-----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, G1rEU/P2lHEnZUWZ5swO+Qw/M0wJTqLEY6OkazS5CUj1+3rDbkq4EQZZXAK7u8Sr Ym7g/V7/FfuFmDI8cwZBvw== 0000351708-98-000012.txt : 19981118 0000351708-98-000012.hdr.sgml : 19981118 ACCESSION NUMBER: 0000351708-98-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 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-Q SEC ACT: SEC FILE NUMBER: 000-10743 FILM NUMBER: 98750153 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-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 ----------------------------------------- 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 600, LB70, Dallas, Texas, 75240 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (972) 448-5800 ----------------------------- Indicate by check mark whether the registrant, (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ---------------------------- MCNEIL REAL ESTATE FUND XII, LTD. BALANCE SHEETS (Unaudited)
September 30, December 31, 1998 1997 ------------ ------------ ASSETS - ------ Real estate investments: Land .......................................................... $ 4,534,618 $ 4,534,618 Buildings and improvements .................................... 59,252,670 58,352,857 ------------ ------------ 63,787,288 62,887,475 Less: Accumulated depreciation and amortization .............. (39,067,304) (36,754,194) ------------ ------------ 24,719,984 26,133,281 Asset held for sale .............................................. -- 9,303,533 Cash and cash equivalents ........................................ 6,485,230 1,423,658 Cash segregated for security deposits ............................ 317,549 456,356 Accounts receivable .............................................. 225,298 165,311 Prepaid expenses and other assets ................................ 103,590 139,468 Escrow deposits .................................................. 1,343,025 1,350,788 Deferred borrowing costs, net of accumulated amorti- zation of $542,917 and $767,891 at September 30, 1998 and December 31, 1997, respectively ...................... 1,441,403 1,544,702 ------------ ------------ $ 34,636,079 $ 40,517,097 ============ ============ LIABILITIES AND PARTNERS' DEFICIT - --------------------------------- Mortgage notes payable ........................................... $ 41,260,737 $ 54,200,372 Accounts payable ................................................. -- 9,996 Accrued expenses ................................................. 137,415 277,958 Accrued interest ................................................. 285,390 378,010 Accrued property taxes ........................................... 689,851 932,545 Deferred gain - land condemnation ................................ 297,754 297,754 Advance from Southmark ........................................... 41,615 39,839 Advances from affiliates - General Partner ....................... 34,119 32,136 Payable to affiliates - General Partner .......................... 4,879,438 4,573,052 Security deposits and deferred rental revenue .................... 343,381 519,042 ------------ ------------ 47,969,700 61,260,704 ------------ ------------ Partners' deficit: Limited partners - 240,000 limited partnership units authorized; 229,666 and 229,690 limited partnership units issued and outstanding at September 30, 1998 and December 31, 1997, respectively ......................... (2,999,151) (10,579,935) General Partner ............................................... (10,334,470) (10,163,672) ------------ ------------ (13,333,621) (20,743,607) ------------ ------------ $ 34,636,079 $ 40,517,097 ============ ============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. MCNEIL REAL ESTATE FUND XII, LTD. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------- -------------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Revenue: Rental revenue .................... $ 3,147,850 $ 3,924,806 $ 10,493,265 $ 11,568,267 Interest .......................... 106,627 19,659 199,814 69,467 Gain on sale of real estate........ -- -- 9,568,850 -- ------------ ------------ ------------ ------------ Total revenue ................... 3,254,477 3,944,465 20,261,929 11,637,734 ------------ ------------ ------------ ------------ Expenses: Interest .......................... 915,917 1,201,099 3,053,653 3,616,416 Interest - affiliates ............. 669 669 1,983 1,974 Depreciation and amortization .................... 791,549 893,123 2,313,110 2,828,041 Property taxes .................... 229,674 303,171 768,023 909,513 Personnel expenses ................ 336,864 508,319 1,163,605 1,369,512 Utilities ......................... 213,388 274,895 821,746 962,545 Repair and maintenance ............ 452,238 636,937 1,373,665 1,669,184 Property management fees - affiliates ............... 155,257 194,795 512,659 578,327 Other property operating expenses ........................ 178,567 240,491 550,517 657,487 General and administrative ........ 91,013 69,645 458,991 170,405 General and administrative - affiliates ...................... 66,752 54,110 210,159 165,713 ------------ ------------ ------------ ------------ Total expenses .................. 