-----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, KbIIOKCivoh0/55sHZurGOpkwIcdcmS+AeE8FiO50yeJbEPDtE0bBN+NxQQpGye3 et2kJk29oDVVTFfqDwWDuA== 0000064309-97-000012.txt : 19971117 0000064309-97-000012.hdr.sgml : 19971117 ACCESSION NUMBER: 0000064309-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL PACIFIC INVESTORS FUND 1972 CENTRAL INDEX KEY: 0000064309 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 946279375 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07162 FILM NUMBER: 97721419 BUSINESS ADDRESS: STREET 1: 13760 NOEL RD STE 700 LB70 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 9724485800 MAIL ADDRESS: STREET 1: 13760 NOEL ROAD SUITE 700 LB 70 CITY: DALLAS STATE: TX ZIP: 75240 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended September 30, 1997 ----------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to_____________ Commission file number 0-7162 ------- McNeil PACIFIC INVESTORS FUND 1972 - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 94-6279375 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (972) 448-5800 ----------------------------- Indicate by check mark whether the registrant, (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- McNEIL PACIFIC INVESTORS FUND 1972 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- BALANCE SHEETS (Unaudited)
September 30, December 31, 1997 1996 --------------- --------------- ASSETS - ------ Asset held for sale......................................... $ - $ 6,253,753 Cash and cash equivalents................................... 5,285,695 581,031 Cash segregated for security deposits....................... - 57,204 Accounts receivable......................................... - 4,147 Prepaid expenses and other assets........................... 22,842 23,694 Escrow deposits............................................. 119,346 33,232 Deferred borrowing costs, net of accumulated amortization of $47,607 at December 31, 1996............. - 4,327 -------------- -------------- $ 5,427,883 $ 6,957,388 ============== ============== LIABILITIES AND PARTNERS' EQUITY - -------------------------------- Mortgage note payable....................................... $ - $ 2,023,577 Accrued interest............................................ - 14,755 Other accrued expenses...................................... 10,665 24,346 Payable to affiliates - General Partner..................... 150,272 17,108 Security deposits and deferred rental revenue............... - 58,081 -------------- -------------- 160,937 2,137,867 -------------- -------------- Partners' equity: Limited partners - 15,000 limited partnership units authorized; 13,752.5 limited partnership units issued and outstanding................................. 4,834,716 4,509,577 General Partner.......................................... 432,230 309,944 -------------- -------------- 5,266,946 4,819,521 -------------- -------------- $ 5,427,883 $ 6,957,388 ============== ==============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financialstatements. McNEIL PACIFIC INVESTORS FUND 1972 STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------- --------------------------------- 1997 1996 1997 1996 -------------- --------------- -------------- -------------- Revenue: Rental revenue................ $ 451,095 $ 437,221 $ 1,349,802 $ 1,253,566 Interest...................... 9,056 8,560 24,143 19,721 Gain on sale of real estate................. 151,141 - 151,141 - ------------- ------------- ------------- ------------- Total revenue............... 611,292 445,781 1,525,086 1,273,287 ------------- ------------- ------------- ------------- Expenses: Interest...................... 40,700 47,895 133,196 151,616 Depreciation.................. - 100,119 - 294,116 Property taxes................ 32,029 28,974 90,765 86,922 Personnel expenses............ 75,719 68,873 221,237 205,457 Utilities..................... 16,696 16,036 50,785 48,938 Repair and maintenance........ 84,692 84,174 277,151 244,720 Property management fees - affiliates........... 26,802 25,965 80,160 74,446 Other property operating expenses.................... 46,315 34,340 109,447 102,567 General and administrative.... 37,753 14,769 63,178 31,146 General and administrative - affiliates.................. 18,114 13,577 51,742 32,907 ------------- ------------- ------------- ------------- Total expenses.............. 378,820 434,722 1,077,661 1,272,835 ------------- ------------- ------------- ------------- Net income....................... $ 232,472 $ 11,059 $ 447,425 $ 452 ============= ============= ============= ============= Net income allocated to limited partners........... $ 110,186 $ 11,059 $ 325,139 $ 452 Net income allocated to General Partner............ 122,286 - 122,286 - ------------- ------------- ------------- ------------- Net income....................... $ 232,472 $ 11,059 $ 447,425 $ 452 ============= ============= ============= ============= Net income per limited partnership unit.............. $ 8.01 $ .80 $ 23.64 $ .03 ============= ============= ============= =============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL PACIFIC INVESTORS FUND 1972 STATEMENTS OF PARTNERS' EQUITY (Unaudited) For the Nine Months Ended September 30, 1997 and 1996
