for security deposits .......................... 353,720 426,327 Cash restricted for mortgage payments .......................... 159,250 79,800 Accounts receivable ............................................ 348,192 309,043 Prepaid expenses and other assets .............................. 253,096 233,432 Escrow deposits ................................................ 1,013,433 759,317 Deferred borrowing costs, net of accumulated amortization of $712,452 and $668,233 at March 31, 1999 and December 31, 1998, respectively ................................................ 856,886 901,105 ------------ ------------ $ 31,859,777 $ 32,051,540 ============ ============ LIABILITIES AND PARTNERS' DEFICIT - --------------------------------- Mortgage notes payable, net .................................... $ 35,958,586 $ 36,140,300 Accrued interest ............................................... 256,318 258,427 Accrued property taxes ......................................... 691,084 473,177 Other accrued expenses ......................................... 421,195 400,581 Payable to affiliates - General Partner ........................ 3,193,709 2,965,226 Security deposits and deferred rental revenue .................. 406,060 400,987 ------------ ------------ 40,926,952 40,638,698 ------------ ------------ Partners' deficit: Limited partners - 135,200 limited partnership units authorized; 134,980 limited partnership units outstanding at March 31, 1999 and December 31, 1998........ (3,314,644) (3,041,534) General Partner ............................................. (5,752,531) (5,545,624) ------------ ------------ (9,067,175) (8,587,158) ------------ ------------ $ 31,859,777 $ 32,051,540 ============ ============
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 March 31, ------------------------------ 1999 1998 ----------- ----------- Revenue: Rental revenue ..................................... $ 3,850,229 $ 3,675,778 Interest ........................................... 28,888 59,224 ----------- ----------- Total revenue .................................... 3,879,117 3,735,002 ----------- ----------- Expenses: Interest ........................................... 834,112 773,688 Interest - affiliates .............................. -- 73,460 Depreciation and amortization ...................... 748,201 784,628 Property taxes ..................................... 235,080 241,662 Personnel expenses ................................. 452,897 479,447 Utilities .......................................... 313,750 327,455 Repair and maintenance ............................. 438,102 388,101 Property management fees - affiliates .............. 187,695 179,511 Other property operating expenses .................. 198,287 215,165 General and administrative ......................... 117,301 191,859 General and administrative - affiliates ............ 89,924 82,778 ----------- ----------- Total expenses ................................... 3,615,349 3,737,754 ----------- ----------- Net income (loss) ..................................... $ 263,768 $ (2,752) =========== =========== Net income (loss) allocated to limited partners........ $ 226,316 $ (2,614) Net income (loss) allocated to General Partner ........ 37,452 (138) ----------- ----------- Net income (loss) ..................................... $ 263,768 $ (2,752) =========== =========== Net income (loss) per limited partnership unit ........ $ 1.68 $ (.02) =========== =========== Distributions per limited partnership unit ............ $ 3.70 $ 33.34 =========== ===========
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' EQUITY (DEFICIT) (Unaudited) For the Three Months Ended March 31, 1999 and 1998
Total Partners' General Limited Equity Partner Partners (Deficit) --------------- ------------- ------------- Balance at December 31, 1997 ............ $ (4,653,706) $ 1,607,681 $ (3,046,025) Net loss ................................ (138) (2,614) (2,752) Distributions to limited partners ....... -- (4,499,998) (4,499,998) Management Incentive Distribution ....... (219,626) -- (219,626) -------------- ------------ ------------ Balance at March 31, 1998 ............... $ (4,873,470) $ (2,894,931) $ (7,768,401) ============== ============ ============ Balance at December 31, 1998 ............ $ (5,545,624) $ (3,041,534) $ (8,587,158) Net income .............................. 37,452 226,316 263,768 Distribution to limited partners ........ -- (499,426) (499,426) Management Incentive Distribution........ (244,359) -- (244,359) -------------- ------------ ------------ Balance at March 31, 1999 ............... $ (5,752,531) $ (3,314,644) $ (9,067,175) ============== ============ ============
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
