0000318140-95-000005.txt : 19950815 0000318140-95-000005.hdr.sgml : 19950815 ACCESSION NUMBER: 0000318140-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND XI LTD CENTRAL INDEX KEY: 0000318140 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 942669577 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09783 FILM NUMBER: 95562433 BUSINESS ADDRESS: STREET 1: 13760 NOEL ROAD STREET 2: SUITE 700 LB70 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144485800 MAIL ADDRESS: STREET 1: 13760 NOEL ROAD SUITE 700 LB70 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 June 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 0-9783 MCNEIL REAL ESTATE FUND XI, LTD. ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 94-2669577 ----------------------------------------------------------------------------- (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 XI, LTD. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BALANCE SHEETS
June 30, December 31, 1995 1994 ---------- -------------- ASSETS ------ Real estate investments: Land..................................................... $5,938,464 $ 5,938,464 Buildings and improvements............................... 57,423,864 56,588,508 ---------- ---------- 63,362,328 62,526,972 Less: Accumulated depreciation.......................... (35,825,533) (34,610,759) ----------- ----------- 27,536,795 27,916,213 Cash and cash equivalents................................... 2,656,306 1,932,351 Cash segregated for security deposits....................... 348,537 363,849 Accounts receivable......................................... 16,050 24,577 Prepaid expenses and other assets........................... 170,958 361,909 Escrow deposits............................................. 1,153,713 983,972 Deferred borrowing costs (net of accumulated amortization of $434,492 and $361,743 at June 30, 1995 and December 31, 1994, respectively)............................................ 1,700,378 1,773,127 ---------- ---------- $33,582,737 $ 33,355,998 ========== ========== LIABILITIES AND PARTNERS' DEFICIT Mortgage notes payable, net................................. $39,895,190 $ 40,090,432 Accounts payable............................................ 120,349 112,735 Accrued interest............................................ 303,989 240,267 Accrued property taxes...................................... 402,222 95,268 Accrued expenses............................................ 179,850 223,360 Deferred gain - fire damage................................. 67,016 67,016 Payable to affiliates - General Partner..................... 3,377,882 2,919,444 Security deposits and deferred rental revenue............... 388,744 367,044 ---------- ---------- 44,735,242 44,115,566 ---------- ---------- Partners' deficit: Limited partners - 159,813 and 159,917 limited partnership units authorized and outstanding at June 30, 1995 and December 31, 1994, respectively...... (5,262,535) (5,275,373) General Partner.......................................... (5,889,970) (5,484,195) ---------- ---------- (11,152,505) (10,759,568) ---------- ---------- $ 33,582,737 $ 33,355,998 ========== ===========
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 XI, LTD. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ---------------------------- ----------------------------- 1995 1994 1995 1994 --------- --------- ---------- --------- Revenue: Rent revenue.................. $3,523,916 $3,304,308 $7,013,905 $6,566,153 Interest...................... 35,415 16,122 66,516 35,874 Deferred gain on involuntary conversion...... - - - 28,109 --------- --------- --------- --------- Total revenue............... 3,559,331 3,320,430 7,080,421 6,630,136 --------- --------- --------- --------- Expenses: Interest...................... 1,007,043 970,575 1,953,797 1,962,528 Interest - affiliates......... - - - 3,589 Depreciation.................. 616,517 554,313 1,214,774 1,108,626 Property taxes................ 240,570 263,412 481,140 526,824 Personnel expenses............ 397,093 425,197 901,865 848,833 Utilities..................... 256,607 223,133 490,144 472,366 Repair and maintenance........ 502,306 450,844 901,580 826,638 Property management fees - affiliates........... 175,692 165,192 351,919 328,800 Other property operating expenses.................... 237,334 215,122 444,798 411,583 General and administrative.... 20,800 27,086 55,094 53,502 General and administrative - affiliates.................. 155,214 105,387 271,796 216,362 --------- --------- --------- --------- Total expenses.............. 3,609,176 3,400,261 7,066,907 6,759,651 --------- --------- --------- --------- Net income (loss)................ $ (49,845) $ (79,831) $ 13,514 $ (129,515) ========= ========= ========= ========= Net income (loss) allocable to limited partners.............. $ (47,353) $ (75,839) $ 12,838 $ (634,119) Net income (loss) allocable to General Partner............ (2,492) (3,992) 676 504,604 --------- --------- --------- --------- Net income (loss)................ $ (49,845) $ (79,831) $ 13,514 $ (129,515) ========= ========= ========= ========= Net income (loss) per limited partnership unit.............. $ (.30) $ (.47) $ .08 $ (3.97) ========= ========= ========= =========
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 XI, LTD. STATEMENTS OF PARTNERS' DEFICIT (Unaudited) For the Six Months Ended June 30, 1995 and 1994