3,431,888 4,377,254 11,228,111 12,929,117 ------------ ------------ ------------ ------------ Net income (loss) .................... $ (177,411) $ (432,789) $ 9,033,818 $ (1,291,383) ============ ============ ============ ============ Net income (loss) allocable to limited partners ............... $ (537,834) $ (411,150) $ 8,582,128 $ (1,226,814) Net income (loss) allocable to General Partner ................ 360,423 (21,639) 451,690 (64,569) ------------ ------------ ------------ ------------ Net income (loss) .................... $ (177,411) $ (432,789) $ 9,033,818 $ (1,291,383) ============ ============ ============ ============ Net income (loss) per limited partnership unit .................. $ (2.34) $ (1.79) $ 37.37 $ (5.34) ============ ============ ============ ============ Distributions per limited partnership unit .................. $ 4.36 $ -- $ 4.36 $ -- ============ ============ ============ ============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. MCNEIL REAL ESTATE FUND XII, LTD. STATEMENTS OF PARTNERS' DEFICIT (Unaudited) For the Nine Months Ended September 30, 1998 and 1997
Total General Limited Partners' Partner Partners Deficit ------------- ------------- ------------- Balance at December 31, 1996 ............ $ (9,232,451) $ (9,148,979) $(18,381,430) Net loss ................................ (64,569) (1,226,814) (1,291,383) Management Incentive Distribution........ (631,697) -- (631,697) ------------ ------------ ------------ Balance at September 30, 1997 ........... $ (9,928,717) $(10,375,793) $(20,304,510) ============ ============ ============ Balance at December 31, 1997 ............ $(10,163,672) $(10,579,935) $(20,743,607) Net income .............................. 451,690 8,582,128 9,033,818 Management Incentive Distribution ....... (622,488) -- (622,488) Distribution to limited partners ........ -- (1,001,344) (1,001,344) ------------ ------------ ------------ Balance at September 30, 1998 ........... $(10,334,470) $ (2,999,151) $(13,333,621) ============ ============ ============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. MCNEIL REAL ESTATE FUND XII, LTD. STATEMENTS OF CASH FLOWS (Unaudited) Increase (Decrease) in Cash and Cash Equivalents
Nine Months Ended September 30, ---------------------------------- 1998 1997 -------------- ------------- Cash flows from operating activities: Cash received from tenants ................... $ 10,387,896 $ 11,646,198 Cash paid to suppliers ....................... (4,518,315) (4,785,620) Cash paid to affiliates ...................... (638,920) (1,025,834) Interest received ............................ 199,814 69,467 Interest paid ................................ (3,041,198) (3,515,888) Property taxes paid .......................... (959,296) (996,509) ------------ ------------ Net cash provided by operating activities........ 1,429,981 1,391,814 ------------ ------------ Cash flows from investing activities: Additions to real estate investments ......... (899,813) (1,244,560) Additions to assets held for sale ............ (9,438) -- Proceeds from sale of real estate ............ 18,881,821 -- ------------ ------------ Net cash provided by (used in) investing activities ......................... 17,972,570 (1,244,560) ------------ ------------ Cash used in financing activities: Principal payments on mortgage notes payable .................................... (416,574) (487,936) Retirement of mortgage note payable .......... (12,523,061) -- Management Incentive Distribution paid ....... (400,000) -- Distributions to limited partners ............ (1,001,344) -- ------------ ------------ Net cash used in financing activities ........... (14,340,979) (487,936) ------------ ------------ Net increase (decrease) in cash and cash equivalents .................................. 5,061,572 (340,682) Cash and cash equivalents at beginning of period ....................................... 1,423,658 1,768,249 ------------ ------------ Cash and cash equivalents at end of period ...... $ 6,485,230 $ 1,427,567 ============ ============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financialstatements. MCNEIL REAL ESTATE FUND XII, LTD. STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities
Nine Months Ended September 30, ------------------------------- 1998 1997 ----------- ----------- Net income (loss) ........................................ $ 9,033,818 $(1,291,383) ----------- ----------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization ......................... 2,313,110 2,828,041 Amortization of deferred borrowing costs .............. 103,299 104,537 Net interest added on advances from affiliates - General Partner ........................ 1,983 1,974 Net interest added on advances from Southmark ........................................... 1,776 1,768 Gain on sale of real estate ........................... (9,568,850) -- Changes in assets and liabilities: Cash segregated for security deposits ............... 138,807 (11,684) Accounts receivable ................................. (59,987) 88,630 Prepaid expenses and other assets ................... 35,878 29,748 Escrow deposits ..................................... 7,763 (277,172) Accounts payable .................................... (9,996) (7,412) Accrued expenses .................................... (140,543) (23,752) Accrued interest .................................... (92,620) (5,777) Accrued property taxes .............................. (242,694) 198,862 Payable to affiliates - General Partner ............. 83,898 (281,794) Security deposits and deferred rental revenue ........................................... (175,661) 37,228 ----------- ----------- Total adjustments ................................. (7,603,837) 2,683,197 ----------- ----------- Net cash provided by operating activities ................ $ 1,429,981 $ 1,391,814 =========== ===========
