-----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, B8kNt2DYzU7iCdN0tPIaj9tw14Qc7fZM5thMSWbbrOTpb8T5WxG4X2sVIE36okI1 lT+mmelfu1BiCxpA8zPt0Q== 0000751044-96-000003.txt : 19960401 0000751044-96-000003.hdr.sgml : 19960401 ACCESSION NUMBER: 0000751044-96-000003 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND XV LTD /CA CENTRAL INDEX KEY: 0000751044 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942941516 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-14258 FILM NUMBER: 96541375 BUSINESS ADDRESS: STREET 1: 13760 NOEL RD STE 700 LB70 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144485800 MAIL ADDRESS: STREET 2: 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 0-14258 McNEIL REAL ESTATE FUND XV, LTD. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 94-2941516 - -------------------------------------------------------------------------------- (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 ] 101,479 of the registrant's 102,836 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 41 TOTAL OF 43 PAGES PART I ITEM 1. BUSINESS - ------- -------- Organization - ------------ McNeil Real Estate Fund XV, Ltd. (the "Partnership") was organized June 26, 1984 as a limited partnership under the provisions of the California Uniform Limited Partnership Act. The general partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil ("McNeil"). The Partnership is governed by an amended and restated partnership agreement of limited partnership dated October 11, 1991, as amended (the "Amended Partnership Agreement"). Prior to October 11, 1991, McNeil Realty Investors Corporation (the prior "Corporate General Partner"), a wholly-owned subsidiary of Southmark Corporation ("Southmark"), and McNeil were the general partners of the Partnership, which was governed by an agreement of limited partnership dated June 26, 1984 (the "Original Partnership Agreement"). The principal place of business for the Partnership and General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240. On September 14, 1984, a Registration Statement on Form S-11 was declared effective by the Securities and Exchange Commission whereby the Partnership offered for sale $35,000,000 of limited partnership units ("Units"), with the General Partners' right to increase the offering up to $60,000,000. 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 January 31, 1986, with 101,519 Units sold at $500 each, or gross proceeds of $50,759,500 to the Partnership. In addition, the original general partners purchased a total of 10 Units for $5,000. In 1991 and in 1992, 651 and 696 Units, respectively, were issued to the General Partner for payment of the fixed portion of the Management Incentive Distribution ("MID"). In 1993, 1994 and 1995, 10, 20 and 10 Units, respectively, were relinquished leaving 102,836 Units outstanding as of 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, which included 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 and commenced management of the Partnership's properties pursuant to an assignment of the existing property management agreements from the Southmark affiliates. On October 11, 1991, the limited partners approved a restructuring proposal providing for (i) the replacement of the Corporate General Partner and McNeil with the General Partner; (ii) the adoption of the Amended Partnership Agreement, which substantially alters provisions of the Original Partnership Agreement relating to, among other things, compensation, reimbursements of expenses, and voting rights; and (iii) the approval of a new property management agreement with McREMI, the Partnership's property manager. The Amended Partnership Agreement provides for a MID to replace all other forms of general partner compensation other than property management fees and reimbursements of certain costs. Additional Units may be issued in connection with the payment of the MID pursuant to the Amended Partnership Agreement. In 1992 and 1991, the General Partner received 696 and 651 Units, respectively, for such a payment. See Item 8 - Note 2 "Transactions with Affiliates". For a discussion of the methodology for calculating and distributing the MID see Item 13 - Certain Relationships and Related Transactions. Settlement of Claims: The Partnership filed claims with the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court") against Southmark for damages relating to improper overcharges, breach of contract and breach of fiduciary duty. The Partnership settled these claims in 1991, and such settlement was approved by the Bankruptcy Court. An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April 14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in May 1995 the Partnership received in full satisfaction of its claims, $26,655 in cash, and common and preferred stock in the reorganized Southmark which represents the Partnership's pro-rata share of Southmark assets available for Class 8 Claimants. The Partnership sold the Southmark common and preferred stock in May for $8,608 which, combined with the cash proceeds from Southmark, resulted in a gain on legal settlement of $35,263. CURRENT OPERATIONS - ------------------ General: The Partnership is engaged in real estate activities, including the ownership, operation and management of residential and other real estate related assets. At December 31, 1995, the Partnership owned four income-producing properties as described in Item 2 - Properties. The Partnership does not directly employ any personnel. The Partnership is managed by the General Partner and, in accordance with the Amended Partnership Agreement, the Partnership reimburses affiliates of the General Partner for certain costs incurred by affiliates in connection with the management of the Partnership's business. See Item 8 - Note 2 - "Transactions With Affiliates." The business of the Partnership to date has involved only one industry segment. See Item 8 - Financial Statements and Supplementary Data. The Partnership has no foreign operations. The business of the Partnership is not seasonal. Business Plan: The Partnership's anticipated plan of operations for 1996 is to preserve or increase the net operating income of its properties whenever possible, while at the same time making whatever capital expenditures are reasonable under the circumstances in order to preserve and enhance the value of the Partnership's properties. The General Partner is evaluating market and other economic conditions to determine the optimum time to commence an orderly liquidation of the Partnership's properties in accordance with the terms of the Amended Partnership Agreement. In conjunction therewith, the General Partner will continue to explore potential avenues to enhance the value of the Units in the Partnership, which may include, among other things, asset sales or refinancings of the Partnership's properties 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, is described in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. See Item 2 - Properties for discussion of competitive conditions at the Partnership's properties. Other information: The environmental laws of the federal government and of certain state and local governments impose liability on current property owners for the clean-up of hazardous and toxic substances discharged on the property. This liability may be imposed without regard to the timing, cause or person responsible for the release of such substances onto the property. The Partnership could be subject to such liability in the event that it owns properties having such environmental problems. The Partnership has no knowledge of any pending claims or proceedings regarding such environmental problems. 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 $95.00 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 6.74% 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. ITEM 2. PROPERTIES - ------- ---------- The following table sets forth the real estate investment portfolio of the Partnership at December 31, 1995. The buildings and the land on which they are located are owned by the Partnership in fee, subject in each case (with the exception of Cedar Run, which is unencumbered by mortgage indebtedness) to a first lien deed of trust as set forth more fully in Item 8 - Note 5 - "Mortgage Notes Payable". See also Item 8 - Note 4 - "Real Estate Investments" and Schedule III - "Real Estate Investments and Accumulated Depreciation." In the opinion of the management, the properties are adequately covered by insurance.
Net Basis 1995 Date Property Description of Property Debt Property Tax Acquired - ------------- ----------- -------------- ------------- ------------ -------- Arrowhead (1) Apartments Shawnee, KS 436 units $ 8,617,008 $ 7,119,395 $ 146,627 3/85 Cedar Run Apartments Lexington, KY 152 units 3,611,727 - 30,247 12/85 Mountain Shadows (2) Apartments Albuquerque, NM 504 units 13,515,173 11,856,268 182,945 8/85 Woodcreek (3) Apartments Cary, NC 200 units 5,805,086 5,240,470 61,814 12/85 ------------- ------------ --------- $ 31,548,994 $ 24,216,133 $ 421,633 ============= ============ =========
- ----------------------------------------- Total: Apartments - 1,292 units (1) Arrowhead Apartments is owned by Arrowhead Fund XV Limited Partnership which is wholly-owned by the Partnership. (2) Mountain Shadows Apartments is owned by McNeil Mountain Shadows Fund XV Limited Partnership which is wholly-owned by the Partnership. (3) Woodcreek Apartments is owned by Woodcreek Fund XV, Ltd. which is wholly- owned by the Partnership. The following table sets forth the properties' occupancy rate and rent per square foot for each of the last five years:
1995 1994 1993 1992 1991 ------ ----- ----- ------ ----- Arrowhead Occupancy Rate............ 95% 95% 96% 92% 89% Rent Per Square Foot...... $6.76 $6.42 $5.95 $5.49 $5.25 Cedar Run Occupancy Rate............ 95% 95% 91% 92% 90% Rent Per Square Foot...... $7.22 $7.14 $6.61 $6.32 $6.13 Mountain Shadows Occupancy Rate............ 88% 94% 95% 93% 89% Rent Per Square Foot...... $8.24 $7.97 $7.53 $6.88 $6.26 Woodcreek Occupancy Rate............ 95% 99% 97% 92% 98% Rent Per Square Foot...... $8.42 $8.08 $7.40 $6.87 $6.62
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 at Properties - ------------------------------------ Occupancy rates at Arrowhead mirror the local area average of 95%. Area occupancy rates are expected to remain in the 95% range. Arrowhead is located in an affluent county in metropolitan Kansas City. The apartment market is extremely concentrated with over 3,000 apartment units within a one mile radius of Arrowhead. The increase in capital improvements over the last several years has allowed the property to reposition itself as one of the leaders in the market. The extensive capital improvement program at Cedar Run has resulted in increasing the occupancy rate from 90% in 1991 to 95% in 1995. The market has fluctuated from 90% to 96%, while Cedar Run has held its occupancy rate constant throughout the year. The property's rent per square foot is currently 12% higher than the local market rate. There has been little new development of multi-family projects in the area. Mountain Shadows is located in a very competitive market in Albuquerque. The market maintains an occupancy level at 88% with an additional 1,892 units under construction. The capital improvements program that Mountain Shadows has been involved in has kept the property aggressive in the market. The occupancy rate at Woodcreek dropped off slightly in 1995 to 95% due to the additional units added in the market during the year. The market averages a strong 96%. The property is located in a rapidly developing area of Wake County in North Carolina. The current capital improvement program has enabled the property to stay competitive in a growing market. ITEM 3. LEGAL PROCEEDINGS - ------- ----------------- The Partnership is not party to, nor are any of the Partnership's properties the subject of, any material pending legal proceedings, other than ordinary, routine litigation incidental to the Partnership's business, except for the following: 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) James F. Schofield, Gerald C. Gillett and Donna S. Gillett v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, 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. et al - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint) and United States District Court, Southern District of New York, Case No. 95CIV.6711 (Class and Derivative Action Complaint) These are corporate/securities class and derivative actions brought in state and federal court by limited partners of each of the nine (9) limited partnerships that are named as nominal defendants as listed above (as defined in this Section 4, the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and four (4) of their senior officers and/or directors (as defined in this Section 4, collectively, the "Defendants") have breached their fiduciary duties. Specifically, Plaintiffs allege that Defendants have caused the Partnerships to enter into several wasteful transactions that have no business purpose or benefit to the Partnerships and which have rendered such units highly illiquid and artificially depressed the prices that are available for units on the limited resale market. Plaintiffs also allege that Defendants have engaged in a course of conduct to prevent the acquisition of units by Carl Icahn by disseminating false, misleading and inadequate information. Plaintiffs further allege that Defendants have 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 and, thereby, have breached the partnership agreements. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend these actions. 5) 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 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. 6) 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 6, the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 6, 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. See also Item 8 - Note 9 - "Gain on Legal Settlement." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND RELATED - ------- -------------------------------------------------------------------- SECURITY HOLDER MATTERS ----------------------- (A) There is no established public trading market for Units, nor is one expected to develop. (B) Title of Class Number of Record Unit Holders -------------- ----------------------------- Limited partnership units 5,568 as of February 16, 1996 (C) No distributions were made to the limited partners during 1995. Cash distributions of $499,993 were made to the limited partners during 1994. The distributions consisted of funds from the sale of Riverway Five. The Partnership accrued distributions of $519,812 and $508,862 for the benefit of the General Partner for the years ended December 31, 1995 and 1994, respectively, of which all have been paid as of December 31, 1995. These distributions are the contingent MID pursuant to the Amended Partnership Agreement. Distributions of the contingent MID are expected to be paid to the General Partner in 1996. See Item 8 - Note 2 - "Transactions with Affiliates." See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of distributions and the likelihood they will continue to limited partners. In February 1996, a distribution of $500,000 was made to the limited partners. ITEM 6. SELECTED FINANCIAL DATA - ------- ----------------------- The following table sets forth a summary of certain financial data for the Partnership. This summary should be read in conjunction with the Partnership's financial statements and notes thereto appearing in Item 8.
