-----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, ObMa3fGkV1On7y8wNaZNW+s2tH6JoJ3LmzBM6mqX7dWXKTFlfVWkQ2C2r4n4d3X4 s532SigaMF8bwM4oes7NnA== 0000064309-96-000002.txt : 19960401 0000064309-96-000002.hdr.sgml : 19960401 ACCESSION NUMBER: 0000064309-96-000002 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-07162 FILM NUMBER: 96541277 BUSINESS ADDRESS: STREET 1: 13760 NOEL RD STE 700 LB70 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144485800 MAIL ADDRESS: STREET 1: 13760 NOEL ROAD SUITE 700 LB 70 CITY: DALLAS STATE: TX ZIP: 75240 10-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 0-7162 ------- 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 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 ] 13,702.5 of the registrant's 13,752.5 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 32. TOTAL OF 34 PAGES PART I ITEM 1. BUSINESS - ------- -------- ORGANIZATION - ------------ McNeil Pacific Investors Fund 1972 (the "Partnership") was organized September 30, 1971 as a limited partnership under 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 General Partner was elected at a meeting of limited partners on March 30, 1992, at which time the Partnership's restated certificate and agreement of limited partnership (the "Partnership Agreement") was amended. Prior to March 30, 1992, Pacific Investors Corporation (the "Corporate General Partner"), an affiliate of Southmark Corporation ("Southmark"), and McNeil were the general partners of the Partnership. The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240. On March 8, 1972, a Registration Statement on Form S-11 was declared effective by the Securities and Exchange Commission whereby the Partnership offered for sale $15,000,000 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 April 30, 1973 with 13,795 Units sold for gross proceeds of $13,795,000 to the Partnership. The original general partners purchased 50 Units for $50,000. 37.5 and 5 Units were relinquished in 1994 and 1995, respectively, leaving 13,752.5 Units outstanding at December 31, 1995. 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, including Southmark's interest 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. On March 30, 1992, the limited partners approved a proposal to (i) replace McNeil and the Corporate General Partner as general partners of the Partnership with the General Partner, and (ii) amend the Partnership Agreement to (a) extend the term of the Partnership from December 31, 1992, until December 31, 2002, (b) provide for a limitation on administrative operating expenses equal to 2% of tangible asset value, as defined, and (c) provide for the establishment of an oversight committee that will review and report on the Partnership's compliance with the 2% limitation on administrative operating expenses. CURRENT OPERATIONS - ------------------ General: The Partnership is engaged in real estate activities, including the ownership, operation and management of residential rental real estate and other real estate related assets. At December 31, 1995, the Partnership owned one income-producing property as described in Item 2 - Property. The Partnership does not directly employ any personnel. The General Partner conducts the business of the Partnership directly and through its affiliates. The Partnership is managed by the General Partner. In accordance with the Partnership Agreement, the Partnership reimburses affiliates of the General Partner for certain expenses incurred by the affiliates in connection with the management of the Partnership. 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 property 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 property. The General Partner is evaluating market and other economic conditions to determine the optimum time to commence an orderly liquidation of the Partnership's property in accordance with the terms of the Partnership Agreement. In conjunction therewith, the General Partner will continue to explore potential avenues to enhance the value of the limited partners' Units in the Partnership, which may include, among other things, asset sales or refinancing of the Partnership's property followed by distributions. 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, are described in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. See Item 2 - Property for discussion of competitive conditions at the Partnership's property. 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 the property has such environmental problems. The Partnership has no knowledge of any pending claims or proceedings regarding such environmental problems. In August 1995, High River Limited Partnership, a Delaware limited partnership controlled by Carl C. Icahn ("High River"), made an unsolicited tender offer (the "HR Offer") to purchase from holders of Units up to approximately 45% of the outstanding Units of the Partnership for a purchase price of $110 per Unit. In addition, High River made unsolicited tender offers for certain other partnerships controlled by the General Partner. The Partnership recommended that the limited partners reject the HR Offer made with respect to the Partnership and not tender their Units pursuant to the HR Offer. The HR Offer terminated, after numerous extensions, on October 6, 1995. The General Partner believes that as of February 29, 1996, High River has purchased approximately 4.92% of the outstanding Units pursuant to the HR Offer. In addition, all litigation filed by High River, Mr. Icahn and his affiliates in connection with the HR Offer has been dismissed without prejudice. See Item 3 - Legal Proceedings. ITEM 2. PROPERTY - ------- -------- The following table sets forth the real estate investment portfolio of the Partnership at December 31, 1995. The buildings and land on which they are located are owned by the Partnership in fee, subject to a first lien deed of trust as set forth more fully in Item 8 - Note 5 - "Mortgage Note Payable" and Schedule III - "Real Estate Investments and Accumulated Depreciation." In the opinion of management, the property is adequately covered by insurance.
Net Basis 1995 Date Property Description of Property Debt Property Tax Acquired - -------- ----------- ----------- ---- ------------ -------- Palm Bay Apartments Orlando, FL 346 units $6,335,493 $2,161,204 $101,961 6/91 ========= ========= =======
The following table sets forth the occupancy rate and rent per square foot of the Partnership's property for each of the last three years. This information is not available for 1991 and 1990, the years before the Partnership reacquired the property through foreclosure.