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XII, LTD. Notes to Financial Statements (Unaudited) September 30, 1998 NOTE 1. - ------- McNeil Real Estate Fund XII, Ltd. (the "Partnership") was organized February 2, 1981 as a limited partnership organized under the provisions of the California Uniform Limited Partnership Act. The general partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil. The Partnership is governed by an amended and restated limited partnership agreement, dated September 6, 1991 (the "Amended Partnership Agreement"). The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240. In the opinion of management, the financial statements reflect all adjustments necessary for a fair presentation of the Partnership's financial position and results of operations. All adjustments were of a normal recurring nature. However, the results of operations for the nine months ended September 30, 1998 are not necessarily indicative of the results to be expected for the year ending December 31, 1998. NOTE 2. - ------- The financial statements should be read in conjunction with the financial statements contained in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1997, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Real Estate Fund XII, Ltd., c/o McNeil Real Estate Management, Inc., Investor Services, 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240. NOTE 3. - ------- The Partnership pays property management fees equal to 5% of the gross rental receipts of the Partnership's properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management services for the Partnership's residential and commercial properties and leasing services for its residential properties. McREMI may choose to provide leasing services for the Partnership's commercial properties, in which case McREMI will receive a property management fee from such commercial properties equal to 3% of the property's gross rental receipts plus 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. Affiliates of the General Partner have advanced funds to the Partnership to meet working capital requirements. These advances accrue interest at a rate equal to the prime lending rate plus 1%. Under terms of the Amended Partnership Agreement, the Partnership is paying a Management Incentive Distribution ("MID") to the General Partner. The maximum MID is calculated as 1% of the tangible asset value of the Partnership. The maximum MID percentage decreases subsequent to 1999. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $10,000 per apartment unit for residential property and $50 per gross square foot for commercial property to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible items. MID will be paid to the extent of the lesser of the Partnership's excess cash flow, as defined, or net operating income, as defined, 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 limited partnership ("Units") will be deferred and is payable, without interest, from the first available cash and/or (ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of Units issued in payment of the MID is based on the greater of $50 per Unit or the net tangible asset value, as defined, per Unit. Any amount of the MID that is paid to the General Partner in Units will be treated as if cash is distributed to the General Partner and is then contributed to the Partnership by the General Partner. The MID represents a return of equity to the General Partner for increasing cash flow, as defined, and accordingly is treated as a distribution. Compensation, reimbursements and distributions paid to or accrued for the benefit of the General Partner and its affiliates are as follows:
Nine Months Ended September 30, ------------------------ 1998 1997 -------- -------- Property management fees - affiliates ................. $512,659 $578,327 Interest - affiliates ................................. 1,983 1,974 Charged to general and administrative affiliates: Partnership administration ......................... 210,159 165,713 -------- -------- $724,801 $746,014 ======== ======== Charged to General Partner's deficit: MID ................................................ $622,488 $631,697 ======== ========