Statements of Years Ended December 31, Operations 1995 1994 1993 1992 1991 - ------------------ ------------- ------------- -------------- ------------- -------- Rental revenue............... $ 7,716,859 $ 7,415,746 $ 7,237,745 $ 7,897,402 $ 7,685,515 Total revenue................ 7,991,130 7,772,979 7,280,900 7,982,880 7,798,105 Write-down for permanent impairment of real estate... - - - 3,327,000 2,000,000 Loss on disposition of real estate...................... - - 2,002,611 - - Loss before extraordinary items....................... (198,113) (41,096) (3,099,381) (5,450,278) (5,051,760) Extraordinary gain on early extinguishment of debt...... - - 2,681,807 52,623 - Net loss..................... (198,113) (41,096) (417,574) (5,397,655) (5,051,760) Net loss per limited partnership unit: Loss before extraordinary items....................... $ (6.90) $ (5.19) $ (35.26) $ (52.45) $ (49.19) Extraordinary gain on early extinguishment of debt...... - - 25.81 .51 - ---------- --------- ---------- ---------- ---------- Net loss..................... $ (6.90) $ (5.19) $ (9.45) $ (51.94) $ (49.19) ========== ========= ========== ========== ========== As of December 31, ---------------------------------------------------------------------- Balance Sheets 1995 1994 1993 1992 1991 - -------------- ----------- ---------- ----------- ----------- ----------- Real estate investments, net........................... $31,548,994 $32,336,645 $33,207,297 $35,470,317 $46,927,977 Asset held for sale............ - - - 6,515,301 - Total assets................... 35,129,849 37,030,171 38,348,427 43,663,439 49,330,836 Mortgage notes payable, net........................... 24,216,133 25,443,252 25,803,685 30,191,039 30,366,355 Partners' equity............... 10,037,853 10,755,778 11,805,729 12,627,676 18,077,250
See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. The Partnership sold Riverway Five on December 28, 1993, while La Plaza East was lost to foreclosure on May 11, 1993. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - ------- ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- FINANCIAL CONDITION - ------------------- The Partnership was formed to acquire, operate and ultimately dispose of a portfolio of income-producing real properties. As of December 31, 1995, the Partnership owned four apartment properties. Three of the four Partnership's properties are subject to mortgage notes. During 1992, La Plaza East lost a major tenant and management determined that it would be in the Partnership's best economic interest not to make the improvement required to lease the property. Therefore in September 1992, the Partnership ceased making debt service payments on La Plaza East and it was subsequently placed in receivership. On May 11, 1993, the Partnership allowed the foreclosure of La Plaza East by the lender in full settlement of the mortgage indebtedness on the property. Riverway Five was sold by the Partnership on December 28, 1993 yielding cash proceeds of $2,034,822. The property had very limited parking spaces and was only 64% occupied. The Partnership had previously recorded write-downs of $1,800,000 and $2,000,000 in 1992 and 1991, respectively, due to reevaluations of the long-term prospects for the market and the lack of available parking. Management believed that leasing the vacant space would be most difficult, therefore the Partnership accepted a purchase offer, and the property was sold for $2,100,000. The Partnership filed suit against the title company involved in the Partnership's purchase of the property over representations of rights to additional parking when the property was acquired. In September 1994, the Partnership and Chicago Title reached a settlement of $300,000 which is recorded as gain on settlement of litigation on the Statements of Operations net of related legal costs. RESULTS OF OPERATIONS - --------------------- 1995 compared to 1994 Revenue: Partnership revenues increased by $218,151 or 3% for the year ended 1995 as compared to 1994. Rental revenue and interest income increased by $301,113 and $104,776, respectively. In 1994, the Partnership recognized income of $223,001 for the settlement of litigation, as discussed above. In 1995, the Partnership recognized a gain on legal settlement of $35,263 as a result of the settlement with Southmark. Rental revenue was $7,716,859 for 1995 as compared to $7,415,746 in 1994. The increase is primarily due to increases in rental rates, offset by slight decreases in occupancy rates at all the properties. Interest income earned on cash and cash equivalents increased due to an increase in the interest rates and larger average cash balances invested in interest-bearing accounts. Expenses: Partnership expenses increased in 1995 by $375,168 or 5% as compared to the same period last year. The increase is primarily due to increases in property taxes, other property operating and general and administrative expenses. Property tax expense for 1995 was $421,633 as compared to $393,660 in 1994. The increase of $27,973 or 7% is a result of an increase in the assessed property value at Mountain Shadows. Other property operating expenses increased $53,477 or 12% for the year ended 1995 as compared to the year ended 1994. The increase can be attributed to increases in hazard insurance at Arrowhead and Mountain Shadows, as well as increases in office supplies and marketing at all four properties. General and administrative expenses increased $145,222 as compared to 1994 due to costs incurred by the Partnership in the third quarter of 1995 to evaluate and disseminate information regarding an unsolicited tender offer as discussed in Item 1 - Business. 1994 compared to 1993 Revenue: Partnership revenues increased by $492,079 or 7% in 1994 as compared to 1993. Rental revenue and interest income increased by $178,001 and $91,077, respectively. Rental revenue for 1994 was $7,415,746 as compared to $7,237,745 for the same period in 1993. This increase is primarily due to increases in rental rates at all of the properties and an increase in the occupancy rate at Cedar Run and Woodcreek. These increases offset the loss of $340,501 in rental revenue due to the sale of Riverway Five, as discussed above. The Partnership also recognized income of $223,001 in 1994 for the settlement of the lawsuit, as discussed above. Interest income earned on cash and cash equivalents increased due to an increase in the interest rates and larger average cash balances invested in interest-bearing accounts. Expenses: Partnership expenses decreased in 1994 by $2,566,206 or 25% as compared to the same period last year due to the loss on dispositions of real estate of $2,002,611 relating to the foreclosure of La Plaza East in May 1993 and the sale of Riverway Five. The effects from these transactions were declines of $48,705 for depreciation, $50,447 for property taxes, $13,405 for personnel expenses, $87,811 for utilities, $47,245 for repair and maintenance, $18,301 for property management fees - affiliates, and $28,788 for other property operating expenses. In addition to the foreclosure of La Plaza East and sale of Riverway Five, other factors affected the level of expenses reported by the remaining properties. Interest expense decreased $261,161 or 10% as compared to the same period in 1993 due to the refinancing in June of 1993 of the mortgage payable at Arrowhead and Mountain Shadows at lower interest rates. General and administrative expenses decreased by $105,882 or 48% as compared to 1993 due to savings the Partnership achieved through a new tax processing and reporting system and reductions in legal and professional fees. General and administrative - affiliates decreased by $69,347 or 23% as compared to 1993 primarily due to an amendment of the Amended Partnership Agreement which eliminated the Fixed MID effective July 1993. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership has experienced positive cash flow from operations of $4,887,783 for the three years ended December 31, 1995. In 1995, the Partnership received net cash proceeds of $1,367,557 through the refinance of Woodcreek. During 1993, the Partnership received net cash proceeds of $4,288,348 for the sale of Riverway Five and the refinancings of Arrowhead and Mountain Shadows. Over the last three years the Partnership has used cash to fund $3,083,787 in additions to real estate investments, $1,125,290 in scheduled principal payments on mortgage notes payable, $981,925 for additional deferred borrowing costs and $1,445,502 for payment of the contingent portion of the MID. In December 1995, proceeds from the refinance of Woodcreek and current cash reserves totaling $2,217,856 were used to pay off the mortgage on Cedar Run. The Partnership's generated cash flow of $1,914,501 through operating activities in 1995 as compared to $2,107,801 in 1994. This decline of $193,300 in cash provided by operating activities is primarily due to the proceeds received from the litigation settlement in 1994. The increases in the cash received from tenants and interest received were offset by the increase in the cash paid to suppliers and the property taxes paid. The Partnership generated cash flow of $2,107,801 through operating activities in 1994 as compared to $865,481 in 1993. The increase in 1994 was partially attributed to the reduction in the amount of interest paid during 1994 as compared to 1993. The refinancing of the mortgage notes on Arrowhead and Mountain Shadows yielded lower interest rates. Other factors include an increase in the cash received from tenants due to the increase in rental rates, the reduction in the taxes paid during 1994, and an increase in interest received. The Partnership expended $1,168,355, $1,014,729 and $900,703 for capital improvements to the properties in 1995, 1994 and 1993, respectively. The Partnership also received proceeds of $2,034,822 for the sale of Riverway Five in December of 1993. During 1994, the Partnership paid distributions to the limited partners of $499,993 for the first time since 1986. In 1995, proceeds from the refinance of a mortgage note were used to retire another mortgage note, as discussed above. In 1993, the Partnership refinanced two mortgage notes, as discussed above, and received proceeds of $2,253,526. Short-term liquidity: The Partnership held cash and cash equivalents of $2,079,352 at December 31, 1995, down $1,205,195 from the balance at December 31, 1994. This balance provides a reasonable level of working capital for the Partnership's operations. In 1996, operations of the Partnership's properties are expected to provide positive cash flow from operations. Management will perform routine repairs and maintenance on the properties to preserve and enhance their value in the market. In the past three years the Partnership has spent over $3 million renovating the properties so they can remain competitive in their respective markets. In 1996, the Partnership has budgeted to spend approximately $510,000 on capital improvements, which are expected to be funded from operations of the properties. The General Partner has established a revolving credit facility not to exceed $5,000,000 in the aggregate which is available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. The Partnership has not received, nor is there any assurance that the Partnership will receive, any funds under the facility because no amounts will be reserved for any particular partnership. As of December 31, 1995, $2,662,819 remained available for borrowing under the facility; however, additional funds could become available as other partnerships repay borrowings. This commitment by the General Partner will terminate on October 11, 1996. 