-----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, SecLoTHSvUSCi1C4vhpY2hEUExRzZ9Ru1yshC1QBG4oQ+uuUb6pLMT7pxSe9M8GB Doh8V8RzKwwCwjUg86sd7g== 0000312812-97-000013.txt : 19970814 0000312812-97-000013.hdr.sgml : 19970814 ACCESSION NUMBER: 0000312812-97-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 97659213 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 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 June 30, 1997 ----------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to_____________ Commission file number 0-9325 --------- 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 --- --- McNEIL REAL ESTATE FUND X, LTD. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- BALANCE SHEETS (Unaudited)
June 30, December 31, 1997 1996 --------------- -------------- ASSETS - ------ Real estate investments: Land..................................................... $ 8,836,046 $ 8,836,046 Buildings and improvements............................... 71,615,509 71,110,263 -------------- ------------- 80,451,555 79,946,309 Less: Accumulated depreciation.......................... (51,230,343) (49,689,189) -------------- ------------- 29,221,212 30,257,120 Assets held for sale, net................................... 3,052,771 5,308,731 Cash and cash equivalents................................... 5,503,492 2,660,679 Cash segregated for security deposits....................... 339,758 301,259 Accounts receivable......................................... 524,889 575,995 Prepaid expenses and other assets........................... 291,151 329,136 Escrow deposits............................................. 814,590 802,841 Deferred borrowing costs, net of accumulated amortization of $428,846 and $438,719 at June 30, 1997 and December 31, 1996, respectively............................................. 1,102,325 1,171,591 -------------- ------------- $ 40,850,188 $ 41,407,352 ============== ============= LIABILITIES AND PARTNERS' DEFICIT - --------------------------------- Mortgage notes payable, net................................. $ 35,757,419 $ 41,612,292 Mortgage notes payable - affiliates......................... 3,136,029 800,000 Accounts payable............................................ 16,153 61,356 Accrued interest............................................ 261,255 309,977 Accrued interest - affiliates............................... 24,977 6,625 Accrued property taxes...................................... 657,177 530,973 Other accrued expenses...................................... 289,045 309,981 Deferred gain on involuntary conversion..................... - 65,800 Payable to affiliates - General Partner..................... 3,282,394 3,555,343 Security deposits and deferred rental revenue............... 396,201 375,061 -------------- ------------- 43,820,650 47,627,408 -------------- ------------- Partners' equity (deficit): Limited partners - 135,200 limited partnership units authorized; 134,980 limited partnership units outstanding at June 30, 1997 and December 31, 1996..... 2,835,644 (704,049) General Partner.......................................... (5,806,106) (5,516,007) -------------- ------------- (2,970,462) (6,220,056) -------------- ------------- $ 40,850,188 $ 41,407,352 ============== =============
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 Six Months Ended June 30, June 30, --------------------------------- --------------------------------- 1997 1996 1997 1996 -------------- --------------- -------------- -------------- Revenue: Rental revenue................ $ 3,934,244 $ 4,039,535 $ 7,861,065 $ 8,017,638 Interest...................... 57,385 28,158 105,040 77,515 Gain on involuntary conversion.................. 65,800 - 65,800 - Gain on sale of real estate... 2,912,440 - 2,912,440 - ------------- ------------- ------------- ------------- Total revenue............... 6,969,869 4,067,693 10,944,345 8,095,153 ------------- ------------- ------------- ------------- Expenses: Interest...................... 895,534 1,072,539 1,842,299 2,152,935 Interest - affiliates......... 74,577 18,652 111,565 37,611 Depreciation and amortization................ 776,877 826,996 1,541,154 1,639,182 Property taxes................ 263,423 264,323 539,165 542,704 Personnel expenses............ 401,503 403,219 885,363 877,844 Utilities..................... 285,125 301,000 652,821 609,002 Repair and maintenance........ 521,401 500,085 962,719 919,646 Property management fees - affiliates........... 191,450 204,913 384,516 404,498 Other property operating expenses.................... 240,823 254,064 491,153 504,420 General and administrative.... 63,373 57,632 148,670 106,302 General and administrative - affiliates.................. 98,342 119,455 192,691 240,456 ------------- ------------- ------------- ------------- Total expenses.............. 