-----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, TQ6yfH0EbU7CD4jt48E/R0RGekxgZKDOiV2kd2tYSO5EnQ3FsPP1GmBQDQUlESxk GYHN/CfI13jBHlw0Dmu58g== 0000351708-96-000007.txt : 19960401 0000351708-96-000007.hdr.sgml : 19960401 ACCESSION NUMBER: 0000351708-96-000007 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND XII LTD CENTRAL INDEX KEY: 0000351708 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 942717957 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-10743 FILM NUMBER: 96541616 BUSINESS ADDRESS: STREET 1: 13760 NOEL ROAD, STE 700 STREET 2: LB70, CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144485800 MAIL ADDRESS: STREET 1: 13760 NOEL ROAD SUITE 700 STREET 2: LB70 CITY: DALLAS STATE: TX ZIP: 75240 10-K405 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K405 [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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 0-10743 --------- McNEIL REAL ESTATE FUND XII, LTD. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 94-2717957 - -------------------------------------------------------------------------------- (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 ------------------------------ Securities registered pursuant to Section 12(b) of the Act: None - ---------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: Limited partnership - ---------------------------------------------------------- units 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] 228,276 of the registrant's 229,828 limited partnership units are held by non-affiliates of this registrant. The aggregate market value of units held by non-affiliates is not determinable since there is no public trading market for limited partnership units and transfers of units are subject to certain restrictions. Documents Incorporated by Reference: See Item 14, Page 39 TOTAL OF 42 PAGES PART I ITEM 1. BUSINESS - ------- -------- ORGANIZATION - ------------ McNeil Real Estate Fund XII, Ltd. (the "Partnership") was organized February 2, 1981, 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 ("McNeil"). The Partnership is governed by an amended and restated partnership agreement of limited partnership dated September 6, 1991, as amended (the "Amended Partnership Agreement"). Prior to September 6, 1991, Pacific Investors Corporation (the prior "Corporate General Partner"), a wholly-owned subsidiary of Southmark Corporation ("Southmark"), and McNeil were the general partners of the Partnership, which was governed by an agreement of limited partnership, dated February 2, 1981 (the "Original Partnership Agreement") as amended May 13, 1981. The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240. On June 8, 1981, a Registration Statement on Form S-11 was declared effective by the Securities and Exchange Commission whereby the Partnership offered for sale $120,000,000 of limited partnership units ("Units"). The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The sale of Units closed on September 30, 1982, with 230,728 Units sold at $500 each, or gross proceeds of $115,364,000 to the Partnership. In addition, the original general partners purchased a total of 200 Units for $100,000. In 1994 and 1993, 223 and 111 Units were relinquished, respectively. An additional 614 Units were relinquished in 1995 leaving 229,980 Units outstanding at December 31, 1995. Subsequent to year end, 152 Units were relinquished, leaving 229,828 Units outstanding as of February 16, 1996. SOUTHMARK BANKRUPTCY AND CHANGE IN GENERAL PARTNER - -------------------------------------------------- On July 14, 1989, Southmark filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Neither the Partnership, McNeil nor the Corporate General Partner were included in the filing. Southmark's reorganization plan became effective August 10, 1990. Under the plan, most of Southmark's assets, which included Southmark's interests in the Corporate General Partner, are being sold or liquidated for the benefit of creditors. In accordance with Southmark's reorganization plan, Southmark, McNeil and various of their affiliates entered into an asset purchase agreement on October 12, 1990, providing for, among other things, the transfer of control to McNeil or his affiliates of 34 limited partnerships (including the Partnership) in the Southmark portfolio. On February 14, 1991, pursuant to the asset purchase agreement as amended on that date: (a) an affiliate of McNeil purchased the Corporate General Partner's economic interest in the Partnership; (b) McNeil became the managing general partner of the Partnership pursuant to an agreement with the Corporate General Partner that delegated management authority to McNeil; and (c) McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of McNeil, acquired the assets relating to the property management and partnership administrative business of Southmark and its affiliates and commenced management of the Partnership's properties pursuant to an assignment of the existing property management agreements from the Southmark affiliates. On September 6, 1991, the limited partners approved a restructuring proposal that provided for (i) the replacement of the Corporate General Partner and McNeil with the General Partner; (ii) the adoption of the Amended Partnership Agreement, which substantially alters the provisions of the Original Partnership Agreement relating to, among other things, compensation, reimbursement of expenses, and voting rights; and (iii) the approval of a new property management agreement with McREMI, the Partnership's property manager. The Amended Partnership Agreement provides for a Management Incentive Distribution ("MID") to replace all other forms of general partner compensation other than property management fees and reimbursement of certain costs. Additional Units may be issued in connection with the payment of the MID pursuant to the Amended Partnership Agreement. See Item 8 - Note 2 - -"Transactions with Affiliates". For a discussion of the methodology for calculating and distributing the MID, see Item 13 - Certain Relationships and Related Transactions. Settlement of Claims: The Partnership filed claims with the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court") against Southmark for damages relating to improper overcharges, breach of contract and breach of fiduciary duty. The Partnership settled these claims in 1991, and such settlement was approved by the Bankruptcy Court. An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April 14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in May 1995 the Partnership received in full satisfaction of its claims, $49,818 in cash, and common and preferred stock in the reorganized Southmark which represents the Partnership's pro-rata share of Southmark assets available for Class 8 Claimants. The Partnership sold the Southmark common and preferred stock in May 1995 for $16,039, which combined with the cash proceeds from Southmark, resulted in a gain on legal settlement of $65,857. CURRENT OPERATIONS - ------------------ General: The Partnership is engaged in diversified real estate activities, including the ownership, operation and management of residential and commercial real estate and other real estate related assets. At December 31, 1995, the Partnership owned seven properties, of which six are real estate investments and one asset is currently held for sale, as described in Item 2 - Properties. The Partnership does not directly employ any personnel. The Partnership is managed by the General Partner, and, in accordance with the Amended Partnership Agreement, the Partnership reimburses affiliates of the General Partner for certain costs incurred by affiliates of the General Partner in connection with the management of the Partnership's business. See Item 8 - Note 2 - "Transactions with Affiliates." The business of the Partnership to date has involved only one industry segment. See Item 8 - Financial Statements and Supplementary Data. The Partnership has no foreign operations. The business of the Partnership is not seasonal. Business Plan: The Partnership's anticipated plan of operations for 1996 is to preserve or increase the net operating income of its properties whenever possible, while at the same time making whatever capital expenditures are reasonable under the circumstances in order to preserve and enhance the value of the Partnership's properties. The General Partner is evaluating market and other economic conditions to determine the optimum time to commence an orderly liquidation of the Partnership's properties in accordance with the terms of the Amended Partnership Agreement. In conjunction therewith, the General Partner will continue to explore potential avenues to enhance the value of the Units in the Partnership, which may include, among other things, asset sales or refinancings of the Partnership's properties which may result in distributions to the limited partners. See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. Competitive Conditions: Since the principal business of the Partnership is to own and operate real estate, the Partnership is subject to all of the risks incident to ownership of real estate and interests therein, many of which relate to the illiquidity of this type of investment. These risks include changes in general or local economic conditions, changes in supply or demand for competing properties in an area, changes in interest rates and availability of permanent mortgage funds which may render the sale or refinancing of a property difficult or unattractive, changes in real estate and zoning laws, increases in real property tax rates and Federal or local economic or rent controls. The illiquidity of real estate investments generally impairs the ability of the Partnership to respond promptly to changed circumstances. The Partnership competes with numerous established companies, private investors (including foreign investors), real estate investment trusts, limited partnerships and other entities (many of which have greater resources than the Partnership) in connection with the sale, financing and leasing of properties. The impact of these risks on the Partnership, including losses from operations and foreclosures of the Partnership's properties, is described in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. See Item 2 - Properties for discussion of competitive conditions at the Partnership's properties. Other Information: The environmental laws of the Federal government and of certain state and local governments impose liability on current property owners for the clean-up of hazardous and toxic substances discharged on the property. This liability may be imposed without regard to the timing, cause or person responsible for the release of such substances onto the property. The Partnership could be subject to such liability in the event that it owns properties having such environmental problems. The Partnership has no knowledge of any pending claims or proceedings regarding such environmental problems. ITEM 2. PROPERTIES - ------- ---------- The following table sets forth the properties of the Partnership at December 31, 1995. The buildings and the land on which they are located are owned by the Partnership in fee, subject in each case to a first lien deed of trust as set forth more fully in Item 8 - Note 5 - "Mortgage Notes Payable". See also Item 8 - - Note 4 - "Real Estate Investments" and Schedule III - "Real Estate Investments and Accumulated Depreciation and Amortization." In the opinion of management, the properties are adequately covered by insurance.
Net Basis 1995 Date Property Description of Property Debt Property Tax Acquired - -------- ----------- ----------- ----------- ------------ -------- Real Estate Investments: Brendon Way (1) Apartments Indianapolis, IN 770 units $10,263,107 $18,002,757 $ 396,633 1/82 Buccaneer Village (2) Apartments Denver, CO 284 units 4,618,167 5,496,384 64,437 2/82 Castle Bluff (3) Apartments Kentwood, MI 241 units 2,445,812 4,459,417 129,669 1/82 Channingway Apartments Columbus, OH 770 units 9,949,626 12,988,079 258,769 12/82 Palisades at the Galleria (4) Apartments Atlanta, GA 370 units 7,448,014 10,593,002 135,464 7/82 Plaza Westlake (5) Glendale Retail Center Heights, IL 121,464 sq. ft. 4,373,342 3,638,288 89,836 3/82 Asset held for sale: Millwood Park (6) Kansas City, Apartments MO 301 units 3,164,323 3,982,499 69,117 1/82 ---------- ---------- --------- $42,262,391 $59,160,426 $1,143,925 ========== ========== =========
- ----------------------------------------- Total: Apartments - 2,736 units Retail Center - 121,464 sq. ft. (1) Brendon Way Apartments is owned by Brendon Way Fund XII Associates which is wholly-owned by the Partnership and the General Partner. (2) Buccaneer Village Apartments is owned by Buccaneer Fund XII, Ltd. which is wholly-owned by the Partnership. (3) Castle Bluff Apartments is owned by Castle Bluff Fund XII Associates, L.P. which is wholly-owned by the Partnership and the General Partner. (4) Palisades at the Galleria Apartments is owned by Palisades Fund XII Associates, L.P. which is wholly-owned by the Partnership. (5) Plaza Westlake is owned by Plaza Westlake Fund XII, Ltd. which is wholly-owned by the Partnership. (6) Millwood Park Apartments is owned by Millwood Park Fund XII, Ltd. which is wholly-owned by the Partnership. The following table sets forth the properties' occupancy rate and rent per square foot for each of the last five years:
1995 1994 1993 1992 1991 ----- ----- ----- ----- ----- Brendon Way Occupancy Rate............ 86% 90% 90% 85% 88% Rent Per Square Foot...... $6.12 $6.05 $5.60 $5.68 $5.73 Buccaneer Village Occupancy Rate............ 94% 95% 96% 97% 94% Rent Per Square Foot...... $7.92 $7.42 $7.00 $6.25 $5.82 Castle Bluff Occupancy Rate............ 96% 98% 93% 93% 91% Rent Per Square Foot...... $7.28 $6.92 $6.62 $6.37 $6.29 Channingway Occupancy Rate............ 86% 89% 91% 89% 87% Rent Per Square Foot...... $5.88 $5.88 $5.75 $5.46 $4.96 Millwood Park Occupancy Rate............ 84% 92% 96% 86% 89% Rent Per Square Foot...... $5.75 $5.78 $5.11 $4.90 $4.84 Palisades at the Galleria Occupancy Rate............ 97% 99% 98% 92% 83% Rent Per Square Foot...... $8.20 $7.83 $7.04 $6.22 $5.08 Plaza Westlake Occupancy Rate............ 98% 99% 100% 85% 90% Rent Per Square Foot...... $7.75 $7.73 $7.92 $7.84 $6.60
Occupancy rate represents all units leased divided by the total number of units for residential properties and square footage leased divided by total square footage for other properties as of December 31 of the given year. Rent per square foot represents all revenue, except interest, derived from the property's operations divided by the leasable square footage of the property. Competitive Conditions at Properties - ------------------------------------ Brendon Way is competing against newer properties as well as some that have recently been renovated. The property's occupancy is currently below the average market occupancy rate of 93%. Rental rates at Brendon Way are averaging $.59 per square foot, which is comparable to the competitors. Minor renovations have improved the curb appeal of the property. The lack of funds to complete a major renovation of the aging property creates a challenge for Brendon Way to stay competitive. Since 1991, the rental rates at Buccaneer Village have increased by 36% due to improved market conditions. The market maintains a strong occupancy level at 96%. A major rehabilitation project is occurring across the street from the property. Although Buccaneer Village will not compete directly with the new construction, the new construction will tend to slow the increase in rental rates that the older property may expect in the coming years. Buccaneer Village will continue with ongoing capital improvements to allow the property to compete effectively in the market place. Castle Bluff is in a highly competitive market with the occupancy rates running between 97% and 98%. Castle Bluff is currently competing in a robust economy. The property has done some renovations to remain aggressive in the market and anticipates raising the rental rates to $.63 per square foot. Channingway is located in an area east of Columbus, Ohio with a market of 28,355 apartment units. The property is currently below the market average occupancy rate of 94%; however, monthly rental rates have stayed higher than market. In 1996, the property will continue to cure the deferred maintenance items to add value and marketability to the community. Millwood Park finished the year below the market occupancy rate of 91%. There has been no new construction within a three mile radius of the property over the last two years, and the population has increased less than 1% during the last 10 years. Rental rates at Millwood Park are averaging $.55 to $.57 per square foot, which is in line with the market rate. It is anticipated that the occupancy rate will stabilize at approximately 90% during 1996. Millwood is currently on the market for sale. Occupancy rates at Palisades at the Galleria have remained strong since the 1991 renovation program began. The $3 million renovation program included new interiors, signage, exterior painting, asphalt and upgrading the clubhouse. The market continues to maintain an average occupancy level at 95%. Palisades at the Galleria is located in Atlanta, Georgia and with the 1996 Olympics, the market should remain strong throughout 1996. The market, however, may remain flat in 1997 due to the oversupply of new construction. Plaza Westlake enters 1996 with an occupancy rate of 98%, higher than the market average of 93%. Plaza Westlake is located in a high traffic area with a proven anchor. The rental rate per square foot approximates the average rate charged by the seven centers competing directly with Plaza Westlake. The following schedule shows lease expirations for the Partnership's commercial property for 1996 through 2005:
Number of Annual % of Gross Expirations Square Feet Rent Annual Rent ----------- ----------- -------- ----------- Plaza Westlake 1996 4 10,236 $111,024 13% 1997 3 5,963 63,312 7% 1998 3 27,184 251,864 30% 1999 3 70,452 338,582 40% 2000 2 3,690 47,142 6% Thereafter - - - -
No residential tenant leases 10% or more of the available rental space. The following schedule reflects information on commercial tenants occupying 10% or more of the leasable square feet for the commercial property:
Nature of Business Square Footage Lease Use Leased Annual Rent Expiration - -------------- -------------- ----------- ---------- Plaza Westlake Entertainment 17,584 $ 149,464 1998 Retail 68,020 310,857 1999
ITEM 3. LEGAL PROCEEDINGS - ------- ----------------- The Partnership is not party to, nor are any of the Partnership's properties the subject of, any material pending legal proceedings, other than ordinary, routine litigation incidental to the Partnership's business. For a discussion of the Southmark bankruptcy, see Item 1 - Business. See also Item 8 - Note 10 - "Gain on Legal Settlement." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND - ------- ------------------------------------------------------------ RELATED SECURITY HOLDER MATTERS ------------------------------- (A) There is no established public trading market for limited partnership units, nor is one expected to develop. (B) Title of Class Number of Record Unit Holders -------------- ----------------------------- Limited partnership units 13,759 as of February 16, 1996 (C) No distributions were made to the limited partners in 1995 or 1994, and none are anticipated in 1996. The Partnership accrued distributions of $1,044,865 and $1,164,549 for the benefit of the General Partner for the years ended December 31, 1995 and 1994, respectively. Total distributions of $4,798,846 remain unpaid as of December 31, 1995. These distributions are the contingent portion of the MID pursuant to the Amended Partnership Agreement. The Partnership anticipates making additional distributions to the General Partner for the contingent MID in 1996. See Item 8 - Note 2 - "Transactions with Affiliates." See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of distributions and the likelihood they will be resumed to the limited partners. ITEM 6. SELECTED FINANCIAL DATA - ------- ----------------------- The following table sets forth a summary of certain financial data for the Partnership. This summary should be read in conjunction with the Partnership's financial statements and notes thereto appearing in Item 8.
Years Ended December 31, -------------------------------------------------------------------------- Statements of Operations 1995 1994 1993 1992 1991 - ------------------- ------------ ------------ ------------ ------------ ------------- Rental revenue............... $ 17,533,914 $ 21,295,696 $ 24,228,119 $ 23,603,862 $ 24,067,446 Total revenue................ 21,195,706 27,701,373 32,481,572 24,837,444 24,240,414 Gain (loss) on disposition of real estate.............. 3,427,513 6,307,885 8,193,880 714,048 (1,667,056) Income (loss) before extraordinary item.......... 1,183,425 3,220,934 4,178,756 (3,917,231) (9,057,704) Extraordinary gain on extinguishment of debt, net 1,304,587 246,149 - 79,639 5,684,818 Net income (loss)............ 2,488,012 3,467,083 4,178,756 (3,837,592) (3,372,886) Net income (loss) per limited partnership unit: Income (loss) before extraordinary item $ 4.89 $ 13.27 $ 17.20 $ (16.11) $ (37.29) Extraordinary gain on extinguishment of debt 5.25 1.01 - .33 23.39 ----------- ----------- ----------- ----------- ----------- Net income (loss)............ $ 10.14 $ 14.28 $ 17.20 $ (15.78) $ (13.90) =========== =========== =========== =========== ===========
As of December 31, -------------------------------------------------------------------------- Balance Sheets 1995 1994 1993 1992 1991 - -------------- ------------ ------------ ------------ ------------ ------------- Real estate investments, net... $ 39,098,068 $ 40,915,017 $ 52,304,839 $ 65,885,322 $ 75,552,691 Assets held for sale........... 3,164,323 12,724,693 11,421,936 7,484,189 1,626,350 Total assets................... 52,112,866 60,189,348 72,830,100 78,455,373 83,546,776 Mortgage notes payable, net.... 59,160,426 68,152,522 79,867,507 90,732,765 94,217,264 Partners' deficit.............. (17,849,184) (19,292,331) (21,594,865) (24,581,787) (19,785,168)
See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. The following properties were sold or foreclosed on by the lender.