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 can deteriorate. In that event, the Partnership would require other sources of working capital. No such other sources have been identified, and the Partnership has no established lines of credit. Other possible actions to resolve working capital deficiencies include refinancing or renegotiating terms of existing loans, deferring major capital expenditures on Partnership properties except where improvements are expected to enhance the competitiveness or marketability of the properties, or arranging working capital support from affiliates. All or a combination of these steps may be inadequate or unfeasible in resolving such potential working capital deficiencies. No affiliate support has been required in the past, and there is no assurance that support would be provided in the future, since neither the General Partner nor any affiliates have any obligation in this regard in excess of the $5,000,000 revolving credit facility discussed above. Distributions: Terms of the Amended Partnership Agreement specify that income before depreciation is allocated to the General Partner to the extent of contingent MID paid in cash. Depreciation is allocated in the ratio of 95:5 to the limited partners and the General Partner, respectively. Therefore for the three year period ended December 31, 1995, $511,270, $492,604, and $554,160, respectively, was allocated to the General Partner. The limited partners received allocations of net loss of $(709,383), $(533,700) and $(971,734) for the three year period ended December 31, 1995, respectively. During 1994, the limited partners received a cash distribution of $499,993. This distribution consisted of funds from the sale of Riverway Five. A distribution of $519,812 for the contingent portion of the MID was accrued by the Partnership for the General Partner in 1995. In light of the Cedar Run payoff, management did not make any distributions to the limited partners in 1995. In February 1996, a distribution of $500,000 was made to the limited partners. The General Partner will continue to monitor the cash reserves and working capital needs of the Partnership to determine when cash flow will support additional distributions to the limited partners. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------- ------------------------------------------- Page Number ------ INDEX TO FINANCIAL STATEMENTS - ----------------------------- Financial Statements: Report of Independent Public Accountants.............................15 Balance Sheets at December 31, 1995 and 1994.........................16 Statements of Operations for each of the three years in the period ended December 31, 1995...........................................17 Statements of Partners' Equity (Deficit) for each of the three years in the period ended December 31, 1995.............................18 Statements of Cash Flows for each of the three years in the period ended December 31, 1995....................................19 Notes to Financial Statements........................................21 Financial Statement Schedule - Schedule III - Real Estate Investments and Accumulated Depreciation...................................................33 All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of McNeil Real Estate Fund XV, Ltd.: We have audited the accompanying balance sheets of McNeil Real Estate Fund XV, Ltd. (a California limited partnership) as of December 31, 1995 and 1994, and the related statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1995. These financial statements and the schedule referred to below are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of McNeil Real Estate Fund XV, Ltd. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Dallas, Texas March 6, 1996 McNEIL REAL ESTATE FUND XV, LTD. BALANCE SHEETS
December 31, ----------------------------------- 1995 1994 --------------- -------------- ASSETS - ------ Real estate investments: Land..................................................... $ 7,087,195 $ 7,087,195 Building and improvements................................ 44,889,821 43,721,466 -------------- ------------- 51,977,016 50,808,661 Less: Accumulated depreciation.......................... (20,428,022) (18,472,016) -------------- ------------- 31,548,994 32,336,645 Cash and cash equivalents................................... 2,079,352 3,284,547 Cash segregated for security deposits....................... 249,574 244,994 Accounts receivable......................................... 6,691 11,488 Prepaid expenses and other assets........................... 43,905 85,623 Escrow deposits............................................. 364,431 278,490 Deferred borrowing costs, net of accumulated amortization of $172,430 and $124,350 at December 31, 1995 and 1994, respectively ................ 836,902 788,384 -------------- ------------- $ 35,129,849 $ 37,030,171 ============== ============= LIABILITIES AND PARTNERS' EQUITY (DEFICIT) - ------------------------------------------ Mortgage notes payable, net................................. $ 24,216,133 $ 25,443,252 Accounts payable............................................ 42,258 26,499 Accrued expenses............................................ 197,112 79,404 Accrued interest............................................ 169,346 188,816 Accrued property taxes...................................... 164,534 212,148 Payable to affiliates - General Partner..................... 48,469 56,915 Security deposits and deferred rental income................ 254,144 267,359 -------------- ------------- 25,091,996 26,274,393 -------------- ------------- Partners' equity (deficit): Limited partners - 120,000 limited partnership units authorized; 102,836 and 102,846 limited partnership units issued and outstanding at December 31, 1995 and 1994, respectively..................................... 10,394,645 11,104,028 General Partner............................................ (356,792) (348,250) -------------- ------------- 10,037,853 10,755,778 -------------- ------------- $ 35,129,849 $ 37,030,171 ============== =============
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XV, LTD. STATEMENTS OF OPERATIONS
For the Years Ended December 31, ------------------------------------------------- 1995 1994 1993 ----------- ----------- ----------- Revenue: Rental revenue.......................... $ 7,716,859 $ 7,415,746 $ 7,237,745 Interest................................ 239,008 134,232 43,155 Gain on settlement of legal expenses.... 35,263 - - Gain on settlement of litigation........ - 223,001 - ---------- ---------- ---------- Total revenue......................... 7,991,130 7,772,979 7,280,900 ---------- ---------- ---------- Expenses: Interest................................ 2,433,439 2,397,880 2,659,041 Depreciation and amortization........... 1,956,006 1,885,381 1,826,962 Property taxes.......................... 421,633 393,660 436,860 Personnel expenses...................... 835,031 810,327 771,130 Repairs and maintenance................. 785,740 801,181 862,291 Property management fees - affiliates............................ 385,074 376,559 367,413 Utilities............................... 378,487 366,026 473,874 Other property operating expenses....... 487,602 434,125 455,934 General and administrative.............. 258,081 112,859 218,741 General and administrative - affiliates............................ 248,150 236,077 305,424 Loss on dispositions of real estate..... - - 2,002,611 ---------- ---------- ---------- Total expenses........................ 8,189,243 7,814,075 10,380,281 ---------- ---------- ---------- Loss before extraordinary item............. (198,113) (41,096) (3,099,381) Extraordinary gain on early extin- guishment of debt....................... - - 2,681,807 ---------- ---------- ---------- Net loss................................... $ (198,113) $ (41,096) $ (417,574) ========== ========== ========== Net loss allocable to limited partners..... $ (709,383) $ (533,700) $ (971,734) Net income allocable to General Partner......................... 511,270 492,604 554,160 ---------- ---------- ---------- Net loss................................... $ (198,113) $ (41,096) $ (417,574) ========== ========== ========== Net loss per limited partnership unit: Loss before extraordinary item.......... $ (6.90) $ (5.19) $ (35.26) Extraordinary gain on early extinguishment of debt................ - - 25.81 ---------- ---------- ---------- Net loss................................... $ (6.90) $ (5.19) $ (9.45) ========== ========== ========== Distribution per limited partnership unit.. $ - $ 4.86 $ - ========== ========== ==========
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XV, LTD. STATEMENTS OF PARTNERS' EQUITY (DEFICIT) For the Years Ended December 31, 1995, 1994 and 1993
Total General Limited Partners' Partner Partners Equity ---------------- --------------- --------------- Balance at December 31, 1992.............. $ (481,779) $ 13,109,455 $ 12,627,676 Net income (loss)......................... 554,160 (971,734) (417,574) Contingent Management Incentive Distribution........................... (404,373) - (404,373) -------------- -------------- -------------- Balance at December 31, 1993.............. (331,992) 12,137,721 11,805,729 Net income (loss)......................... 492,604 (533,700) (41,096) Limited partners distribution............. - (499,993) (499,993) Contingent Management Incentive Distribution........................... (508,862) - (508,862) -------------- -------------- -------------- Balance at December 31, 1994.............. (348,250) 11,104,028 10,755,778 Net income (loss)......................... 511,270 (709,383) (198,113) Contingent Management Incentive Distribution........................... (519,812) - (519,812) -------------- -------------- -------------- Balance at December 31, 1995.............. $ (356,792) $ 10,394,645 $ 10,037,853 ============== ============== ==============
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XV, LTD. STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash and Cash Equivalents
For the Years Ended December 31, -------------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ Cash flows from operating activities: Cash received from tenants.............. $ 7,687,865 $ 7,446,868 $ 7,204,490 Cash received from legal settlement..... 35,263 - - Cash paid to suppliers.................. (2,639,152) (2,486,722) (2,780,099) Cash paid to affiliates................. (630,652) (611,940) (715,617) Interest received....................... 239,008 134,232 43,155 Interest paid........................... (2,308,035) (2,285,387) (2,571,339) Property taxes paid..................... (469,796) (312,251) (563,749) Proceeds from litigation settlement..... - 223,001 - Insurance proceeds...................... - - 248,640 ---------- ----------- ---------- Net cash provided by operating activities.. 1,914,501 2,107,801 865,481 ---------- ----------- ---------- Cash flows from investing activities: Additions to real estate investments........................... (1,168,355) (1,014,729) (900,703) Net proceeds from disposition of real estate........................... - - 2,034,822 ---------- ----------- ---------- Net cash provided by (used in) investing activities.................... (1,168,355) (1,014,729) 1,134,119 ---------- ----------- ---------- Cash flows from financing activities: Net proceeds from refinancing of mortgage notes payable................ 1,367,557 - 2,253,526 Principal payments on mortgage notes payable......................... (2,644,430) (407,750) (290,966) Deferred borrowing costs paid........... (143,638) - (838,287) Limited partners distribution........... - (499,993) - Contingent Management Incentive Distribution................ (530,830) (511,458) (403,214) ---------- ----------- ---------- Net cash provided by (used in) financing activities.................. (1,951,341) (1,419,201) 721,059 ---------- ----------- ---------- Net increase (decrease) in cash and cash equivalents...................... (1,205,195) (326,129) 2,720,659 Cash and cash equivalents at beginning of year..................... 3,284,547 3,610,676 890,017 ---------- ----------- ---------- Cash and cash equivalents at end of year............................... $ 2,079,352 $ 3,284,547 $ 3,610,676 ========== =========== ==========
See discussions of noncash investing and financing activities in Note 7. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XV, LTD. STATEMENTS OF CASH FLOWS Reconciliation of Net Loss to Net Cash Provided by Operating Activities
