-----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, We6IAFOS5R+e2nhYU1nZ6wzr8XJwSSD0G9z942BZMkSZYsFataxscFSIdJrV6MS1 MoLe55V7Zlh+2aohPN6Wqw== 0000750334-98-000012.txt : 19981118 0000750334-98-000012.hdr.sgml : 19981118 ACCESSION NUMBER: 0000750334-98-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND XX L P CENTRAL INDEX KEY: 0000750334 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330050225 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14007 FILM NUMBER: 98750741 BUSINESS ADDRESS: STREET 1: 13760 NOEL RD STE 600 LB70 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 9724485800 MAIL ADDRESS: STREET 1: 13760 NOEL ROAD SUITE 600 LB 70 STREET 2: 13760 NOEL ROAD SUITE 600 LB 70 CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHMARK INCOME INVESTORS LTD DATE OF NAME CHANGE: 19920413 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 ------------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to_____________ Commission file number 0-14007 ----------- MCNEIL REAL ESTATE FUND XX, L.P. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 33-0050225 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (972) 448-5800 ---------------------------- Indicate by check mark whether the registrant, (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- --------------------- MCNEIL REAL ESTATE FUND XX, L.P. BALANCE SHEETS (Unaudited)
September 30, December 31, 1998 1997 ------------- ------------ ASSETS - ------ Real estate investments: Land ......................................................... $ 392,000 $ 392,000 Buildings and improvements ................................... 3,930,435 3,882,558 ------------ ------------ 4,322,435 4,274,558 Less: Accumulated depreciation .............................. (1,467,812) (1,290,949) ------------ ------------ 2,854,623 2,983,609 Mortgage loan investments, net of allowance of $792,013 at December 31, 1997 ................................ -- 3,268,712 Mortgage loan investments - affiliate, net of allowance of $130,000 at December 31, 1997 ............................. -- 3,600,076 Cash and cash equivalents ....................................... 3,026,759 1,824,293 Cash segregated for security deposits ........................... 25,491 27,405 Interest and other accounts receivable .......................... 5,963 140,025 Escrow deposits ................................................. 138,445 162,652 Deferred borrowing costs, net of accumulated amortization of $72,171 and $60,222 at September 30, 1998 and December 31, 1997, respectively ..................... 89,323 101,272 Prepaid expenses and other assets ............................... 4,200 4,200 ------------ ------------ $ 6,144,804 $ 12,112,244 ============ ============ LIABILITIES AND PARTNERS' EQUITY (DEFICIT) - ------------------------------------------ Mortgage note payable, net ...................................... $ 2,627,163 $ 2,666,814 Accounts payable and other accrued expenses ..................... 43,300 61,994 Accrued property taxes .......................................... 118,985 137,050 Payable to affiliates ........................................... 319,178 203,444 Deferred revenue ................................................ -- 27,229 Security deposits and deferred rental revenue ................... 29,061 29,494 ------------ ------------ 3,137,687 3,126,025 ------------ ------------ Partners' equity (deficit): Limited partners - 60,000 limited partnership units authorized; 49,512 limited partnership units issued and outstanding at September 30, 1998 and December 31, 1997 .......................................... 3,291,047 9,282,684 General Partner .............................................. (283,930) (296,465) ------------ ------------ 3,007,117 8,986,219 ------------ ------------ $ 6,144,804 $ 12,112,244 ============ ============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XX, L.P. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ----------------------------- 1998 1997 1998 1997 ---------- ---------- ---------- ----------- Revenue: Rental revenue ....................... $ 320,966 $ 308,473 $ 967,846 $ 966,384 Interest income on mortgage loan investments ................... 42,092 80,065 180,872 210,317 Interest income on mortgage loan investments - affiliate........ -- 15,473 108,214 45,915 Other interest income ................ 93,607 50,624 178,719 120,424 Gain on extinguishment of mortgage loan investment ........... -- -- 1,025,833 -- Gain on disposition of real estate ............................. -- 1,962,280 -- 1,962,280 ---------- ---------- ---------- ---------- Total revenue ...................... 456,665 2,416,915 2,461,484 3,305,320 ---------- ---------- ---------- ---------- Expenses: Interest ............................. 60,677 61,553 182,975 185,528 Depreciation ......................... 57,626 33,287 176,863 178,311 Property taxes ....................... 41,046 39,406 118,984 128,645 Personnel costs ...................... 37,242 38,539 111,316 116,001 Utilities ............................ 23,175 22,647 63,350 62,286 Repairs and maintenance .............. 30,005 33,783 87,283 103,091 Property management fees - affiliates .................. 