Property Date Sold or Foreclosed ----------------------------- ----------------------- Lamar Plaza July 1995 - Sold Sundance Apartments June 1995 - Sold Fox Run Apartments December 1994 - Sold Village East Apartments November 1994 - Sold Cedar Mill Crossing Apartments December 1993 - Sold Valley Fair Shopping Center May 1992 - Sold Tennessee Ridge Apartments October 1991 - Foreclosed Channingway Commercial Center September 1991 - Foreclosed
ITEM 7. 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 December 31, 1995, the Partnership owned seven properties. All of the Partnership properties are subject to mortgage notes. During 1995, the Partnership refinanced the mortgage notes on four properties and sold two properties. These refinancings and sales resulted in net cash proceeds to the Partnership of $5,194,651. RESULTS OF OPERATIONS - --------------------- 1995 compared to 1994 Revenue: Total Partnership revenues decreased in 1995 by $6,505,667 or 23% as compared to the same period in 1994. Rental revenue decreased by $3,761,782 or 18% while interest income increased $91,507. In 1994 the Partnership incurred gains on involuntary conversion and disposition of real estate totalling $6,328,762, while in 1995 gains on legal settlement and disposition of real estate totaled $3,493,370. Rental revenue for the year ended 1995 was $17,533,914 as compared to $21,295,696 in 1994. The decrease of $3,761,782 is due to the loss in rental revenue generated by Village East and Fox Run, which were sold in November and December of 1994 and Sundance and Lamar Plaza, which were sold in June and July of 1995. This decrease was partially offset by the increase in rental revenue at six of the Partnership's properties. Interest income increased by $91,506 as compared to the same period in 1994. This increase is due to larger average cash balances being invested in interest-bearing accounts. Expenses: Partnership expenses decreased by $4,468,158 for the year ended 1995 as compared to 1994 primarily due to the sale of Fox Run and Village East in 1994 and Sundance and Lamar Plaza in 1995. The effects from these transactions were declines of $1,596,275 for interest, $798,669 for depreciation, $222,028 for property taxes, $524,486 for personnel expenses, $350,785 for utilities, $543,305 for repair and maintenance, $204,565 for property management fees, and $261,979 for other operating expenses. In addition to the sale of Fox Run, Village East, Sundance, and Lamar, other factors affected the level of expenses reported by the remaining properties. Interest expense - affiliates increased by $22,025 or 16% due to an increase in the prime rate used to calculate interest expense on the advances. General and administrative expenses decreased $64,728 or 39% in 1995 compared to 1994 due to a reduction in legal and consulting fees and tax preparation. General and administrative - affiliate expenses decreased $61,078 or 12% for the year ended 1995 as compared to 1994. This decrease is due to a decrease in the percentage of the Partnership's portion of reimbursable costs which is based on the number of properties owned. 1994 compared to 1993 Revenue: Total Partnership revenues in 1994 decreased by $4,780,199 or 15% as compared to 1993. This decrease is due to the sale of Cedar Mill Crossing in 1993. Revenues also declined as a result of a reduction in the gain on disposition of real estate from $8,193,880 in 1993 to $6,307,885 in 1994. Rental revenue decreased by $2,932,423 while interest income increased by $17,342. Rental revenue for 1994 was $21,295,696 as compared to $24,228,119 in 1993. The decrease is due to the sale of Cedar Mill Crossing, which reduced rental revenue by $3,471,915. This decline was partially offset by a $539,492 increase in rental revenue at the remaining properties due to increases in rental rates at six of the Partnership's properties. Interest income increased due to higher interest rates earned in 1994 as compared to 1993. Expenses: Partnership expenses decreased by $3,822,377 or 14% for the year ended December 31, 1994 as compared to 1993. During 1993, Cedar Mill Crossing was sold and the effects from the sale were declines of $1,298,509 in interest, $435,502 in depreciation and amortization, $308,509 in property taxes, $353,596 in personnel expenses, $174,804 in property management fees, $335,001 in utilities, $371,953 in repairs and maintenance and $175,041 in other property operating expenses. In addition to the sale of Cedar Mill Crossing, other factors affected the level of expenses reported by the remaining properties. Interest expense - affiliates decreased by $269,889 or 66% in 1994 as compared to the same period last year. This decrease is due to paying off the affiliate loans and paying down on the advances outstanding in January 1994. Depreciation and amortization on the properties increased by $239,164 or 5% due to the substantial capital improvements made at the properties over the last few years. Property taxes decreased by $228,459 or 13% due to a decrease in the estimated tax liability at Castle Bluff, a reduction in the appraised value at Lamar Plaza, and a refund of taxes resulting from the sale of Fox Run. Expenses for personnel, repairs and maintenance, utilities, and other property operating increased $583,153 for 1994 as compared to 1993. Personnel expenses increased by $148,797 or 6% due to increases in maintenance employee hours and incentive bonus paid. Repairs and maintenance increased by $307,857 or 12% due to increases in roof repair, electrical, and HVAC supplies. This increase is also due to repairs and expenses associated with preparing vacated units for occupancy. Other property operating increased by $99,616 or 7% primarily due to an increase in other professional expenses associated with a real estate tax appeal on Plaza Westlake and an increase in resident pre-qualification at all the properties. General and administrative decreased by $223,502 or 58% primarily due to a reduction in tax preparation, legal costs and professional fees. General and administrative - affiliates decreased by $234,714 or 31% as compared to the same period last year due to an amendment to the Amended Partnership Agreement which eliminated the fixed portion of the MID effective July 1993. This decrease was partially offset by an increase in reimbursements to affiliates because of fewer partnerships over which overhead costs are allocated. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- At December 31, 1995, the Partnership held cash and cash equivalents of $5,791,363, up $2,477,598 as compared to 1994. The Partnership has experienced positive cash flow from operations of $7,061,543 for the three years ended December 31, 1995. During 1995 and 1993, the Partnership received net cash proceeds of $6,601,232 for the refinancing of Millwood Park, Buccaneer Village, Palisades at the Galleria and Plaza Westlake. The Partnership also sold six properties in the last three years and has received $7,876,885 in proceeds along with insurance proceeds of $40,441 from the 1994 fire at Brendon Way and $1,691,188 in advances and mortgage notes from affiliates. Over the last three years the Partnership has used cash to fund $6,127,461 in additions to real estate investments, $5,893,293 in principal payments, $1,007,138 for additions to deferred borrowing costs, $4,754,479 for the repayment of advances and mortgage notes from affiliates and $300,000 for the payment of the Contingent MID. Cash provided from operating activities increased slightly in 1995 as compared to 1994. This increase can be attributed to the cash received from legal settlement and the increase in interest received. With the sale of four properties the past two years, the amount received from tenants has declined $3,727,847 while the amount of cash paid for all operating activities has also declined by $3,509,609. The Partnership generated cash from operating activities of $2,103,456 in 1994 as compared to $2,834,505 in 1993. This decrease can be attributed to the increase in the amount paid to affiliates during 1994, which consisted of repayment of accrued interest and the fixed portion of the MID. The Partnership continues to invest substantial sums into improvements at its properties. A total of 6.1 million of improvements have been added to the Partnership's properties over the past three years. An additional $1.35 million of improvements have been budgeted for 1996. Short-term liquidity: The Partnership expended considerable resources during the past three years to restore its properties to good operating condition. These expenditures have been necessary to maintain the competitive position of the Partnership's aging properties in each of their markets. The capital improvements made during the past three years have enabled the Partnership to increase its rental revenues and reduce certain of its repairs and maintenance expenses. The Partnership has budgeted an additional $1.35 million of capital improvements for 1996, to be funded from property operations and cash reserves. At December 31, 1995, the Partnership held cash and cash equivalents of $5,791,363. The General Partner considers this level of cash reserves to be adequate to meet the Partnership's operating needs. The General Partner anticipates using reserves to repay affiliate advances and a portion of the affiliate payables. The General Partner believes that anticipated operating results for 1996 will be sufficient to fund the Partnership's budgeted capital improvements for 1996 and to repay the current portion of the Partnership's mortgage notes. 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. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. There is no assurance that the partnership will be able to receive additional funds from the facility because no amount will be reserved for any particular partnership. As of December 31, 1995, $2,662,819 was available from the facility. However, additional funds could become available as other partnerships repay borrowings. This commitment by the General Partner will terminate on September 6, 1996. The Partnership has borrowed $1,419,339 which will be repaid from available cash reserves of the Partnership. These borrowings are not due upon termination of the revolving credit facility. Long-term liquidity: The Partnership's working capital needs have been supported by advances from affiliates during the past several years. Some of that support was provided on a short-term basis to meet monthly operating requirements, with repayment occurring as funds became available; other advances were longer term in nature due to lack of funds for repayment. Additionally, the General Partner has allowed the Partnership to defer payment of MID and reimbursements until such time as the Partnership 's cash reserves allow payments. During 1995, the Partnership has begun to make repayments to the General Partner for advances and has paid some of the accrued MID. The Partnership will continue to make such payments as is allowed by cash reserves and cash flows of the Partnership. However, the Partnership will not be able to repay the General Partner all payables outstanding in the foreseeable future. The General Partner will continue to defer the unpaid sums until the Partnership's cash reserves allow such payments. For the long-term, property operations will remain the primary source of funds. In this regard, the General Partner expects that the $6 million of capital improvements made by the Partnership during the past three 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 an additional source of liquidity, the General Partner may attempt to sell Partnership properties judged to be mature considering the circumstances of the market where the properties are located, as well as the Partnership's need for liquidity. However, there can be no guarantee that the Partnership will be able to sell any of its properties for an amount sufficient to retire the related mortgage note and still provide cash proceeds to the Partnership, or that such cash proceeds could be timed to coincide with the liquidity needs of the Partnership. In this regard, the Partnership has placed Millwood Park on the market. Income allocation and distributions: Terms of the Amended Partnership Agreement specify that income before depreciation is allocated to the General Partner to the extent of Contingent 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 year period ended December 31, 1995, $124,401, $173,354, and $208,938, respectively, were allocated to the General Partner. The limited partners received allocations of net income of $2,363,611, $3,293,729 and $3,969,818 for the three year period ended December 31, 1995, respectively. 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 $1,044,865 for the contingent MID has been accrued by the Partnership for the year ended December 31, 1995 for the General Partner. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------- -------------------------------------------
Page Number INDEX TO FINANCIAL STATEMENTS ------ - ----------------------------- Financial Statements: Report of Independent Public Accountants............... 15 Balance Sheets at December 31, 1995 and 1994........... 16 Statements of Operations for each of the three years in the period ended December 31, 1995............... 17 Statements of Partners' Deficit for each of the three years in the period ended December 31, 1995......... 18 Statements of Cash Flows for each of the three years in the period ended December 31, 1995................ 19 Notes to Financial Statements.......................... 21 Financial Statement Schedule - Schedule III - Real Estate Investments and Accumulated Depreciation and Amortization........ 34
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of McNeil Real Estate Fund XII, Ltd.: We have audited the accompanying balance sheets of McNeil Real Estate Fund XII, Ltd. (a California limited partnership) as of December 31, 1995 and 1994, and the related statements of operations, partners' deficit and cash flows for each of the three years in the period ended December 31, 1995. These financial statements and the schedule referred to below are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of McNeil Real Estate Fund XII, Ltd. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Dallas, Texas March 13, 1996 McNEIL REAL ESTATE FUND XII, LTD. BALANCE SHEETS
December 31, -------------------------------- 1995 1994 -------------------------------- ASSETS - ------ Real estate investments: Land..................................................... $ 6,280,580 $ 6,280,580 Buildings and improvements............................... 73,318,763 71,739,632 ----------- ----------- 79,599,343 78,020,212 Less: Accumulated depreciation and amortization......... (40,501,275) (37,105,195) ----------- ----------- 39,098,068 40,915,017 Assets held for sale........................................ 3,164,323 12,724,693 Cash and cash equivalents................................... 5,791,363 3,313,765 Cash segregated for security deposits....................... 316,665 303,436 Accounts receivable......................................... 206,847 317,559 Prepaid expenses and other assets........................... 149,212 258,668 Escrow deposits............................................. 1,459,480 896,234 Deferred borrowing costs, net of accumulated amortization of $476,661 and $652,691 at December 31, 1995 and 1994, respectively................. 1,926,908 1,459,976 ----------- ----------- $ 52,112,866 $ 60,189,348 =========== =========== LIABILITIES AND PARTNERS' DEFICIT - --------------------------------- Mortgage notes payable, net................................. $ 59,160,426 $ 68,152,522 Accounts payable............................................ 86,164 220,341 Accrued expenses............................................ 146,379 146,722 Accrued interest............................................ 411,489 1,680,833 Accrued property taxes...................................... 935,318 961,459 Advances from Southmark..................................... 35,147 32,690 Advances from affiliates - General Partner.................. 1,474,968 1,814,115 Payable to affiliates - General Partner..................... 7,196,483 5,926,684 Security deposits and deferred rental income................ 515,676 546,313 ----------- ----------- 69,962,050 79,481,679 ----------- ----------- Partners' deficit: Limited partners - 240,000 limited partnership units authorized; 229,980 and 230,594 limited partnership units issued and outstanding at December 31, 1995 and 1994, respectively............... (7,513,252) (9,844,782) General Partner.......................................... (10,335,932) (9,447,549) ----------- ----------- (17,849,184) (19,292,331) ----------- ----------- $ 52,112,866 $ 60,189,348 =========== ===========
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XII, LTD. STATEMENTS OF OPERATIONS
For the Years Ended December 31, -------------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ Revenue: Rental revenue.......................... $ 17,533,914 $ 21,295,696 $ 24,228,119 Interest................................ 168,422 76,915 59,573 Gain on disposition of real estate...... 3,427,513 6,307,885 8,193,880 Gain on involuntary conversion.......... - 20,877 - Gain on legal settlement................ 65,857 - - ----------- ----------- ----------- Total revenue......................... 21,195,706 27,701,373 32,481,572 ----------- ----------- ----------- Expenses: Interest................................ 6,204,096 7,642,760 9,211,571 Interest - affiliates................... 160,853 138,828 408,717 Depreciation and amortization........... 4,019,174 4,619,944 4,816,282 Property taxes.......................... 1,222,545 1,515,606 2,052,574 Personnel expenses...................... 2,077,845 2,696,563 2,901,362 Repairs and maintenance................. 2,321,887 2,956,539 3,020,635 Property management fees - affiliates............................ 877,423 1,067,967 1,207,684 Utilities............................... 1,346,961 1,729,864 2,037,982 Other property operating expenses....... 1,232,640 1,437,705 1,513,130 General and administrative.............. 99,149 163,877 387,379 General and administrative - affiliates............................ 449,708 510,786 745,500 ----------- ----------- ----------- Total expenses........................ 20,012,281 24,480,439 28,302,816 ----------- ----------- ----------- Income before extraordinary item........... 1,183,425 3,220,934 4,178,756 Extraordinary gain on extinguishment of debt, net............................ 1,304,587 246,149 - ----------- ----------- ----------- Net income................................. $ 2,488,012 $ 3,467,083 $ 4,178,756 =========== =========== =========== Net income allocable to limited partners................................ $ 2,331,530 $ 3,293,729 $ 3,969,818 Net income allocable to General Partner................................ 156,482 173,354 208,938 ----------- ----------- ----------- Net income................................. $ 2,488,012 $ 3,467,083 $ 4,178,756 =========== =========== =========== Net income per limited partnership unit: Income before extraordinary item........ $ 4.89 $ 13.27 $ 17.20 Extraordinary gain on extinguishment of debt............................... 5.25 1.01 - ----------- ----------- ----------- Net income.............................. $ 10.14 $ 14.28 $ 17.20 =========== =========== ===========
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XII, LTD. STATEMENTS OF PARTNERS' DEFICIT For the Years Ended December 31, 1995, 1994 and 1993
Total General Limited Partners' Partner Partners Deficit ------------- ------------- ------------- Balance at December 31, 1992.............. $ (7,473,458) $(17,108,329) $(24,581,787) Net income................................ 208,938 3,969,818 4,178,756 Contingent Management Incentive Distribution........................... (1,191,834) - (1,191,834) ----------- ----------- ----------- Balance at December 31, 1993.............. (8,456,354) (13,138,511) (21,594,865) Net income................................ 173,354 3,293,729 3,467,083 Contingent Management Incentive Distribution........................... (1,164,549) - (1,164,549) ----------- ----------- ----------- Balance at December 31, 1994.............. (9,447,549) (9,844,782) (19,292,331) Net income................................ 156,482 2,331,530 2,488,012 Contingent Management Incentive Distribution........................... (1,044,865) - (1,044,865) ----------- ----------- ----------- Balance at December 31, 1995.............. $(10,335,932) $ (7,513,252) $(17,849,184) =========== =========== ===========
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XII, LTD. STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash and Cash Equivalents
For the Years Ended December 31, ------------------------------------------------- 1995 1994 1993 ----------- ------------ ----------- Cash flows from operating activities: Cash received from tenants..................... $17,504,409 $ 21,232,256 $ 24,214,841 Cash received from legal settlement............ 65,857 - - Cash paid to suppliers......................... (7,827,222) (8,698,900) (9,274,750) Cash paid to affiliates........................ (1,102,197) (1,809,129) (1,199,948) Interest received.............................. 168,422 76,915 59,573 Interest paid.................................. (5,428,928) (6,643,256) (8,493,337) Interest paid to affiliates.................... (264,854) (470,490) (210,778) Property taxes paid............................ (991,905) (1,583,940) (2,261,096) ---------- ----------- ---------- Net cash provided by operating activities......... 2,123,582 2,103,456 2,834,505 ---------- ----------- ---------- Cash flows from investing activities: Additions to real estate investments........... (1,646,416) (1,968,318) (2,512,727) Net proceeds from disposition of real estate investments...................... 45,000 2,791,434 5,040,451 Insurance proceeds from fire................... - 40,441 - ---------- ----------- ---------- Net cash provided by (used in) investing activities........................... (1,601,416) 863,557 2,527,724 ---------- ----------- ---------- Cash flows from financing activities: Principal payments on mortgage notes payable................................ (2,489,684) (1,442,587) (1,961,022) Reinstatement of mortgage principal due to note modification..................... - - 258,586 Proceeds from refinancing of mortgage notes payable....................... 5,317,966 - 1,283,267 Deferred borrowing costs paid.................. (637,704) (44,891) (324,543) Mortgage loans from affiliate.................. - - 1,556,670 Repayment of mortgage loans from affiliate.................................... - (1,603,135) (1,709,535) Advances from affiliates - General Partner...................................... - 6,000 128,518 Repayment of advances from affiliates - General Partner................. (235,146) (1,206,664) - Contingent Management Incentive Distribution................................. - (300,000) - ---------- ----------- ---------- Net cash provided by (used in) financing activities..................................... 1,955,432 (4,591,277) (768,059) ---------- ----------- ---------- Net increase (decrease) in cash and cash equivalents............................. 2,477,598 (1,624,264) 4,594,170 Cash and cash equivalents at beginning of year............................ 3,313,765 4,938,029 343,859 ---------- ----------- ---------- Cash and cash equivalents at end of year.......... $ 5,791,363 $ 3,313,765 $ 4,938,029 ========== =========== ==========
See discussion of noncash investing and financing activities in Notes 6 and 7. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XII, LTD. STATEMENTS OF CASH FLOWS Reconciliation of Net Income to Net Cash Provided by Operating Activities
For the Years Ended December 31, ------------------------------------------------- 1995 1994 1993 ----------- ----------- ----------- Net income................................. $ 2,488,012 $ 3,467,083 $ 4,178,756 ---------- ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........... 4,019,174 4,619,944 4,816,282 Amortization of discounts on mortgage notes payable................ 217,857 308,183 305,006 Amortization of deferred borrowing costs....................... 170,772 226,604 257,640 Net interest added to advances from Southmark........................ 2,457 2,035 1,750 Net interest added to advances from affiliates - General Partner..... 27,726 131,727 197,939 Gain on disposition of real estate...... - (6,307,885) (8,193,880) Gain on involuntary conversion.......... (3,427,513) (20,877) - Extraordinary gain on extinguish- ment of debt.......................... (1,304,587) (246,149) - Changes in assets and liabilities: Cash segregated for security deposits............................ (13,229) 44,550 (26,685) Accounts receivable................... 110,712 64,178 60,079 Prepaid expenses and other assets.............................. 109,456 30,607 45,907 Escrow deposits....................... (563,246) 608,375 324,729 Accounts payable...................... (134,177) (427,528) 58,914 Accrued expenses...................... (343) 98,033 (47,486) Accrued interest...................... 252,355 (705) 153,838 Accrued property taxes................ (26,141) (186,427) (114,031) Payable to affiliates - General Partner............................. 224,934 (230,376) 753,236 Security deposits and deferred rental income....................... (30,637) (77,916) 62,511 ---------- ---------- ---------- Total adjustments................. (364,430) (1,363,627) (1,344,251) ---------- ---------- ---------- Net cash provided by operating activities............................ $ 2,123,582 $ 2,103,456 $ 2,834,505 ========== ========== ==========
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XII, LTD. NOTES TO FINANCIAL STATEMENTS December 31, 1995 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------- Organization - ------------ McNeil Real Estate Fund XII, Ltd. (the "Partnership") was organized February 2, 1981, 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 partnership agreement of limited partnership dated September 6, 1991, as amended (the "Amended Partnership Agreement"). The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240. The Partnership is engaged in diversified real estate activities, including the ownership, operation and management of residential and commercial real estate and other real estate related assets. At December 31, 1995, the Partnership owned seven income-producing properties. One of these properties is currently held for sale, as described in Note 4 - Real Estate Investments. Basis of Presentation - --------------------- The accompanying financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Partnership's financial statements include the accounts of the following listed tier partnerships. These single asset tier partnerships were formed to accommodate the refinancing of the respective property. The Partnership's and the General Partner's ownership interest in each tier partnership is detailed below. The Partnership retains effective control of each tier partnership. The General Partner's minority interest is not presented as it is either negative or immaterial.