For the Years Ended December 31, -------------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ Net loss................................... $ (198,113) $ (41,096) $ (417,574) ---------- ---------- ---------- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization........... 1,956,006 1,885,381 1,826,962 Amortization of discounts on mortgage notes payable................ 49,754 47,317 22,583 Amortization of deferred borrowing costs................................. 95,120 68,136 98,023 Extraordinary gain on early extinguishment of debt................ - - (2,681,807) Loss on disposition of real estate...... - - 2,002,611 Changes in assets and liabilities: Cash segregated for security deposits............................ (4,580) 12,952 (37,854) Accounts receivable................... 4,797 8,137 (1,724) Accounts receivable - insurance claim............................... - - 248,640 Prepaid expenses and other assets..... 41,718 (29,561) 4,572 Escrow deposits....................... (85,941) 61,811 (326,968) Accounts payable...................... 15,759 (9,505) 21,077 Accrued expenses...................... 117,708 12,911 33,688 Accrued interest...................... (19,470) (2,960) (32,904) Accrued property taxes................ (47,614) 70,734 129,404 Payable to affiliates - General Partner............................. 2,572 696 (42,780) Security deposits and deferred rental income....................... (13,215) 22,848 19,532 ---------- ---------- ---------- Total adjustments................. 2,112,614 2,148,897 1,283,055 ---------- ---------- ---------- Net cash provided by operating activities.. $ 1,914,501 $ 2,107,801 $ 865,481 ========== ========== ==========
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XV, LTD. NOTES TO FINANCIAL STATEMENTS December 31, 1995 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------- Organization - ------------ McNeil Real Estate Fund XV, Ltd. (the "Partnership") was organized June 26, 1984 as a limited partnership under the provisions of the California Uniform Limited Partnership Act. The general partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil. The Partnership is governed by an amended and restated partnership agreement of limited partnership dated October 11, 1991, as amended (the "Amended Partnership Agreement"). The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240. The Partnership is engaged in real estate activities, including the ownership, operation and management of residential and other real estate related assets. At December 31, 1995, the Partnership owned four income-producing properties as described in Note 4 - Real Estate Investments. Basis of Presentation - --------------------- The accompanying financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Partnership's financial statements include the accounts of the following listed tier partnerships. These single asset tier partnerships were formed to accommodate the refinancing of the respective property. The Partnership's and the General Partner's ownership interest in each tier partnership is detailed as follows:
% of Ownership Interest Tier Partnership Partnership General Partner ---------------- ----------- --------------- Arrowhead Fund XV LP (a)(b) 100 - McNeil Mountain Shadows Fund XV LP (a)(b) 100 - Woodcreek Fund XV, Ltd. (a)(c) 100 -
(a) The general partner of these partnerships is a corporation whose stock is 100% owned by the Partnership. (b) Included in financial statements for years ended December 31, 1995, 1994 and 1993. (c) Included in financial statements for year ended December 31, 1995. Real Estate Investments - ----------------------- Real estate investments are generally stated at the lower of cost or net realizable value. Real estate investments are monitored on an ongoing basis to determine if the property has sustained a permanent impairment in value. At such time, a write-down is recorded to reduce the basis of the property to its net realizable value. A permanent impairment is determined to have occurred when a decline in property value is considered to be other than temporary based upon management's expectations with respect to projected cash flows and prevailing economic conditions. Improvements and betterment's 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 and Amortization - ----------------------------- Buildings and improvements are depreciated using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 25 years. Tenant improvements were amortized over the terms of the related tenant lease using the straight-line method. Cash and Cash Equivalents - ------------------------- Cash and cash equivalents include cash on hand and cash on deposit with financial institutions with original maturities of three months or less. Carrying amounts for cash and cash equivalents approximate fair value. Escrow Deposits - --------------- The Partnership is required to maintain escrow accounts in accordance with the terms of various mortgage indebtedness agreements. These escrow accounts are controlled by the mortgagee and are used for payment of property taxes, hazard insurance, capital improvements and/or property replacements. Carrying amounts for escrow deposits approximate fair value. Deferred Borrowing Costs - ------------------------ Loan fees and other related costs incurred to obtain long-term financing on real property are capitalized and amortized using a method that approximates the effective interest method over the terms of the related mortgage notes payable. Amortization of deferred borrowing costs is included in interest expense on the Statements of Operations. Discounts on Mortgage Notes Payable - ----------------------------------- Discounts on mortgage notes payable are being amortized over the remaining terms of the related mortgage notes using the effective interest method. Amortization of discounts on mortgage notes payable is included in interest expense on the Statements of Operations. Rental Revenue - -------------- The Partnership leases its residential properties under short-term operating leases. Lease terms generally are less than one year in duration. Rental revenue is recognized as earned. The Partnership leased its commercial properties under noncancelable operating leases. Certain leases provided concessions and/or periods of escalating or free rent. Rental revenue was recognized on a straight-line basis over the term of the related leases. Income Taxes - ------------ No provision for Federal income taxes is necessary in the financial statements of the Partnership because, as a partnership, it is not subject to Federal income tax and the tax effect of its activities accrues to the partners. Allocation of Net Income and Net Loss - ------------------------------------- The Amended Partnership Agreement provides for net income of the Partnership for both financial statements and income tax reporting purposes to be allocated as indicated below. For allocation purposes, net income and net loss of the Partnership are determined prior to deductions for depreciation: a) first, deductions for depreciation shall be allocated 1% to the General Partner and 99% to the limited partners; b) then, net income in an amount equal to the greater of 1) 1% of net income or 2) the cumulative amount distributed for the contingent portion of the Management Incentive Distribution ("MID") for which no income allocation has previously been made shall be allocated to the General Partner; provided that if all or a portion of such distribution consists of limited partnership units ("Units"), the amount of net income allocated shall be equal to the amount of cash the General Partner would have otherwise received; and c) any remaining net income shall be allocated 100% to the limited partners. The Amended Partnership Agreement provides that net losses shall be allocated 1% to the General Partner and 99% to the limited partners. Federal income tax law provides that the allocation of loss to a partner will not be recognized unless the allocation is in accordance with a partner's interest in the partnership or the allocation has substantial economic effect. Internal Revenue Code Section 704(b) and accompanying Treasury Regulations establish criteria for allocation of Partnership deductions attributable to debt. The Partnership's tax allocations for 1995, 1994 and 1993 have been made in accordance with these provisions. Distributions - ------------- Pursuant to the Amended Partnership Agreement and at the discretion of the General Partner, distributions of cash from property operations shall be made as follows: (a) first, to the General Partner, an amount equal to the contingent portion of the MID; and (b) any remaining distributable cash, as defined, shall be distributed 100% to the limited partners. At the discretion of the General Partner, distribution of cash from sales or refinancing shall be distributed as follows: (a) first, to the General Partner, an amount equal to any contingent portion of the MID not satisfied through distributions of cash from property operations; and (b) any remaining cash shall be distributed to the limited partners in the following proportions: 95/270 to Group A subscribers, 90/270 to Group B subscribers and 85/270 to Group C subscribers of the pro rata portion of the original invested capital attributable to each group of subscribers. No distributions were made to the limited partners during 1995 or 1993. Cash distributions of $499,993 were made to the limited partners during 1994. The Partnership accrued distributions of $519,812, $508,862 and $404,373 for the benefit of the General Partner for the years ended December 31, 1995, 1994 and 1993, respectively. The distributions are the contingent portion of the MID pursuant to the Amended Partnership Agreement. In February 1996, a distribution of $500,000 was made to the limited partners. The General Partner will continue to monitor the cash reserves and working capital needs of the Partnership to determine when cash flow will support additional distributions to the limited partners. Net Income (Loss) Per Limited Partnership Unit - ---------------------------------------------- Net income (loss) per Unit is computed by dividing net income (loss) allocated to the limited partners by the weighted average number of Units outstanding calculated on the last day of each calendar month. Per Unit information has been computed based on 102,836, 102,846 and 102,866 weighted average Units outstanding in 1995, 1994 and 1993, respectively. Reclassification - ---------------- Certain reclassifications have been made to prior period amounts to conform with the current year presentation. NOTE 2 - TRANSACTIONS WITH AFFILIATES - ------------------------------------- The Partnership pays property management fees equal to 5% of the gross rental receipts of the Partnership's properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management services for the Partnership's residential and commercial properties and leasing services for its residential properties. McREMI could have also chosen to provide leasing services for the Partnership's commercial properties, in which case McREMI would have received property management fees from such commercial properties equal to 3% of the property's gross rental receipts plus leasing commissions based on the prevailing market rate for such services where the property was located. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. The Partnership reimbursed an affiliate of the General Partner for costs incurred in connection with refinancing and modification of mortgage notes payable. These costs are capitalized as deferred borrowing costs and amortized over the remaining term of the related mortgage. Under the terms of the Amended Partnership Agreement, the Partnership is paying the MID to the General Partner. The maximum MID is calculated as 1% of the tangible asset value of the Partnership. The maximum MID percentage decreases subsequent to 1999. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $10,000 per apartment unit for residential property and $50 per gross square foot for commercial property to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible assets. Prior to July 1, 1993, the MID consisted of two components: (i) the fixed portion was payable without respect to the net income of the Partnership and was equal to 25% of the maximum MID (the "Fixed MID") and (ii) a contingent portion which was payable only to the extent of the lesser of the Partnership's excess cash flow, as defined, or net operating income (the "Entitlement Amount") and is equal to up to 75% of the maximum MID (the "Contingent MID"). Effective July 1, 1993, the General Partner amended the Amended Partnership Agreement as a settlement to a class action complaint. This amendment eliminated the Fixed MID portion and made the entire MID payable to the extent of the Entitlement Amount. In all other respects, the calculation and payment of the MID remained the same. Fixed MID was payable in Units unless the Entitlement Amount exceeded the amount necessary to pay the Contingent MID, in which case, at the General Partner's option, the Fixed MID was paid in cash to the extent of such excess. Contingent MID will be paid to the extent of the Entitlement Amount, and may be paid (i) in cash, unless there is insufficient cash to pay the distribution in which event any unpaid portion not taken in Units will be deferred and is payable, without interest, from the first available cash and/or (ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of Units issued in payment of the MID is based on the greater of $50 per Unit or the net tangible asset value, as defined, per Unit. During 1991, the Partnership amended its capitalization policy and began capitalizing certain costs of improvements and betterments which under policies of prior management had been expensed when incurred. The purpose of the amendment was to more properly recognize items which were capital in nature. The effect of the amendment standing alone was evaluated at the time the change was made and determined not to be material to the financial statements of the Partnership in 1991, nor was it expected to be material in any future year. However, the amendment can have a material effect on the calculation of the Entitlement Amount which determines the amount of Contingent MID earned and the amount of Fixed MID payable in cash. Capital improvements are excluded from cash flow, as defined. The majority of base period cash flow was measured under the previous capitalization policy, while incentive period cash flow is determined using the amended policy. Under the amended policy, more items are capitalized, and cash flow increases. The amendment of the capitalization policy did not materially affect the MID for 1995, 1994 or 1993 because the Entitlement Amount was sufficient to pay Contingent MID notwithstanding the amendment to the capitalization policy. Any amount of the MID that is paid to the General Partner in Units will be treated as if cash is distributed to the General Partner and is then contributed to the Partnership by the General Partner. The Fixed MID was treated as a fee payable to the General Partner by the Partnership for services rendered. The Contingent MID represents a return of equity to the General Partner for increasing cash flow, as defined, and accordingly is treated as a distribution. Compensation and reimbursements paid or accrued for the benefit of the General Partner or its affiliates are as follows:
For the Years Ended December 31, ----------------------------------------------- 1995 1994 1993 --------- --------- --------- Deferred borrowing costs................... $ - $ - $ 42,839 Property management fees - affiliates...... 385,074 376,559 367,413 Charged to general and administrative - affiliates: Partnership administration.............. 248,150 236,077 246,365 Fixed MID............................... - - 59,059 -------- -------- -------- $ 633,224 $ 612,636 $ 715,676 ======== ======== ======== Charged to General Partner's deficit: Contingent MID.......................... $ 519,812 $ 508,862 $ 404,373 ======== ======== ========
Payable to affiliates - General Partner at December 31, 1995 and 1994 consists primarily of reimbursable costs and property management fees which are due and payable from current operations. NOTE 3 - TAXABLE LOSS - --------------------- McNeil Real Estate Fund XV, Ltd. is a partnership and is not subject to Federal and state income taxes. Accordingly, no recognition has been given to income taxes in the accompanying financial statements of the Partnership since the income or loss of the Partnership is to be included in the tax returns of the individual partners. The tax returns of the Partnership are subject to examination by Federal and state taxing authorities. If such examinations result in adjustments to distributive shares of taxable income or loss, the tax liability of the partners could be adjusted accordingly. The Partnership's net assets and liabilities for tax purposes exceeded the net assets and liabilities for financial reporting purposes by $472,231 in 1995, $284,142 in 1994 and $223,814 in 1993. NOTE 4 - REAL ESTATE INVESTMENTS - -------------------------------- The basis and accumulated depreciation of the Partnership's real estate investments at December 31, 1995 and 1994 are set forth in the following tables:
Buildings and Accumulated Net Book 1995 Land Improvements Depreciation Value ---- ----------- ------------- ------------- ------------ Arrowhead Shawnee, KS $ 1,537,294 $ 13,723,961 $ (6,644,247) $ 8,617,008 Cedar Run Lexington, KY 866,465 4,660,303 (1,915,041) 3,611,727 Mountain Shadows Albuquerque, NM 3,236,768 19,017,982 (8,739,577) 13,515,173 Woodcreek Cary, NC 1,446,668 7,487,575 (3,129,157) 5,805,086 ---------- ----------- ------------ ----------- $ 7,087,195 $ 44,889,821 $ (20,428,022) $ 31,548,994 ========== =========== ============ =========== Buildings and Accumulated Net Book 1994 Land Improvements Depreciation Value ---- ----------- ------------- -------------- ------------ Arrowhead $ 1,537,294 $ 13,461,561 $ (6,043,380) $ 8,955,475 Cedar Run 866,465 4,398,333 (1,693,290) 3,571,508 Mountain Shadows 3,236,768 18,632,378 (7,936,767) 13,932,379 Woodcreek 1,446,668 7,229,194 (2,798,579) 5,877,283 ---------- ----------- ------------ ----------- $ 7,087,195 $ 43,721,466 $ (18,472,016) $ 32,336,645 ========== =========== ============ ===========
During the second quarter of 1992, the Partnership placed La Plaza East on the market. This decision was made after a major tenant gave notice of intent to terminate their lease in October 1992 and management determined that the cost of improvements required to lease this space could not be recovered by the Partnership. Management recorded a write-down of $1,527,000 to reflect a permanent impairment in the carrying value of the real estate during the second quarter of 1992. As of September 30, 1992, the Partnership ceased making debt service payments on the mortgage note and in November 1992, the property was placed in receivership. The property was lost through foreclosure on May 12, 1993. See Note 7. During the fourth quarter of 1992, the Partnership recorded a $1,800,000 write-down for permanent impairment of the Partnership's investment in Riverway Five. The Partnership wrote down the carrying value of the property to its estimated recoverable amount due to a reevaluation of the long-term prospects for this market and the lack of parking available at the property. On or about August 19, 1993, the Partnership filed an action against the title company regarding the lack of parking. Although Riverway Five was sold December 28, 1993, the Partnership continued to pursue the action filed against the title company. On September 14, 1994, the Partnership received a settlement of $300,000 which is included in the Statement of Operations net of related legal costs. Except for Cedar Run, the Partnership's real estate properties are encumbered by mortgage indebtedness as discussed in Note 5. NOTE 5 - MORTGAGE NOTES PAYABLE - ------------------------------- The following table sets forth the mortgage notes payable of the Partnership at December 31, 1995 and 1994. All mortgage notes are secured by real estate investments.
Mortgage Annual Monthly Lien Interest Payments/ December 31, Property Position (a) Rates % Maturity Date (d) 1995 1994 - -------- --------------- ------- ----------------- -------------- ---------------- Arrowhead First 8.150 $ 60,450 07/03 $ 7,294,796 $ 7,420,072 Discount (b) (175,401) (194,068) -------------- -------------- 7,119,395 7,226,004 ------------- -------------- Cedar Run (e) First 11.035 22,919 01/01 - 2,246,411 ------------- -------------- Mountain Shadows First 8.150 100,670 07/03 12,148,372 12,357,000 Discount (b) (292,104) (323,191) -------------- -------------- 11,856,268 12,033,809 -------------- -------------- Woodcreek First (c) 8.540 40,517 08/02 5,240,470 - First 10.000 28,546 08/95 - 2,700,090 Second 11.000 11,918 12/95 - 1,236,938 ------------- -------------- 5,240,470 3,937,028 ------------- -------------- $ 24,216,133 $ 25,443,252 ============= ==============
(a) The debt is non-recourse to the Partnership. (b) Discounts are based on an effective interest rate of 8.62% for Arrowhead and Mountain Shadows. (c) On August 11, 1995, the Partnership refinanced the mortgage note payable on Woodcreek (See Note 6). (d) Balloon payments on the mortgage notes payable are due as follows:
Property Balloon Payment Date ---------------- --------------- ----- Woodcreek $4,894,767 08/02 Arrowhead 5,947,622 07/03 Mountain Shadows 9,904,857 07/03
(e) On December 28, 1995, the Partnership paid off the mortgage note payable on Cedar Run in the amount of $2,217,856. The related deferred borrowing costs in the amount of $47,040 were written off. Scheduled principal maturities of the mortgage notes payable under existing agreements, before consideration of discounts of $467,505, are as follows:
1996.................................... $ 402,373 1997.................................... 436,589 1998.................................... 473,715 1999.................................... 513,999 2000.................................... 557,709 Thereafter.............................. 22,299,253 ----------- Total................................. $ 24,683,638 ===========
Based on borrowing rates currently available to the Partnership for mortgage loans with similar terms and average maturities, the fair value of notes payable was approximately $24,306,000 as of December 31, 1995. NOTE 6 - REFINANCING OF MORTGAGE NOTES PAYABLE - ---------------------------------------------- On August 11, 1995, the Partnership refinanced the mortgage notes payable on Woodcreek. The new loan bears an interest rate of 8.54% and will mature August 11, 2002. Following is a summary of the transaction:
New loan proceeds...................... $ 5,250,000 Existing debt retired................... (3,882,443) ------------ Cash proceeds from refinancing.. $ 1,367,557 ============
The Partnership deposited $131,656 into property tax and deferred maintenance escrows and incurred loan costs of $143,638 relating to the refinancing. On June 24, 1993, the General Partner refinanced a portfolio of properties via a Real Estate Mortgage Investment Conduit ("REMIC"). This REMIC consists of a pool of properties from various partnerships affiliated with the General Partner. Arrowhead and Mountain Shadows were included in the REMIC. The properties in the REMIC are not collateralized across the partnerships, but are cross-collateralized within the same partnership. The new mortgage loans bear an interest rate of 8.15%, which has been discounted to an effective rate of 8.62%, and mature in July 2003. Following is a summary of the cash proceeds relating the refinancings:
Mountain Arrowhead Shadows Total ------------ ------------- ------------- New loan proceeds.................. $ 7,581,000 $ 12,625,000 $ 20,206,000 Existing debt retired.............. (6,973,979) (10,219,402) (17,193,381) Mortgage discount.................. (220,294) (366,865) (587,159) Prepayment penalty................. (69,740) (102,194) (171,934) ---------- ----------- ----------- Cash proceeds from refinancing..... $ 316,987 $ 1,936,539 $ 2,253,526 ========== =========== ===========
Of the proceeds, the Partnership deposited $389,881 into property tax, insurance, and replacements escrows and incurred loan costs of $838,287 relating to the refinancings. The Partnership also recognized an extraordinary loss on early extinguishment of debt on Arrowhead in the amount of $94,386 and Mountain Shadows in the amount of $155,239, which is attributable to the unamortized loan costs and prepayment penalties related to the retired mortgages. NOTE 7 - DISPOSITION OF PROPERTY - -------------------------------- On December 28, 1993, the Partnership sold its investment in Riverway Five to an unaffiliated buyer for a cash sales price of $2,100,000. Cash proceeds from this transaction, as well as the gain on sale of Riverway Five is detailed below.