15,944 14,944 45,976 47,767 Other property operating expenses ........................... 20,835 26,610 57,127 72,884 General and administrative ........... 39,384 25,749 202,584 82,213 General and administrative - affiliates ......................... 30,412 73,197 161,538 205,132 ---------- ---------- ---------- ---------- Total expenses ..................... 356,346 369,715 1,207,996 1,181,858 ---------- ---------- ---------- ---------- Net income .............................. $ 100,319 $2,047,200 $1,253,488 $2,123,462 ========== ========== ========== ========== Net income allocable to limited partners .................. $ 99,316 $2,026,728 $1,240,953 $2,102,227 Net income allocable to General Partner ................... 1,003 20,472 12,535 21,235 ---------- ---------- ---------- ---------- Net income .............................. $ 100,319 $2,047,200 $1,253,488 $2,123,462 ========== ========== ========== ========== Net income per limited partnership unit ..................... $ 2.00 $ 40.94 $ 25.06 $ 42.46 ========== ========== ========== ========== Distributions per limited partnership unit ..................... $ 116.14 $ 50.49 $ 146.08 $ 65.64 ========== ========== ========== ==========
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. MCNEIL REAL ESTATE FUND XX, L.P. STATEMENTS OF PARTNERS' EQUITY (DEFICIT) (Unaudited) For the Nine Months Ended September 30, 1998 and 1997
Total General Limited Partners' Partner Partners Equity (Deficit) ------------- ------------ ---------------- Balance at December 31, 1996 ............ $ (318,863) $ 10,315,277 $ 9,996,414 Net income .............................. 21,235 2,102,227 2,123,462 Distributions to limited partners........ -- (3,249,987) (3,249,987) ------------ ------------ ------------ Balance at September 30, 1997 ........... $ (297,628) $ 9,167,517 $ 8,869,889 ============ ============ ============ Balance at December 31, 1997 ............ $ (296,465) $ 9,282,684 $ 8,986,219 Net income .............................. 12,535 1,240,953 1,253,488 Distributions to limited partners ....... -- (7,232,590) (7,232,590) ------------ ------------ ------------ Balance at September 30, 1998 ........... $ (283,930) $ 3,291,047 $ 3,007,117 ============ ============ ============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. MCNEIL REAL ESTATE FUND XX, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Increase (Decrease) in Cash and Cash Equivalents
Nine Months Ended September 30, -------------------------------- 1998 1997 ------------ ------------ Cash flows from operating activities: Cash received from tenants ........................ $ 1,006,444 $ 973,198 Cash paid to suppliers ............................ (539,235) (485,988) Cash paid to affiliates ........................... (91,780) (272,644) Interest received ................................. 375,076 325,966 Interest received from affiliate .................. 184,958 36,665 Interest paid ..................................... (165,000) (168,562) Property taxes paid ............................... (280) (24,100) Property taxes escrowed ........................... (115,800) (97,044) ----------- ----------- Net cash provided by operating activities ............ 654,383 287,491 ----------- ----------- Cash flows from investing activities: Additions to real estate investments .............. (47,877) (157,761) Collection of principal on mortgage loan investments ..................................... 53,364 101,584 Proceeds from payoff of mortgage loan investments ..................................... 4,241,181 -- Collection of principal on mortgage loan investments - affiliate ......................... 9,126 -- Proceeds from payoff of mortgage loan investments - affiliate ......................... 3,570,896 -- Proceeds from disposition of real estate .......... -- 4,493,834 ----------- ----------- Net cash provided by investing activities ............ 7,826,690 4,437,657 ----------- ----------- Cash flows from financing activities: Principal payments on mortgage note payable........ (46,017) (42,427) Distributions to limited partners ................. (7,232,590) (3,249,987) ----------- ----------- Net cash used in financing activities ................ (7,278,607) (3,292,414) ----------- ----------- Net increase in cash and cash equivalents ........... 1,202,466 1,432,734 Cash and cash equivalents at beginning of period ............................................ 1,824,293 3,188,257 ----------- ----------- Cash and cash equivalents at end of period ........... $ 3,026,759 $ 4,620,991 =========== ===========
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. MCNEIL REAL ESTATE FUND XX, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Income to Net Cash Provided by Operating Activities