% of Ownership Interest Tier Partnership Partnership General Partner ---------------- ----------- --------------- Limited Partnerships: Buccaneer Fund XII, Ltd. (a)(c) 100 - Castle Bluff Fund XII Associates, L.P. (b) 99 1 Millwood Park Fund XII, Ltd. (a)(c) 100 - Palisades Fund XII Associates, L.P. (a)(b) 100 - Plaza Westlake Fund XII, Ltd. (a)(c) 100 - General Partnerships: Brendon Way Fund XII Associates (b) 99 1
(a) The general partner of these partnerships is a corporation whose stock is 100% owned by the Partnership. (b) Included in financial statements for years ended December 31, 1995, 1994 and 1993. (c) Included in financial statements for years ended December 31, 1995. Real Estate Investments - ----------------------- Real estate investments are generally stated at the lower of cost or net realizable value. Real estate investments are monitored on an ongoing basis to determine if the property has sustained a permanent impairment in value. At such time, a write-down is recorded to reduce the basis of the property to its net realizable value. A permanent impairment is determined to have occurred when a decline in property value is considered to be other than temporary based upon management's expectations with respect to projected cash flows and prevailing economic conditions. Improvements and betterments are capitalized and expensed through depreciation charges. Repairs and maintenance are charged to operations as incurred. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This statement is effective for financial statements for fiscal years beginning after December 15, 1995. The Partnership has not adopted the principles of this statement within the accompanying financial statements; however, it is not anticipated that adoption will have a material effect on the carrying value of the Partnership's long-lived assets. Assets Held for Sale - -------------------- Assets held for sale are stated at the lower of cost or estimated realizable value. Depreciation and Amortization - ----------------------------- Buildings and improvements are depreciated using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 25 years. Tenant improvements are amortized over the terms of the related tenant lease using the straight-line method. Cash and Cash Equivalents - ------------------------- Cash and cash equivalents include cash on hand and cash on deposit with financial institutions with original maturities of three months or less. Carrying amounts for cash and cash equivalents approximate fair value. Escrow Deposits - --------------- The Partnership is required to maintain escrow accounts in accordance with the terms of various mortgage indebtedness agreements. These escrow accounts are controlled by the mortgagee and are used for payment of property taxes, hazard insurance, capital improvements and/or property replacements. Carrying amounts for escrow deposits approximate fair value. Deferred Borrowing Costs - ------------------------ Loan fees and other related costs incurred to obtain long-term financing on real property are capitalized and amortized using a method that approximates the effective interest method over the terms of the related mortgage notes payable. Amortization of deferred borrowing costs is included in interest expense on the Statements of Operations. Discounts on Mortgage Notes Payable - ----------------------------------- Discounts on mortgage notes payable are being amortized over the remaining terms of the related mortgage notes using the effective interest method. Amortization of discounts on mortgage notes payable is included in interest expense on the Statements of Operations. Rental Revenue - -------------- The Partnership leases its residential properties under short-term operating leases. Lease terms generally are less than one year in duration. Rental revenue is recognized as earned. The Partnership leases its commercial property under non-cancelable operating leases. Certain leases provide concessions and/or periods of escalating or free rent. Rental revenue is recognized on a straight-line basis over the term of the related leases. The excess of the rental revenue recognized over the contractual rental payments is recorded as accrued rent receivable and included in accounts receivable on the Balance Sheets. Income Taxes - ------------ No provision for Federal income taxes is necessary in the financial statements of the Partnership because, as a partnership, it is not subject to Federal income tax, and the tax effect of its activities accrues to the partners. Allocation of Net Income and Net Loss The Amended Partnership Agreement provides for net income of the Partnership for both financial statement and income tax purposes to be allocated as indicated below. For allocation purposes, net income and net loss of the Partnership are determined prior to deductions for depreciation. a) first, 5% of all deductions for depreciation shall be allocated to the General Partner and 95% to the limited partners; b) then, net income in an amount equal to the cumulative amount paid to the General Partner for the contingent portion of the Management Incentive Distribution ("MID") for which no previous income allocations have been made, shall be allocated to the General Partner; provided, however, that if all or a portion of such payment consists of limited partnership units ("Units"), the amount of net income allocated shall be equal to the amount of cash the General Partner would have otherwise received; and c) then, any remaining net income shall be allocated to achieve the ratio of 5% to the General Partner and 95% to the limited partners. The Amended Partnership Agreement also provides that net losses, other than those arising from a sale or refinancing, shall be allocated 5% to the General Partner and 95% to the limited partners. Net losses arising from a sale or refinancing shall be allocated 1% to the General Partner and 99% to the limited partners. Federal income tax law provides that the allocation of loss to a partner will not be recognized unless the allocation is in accordance with a partner's interest in the partnership or the allocation has substantial economic effect. Internal Revenue Code Section 704(b) and accompanying Treasury Regulations establish criteria for allocations of Partnership deductions attributable to debt. The Partnership's tax allocations for 1995, 1994 and 1993 have been made in accordance with these provisions. Distributions - ------------- Pursuant to the Amended Partnership Agreement and at the discretion of the General Partner, distributions during each taxable year shall be made as follows: (a) first, to the General Partner, an amount equal to the contingent portion of the MID; and (b) any remaining distributable cash, as defined, shall be distributed 100% to the limited partners. No distributions were made to the limited partners in 1995, 1994 or 1993. The Partnership accrued distributions of $1,044,865, $1,164,549 and $1,191,834 for the benefit of the General Partner for the years ended December 31, 1995, 1994 and 1993, respectively. These distributions are the contingent portion of the MID pursuant to the Amended Partnership Agreement. Net Income Per Limited Partnership Unit - --------------------------------------- Net income per Unit is computed by dividing net income allocated to the limited partners by the weighted average number of Units outstanding. Per Unit information has been computed based on 229,980, 230,594 and 230,817 Units outstanding in 1995, 1994 and 1993. Reclassifications - ----------------- Certain reclassifications have been made to prior period amounts to conform with the current year presentation. NOTE 2 - TRANSACTIONS WITH AFFILIATES - ------------------------------------- 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 property, in which case McREMI will receive property management fees from the commercial property 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 the 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. 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 was 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 eliminated 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 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, as defined, per Unit. No Units were issued in payment of the MID in 1995, 1994 or 1993. During 1991, the Partnership amended its capitalization policy and began capitalizing certain costs of improvements and betterments which under policies of prior management had been expensed when incurred. The purpose of the amendment was to more properly recognize items which were capital in nature. The effect of the amendment standing alone was evaluated at the time the change was made and determined not to be material to the financial statements of the Partnership in 1991, nor was it expected to be material in any future year. However, the amendment can have a material effect on the calculation of the Entitlement Amount which determines the amount of Contingent MID earned and the amount of Fixed MID payable in cash. Capital improvements are excluded from cash flow, as defined. The majority of base period cash flow was measured under the previous capitalization policy, while incentive period cash flow is determined using the amended policy. Under the amended policy, more items are capitalized, and cash flow increases. The amendment of the capitalization policy did not materially affect the MID for 1995, 1994 or 1993 because the Entitlement Amount was sufficient to pay Contingent MID notwithstanding the amendment to the capitalization policy. 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 and reimbursements paid or accrued for the benefit of the General Partner or its affiliates are as follows:
For the Years Ended December 31, ------------------------------------------------ 1995 1994 1993 ---------- ----------- ----------- Property management fees - affiliates...... $ 877,423 $ 1,067,967 $ 1,207,684 Charged to interest expense: Interest expense on affiliate loans and advances.................... 160,853 138,828 408,717 Charged to general and administrative - affiliates: Partnership administration.............. 449,708 510,786 592,477 Fixed MID............................... - - 153,023 ---------- ---------- ---------- $ 1,487,984 $ 1,717,581 $ 2,361,901 ========== ========== ========== Charged to General Partner's deficit: Contingent MID $ 1,044,865 $ 1,164,549 $ 1,191,834 ========== ========== ==========
Payable to affiliates - General Partner at December 31, 1995 and 1994 consisted primarily of accrued property management fees, MID and cost reimbursements and are due and payable from operations. The General Partner has waived the collection terms of the MID and reimbursements until the Partnership has an adequate level of cash reserves. 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. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. As discussed below, the Partnership received advances under the revolving credit facility to fund additions to the Partnership's real estate investment and costs incurred in connection with the refinancing of the Partnership's mortgage notes payable. There is no assurance that the Partnership will receive any additional funds under the facility because no amounts will be reserved for any particular partnership. As of December 31, 1995, $2,662,819 remained available for borrowing under the facility; however, additional funds could become available as other partnerships repay existing borrowings. This commitment will terminate on September 6, 1996. The Partnership has borrowed $1,419,339 which will be repaid from available cash reserves of the Partnership. These borrowings are not due upon termination of the revolving credit facility. The total advances from affiliates at December 31, 1995 and 1994 consist of the following:
1995 1994 ------------ ----------- Advances from General Partner- revolving credit facility $ 1,419,339 $ 1,654,485 Advances purchased by General Partner 27,903 27,903 Accrued interest payable 27,726 131,727 ---------- ---------- $ 1,474,968 $ 1,814,115 ========== ==========
The advances are unsecured, due on demand and accrue interest at the prime lending rate of the Bank of America plus 1%. The prime lending rate was 8.5% at December 31, 1995 and 1994. NOTE 3 - TAXABLE LOSS - --------------------- McNeil Real Estate Fund XII, Ltd. is a partnership and is not subject to Federal and state income taxes. Accordingly, no recognition has been given to income taxes in the accompanying financial statements of the Partnership since the income or loss of the Partnership is to be included in the tax returns of the individual partners. The tax returns of the Partnership are subject to examination by Federal and state taxing authorities. If such examinations result in adjustments to distributive shares of taxable income or loss, the tax liability of the partners could be adjusted accordingly. The Partnership's net assets and liabilities for financial reporting purposes exceeded the net assets and liabilities for tax purposes by $1,939,981 in 1995, $8,345,846 in 1994 and $12,981,815 in 1993. NOTE 4 - REAL ESTATE INVESTMENTS - -------------------------------- The basis and accumulated depreciation of the Partnership's real estate investments held at December 31, 1995 and 1994 are set forth in the following tables:
Accumulated Buildings and Depreciation Net Book 1995 (a) Land Improvements and Amortization Value -------- ----------- ------------- ---------------- ------------ Brendon Way Indianapolis, IN $ 1,067,661 $ 20,754,167 $ (11,558,721) $ 10,263,107 Buccaneer Village Denver, CO 996,813 8,770,558 (5,149,204) 4,618,167 Castle Bluff Kentwood, MI 239,839 5,180,700 (2,974,727) 2,445,812 Channingway Columbus, OH 1,544,716 18,036,789 (9,631,879) 9,949,626 Palisades at the Galleria Atlanta, GA 975,967 14,101,466 (7,629,419) 7,448,014 Plaza Westlake Glendale Heights, IL 1,455,584 6,475,083 (3,557,325) 4,373,342 ---------- ----------- ------------ ----------- $ 6,280,580 $ 73,318,763 $ (40,501,275) $ 39,098,068 ========== =========== ============ =========== Accumulated Buildings and Depreciation Net Book 1994 (a) Land Improvements and Amortization Value -------- ----------- ------------- ---------------- ------------ Brendon Way $ 1,067,661 $ 20,298,094 $ (10,588,352) $ 10,777,403 Buccaneer Village 996,813 8,615,740 (4,792,446) 4,820,107 Castle Bluff 239,839 5,082,220 (2,755,779) 2,566,280 Channingway 1,544,716 17,664,080 (8,838,364) 10,370,432 Palisades at the Galleria 975,967 13,866,792 (6,873,775) 7,968,984 Plaza Westlake 1,455,584 6,212,706 (3,256,479) 4,411,811 ---------- ----------- ------------ ----------- $ 6,280,580 $ 71,739,632 $ (37,105,195) $ 40,915,017 ========== =========== ============ ===========
(a) During 1994, management placed Millwood Park on the market for sale. Therefore, at December 31, 1995 and 1994, Millwood Park is recorded as an asset held for sale. The Partnership leases its commercial property under various non-cancelable operating lease agreements. Future minimum rents to be received as of December 31, 1995, are as follows:
1996.................................... $ 743,000 1997.................................... 684,000 1998.................................... 462,000 1999.................................... 361,000 2000.................................... 47,000 Thereafter.............................. - --------- Total............................... $2,297,000 =========
Future minimum rents do not include contingent rents or operating expense reimbursements. Contingent rents and operating expense reimbursements amounted to $191,814 in 1995, $251,475 in 1994 and $340,026 in 1993, and are included in rental income on the Statements of Operations. The Partnership's properties are encumbered by mortgage indebtedness as discussed in Note 5. NOTE 5 - MORTGAGE NOTES PAYABLE - ------------------------------- The following table sets forth mortgage notes payable of the Partnership at December 31, 1995 and 1994. All mortgage notes are secured by real estate investments or the assets held for sale.
Mortgage Annual Monthly Lien Interest Payments/ December 31, Property Position (a) Rates % Maturity Date (l) 1995 1994 - -------- ------------ -------- ----------------- ------------ ------------ Brendon Way First 8.00 $133,911 05/24 $ 18,002,757 $ 18,162,469 ----------- ----------- Buccaneer Village First (b) 8.10 40,741 10/02 5,496,384 - First 9.50 28,853 04/07 - 2,508,392 Second 10.75 9,335 07/95 - 988,077 Interest in net profits (d) - 2,688,068 Discount (c) - (386,967) ----------- ----------- 5,496,384 5,797,570 ----------- ----------- Castle Bluff First 9.25 36,926 12/24 4,459,417 4,488,555 ----------- -----------
Mortgage Annual Monthly Lien Interest Payments/ December 31, Property Position (a) Rates % Maturity Date (l) 1995 1994 - -------- ------------ -------- ----------------- ------------ ------------ Channingway(k) First Variable (e) Variable (e) 08/98 $ 12,988,079 $ 13,181,124 ----------- ----------- Lamar Plaza Wrap (f) (f) (f) 07/95 - 3,980,606 Discount (c) - (85,273) ----------- ----------- - 3,895,333 ----------- ----------- Millwood Park First (g) 8.10 29,500 10/02 3,982,499 - First 8.50 30,671 09/04 - 2,579,310 Second 10.00 6,115 07/95 - 733,856 Discount (c) - (372,176) ----------- ----------- 3,982,499 2,940,990 ----------- ----------- Palisades at the Galleria First (h) 8.08 78,371 10/02 10,593,002 - First Variable Variable 10/95 - 8,392,910 ----------- ----------- 10,593,002 8,392,910 ----------- ----------- Plaza Westlake First (i) 9.50 37,285 01/00 3,638,288 - First 9.50 44,548 03/95 - 3,383,827 Discount (c) - (28,519) ----------- ----------- 3,638,288 3,355,308 ----------- ----------- Sundance Wrap (j) (j) (j) 07/95 - 7,780,557 Interest in profits 7.43 - 196,569 Discount (c) - (38,863) ----------- ----------- - 7,938,263 ----------- ----------- $ 59,160,426 $ 68,152,522 =========== ===========
(a) The debt, except for Plaza Westlake, is non-recourse to the Partnership. (b) On October 20, 1995, the Partnership refinanced the mortgage note payable on Buccaneer Village. See Note 7. (c) Discounts were based on effective interest rates of 11% to 14%. (d) On February 6, 1995, the Partnership paid off the interest in net profits on Buccaneer Village for a discounted amount of $1,750,000. The Partnership recognized a gain on early extinguishment of debt of $1,838,192. (e) Interest on the Channingway mortgage note is adjusted annually to 2.75% over the one year Treasury bill weekly average rate with a ceiling of 15% and a floor of 7.25%. The interest rate at December 31, 1995 and 1994 was 8.5% and 7.875%, respectively. (f) The wrap mortgage note on Lamar Plaza consisted of two separate principal portions - equity and junior. The mortgage note required principal and interest payments of $32,672 on the equity portion based on a 10.75% interest rate. The junior portion bore interest at 7.43%. Payments on the junior portion would be made only when the amount of net cash flow was in excess of payments made on the equity portion as calculated on a quarterly basis. On July 27, 1995, Lamar Plaza was sold. See Note 6. (g) On October 31, 1995, the Partnership refinanced the mortgage note payable on Millwood Park. See Note 7. (h) On October 13, 1995, the Partnership refinanced the mortgage note payable on Palisades at the Galleria. See Note 7. (i) On March 24, 1995, the Partnership refinanced the mortgage note payable on Plaza Westlake. See Note 7. (j) The wrap mortgage note on Sundance consisted of three separate principal portions - wrap, equity and junior. The mortgage note required principal and interest payments of $63,408 on the wrap portion based on an interest rate of 10.375% and interest only payments of $11,837 on the equity portion based on an interest rate of 10.75%. Payments on the junior portion would be made only when the amount of net cash flow was in excess of payments made on the wrap and equity portion as calculated on a quarterly basis. The junior portion bore interest of 7.43%. The modified balance of the note included $172,430 of accrued and unpaid interest at the date of modification. On June 19, 1995, the Partnership sold Sundance and all mortgage debt was relieved. See Note 6. (k) The mortgage encumbering one of the Partnership's properties, Channingway, contains provisions which may give the lenders the right to accelerate the mortgage debt as a result of the September 1991 restructuring of the Partnership. The General Partner has requested that the lender waive its right to accelerate the mortgage debt. The lender may require the payment of fees or additional interest as a condition to granting such waiver. In the event the waiver is not obtained, and the mortgage debt is accelerated, the Partnership will be required to satisfy the outstanding mortgage debt which approximated $13 million at December 31, 1995. In such event, the Partnership will arrange alternative sources of mortgage financing. However, such refinancing may be at an interest rate which is higher or is otherwise on terms which are less favorable than those provided for by the current mortgage. Furthermore, if alternative financing cannot be obtained, the lender could foreclose on the property securing the mortgage. Management believes the likelihood of this outcome is remote and accordingly has not reflected this balance as currently due. (l) Balloon payments on the mortgage notes are due as follows:
Property Balloon Payment Date -------- --------------- ---- Channingway $12,293,000 08/98 Plaza Westlake 3,145,640 01/00 Buccaneer Village 5,099,378 10/02 Millwood Park 3,696,959 10/02 Palisades at the Galleria 9,825,319 10/02
Principal maturities of the mortgage notes payable are as follows:
Real Estate Asset Held Investments For Sale ----------- ---------- 1996.................................... $ 635,643 $ 32,614 1997.................................... 692,824 35,356 1998.................................... 13,096,545 38,329 1999.................................... 566,433 41,551 2000.................................... 3,636,362 45,045 Thereafter.............................. 36,550,120 3,789,604 ---------- --------- Total $55,177,927 $3,982,499 ========== =========
Based on borrowing rates currently available to the Partnership for mortgage loans with similar terms and average maturities, the fair value of notes payable was approximately $58,903,000 as of December 31, 1995. NOTE 6 - SALES AND DISPOSITIONS OF PROPERTIES - --------------------------------------------- On July 27, 1995, the Partnership sold its investment in Lamar Plaza to an unaffiliated buyer for assumption of the first and second liens by the purchaser. The gain on disposition is detailed below:
Gain on Sale ------------- Mortgage and accrued interest assumed by purchaser......................................... $ 4,195,215 Basis of real estate sold............................ (3,030,994) ---------- Gain on disposition of real estate................... $ 1,164,221 ==========
On June 19, 1995 the Partnership sold its investment in Sundance to an unaffiliated buyer for a cash sales price of $45,000 and assumption of the first, second and third liens by the purchaser. Cash proceeds and the gain on disposition are detailed below.