Gain on Sale Cash Proceeds ------------ ------------- Sales price.......................................... $ 2,100,000 $ 2,100,000 Real estate taxes paid............................... - (50,447) Selling costs........................................ (14,731) (14,731) Basis of real estate sold............................ (1,370,233) - ---------- Gain on sale......................................... $ 715,036 ========== ---------- Net cash proceeds.................................... $ 2,034,822 ==========
On May 11, 1993, La Plaza East was foreclosed on by the lender in full settlement of the mortgage indebtedness. In connection with this transaction, the Partnership recognized a loss on disposition of real estate and an extraordinary gain on early extinguishment of debt. The amounts are determined as follows:
Estimated fair value of real estate......... $ 3,756,000 Carrying value.............................. (6,473,647) ---------- Loss on disposition of real estate.......... $(2,717,647) ========== Amount of mortgage and accrued interest settled.......................... $ 6,687,432 Estimated fair value of real estate......... (3,756,000) ---------- Gain on early extinguishment of debt........ $ 2,931,432 ==========
The Partnership ceased recording income and expense on La Plaza East when it was placed into receivership in November 1992. Had the Partnership continued to report the operations of La Plaza East during 1993 through the date of foreclosure they would be as follows:
Rental and other income..................... $ 277,272 Interest expense............................ (397,629) Depreciation and amortization............... (112,934) Property taxes.............................. (49,763) Property management fees.................... (13,271) Utilities................................... (38,218) Other property operating.................... (45,660) -------- Net loss.................................... $(380,203) ========
NOTE 8 - LEGAL PROCEEDINGS - -------------------------- The Partnership is not party to, nor are any of the Partnership's properties the subject of, any material pending legal proceedings, other than ordinary routine litigation incidental to the Partnership's business, except for the following: 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) James F. Schofield, Gerald C. Gillett and Donna S. Gillett v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, 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. et al - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint) and United States District Court, Southern District of New York, Case No. 95CIV.6711 (Class and Derivative Action Complaint) These are corporate/securities class and derivative actions brought in state and federal court by limited partners of each of the nine (9) limited partnerships that are named as nominal defendants as listed above (as defined in this Section 4, the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and four (4) of their senior officers and/or directors (as defined in this Section 4, collectively, the "Defendants") have breached their fiduciary duties. Specifically, Plaintiffs allege that Defendants have caused the Partnerships to enter into several wasteful transactions that have no business purpose or benefit to the Partnerships and which have rendered such units highly illiquid and artificially depressed the prices that are available for units on the limited resale market. Plaintiffs also allege that Defendants have engaged in a course of conduct to prevent the acquisition of units by Carl Icahn by disseminating false, misleading and inadequate information. Plaintiffs further allege that Defendants have 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 and, thereby, have breached the partnership agreements. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend these actions. 5) 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 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. 6) 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 6, the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil and other senior officers (as defined in this Section 6, 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. (7) HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young BDO Seidman et al (Case #92-06560-A). This suit was filed on behalf of the Partnership and other affiliated partnerships (the "Affiliated Partnerships") on May 26, 1992, in the 14th Judicial District Court of Dallas County. The petition sought recovery against the Partnership's former auditors, BDO Seidman, for negligence and fraud in failing to detect and/or report overcharges of fees/expenses by Southmark, the former general partner. The former auditors asserted counterclaims against the Affiliated Partnerships based on alleged fraudulent misrepresentations made to the auditors by the former management of the Affiliated Partnerships (Southmark) in the form of client representation letters executed and delivered to the auditors by Southmark management. The counterclaims sought recovery of attorneys' fees and costs incurred in defending this action. The original petition also alleged causes of action against certain former officers and directors of the Partnership's original general partner for breach of fiduciary duty, fraud and conspiracy relating to the improper assessment and payment of certain administrative fees/expenses. On January 11, 1994 the allegations against the former officers and directors were dismissed. The trial court granted summary judgment in favor of Ernst & Young and BDO Seidman on the fraud and negligence claims based on the statute of limitations. The Affiliated Partnerships appealed the summary judgment to the Dallas Court of Appeals. In August 1995, the Appeals Court upheld all of the summary judgments in favor of BDO Seidman. In exchange for the plaintiff's agreement not to file any motions for rehearing or further appeals, BDO Seidman agreed that it will not pursue the counterclaims against the Partnership. NOTE 9 - GAIN ON LEGAL SETTLEMENT - --------------------------------- The Partnership filed claims with the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court") against Southmark Corporation ("Southmark"), an affiliate of a previous general partner for damages relating to improper overcharges, breach of contract and breach of fiduciary duty. The Partnership settled these claims in 1991, and such settlement was approved by the Bankruptcy Court. An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April 14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in May 1995 the Partnership received in full satisfaction of its claims, $26,655 in cash, and common and preferred stock in the reorganized Southmark which represents the Partnership's pro-rata share of Southmark assets available for Class 8 Claimants. The Partnership sold the Southmark common and preferred stock in May for $8,608 which, combined with the cash proceeds from Southmark, resulted in a gain on legal settlement of $35,263. McNEIL REAL ESTATE FUND XV, LTD. 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: Arrowhead Shawnee, KS $ 7,119,395 $ 1,537,294 $ 12,035,648 $ - $ 1,688,313 Cedar Run Lexington, KY - 866,465 3,947,228 (150,600) 863,675 Mountain Shadows Albuquerque, NM 11,856,268 3,236,768 17,555,977 - 1,462,005 Woodcreek Cary, NC 5,240,470 1,446,668 6,590,377 - 897,198 ----------- ---------- ----------- --------- ---------- $ 24,216,133 $ 7,087,195 $ 40,129,230 $ (150,600) $ 4,911,191 =========== ========== =========== ========= ==========
(b) The 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 REAL ESTATE FUND XV, LTD. 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: Arrowhead Shawnee, KS $ 1,537,294 $ 13,723,961 $ 15,261,255 $ (6,644,247) Cedar Run Lexington, KY 866,465 4,660,303 5,526,768 (1,915,041) Mountain Shadows Albuquerque, NM 3,236,768 19,017,982 22,254,750 (8,739,577) Woodcreek Cary, NC 1,446,668 7,487,575 8,934,243 (3,129,157) ---------- ----------- ----------- ----------- $ 7,087,195 $ 44,889,821 $ 51,977,016 $(20,428,022) ========== =========== =========== ===========
(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 $52,710,907 and accumulated depreciation was $29,241,575 December 31, 1995. See accompanying notes to Schedule III. McNEIL REAL ESTATE FUND XV, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1995
Date of Date Depreciable Description Construction Acquired lives (years) - ------------------ ------------ -------- ------------- APARTMENTS: Arrowhead Shawnee, KS 1971 03/85 3-25 Cedar Run Lexington, KY 1978 12/85 3-25 Mountain Shadows Albuquerque, NM 1986 08/85 3-25 Woodcreek Cary, NC 1981 12/85 3-25
See accompanying notes to Schedule III. McNEIL REAL ESTATE FUND XV, LTD. Notes to Schedule III Real Estate Investments and Accumulated Depreciation A summary of activity for the Partnership's real estate investments and accumulated depreciation is as follows:
For the Years Ended December 31, -------------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ Real estate investments: - ------------------------ Balance at beginning of year............... $ 50,808,661 $ 49,793,932 $ 52,126,161 Improvements............................... 1,168,355 1,014,729 900,703 Disposition of real estate................. - - (3,232,932) ----------- ----------- ----------- Balance at end of year..................... $ 51,977,016 $ 50,808,661 $ 49,793,932 =========== =========== =========== Accumulated depreciation: - ------------------------- Balance at beginning of year............... $ 18,472,016 $ 16,586,635 $ 16,655,844 Depreciation............................... 1,956,006 1,885,381 1,826,962 Disposition of real estate................. - - (1,896,171) ----------- ----------- ----------- Balance at end of year..................... $ 20,428,022 $ 18,472,016 $ 16,586,635 =========== =========== ===========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING - ------- ----------------------------------------------------------- AND FINANCIAL DISCLOSURE ------------------------ None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- -------------------------------------------------- Neither the Partnership nor the General Partner has any directors or executive officers. The names and ages of, as well as the positions held by, the officers and directors of McNeil Investors, Inc., the general partner of the General Partner, are as follows:
Other Principal Occupations and Other Name and Position Age Directorships During the Past 5 Years - ----------------- --- ------------------------------------- Robert A. McNeil, 75 Mr. McNeil is also Chairman of the Chairman of the Board and Director of McNeil Real Board and Director Estate Management, Inc. ("McREMI") which is an affiliate of the General Partner. He has held the foregoing positions since the formation of such entity in 1990. Mr. McNeil received his B.A. degree from Stanford University in 1942 and his L.L.B. degree from Stanford Law School in 1948. He is a member of the State Bar of California and has been involved in real estate financing since the late 1940's and in real estate acquisitions, syndications and dispositions since 1960. From 1986 until active operations of McREMI and McNeil Partners, L.P. began in February 1991, Mr. McNeil was a private investor. Mr. McNeil is a member of the International Board of Directors of the Salk Institute, which promotes research in improvements in health care. Carole J. McNeil 52 Mrs. McNeil is Co-Chairman, with Co-Chairman of the husband Robert A. McNeil, of McNeil Board Investors, Inc. Mrs. McNeil has twenty years of real estate experience, most recently as a private investor from 1986 to 1993. In 1982, she founded Ivory & Associates, a commercial real estate brokerage firm in San Francisco, CA. Prior to that, she was a commercial real estate associate with the Madison Company and, earlier, a commercial sales associate and analyst with Marcus and Millichap in San Francisco. In 1978, Mrs. McNeil established Escrow Training Centers, California's first accredited commercial training program for title company escrow officers and real estate agents needing college credits to qualify for brokerage licenses. She began in real estate as Manager and Marketing Director of Title Insurance and Trust in Marin County, CA. Mrs. McNeil serves on the International Board of Directors of the Salk Institute.
Other Principal Occupations and Other Name and Position Age Directorships During the Past 5 Years - ----------------- --- ------------------------------------- Donald K. Reed, 50 Mr.Reed is President, Chief Executive Director, President, Officer and Director of McREMI which is and Chief Executive an affiliate of the General Partner. Officer Prior to joining McREMI in March 1993, Mr. Reed was President, Chief Operating Officer and Director of Duddlesten Management Corporation and Duddlesten Realty Advisors, Inc., with responsibility for a management portfolio of office, retail, multi-family and mixed-use land projects representing $2 billion in asset value. He was also Chief Operating Officer, Director and member of the Executive Committee of all Duddlesten affiliates. Mr. Reed started with the Duddlesten companies in 1976 and served as Senior Vice President and Chief Financial Officer and as Executive Vice President and Chief Operating Officer of Duddlesten Management Corporation before his promotion to President in 1982. He was President and Chief Operating Officer of Duddlesten Realty Advisors, Inc., which has been engaged in real estate acquisitions, marketing and dispositions, since its formation in 1989. Ron K. Taylor 38 Mr. Taylor is a Senior Vice President of Vice President 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, was known by the Partnership to own more than 5% of the Units, other than High River Limited Partnership which owns 6,934 Units (approximately 6.74% of the outstanding Units). The business address for High River Limited Partnership is 100 South Bedford Road, Mount Kisco, New York 10549. (B) Security ownership of management. The General Partner and the officers and directors of its general partner, collectively, own 1,357 Units, which represent less than 2% of the outstanding Units. (C) Change in control. None. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ---------------------------------------------- Under the terms of the Amended Partnership Agreement, the Partnership is paying the MID to the General Partner. The maximum MID is calculated as 1% of the tangible asset value of the Partnership. The maximum MID percentage decreases subsequent to 1999. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $10,000 per apartment unit for residential property and $50 per gross square foot for commercial property to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible assets. Prior to July 1, 1993, the MID consisted of two components: (i) the fixed portion which was payable without respect to the net income of the Partnership and was equal to 25% of the maximum MID (the "Fixed MID") and (ii) a contingent portion which was payable only to the extent of the lesser of the Partnership's excess cash flow, as defined, or net operating income (the "Entitlement Amount") and is equal to up to 75% of the maximum MID (the "Contingent MID"). Effective July 1, 1993, the General Partner amended the Amended Partnership Agreement as a settlement to a class action complaint. This amendment eliminates the Fixed MID portion and makes the entire MID payable to the extent of the Entitlement Amount. In all other respects the calculation and payment of the MID will remain the same. Contingent MID will be paid to the extent of the Entitlement Amount, and may be paid (i) in cash, unless there is insufficient cash to pay the distribution in which event any unpaid portion not taken in Units will be deferred and is payable, without interest, from the first available cash and/or (ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of Units issued in payment of the MID is based on the greater of $50 per Unit or the net tangible asset value, as defined, per Unit. For the year ended December 31, 1995, the Partnership paid or accrued for the General Partner Contingent MID in the amount of $519,812. Any amount of the MID that is paid to the General Partner in Units will be treated as if cash is distributed to the General Partner and is then contributed to the Partnership by the General Partner. The Fixed MID was treated as a fee payable to the General Partner by the Partnership for services rendered. The Contingent MID represents a return of equity to the General Partner for increasing cash flow, as defined, and accordingly is treated as a distribution. The Partnership pays property management fees equal to 5% of the gross rental receipts of the Partnership's properties to McREMI, an affiliate of the General Partner, for providing property management and leasing services for the Partnership's residential properties. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. For the year ended December 31, 1995, the Partnership paid or accrued $633,224 in property management fees and reimbursements. See Item 1 - Business, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 8 - Note 2 - "Transactions with Affiliates." ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K - -------- ----------------------------------------------------------------- See accompanying Index to Financial Statements at Item 8. (A) Exhibits The following exhibits are incorporated by reference and are an integral part of this Form 10-K.
