-----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, GKJ5hy0PEWR/Z6ArSMLUgZGS9BkrzVmxOmb5I/I8bvpLtqeW7H5rEV5RhcvLmWK0 XDgBcSd+oeH8V3r4xfy4Rg== 0000751044-97-000003.txt : 19970329 0000751044-97-000003.hdr.sgml : 19970329 ACCESSION NUMBER: 0000751044-97-000003 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 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: 97567713 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, 1996 ------------------------------------------------- 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 600, LB70, Dallas, Texas, 75240 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (972) 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 102,796 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 34 TOTAL OF 36 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 600, 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, for 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 Management Incentive Distribution ("MID"). During 1993 to 1995, 40 Units were relinquished leaving 102,836 Units outstanding as of December 31, 1996. Subsequent to year end, 40 Units were relinquished leaving 102,796 Units outstanding at January 31, 1997. 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, were 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. See Item 8 - Note 2 - "Transactions with Affiliates". In 1992, the General Partner received 696 Units for such a payment. 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 1995 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 commercial real estate and other real estate related assets. At December 31, 1996, 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 determined to evaluate market and other economic conditions to establish the optimum time to commence an orderly liquidation of the Partnership's assets in accordance with the terms of the Amended Partnership Agreement. Taking such conditions as well as other pertinent information into account, the Partnership has determined to begin orderly liquidation of all its assets. Although there can be no assurance as to the timing of the liquidation due to real estate market conditions, the general difficulty of disposing of real estate, and other general economic factors, it is anticipated that such liquidation would result in the dissolution of the Partnership followed by a liquidating distribution to Unitholders by December 2001. Until such time as the Partnership's assets are liquidated, the Partnerships plan of operations is to preserve or increase the net operating income of its assets 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 assets. 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. Forward-Looking Information: Within this document, certain statements are made as to the expected occupancy trends, financial condition, results of operations, and cash flows of the Partnership for periods after December 31, 1996. All of these statements are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical and involve risks and uncertainties. The Partnership's actual occupancy trends, financial condition, results of operations, and cash flows for future periods may differ materially due to several factors. These factors include, but are not limited to, the Partnership's ability to control costs, make necessary capital improvements, negotiate sales or refinancings of its properties and respond to changing economic and competitive factors. Other information: 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 to purchase from holders of Units up to approximately 6.9% of the outstanding Units of the Partnership for a purchase price of $95.00 per Unit. In September 1996, High River made another unsolicited tender offer to purchase any and all of the outstanding Units of the Partnership for a purchase price of $100.24 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 tender offers made with respect to the Partnership and not tender their Units. The General Partner believes that as of January 31, 1997, High River has purchased approximately 10.3% of the outstanding Units pursuant to the tender offers. In addition, all litigation filed by High River, Mr. Icahn and his affiliates in connection with the tender offers have been dismissed without prejudice. ITEM 2. PROPERTIES - ------- ---------- The following table sets forth the real estate investment portfolio of the Partnership at December 31, 1996. 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 management, the properties are adequately covered by insurance.
Net Basis 1996 Date Property Description of Property Debt Property Tax Acquired - ---------- ------------ -------------- ------------- ------------ -------- Arrowhead (1) Apartments Shawnee, KS 436 units $ 8,198,117 $ 6,999,878 $ 153,169 3/85 Cedar Run Apartments Lexington, KY 152 units 3,482,114 - 30,617 12/85 Mountain Shadows (2) Apartments Albuquerque, NM 504 units 12,809,173 11,656,890 187,976 8/85 Woodcreek (3) Apartments Cary, NC 200 units 5,762,089 5,200,253 61,758 12/85 ------------- ------------- ---------- $ 30,251,493 $ 23,857,021 $ 433,520 ============= ============= ==========
- ----------------------------------------- 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:
1996 1995 1994 1993 1992 --------- ---------- ----------- ---------- ------------ Arrowhead Occupancy Rate............ 95% 95% 95% 96% 92% Rent Per Square Foot...... $ 7.12 $ 6.76 $ 6.42 $ 5.95 $ 5.49 Cedar Run Occupancy Rate............ 95% 95% 95% 91% 92% Rent Per Square Foot...... $ 7.62 $ 7.22 $ 7.14 $ 6.61 $ 6.32 Mountain Shadows Occupancy Rate............ 87% 88% 94% 95% 93% Rent Per Square Foot...... $ 8.28 $ 8.24 $ 7.97 $ 7.53 $ 6.88 Woodcreek Occupancy Rate............ 96% 95% 99% 97% 92% Rent Per Square Foot...... $ 8.80 $ 8.42 $ 8.08 $ 7.40 $ 6.87