Nine Months Ended September 30, ------------------------------- 1998 1997 ----------- ----------- Net income ............................................ $ 1,253,488 $ 2,123,462 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ....................................... 176,863 178,311 Amortization of deferred borrowing costs ........... 11,949 11,210 Amortization of discount on mortgage note payable .......................................... 6,366 6,044 Gain on extinguishment of mortgage loan investment .................................. (1,025,833) -- Gain on disposition of real estate ................. -- (1,962,280) Disposition fee payable to affiliate ............... -- (124,500) Changes in assets and liabilities: Cash segregated for security deposits ............ 1,914 24,729 Interest and other accounts receivable ........... 134,062 (14,365) Escrow deposits .................................. 24,207 33,261 Prepaid expenses and other assets ................ -- 834 Accounts payable and other accrued expenses ....................................... (18,694) (46,616) Accrued property taxes ........................... (18,065) (26,412) Payable to affiliates ............................ 115,734 104,755 Deferred revenue ................................. (7,175) (4,968) Security deposits and deferred rental revenue ........................................ (433) (15,974) ----------- ----------- Total adjustments .............................. (599,105) (1,835,971) ----------- ----------- Net cash provided by operating activities ............. $ 654,383 $ 287,491 =========== ===========
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. MCNEIL REAL ESTATE FUND XX, L.P. Notes to Financial Statements September 30, 1998 (Unaudited) NOTE 1. - ------- McNeil Real Estate Fund XX, L.P. (the "Partnership"), formerly known as Southmark Income Investors, Ltd., was organized on July 19, 1984 as a limited partnership under the provisions of the California Revised 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 principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 600, Dallas, Texas 75240. In the opinion of management, the financial statements reflect all adjustments necessary for a fair presentation of the Partnership's financial position and results of operations. All adjustments were of a normal recurring nature. However, the results of operations for the nine months ended September 30, 1998 are not necessarily indicative of the results to be expected for the year ending December 31, 1998. NOTE 2. - ------- The financial statements should be read in conjunction with the financial statements contained in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1997, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Real Estate Fund XX, L.P., c/o McNeil Real Estate Management, Inc., Investor Services, 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240. NOTE 3. - ------- The Partnership pays property management fees equal to 5% of the gross rental receipts for its properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management services. Under the terms of its partnership agreement, the Partnership pays a disposition fee to an affiliate of the General Partner equal up to 3% of the gross sales price for brokerage services performed in connection with the sale of the Partnership's properties, provided, however, that in no event shall all real estate commissions (including the disposition fee) paid to all persons exceed the amount customarily charged in similar arms-length transactions. The fee is due and payable at the time the sale closes. The Partnership incurred $124,500 of such fees during 1997 in connection with the sale of 1130 Sacramento Condominiums. This amount represents 2.65% of the gross sales price. These fees have not yet been paid by the Partnership and are included in payable to affiliates on the Balance Sheets at September 30, 1998 and December 31, 1997. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. The Partnership is paying an asset management fee which is payable to the General Partner. Through 1999, the asset management fee is calculated as 1% of the Partnership's tangible asset value. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property, (ii) a value of $10,000 per apartment unit or (iii) on 1130 Sacramento, the net book value of the property is used to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible items. The fee percentage decreases subsequent to 1999. Total accrued but unpaid asset management fees of $116,983 and $36,633 were outstanding at September 30, 1998 and December 31, 1997, respectively. Compensation and reimbursements paid to or accrued for the benefit of the General Partner and its affiliates are as follows: Nine Months Ended September 30, --------------------- 1998 1997 -------- -------- Property management fees .......................... $ 45,976 $ 47,767 Charged to gain on disposition of real estate: Disposition fees ............................... -- 124,500 Charged to general and administrative - affiliates: Partnership administration ..................... 81,188 83,087 Asset management fee ........................... 