3,812,428 4,022,878 7,752,116 8,034,600 ------------- ------------- ------------- ------------- Income before extraordinary item.......................... $ 3,157,441 $ 44,815 $ 3,192,229 $ 60,553 Extraordinary gain on extinguishment of debt........ 533,764 - 533,764 269,596 ------------- ------------- ------------- ------------- Net income....................... $ 3,691,205 $ 44,815 $ 3,725,993 $ 330,149 ============= ============= ============= ============= Net income allocated to limited partners........... $ 3,506,644 $ 42,575 $ 3,539,693 $ 313,642 Net income allocated to General Partner............ 184,561 2,240 186,300 16,507 ------------- ------------- ------------- ------------- Net income....................... $ 3,691,205 $ 44,815 $ 3,725,993 $ 330,149 ============= ============= ============= ============= Net income per limited partnership unit: Income before extraordinary item.......... $ 22.22 $ .31 $ 22.46 $ .42 Extraordinary gain on extinguishment of debt...... 3.76 - 3.76 1.90 ------------- ------------- ------------- ------------- Net income....................... $ 25.98 $ .31 $ 26.22 $ 2.32 ============= ============= ============= =============
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 Six Months Ended June 30, 1997 and 1996
Total General Limited Partners' Partner Partners Deficit --------------- --------------- --------------- Balance at December 31, 1995.............. $ (4,524,439) $ (1,788,928) $ (6,313,367) Net income................................ 16,507 313,642 330,149 Management Incentive Distribution......... (522,159) - (522,159) ------------- ------------- ------------- Balance at June 30, 1996.................. $ (5,030,091) $ (1,475,286) $ (6,505,377) ============= ============= ============= Balance at December 31, 1996.............. $ (5,516,007) $ (704,049) $ (6,220,056) Net income................................ 186,300 3,539,693 3,725,993 Management Incentive Distribution......... (476,399) - (476,399) ------------- ------------- ------------- Balance at June 30, 1997.................. $ (5,806,106) $ 2,835,644 $ (2,970,462) ============= ============= =============
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
Six Months Ended June 30, ------------------------------------ 1997 1996 ---------------- ---------------- Cash flows from operating activities: Cash received from tenants............................... $ 7,878,777 $ 8,059,340 Cash paid to suppliers................................... (3,201,765) (3,227,362) Cash paid to affiliates.................................. (1,326,555) (561,680) Interest received........................................ 105,040 77,515 Interest paid............................................ (1,773,870) (1,966,625) Interest paid to affiliates.............................. (93,213) (37,611) Property taxes paid and escrowed......................... (434,999) (624,546) -------------- -------------- Net cash provided by operating activities................... 1,153,415 1,719,031 -------------- -------------- Cash flows from investing activities: Additions to real estate investments..................... (505,246) (844,397) Additions to assets held for sale........................ (3,144) - Proceeds from sale of real estate........................ 5,234,654 - -------------- -------------- Net cash provided by (used in) investing activities......... 4,726,264 (844,397) -------------- -------------- Cash flows from financing activities: Net proceeds from refinancing mortgage notes payable.......................................... 495,838 475,775 Principal payments on mortgage notes payable................................................ (473,942) (414,880) Deferred borrowing costs paid............................ - (112,241) Retirement of mortgage note payable...................... (3,058,762) - -------------- -------------- Net cash used in financing activities....................... (3,036,866) (51,346) -------------- -------------- Net increase in cash and cash equivalents................... 2,842,813 823,288 Cash and cash equivalents at beginning of period................................................... 2,660,679 1,813,594 -------------- -------------- Cash and cash equivalents at end of period.................. $ 5,503,492 $ 2,636,882 ============== ==============
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 to Net Cash Provided By Operating Activities