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 - ------------------------------------ The occupancy rate at Arrowhead is running slightly above the local area average of 94%. 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. Over the past three years, Cedar Run has reduced its dependency on college students. This has enabled Cedar Run to maintain an occupancy rate of 95% since 1994. 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 and has experienced a decline in occupancy rates since 1993. This decline can be attributed to the construction of new multi-family units. The market maintains an occupancy level at 90%. The capital improvements program that Mountain Shadows has been involved in has kept the property aggressive in the market. The occupancy rate at Woodcreek currently mirrors the market rate of 96%. The property is located in a rapidly developing area of Wake County in North Carolina with an additional 6,189 units planned in 1997. 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) James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint). The action involves purported class and derivative actions brought by limited partners of each of the fourteen limited partnerships that were named as nominal defendants as listed above (as defined in this Section 1, the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (as defined in this Section 1, collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. On January 7, 1997, the Court ordered consolidation with three other similar actions listed below. The Partnerships filed a demurrer to the complaint and a motion to strike on February 14, 1997, seeking to dismiss the complaint in all respects. The demurrer is pending. The Partnerships deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 2) 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). On January 7, 1997, this action was consolidated by court order with Scholfield, et al., referenced above. 3) 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). On January 7, 1997, this action was consolidated by court order with Scholfield, et al., referenced above. 4) 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. On April 11, 1996, the action was dismissed without prejudice in anticipation of consolidation with other class action complaints. On January 7, 1997, this action was consolidated by court order with Schofield, et al., referenced above. For a discussion of the Southmark bankruptcy, see Item 1 - Business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND RELATED - ------- ---------------------------------------------------------------------- SECURITY HOLDER MATTERS ----------------------- (A) There is no established public trading market for Units, nor is one expected to develop. (B) Title of Class Number of Record Unit Holders -------------- ----------------------------- Limited partnership units 5,314 as of January 31, 1997 (C) Cash distributions of $999,981 were made to the limited partners during 1996. The distributions consisted of funds from operations. No distributions were made to the limited partners during 1995. The Partnership accrued distributions of $511,760 and $519,812 for the benefit of the General Partner for the years ended December 31, 1996 and 1995, respectively, of which all but $42,651 was paid as of December 31, 1996. These distributions are the MID pursuant to the Amended Partnership Agreement. Distributions of the MID are expected to be paid to the General Partner in 1997. 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 1997, 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 1996 1995 1994 1993 1992 - ------------------ ------------- ------------- -------------- ------------- ------------- Rental revenue................. $ 7,973,979 $ 7,716,859 $ 7,415,746 $ 7,237,745 $ 7,897,402 Total revenue.................. 8,076,096 7,991,130 7,772,979 7,280,900 7,982,880 Write-down for permanent impairment of real estate...................... - - - - 3,327,000 Loss on disposition of real estate...................... - - - (2,002,611) - Loss before extraordinary items....................... (133,470) (198,113) (41,096) (3,099,381) (5,450,278) Extraordinary gain on early extinguishment of debt...... - - - 2,681,807 52,623 Net loss....................... (133,470) (198,113) (41,096) (417,574) (5,397,655) Net loss per limited partner- ship unit: Loss before extraordinary items......................... $ (5.66) $ (6.90) $ (5.19) $ (35.26) $ (52.45) Extraordinary gain on early extinguishment of debt........ - - - 25.81 .51 --------- ---------- ------------ ------------ ------------ Net loss....................... $ (5.66) $ (6.90) $ (5.19) $ (9.45) $ (51.94) ========= ========== ============ ============ =========== Distribution per limited partnership unit............ $ 9.70 $ - $ 4.86 $ - $ - ========= ========== ============ ============ ===========
As of December 31, Balance Sheets 1996 1995 1994 1993 1992 - -------------- ------------- ------------- -------------- ------------- -------- Real estate investments, net......................... $ 30,251,493 $ 31,548,994 $ 32,336,645 $ 33,207,297 $ 35,470,317 Asset held for sale............ - - - - 6,515,301 Total assets................... 33,180,985 35,129,849 37,030,171 38,348,427 43,663,439 Mortgage notes payable, net......................... 23,857,021 24,216,133 25,443,252 25,803,685 30,191,039 Partners' equity............... 8,392,642 10,037,853 10,755,778 11,805,729 12,627,676