NOTE 4. - ------- The Partnership has become aware of the presence of certain solvent based contamination in ground water under a portion of the Lodge at Aspen Grove. The source of the contamination is related to a documented release of solvents from underground storage tanks located at a Colorado Department of Transportation ("CDOT") facility nearby. The Partnership has been informed that CDOT, as the responsible party, has agreed to remediate the property to comply with state and federal standards. CDOT has submitted a corrective action plan to the Colorado Department of Public Health and Environment and implementation of the plan is ongoing. The Partnership is unable to estimate impairment, if any, to the property at this time. However, due to the existence and involvement of the responsible party, the Partnership does not believe that this event has a material impact on the accompanying financial statements. NOTE 5. - ------- On April 7, 1998, the Partnership sold to an unaffiliated buyer, Channingway Apartments, a 770 unit apartment complex, located in Columbus, Ohio, for a cash sales price of $19,150,000. Cash proceeds from this transaction, as well as the gain on sale are detailed below. Gain on Sale Cash Proceeds ------------ ------------- Cash sales price .......................... $ 19,150,000 $ 19,150,000 Selling costs ............................. (268,179) (268,179) Basis of real estate sold ................. (9,312,971) ------------ ------------ Gain on sale of real estate ............... $ 9,568,850 ============ Proceeds from sale of real estate ......... 18,881,821 Retirement of mortgage note payable........ (12,523,061) ------------ Net cash proceeds ......................... $ 6,358,760 ============ NOTE 6. - ------- On October 5, 1998, the Partnership made an early payoff of the Plaza Westlake mortgage loan for approximately $3.7 million. NOTE 7. - ------- James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint). The action involves purported class and derivative actions brought by limited partners of each of the fourteen limited partnerships that were named as nominal defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. Defendants filed a demurrer to the consolidated and amended complaint and a motion to strike on February 14, 1997, seeking to dismiss the consolidated and amended complaint in all respects. A hearing on Defendant's demurrer and motion to strike was held on May 5, 1997. The Court granted Defendants' demurrer, dismissing the consolidated and amended complaint with leave to amend. On October 31, 1997, the Plaintiffs filed a second consolidated and amended complaint. The case was stayed pending settlement discussions. A Stipulation of Settlement dated September 15, 1998 has been signed by the parties. Preliminary Court approval was received on October 6, 1998. A hearing on final Court approval is scheduled for December 17, 1998. Plaintiff's counsel intend to seek an order awarding attorney's fees and reimbursements of their out-of-pocket expenses. The amount of such award is undeterminable until final approval is received from the court. Fees and expenses shall be allocated amongst the Partnerships on a pro rata basis, based upon tangible asset value of each such partnership, less total liabilities, calculated in accordance with the Amended Partnership Agreements for the quarter most recently ended. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- 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 September 30, 1998, the Partnership owned four apartment properties and one shopping center. Four of the Partnership's properties are subject to mortgage notes. The Partnership recorded a $9,568,850 gain on the sale of Channingway Apartments. Net proceeds from the sale, after repayment of the related mortgage note, amounted to $6,358,760. The net proceeds from the sale were added to the Partnership's balance of cash reserves. On September 30, 1998, the Partnership distributed $1,001,344 ($4.36 per limited partnership unit) to the limited partners. The distribution was funded from the recent sale of Channingway Apartments. RESULTS OF OPERATIONS - --------------------- Revenue: Partnership rental revenues decreased $776,956 and $1,075,002 for the three and nine months ended September 30, 1998 as compared to the same period last year. Excluding the effects of the sale of Channingway Apartments, Partnership revenues increased $930,347 or 8% for the nine months ended September 30, 1998. Greater cash reserves led to an increase of $130,347 in interest income for the nine months ended September 30, 1998. Rental revenues increased at all of the Partnership's five remaining properties. The property reporting the largest increase in rental revenue, on a percentage basis, were Plaza Westlake and Brendon Way Apartments. The increase in rent on Plaza Westlake is due to an increase in contingent rents billed, as compared to the prior year, while the increase at Brendon Way Apartments is primarily due to greater occupancy during 1998. The Lodge at Aspen Grove increased base rental rates 7%, but the increase was partially offset by decreased occupancy rates. The remainder of the Partnership's properties reported small increases in rental revenue. Expenses: Partnership expenses decreased $945,366 and $1,701,006 or 13% for the three and nine months ended September 30, 1998 as compared to the same period last year. Excluding