80,350 122,045 -------- -------- $207,514 $377,399 ======== ======== Payable to affiliates at September 30, 1998 and December 31, 1997 consisted primarily of unpaid property management fees, disposition fees, Partnership general and administrative expenses and asset management fees and are due and payable from current operations. NOTE 4. - ------- The Partnership's mortgage loan investments - affiliate were secured by first and second liens on Fort Meigs Plaza Shopping Center, which was owned by an affiliate of the General Partner. On April 20, 1998, Fort Meigs Plaza was sold to a non-affiliate for a gross sales price of $3.8 million. The Partnership received $3,615,353 as payment in full for both principal and interest receivable on the loans, which represents the available cash proceeds from the sale of the property. NOTE 5. - ------- The mortgage loan investment secured by Idlewood Nursing Home matured in February 1998. On May 1, 1998, the Partnership received $2.4 million from the borrower as payment in full for both principal and interest receivable on the loan (the actual balance of the loan was greater than the book value). Since the Partnership owned an 83% participation interest in the note, $408,000 of the $2.4 million settlement was paid to the owner of the remaining 17% of the note. As a result of this transaction, the Partnership recognized a $1,025,833 gain on extinguishment of mortgage loan investment, which represents the net cash received in excess of the book value of the loan. NOTE 6. - ------- On August 20, 1998, the Partnership received $2,541,572 as payment in full for both principal and interest receivable on the mortgage loan investment secured by Lakeland Nursing Home. Since the Partnership owned a 90% participation interest in the note, $254,157 of the payoff was paid to the owner of the remaining 10% of the note. NOTE 7. - ------- On August 1, 1997, the Partnership sold one of four units of 1130 Sacramento Condominiums, located in San Francisco, California, to an unaffiliated purchaser. The remaining three units were sold to the same purchaser on August 28, 1997. The cash purchase price for all four units was $4,700,000. Cash proceeds and the gain on disposition of real estate are detailed below: Gain on Sale Cash Proceeds ------------ ------------- Cash sales price......................... $ 4,700,000 $ 4,700,000 Selling costs............................ (330,666) (206,166) ----------- Net cash proceeds........................ $ 4,493,834 =========== Carrying value........................... (2,407,054) ----------- Gain on disposition of real estate....... $ 1,962,280 =========== As discussed in Note 3, the Partnership incurred a $124,500 disposition fee payable to an affiliate of the General Partner in connection with the sale of 1130 Sacramento. This fee reduced the amount of the gain on disposition of real estate and is included in selling costs above. However, as the fee has not yet been paid, it did not reduce the amount of net cash proceeds from the sale. The net cash proceeds from the sale of 1130 Sacramento will be $4,369,334 after payment of the disposition fee. NOTE 8. - ------- James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint). The action involves purported class and derivative actions brought by limited partners of each of the fourteen limited partnerships that were named as nominal defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. Defendants filed a demurrer to the consolidated and amended complaint and a motion to strike on February 14, 1997, seeking to dismiss the consolidated and amended complaint in all respects. A hearing on Defendant's demurrer and motion to strike was held on May 5, 1997. The Court granted Defendants' demurrer, dismissing the consolidated and amended complaint with leave to amend. On October 31, 1997, the Plaintiffs filed a second consolidated and amended complaint. The case was stayed pending settlement discussions. A Stipulation of Settlement dated September 15, 1998 has been signed by the parties. Preliminary Court approval was received on October 6, 1998. A hearing on final Court approval is scheduled for December 17, 1998. Plaintiff's counsel intend to seek an order awarding attorney's fees and reimbursements of their out-of-pocket expenses. The amount of such award is undeterminable until final approval is received from the court. Fees and expenses shall be allocated amongst the Partnerships on a pro rata basis, based upon tangible asset value of each such partnership, less total liabilities, calculated in accordance with the Amended Partnership Agreements for the quarter most recently ended. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- There has been no significant change in the operations of Sterling Springs Apartments. 1130 Sacramento Condominiums was sold in August 1997. The Partnership's mortgage loan investments - affiliate secured by Fort Meigs Plaza were repaid in April 1998. The Partnerships two mortgage loan investments secured by Idlewood Nursing Home and Lakeland Nursing Home were repaid in May 1998 and August 1998, respectively. The Partnership reported net income of $1,253,488 for the first nine months of 1998 as compared to $2,123,462 for the same period in 1997. Revenues in 1998 decreased to $2,461,484 from $3,305,320 in 1997, while expenses were $1,207,996 in 1998 as compared to $1,181,858 in 1997. Net cash provided by operating activities was $654,383 for the nine months ended September 30, 1998. The Partnership expended $47,877 for capital improvements, made $46,017 in principal payments on its mortgage note payable and distributed $7,232,590 to the limited partners. After receiving