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 foreclosed upon 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, 1996, the Partnership owned four apartment properties. Three of the four Partnership's properties are subject to mortgage notes. 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 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 - --------------------- 1996 compared to 1995 Revenue: Partnership revenues increased by $84,966 or 1.1% for the year ended 1996 as compared to 1995. Rental revenue increased by $257,120 or 3%, while interest income decreased $136,891. Rental revenue was $7,973,979 for 1996 as compared to $7,716,859 in 1995. The increase of $257,120 or 3% is primarily due to increases in rental rates, offset by a slight increase in rental discounts given to Mountain Shadow tenants. Interest income decreased by $136,891 or 57% in 1996 as compared to 1995 due to smaller average cash balances invested in interest-bearing accounts. The Partnership also recognized a gain on legal settlement from Southmark of $35,263 in 1995. No such gain has been recognized in 1996. Expenses: Partnership expenses increased in 1996 by $20,323 or 0.2% as compared to the same period last year. Increases in personnel, repairs and maintenance, and general and administrative expenses were offset by decreases in mortgage interest and general and administrative - affiliate expenses. Mortgage interest expense decreased for the year ended 1996, compared to 1995, by $299,187 or 12%. The decrease is due to the payoff of the Cedar Run mortgage note payable in December 1995. Personnel expenses for 1996 were $883,514 as compared to $835,031 in 1995. The increase of $48,483 or 6% is due to increased office and maintenance salaries at all of the properties. Repairs and maintenance expense for the period ended 1996 increased by $216,826 or 28%, compared to 1995. The increase is partially due to the replacement of carpeting, which met the Partnership's criteria for capitalization in 1995 based on the magnitude of replacements, but were expensed in 1996. In addition, furniture rental increased at Mountain Shadows due to an increase in corporate unit leases where furniture rental is included in the lease. The Partnership also experienced increases in contract painting and cleaning services as a result of increased turnover of residents at the properties. General and administrative expenses increased in 1996 by $35,200 or 14%, as compared to 1995, due to costs incurred by the Partnership to evaluate and disseminate information regarding an unsolicited 1996 tender offer as discussed in Item 1 - Business. General and administrative - affiliates expense decreased by $45,581 or 18% for the period ended 1996 as compared to 1995. The decrease is due to the reduction of overhead expenses allocable to the Partnership. 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. Rental revenue was $7,716,859 for 1995 as compared to $7,415,746 in 1994. The increase was 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 from 1994 to 1995 due to an increase in the interest rates and larger average cash balances invested in interest-bearing accounts. 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. Expenses: Partnership expenses increased in 1995 by $375,168 or 5% as compared to the same period in 1994. The increase was 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% was 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 during 1995 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 1995 tender offer. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership has experienced positive cash flow from operations of $6,004,721 for the three years ended December 31, 1996. In 1995, the Partnership received net cash proceeds of $1,367,557 through the refinancing of Woodcreek. Over the last three years the Partnership has used cash to fund $3,010,580 in additions to real estate investments, $1,236,697 in scheduled principal payments on mortgage notes payable, $143,638 for additional deferred borrowing costs, $1,511,397 for payment of the MID and $1,499,974 for distributions to the limited partners. In December 1995, proceeds from the refinancing of Woodcreek and current cash reserves totaling $2,217,856 were used to pay off the principal balance of the mortgage note on Cedar Run. Cash generated from operating activities increased by $67,918 in 1996 as compared to 1995. The increase in cash received from tenants and the reduction in interest paid as well as cash paid to affiliates offset the increase in cash paid to suppliers and the decrease in interest received. The Partnership 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 expended $827,496, $1,168,355 and $1,014,729 for capital improvements to the properties in 1996, 1995 and 1994, respectively. During 1996 and 1994, the Partnership paid distributions to the limited partners of $1,499,974. In 1995, proceeds from the refinancing of a mortgage note were used to retire another mortgage note, as discussed above. Short-term liquidity: The Partnership held cash and cash equivalents of $1,362,812 at December 31, 1996, down $716,540 from the balance at December 31, 1995. This balance provides a reasonable level of working capital for the Partnership's operations. In 1997, 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 $2.9 million renovating the properties so they can remain competitive in their respective markets. In 1997, the Partnership has budgeted to spend approximately $547,000 on capital improvements, which are expected to be funded from operations of the properties. 