Gain on Sale Cash Proceeds ------------ ------------- Sales price.......................................... $ 45,000 $ 45,000 Mortgages and accrued interest assumed by purchaser......................................... 8,191,859 Basis of real estate sold............................ (5,973,567) ---------- Gain on disposition of real estate................... $ 2,263,292 ========== ------- Net cash proceeds.................................... $ 45,000 =======
Also related to the sale of Sundance, the Partnership recognized a $268,433 gain on early extinguishment of debt related to the interest in net profits portion of the debt. On December 19, 1994, the Partnership sold its investment in Fox Run to an unrelated third party for a cash sales price of $54,947 and assumption of the first and second liens by the purchaser. Cash proceeds and the gain on disposition are detailed below.
Gain on Sale Cash Proceeds ------------ ------------- Sales price.......................................... $ 54,947 $ 54,947 Mortgages and accrued interest assumed by purchaser......................................... 5,345,732 Basis of real estate sold............................ (4,087,990) ---------- Gain on disposition of real estate................... $ 1,312,689 ========== Credit for security deposit liability................ (27,438) ------- Net cash proceeds.................................... $ 27,509 =======
Also related to the sale of Fox Run Apartments, the Partnership recognized a $246,149 gain on early extinguishment of debt related to the interest in net profits portion of the debt. On November 18, 1994, the Partnership sold its investment in Village East to an unaffiliated buyer for a sales price of $8,625,000. Cash proceeds from this transaction and the gain on sale of Village East are detailed below.
Gain on Sale Cash Proceeds ------------- ------------- Sales price.......................................... $ 8,625,000 $ 8,625,000 Selling costs........................................ (301,919) (301,919) Prorations........................................... - (216,806) Basis of real estate sold............................ (3,327,885) - ---------- Gain on sale......................................... $ 4,995,196 - ========== ----------- Proceeds from sale of real estate investment......... 8,106,275 Retirement of mortgage note assumed.................. (5,342,350) ----------- Net cash proceeds.................................... $ 2,763,925 ===========
On December 29, 1993, the Partnership sold its investment in Cedar Mill Crossing to an unaffiliated buyer for a cash sales price of $15,700,000. Cash proceeds from this transaction and the gain on sale of Cedar Mill Crossing are detailed below.
Gain on Sale Cash Proceeds ------------ ------------- Sales price.......................................... $15,700,000 $ 15,700,000 Selling costs........................................ (327,552) (327,552) Prorations........................................... - 130,435 Basis of real estate sold............................ (7,377,281) - ---------- Gain on sale......................................... $ 7,995,167 ========== ----------- Proceeds from sale of real estate investment......... 15,502,883 Retirement of mortgage note assumed.................. (10,751,095) ----------- Net cash proceeds.................................... $ 4,751,788 ===========
In January 1994, cash proceeds were used to repay advances from affiliates. In August 1993, the Partnership sold its investment in a parcel of land at Plaza Westlake to an unaffiliated buyer for a cash sales price of $310,000. Cash proceeds from this transaction and the gain on sale of the land parcel are detailed below.
Gain on Sale Cash Proceeds ------------ ------------- Sales price.......................................... $ 310,000 $ 310,000 Selling costs........................................ (21,337) (21,337) Basis of real estate sold............................ (89,950) - ---------- Gain on sale......................................... $ 198,713 ========== ----------- Net cash proceeds.................................... $ 288,663 ===========
NOTE 7 - REFINANCING OF MORTGAGE NOTES PAYABLE - ---------------------------------------------- On October 31, 1995, the Partnership refinanced the mortgage note payable on Millwood Park. The new loan bears an interest rate of 8.1%, requires monthly principal and interest payments of $29,500, and will mature October 31, 2002. Following is a summary of the transaction:
New loan proceeds......................... $ 3,982,500 Existing debt retired..................... (3,172,754) ---------- Cash proceeds from refinancing............ $ 809,746 ==========
The Partnership deposited $460,348 into property tax and deferred maintenance escrows and incurred costs of $112,810 relating to the refinancing. Also relating to the refinancing, the Partnership recognized a $333,080 loss on early extinguishment of debt due to the unamortized mortgage discount related to the retired mortgage. On October 20, 1995, the Partnership refinanced the mortgage note payable on Buccaneer Village. The new loan bears an interest rate of 8.1%, requires monthly principal and interest payments of $40,741, and will mature October 24, 2002. Following is a summary of the transaction:
New loan proceeds......................... $ 5,500,000 Existing debt retired..................... (3,398,218) Prepayment penalty........................ (113,650) ---------- Cash proceeds from refinancing............ $ 1,988,132 ==========
The Partnership deposited $149,217 into property tax and deferred maintenance escrows and incurred loan costs of $149,892 relating to the refinancing. Also relating to the refinancing, the Partnership recognized a $468,958 loss on early extinguishment of debt due to the unamortized mortgage discount and prepayment penalties related to the retired mortgage. On October 13, 1995, the Partnership refinanced the mortgage note payable on Palisades at the Galleria. The new loan bears an interest rate of 8.08%, requires monthly principal and interest payments of $78,371 and will mature October 16, 2002. Following is a summary of the transaction:
New loan proceeds......................... $10,600,000 Existing debt retired..................... (8,413,974) ---------- Cash proceeds from refinancing............ $ 2,186,026 ==========
The Partnership deposited $290,726 into property tax, insurance and deferred maintenance escrows and incurred loan costs of $242,099 relating to the refinancing. On March 24, 1995, the Partnership refinanced the mortgage note payable on Plaza Westlake. The new loan bears an interest rate of 9.5%, requires monthly principal and interest payments of $37,285, and will mature January 31, 2000. Following is a summary of the transaction:
New loan proceeds......................... $ 4,000,000 Capital improvement account............... (300,000) Existing debt retired..................... (3,365,938) ---------- Cash proceeds from refinancing............ $ 334,062 ==========
In addition, the Partnership incurred loan costs of $132,903 relating to the refinancing. On February 6, 1995, the Partnership paid off the interest in net profits on Buccaneer Village for retirement of $3,588,192 of debt and accrued interest. The debt was retired at a discounted payoff of $1,750,000, which resulted in an extraordinary gain on extinguishment of debt of $1,838,192. During 1993, the Partnership received additional proceeds of $1,283,267 that were withheld at the time of the November 1992 refinancing of the mortgage note on Palisades at the Galleria. On June 30, 1993, the Partnership modified the terms of the mortgage note payable on Brendon Way by increasing the principal balance of the note by $258,568 to $18,368,000. The modification also reduced the interest rate from 10.50% to 8.00% and monthly payments from $164,969 to $133,911. NOTE 8 - GAIN ON INVOLUNTARY CONVERSION - --------------------------------------- On May 25, 1994, one unit at Brendon Way Apartments was destroyed by fire causing $49,621 in damages. The Partnership has received $40,441 in insurance reimbursements as of December 31, 1995, to cover the cost to repair this unit. Insurance reimbursements received in excess of the basis of the property damaged were recorded as a $20,877 gain on involuntary conversion. NOTE 9 - LEGAL PROCEEDINGS - -------------------------- The Partnership is not party to, nor is any of the Partnership's properties the subject of, any material pending legal proceedings, other than ordinary routine litigation incidental to the Partnership's business except for the following: HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young BDO Seidman et al (Case #92-06560-A). This suit was filed on behalf of the Partnership and other affiliated partnerships (the "Affiliated Partnerships") on May 26, 1992, in the 14th Judicial District Court of Dallas County. The petition sought recovery against the Partnership's former auditors, BDO Seidman, for negligence and fraud in failing to detect and/or report overcharges of fees/expenses by Southmark, the former general partner. The former auditors asserted counterclaims against the Affiliated Partnerships based on alleged fraudulent misrepresentations made to the auditors by the former management of the Affiliated Partnerships (Southmark) in the form of client representation letters executed and delivered to the auditors by Southmark management. The counterclaims sought recovery of attorneys' fees and costs incurred in defending this action. The original petition also alleged causes of action against certain former officers and directors of the Partnership's original general partner for breach of fiduciary duty, fraud and conspiracy relating to the improper assessment and payment of certain administrative fees/expenses. On January 11, 1994 the allegations against the former officers and directors were dismissed. The trial court granted summary judgment in favor of Ernst & Young and BDO Seidman on the fraud and negligence claims based on the statute of limitations. The Affiliated Partnerships appealed the summary judgment to the Dallas Court of Appeals. In August 1995, the Appeals Court upheld all of the summary judgments in favor of BDO Seidman. In exchange for the plaintiff's agreement not to file any motions for rehearing or further appeals, BDO Seidman agreed that it will not pursue the counterclaims against the Partnership. NOTE 10 - GAIN ON LEGAL SETTLEMENT - ---------------------------------- The Partnership filed claims with the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court") against Southmark Corporation ("Southmark"), an affiliate of a previous general partner, for damages relating to improper overcharges, breach of contract and breach of fiduciary duty. The Partnership settled these claims in 1991, and such settlement was approved by the Bankruptcy Court. An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April 14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in May 1995 the Partnership received in full satisfaction of its claims, $49,818 in cash, and common and preferred stock in the reorganized Southmark which represents the Partnership's pro-rata share of Southmark assets available for Class 8 Claimants. The Partnership sold the Southmark common and preferred stock in May 1995 for $16,039, which combined with the cash proceeds from Southmark, resulted in a gain on legal settlement of $65,857. NOTE 11 - SUBSEQUENT EVENT - -------------------------- On February 23, 1996, the Partnership was awarded $499,000 as payment for condemnation of 6.45 acres at Palisades at the Galleria by Cobb County, Georgia. The county required the right-of-way to this property for highway construction. The condemnation of this parcel will not materially affect the operations of the property. The $499,000 is being held in escrow by the mortgagee pending completion of construction. Upon receipt of the $499,000, the Partnership will recognize a gain of approximately $298,000. McNEIL REAL ESTATE FUND XII, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION December 31, 1995
Cumulative Costs Initial Cost (b) Write-down Capitalized Related (b) Buildings and and Permanent Subsequent Description Encumbrances Land Improvements Impairment To Acquisition - ----------- ------------ ---- ------------- ------------- -------------- Apartments: Brendon Way Indianapolis, IN $18,002,757 $ 1,067,661 $17,490,677 $ - $ 3,263,490 Buccaneer Village Denver, CO 5,496,384 996,813 8,058,534 - 712,024 Castle Bluff Kentwood, MI 4,459,417 239,839 4,650,535 - 530,165 Channingway Columbus, OH 12,988,079 1,544,716 16,438,004 - 1,598,785 Palisades at the Galleria Atlanta, GA 10,593,002 975,967 10,920,268 - 3,181,198 Plaza Westlake Glendale Heights, IL 3,638,288 1,635,485 6,222,137 (746,424) 819,469 ---------- ---------- ---------- -------- ---------- $55,177,927 $ 6,460,481 $63,780,155 $(746,424) $10,105,131 ========== ========== ========== ======== ========== Asset Held for Sale: Millwood Park Kansas City, MO $ 3,982,499 ==========
(b) The initial cost and encumbrances reflect the present value of future loan payments discounted, if appropriate, at a rate estimated to be the prevailing interest rate at the date of acquisition. See accompanying notes to Schedule III. McNEIL REAL ESTATE FUND XII, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION December 31, 1995
Gross Amount at Which Carried at Close of Period Accumulated Buildings and Depreciation Description Land Improvements Total (a) and Amortization - ----------- ---- ------------- --------- ---------------- Apartments: Brendon Way Indianapolis, IN $ 1,067,661 $20,754,167 $21,821,828 $(11,558,721) Buccaneer Village Denver, CO 996,813 8,770,558 9,767,371 (5,149,204) Castle Bluff Kentwood, MI 239,839 5,180,700 5,420,539 (2,974,727) Channingway Columbus, OH 1,544,716 18,036,789 19,581,505 (9,631,879) Palisades at the Galleria Atlanta, GA 975,967 14,101,466 15,077,433 (7,629,419) Plaza Westlake Glendale Heights, IL 1,455,584 6,475,083 7,930,667 (3,557,325) ---------- ---------- ---------- ----------- $ 6,280,580 $73,318,763 $79,599,343 $(40,501,275) ========== ========== ========== =========== Asset Held for Sale: Millwood Park Kansas City, MO $ (c) $ (c) $ 3,164,323 $ (c) ========== ========== ========== ============
(a) For Federal income tax purposes, the properties are depreciated over lives ranging from 15-25 years using ACRS or MACRS methods. The aggregate cost of real estate investments for Federal income tax purposes was approximately $96,560,742 and accumulated depreciation was $76,179,570 December 31, 1995. (c) Asset held for sale is stated at the lower of cost or net realizable value. Historical cost net of accumulated depreciation and cumulative write-downs become the new cost basis when the asset is classified as "Held for Sale." See accompanying notes to Schedule III. McNEIL REAL ESTATE FUND XII, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION December 31, 1995
Date of Date Depreciable Description Construction Acquired lives (years) - ----------- ------------ -------- ------------- Apartments: Brendon Way Indianapolis, IN 1968/73 01/82 3-25 Buccaneer Village Denver, CO 1970 02/82 3-25 Castle Bluff Kentwood, MI 1976/77 01/82 3-25 Channingway Columbus, OH 1970/75 12/82 3-25 Palisades at the Galleria Atlanta, GA 1973 07/82 3-25 Plaza Westlake Glendale Heights, IL 1980 03/82 3-25 Asset Held for Sale: Millwood Park Kansas City, MO 1973 01/82
See accompanying notes to Schedule III. McNEIL REAL ESTATE FUND XII, LTD. Notes to Schedule III Real Estate Investments and Accumulated Depreciation and Amortization A summary of activity for the Partnership's real estate investments and accumulated depreciation and amortization is as follows:
For the Years Ended December 31, -------------------------------------------------- 1995 1994 1993 ----------- ------------ ------------- Real Estate Investments: - ------------------------ Balance at beginning of year............... $ 78,020,212 $ 96,194,009 $114,069,986 Improvements............................... 1,579,131 1,869,162 2,010,640 Reclassification to assets held for sale... - (4,916,139) (19,796,667) Dispositions of real estate................ - (15,084,622) (89,950) Replacement of assets...................... - (42,198) - ----------- ----------- ----------- Balance at end of year..................... $ 79,599,343 $ 78,020,212 $ 96,194,009 =========== =========== =========== Accumulated Depreciation and Amortization: - ------------------------------------------ Balance at beginning of year............... $ 37,105,195 $ 43,889,170 $ 48,184,664 Depreciation............................... 3,396,080 3,683,991 3,647,465 Reclassification to assets held for sale... - (2,776,585) (7,942,959) Dispositions of real estate................ - (7,668,747) - Replacement of assets...................... - (22,634) - ----------- ----------- ----------- Balance at end of year..................... $ 40,501,275 $ 37,105,195 $ 43,889,170 =========== =========== =========== Assets Held for Sale: - --------------------- Balance at beginning of year............... $ 12,724,693 $ 11,421,936 $ 7,434,149 Reclassification to assets held for sale... - 2,139,554 11,853,708 Improvements............................... 67,285 99,156 502,087 Depreciation............................... (623,094) (935,953) (1,168,817) Sale ...................................... (9,004,561) - (7,199,191) ----------- ----------- ----------- Balance at end of year..................... $ 3,164,323 $ 12,724,693 $ 11,421,936 =========== =========== ===========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING - ------- ----------------------------------------------------------- AND FINANCIAL DISCLOSURE ------------------------ None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- -------------------------------------------------- Neither the Partnership nor the General Partner has any directors or executive officers. The names and ages of, as well as the positions held by, the officers and directors of McNeil Investors, Inc., the general partner of the General Partner, are as follows:
Other Principal Occupations and Other Name and Position Age Directorships During the Past 5 Years - ----------------- --- ------------------------------------- Robert A. McNeil, 75 Mr. McNeil is also Chairman of the Chairman of the Board and Director of McNeil Real Board and Director Estate Management, Inc. ("McREMI") which is an affiliate of the General Partner. He has held the foregoing positions since the formation of such entity in 1990. Mr. McNeil received his B.A. degree from Stanford University in 1942 and his L.L.B. degree from Stanford Law School in 1948. He is a member of the State Bar of California and has been involved in real estate financing since the late 1940's and in real estate acquisitions, syndications and dispositions since 1960. From 1986 until active operations of McREMI and McNeil Partners, L.P. began in February 1991, Mr. McNeil was a private investor. Mr. McNeil is a member of the International Board of Directors of the Salk Institute, which promotes research in improvements in health care. Carole J. McNeil 52 Mrs. McNeil is Co-Chairman, with Co-Chairman of the husband Robert A. McNeil, of McNeil Board Investors, Inc. Mrs. McNeil has twenty years of real estate experience, most recently as a private investor from 1986 to 1993. In 1982, she founded Ivory & Associates, a commercial real estate brokerage firm in San Francisco, CA. Prior to that, she was a commercial real estate associate with the Madison Company and, earlier, a commercial sales associate and analyst with Marcus and Millichap in San Francisco. In 1978, Mrs. McNeil established Escrow Training Centers, California's first accredited commercial training program for title company escrow officers and real estate agents needing college credits to qualify for brokerage licenses. She began in real estate as Manager and Marketing Director of Title Insurance and Trust in Marin County, CA. Mrs. McNeil serves on the International Board of Directors of the Salk Institute.