Total General Limited Partners' Partner Partners Equity -------------- -------------- -------------- Balance at December 31, 1995.............. $ 309,944 $ 4,405,038 $ 4,714,982 Net income................................ - 452 452 ------------- ------------- ------------- Balance at September 30, 1996............. $ 309,944 $ 4,405,490 $ 4,715,434 ============= ============= ============= Balance at December 31, 1996.............. $ 309,944 $ 4,509,577 $ 4,819,521 Net income................................ 122,286 325,139 447,425 ------------- ------------- ------------- Balance at September 30, 1997............. $ 432,230 $ 4,834,716 $ 5,266,946 ============= ============= =============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL PACIFIC INVESTORS FUND 1972 STATEMENTS OF CASH FLOWS (Unaudited) Increase in Cash and Cash Equivalents
Nine Months Ended September 30, ----------------------------------- 1997 1996 --------------- --------------- Cash flows from operating activities: Cash received from tenants....................... $ 1,351,258 $ 1,256,778 Cash paid to suppliers........................... (732,813) (664,713) Cash paid to affiliates.......................... (135,738) (108,546) Interest received................................ 24,143 19,721 Interest paid.................................... (143,624) (138,888) Property taxes paid and escrowed................. (176,879) (74,902) ------------- ------------- Net cash provided by operating activities........... 186,347 289,450 ------------- ------------- Cash flows from investing activities: Additions to real estate investments............. (69,821) (137,449) Proceeds from sale of real estate................ 6,611,715 - ------------- ------------- Net cash provided by (used in) investing activities............................. 6,541,894 (137,449) ------------- -------------- Cash flows from financing activities: Principal payments on mortgage notes payable........................................ (98,648) (102,087) Retirement of mortgage note payable.............. (1,924,929) - ------------- ------------- Net cash used in financing activities............... (2,023,577) (102,087) ------------- ------------- Net increase in cash and cash equivalents........... 4,704,664 49,914 Cash and cash equivalents at beginning of period........................................ 581,031 523,389 ------------- ------------- Cash and cash equivalents at end of period.......... $ 5,285,695 $ 573,303 ============= =============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. MCNEIL PACIFIC INVESTORS FUND 1972 STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Income to Net Cash Provided by Operating Activities
Nine Months Ended September 30, ---------------------------------- 1997 1996 -------------- -------------- Net income.......................................... $ 447,425 $ 452 ------------- ------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation..................................... - 294,116 Amortization of deferred borrowing costs......... 4,327 7,790 Gain on sale of real estate...................... (151,141) - Changes in assets and liabilities: Cash segregated for security deposits.......... 57,204 (13,011) Accounts receivable............................ 4,147 2,017 Prepaid expenses and other assets.............. 852 (1,047) Escrow deposits................................ (86,114) (74,902) Accounts payable............................... - (19,903) Accrued interest............................... (14,755) 4,938 Accrued property taxes......................... - 86,922 Other accrued expenses......................... (13,681) (12,624) Payable to affiliates - General Partner........ (3,836) (1,193) Security deposits and deferred rental revenue...................................... (58,081) 15,895 ------------- ------------- Total adjustments............................ (124,078) 288,998 ------------- ------------- Net cash provided by operating activities........... $ 186,347 $ 289,450 ============= =============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL PACIFIC INVESTORS FUND 1972 Notes To Financial Statements (Unaudited) September 30, 1997 NOTE 1. - ------- McNeil Pacific Investors Fund 1972 (the "Partnership") is a limited partnership organized under the laws of the State of California to invest in real property. The general partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil. The 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, 1997, are not necessarily indicative of the results to be expected for the year ending December 31, 1997. NOTE 2. - ------- The financial statements should be read in conjunction with the financial statements contained in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1996, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Pacific Investors Fund 1972, c/o The Herman Group, 2121 San Jacinto St., 26th Floor, Dallas, Texas 75201. NOTE 3. - ------- The Partnership pays property management fees equal to 6% of the gross rental receipts of the Partnership's property to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management and leasing services for the Partnership's property. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. The General Partner is entitled to receive a partnership management fee equal to 9.5% of distributions of cash from operations when distributable cash from operations is distributed to the limited partners. No partnership management fees were incurred or paid during the nine month periods ended September 30, 1997 and 1996. The General Partner is entitled to receive a sales commission as compensation for selling Partnership property equal to the lesser of 4% of the sales price of the property sold or the customary fee charged by independent real estate brokers in the area where the property is located. The General Partner is also entitled to a distribution of cash from sales and refinancings and cash from working capital reserves equal to 9.5% of such distributions. No such distributions were paid to the partners during 1996 or during the first nine months of 1997. Compensation and reimbursements accrued for the benefit of the General Partner and its affiliates are as follows: Nine Months Ended September 30, ----------------------- 1997 1996 ---------- --------- Property management fees - affiliates............... $ 80,160 $ 74,446 Charged to gain on sale of real estate: Sales commission................................. 137,000 - Charged to general and administrative - affiliates: Partnership administration....................... 51,742 32,907 -------- -------- $ 268,902 $ 107,353 ======== ======== NOTE 4. - ------- On September 30, 1997, the Partnership sold Palm Bay Apartments to an unaffiliated purchaser for a cash sales price of $6,850,000. Cash proceeds from the transaction, as well as the gain on sale, are detailed below.
Proceeds Gain on Sale from Sale ------------- -------------- Sales price......................................... $ 6,850,000 $ 6,850,000 Selling costs....................................... (375,285) (375,285) Add back unpaid sales commission due to the General Partner..................... - 137,000 Basis of real estate sold........................... (6,323,574) ----------- ------------ Gain on sale of real estate......................... $ 151,141 =========== Proceeds from sale of real estate................... 6,611,715 Sales commission due to the General Partner......... (137,000) Retirement of mortgage note payable................. (1,924,929) ------------- Net cash proceeds................................... $ 4,549,786 ============
NOTE 5. - ------- On October 1, 1996, the General Partner placed the Partnership's only remaining property, Palm Bay Apartments, on the market for sale. Consequently, Palm Bay Apartments was classified as an Asset Held for Sale on the accompanying financial statements until the September 30, 1997 sale of the property. In 1996, the Partnership adopted the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement requires the cessation of depreciation on assets held for sale. Accordingly, no depreciation charges have been incurred since October 1, 1996. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- On September 30, 1997, the Partnership sold Palm Bay Apartments. The sale of Palm Bay Apartments completes the liquidation of the Partnership's real estate investment portfolio. Proceeds from the sale have been invested in short-term interest bearing accounts while the General Partner winds-up the Partnership's affairs. RESULTS OF OPERATIONS - --------------------- Revenues: Rental revenues at Palm Bay Apartments increased 3.2% and 7.7% for the quarter and nine months ended September 30, 1997 as compared to the same periods of 1996. Most of the increase in rental revenue was obtained by improving the occupancy rate of the Orlando property. Vacancy losses decreased 11.9%, and other rental discounts and concessions decreased 77%. The Partnership also increased base rental rates an average of 4.1% for the property's units. Also included in revenues for the third quarter is the $151,141 gain on the sale of Palm Bay Apartments. Expenses: Partnership expenses decreased $195,174 or 15.3% for the nine months ended September 30, 1997 as compared to the nine months ended September 30, 1996. For the third quarter, expenses decreased $55,902 or 12.9%. In accordance with accounting standards, the Partnership ceased depreciating Palm Bay Apartments after deciding to sell the property in October 1996. Thus, no depreciation is recorded in 1997; the Partnership incurred $294,116 of depreciation expense for the nine months ended September 30, 1996. Excluding depreciation, expenses increased $98,942 or 10.1% for the nine months ended September 30, 1997. Increases in repair and maintenance, general and administrative, and general and administrative expenses paid to affiliates were partially offset by decreased interest expense. Repair and maintenance expenses increased $32,431 or 13.2% for the first nine months of 1997 as compared to the first nine months of 1996. Costs incurred for replacement of appliances and floor coverings were expensed in 1997 as opposed to being capitalized in 1996. The 1997 costs did not meet the Partnership's capitalization criteria and were, therefore, expensed. General and administrative