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. The Partnership has determined to evaluate market and other economic conditions to establish the optimum time to commence an orderly liquidation of the Partnership's assets in accordance with the terms of the Amended Partnership Agreement. Taking such conditions as well as other pertinent information into account, the Partnership has determined to begin orderly liquidation of all its assets. Although there can be no assurance as to the timing of the liquidation due to real estate market conditions, the general difficulty of disposing of real estate, and other general economic factors, it is anticipated that such liquidation would result in the dissolution of the Partnership followed by a liquidating distribution to Unitholders by December 2001. Income allocations and distributions: Terms of the Amended Partnership Agreement specify that income before depreciation is allocated to the General Partner to the extent of MID paid in cash. Depreciation is allocated in the ratio of 99:1 to the limited partners and the General Partner, respectively. Therefore, for each of the three years ended December 31, 1996, income of $448,715, $511,270 and $492,604, respectively, was allocated to the General Partner. The limited partners received allocations of net loss of $582,185, $709,383 and $533,700 for each of the three years ended December 31, 1996, respectively. During 1996, the limited partners received a cash distribution of $999,981. This distribution consisted of funds from operations. A distribution of $511,760 for the MID was accrued by the Partnership for the General Partner in 1996. In light of the Cedar Run mortgage note payoff, management did not make any distributions to the limited partners in 1995. In February 1997, 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....................................... 14 Balance Sheets at December 31, 1996 and 1995................................... 15 Statements of Operations for each of the three years in the period ended December 31, 1996..................................................... 16 Statements of Partners' Equity (Deficit) for each of the three years in the period ended December 31, 1996....................................... 17 Statements of Cash Flows for each of the three years in the period ended December 31, 1996.............................................. 18 Notes to Financial Statements.................................................. 20 Financial Statement Schedule - Schedule III - Real Estate Investments and Accumulated Depreciation............................................................. 29
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, 1996 and 1995, and the related statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, 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 17, 1997 McNEIL REAL ESTATE FUND XV, LTD. BALANCE SHEETS
December 31, ------------------------------------ 1996 1995 ---------------- -------------- ASSETS - ------ Real estate investments: Land..................................................... $ 7,087,195 $ 7,087,195 Buildings and improvements............................... 45,563,139 44,889,821 -------------- ------------- 52,650,334 51,977,016 Less: Accumulated depreciation.......................... (22,398,841) (20,428,022) -------------- ------------- 30,251,493 31,548,994 Cash and cash equivalents................................... 1,362,812 2,079,352 Cash segregated for security deposits....................... 263,255 249,574 Accounts receivable......................................... 188,831 6,691 Prepaid expenses and other assets........................... 43,266 43,905 Escrow deposits............................................. 310,888 364,431 Deferred borrowing costs, net of accumulated amortization of $248,892 and $172,430 at December 31, 1996 and 1995, respectively ................ 760,440 836,902 -------------- ------------- $ 33,180,985 $ 35,129,849 ============== ============= LIABILITIES AND PARTNERS' EQUITY (DEFICIT) - ------------------------------------------- Mortgage notes payable, net................................. $ 23,857,021 $ 24,216,133 Accounts payable............................................ - 42,258 Accrued expenses............................................ 149,324 197,112 Accrued interest............................................ 166,600 169,346 Accrued property taxes...................................... 170,447 164,534 Deferred gain - involuntary conversion...................... 97,210 - Payable to affiliates - General Partner..................... 99,892 48,469 Security deposits and deferred rental income................ 247,849 254,144 -------------- ------------- 24,788,343 25,091,996 -------------- ------------- Partners' equity (deficit): Limited partners - 120,000 limited partnership units authorized; 102,836 limited partnership units issued and outstanding at December 31, 1996 and 1995... 8,812,479 10,394,645 General Partner.......................................... (419,837) (356,792) -------------- ------------- 8,392,642 10,037,853 -------------- ------------- $ 33,180,985 $ 35,129,849 ============== =============
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XV, LTD. STATEMENTS OF OPERATIONS
For the Years Ended December 31, ---------------------------------------------------- 1996 1995 1994 -------------- -------------- --------------- Revenue: Rental revenue.......................... $ 7,973,979 $ 7,716,859 $ 7,415,746 Interest................................ 102,117 239,008 134,232 Gain on settlement of legal expenses.... - 35,263 - Gain on settlement of litigation, net... - - 223,001 ------------- ------------- -------------- Total revenue......................... 8,076,096 7,991,130 7,772,979 ------------- ------------- -------------- Expenses: Interest................................ 2,134,252 2,433,439 2,397,880 Depreciation and amortization........... 2,039,432 1,956,006 1,885,381 Property taxes.......................... 433,520 421,633 393,660 Personnel expenses...................... 883,514 835,031 810,327 Repairs and maintenance................. 1,002,566 785,740 801,181 Property management fees - affiliates............................ 399,829 385,074 376,559 Utilities............................... 