Exhibit Number Description ------- ----------- 3. Partnership Agreement dated June 26, 1984 and amended as of September 7, 1984. (1) 3.1 Amended and Restated Partnership Agreement of McNeil Real Estate Fund XV, Ltd., dated October 11, 1991.(1) 3.2 Amendment No. 1 to the Amended and Restated Partnership Agreement, dated March 28, 1994. (2) 3.3 Amendment No. 2 to the Amended and Restated Partnership Agreement, dated March 28, 1994. (2) 10.1 Property Management Agreement, dated October 11, 1991, between McNeil Real Estate Fund XV, Ltd. and McNeil Real Estate Management, Inc. (1) 10.2 Revolving Credit Agreement, dated August 6, 1991, between McNeil Partners, L.P. and various selected partnerships, including the Registrant. (1) 10.3 Termination Agreement, dated October 11, 1991, between McNeil Real Estate Fund XV, Ltd. and McNeil Partners, L.P. (1) 10.4 Amendment of Property Management Agreement, dated March 5, 1993, between McNeil Real Estate Fund XV, Ltd. and McNeil Real Estate Management, Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1992) 10.5 Loan Agreement, dated June 24, 1993, between Lexington Mortgage Company and McNeil Real Estate Fund XV, Ltd. et al. (Incorporated by reference to the Annual Report of McNeil Real Estate Fund XI, Ltd. (File No. 0-9783), on Form 10-K for the period ended December 31, 1993) 10.6 Master Property Management Agreement, dated as of June 24, 1993 between McNeil Real Estate Management, Inc. and McNeil Real Estate Fund XV, Ltd. (2) 10.7 Mortgage Note, dated August 11, 1995, between Woodcreek Fund XV, Ltd. and Fleet Real Estate Capital, Inc. 11. Statement regarding computation of Net Income (Loss) per limited partnership unit (see Note 1 to Financial Statements).
Exhibit Number Description ------- ----------- 22. Following is a list of subsidiaries of the Partnership: Names Under Jurisdiction Which It Is Name of Subsidiary Incorporation Doing Business ------------------ ------------- -------------- Arrowhead Fund XV Delaware None Limited Partnership McNeil Mountain Shadows Delaware None Fund XV Limited Partnership Woodcreek Fund XV, Ltd. Texas None
(1) Incorporated by reference to the Annual Report of McNeil Real Estate Fund XV, Ltd. (File No. 0-14258), on Form 10-K for the period ended December 31, 1991, as filed with the Securities and Exchange Commission on March 29, 1992. (2) Incorporated by reference to the Annual Report of McNeil Real Estate Fund XV, Ltd. (File No. 0-14258), on Form 10-K for the period ended December 31, 1993, as filed with the Securities and Exchange Commission on March 30, 1994. The Partnership has omitted instruments with respect to long-term debt where the total amount of the securities authorized thereunder does not exceed 10% of the total assets of the Partnership and its subsidiaries on a consolidated basis. The Partnership agrees to furnish a copy of each instrument to the Commission upon request. 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 REAL ESTATE FUND XV, LTD. A Limited Partnership SIGNATURE PAGE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
McNEIL REAL ESTATE FUND XV, LTD. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner March 29, 1996 By: /s/ Robert A. McNeil - --------------------------- ------------------------------------------------ Date Robert A. McNeil Chairman of the Board and Director (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. March 29, 1996 By: /s/ Donald K. Reed - ---------------------------- ------------------------------------------------ Date Donald K. Reed President and Director of McNeil Investors, Inc. March 29, 1996 By: /s/ Ron K. Taylor - ---------------------------- ------------------------------------------------ Date Ron K. Taylor Acting Chief Financial Officer of McNeil Investors, Inc. March 29, 1996 By: /s/ Brandon K. Flaming - ---------------------------- ------------------------------------------------ Date Brandon K. Flaming Chief Accounting Officer of McNeil Real Estate Management, Inc.
EX-27 2
5 12-MOS DEC-31-1995 DEC-31-1995 2,079,352 0 6,691 0 0 0 51,977,016 (20,428,022) 35,129,849 0 24,216,133 0 0 0 0 35,129,849 7,716,859 7,991,130 0 0 5,755,804 0 2,433,439 0 0 (198,113) 0 0 0 (198,113) 0 0
EX-10.7 3 Loan No. 55-9509025 MORTGAGE NOTE $5,250,000.00 August 11, 1995 FOR VALUE RECEIVED, WOODCREEK FUND XV, LTD., a Texas limited partnership doing business in North Carolina as Woodcreek Fund XV, Ltd., Limited Partnership, having its principal office at 13760 Noel Road, Suite 700, Dallas, Texas 75240 ("Maker") promises to pay to the order of FLEET REAL ESTATE CAPITAL, INC., a Rhode Island corporation, or its assigns ("Payee") having its principal office at 4275 Executive Square, Suite 200, La Jolla, California 92037, the Principal Amount (as defined below), together with interest from the date hereof at the Interest Rate (as defined below). Interest accruing hereunder shall be calculated on the basis of a 360-day year of twelve 30-day months. WHEN USED HEREIN, the following capitalized terms shall have the following meanings: "Commencement Date" shall be October 1, 1995. "Closing Date" shall be August 11, 1995. "Default Rate" shall be the Interest Rate plus five percent (5%) per annum. "Interest Rate" shall be eight and fifty-four one hundredths percent (8.54%) per annum. "Lockout Period" shall be the period from August 11, 1995 through September 1, 1999. "Maturity Date" shall be August 11, 2002. "Monthly Amount" shall be the sum of Forty Thousand Five Hundred Sixteen and 88/100 Dollars ($40,516.88). "Payment Date" shall be the first business day of each month commencing on the first business day of the second full month after the Closing Date and continuing to and including the Maturity Date. "Principal Amount" shall be Five Million Two Hundred Fifty Thousand and No/100 United States Dollars. The Principal Amount and interest thereon shall be due and payable in lawful money of the United States as follows: (a) On the date hereof, all accrued and unpaid interest on the unpaid balance through the end of the month in which the Closing Date occurs shall be due and payable. Thereafter, commencing on the Commencement Date, eighty-three (83) equal monthly installments of principal and interest at the Monthly Amount each shall be due and payable. Each installment of principal and interest shall be applied first to interest and the remainder thereof to reduction of principal. Each monthly installment shall be due on each Payment Date. In addition, all amounts advanced by Payee pursuant to applicable provisions of the Security Documents (as hereinafter defined), together with any interest at the Default Rate or other charges as therein provided, shall be immediately due and payable hereunder. In the event any such advance is not so repaid by Maker, Payee may, at its option, first apply any payments received hereunder to repay said advances together with any interest thereon or other charges as provided in the Security Documents, and the balance, if any, shall be applied in payment of any installment then due. The entire remaining unpaid balance of principal of this Note, all interest accrued thereon and all other sums payable hereunder or under the Security Documents shall be due and payable in full on the Maturity Date. (b) Amounts due on this Note shall be payable, without any counterclaim, setoff or deduction whatsoever, at the office of Payee or its agent or designee at the address set forth in Exhibit 1 or at such other place as Payee or its agent or designee may from time to time designate in writing. (c) This Note is secured by a Deed of Trust, Mortgage, Security Agreement and Assignment of Rents and Leases of even date herewith (the "Mortgage") from Maker to Payee and by an Assignment of Rents and Leases of even date herewith (the "Assignment") from Maker to Payee. The Mortgage, the Assignment and any other instrument given at any time to secure this Note are hereinafter collectively called the "Security Documents." (d) This Note may not be prepaid prior to the end of the Lockout Period, except as set forth herein. Any prepayment of this Note, in whole or in part, prior to the end of the Lockout Period, except as permitted herein, shall constitute an "Event of Default" under the Mortgage. Maker has the right to prepay the principal of this Note in full or in part on any Payment Date after the end of the Lockout Period, upon sixty days' prior written notice and payment, together with the portion of the principal to be prepaid, of a prepayment premium in an amount calculated as specified in Appendix 1. The calculation of the prepayment premium shall be made by Payee and shall, absent manifest error, be conclusive. In the event this Note is prepaid from the proceeds of insurance or condemnation awards in accordance with Sections 10, 11 and 12 of the Mortgage either prior to or after the end of the Lockout Period, a prepayment premium shall be payable calculated as specified in Appendix 1. Notwithstanding the foregoing, this Note may be prepaid without a prepayment premium during the one hundred eighty (180) day period prior to the Maturity Date. Upon acceleration of this Note in accordance with its terms and the terms of the Security Documents, Maker agrees to pay the prepayment premium described above in the amount that would be due if a voluntary payment were made on the date of such acceleration. A tender of payment of the amount necessary to pay and satisfy the entire unpaid principal balance of this Note or any portion thereof at any time after an Event of Default under the Mortgage or an acceleration by Payee of the indebtedness evidenced hereby, whether such payment is tendered voluntarily, during or after foreclosure of the Mortgage, or pursuant to realization upon other security, shall constitute a purposeful evasion of the prepayment terms of this Note, shall be deemed to be a voluntary prepayment hereof, and Maker shall be required to pay the prepayment premium as described above. Partial prepayments of principal shall not change the Payment Dates or amounts of subsequent monthly installments, unless Payee shall otherwise agree in writing. Notwithstanding the foregoing, nothing in this paragraph (d) shall vary or negate the provisions of Section 18(c) of the Mortgage. (e) If Maker defaults in the payment of any installment of principal and interest on the date on which it shall fall due or in the performance of any of the agreements, conditions, covenants, provisions or stipulations contained in this Note or in the Security Documents, and if such default shall continue beyond any grace period provided for in the Mortgage so as to constitute an Event of Default thereunder, then Payee, at its option and without further notice to Maker, may declare immediately due and payable the entire unpaid principal balance of this Note, together with interest thereon at an annual rate after the date of such default equal to the Default Rate, together with all sums due by Maker under the Security Documents, anything herein or in the Security Documents to the contrary notwithstanding. The foregoing provision shall not be construed as a waiver by Payee of its right to pursue any other remedies available to it under the Mortgage, this Note or any other Security Document, nor shall it be construed to limit in any way the application of the Default Rate. Any payment hereunder may be enforced and recovered in whole or in part at such time by one or more of the remedies provided to Payee in this Note or in the Security Documents. In the event that: (i) this Note or any Security Document is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding; (ii) an attorney is retained to represent Payee in any bankruptcy, reorganization, receivership, or other proceedings affecting creditors' rights and involving a claim under this Note or any Security Document; (iii) an attorney is retained to protect or enforce the lien of the Mortgage or any Security Document; or (iv) an attorney is retained to represent Payee in any other proceedings whatsoever in connection with this Note, the Mortgage, any of the Security Documents or any portion of the Mortgaged Property (as defined in the Mortgage), then Maker shall pay to Payee all reasonable attorney's fees, costs and expenses incurred in connection therewith, including costs of appeal, together with interest on any judgment obtained by Payee at the Default Rate. (f) If Maker defaults in the payment of any monthly installment on the Payment Date, and such default is not cured within fifteen (15) days thereafter, then Maker shall pay to Payee a late payment charge in an amount equal to four percent (4%) of the amount of the installment not paid as aforesaid.. Said late charge payments, if payable, shall be secured by the Mortgage and the other Security Documents, shall be payable without notice or demand