1995 1994 1993 1992 ----- ----- ----- ----- Palm Bay - -------- Occupancy Rate................... 86% 82% 77% 73% Rent Per Square Foot............. $4.77 $4.58 $4.15 $3.71
Occupancy rate represents all units leased divided by the total number of units of the property 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 - Palm Bay Apartments - -------------------------------------------- The financial performance of Palm Bay Apartments has improved as a result of the capital renovation program. Occupancy rates have risen from 63% at the date the Partnership repossessed Palm Bay Apartments in 1992 to 86% at the end of 1995. Occupancy rates for the local area average 89%. Rental rates have also improved due to the renovation program. The renovation program has made the property much more competitive in its market. The local area offers diverse competition from high quality property to low quality subsidized housing. The property's location and townhouse units give it a competitive edge in the market. Conversely, several of the property's competitors offer tax-subsidized rental rates. An interior upgrade program is addressing the dated appearance of the units' interiors so that the property can compete effectively with the newer properties in the area. ITEM 3. LEGAL PROCEEDINGS - ------- ----------------- 1) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil (L95012) - High River ("HR") filed this action in the United States District Court for the Southern District of New York against McNeil Partners, L.P., McNeil Investors, Inc. and Mr. and Mrs. McNeil (as defined in this Section 1, collectively, the "Defendants") requesting, among other things, names and addresses of the limited partners in the partnerships referenced above (as defined in this Section 1, the "Partnerships"). The District Court issued a preliminary injunction against the Partnerships requiring them to commence mailing materials relating to the HR tender offer on August 14, 1995. On August 18, 1995, the Defendants filed an Answer and Counterclaim. The Counterclaim principally asserts (1) the HR tender offers have been undertaken in violation of the federal securities laws, on the basis of material, non-public, and confidential information, and (2) that the HR offer documents omit and/or misrepresent certain material information about the HR tender offers. The Counterclaim seeks a preliminary and permanent injunction against the continuation of the HR tender offers and, alternatively, ordering corrective disclosure with respect to allegedly false and misleading statements contained in the tender offer documents. This action was dismissed without prejudice in November 1995. 2) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil - United States District Court for the Southern District of New York, (Case No. 95 Civ. 9488) (Second Action). On November 7, 1995, High River filed a second complaint with the District Court which alleges, inter alia, that McNeil Partners, L.P.'s (the "General Partner") Schedule 14D-9 filed in connection with the High River tender offers was materially false and misleading, in violation of Sections 14(d) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(d) and (e), and the SEC Regulations promulgated thereunder; and that High River further alleges that the General Partner has wrongfully refused to admit High River as a limited partner to the ten partnerships referenced above. Additionally, High River purports to assert claims derivatively on behalf of McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund XXV, L.P., for breach of contract and breach of fiduciary duty, asserting that the General Partner has charged these partnerships excessive fees. High River's complaint seeks, inter alia, preliminary injunctive relief requiring the General Partner to admit High River as a limited partner in each of the ten partnerships referenced above and to transfer the tendered units of interest in the partnerships to High River; an unspecified award of damages payable to High River and an additional unspecified award of damages payable to certain of the partnerships; an order that defendants must discharge their fiduciary duties and must account for all fees they have received from certain of the partnerships; and attorneys' fees. On January 31, 1996, this action was dismissed without prejudice. 3) Robert Lewis v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil et al - In the District Court of Dallas County, Texas, A-14th Judicial District, Cause No. 95-08535 (Class Action) - Plaintiff, Robert Lewis, is a limited partner with McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV, Ltd. Plaintiff brings this action on his own behalf and as a class action on behalf of the class of all limited partners of McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund XXV, Ltd. (as defined in this Section 3, the "Partnerships") as of August 4, 1995. Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 3, collectively, the "Defendants") breached their fiduciary duties by, among other things, (1) failing to attempt to sell the properties owned by the Partnerships (as defined in this Section 3, the "Properties") and extending the lives of the Partnerships indefinitely, contrary to the Partnerships' business plans, (2) paying distributions to themselves and generating fees for their affiliates, (3) refusing to make significant distributions to the class members, despite the fact that the Partnerships have positive cash flows and substantial cash balances, and (4) failing to take steps to create an auction market for equity interests of the Partnerships, despite the fact that a third party bidder filed tender offers for approximately forty-five percent (45%) of the outstanding units of each of the Partnerships. Plaintiff also claims that Defendants have breached the partnership agreements of the Partnerships by failing to take steps to liquidate the Properties and by their alteration of the Partnerships' primary purposes, their acts in contravention of these agreements, and their use of the assets of the Partnerships for their own benefit instead of for the benefit of the Partnerships. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 4) Alfred Napoletano v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133849 (Class Action Complaint) Plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above (as defined in this Section 4, the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 4, collectively, the "Defendants") have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River tender offers, (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 5) Warren Heller v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133957 (Class Action Complaint) Plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above (as defined in this Section 5, the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 5, collectively, the "Defendants") have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River tender offers, (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. For a discussion of the Southmark bankruptcy, see Item 1 - Business. 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 1,285 as of February 16, 1996 (C) No distributions were paid to the partners in 1995 or 1994, and none are anticipated in 1996. See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the likelihood that the Partnership will resume distributions to the 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.
Statements of Years Ended December 31, Operations 1995 1994 1993 1992 1991 - ------------------ ----------- ----------- ----------- ----------- ----------- Rental revenue............... $ 1,376,148 $ 1,475,264 $ 1,894,385 $ 1,815,723 $ 632,703 Gain on disposition of real estate............... - 574,701 - - - Total revenue................ 1,439,428 2,095,660 1,908,162 1,870,452 1,170,484 Loss on foreclosure of mortgage note receivable................ - - - - (95,864) Write-down for permanent impairment of real estate............ - - 2,700,000 - - Net income (loss)............ (285,886) 433,544 (3,102,551) (816,851) 25,183 Net income (loss) per limited partnership unit.. $ (20.79) $ 48.52 $ (224.90) $ (59.21) $ 1.83 ========== ========== ========== ========== ========== As of December 31, Balance Sheets 1995 1994 1993 1992 1991 - -------------- ----------- ----------- ----------- ----------- ----------- Real estate investments, net... $ 6,335,493 $ 6,239,081 $ 5,814,474 $11,528,672 $11,631,995 Asset held for sale, net....... - - 3,209,269 - - Total assets................... 6,993,903 7,516,368 9,405,117 12,665,342 13,504,953 Mortgage notes payable......... 2,161,204 2,287,341 4,523,714 4,738,775 4,865,866 Partners' equity............... 4,714,982 5,000,868 4,567,324 7,669,875 8,486,726