362,268 378,487 366,026 Other property operating expenses....... 458,335 487,602 434,125 General and administrative.............. 293,281 258,081 112,859 General and administrative - affiliates............................ 202,569 248,150 236,077 ------------- ------------- -------------- Total expenses........................ 8,209,566 8,189,243 7,814,075 ------------- ------------- -------------- Net loss................................... $ (133,470) $ (198,113) $ (41,096) ============= ============= ============== Net loss allocable to limited partners..... $ (582,185) $ (709,383) $ (533,700) Net income allocable to General Partner......................... 448,715 511,270 492,604 ------------- ------------- -------------- Net loss................................... $ (133,470) $ (198,113) $ (41,096) ============= ============= ============== Net loss per limited partnership unit...... $ (5.66) $ (6.90) $ (5.19) ============= ============= ============== Distribution per limited partnership unit.. $ 9.70 $ - $ 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, 1996, 1995 and 1994
Total General Limited Partners' Partner Partners Equity ---------------- ---------------- ---------------- 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) 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) Management Incentive Distribution......... (519,812) - (519,812) -------------- -------------- -------------- Balance at December 31, 1995.............. (356,792) 10,394,645 10,037,853 Net income (loss)......................... 448,715 (582,185) (133,470) Limited partners distribution............. - (999,981) (999,981) Management Incentive Distribution......... (511,760) - (511,760) -------------- -------------- -------------- Balance at December 31, 1996.............. $ (419,837) $ 8,812,479 $ 8,392,642 ============== ============== ==============
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, ----------------------------------------------------- 1996 1995 1994 -------------- --------------- ---------------- Cash flows from operating activities: Cash received from tenants.............. $ 7,957,172 $ 7,687,865 $ 7,446,868 Cash received from legal settlement..... - 35,263 - Cash paid to suppliers.................. (2,999,800) (2,639,152) (2,486,722) Cash paid to affiliates................. (593,626) (630,652) (611,940) Interest received....................... 102,117 239,008 134,232 Interest paid........................... (2,017,275) (2,308,035) (2,285,387) Property taxes paid..................... (466,169) (469,796) (312,251) Net proceeds from litigation settlement............................ - - 223,001 ------------- ------------- -------------- Net cash provided by operating activities.. 1,982,419 1,914,501 2,107,801 ------------- ------------- -------------- Net cash used in investing activities: Additions to real estate investments........................... (827,496) (1,168,355) (1,014,729) ------------- ------------- -------------- Cash flows from financing activities: Net proceeds from refinancing of mortgage notes payable................ - 1,367,557 - Principal payments on mortgage notes payable......................... (402,373) (2,644,430) (407,750) Deferred borrowing costs paid........... - (143,638) - Limited partners distribution........... (999,981) - (499,993) Management Incentive Distribution....... (469,109) (530,830) (511,458) ------------- ------------- -------------- Net cash used in financing activities...... (1,871,463) (1,951,341) (1,419,201) ------------- ------------- -------------- Net decrease in cash and cash equivalents............................. (716,540) (1,205,195) (326,129) Cash and cash equivalents at beginning of year..................... 2,079,352 3,284,547 3,610,676 ------------- ------------- -------------- Cash and cash equivalents at end of year............................... $ 1,362,812 $ 2,079,352 $ 3,284,547 ============= ============= ==============
See discussions of noncash investing and financing activities in Note 6. 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, --------------------------------------------------- 1996 1995 1994 --------------- --------------- -------------- Net loss................................... $ (133,470) $ (198,113) $ (41,096) ------------- ------------- ------------- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization........... 2,039,432 1,956,006 1,885,381 Amortization of discounts on mortgage notes payable................ 43,261 49,754 47,317 Amortization of deferred borrowing costs................................. 76,462 95,120 68,136 Changes in assets and liabilities: Cash segregated for security deposits............................ (13,681) (4,580) 12,952 Accounts receivable................... 635 4,797 8,137 Prepaid expenses and other assets..... 639 41,718 (29,561) Escrow deposits....................... 53,543 (85,941) 61,811 Accounts payable...................... (42,258) 15,759 (9,505) Accrued expenses...................... (47,788) 117,708 12,911 Accrued interest...................... (2,746) (19,470) (2,960) Accrued property taxes................ 5,913 (47,614) 70,734 Payable to affiliates - General Partner............................. 8,772 2,572 696 Security deposits and deferred rental income....................... (6,295) (13,215) 22,848 ------------- ------------- -------------- Total adjustments................. 2,115,889 2,112,614 2,148,897 ------------- ------------- -------------- Net cash provided by operating activities.. $ 1,982,419 $ 1,914,501 $ 2,107,801 ============= ============= ==============