by Payee except as required by North Carolina law, and are independent of and have no effect upon the rights of Payee under paragraph (e) above. (g) Maker and all endorsers, sureties and guarantors hereby jointly and severally waive all applicable exemption rights, valuation and appraisement, presentment for payment, demand, notice of demand, notice of nonpayment or dishonor, protest and notice of protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note. Maker and all endorsers, sureties and guarantors consent to any and all extensions of time, renewals, waivers or modifications that may be granted by Payee with respect to the payment or other provisions of this Note and to the release of the collateral or any part thereof, with or without substitution, and agree that additional makers, endorsers, guarantors or sureties may become parties hereto without notice to them or affecting their liability hereunder. (h) Payee shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by Payee, and then only to the extent specifically set forth in writing. A waiver of one event shall not be construed as continuing or as a bar to or waiver of any right or remedy to a subsequent event. (i) This Note shall be governed by and construed in accordance with the laws of the State in which the Mortgaged Property is located (the "State"). (j) The parties hereto intend and believe that each provision in this Note comports with all applicable law. However, if any provision in this Note is found by a court of law to be in violation of any applicable law, and if such court should declare such provision of this Note to be unlawful, void or unenforceable as written, then it is the intent of all parties hereto that such provision shall be given full force and effect to the fullest possible extent that is legal, valid and enforceable, that the remainder of this Note shall be construed as if such unlawful, void or unenforceable provision were not contained therein, and that the rights, obligations and interest of Maker and the holder hereof under the remainder of this Note shall continue in full force and effect; provided, however, that if any provision of this Note which is found to be in violation of any applicable law concerns the imposition of interest hereunder, the rights, obligations and interests of Maker and Payee with respect to the imposition of interest hereunder shall be governed and controlled by the provisions of the following paragraph. (k) It being the intention of Payee and Maker to comply with the laws of the State with regard to the rate of interest charged hereunder, it is agreed that, notwithstanding any provision to the contrary in this Note, the Mortgage, or any of the other Security Documents, no such provision, including without limitation any provision of this Note providing for the payment of interest or other charges, shall require the payment or permit the collection of any amount ("Excess Interest") in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by this Note. If any Excess Interest is provided for, or is adjudicated to be provided for, in this Note, the Mortgage, or any of the other Security Documents, then in such event: (i) the provisions of this paragraph shall govern; (ii) Maker shall not be obligated to pay any Excess Interest; (iii) any Excess Interest that Payee may have received hereunder shall, at the option of Payee, be (x) applied as a credit against the unpaid principal balance then due under this Note, accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (y) refunded to the payor thereof or (z) any combination of the foregoing; (iv) the applicable interest rate or rates provided for herein shall be automatically subject to reduction to the maximum lawful rate allowed to be contracted for in writing under the applicable usury laws of the aforesaid State, and this Note, the Mortgage and the other Security Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in such interest rate or rates; and (v) Maker shall not have any action or remedy against Payee for any damages whatsoever or any defense to enforcement of this Note, Mortgage or any other Security Document arising out of the payment or collection of any Excess Interest. (l) Upon any endorsement, assignment, or other transfer of this Note by Payee or by operation of law, the term "Payee," as used herein, shall mean such endorsee, assignee, or other transferee or successor to Payee then becoming the holder of this Note. This Note shall inure to the benefit of Payee and its successors and assigns and shall be binding upon the undersigned and its successors and assigns. The term "Maker" as used herein shall include the respective successors and assigns, legal and personal representatives, executors, administrators, devisees, legatees and heirs of Maker. (m) Any notice, demand or other communication which any party may desire or may be required to give to any other party shall be in writing and shall be given as provided in the Mortgage. (n) To the extent that Maker makes a payment or Payee receives any payment or proceeds for Maker's benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the obligations of Maker hereunder intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Payee. (o) Maker shall execute and acknowledge (or cause to be executed and acknowledged) and deliver to Payee all documents, and take all actions, reasonably required by Payee from time to time to confirm the rights created or now or hereafter intended to be created under this Note and the Security Documents, to protect and further the validity, priority and enforceability of this Note and the Security Documents, to subject to the Security Documents any property of Maker intended by the terms of any one or more of the Security Documents to be encumbered by the Security Documents, or otherwise carry out the purposes of the Security Documents and the transactions contemplated thereunder; provided, however, that no such further actions, assurances and confirmations shall increase Maker's obligations under this Note. (p) No modification, amendment, extension, discharge, termination or waiver (a "Modification") of any provision of this Note, or any one or more of the other Security Documents, nor consent to any departure by Maker therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on, Maker shall entitle Maker to any other or future notice or demand in the same, similar or other circumstances. Payee does not hereby agree to, nor does Payee hereby commit itself to, enter into any Modification. (q) Maker hereby expressly and unconditionally waives, in connection with any suit, action or proceeding brought by Payee on this Note, any and every right it may have to (a) interpose any counterclaim therein (other than a counterclaim which can only be asserted in the suit, action or proceeding brought by Payee on this Note and cannot be maintained in a separate action) and (b) have the same consolidated with any other or separate suit, action or proceeding. (r) Notwithstanding any provision to the contrary in the Mortgage or this Note, Payee shall not have any recourse to any asset of Maker or its partners other than the Mortgaged Property in order to satisfy the indebtedness for payment of the principal and interest evidenced by this Note, and Payee's sole recourse for satisfaction of the payment of principal and interest evidenced by this Note shall be to exercise its rights against the Mortgaged Property encumbered by the Mortgage and the other collateral securing this Note. The foregoing sentence shall not be deemed or construed to be a release of the indebtedness evidenced by this Note or in any way impair, limit or otherwise affect the lien of the Mortgage or any such other instrument securing repayment of this Note or prevent Payee from naming Maker, its partners, or their successors or assigns as a defendant to any action to enforce any remedy for default so long as there is no personal or deficiency money judgment sought or entered against Maker, its partners, or their successors or assigns for payment of principal and interest evidenced by this Note. Notwithstanding the foregoing provisions of this paragraph, it is expressly understood and agreed that the aforesaid limitation of liability shall no way affect or apply to Maker's or its partners' continued personal liability for the payment to Payee of: (i) any loss or damage occurring by reason of all or any part of the Mortgaged Property being encumbered by a voluntary lien (other than the Mortgage) granted by Maker; (ii) any Rents (as defined in the Mortgage), issues, profits and/or income collected by Maker in excess of normal and verifiable operating expenses from the Mortgaged Property after default by Maker hereunder, under the Mortgage or under any other instrument securing or referring to this Note; (iii) unrefunded security deposits made by tenants of the Mortgaged Property; (iv) payment of Taxes, as defined in Section 5 of the Mortgage, and insurance premiums, payment of which is required to be made by Maker under the Mortgage; (v) Rents, security deposits with respect to leases of the Mortgaged Property, insurance proceeds, condemnation awards and any other payments or consideration which Maker receives and to which Payee is entitled pursuant to the terms of the Mortgage or of any other Security Document; (vi) damage to the Mortgaged Property from waste committed or permitted by Maker; (vii) loss or damage occurring by reason of the failure of Maker to comply with any of the provisions of Section 35 of the Mortgage; (viii) any loss or claim incurred by or asserted against Payee as a result of fraud or misrepresentation by Maker or any of the partners thereof with respect to any certification, representation or warranty made by Maker or such other persons to Payee herein or in any of the Security Documents; (ix) all indebtedness and obligations arising under or pursuant to that certain Environmental Indemnity dated of even date herewith executed by Maker, the general partner of Maker and McNeil Real Estate Fund XV, Ltd. for the benefit of Payee; and (x) reasonable attorney's fees incurred by Payee in connection with suit filed on account of any of the foregoing clauses (i) through (ix). IN WITNESS WHEREOF, Maker has caused this Note to be executed under seal and delivered as of the day and year first above written. WOODCREEK FUND XV, LTD., a Texas limited partnership doing business in North Carolina as Woodcreek Fund XV, Ltd., Limited Partnership By: Woodcreek Fund XV Corp., a Delaware corporation, General Partner By: /s/ Ron K. Taylor --------------------------- Ron K. Taylor, Vice President [SEAL] ATTEST: By: /s/ Harriet Yates ---------------------------- Harriet Yates, Secretary [SEAL] APPENDIX 1 Calculation of Prepayment Premium The prepayment premium shall be equal to the greater of (A) one percent (1%) of the portion of the principal amount of this Note being repaid or (B) the product of (i) a fraction whose numerator is an amount equal to the portion of the principal balance of this Note being prepaid and whose denominator is the entire outstanding principal balance of this Note on the date of such prepayment (after subtracting the amount of any scheduled principal payment due on such Payment Date), multiplied by (ii) an amount equal to the remainder obtained by subtracting (x) an amount equal to the entire outstanding principal balance of this Note as of the date of such prepayment (after subtracting the amount of any scheduled principal payment due on such Payment Date) from (y) the present value as of the date of such prepayment of the remaining scheduled payments of principal and interest on this Note (including any final installment of principal payable on the Maturity Date) determined by discounting such payments at the Discount Rate (as hereinafter defined). For purposes of this Note: (x) "Discount Rate" shall mean the rate which, when compounded monthly, is equivalent to the Treasury Rate (defined below); and (y) "Treasury Rate" shall mean the yield calculated by the linear interpolation of the yield, as reported in Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading "U.S. government securities/Treasury constant maturities" for the week ending prior to the date of the relevant prepayment of this Note, of U.S. Treasury constant maturities with a maturity date (one longer and one shorter) most nearly approximating the Maturity Date of this Note. In the event Release H.15 is no longer published, the Payee shall select a comparable publication to determine the Treasury Rate. EXHIBIT 1 Amounts due on this note shall be payable to Fleet Real Estate Capital, Inc. at the following address: Fleet Real Estate Capital, Inc. 4275 Executive Square Suite 200 La Jolla, CA 92037 Loan No.: 55-9509025 -----END PRIVACY-ENHANCED MESSAGE-----