expenses doubled to $63,178 for the first nine months of 1997 as compared to the first nine months of 1996. The Partnership incurred approximately $48,000 of costs in connection with the proxy of the limited partners to approve the sale of Palm Bay Apartments and the liquidation of the Partnership. Additionally, beginning in 1997, the Partnership began incurring charges for investor services, which are now provided by a third party vendor instead of by affiliates of the General Partner. General and administrative expenses paid to affiliates of the General Partner increased $18,835 or 57% for the first nine months of 1997 as compared to the first nine months of 1996. As discussed in the preceding paragraph, the Partnership's costs for investor relations are reported in general and administrative instead of general and administrative paid to affiliates beginning in 1997. However, the Partnership incurred increased costs relating to the proposed sale of Palm Bay Apartments and the anticipated liquidation of the Partnership. Interest expense decreased $18,420 or 12.1% in the first nine months of 1997 as compared to the first nine months of 1996. Interest expense on the Palm Bay mortgage note continues to decrease as the balance of the note is paid down through monthly debt service payments. Approximately half of the decrease is attributable to a one-time adjustment that increased interest expense in 1996. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash generated by Partnership operating activities decreased to $186,347 for the nine months ended September 30, 1997 from the $289,450 generated by operating activities for the first nine months of 1996. Increases in cash payments to suppliers, affiliates and for property taxes increased more than the increase in rental receipts from Palm Bay Apartments. The Partnership also expended $69,821 in 1997 for capital improvements to Palm Bay Apartments prior to the September 30, 1997 sale of the property. Cash proceeds from the sale amounted to $6,611,715. Of that amount, $1,924,929 was used to retire the Palm Bay mortgage note. An additional $137,000 will be used to pay the sales commission due to the General Partner. Liquidity: As a result of the sale of Palm Bay Apartments and the retirement of the Palm Bay mortgage note, the Partnership had $5,285,695 of cash and cash equivalents as of September 30, 1997, and no material obligations other than a $137,000 sale commission due to the General Partner. Distributions: Distributions to partners have been suspended as part of the General Partner's policy of maintaining adequate cash reserves. However, with the sale of Palm Bay Apartments, the Partnership is now in the process of winding up its affairs, and will distribute its remaining cash to the limited partners after various provisions are made for remaining fees and expenses due to the General Partner, and for a $250,000 reserve to provide for potential legal fees, costs and expenses relating to ongoing litigation (see Item 1 - Legal Proceedings). The General Partner has determined to distribute approximately $4,772,397 in December 1997, of which $4,340,167 will be distributed to the limited partners, and $432,230 will be distributed to the General Partner. 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. Defendants intend to file a demurrer to the second consolidated and amended complaint on or before December 1, 1997. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- (a) Exhibits. Exhibit Number Description ------- ----------- 3. Restated Certificate and Agreement of Limited Partnership dated of March 8, 1972. (1) 4. Amendment to Restated Certificate and Agreement of Limited Partnership dated March 30, 1992. (2) 11. Statement regarding computation of net income per limited partnership unit: Net income per limited partnership unit is computed by dividing net income allocated to the limited partners by the number of limited partnership units outstanding. Per unit information has been computed based on 13,752.5 limited partnership units outstanding in 1997 and 1996. 27. Financial Data Schedule for the quarter ended September 30, 1997. (1) Incorporated by reference to the Annual Report of Registrant on Form 10-K for the period ended December 31, 1990, as filed on March 29, 1991. (2) Incorporated by reference to the Current Report on Form 8-K filed by the Registrant with the Securities and Exchange Commission on April 10, 1992. (b) Reports on Form 8-K. On October 15, 1997, the Partnership filed a Current Report on Form 8-K to report the September 30, 1997 sale of Palm Bay Apartments to an unaffiliated purchaser. McNEIL PACIFIC INVESTORS FUND 1972 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 PACIFIC INVESTORS FUND 1972 By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner November 14, 1997 By: /s/ Ron K. Taylor - ----------------- ------------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) November 14, 1997 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-31-1997 SEP-30-1997 5,285,695 0 0 0 0 0 0 0 5,427,883 0 0 0 0 0 0 5,427,883 1,349,802 1,525,086 0 0 944,465 0 133,196 447,425 0 0 0 0 0 447,425 0 0
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