Six Months Ended June 30, ----------------------------------- 1997 1996 ---------------- --------------- Net income ................................................. $ 3,725,993 $ 330,149 -------------- -------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................ 1,541,154 1,639,182 Amortization of discounts on mortgage notes payable.......................................... 51,786 77,266 Amortization of deferred borrowing costs................. 65,365 62,250 Gain on sale of real estate.............................. (2,912,440) - Extraordinary gain on extinguishment of debt............. (533,764) (269,596) Changes in assets and liabilities: Cash segregated for security deposits.................. (38,499) (27,797) Accounts receivable.................................... 17,129 58,884 Prepaid expenses and other assets...................... 12,753 14,273 Escrow deposits........................................ (11,749) (437,681) Accounts payable....................................... (45,203) (88,262) Accrued interest....................................... (48,722) 46,794 Accrued interest - affiliates.......................... 18,352 - Accrued property taxes................................. 126,204 250,565 Other accrued expenses................................. (20,936) (34,192) Deferred gain on involuntary conversion................ (65,800) - Payable to affiliates - General Partner................ (749,348) 83,274 Security deposits and deferred rental revenue.............................................. 21,140 13,922 -------------- -------------- Total adjustments.................................... (2,572,578) 1,388,882 -------------- -------------- Net cash provided by operating activities................... $ 1,153,415 $ 1,719,031 ============== ==============
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) June 30, 1997 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 six months ended June 30, 1997, are not necessarily indicative of the results to be expected for the year ending December 31, 1997. NOTE 2. - ------- The financial statements should be read in conjunction with the financial statements contained in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1996, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Real Estate Fund X, Ltd., c/o The Herman Group, 2121 San Jacinto St., 26th Floor, Dallas, Texas 75201. NOTE 3. - ------- The Partnership pays property management fees equal to 5% of the gross rental receipts of the Partnership's properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management 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. The maximum MID percentage decreases subsequent to 1999. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $10,000 per apartment unit 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. MID will be paid to the extent of the lesser of the Partnership's excess cash flow, as defined, or net operating income, as defined (the "Entitlement Amount"), and may be paid (i) in cash, unless there is insufficient cash to pay the distribution in which event any unpaid portion not taken in Units will be deferred and is payable, without interest, from the first available cash and/or (ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of Units issued in payment of the MID is based on the greater of $50 per Unit or the net tangible asset value, as defined, per Unit. Any amount of the MID that is paid to the General Partner in Units will be treated as if cash is distributed to the General Partner and is then contributed to the Partnership by the General Partner. The MID represents a return of equity to the General Partner for increasing cash flow, as defined, and accordingly is treated as a distribution. On August 1, 1994, the Partnership obtained a mortgage loan from McNeil Real Estate Fund XXVII, L.P. ("Fund XXVII"), an affiliate of the General Partner, for $800,000. The mortgage loan is secured by a second lien on Lakeview Plaza. Terms of the mortgage loan require monthly interest-only payments equal to the prime lending rate of Bank of America plus 1% with the principal balance due August 1, 1997. Effective August 1, 1997, Fund XXVII reconveyed the lien back to the Partnership in consideration of the additional borrowing discussed in the following paragraph. On February 28, 1997, the Partnership refinanced the La Plaza mortgage note with a $2,336,029 mortgage loan from Fund XXVII. See Note 5. Effective August 1, 1997, the Partnership borrowed an additional $800,000 from Fund XXVII. The refinancing and the additional borrowing are jointly secured by a single lien on La Plaza Office Building. Payment terms for the mortgage note and the additional borrowing require monthly interest-only payments equal to 1% plus the prime lending rate of Bank of America. The new mortgage note, together with the additional borrowing, is due February 28, 2000. Compensation, reimbursements and distributions paid to or accrued for the benefit of the General Partner and its affiliates are as follows: Six Months Ended June 30, ------------------------ 1997 1996 ---------- ---------- Property management fees - affiliates......... $ 384,516 $ 404,498 Interest - affiliates......................... 111,565 37,611 Charged to general and administrative affiliates: Partnership administration.................. 