Total General Limited Partners' Partner Partners Deficit ------------ ------------ ------------- Balance at December 31, 1993.............. $(5,157,708) $(4,638,590) $ (9,796,298) Net income (loss)......................... 504,604 (634,119) (129,515) Contingent Management Incentive Distribution........................... (372,075) - (372,075) ---------- ---------- ----------- Balance at June 30, 1994.................. $(5,025,179) $(5,272,709) $(10,297,888) ========== ========== =========== Balance at December 31, 1994.............. $(5,484,195) $(5,275,373) $(10,759,568) Net income................................ 676 12,838 13,514 Contingent Management Incentive Distribution........................... (406,451) - (406,451) ---------- ---------- ---------- Balance at June 30, 1995.................. $(5,889,970) $(5,262,535) $(11,152,505) ========== ========== ===========
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 XI, LTD. STATEMENTS OF CASH FLOWS (Unaudited) Increase (Decrease) in Cash and Cash Equivalents
Six Months Ended June 30, ----------------------------------- 1995 1994 ----------------------------------- Cash flows from operating activities: Cash received from tenants........................ $7,056,377 $ 6,595,128 Cash paid to suppliers............................ (2,468,728) (2,345,590) Cash paid to affiliates........................... (571,728) (432,695) Interest received................................. 66,516 35,874 Interest paid..................................... (1,806,492) (1,907,165) Interest paid to affiliates....................... - (4,308) Property taxes paid............................... (510,558) (384,954) Additions to deferred borrowing costs............. - (1,320) ---------- --------- Net cash provided by operating activities............ 1,765,387 1,554,970 ---------- --------- Cash flows from investing activities: Additions to real estate investments.............. (835,356) (922,243) --------- --------- Cash flows from financing activities: Principal payments on mortgage notes payable......................................... (206,076) (205,363) Repayment of advances from affiliates............. - (935,658) Contingent Management Incentive Distribution.................................... - (560,035) --------- --------- Net cash used in financing activities................ (206,076) (1,701,056) -------- ---------- Net increase (decrease) in cash and cash equivalents....................................... 723,955 (1,068,329) Cash and cash equivalents at beginning of period............................................ 1,932,351 2,920,957 --------- --------- Cash and cash equivalents at end of period........... $2,656,306 $ 1,852,628 ========= =========
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 XI, LTD. STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities
Six Months Ended June 30, ------------------------------------ 1995 1994 ------------------------------------ Net income (loss).................................... $ 13,514 $ (129,515) ---------- --------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation...................................... 1,214,774 1,108,626 Amortization of discounts on mortgage notes payable................................... 10,834 11,994 Amortization of deferred borrowing costs.......... 72,749 72,359 Changes in assets and liabilities: Cash segregated for security deposits........... 15,312 (11,825) Accounts receivable............................. 8,527 32,253 Prepaid expenses and other assets............... 190,951 12,853 Escrow deposits................................. (169,741) (132,989) Deferred borrowing costs........................ - (1,320) Accounts payable................................ 7,614 144,566 Accrued interest................................ 63,722 (29,709) Accrued property taxes.......................... 306,954 465,876 Accrued expenses................................ (43,510) (104,493) Payable to affiliates - General Partner......... 51,987 112,467 Deferred gain - fire............................ - (28,109) Security deposits and deferred rental revenue....................................... 21,700 31,936 --------- --------- Total adjustments............................. 1,751,873 1,684,485 --------- --------- Net cash provided by operating activities............ $1,765,387 $ 1,554,970 ========= ==========
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 XI, LTD. Notes to Financial Statements (Unaudited) June 30, 1995 NOTE 1. ------- McNeil Real Estate Fund XI, Ltd. (the "Partnership") was organized June 2, 1980 as a limited partnership under the provisions of the California Uniform Limited Partnership Act. 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 amended and restated limited partnership agreement, dated August 6, 1991 (the "Amended Partnership Agreement"). The principal place of business for the Partnership and for 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 financial position and results of operations of the Partnership. All adjustments were of a normal recurring nature. However, the results of operations for the six months ended June 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 XI, Ltd. c/o McNeil Real Estate Management, Inc., Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240. NOTE 3. ------- Certain reclassifications have been made to prior period amounts to conform with the current year presentation. NOTE 4. ------- The Partnership pays property management fees equal to 5% of gross rental receipts of the Partnership's properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management and leasing services. 