Other Principal Occupations and Other Name and Position Age Directorships During the Past 5 Years - ----------------- --- ------------------------------------- Donald K. Reed, 50 Mr. Reed is President, Chief Executive Director, President, Officer and Director of McREMI which and Chief Executive is an affiliate of the General Partner. Officer Prior to joining McREMI in March 1993, Mr. Reed was President, Chief Operating Officer and Director of Duddlesten Management Corporation and Duddlesten Realty Advisors, Inc., with responsibility for a management portfolio of office, retail, multi-family and mixed-use land projects representing $2 billion in asset value. He was also Chief Operating Officer, Director and member of the Executive Committee of all Duddlesten affiliates. Mr. Reed started with the Duddlesten companies in 1976 and served as Senior Vice President and Chief Financial Officer and as Executive Vice President and Chief Operating Officer of Duddlesten Management Corporation before his promotion to President in 1982. He was President and Chief Operating Officer of Duddlesten Realty Advisors, Inc., which has been engaged in real estate acquisitions, marketing and dispositions, since its formation in 1989. Ron K. Taylor 38 Mr. Taylor is a Senior Vice President Vice President of McREMI and has been in this capacity since McREMI commenced active operations in 1991. He also serves as Acting Chief Financial Officer of McREMI since the resignation of Robert C. Irvine on January 31, 1996. Mr. Taylor is primarily responsible for Asset Management functions at McREMI, including property dispositions, commercial leasing, real estate finance and portfolio management. Prior to joining McREMI, Mr. Taylor served as an Executive Vice President for a national syndication/property management company. Mr. Taylor has been involved in the real estate industry since 1983.
Each director shall serve until his successor shall have been duly elected and qualified. ITEM 11. EXECUTIVE COMPENSATION - -------- ---------------------- No direct compensation was paid or payable by the Partnership to directors or officers (since it does not have any directors or officers) for the year ended December 31, 1995, nor was any direct compensation paid or payable by the Partnership to directors or officers of the general partner of the General Partner for the year ended December 31, 1995. The Partnership has no plans to pay any such remuneration to any directors or officers of the general partner of the General Partner in the future. See Item 13 - Certain Relationships and Related Transactions for amounts of compensation and reimbursements paid by the Partnership to the General Partner and its affiliates. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------- -------------------------------------------------------------- (A) Security ownership of certain beneficial owners. No individual or group, as defined by Section 13(d)(3) of the Securities Exchange Act of 1934, known to the Partnership is the beneficial owner of more than 5 percent of the Partnership's securities. (B) Security ownership of management. The General Partner and the officers and directors of its general partner, collectively, own 1,552 Units, which is less than 1% of the outstanding Units. (C) Change in control. None. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ---------------------------------------------- Under the terms of the Amended Partnership Agreement, the Partnership is paying the 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. The 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. Prior to July 1, 1993, the MID consisted of two components: (i) the fixed portion which was payable without respect to 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 was 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 eliminated 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. Contingent MID will be paid to the extent of the Entitlement Amount, and may be paid (i) in cash, unless there is insufficient cash to pay the distribution in which event any unpaid portion not taken in Units will be deferred and is payable, without interest, from the first available cash and/or (ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of Units issued in payment of the MID is based on the greater of $50 per unit or the net tangible asset value, as defined, per Unit. For the year ended December 31, 1995, the Partnership paid or accrued for the General Partner Contingent MID in the amount of $1,044,865. Any amount of the MID which 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 the 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. The Partnership pays property management fees equal to 5% of the gross rental receipts of the Partnership's properties to McREMI, an affiliate of the General Partner, for providing property management services for residential and commercial properties and leasing services for the Partnership's residential properties. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. For the year ended December 31, 1995, the Partnership paid or accrued $1,327,131 in property management fees and reimbursements. A revolving credit facility has been established by the General Partner for the benefit of the Partnership. The credit facility may not exceed $5,000,000 in the aggregate and is available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. For the year ended December 31, 1995, no funds were borrowed from this facility. See Item 1 - Business, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 8 - Note 2 - "Transactions with Affiliates." ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K - -------- ----------------------------------------------------------------- See accompanying index to financial statements at Item 8.
(A) Exhibits -------- Exhibit Number Description ------- ----------- 3.1 First Amended and Restated Certificate of Limited Partnership dated February 20, 1981. (1) 3.2 Limited Partnership Agreement dated February 2, 1981 and amended March 31, 1981 and May 13, 1981. (1) 3.3 Amended and Restated Partnership Agreement, dated September 6, 1991 (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1991). 3.4 Amendment No. 1 to the Amended and Restated Partnership Agreement, dated March 28, 1994. (4) 3.5 Amendment No. 2 to the Amended and Restated Partnership Agreement, dated March 28, 1994. (4) 10.1 Promissory Note, dated July 13, 1988, between McNeil Real Estate Fund XII, Ltd. and Transohio Savings Bank. (1) 10.2 Installment Note, dated December 5, 1990, between McNeil Real Estate Fund XII, Ltd. and The State of Oregon, Public Employees' Retirement Fund. (1) 10.3 Mortgage Note, dated April 25, 1989, between Brendon Way Fund XII Associates and American Mortgages, Inc. (1) 10.4 Assignment and Assumption Agreement, dated September 6, 1991, between Pacific Investors Corporation, Robert A. McNeil and McNeil Partners, L.P. regarding McNeil Real Estate Fund XII, Ltd.(2) 10.5 Assignment and Assumption Agreement, dated September 6, 1991, between Pacific Investors Corporation and McNeil Partners, L.P. regarding Brendon Way Fund XII Associates.(2) 10.6 Assignment and Assumption Agreement, dated September 6, 1991, between Castle Bluff Apartments Corp. and McNeil Partners, L.P. regarding Castle Bluff Fund XII Associates.(2) 10.7 Property Management Agreement, dated September 6, 1991, between McNeil Real Estate Fund XII, Ltd. and McNeil Real Estate Management, Inc.(2) 10.8 Property Management Agreement, dated September 6, 1991, between Brendon Way Fund XII Associates and McNeil Real Estate Management, Inc.(2)
Exhibit Number Description ------- -----------
10.9 Property Management Agreement, dated September 6, 1991, between Castle Bluff Fund XII Associates and McNeil Real Estate Management, Inc.(2) 10.10 Asset Management Agreement, dated September 6, 1991, between McNeil Real Estate Fund XII, Ltd. and McNeil Partners, L.P.(2) 10.11 Termination Agreement, dated September 6, 1991, Southmark Management Corporation, Southmark Commercial Management, McNeil Real Estate Fund XII, Ltd. and McNeil Real Estate Management, Inc.(2) 10.12 Termination Agreement, dated September 6, 1991, between Brendon Way Associates Fund XII and McNeil Real Estate Management, Inc.(2) 10.13 Termination Agreement, dated September 6, 1991, between Castle Bluff XII Associates, L.P. and McNeil Real Estate Management, Inc.(2) 10.14 Revolving Credit Agreement, dated August 6, 1991, between McNeil Partners, L.P. and certain partnerships, including the Partnership.(2) 10.15 Amended Property Management Agreement, dated March 5, 1993, between McNeil Real Estate Fund XII, Ltd. and McNeil Real Estate Management, Inc. (3) 10.16 Second Modification of Deed of Trust Note, dated June 30, 1993, between American Mortgages, Inc. and Brendon Way XII Associates. (4) 10.17 Mortgage Note, dated March 24, 1995, between Plaza Westlake Fund XII, Ltd. and Bank One. 10.18 Promissory Note, dated October 13, 1995, between Palisades Fund XII Associates, L.P. and Fleet Real Estate Capital, Inc. 10.19 Mortgage Note, dated October 20, 1995, between Buccaneer Village Fund XII, Ltd. and Fleet Real Estate Capital, Inc. 10.20 Mortgage Note, dated October 31, 1995, between Millwood Park Fund XII, Ltd. and Fleet Real Estate Capital, Inc. 11. Statement regarding computation of Net Income per limited partnership unit (see Note 1 to Financial Statements)
Exhibit Number Description ------- ----------- 22. Following is a list of subsidiaries of the Partnership:
Names Under Jurisdiction Which It Is Name of Subsidiary Incorporation Doing Business ------------------ ------------- -------------- Brendon Way Fund XII Indiana None Associates Buccaneer Fund XII, Ltd. Texas None Castle Bluff Fund XII Georgia None Associates Millwood Park Fund Texas None Fund XII, Ltd. Palisades Fund XII Texas None Associates, L.P. Plaza Westlake Fund Texas None XII, Ltd.
(1) Incorporated by reference to the Annual Report of McNeil Real Estate Fund XII, Ltd. (File No. 0-10743), on Form 10-K for the period ended December 31, 1990, as filed with the Securities and Exchange Commission on March 29, 1991. (2) Incorporated by reference to the Annual Report of McNeil Real Estate Fund XII, Ltd. (File No. 0-10743), on Form 10-K for the period ended December 31, 1991, as filed with the Securities and Exchange Commission on March 29, 1992. (3) Incorporated by reference to the Annual Report of McNeil Real Estate Fund XII, Ltd. (File No. 0-10743), on Form 10-K for the period ended December 31, 1992, as filed with the Securities and Exchange Commission on March 30, 1993. (4) Incorporated by reference to the Annual Report of McNeil Real Estate Fund XII, Ltd. (File No. 0-10743), on Form 10-K for the period ended December 31, 1993, as filed with the Securities and Exchange Commission on March 30, 1994.
The Partnership has omitted instruments with respect to long-term debt where the amount of securities authorized thereunder does not exceed 10% of the total assets of the Partnership and its subsidiaries on a consolidated basis. The Partnership agrees to furnish a copy of each such instrument to the Commission upon request. (B) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended December 31, 1995. McNEIL REAL ESTATE FUND XII, LTD. A Limited Partnership SIGNATURE PAGE Pursuant to the requirements of Section 13 or 15(d) 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 XII, LTD. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner March 29, 1996 By: /s/ Robert A. McNeil - ------------------ ------------------------------------------------ Date Robert A. McNeil Chairman of the Board and Director (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
March 29, 1996 By: /s/ Donald K. Reed - -------------- ------------------------------------------------ Date Donald K. Reed President and Director of McNeil Investors, Inc. March 29, 1996 By: /s/ Ron K. Taylor - -------------- ------------------------------------------------- Date Ron K. Taylor Acting Chief Financial Officer of McNeil Investors, Inc. March 29, 1996 By: /s/ Brandon K. Flaming - -------------- ------------------------------------------------- Date Brandon K. Flaming Chief Accounting Officer of McNeil Real Estate Management, Inc.
EX-27 2
5 12-MOS DEC-31-1995 DEC-31-1995 5,791,363 0 212,476 (5,629) 0 0 79,599,343 (40,501,275) 52,112,866 0 59,160,426 0 0 0 0 52,112,866 17,533,914 21,195,706 0 0 13,647,332 0 6,364,949 0 0 1,183,425 0 1,304,587 0 2,488,012 0 0
EX-10.17 3 MORTGAGE NOTE Re: Plaza Westlake Shopping Center $4,000,000.00 March 24, 1995 Chicago, Illinois FOR VALUE RECEIVED, PLAZA WESTLAKE FUND XII, LTD., a Texas limited partnership ("Maker") hereby jointly and severally promises to pay to the order of Bank One, Chicago, NA, a national bank ("Lender") the principal sum of Four Million and no/100 Dollars ($4,000,000.00) ("Loan") (or so much thereof as shall have been disbursed by Lender from time-to-time to or on behalf of Maker), at the place and in the manner hereinafter provided, together with interest from the date hereof on the balance of the principal remaining from time-to-time unpaid at the rates described below. During the period commencing as of the date of the initial disbursement of the proceeds of the Loan ("Loan Opening Date") and continuing thereafter through January 31, 2000 ("Maturity Date"), unless Maker otherwise elects as provided below interest shall accrue on the outstanding principal balance of the Loan remaining from time-to-time unpaid under this Note prior to the Maturity Date at a rate per annum ("Initial Interest Rate") equal to the Prime Rate (as hereinafter defined), plus one percent (1.00%). For the purposes hereof, the term "Prime Rate" shall mean and refer to the annual rate of interest announced by Lender from time-to-time as its "Prime Rate," which is neither represented nor warranted by Lender to be the lowest or most advantageous rate of interest charged by Lender to its customers. The Initial Interest Rate shall change concurrently with each change in the Prime Rate, without Lender being required to give prior notice to Maker or any guarantor of this Note. Maker shall have a one time right, but not the obligation, to fix the interest rate at the Loan Opening Date ("Interest Rate Election"), at a fixed rate per annum equal to the level of the five-year Treasury issue maturing closest to the Maturity Date as designated by Lender, plus Two Hundred Fifty (250) basis points, i.e. two and one-half percent ("Election Interest Rate") and after such election the Loan shall bear interest at the Election Interest Rate. The Initial Interest Rate and/or the Election Interest Rate are sometimes referred to as the "Loan Rate". Interest accruing on the principal outstanding under either the Initial Interest Rate or the Election Interest Rate shall be: (a) computed on the basis of a year consisting of 360 days and (b) charged for the actual number of days within each monthly period in which any amounts remain outstanding under the Loan. The Loan shall be repaid on the first day of each month in equal monthly installments of principal, calculated on a twenty (20) year amortization of the original principal balance of the Loan, together with interest on the principal balance from time to time remaining unpaid at the applicable Loan Rate, with a balloon payment of all principal, plus accrued and unpaid interest and all fees and expenses due and payable to Lender on the Maturity Date. This Note evidences an arrangement, pursuant to which Lender may from time-to-time make loans or advances to or for the account of the Maker through means of drafts, items, orders for the payment of money, evidences of debt or similar written instruments, whether negotiable or nonnegotiable, signed by the Maker or a person authorized or permitted to do so on behalf of the Maker, which loans or advances are charged to an account in respect of which the Lender renders bills or statements to Maker at regular intervals, the amount of which statements are payable by Maker as herein provided. All advances shall have the priority of the original advance of funds evidenced by the Note. Lender shall not be obligated to advance sums in excess of the amount of the Loan hereunder. Any prepayments of the Loan, including, without limitation any amount of the Loan deemed by Lender to be repaid as a result of any partial repayments of the Loan, shall incur a prepayment penalty during the first twelve (12) months after the Loan Opening Date of one percent (1%) of the committed amount of the Loan (the "Prepayment Premium"). Thereafter, from the thirteenth (13th) month through the Maturity Date, Borrower may upon ten (10) days prior written notice prepay the entire amount of the Loan at par without premium. All payments on account of the indebtedness evidenced by this Note shall be first applied to accrued and unpaid interest on the unpaid principal balance of this Note, secondly, to all other sums then due Lender hereunder or under any of the Loan Documents, and the remainder, if any, to said unpaid principal balance. Any partial prepayments shall be applied to the installments due hereunder in the inverse order of their due date. After the Maturity Date, or the earlier acceleration of the indebtedness evidenced by this Note, or if said indebtedness has not been accelerated, during any period in which an Event of Default (as hereinafter defined) exists under this Note or any of the Loan Documents, Maker shall pay interest on the balance of principal remaining unpaid during any such period at an annual rate equal to four percent (4%) plus the applicable Loan Rate then in effect under this Note. The interest accruing under this paragraph shall be immediately due and payable by Maker to the holder of this Note and shall be additional indebtedness evidenced by this Note. In the event any payment of interest or principal due hereunder or any escrow fund payment or deposit for taxes or insurance due under the Mortgage (as hereinafter defined), other than amounts unpaid after maturity, is not made within fifteen (15) days after the date when any such payment is due in accordance with the terms hereof or thereof, then, in addition to the payment of the amount so due, Maker shall pay to Lender a "late charge" of five cents ($.05) for each whole dollar so overdue to defray part of the cost of collection and handling such late charge. Maker agrees that the damages to be sustained by the holder hereof for the detriment caused by any late payment is extremely difficult and impractical to ascertain, and that the amount of five cents ($.05) for each $1.00 due is a reasonable estimate of such damages, does not constitute interest, and is not a penalty. All payments of principal and interest hereunder shall be paid in coin or currency which, at the time or times of payment, is the legal tender for public and private debts in the United States of America and shall be made at such place as Lender or the legal holder or holders of this Note may from time to time appoint, and in the absence of such appointment, then at the offices of Lender at 14 South LaGrange Road, LaGrange, Illinois 60525-2491. Payment submitted in funds not available until collected shall continue to bear interest until collected. If payment hereunder becomes due and payable on a Saturday, Sunday or legal holiday under the laws of the State of Illinois, the due date thereof shall be extended to the next succeeding business day. and interest shall be payable thereon at the then applicable interest rate during such extension. Notwithstanding any provisions of this Note or any instrument securing payment of the indebtedness evidenced by this Note to the contrary, it is the intent of Maker and Lender that Lender shall never be entitled to receive, collect or apply as interest on principal of the indebtedness, any amount in excess of the maximum rate of interest permitted to be charged by applicable law; and if under any circumstance whatsoever, fulfillment of any provision of this Note, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by applicable law, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity; and in the event Lender ever receives, collects or applies as interest any such excess, such amount which would be excess interest shall be deemed a permitted partial prepayment of principal and treated hereunder as such; and if the principal of the indebtedness secured hereby is paid in full, any remaining excess funds shall forthwith be paid to Maker. In determining whether or not interest of any kind payable hereunder, under any specific contingency, exceeds the highest lawful rate, Maker and Lender shall, to the maximum extent permitted under applicable law, (1) characterize any non-principal payment as an expense, fee or premium rather than as interest and (2) amortize, prorate, allocate and spread, to the end that the interest on account of such indebtedness does not exceed the maximum amount permitted by applicable law; provided that if the amount of interest received for the actual period of existence thereof exceeds the maximum lawful rate, Lender shall refund to Maker the amount of such excess. Lender shall not be subject to any penalties provided by any laws for contracting for, charging or receiving interest in excess of the maximum lawful rate. This Note and any and all other liabilities and obligations and indebtedness of Maker to Lender, whether such liabilities, obligation or indebtedness are now existing or hereafter created, direct or indirect, absolute or contingent, joint or several, due or to become due, howsoever created, arising or evidenced, and howsoever acquired by Lender, are secured, inter alia, by the Security Agreement of even date herewith made by Maker, the Assignment of Rents and Leases of even date herewith made by Maker, and the Mortgage (the "Mortgage") of even date herewith made by the Maker to Lender creating a first mortgage lien on certain real property (the "Premises") legally described in Exhibit 1 attached to the Mortgage (the Mortgage and said security documents and any other document or instrument securing this Note or delivered to induce Lender to disburse the proceeds evidenced hereby are hereinafter collectively referred to as the "Loan Documents"). Reference is hereby made to the Loan Documents (which are incorporated herein by reference as fully and with the same effect as if set forth herein at length) for a legal description of the Premises, a statement of the covenants and agreements contained therein, a statement of the rights, remedies, and security afforded thereby, and all matters therein contained. The occurrence of any one or more of the following events shall constitute an "Event of Default" under this Note: (a) the failure by Maker to make payment of principal or interest as same becomes due and payable or payment of any other amount due to Lender under this Note, within ten (10) days after the date when any such payment is due in accordance with the terms hereof, or the failure of Maker to make payment of any amounts due to Lender under the Mortgage or any of the other Loan Documents within ten (10) days after written notice from Lender that any such payment is due in accordance with the terms thereof; or (b) the occurrence of any one or more of the "Events of Default" under paragraph 14 of the Mortgage; or (c) the occurrence of an "Event of Default" under the Certificate and Agreement or any other of the Loan Documents other than the Mortgage; or (d) the sale, assignment or other disposition of all or any portion of the Premises, or any interest in the Maker (including without limitation, the sale of any shares or any partnership interest, if any) in violation of paragraph 27 of the Mortgage. At the election of the holder hereof, and without notice, the principal balance remaining unpaid under this Note, and all unpaid interest accrued thereon, shall be and become immediately due and payable in full in the case of