192,691 240,456 --------- --------- $ 688,772 $ 682,565 ========= ========= Charged to General Partner's deficit: Management Incentive Distribution......... $ 476,399 $ 522,159 ========= ========= NOTE 4. - ------- On June 5, 1997, the Partnership sold Cave Spring Corners Shopping Center to an unaffiliated purchaser for a cash sales price of $5,250,000. Cash proceeds from the sale, as well as the gain on sale are detailed on the following page. Gain on Sale Cash Proceeds ------------ ------------- Cash sales price............................... $ 5,250,000 $ 5,250,000 Selling costs.................................. (15,346) (15,346) Borrowing costs written off.................... (3,901) Prepaid leasing commissions written off........ (25,232) Straight-line rent receivables written off..... (33,977) Basis of real estate sold...................... (2,259,104) ---------- Gain on sale of real estate.................... $ 2,912,440 ========== Proceeds from sale of real estate............. 5,234,654 Retirement of mortgage note payable........... (3,058,762) ---------- Net cash proceeds............................. $ 2,175,892 ========== NOTE 5. - ------- On February 28, 1997, the Partnership refinanced the La Plaza mortgage note with a $2,336,029 mortgage note from Fund XXVII, an affiliate of the General Partner. The new mortgage note bears interest at a variable rate equal to 1% plus the prime lending rate of Bank of America and requires monthly interest-only debt service payments until the February 28, 2000 maturity date. Cash used to close the refinancing transaction is as follows: New loan proceeds............................. $ 2,336,029 Existing debt retired......................... (2,373,955) ------------ Net cash used to refinance mortgage note payable....................... $ (37,926) ============ NOTE 6. - ------- On January 26, 1996, the Partnership refinanced the Spanish Oaks mortgage note. The new mortgage note, in the amount of $4,000,000, bears interest at 7.71%, requires monthly principal and interest payments of $28,546, and matures on January 26, 2003. In connection with the refinancing, the Partnership and the prior lienholder agreed to a discounted payoff of the prior mortgage note that resulted in a $803,360 extraordinary gain on extinguishment of debt. $269,596 of the extraordinary gain was recognized during the first quarter of 1996. The remaining $533,764 of the extraordinary gain was recognized during the second quarter of 1997 after negotiations concerning the amount of the payoff were completed. Cash proceeds from the refinancing transaction are as follows: New loan proceeds............................ $ 4,000,000 Cash paid to retire existing debt............ (2,990,461) Proceeds from refinancing received in 1996... (475,775) ------------ Proceeds from refinancing received in 1997... $ 533,764 ============ The Partnership incurred $166,403 of deferred borrowing costs related to the refinancing of the Spanish Oaks mortgage note. The Partnership was also required to fund $165,291 into various escrows for property taxes, hazard insurance and deferred maintenance. NOTE 7. - ------- On October 1, 1996, the Partnership placed Cave Spring Corners and Iberia Plaza on the market for sale. Consequently, these properties are shown as assets held for sale on the accompanying financial statements. In accordance with the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Partnership ceased recording depreciation charges on these properties effective October 1, 1996. Cave Spring Corners was sold June 5, 1997 (see Note 4). NOTE 8. - ------- On March 31, 1996, a fire destroyed or damaged 16 units and 2 laundry rooms at Regency Park Apartments. The total cost to repair the fire damage was $530,148. The Partnership's insurance carrier will reimburse the Partnership for all costs incurred as a result of the fire less a standard deductible. The excess of cash to be received over the basis of the property destroyed in the fire resulted in a $350,927 gain on involuntary conversion. Because only a part of the insurance proceeds were received by December 31, 1996, only $285,127 of the gain on involuntary conversion was recognized on the Partnership's Statement of Operations for the year ended December 31, 1996. The remainder of the insurance proceeds were received during the second quarter of 1997, at which time the remaining gain of $65,800 was recognized. 