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 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. Prior to July 1, 1993, the MID consisted of two components: (i) the fixed portion which was payable without respect to the net income of the Partnership and was equal to 25% of the maximum MID (the "Fixed MID") and (ii) a contingent portion which was 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 is equal to up to 75% of the maximum MID (the "Contingent MID"). Effective July 1, 1993 the General Partner amended the Amended Partnership Agreement as a settlement to a class action complaint. This amendment eliminates the Fixed MID portion and makes the entire MID payable to the extent of the Entitlement Amount. In all other respects the calculation and payment of the MID remain the same. 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 was 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 per Unit, as defined. 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 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. 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, --------------------------------- 1995 1994 --------- --------- Property management fees - affiliates................ $ 351,919 $ 328,800 Charged to interest expense: Interest - affiliate.............................. - 3,589 Charged to general and administrative - affiliates: Partnership administration........................ 271,796 216,362 --------- --------- $ 623,715 $ 548,751 ========= ========= Charged to General Partner's deficit: Contingent MID.................................... $ 406,451 $ 372,075 ========= =========
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, 1995, the Partnership owned eight apartment properties, which are all subject to mortgage notes. RESULTS OF OPERATIONS --------------------- Revenue: Total Partnership revenues increased by $450,285 or 7% for the first six months of 1995 as compared to the same period last year. Rental revenue and interest income increased $447,752 or 7% and $30,642 or 85%, respectively. The Partnership also recognized a gain on involuntary conversion of $28,109 in 1994 as a result of a fire at Sun Valley in 1993. Rental revenue for the first six months of 1995 was $7,013,905, as compared to $6,566,153 for the same period in 1994. The increase in rental revenue for the six months ended June 30, 1995 is due to an increase in the rental rates at all of the Partnership's properties and increases in the occupancy rate at three of the Partnership's properties. Of the three properties that experienced increases in their occupancy, Villa Del Rio showed the largest increase of 7% from 91% at June 30, 1994 to 98% at June 30, 1995. Interest income for the six months and three months ended June 30, 1995 increased $30,642 or 85% and $19,294 or 120%, respectively, due to an increase in the cash balances being invested in interest-bearing accounts and an increase in the interest rates. Expenses: Total Partnership expenses increased by $319,342 or 5% for the period ending June 30, 1995 as compared to the period ending June 30, 1994. Interest expense - affiliates for the six months ended June 30, 1995 decreased by $3,589 or 100%. This is due to the repayment of all affiliate advances and mortgage loans during 1994. Depreciation expense for the six months and the three months ended June 30, 1995, increased by $106,148 or 10% and $62,204 or 11%, respectively. The increase is due to capital improvements made at the properties. During 1995, the Partnership has made $835,356 in capital improvements of which $498,561 of the improvements were made during the second quarter of 1995. Property taxes decreased $45,684 or 9% and $22,842 or 9%, respectively, for the six months and the three months ended June 30, 1995. This is due to an decrease in the estimated tax liability at Acacia Lakes, Knollwood, Sun Valley, Rock Creek, and The Village. Personnel expenses increased $53,032 or 6% for the six months ended June 30, 1995 as compared to the same period in 1994. This increase is due to an increase in overall compensation at all the properties. For the three months ended June 30, 1995, personnel expenses decreased by $28,104 or 7% because of additional temporary maintenance personnel hired at Knollwood in 1994 to assist with a capital improvements project, which has been completed. In addition, there was a decrease in the cost of workers' compensation insurance at all the properties. Property management fees - affiliates for the six months and the three months ended June 30, 1995 increased by $23,119 or 7% and $10,500 or 6%, respectively, due to the increase in the rental receipts at the properties, the basis for computing such fees. General and administrative decreased $6,286 or 23% for the three months ended June 30, 1995 as compared to the same period in 1994 due a reduction in fees paid for professional services. General and administrative - affiliates for the six months and the three months ended June 30, 1995 increased by $55,434 or 26% and $49,827 or 47%, respectively, due to an increase in reimbursements to affiliates because of fewer partnerships over which overhead costs are allocated. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Partnership generated $1,765,387 through operating activities for the period ending June 30, 1995 as compared to $1,554,970 for the same period in 1994. This increase of $210,417 can be attributed to the increase in the cash received from tenants as a result of the increase in rental rates at all of the properties. The Partnership funded $835,356 in additions to real estate investments for the six months ending June 30, 1995. All of the Partnership's properties began capital improvements projects to enhance the value of the properties so they can remain competitive in the market. There was a net use of cash from financing activities of $206,076 and $1,701,056 for the six months ended June 30,1995 and 1994, respectively. This decrease in cash used was due to the repayment of advances from affiliates and the payment of the Contingent MID in 1994. Short Term Liquidity: At June 30, 1995, the Partnership held cash and cash equivalents of $2,656,306 as compared to $1,932,351 at December 31, 1994. The General Partner considers the Partnership's cash reserves adequate for operations for the remainder of 1995. During 1995, operations of the Partnership's properties are expected to provide positive cash flow from operations. However, cash flow from property operations will not be sufficient to make distributions to the General Partner for the Contingent MID in 1995. Management will continue to address ongoing capital improvements needs in light of the aging condition of the Partnership's properties. The Partnership has budgeted approximately $1.2 million for capital improvements for 1995. 