See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. The following property was sold by the Partnership. Property Date Sold -------- --------- Pacesetter Apartments March 17, 1994 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- Since the sale of Pacesetter Apartments on March 17, 1994, the focus of the Partnership's efforts have been directed to the renovation program at Palm Bay Apartments (formerly known as Greentree Apartments). From the three year period ending December 31, 1995, the Partnership has completed capital renovation projects totaling $1,555,223. To date, occupancy at Palm Bay Apartments has not recovered as much as was hoped. As the capital renovation program winds down, the focus of the Partnership will turn to leasing the restored units and increasing operating efficiencies at the property. RESULTS OF OPERATIONS - --------------------- 1995 compared to 1994: Revenue: Rental revenues for 1995 decreased $99,116 or 6.7% compared to 1994. The decrease is principally due to the sale of Pacesetter Apartments in March 1994. Rental revenue from Palm Bay Apartments increased $54,794 or 4.1%. The Partnership was able to increase both occupancy and base rental rates due to the major capital improvements undertaken at Palm Bay Apartments. The occupancy rate at December 31, 1995 was 86%, up from 82% at December 31, 1994. The Partnership increased rental rates at Palm Bay Apartments an average of 2.9% in 1995. The Partnership has not been able to increase occupancy rates or base rental rates as quickly as was hoped. Several apartment communities in the immediate area have also undergone major rehabilitation, and several of the competing apartment communities are able to offer their units at rates that have been subsidized by various government programs. The effect of the competition has restricted the increase in rental revenue that was otherwise expected from Palm Bay Apartments. Management is implementing various marketing strategies to attempt to improve the revenue growth of the property. Revenues for 1994 also include the one-time gain on sale of Pacesetter Apartments in the amount of $574,701. Expenses: Partnership expenses increased $63,198 or 3.8% in 1995 compared to 1994. However, after excluding expenses pertaining to Pacesetter Apartments, expenses increased $238,253 or 18% in 1995 compared to 1994. Increased expenses were concentrated in depreciation, repair and maintenance, other property operating, and general and administrative. The largest increase, on both an absolute and percentage basis, was the increase in depreciation expense. Depreciation expense at Palm Bay Apartments increased $121,331 or 54% in 1995 compared to 1994. The increase in depreciation expense is due to the continuing investment of Partnership resources into capital improvements. For the year 1995, the Partnership invested $440,906 in capital improvements. These capital improvements are generally being depreciated over lives ranging from five to ten years. Repair and maintenance expenses at Palm Bay increased $54,740 or 19% in 1995 as compared to 1994. The increased level of repair and maintenance expenses are attributable to costs incurred preparing vacant units for rental. Repair and maintenance expenses will likely continue to increase until Palm Bay's occupancy rate stabilizes. Other property operating expenses increased substantially at Palm Bay Apartments. Efforts to refurbish down units and intensive leasing activity have increased a number of expense categories to unusually high levels. The General Partner anticipates that these expenses will moderate after the restored units have been leased. The increase in other property operating expenses at Palm Bay Apartments totaled $61,564 or 47%. Property management fees - affiliates at Palm Bay Apartments increased $14,390 or 22% in 1995 compared to 1994. An increase in rental receipts, upon which such fees are based, and the increase in the management fee percentage to 6% from 5% (effective January 1, 1995) were the reasons for the increase. General and administrative for 1995 increased $34,678 or 116% compared to 1994. The Partnership incurred $44,554 of costs relating to the evaluation and dissemination of information regarding an unsolicited tender offer. General and administrative - affiliates increased $14,312 or 22% in 1995 compared to 1994. Reimbursements to affiliates are based, in part, on a declining number of properties managed by affiliates of the General Partner. 1994 compared to 1993: Revenue: Rental revenues for 1994 decreased $419,121 or 22% compared to 1993. The decrease is entirely attributable to the sale of Pacesetter Apartments in March 1994. Rental revenue from Palm Bay Apartments increased $125,713 or 10.5%. The Partnership was able to increase both occupancy and base rental rates due to the major capital improvements undertaken at Palm Bay Apartments. Occupancy has improved to 82%, and rental rates were increased 10.4%. The sale of Pacesetter Apartments in March 1994 generated a $574,701 gain on disposition of real estate in 1994. Proceeds from the sale of Pacesetter Apartments substantially increased the amounts of Partnership cash invested in interest-bearing accounts. Interest revenue increased by $31,918 to $45,695 in 1994. Expenses: Total Partnership expenses decreased $3,348,597 or 67% in 1994 compared to 1993. However, most of the decrease was due to the $2.7 million write-down for permanent impairment of real estate recorded by the Partnership during 1993. Expenses also decreased due to the sale of Pacesetter Apartments in March 1994. Excluding these items, expenses increased $41,611 or 3.0% in 1994 compared to 1993. Interest expense decreased $159,483 or 39% in 1994 compared to 1993. Interest expense on the Palm Bay mortgage note decreased 4.5% as regular monthly debt service payments continue to reduce the outstanding principal balance of the Palm Bay mortgage note. The rest of the decrease is attributable to the sale of Pacesetter Apartments in March 1994. The extensive capital improvements placed in service at Palm Bay Apartments during 1994 and 1993 have increased charges for depreciation. Depreciation at Palm Bay Apartments increased $34,841 or 18.5% in 1994 compared to 1993. However, due to the sale of Pacesetter Apartments, depreciation charges for the Partnership decreased $13,651 or 5.0%. The Partnership has benefited from decreased property tax assessments at Palm Bay Apartments. The poor condition of the property at the time the Partnership repossessed the property was reflected in property value assessments during 1994. Property taxes remitted to local taxing jurisdictions decreased 21% in 1994. It is probable that property tax assessments will increase in future years if the capital improvement program underway at Palm Bay Apartments restores the value of the property to its former levels. Personnel expenses at Palm Bay Apartments increased $26,046 or 11.8% in 1994 compared to 1993. Personnel expenses are expected to continue to increase due to the Partnership's effort to increase occupancy rates by the continuous refurbishment of residential units and upgrading of services offered to tenants. Such improvements are partially achieved through higher maintenance standards that require additional personnel and maintenance expenditures. Higher personnel expenses can also be attributed to on-site personnel performing certain maintenance procedures that were formerly contracted to vendors. Repairs and maintenance expenses at Palm Bay Apartments increased $24,574 or 9.2% in 1994 compared to 1993. Increases in repairs and maintenance expense are attributable to costs incurred preparing vacant units for rental. Repairs and maintenance expenses will likely continue to increase for as long as Palm Bay's occupancy rate continues to increase. Similarly, property management fees - affiliates at Palm Bay Apartments will continue to increase as rental revenues increase. For 1994, Palm Bay Apartments recorded an 11.5% increase in property management fees - affiliates, in line with the 10.5% increase in rental revenues. General and administrative expense for 1994 decreased $6,393 or 17.6% compared to 1993. This decrease was due to savings the Partnership achieved through a new tax processing and reporting system and a reduction in legal fees. General and administrative expenses paid to affiliates decreased $38,429 or 37% during 1994 compared to 1993. Partnership administrative expenses paid to affiliates are based, in large part, on the number of properties owned by the Partnership and other affiliated Partnerships. The sale of Pacesetter Apartments in 1994 led to a decrease in these expenses. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership generated $28,071 from operating activities in 1995, a decrease of $134,292 from the $162,363 provided by operating activities in 1994. Cash paid to affiliates in 1995 included an $81,000 brokerage commission on the sale of Pacesetter Apartments that was incurred in 1994 but not paid until 1995. The Partnership used its cash reserves to fund $440,906 of capital improvements to Palm Bay Apartments during 1995. An additional $126,137 was expended to repay the Palm Bay mortgage note through monthly debt service payments. These payments will gradually pay down the mortgage note balance until June 1997, when the Palm Bay mortgage note matures. Short-term liquidity: During the three year period ended December 31, 1995, the Partnership experienced losses totaling $2,954,893. Cash used by operations during the three year period totaled $44,925. An additional $1.56 million of cash was invested in capital improvements at the Partnership's properties. The Partnership has used its cash reserves and the sale of Pacesetter Apartments to fund these expenditures. The sale of Pacesetter Apartments simultaneously provided a substantial addition to the Partnership's cash reserves as well as removed a substantial drain on Partnership resources. Due to the sale of Pacesetter Apartments, the Partnership entered 1995 with adequate cash reserves. A substantial portion of the proceeds from the sale of Pacesetter Apartments has been invested in capital improvements at Palm Bay Apartments. The Partnership has budgeted $90,000 of capital improvements for 1996 in addition to the $1.56 million of capital improvements made during the three-year period ended December 31, 1995. The capital improvements at Palm Bay Apartments are necessary to allow the property to increase its rental revenues and become competitive in the Orlando sub-market where the property is located. At December 31, 1995, the Partnership held $523,389 of cash and cash equivalents, down $538,972 from the balance at the end of 1994. The General Partner anticipates that cash generated from operations in 1996 will be sufficient to pay the Partnership's operating expenses, debt service, and budgeted capital improvements. The Partnership will use its cash reserves to fund any shortfall if operating cash flow should prove insufficient to meet all the Partnership's expected expenditures. The General Partner considers the Partnership's cash reserves adequate for anticipated operations for 1996. The General Partner has established a revolving credit facility not to exceed $5,000,000 in the aggregate that 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 receive additional funds under the facility because no amounts will be reserved for any particular partnership. As of December 31, 1995, $2,662,819 remains available from the facility; however, additional funds could become available as other partnerships repay borrowings. This commitment will terminate on March 30, 1997. Long-term liquidity: For the long term, property operations will remain the primary source of funds. While the present outlook for the Partnership's liquidity is favorable, market conditions may change and property operations may deteriorate. The General Partner expects that the capital improvements at Palm Bay Apartments will yield improved cash flow from operations in 1996. Furthermore, the Partnership has budgeted an additional $90,000 of capital improvements for 1996. 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 property. As an additional source of liquidity, the General Partner may attempt to refinance the Palm Bay mortgage note. The General Partner estimates that such a refinancing could yield proceeds to the Partnership in excess of the amount needed to retire the current mortgage note. However, there can be no guarantee that the Partnership will be able to obtain such mortgage refinancing on terms or in amounts favorable to the Partnership, or that the cash proceeds from such refinancing could be timed to coincide with the liquidity needs of the Partnership. Distributions: Distributions to partners have been suspended as part of the General Partner's policy of maintaining adequate cash reserves. Distributions to Unit holders 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 Unit holders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------- -------------------------------------------
Page Number ------ INDEX TO FINANCIAL STATEMENTS Financial Statements: Report of Independent Public Accountants..................... 13 Balance Sheets at December 31, 1995 and 1994................. 14 Statements of Operations for each of the three years in the period ended December 31, 1995............................. 15 Statements of Partners' Equity for each of the three years in the period ended December 31, 1995...................... 16 Statements of Cash Flows for each of the three years in the period ended December 31, 1995............................. 17 Notes to Financial Statements................................ 19 Financial Statement Schedule: Schedule III - Real Estate Investment and Accumulated Depreciation........................................... 27
All other schedules are omitted because they are not applicable or the financial information required is included in the financial statements or the notes thereto. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of McNeil Pacific Investors Fund 1972: We have audited the accompanying balance sheets of McNeil Pacific Investors Fund 1972 (a California limited partnership) as of December 31, 1995 and 1994, and the related statements of operations, partners' equity 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. As further discussed in Note 5 to the financial statements, the mortgage note secured by the Partnership's only property is due and payable on June 1, 1997. Management's current projections indicate that there will not be sufficient cash flow from operations to fund that obligation. Management is currently analyzing the Partnership's options, including refinancing the mortgage note or marketing the property for sale. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of McNeil Pacific Investors Fund 1972 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 a 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 PACIFIC INVESTORS FUND 1972 BALANCE SHEETS
December 31, ------------------------------- 1995 1994 ------------ ----------- ASSETS - ------ Real estate investment: Land..................................................... $ 2,336,000 $ 2,336,000 Buildings and improvements............................... 5,010,483 4,569,577 ---------- ---------- 7,346,483 6,905,577 Less: Accumulated depreciation.......................... (1,010,990) (666,496) ---------- ---------- 6,335,493 6,239,081 Cash and cash equivalents................................... 523,389 1,062,361 Cash segregated for security deposits....................... 43,885 36,309 Accounts receivable......................................... 3,849 3,741 Prepaid expenses and other assets........................... 23,220 24,594 Escrow deposits............................................. 49,353 125,181 Deferred borrowing costs, net of accumulated amortization of $37,220 and $26,833 at December 31, 1995 and 1994, respectively................. 14,714 25,101 ---------- ---------- $ 6,993,903 $ 7,516,368 ========== ========== LIABILITIES AND PARTNERS' EQUITY - -------------------------------- Mortgage note payable....................................... $ 2,161,204 $ 2,287,341 Accounts payable............................................ 20,363 31,328 Accrued interest............................................ 10,076 16,679 Other accrued expenses...................................... 24,853 38,685 Payable to affiliates - General Partner..................... 15,227 93,329 Security deposits and deferred rental revenue............... 47,198 48,138 ---------- ---------- 2,278,921 2,515,500 ---------- ---------- Partners' equity: Limited partners - 15,000 limited partnership units authorized; 13,752.5 and 13,757.5 limited partnership units issued and outstanding at December 31, 1995 and 1994, respectively..................................... 4,405,038 4,690,924 General Partner.......................................... 309,944 309,944 ---------- ---------- 4,714,982 5,000,868 ---------- ---------- $ 6,993,903 $ 7,516,368 ========== ==========