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. At June 30, 1997, the Partnership owned seven apartment properties, one office building and two strip shopping centers. All of the Partnership's properties are subject to mortgage notes. On September 18, 1996, the Partnership sold Parkway Plaza Shopping Center to an unaffiliated purchaser. The Partnership recognized a $275,424 gain on the disposition. Cash proceeds to the Partnership amounted to $283,585. On June 5, 1997, the Partnership sold Cave Springs Plaza to an unaffiliated purchaser. The Partnership recognized a $2,912,440 gain on the disposition. Cash proceeds from the sale amounted to $2,175,892 from the sale. Currently, the Partnership is marketing Iberia Plaza for sale. RESULTS OF OPERATIONS - --------------------- The Partnership reported net income of $3,725,993 for the first six months of 1997, an increase of $3,395,844 from the net income of $330,149 reported for the first six months of 1996. Net income for the second quarter increased $3,646,390 to $3,691,205. Included in net income for the quarter and six months ended June 30, 1997 is a $2,912,440 gain from the sale of Cave Spring Corners. Also included in net income for both 1997 and 1996 are extraordinary gains on the extinguishment of debt relating to the refinancing of the Spanish Oaks mortgage debt. These gains amounted to $533,764 and $269,596 for the six months ended June 30, 1997 and 1996, respectively. Excluding the gain on sale and the extraordinary gains, Partnership income increased $219,236 to $279,789 for the first six months of 1997 as compared to the same period of 1996. Revenues: Rental revenue decreased $156,573 or 2.0% for the first six months of 1997 as compared to the same period of 1996. The decrease is attributable to the September 18, 1996 sale of Parkway Plaza. Excluding the effects of the sale of Parkway Plaza, rental revenues increased $209,790 or 2.7% for the first six months of 1997 as compared to the same period of 1996. Considered as a group, the Partnership's residential properties reported no significant increase in rental revenue for the first six months of 1997. For the most part, increases in base rental rates were offset by increased vacancy losses. Vacancy losses increased at all of the Partnership's residential properties except for Sandpiper Apartments. Soft markets contributed to decreased rental revenue at Briarwood Apartments, Orchard Apartments and Spanish Oaks Apartments, while rental revenue was unchanged at Regency Park Apartments. Rental revenue increased modestly at Coppermill Apartments and Quail Meadows Apartments and Spanish Oaks Apartments. Sandpiper Apartments continued a pattern of strong performance with a 4.9% increase in rental revenue. The Partnership's commercial properties reported the most improvement in rental revenue. Rental rates improved modestly at Iberia Plaza and Lakeview Plaza, while occupancy rates improved to near 100% levels. The largest increase in rental revenue, however, occurred at La Plaza Office Building. Rental revenue at the Las Vegas property increased 14.5% for the first six months of 1997 as compared to the same period of 1996. Rental rates increased at La Plaza, but most of the increase came from improving occupancy. The average occupancy rate at La Plaza improved to 85% at June 30, 1997, up from 77% at the beginning of 1996. Expenses: Partnership expenses decreased $282,484 or 3.5% for the first six months of 1997 as compared to the same period of 1996. As with rental revenues, most of the decrease is attributable to the sale of Parkway Plaza during the third quarter of 1996. However, the Partnership's expenses decreased $56,420 even after excluding expenses attributable to Parkway Plaza. Decreased expenses for depreciation and general and administrative expenses paid to affiliates were mostly offset by increased utilities, interest paid to affiliates and general and administrative expenses. Interest paid to affiliates increased $73,954 to $111,575 for the first six months of 1997 as compared to the same period of 1996. The increase reflects the refinancing of the La Plaza mortgage note with a $2,336,029 mortgage due to an affiliate of the General Partner. The refinancing occurred on February 28, 1997. Because the refinancing paid-off the La Plaza mortgage note, due to a non-affiliated entity, the refinancing had the dual effect of increasing mortgage interest due to affiliates and decreasing the interest expense on non-affiliated mortgage indebtedness by a total of $132,039. Excluding the effects of Parkway Plaza, utility expenses increased $49,791 or 8.3% to $367,696 for the first six months of 1997 as compared to the same period of 1996. The increases were concentrated in gas and oil expenses, especially for Sandpiper Apartments and Spanish Oaks Apartments, and an increase in water and sewer expenses, particularly at Coppermill Apartments. General and administrative expenses increased $42,368 to $148,670 for the first six months of 1997. The Partnership incurred approximately $30,000 of fees and costs to settle a legal dispute (see Item 1 - Legal Proceedings). In addition, beginning in 1997, the Partnership incurred $15,599 of charges for investor services provided by a third party vendor which, prior to 1997, were provided by affiliates of the General Partner. The change from affiliate to third party vendor for investor relation services also accounts for part of the 19.9% decrease in general and administrative expenses paid by affiliates. Payments to affiliates for general and administrative expenses also decreased due to the sale of Parkway Plaza during 1996 and due to decreased charges from affiliates generally. Depreciation expense decreased $98,028 or 6.0% for the first six months of 1997 as compared to the same period of 1996. In accordance with accounting principles, the Partnership ceased depreciating its investment in Cave Spring Corners and Iberia Plaza after the October 1, 1996 decision to market those properties for sale. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash flow provided by operating activities decreased to $1,153,415 for the first six months of 1997 from $1,719,031 for the same period of 1996. For the current year, payments to affiliates have increased to $1,326,555 from $561,680 in 1996. During the first quarter of 1997, the Partnership repaid all of the $779,993 balance of partnership administrative reimbursements outstanding at December 31, 1996. Such expenses were deferred beginning in 1995 to enable the Partnership to restore its balance of cash reserves. Decreased cash flow from operating activities is also attributable to the sale of Parkway Plaza during the third quarter of 1996. The Partnership expended $505,246 for capital improvements during the first six months of 1997, down significantly from the $844,397 expended during the same period of 1996. The Partnership has budgeted a total of $1.6 million of capital improvements for 1997. These additions are needed to maintain the competitiveness of the Partnership's properties in their respective markets and allow the Partnership to reduce the amount of repair and maintenance expenditures that would otherwise be incurred. On February 28, 1997, the Partnership resolved the maturity of the La Plaza mortgage note by refinancing the La Plaza note with a $2,336,029 mortgage note obtained from an affiliate of the General Partner. The new mortgage note bears interest at a variable rate equal to 1% plus the prime lending rate of Bank of America. Monthly interest-only debt service payments are required until the maturity of the new mortgage note on February 28, 2000. Effective August 1, 1997, the Partnership modified the mortgage note to include an additional $800,000 of borrowings. The $800,000 additional borrowing was used to repay the $800,000 second mortgage note on Lakeview Plaza which matured on August 1, 1997. All other terms of the La Plaza mortgage note remain the same. The Partnership's next maturing mortgage note is the Iberia Plaza mortgage note which matures in 1998. The Partnership has placed Iberia Plaza on the market for sale, and intends to use proceeds from the sale of the property to retire the mortgage note. Short-term liquidity: At June 30, 1997, the Partnership held cash reserves of $5,503,492 an increase of $2,842,813 from the balance at the end of 1996. Cash reserves of the Partnership have increased significantly from depressed levels at the end of 1994. The increased cash reserves of the Partnership have allowed the Partnership to resume payment of Partnership administrative reimbursements due to affiliates of the General Partner. Over the past three years, the Partnership has invested large amounts of funds in capital improvements at the Partnership's properties. Although significant challenges remain, total capital expenditures for 1997 are expected to decrease from the average amount expended in each of the past three fiscal years. For the balance of 1997, the largest capital projects of the Partnership will be concentrated at La Plaza Office Building as the property undergoes refurbishment to allow it to take advantage of a strong Las Vegas market. During 1996, 1995 and 1994, the General Partner deferred collection of the MID. As of June 30, 1997, approximately $3.18 million of deferred MID payments were due to the General Partner. The General Partner anticipates resuming payment of MID if the Partnership's properties continue to perform as anticipated. 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 $7 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 an additional $1.6 million of capital improvements for 1997. 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. The Partnership has determined to begin an orderly liquidation of all the Partnership's assets. Although there can be no assurance as to the timing of any liquidation, it is anticipated that such liquidation would result in distributions to the limited partners of the cash proceeds from the sale of the Partnership's properties, subject to cash reserve requirements, as they are sold with the last property disposition before December 2001, followed by a dissolution of the Partnership. In this regard, the Partnership sold Parkway Plaza on September 18, 1996, sold Cave Spring Corners on June 5, 1997, and has placed Iberia Plaza on the market for sale. Income Allocations and Distributions: Terms of the Amended Partnership Agreement specify that income before depreciation is allocated to the General Partner to the extent of MID paid in cash. Depreciation is allocated in the ratio of 95:5 to the limited partners and the General Partner, respectively. Therefore, for the six month period ended June 30, 1997 and 1996, $186,300 and $16,507, respectively, were allocated to the General Partner. The limited partners received allocations of net income of $3,539,693 and $313,642 for the six months ended June 30, 1997 and 1996, respectively. 