the occurrence of any Event of Default. Failure to exercise this option shall not constitute a waiver of the right to exercise same in the event of any subsequent Event of Default. No holder hereof shall, by any act of omission or commission, be deemed to waive any of its rights, remedies or powers hereunder or otherwise unless such waiver is in writing and signed by the holder hereof, and then only to the extent specifically set forth therein. The rights, remedies and powers of the holder hereof, as provided in this Note, the Mortgage and in all of the other Loan Documents are cumulative and concurrent, and may be pursued against Maker, any guarantor, the Premises and any other security given at any time to secure the repayment hereof, all at the sole discretion of the holder hereof. If any suit or action is instituted or attorneys are employed to collect this Note or any part thereof, or for the protection or enforcement of any or all of the security for this Note, whether or not any lawsuit is filed with respect thereto, Maker promises and agrees to pay all costs and expenses of every kind and nature of collection, protection and enforcement including reasonable attorneys' fees and court costs. Maker, any guarantor, and all others who now or may at any time become liable for all or any part of the obligations evidenced hereby, expressly agree hereby to be jointly and severally bound, and jointly and severally: (i) waive and renounce any and all homestead, redemption and exemption rights and the benefit of all valuation and appraisement privileges against the indebtedness evidenced by this Note or by any extension or renewal hereof; (ii) waive presentment and demand for payment, notices of nonpayment and of dishonor, protest of dishonor, and notice of protest; (iii) waive any and all notices in connection with the delivery and acceptance hereof and all other notices in connection with the performance, default, or enforcement of the payment hereof or hereunder, except as otherwise expressly provided in the Loan Documents; (iv) waive any and all lack of diligence and delays in the enforcement of the payment hereof; (v) agree that the liability of each Maker, guarantor, endorser or obligor shall be unconditional and without regard to the liability of any other person or entity for the payment hereof, and shall not in any manner be affected by any indulgence or forbearance granted or consented to by Lender to any of them with respect hereto; (vi) consent to any and all extensions of time, renewals, waivers, or modifications that may be granted by Lender with respect to the payment or other provisions hereof, and to the release of any security at any time given for the payment hereof, or any part thereof, with or without substitution, and to the release of any person or entity liable for the payment hereof; and (vii) consent to the addition of any and all other makers, endorsers, guarantors, and other obligors for the payment hereof, and to the acceptance of any and all other security for the payment hereof, and agree that the addition of any such makers, endorsers, guarantors or other obligors, or security shall not affect the liability of Maker. The proceeds of the loan evidenced by this Note will be used solely for the purposes specified in 815 ILCS 205/4 (1993), as amended, and the principal sum advanced is for a business loan which comes within the purview of such section. Maker agrees that the obligation evidenced by this Note is an exempted transaction under the Truth-In-Lending Act, 15 U.S.C., Section 1601, et seq. Time is of the essence hereof. This Note is governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the statutes, substantive laws and decisions of the State of Illinois. This Note may not be changed or amended orally but only by an instrument in writing signed by the party against whom enforcement of the change or amendment is sought. Lender shall in no event be construed for any purpose to be a partner, joint venturer, agent or associate of Maker or any beneficiary thereof or of any lessee, operator, concessionaire or licensee of Maker or any beneficiary thereof in the conduct of their respective businesses, and by the execution of this Note, Maker agrees to indemnify, defend, and hold Lender harmless from and against any and all damages, costs, expenses and liability that may be incurred by Lender as a result of a claim that Lender is such partner, joint venturer, agent or associate. This Note has been made and delivered at Chicago, Illinois and all funds disbursed to or for the benefit of Maker will be disbursed in Chicago, Illinois. In the event one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein or therein. Maker has executed this Note as of the day and year first written above. PLAZA WESTLAKE FUND XII, LTD., a Texas limited partnership By: PLAZA WESTLAKE CORP., a Delaware corporation By: /s/ Donald K. Reed ----------------------------------- Its: President Attest: /s/ Harriet C. Yates ------------------------------ Its: Secretary EX-10.18 4 PROMISSORY NOTE $10,600,000.00 October 13, 1995 FOR VALUE RECEIVED, PALISADES FUND XII ASSOCIATES, L.P., a Georgia limited partnership having its principal office at 13760 Noel Road, Suite 700, Dallas, Texas 75240 ("Maker") promises to pay to the order of FLEET REAL ESTATE CAPITAL, INC., a Rhode Island corporation, or its assigns ("Payee") having its principal office at 4275 Executive Square, Suite 200, La Jolla, California 92037, the Principal Amount (as defined below), together with interest from the date hereof at the Interest Rate (as defined below). Interest accruing hereunder shall be calculated on the basis of a 360-day year of twelve 30-day months. WHEN USED HEREIN, the following capitalized terms shall have the following meanings: "Commencement Date" shall be December 1, 1995. "Closing Date" shall be October 16, 1995. "Default Rate" shall be the Interest Rate plus five percent (5%) per annum. "Interest Rate" shall be eight and eight one hundredths percent (8.08%) per annum. "Lockout Period" shall be the period from October 16, 1995 through November 1, 1999. "Maturity Date" shall be October 16, 2002. "Monthly Amount" shall be the sum of Seventy-Eight Thousand Three Hundred Seventy-One and 01/100 Dollars ($78,371.01). "Payment Date" shall be the first business day of each month commencing on the first business day of the second full month after the Closing Date and continuing to and including the Maturity Date. "Principal Amount" shall be Ten Million Six Hundred Thousand and No/100 United States Dollars. The Principal Amount and interest thereon shall be due and payable in lawful money of the United States as follows: (a) On the date hereof, all accrued and unpaid interest on the unpaid balance through the end of the month in which the Closing Date occurs shall be due and payable. Thereafter, commencing on the Commencement Date, eighty-three (83) equal monthly installments of principal and interest at the Monthly Amount each shall be due and payable. Each installment of principal and interest shall be applied first to interest and the remainder thereof to reduction of principal. Each monthly installment shall be due on each Payment Date. In addition, all amounts advanced by Payee pursuant to applicable provisions of the Security Documents (as hereinafter defined), together with any interest at the Default Rate or other charges as therein provided, shall be immediately due and payable hereunder. In the event any such advance is not so repaid by Maker, Payee may, at its option, first apply any payments received hereunder to repay said advances together with any interest thereon or other charges as provided in the Security Documents, and the balance, if any, shall be applied in payment of any installment then due. The entire remaining unpaid balance of principal of this Note, all interest accrued thereon and all other sums payable hereunder or under the Security Documents shall be due and payable in full on the Maturity Date. (b) Amounts due on this Note shall be payable, without any counterclaim, setoff or deduction whatsoever, at the office of Payee or its agent or designee at the address set forth in Exhibit 1 or at such other place as Payee or its agent or designee may from time to time designate in writing. (c) This Note is secured by a Deed to Secure Debt, Security Agreement and Assignment of Rents and Leases of even date herewith (the "Mortgage") from Maker to Payee and by an Assignment of Rents and Leases of even date herewith (the "Assignment") from Maker to Payee. The Mortgage, the Assignment and any other instrument given at any time to secure this Note are hereinafter collectively called the "Security Documents." (d) This Note may not be prepaid prior to the end of the Lockout Period, except as set forth herein. Any prepayment of this Note, in whole or in part, prior to the end of the Lockout Period, except as permitted herein, shall constitute an "Event of Default" under the Mortgage. Maker has the right to prepay the principal of this Note in full or in part on any Payment Date after the end of the Lockout Period, upon sixty days' prior written notice and payment, together with the portion of the principal to be prepaid, of a prepayment premium in an amount calculated as specified in Appendix 1. The calculation of the prepayment premium shall be made by Payee and shall, absent manifest error, be conclusive. In the event this Note is prepaid from the proceeds of insurance or condemnation awards in accordance with Sections 10, 11 and 12 of the Mortgage either prior to or after the end of the Lockout Period, a prepayment premium shall be payable calculated as specified in Appendix 1. Notwithstanding the foregoing, this Note may be prepaid without a prepayment premium during the one hundred eighty (180) day period prior to the Maturity Date. Upon acceleration of this Note in accordance with its terms and the terms of the Security Documents, Maker agrees to pay the prepayment premium described above in the amount that would be due if a voluntary payment were made on the date of such acceleration. A tender of payment of the amount necessary to pay and satisfy the entire unpaid principal balance of this Note or any portion thereof at any time after an Event of Default under the Mortgage or an acceleration by Payee of the indebtedness evidenced hereby, whether such payment is tendered voluntarily, during or after foreclosure of the Mortgage, or pursuant to realization upon other security, shall constitute a purposeful evasion of the prepayment terms of this Note, shall be deemed to be a voluntary prepayment hereof, and Maker shall be required to pay the prepayment premium as described above. Partial prepayments of principal shall not change the Payment Dates or amounts of subsequent monthly installments, unless Payee shall otherwise agree in writing. Notwithstanding the foregoing, nothing in this paragraph (d) shall vary or negate the provisions of Section 18(c) of the Mortgage. (e) If Maker defaults in the payment of any installment of principal and interest on the date on which it shall fall due or in the performance of any of the agreements, conditions, covenants, provisions or stipulations contained in this Note or in the Security Documents, and if such default shall continue beyond any grace period provided for in the Mortgage so as to constitute an Event of Default thereunder, then Payee, at its option and without further notice to Maker, may declare immediately due and payable the entire unpaid principal balance of this Note, together with interest thereon at an annual rate after the date of such default equal to the Default Rate, together with all sums due by Maker under the Security Documents, anything herein or in the Security Documents to the contrary notwithstanding. The foregoing provision shall not be construed as a waiver by Payee of its right to pursue any other remedies available to it under the Mortgage, this Note or any other Security Document, nor shall it be construed to limit in any way the application of the Default Rate. Any payment hereunder may be enforced and recovered in whole or in part at such time by one or more of the remedies provided to Payee in this Note or in the Security Documents. In the event that: (i) this Note or any Security Document is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding; (ii) an attorney is retained to represent Payee in any bankruptcy, reorganization, receivership, or other proceedings affecting creditors' rights and involving a claim under this Note or any Security Document; (iii) an attorney is retained to protect or enforce the lien of the Mortgage or any Security Document; or (iv) an attorney is retained to represent Payee in any other proceedings whatsoever in connection with this Note, the Mortgage, any of the Security Documents or any portion of the Mortgaged Property (as defined in the Mortgage), then Maker shall pay to Payee all reasonable attorney's fees, costs and expenses incurred in connection therewith, including costs of appeal, together with interest on any judgment obtained by Payee at the Default Rate. (f) If Maker defaults in the payment of any monthly installment on the Payment Date, and such default is not cured within five days thereafter, then Maker shall pay to Payee a late payment charge in an amount equal to five percent (5%) of the amount of the installment not paid as aforesaid. Said late charge payments, if payable, shall be secured by the Mortgage and the other Security Documents, shall be payable without notice or demand by Payee, and are independent of and have no effect upon the rights of Payee under paragraph (e) above; provided, further Maker acknowledges and agrees that the late charge payments herein provided are not charges in the nature of interest imposed for the use of money advanced under this Note; rather, the late charge payment is imposed to compensate Payee for the expense, inconvenience and economic frustration experienced by Payee as a result of Maker's failure to make timely payments due hereunder, and are a reasonable forecast and estimate of Payee's actual damages and loss on account of such delinquent payments. (g) Maker and all endorsers, sureties and guarantors hereby jointly and severally waive all applicable exemption rights, valuation and appraisement, presentment for payment, demand, notice of demand, notice of nonpayment or dishonor, protest and notice of protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note. Maker and all endorsers, sureties and guarantors consent to any and all extensions of time, renewals, waivers or modifications that may be granted by Payee with respect to the payment or other provisions of this Note and to the release of the collateral or any part thereof, with or without substitution, and agree that additional makers, endorsers, guarantors or sureties may become parties hereto without notice to them or affecting their liability hereunder. (h) Payee shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by Payee, and then only to the extent specifically set forth in writing. A waiver of one event shall not be construed as continuing or as a bar to or waiver of any right or remedy to a subsequent event. (i) This Note shall be governed by and construed in accordance with the laws of the State in which the Mortgaged Property is located (the "State"). (j) The parties hereto intend and believe that each provision in this Note comports with all applicable law. However, if any provision in this Note is found by a court of law to be in violation of any applicable law, and if such court should declare such provision of this Note to be unlawful, void or unenforceable as written, then it is the intent of all parties hereto that such provision shall be given full force and effect to the fullest possible extent that is legal, valid and enforceable, that the remainder of this Note shall be construed as if such unlawful, void or unenforceable provision were not contained therein, and that the rights, obligations and interest of Maker and the holder hereof under the remainder of this Note shall continue in full force and effect; provided, however, that if any provision of this Note which is found to be in violation of any applicable law concerns the imposition of interest hereunder, the rights, obligations and interests of Maker and Payee with respect to the imposition of interest hereunder shall be governed and controlled by the provisions of the following paragraph. (k) It being the intention of Payee and Maker to comply with the laws of the State with regard to the rate of interest charged hereunder, it is agreed that, notwithstanding any provision to the contrary in this Note, the Mortgage, or any of the other Security Documents, no such provision, including without limitation any provision of this Note providing for the payment of interest or other charges, shall require the payment or permit the collection of any amount ("Excess Interest") in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by this Note. If any Excess Interest is provided for, or is adjudicated to be provided for, in this Note, the Mortgage, or any of the other Security Documents, then in such event: (i) the provisions of this paragraph shall govern; (ii) Maker shall not be obligated to pay any Excess Interest; (iii) any Excess Interest that Payee may have received hereunder shall, at the option of Payee, be (x) applied as a credit against the unpaid principal balance then due under this Note, accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (y) refunded to the payor thereof or (z) any combination of the foregoing; (iv) the applicable interest rate or rates provided for herein shall be automatically subject to reduction to the maximum lawful rate allowed to be contracted for in writing under the applicable usury laws of the aforesaid State, and this Note, the Mortgage and the other Security Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in such interest rate or rates; and (v) in determining whether or not the rate of interest hereunder exceeds the maximum rate permitted by the laws of the State, Maker and Payee agree and intend that all sums paid hereunder which are deemed interest for the purpose of determining usury shall be prorated, allocated or spread in equal parts over the longest period of time permitted under the applicable laws of the State. Furthermore, although prepayment premium and late charge payments specified herein (collectively the "Charges") are not intended to be, nor shall they be construed to be, charges in the nature of interest imposed for the use of money advanced under this Note, in no event shall such Charges exceed an amount which, when added to interest accrued hereunder from the date of this Note to the date of collection of such Charges, is equal to five percent (5.0%) per month of the outstanding principal balance from time to time of this Note. (vi) Maker shall not have any action or remedy against Payee for any damages whatsoever or any defense to enforcement of this Note, Mortgage or any other Security Document arising out of the payment or collection of any Excess Interest. (l) Upon any endorsement, assignment, or other transfer of this Note by Payee or by operation of law, the term "Payee," as used herein, shall mean such endorsee, assignee, or other transferee or successor to Payee then becoming the holder of this Note. This Note shall inure to the benefit of Payee and its successors and assigns and shall be binding upon the undersigned and its successors and assigns. The term "Maker" as used herein shall include the respective successors and assigns, legal and personal representatives, executors, administrators, devisees, legatees and heirs of Maker. (m) Any notice, demand or other communication which any party may desire or may be required to give to any other party shall be in writing and shall be given as provided in the Mortgage. (n) To the extent that Maker makes a payment or Payee receives any payment or proceeds for Maker's benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the obligations of Maker hereunder intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Payee. (o) Maker shall execute and acknowledge (or cause to be executed and acknowledged) and deliver to Payee all documents, and take all actions, reasonably required by Payee from time to time to confirm the rights created or now or hereafter intended to be created under this Note and the Security Documents, to protect and further the validity, priority and enforceability of this Note and the Security Documents, to subject to the Security Documents any property of Maker intended by the terms of any one or more of the Security Documents to be encumbered by the Security Documents, or otherwise carry out the purposes of the Security Documents and the transactions contemplated thereunder; provided, however, that no such further actions, assurances and confirmations shall increase Maker's obligations under this Note. (p) No modification, amendment, extension, discharge, termination or waiver (a "Modification") of any provision of this Note, or any one or more of the other Security Documents, nor consent to any departure by Maker therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on, Maker shall entitle Maker to any other or future notice or demand in the same, similar or other circumstances. Payee does not hereby agree to, nor does Payee hereby commit itself to, enter into any Modification. (q) Maker hereby expressly and unconditionally waives, in connection with any suit, action or proceeding brought by Payee on this Note, any and every right it may have to (a) a trial by jury, (b) interpose any counterclaim therein (other than a counterclaim which can only be asserted in the suit, action or proceeding brought by Payee on this Note and cannot be maintained in a separate action) and (c) have the same consolidated with any other or separate suit, action or proceeding. (r) Except as hereinafter provided, notwithstanding any provision to the contrary in the Mortgage or this Note, Payee shall not have any recourse to any asset of Maker or its partners other than the Mortgaged Property in order to satisfy the indebtedness for payment of the principal and interest evidenced by this Note, and Payee's sole recourse for satisfaction of the payment of principal and interest evidenced by this Note shall be to exercise its rights against the Mortgaged Property encumbered by the Mortgage and the other collateral securing this Note. The foregoing sentence shall not be deemed or construed to be a release of the indebtedness evidenced by this Note or in any way impair, limit or otherwise affect the lien of the Mortgage or any such other instrument securing repayment of this Note or prevent Payee from naming Maker, its partners, or their successors or assigns as a defendant to any action to enforce any remedy for default so long as there is no personal or deficiency money judgment sought or entered against Maker, its partners, or their successors or assigns for payment of principal and interest evidenced by this Note. Notwithstanding the foregoing provisions of this paragraph, it is expressly understood and agreed that the aforesaid limitation of liability shall in no way affect or apply to Maker's or its partners' continued personal liability for the payment to Payee of: (i) any loss or damage occurring by reason of all or any part of the Mortgaged Property being encumbered by a voluntary lien (other than the Mortgage) granted by Maker; (ii) any Rents (as defined in the Mortgage), issues, profits and/or income collected by Maker in excess of normal and verifiable operating expenses from the Mortgaged Property after default by Maker hereunder, under the Mortgage or under any other instrument securing or referring to this Note; (iii) unrefunded security deposits made by tenants of the Mortgaged Property; (iv) payment of Taxes, as defined in