See accompanying notes to financial statements. McNEIL PACIFIC INVESTORS FUND 1972 STATEMENTS OF OPERATIONS
For the Years Ended December 31, ---------------------------------------------------- 1995 1994 1993 -------------- -------------- --------------- Revenue: Rental revenue.......................... $ 1,376,148 $ 1,475,264 $ 1,894,385 Interest and other revenue.............. 63,280 45,695 13,777 Gain on disposition of real estate...... - 574,701 - ------------- ------------- -------------- Total revenue......................... 1,439,428 2,095,660 1,908,162 ------------- ------------- -------------- Expenses: Interest................................ 198,948 249,827 409,310 Depreciation............................ 344,494 257,825 271,476 Property taxes.......................... 101,961 123,227 195,994 Personnel expenses...................... 242,331 293,231 366,775 Repairs and maintenance................. 345,524 316,627 466,537 Property management fees - affiliates............................ 79,474 72,765 92,490 Utilities............................... 81,054 86,617 162,959 Other property operating expenses....... 186,282 165,741 204,094 General and administrative.............. 64,649 29,971 36,364 General and administrative - affiliates............................ 80,597 66,285 104,714 Write-down for permanent impairment of real estate............. - - 2,700,000 ------------- ------------- -------------- Total expenses........................ 1,725,314 1,662,116 5,010,713 ------------- ------------- -------------- Net income (loss).......................... $ (285,886) $ 433,544 $ (3,102,551) ============= ============= ============== Net income (loss) allocated to limited partners........................ $ (285,886) $ 667,558 $ (3,102,551) Net loss allocated to General Partner...... - (234,014) - ------------- ------------- -------------- Net income (loss).......................... $ (285,886) $ 433,544 $ (3,102,551) ============= ============= ============== Net income (loss) per limited partnership unit........................ $ (20.79) $ 48.52 $ (224.90) ============= ============= ==============
See accompanying notes to financial statements. McNEIL PACIFIC INVESTORS FUND 1972 STATEMENTS OF PARTNERS' EQUITY For the Years Ended December 31, 1995, 1994 and 1993
Total General Limited Partners' Partner Partners Equity --------------- --------------- --------------- Balance at December 31, 1992.............. $ 543,958 $ 7,125,917 $ 7,669,875 Net loss.................................. - (3,102,551) (3,102,551) -------------- -------------- -------------- Balance at December 31, 1993.............. 543,958 4,023,366 4,567,324 Net income (loss)......................... (234,014) 667,558 433,544 -------------- -------------- -------------- Balance at December 31, 1994.............. 309,944 4,690,924 5,000,868 Net loss.................................. - (285,886) (285,886) -------------- -------------- -------------- Balance at December 31, 1995.............. $ 309,944 $ 4,405,038 $ 4,714,982 ============== ============== ==============
See accompanying notes to financial statements. McNEIL PACIFIC INVESTORS FUND 1972 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.............. $ 1,333,612 $ 1,466,270 $ 1,854,350 Cash paid to suppliers.................. (909,351) (923,620) (1,193,122) Cash paid to affiliates................. (238,173) (63,881) (194,294) Interest received....................... 63,280 45,695 13,777 Interest paid........................... (195,164) (255,305) (416,206) Property taxes paid..................... (26,133) (106,796) (299,864) ------------- ------------- -------------- Net cash provided by (used in) operating activities................... 28,071 162,363 (235,359) ------------- ------------- -------------- Cash flows from investing activities: Additions to real estate investments........................... (440,906) (647,770) (466,547) Proceeds from sale of real estate investment............................ - 3,749,308 - ------------- ------------- -------------- Net cash provided by (used in) investing activities................... (440,906) 3,101,538 (466,547) ------------- ------------- -------------- Cash flows from financing activities: Principal payments on mortgage notes payable......................... (126,137) (142,238) (215,061) Advances from affiliates................ - - 50,000 Repayment of advances from affiliates............................ - (50,000) - Retirement of mortgage note payable............................... - (2,094,135) - ------------- ------------- -------------- Net cash used in financing activities...... (126,137) (2,286,373) (165,061) ------------- ------------- -------------- Net increase (decrease) in cash and cash equivalents...................... (538,972) 977,528 (866,967) Cash and cash equivalents at beginning of year..................... 1,062,361 84,833 951,800 ------------- ------------- -------------- Cash and cash equivalents at end of year............................... $ 523,389 $ 1,062,361 $ 84,833 ============= ============= ==============
See accompanying notes to financial statements. McNEIL PACIFIC INVESTORS FUND 1972 STATEMENTS OF CASH FLOWS Reconciliation of Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities
For the Years Ended December 31, ---------------------------------------------------- 1995 1994 1993 -------------- ------------- -------------- Net income (loss).......................... $ (285,886) $ 433,544 $ (3,102,551) ------------ ------------ ------------ Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation............................ 344,494 257,825 271,476 Amortization of deferred borrowing costs................................. 10,387 10,387 10,387 Write-down for permanent impairment of real estate............. - - 2,700,000 Gain on sale of real estate............. - (574,701) - Changes in assets and liabilities: Cash segregated for security deposits............................ (7,576) 15,264 (18,676) Accounts receivable................... (108) 4,408 22,015 Prepaid expenses and other assets.............................. 1,374 29,469 (27,937) Escrow deposits....................... 75,828 22,087 (98,215) Accounts payable...................... (10,965) (92,800) 41,009 Accrued property taxes................ - (5,656) (5,655) Accrued interest...................... (6,603) (15,865) (17,283) Other accrued expenses................ (13,832) 12,227 (13,041) Payable to affiliates................. (78,102) 75,169 2,910 Security deposits and deferred rental revenue...................... (940) (8,995) 202 ------------ ------------ ------------ Total adjustments................. 313,957 (271,181) 2,867,192 ------------ ------------ ------------ Net cash provided by (used in) operating activities.................... $ 28,071 $ 162,363 $ (235,359) ============ ============ ============