Three Months Ended March 31, -------------------------------- 1999 1998 ------------ ------------ Cash flows from operating activities: Cash received from tenants .......................... $ 3,878,959 $ 3,592,488 Cash paid to suppliers .............................. (1,555,275) (1,785,308) Cash paid to affiliates ............................. (218,633) (161,549) Interest received ................................... 28,888 59,224 Interest paid ....................................... (771,311) (731,850) Interest paid to affiliates ......................... -- (73,460) Property taxes paid and escrowed .................... (225,599) (266,000) ----------- ----------- Net cash provided by operating activities .............. 1,137,029 633,545 ----------- ----------- Cash flows from investing activities: Additions to real estate investments ................ (263,951) (81,163) ----------- ----------- Cash flows from financing activities: Principal payments on mortgage notes payable......... (202,406) (186,016) Cash restricted for mortgage payments ............... (79,450) -- Distributions to limited partners ................... (499,426) (4,499,998) Management Incentive Distribution paid .............. (74,862) -- ----------- ----------- Net cash used in financing activities .................. (856,144) (4,686,014) ----------- ----------- Net increase (decrease) in cash and cash equivalents .................................... 16,934 (4,133,632) Cash and cash equivalents at beginning of period .............................................. 2,680,102 5,755,976 ----------- ----------- Cash and cash equivalents at end of period ............. $ 2,697,036 $ 1,622,344 =========== ===========
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
Three Months Ended March 31, -------------------------------- 1999 1998 ----------- ------------ Net income (loss) ............................................ $ 263,768 $ (2,752) ----------- ----------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization ............................. 748,201 784,628 Amortization of discounts on mortgage notes payable ........................................... 20,692 15,294 Amortization of deferred borrowing costs .................. 44,219 27,837 Changes in assets and liabilities: Cash segregated for security deposits ................... 72,607 (49,437) Accounts receivable ..................................... (39,149) (21,350) Prepaid expenses and other assets ....................... (19,664) 7,251 Escrow deposits ......................................... (254,116) (296,576) Accounts payable ........................................ -- (59,628) Accrued interest ........................................ (2,109) (1,293) Accrued property taxes .................................. 217,907 197,551 Other accrued expenses .................................. 20,614 (48,691) Payable to affiliates - General Partner ................. 58,986 100,740 Security deposits and deferred rental revenue ............................................... 5,073 (20,029) ----------- ----------- Total adjustments ..................................... 873,261 636,297 ----------- ----------- Net cash provided by operating activities .................... $ 1,137,029 $ 633,545 =========== ===========
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) March 31, 1999 NOTE 1. - ------- McNeil Real Estate Fund X, 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. The Partnership is governed by an agreement of limited partnership (the "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 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 X, 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 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 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 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. Prior to June 18, 1998, the La Plaza mortgage note, due to an affiliate of the General Partner, incurred interest at a rate equal to 1% plus the prime lending rate of Bank of America per annum. Terms of the affiliated mortgage note required monthly interest-only debt service payments. On June 5, 1998, the Partnership refinanced the La Plaza mortgage note with a $3,785,000 mortgage note from an unaffiliated lender (see Note 4). 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 ................... $187,695 $179,511 Interest - affiliates ................................... -- 73,460 Charged to general and administrative affiliates: Partnership administration ............................ 89,924 82,778 -------- -------- $277,619 $335,749 ======== ======== Charged to General Partner's deficit: Management Incentive Distribution ..................... $244,359 $219,626 ======== ========