See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XV, LTD. NOTES TO FINANCIAL STATEMENTS December 31, 1996 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 600, LB70, Dallas, Texas, 75240. The Partnership is engaged in real estate activities, including the ownership, operation and management of residential and commercial real estate and other real estate related assets. The Partnership has determined to evaluate market and other economic conditions to establish the optimum time to commence an orderly liquidation of the Partnership's assets in accordance with the terms of the Amended Partnership Agreement. At December 31, 1996, 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 has a 100% ownership interest in each of the following tier partnerships: Tier Partnership ---------------- Arrowhead Fund XV Limited Partnership (a)(b) McNeil Mountain Shadows Fund XV Limited Partnership (a)(b) Woodcreek Fund XV, Ltd. (a)(c) (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, 1996, 1995 and 1994. (c) Included in financial statements for year ended December 31, 1996 and 1995. Real Estate Investments - ----------------------- Real estate investments are generally stated at the lower of depreciated cost or fair value. Real estate investments are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. When the carrying value of a property exceeds the sum of all estimated future cash flows, an impairment loss is recognized. At such time, a write-down is recorded to reduce the basis of the property to its estimated recoverable amount. The Partnership's method of accounting for real estate investments is in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), which the Partnership adopted effective January 1, 1996. The adoption of SFAS 121 did not have a material impact on the accompanying financial statements. Improvements and betterments are capitalized and expensed through depreciation charges. Repairs and maintenance are charged to operations as incurred. 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. 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 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 1996, 1995 and 1994 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 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 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. Cash distributions of $999,981 and $499,993 were made to the limited partners during 1996 and 1994, respectively. No distributions were made to the limited partners during 1995. The Partnership accrued distributions of $511,760, $519,812 and $508,862 for the benefit of the General Partner for the years ended December 31, 1996, 1995 and 1994, respectively. The distributions are the MID pursuant to the Amended Partnership Agreement. In February 1997, 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 Loss Per Limited Partnership Unit - ------------------------------------- Net loss per Unit is computed by dividing net 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 weighted average Units outstanding in 1996 and 1995, and 102,846 weighted average Units outstanding in 1994. 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. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. 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. 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 MID earned. 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 1996, 1995 or 1994 because the Entitlement Amount was sufficient to pay 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 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, --------------------------------------------------- 1996 1995 1994 -------------- -------------- -------------- Property management fees - affiliates...... $ 399,829 $ 385,074 $ 376,559 Charged to general and administrative - affiliates: Partnership administration.............. 202,569 248,150 236,077 ------------- ------------- -------------- $ 602,398 $ 633,224 $ 612,636 ============= ============= ============== Charged to General Partner's deficit: MID..................................... $ 511,760 $ 519,812 $ 508,862 ============= ============ ==============
Payable to affiliates - General Partner at December 31, 1996 and 1995 consists primarily of MID, 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 $713,934 in 1996, $472,231 in 1995 and $284,142 in 1994. NOTE 4 - REAL ESTATE INVESTMENTS - -------------------------------- The basis and accumulated depreciation of the Partnership's real estate investments at December 31, 1996 and 1995 are set forth in the following tables:
Buildings and Accumulated Net Book 1996 Land Improvements Depreciation Value ---- -------------- -------------- --------------- -------------- Arrowhead Shawnee, KS $ 1,537,294 $ 13,912,565 $ (7,251,742) $ 8,198,117 Cedar Run Lexington, KY 866,465 4,770,183 (2,154,534) 3,482,114 Mountain Shadows Albuquerque, NM 3,236,768 19,140,288 (9,567,883) 12,809,173 Woodcreek Cary, NC 1,446,668 7,740,103 (3,424,682) 5,762,089 ------------- ------------- ------------- ------------- $ 7,087,195 $ 45,563,139 $ (22,398,841) $ 30,251,493 ============= ============= ============= ============= Buildings and Accumulated Net Book 1995 Land Improvements Depreciation Value ---- -------------- -------------- --------------- -------------- Arrowhead $ 1,537,294 $ 13,723,961 $ (6,644,247) $ 8,617,008 Cedar Run 866,465 4,660,303 (1,915,041) 3,611,727 Mountain Shadows 3,236,768 19,017,982 (8,739,577) 13,515,173 Woodcreek 1,446,668 7,487,575 (3,129,157) 5,805,086 ------------- ------------- ------------- ------------- $ 7,087,195 $ 44,889,821 $ (20,428,022) $ 31,548,994 ============= ============== ============= =============
On or about August 19, 1993, the Partnership filed an action against the title company regarding the lack of parking at a former Partnership property, Riverway Five. 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, 1996 and 1995. All mortgage notes are secured by real estate investments.