See accompanying notes to financial statements. McNEIL PACIFIC INVESTORS FUND 1972 NOTES TO FINANCIAL STATEMENTS December 31, 1995 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------- Organization - ------------ McNeil Pacific Investors Fund 1972 (the "Partnership") was organized September 30, 1971 as a limited partnership under 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 General Partner was elected at a meeting of limited partners on March 30, 1992, at which time the Partnership's restated certificate and agreement of limited partnership (the "Partnership Agreement") was amended. Prior to March 30, 1992, Pacific Investors Corporation, an affiliate of Southmark Corporation, and McNeil were the general partners of the Partnership. 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 real estate activities, including the ownership, operation and management of residential rental real estate and other real estate related assets. At December 31, 1995, the Partnership owned one income-producing property 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. Real Estate Investment - ---------------------- The real estate investment is generally stated at the lower of cost or net realizable value. The real estate investment is 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. Depreciation - ------------ Buildings and improvements are depreciated using the straight-line method over the estimated useful lives of the assets, ranging from 2 to 25 years. 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 an escrow account in accordance with terms of the Palm Bay mortgage note. This escrow account is controlled by the mortgagee and is used for payment of property taxes. Carrying amounts for escrow deposits approximate fair value. Deferred Borrowing Costs - ------------------------ Loan fees and other related costs incurred to obtain or modify 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. Rental Revenue - -------------- The Partnership leases its property under short-term operating leases. Lease terms generally are less than one year in duration. Rental revenue is recognized as earned. 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 Partnership Agreement provides that income will be allocated to the General Partner to the extent of distributions to the General Partner of cash from sales, refinancings, or from working capital reserves. All remaining net income and all losses are allocated 100% to the limited partners. An estimated gain on the ultimate disposition of Pacesetter Apartments was allocated to the General Partner in 1982 based upon a 1982 sales contract for Pacesetter Apartments. An adjustment was made in 1994 to adjust the amount allocated to the General Partner based on the 1994 sale of Pacesetter Apartments. 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 - ------------- At the discretion of the General Partner, distributions to partners are paid from operations of the Partnership's properties, from sales or refinancing of properties, or from cash maintained as working capital reserves. Cash from operations is distributed 100% to the limited partners. Distributions of cash from sales and refinancings and cash from working capital reserves are made in the following order: (a) First to the limited partners in an amount, when added to all prior distributions to the limited partners of disposition proceeds, that equals 109.6% of the portion of net offering proceeds invested in property sold; then, (b) of the remaining balance, 90.5% to the limited partners and 9.5% to the General Partner. No distributions were paid to the partners during 1995, 1994 or 1993. Net Income (Loss) Per Limited Partnership Unit - ---------------------------------------------- Net income (loss) per limited partnership unit ("Units") is computed by dividing net income (loss) allocated to the limited partners by the weighted average number of Units outstanding. Per Unit information has been computed based on 13,752.5, 13,757.5 and 13,795 Units outstanding in 1995, 1994 and 1993, respectively. NOTE 2 - TRANSACTIONS WITH AFFILIATES - ------------------------------------- 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 during 1995, 1994 or 1993. The Partnership pays property management fees equal to 6% 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 and leasing services for the Partnership's properties. Prior to January 1, 1995, the Partnership paid property management fees equal to 5% of gross rental receipts. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. 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 Partnership accrued an $81,000 sales commission in connection with the 1994 sale of Pacesetter Apartments. The sales commission was paid in 1995. 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 partnerships affiliated with the General Partner if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. The Partnership had $50,000 of outstanding borrowings under the facility at December 31, 1993. The $50,000 was repaid in 1994. Borrowings from the facility are unsecured, due on demand and accrue interest at the prime lending rate of Bank of America plus 1%. 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 borrowings. This commitment will terminate on March 30, 1997. 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.............................. $ 79,474 $ 72,765 $ 92,490 Charged to general and administrative - affiliates: Partnership administration.............. 80,597 66,285 104,714 Charged to gain on disposition of real estate: Brokerage commission.................... - 81,000 - -------- -------- -------- $ 160,071 $ 220,050 $ 197,204 ======== ========= ========
Payable to affiliates - General Partner at December 31, 1995 consists of property management fees and reimbursable administrative costs. Payable to affiliates - General Partner at December 31, 1994 consists of brokerage commissions, property management fees and reimbursable administrative costs. All amounts are due and payable from current operations. NOTE 3 - TAXABLE INCOME - ----------------------- McNeil Pacific Investors Fund 1972 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 $1,948,374 in 1995, $1,973,149 in 1994 and $1,490,685 in 1993. NOTE 4 - REAL ESTATE INVESTMENTS - -------------------------------- The Partnership recorded the Palm Bay (formerly Greentree) and Pacesetter mortgage notes receivable as in-substance foreclosures on June 21, 1991 and September 30, 1991, respectively. The Partnership began recording rental revenues and expenses of the properties as of the dates of the in-substance foreclosures. The Partnership began recording cash flows from operating activities as of the dates the properties were foreclosed, May 28, 1992 for Palm Bay Apartments and January 7, 1993 for Pacesetter Apartments. The Partnership had limited financial resources to fund capital improvements and refurbishments that the General Partner considered necessary to restore the properties to their proper operating condition. The availability of additional mortgage financing or loans from affiliates was also questionable. Without the needed capital improvements and refurbishments, it was doubtful the properties would have been able to generate operating income sufficient to support the carrying value of the properties. Due to the uncertainty of how the Partnership would fund needed capital improvements and refurbishments, the General Partner concluded that the value of the properties had been permanently impaired. Therefore, on June 30, 1993, the Partnership wrote down the carrying value of Palm Bay Apartments by $800,000 and Pacesetter Apartments by $1,900,000 to state the properties at their estimated realizable values. During the fourth quarter of 1993, it became apparent that the Partnership's cash resources would be exhausted before operations at Pacesetter Apartments could be restored to a level that would be adequate to pay required debt service payments on the Pacesetter mortgage note. The General Partner determined that it would be in the best interest of the Partnership to sell Pacesetter Apartments. On March 17, 1994, the property was sold (See Note 6 - "Disposition of Real Estate Investment"). The basis and accumulated depreciation of the Partnership's real estate investment at December 31, 1995 and 1994, is set forth in the following table:
Buildings and Accumulated Net Book 1995 Land Improvements Depreciation Value ---- ------------- ------------- ------------- ----------- Palm Bay Orlando, FL $ 2,336,000 $ 5,010,483 $ (1,010,990) $ 6,335,493 ============ ========== =========== ========== Buildings and Accumulated Net Book 1994 Land Improvements Depreciation Value ---- ------------- -------------- ------------- ----------- Palm Bay $ 2,336,000 $ 4,569,577 $ (666,496) $ 6,239,081 ============ ========== =========== ==========
NOTE 5 - MORTGAGE NOTE PAYABLE - ------------------------------ The following table sets forth the Partnership's mortgage note at December 31, 1995 and 1994. The mortgage note is secured by the Partnership's real estate investment.