a total of $7,874,567 in principal on mortgage loan investments and mortgage loan investments - affiliate, cash and cash equivalents totaled $3,026,759 at September 30, 1998, a net increase of $1,202,466 from the balance at December 31, 1997. RESULTS OF OPERATIONS Revenue: Total revenue decreased by $1,960,250 and $843,836 for the three and nine months ended September 30, 1998, respectively, as compared to the same periods in 1997. The decrease was mainly due to a gain on disposition of real estate recognized in 1997, partially offset by a gain on extinguishment of mortgage loan investment in 1998, as discussed below. Interest income on mortgage loan investments for the three and nine months ended September 30, 1998 decreased by $37,973 and $29,445, respectively, in relation to the comparable periods in 1997. The decrease was due to the Lakeland Nursing Home mortgage loan investment being paid off by the borrower in August 1998. Although the Idlewood Nursing Home mortgage loan investment was also paid off in 1998, no interest was accrued on this loan in 1998 or 1997. In 1993, the Partnership acquired a second lien loan on a property owned by an affiliate. The Partnership purchased the first lien loan on this property in December 1997. Both loans were repaid by the affiliate borrower in April 1998. Interest income on mortgage loan investments - affiliate decreased by $15,473 and increased by $62,299 for the three and nine months ended September 30, 1998, respectively, as compared to the same periods in 1997. The overall increase was due to the first nine months of 1997 including interest on the second lien loan only. 1998 includes interest on both the first and second lien loans. The decrease for the quarter was due to both of the loans being repaid in April 1998. Other interest income increased by $42,983 and $58,295 for the three and nine months ended September 30, 1998, respectively, as compared to the same periods in 1997. The increase was the result of an increase in cash available for short-term investment due to payoff of the Partnership's mortgage loan investments and mortgage loan investments - affiliate during the second and third quarters of 1998. In the second quarter of 1998, the Partnership recognized a $1,025,833 gain on extinguishment of mortgage loan investment related to the payoff of the Idlewood Nursing Home loan. The gain represents the cash payoff received in excess of the book value of the mortgage loan investment. On August 1, 1997, the Partnership sold one of four units of 1130 Sacramento Condominiums to an unaffiliated purchaser. The remaining three units were sold to the same purchaser on August 28, 1997. The cash purchase price for all four units was $4,700,000. The Partnership recognized a gain on disposition of real estate of $1,962,280 as more fully discussed in Item 1, Note 7. Expenses: Total expenses for the three months decreased by $13,369 and increased by $26,138 for the nine months ended September 30, 1998 as compared to the same periods in 1997. The increase was mainly due to an increase in general and administrative expenses, partially offset by decreases in repairs and maintenance, other property operating expenses and general and administrative - affiliates, as discussed below. Repairs and maintenance expense decreased by $3,778 and $15,808 for the three and nine months ended September 30, 1998, respectively, as compared to the same periods in 1997. The overall decrease was mainly attributable to 1130 Sacramento, which was sold in August 1997. In the three and nine months ended September 30, 1998, other property operating expenses decreased by $5,775 and $15,757, respectively, as compared to the same periods in 1997. The decrease was mainly due to a $10,000 deductible paid by the Partnership in 1997 for two minor tenant claims settled by the Partnership's insurance carrier. The remaining decrease was attributable to 1130 Sacramento, which was sold in August 1997. General and administrative expenses increased by $13,635 and $120,371 for the three and nine months ended September 30, 1998, respectively, in relation to the same periods in 1997. The increase was mainly due to costs incurred to explore alternatives to maximize the value of the Partnership (see Liquidity and Capital Resources). General and administrative expenses - affiliates decreased by $42,785 and $43,594 for the three and nine months ended September 30, 1998, respectively, in relation to the same periods in 1997. The decrease was due to a decline in the tangible asset value of the Partnership, on which the fees are based, due to the payoff of the Partnership's mortgage loan investments and mortgage loan investments - affiliate in 1998. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership generated $654,383 of cash through operating activities for the first nine months of 1998 as compared to $287,491 generated during the first nine months of 1997. The increase in 1998 was partially due to an increase in interest received from an affiliate relating to the Fort Meigs Plaza loan (see discussion of increase in interest income on mortgage loan investments - affiliate, above). In addition, there was a decrease in cash paid to affiliates in 1998. The Partnership expended $47,877 and $157,761 for additions to its real estate investments in the nine months ended September 30, 1998 and 1997, respectively. Approximately $30,000 of the decrease in 1998 was attributable to 1130 Sacramento, which was sold in August 1997. In addition, there was a greater amount spent in 1997 for exterior carpentry and painting at Sterling Springs Apartments. In the first nine months of 1998 and 1997, the Partnership collected $53,364 and $101,584, respectively, of principal in mortgage loan investments. The decrease in 1998 was due to the payoff of the Idlewood Nursing Home loan in May 1998 and the Lakeland Nursing Home loan in August 1998. In May 1998, the Partnership received a net total of $4,241,181 as repayment in full of the Partnership's mortgage loan investments. $1,992,000 was received in May 1998 to payoff the Idlewood Nursing Home loan and $2,249,181 was received in August 1998 to payoff the Lakeland Nursing Home loan. In April 1998, the Partnership received $3,570,896 to payoff the principal balance of the Fort Meigs Plaza mortgage loan investments - affiliate. The Partnership received net proceeds from the sale of 1130 Sacramento of $4,493,834 in August 1997. The Partnership distributed $7,232,590 and $3,249,987 to the limited partners during the nine months ended September 30, 1998 and 1997, respectively. Short-term liquidity: At September 30, 1998, the Partnership held cash and cash equivalents of $3,026,759. This balance provides a reasonable level of working capital for the Partnership's immediate needs in operating its remaining property. In 1998, the operation of Sterling Springs Apartments, the Partnership's only remaining property, is expected to provide sufficient positive cash flow for normal operations. Management will perform routine repairs and maintenance on the property to preserve and enhance its value and competitiveness in the market. Capital improvements to the Partnership's property in 1998 are expected to be funded from operations of the property. The mortgage loan investment secured by Idlewood Nursing Home matured in February 1998. On May 1, 1998, the Partnership received $2.4 million from the borrower as payment in full for both principal and interest receivable on the loan (the actual balance of the loan was greater than the book value). Since the Partnership owned an 83% participation interest in the note, $408,000 of the $2.4 million settlement was paid to the owner of the remaining 17% of the note. On August 20, 1998, the Partnership received $2,541,572 as payment in full for both principal and interest receivable on the mortgage loan investment secured by Lakeland Nursing Home. Since the Partnership owned a 90% participation interest in the note, $254,157 of the payoff was paid to the owner of the remaining 10% of the note. The first and second lien mortgage loan investments - affiliate secured by Fort Meigs Plaza matured in March 1998 and September 1997, respectively. The borrowing partnership sold the property to a non-affiliate in April 1998 for $3.8 million. The Partnership received $3,615,353 as payment in full for both principal and interest receivable on the loans. For 1998, management expects that cash from operations of its property, along with the present balance of cash and cash equivalents held, will allow the Partnership to meet its obligations as they come due. Long-term liquidity: The Partnership's property, Sterling Springs Apartments, is encumbered with mortgage debt. The mortgage is not due until 2003. While the outlook for maintenance of adequate levels of liquidity is favorable, should operations deteriorate and present cash resources be insufficient for current needs, the Partnership would require other sources of working capital. No such sources have been identified. The Partnership has no established lines of credit from outside sources. Other possible actions to resolve cash deficiencies include refinancings, deferral of capital expenditures on the Partnership's property except where improvements are expected to increase the competitiveness and marketability of the property, arranging financing from affiliates or the ultimate sale of the property. As previously announced, the Partnership has retained PaineWebber, Incorporated ("PaineWebber") as its exclusive financial advisor to explore alternatives to maximize the value of the Partnership including, without limitation, a transaction in which limited partnership interests in the Partnership are converted into cash. The Partnership, through PaineWebber, has provided financial and other information to interested parties and is currently conducting discussions with one such party in an attempt to reach a definitive agreement with respect to a sale transaction. It is possible that the General Partner and its affiliates will receive non-cash consideration for their ownership interests in connection with any such transaction. There can be no assurance that any such agreement will be reached nor the terms thereof. Forward-Looking Information: Within this document, certain statements are made as to the expected occupancy trends, financial condition, results of