Mortgage Annual Monthly Lien Interest Payments/ December 31, Property Position (a) Rates % Maturity Date (d) 1996 1995 - -------- --------------- ------- ----------------- --------------- ---------------- Arrowhead (c) First 8.150 $ 60,450 07/03 $ 7,158,921 $ 7,294,796 Discount (b) (159,043) (175,401) ------------- -------------- 6,999,878 7,119,395 ------------- -------------- Mountain Shadows (c) First 8.150 100,670 07/03 11,922,091 12,148,372 Discount (b) (265,201) (292,104) ------------- -------------- 11,656,890 11,856,268 Woodcreek First 8.540 40,517 08/02 5,200,253 5,240,470 ------------- -------------- $ 23,857,021 $ 24,216,133 ============= ==============
(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) Financing was obtained under the terms of a Real Estate Mortgage Investment Conduit financing. The mortgage notes payable are cross-collateralized and may not be prepaid in whole or part before July 1998. Any prepayments made during the sixth or seventh loan years are subject to a Yield Maintenance premium, as defined. Additionally, the Partnership must pay a release payment equal to 25% of the prepaid balance which will be applied to the remaining mortgage notes in the collateral pool. (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 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 $424,244, are as follows: 1997.................................... $ 436,589 1998.................................... 473,715 1999.................................... 513,999 2000.................................... 557,709 2001.................................... 605,137 Thereafter.............................. 21,694,116 ---------- Total................................. $24,281,265 ========== 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 $23,497,000 at December 31, 1996 and $24,307,000 at 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. NOTE 7 - 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) James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint). The action involves purported class and derivative actions brought by limited partners of each of the fourteen limited partnerships that were named as nominal defendants as listed above (as defined in this Section 1, the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (as defined in this Section 1, collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. On January 7, 1997, the Court ordered consolidation with three other similar actions listed below. The Partnerships filed a demurrer to the complaint and a motion to strike on February 14, 1997, seeking to dismiss the complaint in all respects. The demurrer is pending. The Partnerships deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. 2) 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). On January 7, 1997, this action was consolidated by court order with Scholfield, et al., referenced above. 3) 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). On January 7, 1997, this action was consolidated by court order with Scholfield, et al., referenced above. 4) 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. On April 11, 1996, the action was dismissed without prejudice in anticipation of consolidation with other class action complaints. On January 7, 1997, this action was consolidated by court order with Schofield, et al., referenced above. 5) 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, L.P. v. High River Limited Partnership, Riverdale Investors Corp., Carl C. Icahn, and Unicorn Associates Corporation - United States District Court for the Central District of California, Case No. 96-5680SVW. On August 12, 1996, High River Limited Partnership (as defined in this Section 5, "High River"), a partnership controlled by Carl C. Icahn, sent a letter to the partnerships referenced above demanding lists of the names, current residences or business addresses and certain other information concerning the unitholders of such partnerships. On August 19, 1996, these partnerships commenced the above action seeking, among other things, to declare that such partnerships are not required to provide High River with a current list of unitholders on the grounds that the defendants commenced a tender offer in violation of the federal securities laws by filing certain Schedule 13D Amendments on August 5, 1996. On October 16, 1996, the presiding judge denied the partnerships' requests for a permanent and preliminary injunction to enjoin High River's tender offers and granted the defendants request for an order directing the partnerships to turn over current lists of unitholders to High River forthwith. On October 24, 1996, the partnerships delivered the unitholder lists to High River. The judge's decision resolved all the issues in the action. NOTE 8 - GAIN ON INVOLUNTARY CONVERSION - --------------------------------------- On October 30, 1996, four units at Woodcreek Apartments were destroyed by fire causing $192,775 in damages. The insurance reimbursements to cover the cost of repairs, net of a deductible, will exceed the basis of the property damaged by $97,210. The Partnership has recorded a deferred gain on involuntary conversion of $97,210 and a receivable of $182,775 from its insurance company for funds not reimbursed as of December 31, 1996. The deferred gain will be recognized as the insurance proceeds are recovered. McNEIL REAL ESTATE FUND XV, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1996
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 $ 6,999,878 $ 1,537,294 $ 12,035,648 $ - $ 1,876,917 Cedar Run Lexington, KY - 866,465 3,947,228 (150,600) 973,555 Mountain Shadows Albuquerque, NM 11,656,890 3,236,768 17,555,977 - 1,584,311 Woodcreek Cary, NC 5,200,253 1,446,668 6,590,377 - 1,149,726 -------------- -------------- -------------- ------------ ------------- $ 23,857,021 $ 7,087,195 $ 40,129,230 $ (150,600) $ 5,584,509 ============== ============== ============== ============ =============