Mortgage Annual Monthly Lien Interest Payments/ December 31, Property Position (a) Rates % Maturity Date (c) 1995 1994 - -------- --------------- ------- ----------------- ------------- ------------ Palm Bay First 8.750 $26,775 06/97(b) $ 2,161,204 $ 2,287,341 ============ ===========
(a) The debt is non-recourse to the Partnership. (b) The Palm Bay mortgage note matures in June 1997. At that time, a balloon payment of approximately $1,975,000 will be due. (c) Principal maturities of the mortgage note after December 31, 1995, are as follows:
1996.................................... $ 137,627 1997.................................... 2,023,577 ---------- $ 2,161,204 ==========
Based on borrowing rates currently available to the Partnership for a mortgage loan with similar terms and average maturities, the fair value of the mortgage note payable was approximately $2,101,900 at December 31, 1995. As indicated above, the mortgage note is secured by the Partnership's only property and is due and payable on June 1, 1997. Management's current projections indicate that there will not be sufficient cash flow from operations to fund that obligation. Management is currently analyzing the Partnership's options, including refinancing the mortgage note or marketing the property for sale. NOTE 6 - DISPOSITION OF REAL ESTATE INVESTMENT - ---------------------------------------------- On March 17, 1994, the Partnership sold its investment in Pacesetter Apartments to an unaffiliated buyer for a cash sales price of $4,050,000. Cash proceeds from this transaction, as well as the gain on sale are detailed below.
Gain on Sale Cash Proceeds ----------------- ----------------- Sales price........................................ $ 4,050,000 $ 4,050,000 Selling costs...................................... (300,692) (300,692) Basis of real estate sold.......................... (3,174,607) --------------- Gain on sale....................................... $ 574,701 =============== --------------- Proceeds from sale of real estate.................. 3,749,308 Retirement of mortgage note........................ (2,094,135) --------------- Net cash proceeds.................................. $ 1,655,173 ===============
NOTE 7 - LEGAL PROCEEDINGS - -------------------------- 1) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil (L95012) - High River ("HR") filed this action in the United States District Court for the Southern District of New York against McNeil Partners, L.P., McNeil Investors, Inc. and Mr. and Mrs. McNeil (as defined in this Section 1, collectively, the "Defendants") requesting, among other things, names and addresses of the limited partners in the partnerships referenced above (as defined in this Section 1, the "Partnerships"). The District Court issued a preliminary injunction against the Partnerships requiring them to commence mailing materials relating to the HR tender offer on August 14, 1995. On August 18, 1995, the Defendants filed an Answer and Counterclaim. The Counterclaim principally asserts (1) the HR tender offers have been undertaken in violation of the federal securities laws, on the basis of material, non-public, and confidential information, and (2) that the HR offer documents omit and/or misrepresent certain material information about the HR tender offers. The Counterclaim seeks a preliminary and permanent injunction against the continuation of the HR tender offers and, alternatively, ordering corrective disclosure with respect to allegedly false and misleading statements contained in the tender offer documents. This action was dismissed without prejudice in November 1995. 2) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil - United States District Court for the Southern District of New York, (Case No. 95 Civ. 9488) (Second Action). On November 7, 1995, High River filed a second complaint with the District Court which alleges, inter alia, that McNeil Partners, L.P.'s (the "General Partner") Schedule 14D-9 filed in connection with the High River tender offers was materially false and misleading, in violation of Sections 14(d) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(d) and (e), and the SEC Regulations promulgated thereunder; and that High River further alleges that the General Partner has wrongfully refused to admit High River as a limited partner to the ten partnerships referenced above. Additionally, High River purports to assert claims derivatively on behalf of McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund XXV, L.P., for breach of contract and breach of fiduciary duty, asserting that the General Partner has charged these partnerships excessive fees. High River's complaint seeks, inter alia, preliminary injunctive relief requiring the General Partner to admit High River as a limited partner in each of the ten partnerships referenced above and to transfer the tendered units of interest in the partnerships to High River; an unspecified award of damages payable to High River and an additional unspecified award of damages payable to certain of the partnerships; an order that defendants must discharge their fiduciary duties and must account for all fees they have received from certain of the partnerships; and attorneys' fees. On January 31, 1996, this action was dismissed without prejudice. 3) Robert Lewis v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil et al - In the District Court of Dallas County, Texas, A-14th Judicial District, Cause No. 95-08535 (Class Action) - Plaintiff, Robert Lewis, is a limited partner with McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV, Ltd. Plaintiff brings this action on his own behalf and as a class action on behalf of the class of all limited partners of McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund XXV, Ltd. (as defined in this Section 3, the "Partnerships") as of August 4, 1995. Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 3, collectively, the "Defendants") breached their fiduciary duties by, among other things, (1) failing to attempt to sell the properties owned by the Partnerships (as defined in this Section 3, the "Properties") and extending the lives of the Partnerships indefinitely, contrary to the Partnerships' business plans, (2) paying distributions to themselves and generating fees for their affiliates, (3) refusing to make significant distributions to the class members, despite the fact that the Partnerships have positive cash flows and substantial cash balances, and (4) failing to take steps to create an auction market for equity interests of the Partnerships, despite the fact that a third party bidder filed tender offers for approximately forty-five percent (45%) of the outstanding units of each of the Partnerships. Plaintiff also claims that Defendants have breached the partnership agreements of the Partnerships by failing to take steps to liquidate the Properties and by their alteration of the Partnerships' primary purposes, their acts in contravention of these agreements, and their use of the assets of the Partnerships for their own benefit instead of for the benefit of the Partnerships. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 4) Alfred Napoletano v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133849 (Class Action Complaint) Plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above (as defined in this Section 4, the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 4, collectively, the "Defendants") have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River tender offers, (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 5) Warren Heller v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133957 (Class Action Complaint) Plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above (as defined in this Section 5, the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 5, collectively, the "Defendants") have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River tender offers, (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. NOTE 8 - PRO FORMA DISCLOSURE (UNAUDITED) - ----------------------------------------- The following pro forma information for the years ended December 31, 1994 and 1993 reflects the results of operations of the Partnership as if the sale of Pacesetter Apartments had occurred as of January 1, 1993. The pro forma information is not necessarily indicative of the results of operations that actually would have occurred or those which might be expected to occur in the future.