the effects of the sale of Channingway Apartments, Partnership expenses increased $318,816 or 3% for the nine months ended September 30, 1998. The Partnership incurred slight decreases in utilities and other property operating expenses. These expenses were offset by increases in general and administrative and general and administrative - affiliates. General and administrative expenses increased $288,586 for the nine months ended September 30, 1998 as compared to the same period last year. The increase was mainly due to costs incurred to explore alternatives to maximize the value of the Partnership (see Liquidity and Capital Resources). The increase was partially offset by decreases attributable to investor services. During 1997, charges for investor services were provided by a third party vendor and beginning with 1998, these services are provided by affiliates of the General Partner. General and administrative-affiliate expenses increased $44,446 for the nine months ended September 30, 1998 as compared to the same period of 1997. The increase is due to the change in investor relation charges as discussed above. All other remaining expense categories remained comparable to the same period last year. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- During the first nine months of 1998, the Partnership provided $1,429,981 in cash from operations as compared to $1,391,814 in cash from operations in 1997. The $38,167 increase can be attributed to the decreases in cash paid to affiliates, cash paid to suppliers, interest and property taxes paid offset by the decrease in cash received from tenants in the first nine months of 1998 as compared to the same period in 1997. The Partnership expended $909,251 and $1,244,560 for capital improvements to its properties for the nine months ended September 30, 1998 and 1997, respectively. The Partnership also received proceeds of $18,881,821 for the sale of Channingway in April 1998. Total principal payments on mortgage notes payable were $416,574 for the nine months ended September 30, 1998 as compared to $487,936 for the same period in 1997. The Partnership used $12,523,061 of the proceeds from the Channingway sale to retire the mortgage note payable on the property. During the third quarter the Partnership also paid $400,000 in MID and $1,001,344 in distributions to the limited partners. Short-term liquidity: At September 30, 1998, the Partnership held cash and cash equivalents of $6,485,230. The General Partner believes that anticipated operating results for 1998 will be sufficient to fund the Partnership's budgeted $1.2 million in capital improvements for 1998 and to repay the current portion of the Partnership's mortgage notes. On October 5, 1998, the Partnership made an early payoff of the Plaza Westlake mortgage loan for approximately $3.7 million. This early retirement will reduce annual interest costs approximately $86,000 and $350,000 for 1998 and 1999, respectively, hence increasing cash flow. Long-term liquidity: For the long-term, property operations will remain the primary source of funds. In this regard, the General Partner expects that the capital improvements made by the Partnership during the past will yield improved cash flow from property operations in the future. If the Partnership's cash position deteriorates, the General Partner may elect to defer certain of the capital improvements, except where such improvements are expected to increase the competitiveness or marketability of the Partnership's properties. As previously announced, the Partnership has retained PaineWebber, Incorporated ("PaineWebber") as its exclusive financial advisor to explore alternatives to maximize the value of the Partnership including, without limitation, a transaction in which limited partnership interests in the Partnership are converted into cash. The Partnership, through PaineWebber, has provided financial and other information to interested parties and is currently conducting discussions with one such party in an attempt to reach a definitive agreement with respect to a sale transaction. It is possible that the General Partner and its affiliates will receive non-cash consideration for their ownership interests in connection with any such transaction. There can be no assurance that any such agreement will be reached nor the terms thereof. Income (loss) allocation and distributions: Terms of the Amended Partnership Agreement specify that income (loss) before depreciation is allocated to the General Partner to the extent of MID paid in cash. Depreciation is allocated in the ratio of 95:5 to the limited partners and the General Partner, respectively. Therefore, for the nine months ended September 30, 1998 and 1997, $451,690 and $(64,569), respectively, was allocated to the General Partner. The limited partners received allocations of $8,582,128 and $(1,226,814) for the nine months ended September 30, 1998 and 1997, respectively. On September 30, the Partnership paid its first distribution to the limited partners since 1986 in the amount of $1,001,344. The distribution was funded from the recent sale of Channingway Apartments. The General Partner will continue