Section 5 of the Mortgage, and insurance premiums, payment of which is required to be made by Maker under the Mortgage; (v) Rents, security deposits with respect to leases of the Mortgaged Property, insurance proceeds, condemnation awards, specifically including, but not limited to, the Condemnation Proceeds, as defined in Section 9 of the Mortgage, and any other payments or consideration which Maker receives and to which Payee is entitled pursuant to the terms of the Mortgage or of any other Security Document; (vi) damage to the Mortgaged Property from waste committed or permitted by Maker; (vii) loss or damage occurring by reason of the failure of Maker to comply with any of the provisions of Section 35 of the Mortgage; (viii) any loss or claim incurred by or asserted against Payee as a result of fraud or misrepresentation by Maker or any of the partners thereof with respect to any certification, representation or warranty made by Maker or such other persons to Payee herein or in any of the Security Documents; (ix) all indebtedness and obligations arising under or pursuant to that certain Environmental Indemnity dated of even date herewith executed by Maker, the general partner of Maker and McNeil Real Estate Fund XII, Ltd. for the benefit of Payee; and (x) reasonable attorney's fees incurred by Payee in connection with suit filed on account of any of the foregoing clauses (i) through (ix). Whenever reference is made herein to payment of "reasonable attorney's fees" or words of similar import, such reference shall refer to and mean payment of actual attorney's fees incurred based upon the attorney's normal hourly rates and amount of time expended, and not attorney's fees as defined in O.C.G.A. 13-1-11. Any term or provision of this Note or any of the Security Documents to the contrary notwithstanding, in the event Maker receives the Condemnation Proceeds (as that term is defined in Section 9 of the Mortgage) and fails to immediately deliver all such Condemnation Proceeds to Payee, or its designated agent, in accordance with Section 9 of the Mortgage, then the outstanding principal balance of this Note, together with all accrued and unpaid interest hereon, and together with any and all other amounts due under any of the Security Documents, shall be immediately due and payable by Maker to Payee, in full, without any notice of acceleration by Payee to Maker, with interest to accrue thereon at the Default Rate. In addition, as specified in paragraph (r)(v) above, Maker, and its partners, and McNeil Real Estate Fund XII, Ltd., a California limited partnership, shall have personal liability for the payment of any Condemnation Proceeds received by Maker and not delivered to Payee in accordance with Section 9 of the Mortgage. IN WITNESS WHEREOF, Maker has caused this Note to be executed, under seal, and delivered as of the day and year first above written. PALISADES FUND XII ASSOCIATES, L.P., a Georgia limited partnership By: Palisades Apartment Corp., a Nevada corporation, General Partner By: /s/ Ron K. Taylor --------------------- Name: Ron K. Taylor Title: Vice President (CORPORATE SEAL) APPENDIX 1 Calculation of Prepayment Premium The prepayment premium shall be equal to the greater of (A) one percent (1%) of the portion of the principal amount of this Note being repaid or (B) the product of (i) a fraction whose numerator is an amount equal to the portion of the principal balance of this Note being prepaid and whose denominator is the entire outstanding principal balance of this Note on the date of such prepayment (after subtracting the amount of any scheduled principal payment due on such Payment Date), multiplied by (ii) an amount equal to the remainder obtained by subtracting (x) an amount equal to the entire outstanding principal balance of this Note as of the date of such prepayment (after subtracting the amount of any scheduled principal payment due on such Payment Date) from (y) the present value as of the date of such prepayment of the remaining scheduled payments of principal and interest on this Note (including any final installment of principal payable on the Maturity Date) determined by discounting such payments at the Discount Rate (as hereinafter defined). For purposes of this Note: (x) "Discount Rate" shall mean the rate which, when compounded monthly, is equivalent to the Treasury Rate (defined below); and (y) "Treasury Rate" shall mean the yield calculated by the linear interpolation of the yield, as reported in Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading "U.S. government securities/Treasury constant maturities" for the week ending prior to the date of the relevant prepayment of this Note, of U.S. Treasury constant maturities with a maturity date (one longer and one shorter) most nearly approximating the Maturity Date of this Note. In the event Release H.15 is no longer published, the Payee shall select a comparable publication to determine the Treasury Rate. EXHIBIT 1 Amounts due on this note shall be payable to Fleet Real Estate Capital, Inc. at the following address: Fleet Real Estate Capital, Inc. 4275 Executive Square Suite 200 La Jolla, CA 92037 Loan No.: 55-9508024 EX-10.19 5 Loan No. 55-9507022 MORTGAGE NOTE $5,500,000.00 October 20, 1995 FOR VALUE RECEIVED, BUCCANEER VILLAGE FUND XII, LTD., a Texas limited partnership having its principal office at 13760 Noel Road, Suite 700, Dallas, Texas 75240 ("Maker") promises to pay to the order of FLEET REAL ESTATE CAPITAL, INC., a Rhode Island corporation, or its assigns ("Payee") having its principal office at 4275 Executive Square, Suite 200, La Jolla, California 92037, the Principal Amount (as defined below), together with interest from the date hereof at the Interest Rate (as defined below). Interest accruing hereunder shall be calculated on the basis of a 360-day year of twelve 30-day months. WHEN USED HEREIN, the following capitalized terms shall have the following meanings: "Commencement Date" shall be December 1, 1995. "Closing Date" shall be October 24, 1995. "Default Rate" shall be the Interest Rate plus five percent (5%) per annum. "Interest Rate" shall be eight and ten one hundredths percent (8.10%) per annum. "Lockout Period" shall be the period from October 24, 1995 through November 1, 1999. "Maturity Date" shall be October 24, 2002. "Monthly Amount" shall be the sum of Forty Thousand Seven Hundred Forty-One and 12/100 Dollars ($40,741.12). "Payment Date" shall be the first business day of each month commencing on the first business day of the second full month after the closing date and continuing to and including the Maturity Date. "Principal Amount" shall be Five Million Five Hundred Thousand and No/100 United States Dollars. The Principal Amount and interest thereon shall be due and payable in lawful money of the United States as follows: (a) On the date hereof, all accrued and unpaid interest on the unpaid balance through the end of the month in which the Closing Date occurs shall be due and payable. Thereafter, commencing on the Commencement Date, eighty-three (83) equal monthly installments of principal and interest at the Monthly Amount each shall be due and payable. Each installment of principal and interest shall be applied first to interest and the remainder thereof to reduction of principal. Each monthly installment shall be due on each Payment Date. In addition, all amounts advanced by Payee pursuant to applicable provisions of the Security Documents (as hereinafter defined), together with any interest at the Default Rate or other charges as therein provided, shall be immediately due and payable hereunder. In the event any such advance is not so repaid by Maker, Payee may, at its option, first apply any payments received hereunder to repay said advances together with any interest thereon or other charges as provided in the Security Documents, and the balance, if any, shall be applied in payment of any installment then due. The entire remaining unpaid balance of principal of this Note, all interest accrued thereon and all other sums payable hereunder or under the Security Documents shall be due and payable in full on the Maturity Date. (b) Amounts due on this Note shall be payable, without any counterclaim, setoff or deduction whatsoever, at the office of Payee or its agent or designee at the address set forth in Exhibit 1 or at such other place as Payee or its agent or designee may from time to time designate in writing. (c) This Note is secured by a Deed of Trust, Mortgage, Security Agreement and Assignment of Rents and Leases of even date herewith (the "Mortgage") from Maker to Payee and by an Assignment of Rents and Leases of even date herewith (the "Assignment") from Maker to Payee. The Mortgage, the Assignment and any other instrument given at any time to secure this Note are hereinafter collectively called the "Security Documents." (d) This Note may not be prepaid prior to the end of the Lockout Period, except as set forth herein. Any prepayment of this Note, in whole or in part, prior to the end of the Lockout Period, except as permitted herein, shall constitute an "Event of Default" under the Mortgage. Maker has the right to prepay the principal of this Note in full or in part on any Payment Date after the end of the Lockout Period, upon sixty days' prior written notice and payment, together with the portion of the principal to be prepaid, of a prepayment premium in an amount calculated as specified in Appendix 1. The calculation of the prepayment premium shall be made by Payee and shall, absent manifest error, be conclusive. In the event this Note is prepaid from the proceeds of insurance or condemnation awards in accordance with Sections 10, 11 and 12 of the Mortgage either prior to or after the end of the Lockout Period, a prepayment premium shall be payable calculated as specified in Appendix 1. Notwithstanding the foregoing, this Note may be prepaid without a prepayment premium during the one hundred eighty (180) day period prior to the Maturity Date. Upon acceleration of this Note in accordance with its terms and the terms of the Security Documents, Maker agrees to pay the prepayment premium described above in the amount that would be due if a voluntary payment were made on the date of such acceleration. A tender of payment of the amount necessary to pay and satisfy the entire unpaid principal balance of this Note or any portion thereof at any time after an Event of Default under the Mortgage or an acceleration by Payee of the indebtedness evidenced hereby, whether such payment is tendered voluntarily, during or after foreclosure of the Mortgage, or pursuant to realization upon other security, shall constitute a purposeful evasion of the prepayment terms of this Note, shall be deemed to be a voluntary prepayment hereof, and Maker shall be required to pay the prepayment premium as described above. Partial prepayments of principal shall not change the Payment Dates or amounts of subsequent monthly installments, unless Payee shall otherwise agree in writing. Notwithstanding the foregoing, nothing in this paragraph (d) shall vary or negate the provisions of Section 18(c) of the Mortgage. (e) If Maker defaults in the payment of any installment of principal and interest on the date on which it shall fall due or in the performance of any of the agreements, conditions, covenants, provisions or stipulations contained in this Note or in the Security Documents, and if such default shall continue beyond any grace period provided for in the Mortgage so as to constitute an Event of Default thereunder, then Payee, at its option and without further notice to Maker, may declare immediately due and payable the entire unpaid principal balance of this Note, together with interest thereon at an annual rate after the date of such default equal to the Default Rate, together with all sums due by Maker under the Security Documents, anything herein or in the Security Documents to the contrary notwithstanding. The foregoing provision shall not be construed as a waiver by Payee of its right to pursue any other remedies available to it under the Mortgage, this Note or any other Security Document, nor shall it be construed to limit in any way the application of the Default Rate. Any payment hereunder may be enforced and recovered in whole or in part at such time by one or more of the remedies provided to Payee in this Note or in the Security Documents. In the event that: (i) this Note or any Security Document is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding; (ii) an attorney is retained to represent Payee in any bankruptcy, reorganization, receivership, or other proceedings affecting creditors' rights and involving a claim under this Note or any Security Document; (iii) an attorney is retained to protect or enforce the lien of the Mortgage or any Security Document; or (iv) an attorney is retained to represent Payee in any other proceedings whatsoever in connection with this Note, the Mortgage, any of the Security Documents or any portion of the Mortgaged Property (as defined in the Mortgage), then Maker shall pay to Payee all reasonable attorney's fees, costs and expenses incurred in connection therewith, including costs of appeal, together with interest on any judgment obtained by Payee at the Default Rate. (f) If Maker defaults in the payment of any monthly installment on the Payment Date, and such default is not cured within five days thereafter, then Maker shall pay to Payee a late payment charge in an amount equal to five percent (5%) of the amount of the installment not paid as aforesaid. Said late charge payments, if payable, shall be secured by the Mortgage and the other Security Documents, shall be payable without notice or demand by Payee, and are independent of and have no effect upon the rights of Payee under paragraph (e) above. (g) Maker and all endorsers, sureties and guarantors hereby jointly and severally waive all applicable exemption rights, valuation and appraisement, presentment for payment, demand, notice of demand, notice of nonpayment or dishonor, protest and notice of protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note. Maker and all endorsers, sureties and guarantors consent to any and all extensions of time, renewals, waivers or modifications that may be granted by Payee with respect to the payment or other provisions of this Note and to the release of the collateral or any part thereof, with or without substitution, and agree that additional makers, endorsers, guarantors or sureties may become parties hereto without notice to them or affecting their liability hereunder. (h) Payee shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by Payee, and then only to the extent specifically set forth in writing. A waiver of one event shall not be construed as continuing or as a bar to or waiver of any right or remedy to a subsequent event. (i) This Note shall be governed by and construed in accordance with the laws of the State in which the Mortgaged Property is located (the "State"). (j) The parties hereto intend and believe that each provision in this Note comports with all applicable law. However, if any provision in this Note is found by a court of law to be in violation of any applicable law, and if such court should declare such provision of this Note to be unlawful, void or unenforceable as written, then it is the intent of all parties hereto that such provision shall be given full force and effect to the fullest possible extent that is legal, valid and enforceable, that the remainder of this Note shall be construed as if such unlawful, void or unenforceable provision were not contained therein, and that the rights, obligations and interest of Maker and the holder hereof under the remainder of this Note shall continue in full force and effect; provided, however, that if any provision of this Note which is found to be in violation of any applicable law concerns the imposition of interest hereunder, the rights, obligations and interests of Maker and Payee with respect to the imposition of interest hereunder shall be governed and controlled by the provisions of the following paragraph. (k) It being the intention of Payee and Maker to comply with the laws of the State with regard to the rate of interest charged hereunder, it is agreed that, notwithstanding any provision to the contrary in this Note, the Mortgage, or any of the other Security Documents, no such provision, including without limitation any provision of this Note providing for the payment of interest or other charges, shall require the payment or permit the collection of any amount ("Excess Interest") in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by this Note. If any Excess Interest is provided for, or is adjudicated to be provided for, in this Note, the Mortgage, or any of the other Security Documents, then in such event: (i) the provisions of this paragraph shall govern; (ii) Maker shall not be obligated to pay any Excess Interest; (iii) any Excess Interest that Payee may have received hereunder shall, at the option of Payee, be (x) applied as a credit against the unpaid principal balance then due under this Note, accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (y) refunded to the payor thereof or (z) any combination of the foregoing; (iv) the applicable interest rate or rates provided for herein shall be automatically subject to reduction to the maximum lawful rate allowed to be contracted for in writing under the applicable usury laws of the aforesaid State, and this Note, the Mortgage and the other Security Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in such interest rate or rates; and (v) Maker shall not have any action or remedy against Payee for any damages whatsoever or any defense to enforcement of this Note, Mortgage or any other Security Document arising out of the payment or collection of any Excess Interest. (l) Upon any endorsement, assignment, or other transfer of this Note by Payee or by operation of law, the term "Payee," as used herein, shall mean such endorsee, assignee, or other transferee or successor to Payee then becoming the holder of this Note. This Note shall inure to the benefit of Payee and its successors and assigns and shall be binding upon the undersigned and its successors and assigns. The term "Maker" as used herein shall include the respective successors and assigns, legal and personal representatives, executors, administrators, devisees, legatees and heirs of Maker. (m) Any notice, demand or other communication which any party may desire or may be required to give to any other party shall be in writing and shall be given as provided in the Mortgage. (n) To the extent that Maker makes a payment or Payee receives any payment or proceeds for Maker's benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the obligations of Maker hereunder intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Payee. (o) Maker shall execute and acknowledge (or cause to be executed and acknowledged) and deliver to Payee all documents, and take all actions, reasonably required by Payee from time to time to confirm the rights created or now or hereafter intended to be created under this Note and the Security Documents, to protect and further the validity, priority and enforceability of this Note and the Security Documents, to subject to the Security Documents any property of Maker intended by the terms of any one or more of the Security Documents to be encumbered by the Security Documents, or otherwise carry out the purposes of the Security Documents and the transactions contemplated thereunder; provided, however, that no such further actions, assurances and confirmations shall increase Maker's obligations under this Note. (p) No modification, amendment, extension, discharge, termination or waiver (a "Modification") of any provision of this Note, or any one or more of the other Security Documents, nor consent to any departure by Maker therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on, Maker shall entitle Maker to any other or future notice or demand in the same, similar or other circumstances. Payee does not hereby agree to, nor does Payee hereby commit itself to, enter into any Modification. (q) Maker hereby expressly and unconditionally waives, in connection with any suit, action or proceeding brought by Payee on this Note, any and every right it may have to (a) a trial by jury, (b) interpose any counterclaim therein (other than a counterclaim which can only be asserted in the suit, action or proceeding brought by Payee on this Note and cannot be maintained in a separate action) and (c) have the same consolidated with any other or separate suit, action or proceeding. (r) Notwithstanding any provision to the contrary in the Mortgage or this Note, Payee shall not have any recourse to any asset of Maker or its partners other than the Mortgaged Property in order to satisfy the indebtedness for payment of the principal and interest evidenced by this Note, and Payee's sole recourse for satisfaction of the payment of principal and interest evidenced by this Note shall be to exercise its rights against the Mortgaged Property encumbered by the Mortgage and the other collateral securing this Note. The foregoing sentence shall not be deemed or construed to be a release of the indebtedness evidenced by this Note or in any way impair, limit or otherwise affect the lien of the Mortgage or any such other instrument securing repayment of this Note or prevent Payee from naming Maker, its partners, or their successors or assigns as a defendant to any action to enforce any remedy for default so long as there is no personal or deficiency money judgment sought or entered against Maker, its partners, or their successors or assigns for payment of principal and interest evidenced by this Note. Notwithstanding the foregoing provisions of this paragraph, it is expressly understood and agreed that the aforesaid limitation of liability shall in no way affect or apply to Maker's or its partners' continued personal liability for the payment to Payee of: (i) any loss or damage occurring by reason of all or any part of the Mortgaged Property being encumbered by a voluntary lien (other than the Mortgage) granted by Maker; (ii) any Rents (as defined in the Mortgage), issues, profits and/or income collected by Maker in excess of normal and verifiable operating expenses from the Mortgaged Property after default by Maker hereunder, under the Mortgage or under any other instrument securing or referring to this Note; (iii) unrefunded security deposits made by tenants of the Mortgaged Property; (iv) payment of Taxes, as defined in Section 5 of the Mortgage, and insurance premiums, payment of which is required to be made by Maker under the Mortgage; (v) Rents, security deposits with respect to leases of the Mortgaged Property, insurance proceeds, condemnation awards and any other payments or consideration which Maker receives and to which Payee is entitled pursuant to the terms of the Mortgage or of any other Security Document; (vi) damage to the Mortgaged Property from waste committed or permitted by Maker; (vii) loss or damage occurring by reason of the failure of Maker to comply with any of the provisions of Section 35 of the Mortgage; (viii) any loss or claim incurred by or asserted against Payee as a result of fraud or misrepresentation by Maker or any of the partners thereof with respect to any certification, representation or warranty made by Maker or such other persons to Payee herein or in any of the Security Documents; (ix) all indebtedness and obligations arising under or pursuant to that certain Environmental Indemnity dated of even date herewith executed by Maker, the general partner of Maker and McNeil Real Estate Fund XII, Ltd. for the benefit of Payee; and (x) reasonable attorney's fees incurred by Payee in connection with suit filed on account of any of the foregoing clauses (i) through (ix). IN WITNESS WHEREOF, Maker has