For the Years Ended December 31, ------------------------------------- 1994 1993 ---------------- -------------- Total revenues..................................... $ 1,287,125 $ 1,209,697 Net loss........................................... (77,885) (1,027,901) Net loss per limited partnership unit.............. (5.66) (74.51)
McNEIL PACIFIC INVESTORS FUND 1972 SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION 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: Palm Bay Apartments Orlando, FL $ 2,161,204 $ 2,336,000 $ 4,214,000 $ (800,000) $ 1,596,483 ============= ============= ============= =========== ============
(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 or refinancing. See accompanying notes to Schedule III. McNEIL PACIFIC INVESTORS FUND 1972 SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1995
Gross Amount at Which Carried at Close of Period Accumulated Buildings and Depreciation Description Land Improvements Total (a) and Amortization - ----------- ---- ------------- --------- ---------------- Apartments: Palm Bay Apartments Orlando, FL $ 2,336,000 $ 5,010,483 $ 7,346,483 $ (1,010,990) ============= ============= =============== =============
(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 $10,653,153 and accumulated depreciation was $940,317 December 31, 1995. See accompanying notes to Schedule III. McNEIL PACIFIC INVESTORS FUND 1972 SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1995
Date of Date Depreciable Description Construction Acquired lives (years) - ----------- ------------ -------- ------------- Apartments: Palm Bay Apartments Orlando, FL 1974 06/91 2-25
See accompanying notes to Schedule III. McNEIL PACIFIC INVESTORS FUND 1972 NOTES TO SCHEDULE III REAL ESTATE INVESTMENT AND ACCUMULATED DEPRECIATION A summary of activity for the Partnership's real estate investments and accumulated depreciation for the years ended December 31, 1995, 1994 and 1993 is as follows:
For the Years Ended December 31, ---------------------------------------------------- 1995 1994 1993 -------------- -------------- --------------- Real estate investments: Balance at beginning of year............... $ 6,905,577 $ 6,257,807 $ 11,952,287 Write-down for permanent impairment of real estate............... - - (2,700,000) Improvements............................... 440,906 647,770 466,547 Reclassification to asset held for sale................................ - - (3,461,027) ------------- ------------- -------------- Balance at end of year..................... $ 7,346,483 $ 6,905,577 $ 6,257,807 ============= ============== ============== Accumulated depreciation: Balance at beginning of year............... $ 666,496 $ 443,333 $ 423,615 Depreciation............................... 344,494 223,163* 271,476 Reclassification to asset held for sale................................ - - (251,758) ------------- -------------- -------------- Balance at end of year..................... $ 1,010,990 $ 666,496 $ 443,333 ============= ============== ===============
* Amount excludes depreciation on Pacesetter Apartments which was classified as an asset held for sale throughout the year. 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 Board and Director of McNeil Real Chairman of the Estate Management, Inc. ("McREMI") which is an affiliate of the General Board and Director 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 husband Robert A. McNeil, of McNeil Co-Chairman of the Investors, Inc. Mrs. McNeil has twenty years of real estate experience, Board most recently as a private investor from 1986 to 1993. In 1982, she founded Ivory & Associates, a commercialreal 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 Officer and Director of McREMI Director, President, which is an affiliate of the General Partner. Prior to joining McREMI in and Chief Executive March 1993, Mr. Reed was President, Chief Operating Officer and Director Officer 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 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% of the Partnership's securities with the exception of the following: 1. The General Conference Corporation of Seventh Day Adventists, 12501 Old Columbia Pike, Silver Spring, Maryland, 20904, owns 950 (6.9%) of the Partnership's Units as of February 29, 1996. 2. A group of ten limited partnerships affiliated with Liquidity Financial Corporation, all of whose outstanding stock is owned by Richard G. Wollack and Brent R. Donaldson, 2200 Powell Street, Suite 700, Emeryville, California, 94608, collectively own 840 (6.1%) of the Partnership's Units as of February 29, 1996. (B) Security ownership of management. The General Partner and the officers and directors of its general partner collectively own 50 Units, which is less than 1% of Units outstanding. (C) Change in control. None. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ---------------------------------------------- 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 for the year ended December 31, 1995. The Partnership pays property management fees equal to 6% of gross rental receipts of the Partnership's property to McREMI 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. For the year ended December 31, 1995, the Partnership paid or accrued $160,071 in property management fees and reimbursements. 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 brokers in the area where the property is located. During 1995, the Partnership paid an $81,000 commission to the General Partner in connection with the 1994 sale of Pacesetter Apartments. 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 partnerships affiliated with the General Partner if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. The Partnership had $50,000 of outstanding borrowings under the facility at December 31, 1993. The $50,000 was repaid during 1994. Borrowings from the facility are unsecured, due on demand and accrue interest at the prime lending rate of Bank of America plus 1%. 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 borrowings. This commitment will terminate on March 30, 1997. 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." PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K - -------- ----------------------------------------------------------------- See accompanying Index to Financial Statements at Item 8.
(A) Exhibits -------- The following exhibits are incorporated by reference and are an integral part of this Form 10-K. Exhibit Number Description ------- ----------- 3.1 Restated Certificate and Agreement of Limited Partnership dated as of March 8, 1972. (1) 3.2 Amendment to Restated Certificate and Agreement of Limited Partnership dated as of March 30, 1992. (3) 10.1 Mortgage Note, dated March 9, 1975, between McNeil Pacific Investors Fund 1972 and John Hancock Life Insurance Company. (2) 10.2 Property Management Agreement, dated as of October 1, 1993, between McNeil Pacific Investors Fund 1972 and McNeil Real Estate Management, Inc. (3) 10.3 Revolving Credit Agreement, dated August 6, 1991 between McNeil Partners, L.P. and McNeil Pacific Investors Fund 1972. (3) 10.4 Amendment of Property Management Agreement, dated January 1, 1995, between McNeil Pacific Investors Fund 1972 and McNeil Real Estate Management, Inc. (4) 10.5 Modification Agreement, dated effective June 1, 1992, between M R Partners, Inc. and John Hancock Mutual Life Insurance Company (4)
Exhibit Number Description ------- ----------- 11. Statement regarding computation of Net Income per Limited Partnership Unit (see Note 1 to Financial Statements). (1) Incorporated by reference to the Annual Report of McNeil Pacific Investors Fund 1972 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 Pacific Investors Fund 1972 (Commission file number 0-7162), on Form 10-K for the period ended December 31, 1991, as filed with the Securities and Exchange Commission on March 30, 1992. (3) Incorporated by reference to the Annual Report of McNeil Pacific Investors Fund 1972 (Commission file number 0-7162), on Form 10-K for the period ended December 31, 1993, as filed with the Securities and Exchange Commission on March 30, 1994. (4) Incorporated by reference to the Annual Report of McNeil Pacific Investors Fund 1972 (Commission file number 0-7162), on Form 10-K for the period ended December 31, 1994, as filed with the Securities and Exchange Commission on March 30, 1995. 27. Financial Data Schedule for the year ended December 31, 1995.
(B) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended December 31, 1995. McNEIL PACIFIC INVESTORS FUND 1972 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 PACIFIC INVESTORS FUND 1972 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 523,389 0 3,849 0 0 0 7,346,483 (1,010,990) 6,993,903 0 2,161,204 0 0 0 0 6,993,903 1,376,148 1,439,428 0 0 1,526,366 0 198,948 0 0 (285,886) 0 0 0 (285,886) 0 0
-----END PRIVACY-ENHANCED MESSAGE-----