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 certain repairs and maintenance expenses from amounts that would otherwise be incurred. Long Term Liquidity: The General Partner has established a revolving credit facility not to exceed $5,000,000 in the aggregate which is available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships if certain conditions are met. However, there is no assurance that the Partnership will receive additional funds under the facility because no amounts will be reserved for any particular partnership. As of June 30, 1995, $2,362,004 remained available for borrowing under the facility; however, additional funds could become available as other partnerships repay borrowings. For the long term, property operations will remain the primary source of funds. While the present outlook for the Partnership's liquidity is favorable, market conditions may change and property operations can deteriorate. In that event, the Partnership would require other sources of working capital. No such other sources have been identified, and the Partnership has no established lines of credit. Other possible actions to resolve working capital deficiencies include refinancing or renegotiating terms of existing loans, deferring major capital expenditures on Partnership properties except where improvements are expected to enhance the competitiveness or marketability of the properties, or arranging working capital support from affiliates. All or a combination of these steps may be inadequate or unfeasible in resolving such potential working capital deficiencies. Affiliate support has been required in the past, but there is no assurance that support would be provided in the future, since neither the General Partner nor any affiliates have any obligation in this regard in excess of the $5,000,000 revolving credit facility discussed above. Distributions: With the exception of the Contingent MID, distributions to partners have been suspended since 1986 as part of the General Partner's policy of maintaining adequate cash reserves. Distributions to the limited partners 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 limited partners. A distribution of $406,451 for the Contingent MID has been accrued by the Partnership for the six month period ending June 30, 1995 for the General Partner. PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION ------- ----------------- On an unsolicited basis, High River Limited Partnership ("High River"), a partnership controlled by Carl Icahn, announced that it has commenced an offer to purchase 71,916 units of limited partnership interest in the Partnership (approximately 45 percent of the Partnership's units) at $63 per unit. High River has stated that the offer is being made as "an investment." The tender offer is due to expire on August 31, 1995, unless extended. The General Partner, with assistance from its advisors, is in the process of evaluating the tender offer from a number of important standpoints and will report to the limited partners its position with respect to such offer. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ------- --------------------------------
(a) Exhibits. Exhibit Number Description ------- ----------- 4. Amended and Restated Limited Partnership Agreement dated as of August 6, 1991. (Incorporated by reference to the Quarterly Report on Form 10-Q, for the quarter ended June 30, 1991). 11. Statement regarding computation of net loss per limited partnership unit: Net loss per limited partnership unit is computed by dividing net loss allocated to the limited partners by the number of limited partnership units outstanding. Per unit information has been computed based on 159,813 and 159,917 limited partnership units outstanding in 1995 and 1994, respectively. 27. Financial Data Schedule for the quarter ended June 30, 1995.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended June 30, 1995. McNEIL REAL ESTATE FUND XI, 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 XI, Ltd. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner August 11, 1995 By: /s/ Donald K. Reed ------------------- ------------------------------------------------- Date Donald K. Reed President and Chief Executive Officer August 11, 1995 By: /s/ Robert C. Irvine ------------------- ------------------------------------------------- Date Robert C. Irvine Chief Financial Officer of McNeil Investors, Inc. Principal Financial Officer August 11, 1995 By: /s/ Brandon K. Flaming ------------------- ------------------------------------------------- Date Brandon K. Flaming Chief Accounting Officer of McNeil Real Estate Management, Inc.
EX-27 2
5 6-MOS DEC-31-1995 JUN-30-1995 2,656,306 0 16,050 0 0 0 63,362,328 (35,825,533) 33,582,737 0 39,895,190 0 0 0 0 33,582,737 7,013,905 7,080,421 0 0 5,113,110 0 1,953,797 13,514 0 13,514 0 0 0 13,514 0 0