NOTE 4. - ------- On June 5, 1998, the Partnership refinanced the La Plaza mortgage note with a $3,785,000 mortgage note from an unaffiliated lender. However, only $3,185,000 of the mortgage note has been funded by the lender. The remaining $600,000 of loan proceeds will be funded to the Partnership as required for the completion of tenant improvements at La Plaza Office Building, if such tenant improvements are needed to induce prospective or current tenants to lease or release space at the property. The outstanding balance of the new mortgage note bears interest at a variable rate equal to 1.75% plus the London Interbank Offered Rate per annum. The new mortgage note requires monthly interest-only debt service payments and annual principal payments equal to 5% of the outstanding principal balance of the mortgage note. Terms of the new La Plaza 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 La Plaza mortgage note matures on June 5, 2001. Cash proceeds from the refinancing transaction are as follows: New loan proceeds...................................... $ 3,785,000 Holdback for capital improvements...................... (600,000) Amount required to payoff existing debt................ (3,136,029) ------------ Cash proceeds from refinancing......................... $ 48,971 ============ The Partnership incurred $70,243 of deferred borrowing costs related to the refinancing of the La Plaza mortgage note. 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 of a portfolio of income-producing real properties. As of March 31, 1999, the Partnership owned seven apartment buildings, one retail shopping center and one office building. All of the Partnership's properties are subject to mortgage indebtedness. On June 5, 1998, the Partnership refinanced the La Plaza mortgage note. The Partnership obtained a 3-year, $3,785,000 mortgage note from an unaffiliated lender, of which $3,185,000 has been funded by the lender. The outstanding balance of the new mortgage note bears interest at a variable rate equal to 1.75% plus the London Interbank Offered Rate per annum. The new note requires monthly interest-only payments and annual principal payments in an amount necessary to reduce the principal balance of the note by 5% annually. The maturity of the new mortgage note is June 5, 2001. RESULTS OF OPERATIONS - --------------------- The Partnership's net income for the first quarter of 1999 amounted to $263,768, an increase of $266,520 over the $2,752 net loss reported by the Partnership for the first quarter of 1998. Revenues: The Partnership's rental revenue increased $174,451 or 4.7% for the first quarter of 1999 as compared to the first quarter of 1998. Rental revenues increased at six of the Partnership's seven residential properties. Rental revenues at Coppermill Apartments, Orchard Apartments, Regency Park Apartments and Sandpiper Apartments increased 13.9%, 13.3%, 12.0% and 5.1%, respectively. These four properties reported increased base rental rates and decreased vacancy losses. Rental revenue at Briarwood Apartments and Spanish Oaks increased 1.0% and 1.2%, respectively. These two properties increased base rental rates, but most of the increase was offset by increased vacancy, concessions, and other rental losses. Rental revenue decreased 7.0% at Quail Meadows as layoffs in the aerospace industry caused vacancy losses at the Wichita property to increase $70,273 to $84,225. Rental revenues at the Partnership's two remaining commercial properties also increased. Lakeview Plaza's rental revenue increased 16.6% primarily due to an improved occupancy rate. La Plaza Office Building's rental revenue increased 6.5% due to implementation of several new leases with increased base rental rates as compared to the previous leases. Interest revenue of the Partnership decreased $30,336 to $28,888 for the first quarter of 1999 as compared to the first quarter of 1998. The Partnership had decreased amounts of cash and cash equivalents invested in interest-bearing accounts. Expenses: Partnership expenses decreased $122,405 or 3.3% for the first quarter of 1999 as compared to the first quarter of 1998. Decreases in general and administrative expenses and in interest paid to affiliates were the expense categories showing the largest decreases in both absolute terms and on a percentage basis. These categories were partially offset by an increase in repair and maintenance expenses. General and administrative expenses decreased $74,558 or 39% for the first quarter of 1999 as compared to the first quarter of 1998. Costs associated with efforts to explore alternatives to maximize the value of the Partnership decreased 30% during the first quarter of 1999 (see Liquidity and Capital Resources). Also, costs to provide investor relation services was provided by an affiliate of the General Partner during the first quarter of 1999. Such costs were provided by a non-affiliate during the first quarter of 1998, and were included in general and administrative expenses. Interest expense paid to affiliates was eliminated with the June 18, 1998 refinancing of the La Plaza mortgage note from an affiliated lender to a non-affiliated lender. The Partnership incurred no