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. Payments of MID have been suspended since the beginning of 1994. The General Partner will continue to monitor the cash reserves and working capital needs of the Partnership to determine when cash flows will support payments of MID and distributions to the Unit holders. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- 1. James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint). The action involves purported class and derivative actions brought by limited partners of each of the fourteen limited partnerships that were named as nominal defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. Defendants filed a demurrer to the consolidated and amended complaint and a motion to strike on February 14, 1997, seeking to dismiss the consolidated and amended complaint in all respects. A hearing on Defendant's demurrer and motion to strike was held on May 5, 1997. The Court granted Defendants' demurrer, dismissing the consolidated and amended complaint with leave to amend. 2. The First National Bank of Chicago, as Trustee Under That Certain Pooling and Servicing Agreement Dated as of December 1, 1995, for Resolution Trust Corporation Commercial Mortgage Pass-Through Certificates, Series 1995-C2 v. McNeil Real Estate Fund X, Ltd., McNeil Partners, L.P. and McNeil Investors, Inc. - U.S. District Court, Northern District of Dallas, Dallas Division; Civil Action No. 33-96CV3198-D; and District Court, Dallas County, Texas, F-116 th Judicial District; Case No.: 96-13066(P96014). The Plaintiffs are the holder of a certain Second Lien Wraparound Promissory Note ("Wraparound Note") secured by the Spanish Oaks Apartments. This action involves a dispute of the principal payoff amount on the Wraparound Note. The Plaintiffs contend that the payoff balance is $3,399,592; however, the Partnership has calculated the payoff balance to be significantly less. On January 26, 1996, the Partnership refinanced the Spanish Oaks Apartments. At that time, the $3,399,592 was escrowed with the American Title Company. The Plaintiffs claim that pursuant to the terms of the Wraparound Note, the Partnership owes the entire escrowed balance. The parties have been ordered to mediation before July 28, 1997. However, settlement was reached in this matter with $3,046,000 being paid to the Plaintiffs. A Compromise and Settlement Agreement and Release dated June 26, 1997 has been signed by all parties. An Order of Dismissal with prejudice is to be entered by the Judge. 3. Alenda and Joseph Gruenwald vs. McNeil Real Estate Management, Inc. d/b/a Briarwood Apartments; ABC Corporations, XYZ Partnerships (Employee Discrimination-EEOC (Sex) - Superior Court of the State of Arizona in and for the County of Pima; Case No. C 314017 (L96009). The Plaintiff, a former property manager for the Partnership, filed a complaint alleging that she was wrongfully terminated from her position in violation of the Arizona Civil Rights Act. The Partnership claims that Plaintiff's termination was a proper business decision resulting from serious concerns about the property's management. After numerous discussions, the parties agreed to a monetary settlement. A Settlement Agreement and Release of All Claims was signed on May 22, 1997. The Judge entered an Order on May 22, 1997, dismissing the case with prejudice. 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 134,980 limited partnership units outstanding in 1997 and 1996. 27. Financial Data Schedule for the quarter ended June 30, 1997. 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. A Form 8-K was filed on June 20, 1997 to report the June 5, 1997 sale of Cave Spring Corners Shopping Center to an unaffiliated purchaser. 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 August 13, 1997 By: /s/ Ron K. Taylor - --------------- ------------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) August 13, 1997 By: /s/ Brandon K. Flaming - --------------- ------------------------------------------- Date Brandon K. Flaming Vice President of McNeil Investors, Inc. (Principal Accounting Officer) EX-27 2
5 6-MOS DEC-31-1997 JUN-30-1997 5,503,492 0 524,889 0 0 0 80,451,555 (51,230,343) 40,850,188 0 38,893,448 0 0 0 0 40,850,188 0 7,861,065 10,944,345 0 5,909,817 0 1,842,299 0 0 3,192,229 0 533,764 0 3,725,993 0 0
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