(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, 1996
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 $ 13,912,565 $ 15,449,859 $ (7,251,742) Cedar Run Lexington, KY 866,465 4,770,183 5,636,648 (2,154,534) Mountain Shadows Albuquerque, NM 3,236,768 19,140,288 22,377,056 (9,567,883) Woodcreek Cary, NC 1,446,668 7,740,103 9,186,771 (3,424,682) -------------- -------------- --------------- ------------- $ 7,087,195 $ 45,563,139 $ 52,650,334 $ (22,398,841) ============== ============== =============== =============
(a) For Federal income tax purposes, the properties are depreciated over lives ranging from 5-27.5 years using ACRS or MACRS methods. The aggregate cost of real estate investments for Federal income tax purposes was approximately $52,928,356 and accumulated depreciation was $20,698,127 at December 31, 1996. See accompanying notes to Schedule III. McNEIL REAL ESTATE FUND XV, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1996
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, ----------------------------------------------------- 1996 1995 1994 --------------- -------------- --------------- Real estate investments: Balance at beginning of year............... $ 51,977,016 $ 50,808,661 $ 49,793,932 Improvements............................... 827,496 1,168,355 1,014,729 Replacement of assets...................... (154,178) - - ------------- ------------- -------------- Balance at end of year..................... $ 52,650,334 $ 51,977,016 $ 50,808,661 ============= ============= ============== Accumulated depreciation: Balance at beginning of year............... $ 20,428,022 $ 18,472,016 $ 16,586,635 Depreciation............................... 2,039,432 1,956,006 1,885,381 Replacement of assets...................... (68,613) - - ------------- ------------- -------------- Balance at end of year..................... $ 22,398,841 $ 20,428,022 $ 18,472,016 ============= ============= ==============
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, 76 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 53 Mrs. McNeil is Co-Chairman, with husband Co-Chairman of the Robert A. McNeil, of McNeil Investors, Board 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 - ----------------- --- ---------------------------------------- Ron K. Taylor 39 Mr. Taylor is the President and Chief President and Chief Executive Officer of McNeil Real Estate Executive Officer Management which is an affiliate of the General Partner. Mr. Taylor has been in this capacity since the resignation of Donald K. Reed on March 4, 1997. Prior to assuming his current responsibilities, Mr. Taylor served as a Senior Vice President of McREMI. Mr. Taylor has been in this capacity since McREMI commenced operations in 1991. Prior to joining McREMI, Mr. Taylor served as an Executive Vice President for a national syndication/property management firm. In this capacity, Mr. Taylor had the responsibility for the management and leasing of a 21,000,000 square foot portfolio of commercial properties. Mr. Taylor has been actively 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, 1996, 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, 1996. 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 10,538 Units (approximately 10.3% 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. 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, 1996, the Partnership paid or accrued for the General Partner MID in the amount of $511,760. Any amount of the MID that is paid to the General Partner in Units will be treated as if cash is distributed to the General Partner and is then contributed to the Partnership by the General Partner. The MID represents a return of equity to the General Partner for increasing cash flow, as defined, and accordingly is treated as a distribution. 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, 1996, the Partnership paid or accrued $602,398 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 Termination Agreement, dated October 11, 1991, between McNeil Real Estate Fund XV, Ltd. and McNeil Partners, L.P. (1) 10.3 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) Exhibit Number Description ------- ------------ 10.4 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) 10.5 Master Property Management Agreement, dated as of June 24, 1993 between McNeil Real Estate Management, Inc. and McNeil Real Estate Fund XV, Ltd. (2) 10.6 Mortgage Note, dated August 11, 1995, between Woodcreek Fund XV, Ltd. and Fleet Real Estate Capital, Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1995). 11. Statement regarding computation of Net Income (Loss) per limited partnership unit (see Item 8 - Note 1 - "Organization and Summary of Significant Accounting Policies"). 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, 1996. (B) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended December 31, 1996. 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 28, 1997 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 28, 1997 By: /s/ Ron K. Taylor - -------------- ------------------------------------------ Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) March 28, 1997 By: /s/ Brandon K. Flaming - -------------- ----------------------------------------- Date Brandon K. Flaming Vice President of McNeil Investors, Inc. (Principal Accounting Officer) EX-27 2
5 12-MOS DEC-31-1996 DEC-31-1996 1,362,812 0 188,831 0 0 0 52,650,334 (22,398,841) 33,180,985 0 23,857,021 0 0 0 0 33,180,985 0 0 0 0 6,075,314 0 2,134,252 0 0 (133,470) 0 0 0 (133,470) 0 0
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