caused this Note to be executed and delivered as of the day and year first above written. BUCCANEER VILLAGE FUND XII, LTD. a Texas limited partnership By: Buccaneer Village Fund XII Corp., a Delaware corporation, General Partner By:/s/ Ron K. Taylor -------------------- Name: Ron K. Taylor Title: Vice President APPENDIX 1 Calculation of Prepayment Premium The prepayment premium shall be equal to the greater of (A) one percent (1%) of the portion of the principal amount of this Note being repaid or (B) the product of (i) a fraction whose numerator is an amount equal to the portion of the principal balance of this Note being prepaid and whose denominator is the entire outstanding principal balance of this Note on the date of such prepayment (after subtracting the amount of any scheduled principal payment due on such Payment Date), multiplied by (ii) an amount equal to the remainder obtained by subtracting (x) an amount equal to the entire outstanding principal balance of this Note as of the date of such prepayment (after subtracting the amount of any scheduled principal payment due on such Payment Date) from (y) the present value as of the date of such prepayment of the remaining scheduled payments of principal and interest on this Note (including any final installment of principal payable on the Maturity Date) determined by discounting such payments at the Discount Rate (as hereinafter defined). For purposes of this Note: (x) "Discount Rate" shall mean the rate which, when compounded monthly, is equivalent to the Treasury Rate (defined below); and (y) "Treasury Rate" shall mean the yield calculated by the linear interpolation of the yield, as reported in Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading "U.S. government securities/Treasury constant maturities" for the week ending prior to the date of the relevant prepayment of this Note, of U.S. Treasury constant maturities with a maturity date (one longer and one shorter) most nearly approximating the Maturity Date of this Note. In the event Release H.15 is no longer published, the Payee shall select a comparable publication to determine the Treasury Rate. EXHIBIT 1 Amounts due on this note shall be payable to Fleet Real Estate Capital, Inc. at the following address: Fleet Real Estate Capital, Inc. 4275 Executive Square Suite 200 La Jolla, CA 92037 Loan No.: 55-9507022 EX-10.20 6 Loan No. 55-9509026 MORTGAGE NOTE $3,982,500.00 October 31, 1995 FOR VALUE RECEIVED, MILLWOOD PARK FUND XII, LTD., a Texas limited partnership having its principal office at 13760 Noel Road, Suite 700, Dallas, Texas 75240 ("Maker") promises to pay to the order of FLEET REAL ESTATE CAPITAL, INC., a Rhode Island corporation, or its assigns ("Payee") having its principal office at 4275 Executive Square, Suite 200, La Jolla, California 92037, the Principal Amount (as defined below), together with interest from the date hereof at the Interest Rate (as defined below). Interest accruing hereunder shall be calculated on the basis of a 360-day year of twelve 30-day months. WHEN USED HEREIN, the following capitalized terms shall have the following meanings: "Commencement Date" shall be December 1, 1995. "Closing Date" shall be October 31, 1995. "Default Rate" shall be the Interest Rate plus five percent (5%) per annum. "Interest Rate" shall be eight and ten one hundredths percent (8.10%) per annum. "Lockout Period" shall be the period from October 31, 1995 through November 1, 1999. "Maturity Date" shall be October 31, 2002. "Monthly Amount" shall be the sum of Twenty Nine Thousand Five Hundred and 28/100 Dollars ($29,500.28). "Payment Date" shall be the first business day of each month commencing on the first business day of the second full month after the Closing Date and continuing to and including the Maturity Date. "Principal Amount" shall be Three Million Nine Hundred Eighty-Two Thousand Five Hundred and No/100 United States Dollars. The Principal Amount and interest thereon shall be due and payable in lawful money of the United States as follows: (a) On the date hereof, all accrued and unpaid interest on the unpaid balance through the end of the month in which the Closing Date occurs shall be due and payable. Thereafter, commencing on the Commencement Date, eighty-three (83) equal monthly installments of principal and interest at the Monthly Amount each shall be due and payable. Each installment of principal and interest shall be applied first to interest and the remainder thereof to reduction of principal. Each monthly installment shall be due on each Payment Date. In addition, all amounts advanced by Payee pursuant to applicable provisions of the Security Documents (as hereinafter defined), together with any interest at the Default Rate or other charges as therein provided, shall be immediately due and payable hereunder. In the event any such advance is not so repaid by Maker, Payee may, at its option, first apply any payments received hereunder to repay said advances together with any interest thereon or other charges as provided in the Security Documents, and the balance, if any, shall be applied in payment of any installment then due. The entire remaining unpaid balance of principal of this Note, all interest accrued thereon and all other sums payable hereunder or under the Security Documents shall be due and payable in full on the Maturity Date. (b) Amounts due on this Note shall be payable, without any counterclaim, setoff or deduction whatsoever, at the office of Payee or its agent or designee at the address set forth in Exhibit 1 or at such other place as Payee or its agent or designee may from time to time designate in writing. (c) This Note is secured by a Deed of Trust, Mortgage, Security Agreement and Assignment of Rents and Leases of even date herewith (the "Mortgage") from Maker to Payee and by an Assignment of Rents and Leases of even date herewith (the "Assignment") from Maker to Payee. The Mortgage, the Assignment and any other instrument given at any time to secure this Note are hereinafter collectively called the "Security Documents." (d) This Note may not be prepaid prior to the end of the Lockout Period, except as set forth herein. Any prepayment of this Note, in whole or in part, prior to the end of the Lockout Period, except as permitted herein, shall constitute an "Event of Default" under the Mortgage. Maker has the right to prepay the principal of this Note in full or in part on any Payment Date after the end of the Lockout Period, upon sixty days' prior written notice and payment, together with the portion of the principal to be prepaid, of a prepayment premium in an amount calculated as specified in Appendix 1. The calculation of the prepayment premium shall be made by Payee and shall, absent manifest error, be conclusive. In the event this Note is prepaid from the proceeds of insurance or condemnation awards in accordance with Sections 10, 11 and 12 of the Mortgage either prior to or after the end of the Lockout Period, a prepayment premium shall be payable calculated as specified in Appendix 1. Notwithstanding the foregoing, this Note may be prepaid without a prepayment premium during the one hundred eighty (180) day period prior to the Maturity Date. Upon acceleration of this Note in accordance with its terms and the terms of the Security Documents, Maker agrees to pay the prepayment premium described above in the amount that would be due if a voluntary payment were made on the date of such acceleration. A tender of payment of the amount necessary to pay and satisfy the entire unpaid principal balance of this Note or any portion thereof at any time after an Event of Default under the Mortgage or an acceleration by Payee of the indebtedness evidenced hereby, whether such payment is tendered voluntarily, during or after foreclosure of the Mortgage, or pursuant to realization upon other security, shall constitute a purposeful evasion of the prepayment terms of this Note, shall be deemed to be a voluntary prepayment hereof, and Maker shall be required to pay the prepayment premium as described above. Partial prepayments of principal shall not change the Payment Dates or amounts of subsequent monthly installments, unless Payee shall otherwise agree in writing. Notwithstanding the foregoing, nothing in this paragraph (d) shall vary or negate the provisions of Section 18(c) of the Mortgage. (e) If Maker defaults in the payment of any installment of principal and interest on the date on which it shall fall due or in the performance of any of the agreements, conditions, covenants, provisions or stipulations contained in this Note or in the Security Documents, and if such default shall continue beyond any grace period provided for in the Mortgage so as to constitute an Event of Default thereunder, then Payee, at its option and without further notice to Maker, may declare immediately due and payable the entire unpaid principal balance of this Note, together with interest thereon at an annual rate after the date of such default equal to the Default Rate, together with all sums due by Maker under the Security Documents, anything herein or in the Security Documents to the contrary notwithstanding. The foregoing provision shall not be construed as a waiver by Payee of its right to pursue any other remedies available to it under the Mortgage, this Note or any other Security Document, nor shall it be construed to limit in any way the application of the Default Rate. Any payment hereunder may be enforced and recovered in whole or in part at such time by one or more of the remedies provided to Payee in this Note or in the Security Documents. In the event that: (i) this Note or any Security Document is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding; (ii) an attorney is retained to represent Payee in any bankruptcy, reorganization, receivership, or other proceedings affecting creditors' rights and involving a claim under this Note or any Security Document; (iii) an attorney is retained to protect or enforce the lien of the Mortgage or any Security Document; or (iv) an attorney is retained to represent Payee in any other proceedings whatsoever in connection with this Note, the Mortgage, any of the Security Documents or any portion of the Mortgaged Property (as defined in the Mortgage), then Maker shall pay to Payee all reasonable attorney's fees, costs and expenses incurred in connection therewith, including costs of appeal, together with interest on any judgment obtained by Payee at the Default Rate. (f) If Maker defaults in the payment of any monthly installment on the Payment Date, and such default is not cured within five days thereafter, then Maker shall pay to Payee a late payment charge in an amount equal to five percent (5%) of the amount of the installment not paid as aforesaid. Said late charge payments, if payable, shall be secured by the Mortgage and the other Security Documents, shall be payable without notice or demand by Payee, and are independent of and have no effect upon the rights of Payee under paragraph (e) above. (g) Maker and all endorsers, sureties and guarantors hereby jointly and severally waive all applicable exemption rights, valuation and appraisement, presentment for payment, demand, notice of demand, notice of nonpayment or dishonor, protest and notice of protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note. Maker and all endorsers, sureties and guarantors consent to any and all extensions of time, renewals, waivers or modifications that may be granted by Payee with respect to the payment or other provisions of this Note and to the release of the collateral or any part thereof, with or without substitution, and agree that additional makers, endorsers, guarantors or sureties may become parties hereto without notice to them or affecting their liability hereunder. (h) Payee shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by Payee, and then only to the extent specifically set forth in writing. A waiver of one event shall not be construed as continuing or as a bar to or waiver of any right or remedy to a subsequent event. (i) This Note shall be governed by and construed in accordance with the laws of the State in which the Mortgaged Property is located (the "State"). (j) The parties hereto intend and believe that each provision in this Note comports with all applicable law. However, if any provision in this Note is found by a court of law to be in violation of any applicable law, and if such court should declare such provision of this Note to be unlawful, void or unenforceable as written, then it is the intent of all parties hereto that such provision shall be given full force and effect to the fullest possible extent that is legal, valid and enforceable, that the remainder of this Note shall be construed as if such unlawful, void or unenforceable provision were not contained therein, and that the rights, obligations and interest of Maker and the holder hereof under the remainder of this Note shall continue in full force and effect; provided, however, that if any provision of this Note which is found to be in violation of any applicable law concerns the imposition of interest hereunder, the rights, obligations and interests of Maker and Payee with respect to the imposition of interest hereunder shall be governed and controlled by the provisions of the following paragraph. (k) It being the intention of Payee and Maker to comply with the laws of the State with regard to the rate of interest charged hereunder, it is agreed that, notwithstanding any provision to the contrary in this Note, the Mortgage, or any of the other Security Documents, no such provision, including without limitation any provision of this Note providing for the payment of interest or other charges, shall require the payment or permit the collection of any amount ("Excess Interest") in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by this Note. If any Excess Interest is provided for, or is adjudicated to be provided for, in this Note, the Mortgage, or any of the other Security Documents, then in such event: (i) the provisions of this paragraph shall govern; (ii) Maker shall not be obligated to pay any Excess Interest; (iii) any Excess Interest that Payee may have received hereunder shall, at the option of Payee, be (x) applied as a credit against the unpaid principal balance then due under this Note, accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (y) refunded to the payor thereof or (z) any combination of the foregoing; (iv) the applicable interest rate or rates provided for herein shall be automatically subject to reduction to the maximum lawful rate allowed to be contracted for in writing under the applicable usury laws of the aforesaid State, and this Note, the Mortgage and the other Security Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in such interest rate or rates; (v) in determining whether or not the rate of interest hereunder exceeds the maximum rate permitted by the laws of the State, Maker and Payee agree and intend that all sums paid hereunder which are deemed interest for the purpose of determining usury shall be prorated, allocated or spread in equal parts over the longest period of time permitted under the applicable laws of the State; and (vi) Maker shall not have any action or remedy against Payee for any damages whatsoever or any defense to enforcement of this Note, Mortgage or any other Security Document arising out of the payment or collection of any Excess Interest. (l) Upon any endorsement, assignment, or other transfer of this Note by Payee or by operation of law, the term "Payee," as used herein, shall mean such endorsee, assignee, or other transferee or successor to Payee then becoming the holder of this Note. This Note shall inure to the benefit of Payee and its successors and assigns and shall be binding upon the undersigned and its successors and assigns. The term "Maker" as used herein shall include the respective successors and assigns, legal and personal representatives, executors, administrators, devisees, legatees and heirs of Maker. (m) Any notice, demand or other communication which any party may desire or may be required to give to any other party shall be in writing and shall be given as provided in the Mortgage. (n) To the extent that Maker makes a payment or Payee receives any payment or proceeds for Maker's benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the obligations of Maker hereunder intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Payee. (o) Maker shall execute and acknowledge (or cause to be executed and acknowledged) and deliver to Payee all documents, and take all actions, reasonably required by Payee from time to time to confirm the rights created or now or hereafter intended to be created under this Note and the Security Documents, to protect and further the validity, priority and enforceability of this Note and the Security Documents, to subject to the Security Documents any property of Maker intended by the terms of any one or more of the Security Documents to be encumbered by the Security Documents, or otherwise carry out the purposes of the Security Documents and the transactions contemplated thereunder; provided, however, that no such further actions, assurances and confirmations shall increase Maker's obligations under this Note. (p) No modification, amendment, extension, discharge, termination or waiver (a "Modification") of any provision of this Note, or any one or more of the other Security Documents, nor consent to any departure by Maker therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on, Maker shall entitle Maker to any other or future notice or demand in the same, similar or other circumstances. Payee does not hereby agree to, nor does Payee hereby commit itself to, enter into any Modification. (q) Maker hereby expressly and unconditionally waives, in connection with any suit, action or proceeding brought by Payee on this Note, any and every right it may have to (a) a trial by jury, (b) interpose any counterclaim therein (other than a counterclaim which can only be asserted in the suit, action or proceeding brought by Payee on this Note and cannot be maintained in a separate action) and (c) have the same consolidated with any other or separate suit, action or proceeding. (r) Except as hereinafter provided, notwithstanding any provision to the contrary in the Mortgage or this Note, Payee shall not have any recourse to any asset of Maker or its partners other than the Mortgaged Property in order to satisfy the indebtedness for payment of the principal and interest evidenced by this Note, and Payee's sole recourse for satisfaction of the payment of principal and interest evidenced by this Note shall be to exercise its rights against the Mortgaged Property encumbered by the Mortgage and the other collateral securing this Note. The foregoing sentence shall not be deemed or construed to be a release of the indebtedness evidenced by this Note or in any way impair, limit or otherwise affect the lien of the Mortgage or any such other instrument securing repayment of this Note or prevent Payee from naming Maker, its partners, or their successors or assigns as a defendant to any action to enforce any remedy for default so long as there is no personal or deficiency money judgment sought or entered against Maker, its partners, or their successors or assigns for payment of principal and interest evidenced by this Note. Notwithstanding the foregoing provisions of this paragraph, it is expressly understood and agreed that the aforesaid limitation of liability shall in no way affect or apply to Maker's or its partners' continued personal liability for the payment to Payee of: (i) any loss or damage occurring by reason of all or any part of the Mortgaged Property being encumbered by a voluntary lien (other than the Mortgage) granted by Maker; (ii) any Rents (as defined in the Mortgage), issues, profits and/or income collected by Maker in excess of normal and verifiable operating expenses from the Mortgaged Property after default by Maker hereunder, under the Mortgage or under any other instrument securing or referring to this Note; (iii) unrefunded security deposits made by tenants of the Mortgaged Property; (iv) payment of Taxes, as defined in Section 5 of the Mortgage, and insurance premiums, payment of which is required to be made by Maker under the Mortgage; (v) Rents, security deposits with respect to leases of the Mortgaged Property, insurance proceeds, condemnation awards, and any other payments or consideration which Maker receives and to which Payee is entitled pursuant to the terms of the Mortgage or of any other Security Document; (vi) damage to the Mortgaged Property from waste committed or permitted by Maker; (vii) loss or damage occurring by reason of the failure of Maker to comply with any of the provisions of Section 35 of the Mortgage; (viii) any loss or claim incurred by or asserted against Payee as a result of fraud or misrepresentation by Maker or any of the partners thereof with respect to any certification, representation or warranty made by Maker or such other persons to Payee herein or in any of the Security Documents; (ix) all indebtedness and obligations arising under or pursuant to that certain Environmental Indemnity dated of even date herewith executed by Maker, the general partner of Maker and McNeil Real Estate Fund XII, Ltd. for the benefit of Payee; and (x) reasonable attorney's fees incurred by Payee in connection with suit filed on account of any of the foregoing clauses (i) through (ix). IN WITNESS WHEREOF, Maker has caused this Note to be executed and delivered as of the day and year first above written. MILLWOOD PARK FUND XII, LTD., a Texas limited partnership By: Millwood Park Corp., a Delaware corporation, General Partner By: /s/ Ron K. Taylor ----------------------- Name: Ron K. Taylor Title: Vice President APPENDIX 1 Calculation of Prepayment Premium The prepayment premium shall be equal to the greater of (A) one percent (1%) of the portion of the principal amount of this Note being repaid or (B) the product of (i) a fraction whose numerator is an amount equal to the portion of the principal balance of this Note being prepaid and whose denominator is the entire outstanding principal balance of this Note on the date of such prepayment (after subtracting the amount of any scheduled principal payment due on such Payment Date), multiplied by (ii) an amount equal to the remainder obtained by subtracting (x) an amount equal to the entire outstanding principal balance of this Note as of the date of such prepayment (after subtracting the amount of any scheduled principal payment due on such Payment Date) from (y) the present value as of the date of such prepayment of the remaining scheduled payments of principal and interest on this Note (including any final installment of principal payable on the Maturity Date) determined by discounting such payments at the Discount Rate (as hereinafter defined). For purposes of this Note: (x) "Discount Rate" shall mean the rate which, when compounded monthly, is equivalent to the Treasury Rate (defined below); and (y) "Treasury Rate" shall mean the yield calculated by the linear interpolation of the yield, as reported in Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading "U.S. government securities/Treasury constant maturities" for the week ending prior to the date of the relevant prepayment of this Note, of U.S. Treasury constant maturities with a maturity date (one longer and one shorter) most nearly approximating the Maturity Date of this Note. In the event Release H.15 is no longer published, the Payee shall select a comparable publication to determine the Treasury Rate. EXHIBIT 1 Amounts due on this note shall be payable to Fleet Real Estate Capital, Inc. at the following address: Fleet Real Estate Capital, Inc. 4275 Executive Square Suite 200 La Jolla, CA 92037 Loan No.: 55-9508024 -----END PRIVACY-ENHANCED MESSAGE-----