to monitor the cash reserves, and working capital needs to determine when cash flows will support additional distributions to the limited partners. Forward-Looking Information: Within this document, certain statements are made as to the expected occupancy trends, financial condition, results of operations, and cash flows of the Partnership for periods after September 30, 1998. All of these statements are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical and involve risks and uncertainties. The Partnership's actual occupancy trends, financial condition, results of operations, and cash flows for future periods may differ materially due to several factors. These factors include, but are not limited to, the Partnership's ability to control costs, make necessary capital improvements, negotiate sales or refinancings of its properties, and respond to changing economic and competitive factors. Other Information: Management has reviewed its information technology infrastructure to identify any systems that could be affected by the year 2000 problem. The year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in major systems failure or miscalculations. The information systems used by the Partnership for financial reporting and significant accounting functions were made year 2000 compliant during recent systems conversions. Management is in the process of evaluating the mechanical and embedded technological systems at the various properties. Management intends to inventory all such systems and query suppliers, vendors and manufacturers to determine year 2000 compliance. In circumstances of non-compliance management will work with the vendor to remedy the problem or seek alternative suppliers who will be in compliance. Management believes that the remediation of any outstanding year 2000 conversion issues will not have a material or adverse effect on the Partnership's operations. However, no estimates can be made as to the potential adverse impact resulting from the failure of third party service providers and vendors to be year 2000 compliant. Management is in the process of identifying those risks as well as developing a contingency plan to mitigate potential adverse effects from non-compliance. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint). The action involves purported class and derivative actions brought by limited partners of each of the fourteen limited partnerships that were named as nominal defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. Defendants filed a demurrer to the consolidated and amended complaint and a motion to strike on February 14, 1997, seeking to dismiss the consolidated and amended complaint in all respects. A hearing on Defendant's demurrer and motion to strike was held on May 5, 1997. The Court granted Defendants' demurrer, dismissing the consolidated and amended complaint with leave to amend. On October 31, 1997, the Plaintiffs filed a second consolidated and amended complaint. The case was stayed pending settlement discussions. A Stipulation of Settlement dated September 15, 1998 has been signed by the parties. Preliminary Court approval was received on October 6, 1998. A hearing on final Court approval is scheduled for December 17, 1998. Plaintiff's counsel intend to seek an order awarding attorney's fees and reimbursements of their out-of-pocket expenses. The amount of such award is undeterminable until final approval is received from the court. Fees and expenses shall be allocated amongst the Partnerships on a pro rata basis, based upon tangible asset value of each such partnership, less total liabilities, calculated in accordance with the Amended Partnership Agreements for the quarter most recently ended. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- (a) Exhibits. Exhibit Number Description ------- ----------- 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). 11. Statement regarding computation of net loss per limited partnership unit: net loss per limited partnership unit is computed by dividing net loss allocated to the limited partners by the number of limited partnership units outstanding. Per unit information has been computed based on 229,666 and 229,690 limited partnership units outstanding in 1998 and 1997. 27. Financial Data Schedule for the quarter ended September 30, 1998. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended September 30, 1998. McNEIL REAL ESTATE FUND XII, LTD. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized: McNEIL REAL ESTATE FUND XII, Ltd. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner November 16, 1998 By: /s/ Ron K. Taylor - ----------------- ------------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) November 16, 1998 By: /s/ Brandon K. Flaming - ----------------- ------------------------------------------- Date Brandon K. Flaming Vice President of McNeil Investors, Inc. (Principal Accounting Officer) EX-27 2
5 9-MOS DEC-31-1998 SEP-30-1998 6,485,230 0 225,298 0 0 0 63,787,288 (39,067,304) 34,636,079 0 41,260,737 0 0 0 0 34,636,079 10,493,265 20,261,929 0 0 8,172,475 0 3,055,636 0 0 9,033,818 0 0 0 9,033,818 0 0
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