interest expense due to affiliates for the first quarter of 1999 as compared $73,460 of interest expense due to affiliates for the first quarter of 1998. When combined with interest expense paid to unaffiliated lenders, the Partnership's total interest expense decreased $13,036 or 1.5% for the first quarter of 1999. Repair and maintenance expenses increased $50,001 or 12.9% for the first quarter of 1999 as compared to the first quarter of 1998. The Partnership incurred increased costs for snow removal, floor covering replacement, and storm damages. Three of the Partnership's properties, Orchard Apartments, Regency Park Apartments, and Lakeview Plaza incurred increased snow removal expenses for the first quarter of 1999 as compared to the first quarter of 1998. The increase in snow removal expenses amounted to approximately $21,900. Expenses for floor covering replacements increased approximately $16,200. Most of the increased expense for floor covering was incurred at Briarwood Apartments, Orchard Apartments, and Spanish Oaks Apartments. Additionally, Spanish Oaks Apartments incurred approximately $11,000 of minor repairs and clean-up expenses related to inclement weather at the San Antonio property. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash provided by operating activities increased $503,484 to $1,137,029 for the first quarter of 1999. Increased cash received from tenants and decreased cash paid to suppliers accounted for most of the increased operating cash flow. Short-term liquidity: At March 31, 1999, the Partnership held cash and cash equivalents of $2,697,036, an increase of $16,934 from the balance at the end of 1998. The General Partner believes this level of cash reserves, combined with anticipated cash flow from operating activities, is adequate to meet the Partnership's operating expenses, debt service requirements, and budgeted capital improvements for 1999. The Partnership continues to invest in capital improvements for its properties. For the first three months of 1999, the Partnership invested $263,951 in capital improvements. The Partnership has budgeted approximately $1,792,000 for capital improvements in 1999. 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. Significant resources may be needed at La Plaza Office Building to renovate and refurbish vacated space for new tenants, and to bring the property into compliance with local building codes. The new La Plaza mortgage note contains a provision whereby the Partnership may borrow an additional $600,000 to meet these capital needs, if necessary. 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 several years will yield improved cash flow from property operations in the future. If the Partnership's cash position deteriorates, the General Partner may elect to defer certain of the capital improvements, except where such improvements are expected to increase the competitiveness or marketability of the Partnership's properties. As 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. 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 General Partner was allocated net income of $37,452 and net loss of $138, respectively. The limited partners were allocated net income of $226,316 and net loss of $2,614 for the three month periods ended March 31, 1999 and 1998, respectively. MID in the amount of $74,862 was paid to the General Partner during the first quarter of 1999. No MID payments were paid to the General Partner during 1998. On March 26, 1999, the Partnership distributed $499,426 ($3.70 per limited partnership unit) to the limited partners. During the first quarter of 1998, the Partnership distributed $4,499,998 ($33.34 per limited partnership unit) to the limited partners. The General Partner will continue to monitor the cash reserves and working capital needs of the Partnership to determine when cash flows will support additional distributions to the limited partners and payments of MID to the General Partner. 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 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 income (loss) per limited partnership unit: Net income (loss) per limited partnership unit is computed by dividing net income (loss) allocated to the limited partners by the number of limited partnership units outstanding. Per unit information has been computed based on 134,980 limited partnership units outstanding in 1999 and 1998. 27. Financial Data Schedule for the quarter ended March 31, 1999. 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 Form 8-K's file during the quarter ended March 31, 1999. 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 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 2,697,036 0 0 0 0 0 82,856,557 (56,678,393) 31,859,777 0 35,958,586 0 0 0 0 31,859,777 3,850,229 3,879,117 0 0 2,781,237 0 834,112 263,768 0 0 0 0 0 263,768 0 0
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