operations, and cash flows of the Partnership for periods after September 30, 1998. All of these statements are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical and involve risks and uncertainties. The Partnership's actual occupancy trends, financial condition, results of operations, and cash flows for future periods may differ materially due to several factors. These factors include, but are not limited to, the Partnership's ability to control costs, make necessary capital improvements, negotiate the sale or refinancing of its property, collect payments on its mortgage loan investment and respond to changing economic and competitive factors. Other Information: Management has reviewed its information technology infrastructure to identify any systems that could be affected by the year 2000 problem. The year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in major systems failure or miscalculations. The information systems used by the Partnership for financial reporting and significant accounting functions were made year 2000 compliant during recent systems conversions. Management is in the process of evaluating the mechanical and embedded technological systems at the various properties. Management intends to inventory all such systems and query suppliers, vendors and manufacturers to determine year 2000 compliance. In circumstances of non-compliance management will work with the vendor to remedy the problem or seek alternative suppliers who will be in compliance. Management believes that the remediation of any outstanding year 2000 conversion issues will not have a material or adverse effect on the Partnership's operations. However, no estimates can be made as to the potential adverse impact resulting from the failure of third party service providers and vendors to be year 2000 compliant. Management is in the process of identifying those risks as well as developing a contingency plan to mitigate potential adverse effects from non-compliance. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint). The action involves purported class and derivative actions brought by limited partners of each of the fourteen limited partnerships that were named as nominal defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. Defendants filed a demurrer to the consolidated and amended complaint and a motion to strike on February 14, 1997, seeking to dismiss the consolidated and amended complaint in all respects. A hearing on Defendant's demurrer and motion to strike was held on May 5, 1997. The Court granted Defendants' demurrer, dismissing the consolidated and amended complaint with leave to amend. On October 31, 1997, the Plaintiffs filed a second consolidated and amended complaint. The case was stayed pending settlement discussions. A Stipulation of Settlement dated September 15, 1998 has been signed by the parties. Preliminary Court approval was received on October 6, 1998. A hearing on final Court approval is scheduled for December 17, 1998. Plaintiff's counsel intend to seek an order awarding attorney's fees and reimbursements of their out-of-pocket expenses. The amount of such award is undeterminable until final approval is received from the court. Fees and expenses shall be allocated amongst the Partnerships on a pro rata basis, based upon tangible asset value of each such partnership, less total liabilities, calculated in accordance with the Amended Partnership Agreements for the quarter most recently ended. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- (a) Exhibits. Exhibit Number Document Description ------- -------------------- 4. Amended and Restated Limited Partnership Agreement dated March 30, 1992. (Incorporated by reference to the Current Report of the registrant on Form 8-K dated March 30, 1992, as filed on April 10, 1992). 11. Statement regarding computation of Net Income per Limited Partnership Unit: Net income per limited partnership unit is computed by dividing net income allocated to the limited partners by the weighted average number of limited partnership units outstanding. Per unit information has been computed based on 49,512 limited partnership units outstanding in 1998 and 1997. 27. Financial Data Schedule for the quarter ended September 30, 1998. (b) Reports on Form 8-K. A Form 8-K with respect to Item 2 dated August 20, 1998 was filed on August 25, 1998 regarding the payoff of the Lakeland Nursing Home mortgage loan investment. MCNEIL REAL ESTATE FUND XX, L.P. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized: McNEIL REAL ESTATE FUND XX, L.P. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner November 16, 1998 By: /s/ Ron K. Taylor - ----------------- ------------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) November 16, 1998 By: /s/ Carol A. Fahs - ----------------- ------------------------------------------- Date Carol A. Fahs Vice President of McNeil Investors, Inc. (Principal Accounting Officer) EX-27 2
5 9-MOS DEC-31-1998 SEP-30-1998 3,026,759 0 5,963 0 0 0 4,322,435 (1,467,812) 6,144,804 0 2,627,163 0 0 0 3,007,117 6,114,804 967,846 2,461,484 484,036 660,899 364,122 0 182,975 1,253,488 0 1,253,488 0 0 0 1,253,488 0 0
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