-----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, PVJFiLrybVqOGE41ypp3qIgUElw/XQot2lk9jPfIq3uGvlrn/79rYb0tu2XUstql NlEVuCUS9f/C9HnDBqTUNg== 0000756427-99-000005.txt : 19990519 0000756427-99-000005.hdr.sgml : 19990519 ACCESSION NUMBER: 0000756427-99-000005 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND XXIV LP CENTRAL INDEX KEY: 0000756427 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 742339537 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-14267 FILM NUMBER: 99629513 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 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHMARK EQUITY PARTNERS LTD DATE OF NAME CHANGE: 19920413 10-Q/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 ------------------------------------------- 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 0-14267 ---------- MCNEIL REAL ESTATE FUND XXIV, L.P. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 74-2339537 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (972) 448-5800 ----------------------------- Indicate by check mark whether the registrant, (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- MCNEIL REAL ESTATE FUND XXIV, L.P. BALANCE SHEETS (Unaudited)
March 31, December 31, 1999 1998 ------------- ------------- ASSETS - ------ Real estate investments: Land .................................................... $ 1,624,347 $ 1,624,347 Buildings and improvements .............................. 18,574,282 18,569,845 ------------ ------------ 20,198,629 20,194,192 Less: Accumulated depreciation and amortization......... (9,323,168) (9,058,971) ------------ ------------ 10,875,461 11,135,221 Assets held for sale ....................................... 2,737,114 2,737,114 Cash and cash equivalents .................................. 824,666 1,103,846 Cash segregated for security deposits ...................... 62,372 62,227 Accounts receivable, net of allowance for doubtful accounts of $38,811 at March 31, 1999 and December 31, 1998 ....................................... 353,539 306,898 Prepaid expenses and other assets, net ..................... 155,627 159,085 ------------ ------------ $ 15,008,779 $ 15,504,391 ============ ============ LIABILITIES AND PARTNERS' EQUITY (DEFICIT) - ------------------------------------------ Mortgage note payable ...................................... $ 1,650,000 $ 1,650,000 Accounts payable and accrued expenses ...................... 143,087 193,779 Payable to affiliates ...................................... 615,541 793,128 Security deposits and deferred rental revenue .............. 74,667 73,623 ------------ ------------ 2,483,295 2,710,530 ------------ ------------ Partners' equity (deficit): Limited partners - 40,000 limited partnership units authorized and outstanding at March 31, 1999 and December 31, 1998 ............................ 12,554,958 12,823,151 General Partner ......................................... (29,474) (29,290) ------------ ------------ 12,525,484 12,793,861 ------------ ------------ $ 15,008,779 $ 15,504,391 ============ ============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XXIV, L.P. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ------------------------------- 1999 1998 ----------- ----------- Revenue: Rental revenue .................................. $ 805,970 $ 1,099,396 Interest ........................................ 10,657 28,558 ----------- ----------- Total revenue ................................. 816,627 1,127,954 ----------- ----------- Expenses: Interest ........................................ 31,435 98,357 Depreciation and amortization ................... 264,197 198,714 Property taxes .................................. 73,251 99,244 Personnel costs ................................. 75,635 76,359 Utilities ....................................... 57,251 69,500 Repairs and maintenance ......................... 70,091 85,806 Property management fees - affiliates ........... 40,798 59,726 Other property operating expenses ............... 42,499 64,701 General and administrative ...................... 60,637 85,551 General and administrative - affiliates ......... 119,210 136,262 Loss on disposition of real estate .............. -- 118,750 Write-down for impairment of real estate......... -- 126,080 ----------- ----------- Total expenses ................................ 835,004 1,219,050 ----------- ----------- Net loss ........................................... $ (18,377) $ (91,096) =========== =========== Net loss allocable to limited partners ............. $ (18,193) $ (90,185) Net loss allocable to General Partner .............. (184) (911) ----------- ----------- Net loss ........................................... $ (18,377) $ (91,096) =========== =========== Net loss per limited partnership unit .............. $ (.45) $ (2.25) =========== =========== Distributions per limited partnership unit ......... $ 6.25 $ 37.50 =========== ===========
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XXIV, L.P. STATEMENTS OF PARTNERS' EQUITY (DEFICIT) (Unaudited) For the Three Months Ended March 31, 1999 and 1998
Total General Limited Partners' Partner Partners Equity (Deficit) ------------- ------------- ----------------- Balance at December 31, 1997 ............. $ (24,560) $ 17,935,844 $ 17,911,284 Net loss ................................. (911) (90,185) (91,096) Distributions to limited partners......... -- (1,500,000) (1,500,000) ------------ ------------ ------------ Balance at March 31, 1998 ................ $ (25,471) $ 16,345,659 $ 16,320,188 ============ ============ ============ Balance at December 31, 1998 ............. $ (29,290) $ 12,823,151 $ 12,793,861 Net loss ................................. (184) (18,193) (18,377) Distributions to limited partners ........ -- (250,000) (250,000) ------------ ------------ ------------ Balance at March 31, 1999 ................ $ (29,474) $ 12,554,958 $ 12,525,484 ============ ============ ============
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XXIV, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Increase (Decrease) in Cash and Cash Equivalents
Three Months Ended March 31, -------------------------------- 1999 1998 ------------ ------------ Cash flows from operating activities: Cash received from tenants ...................... $ 751,269 $ 1,115,659 Cash paid to suppliers .......................... (329,784) (385,691) Cash paid to affiliates ......................... (337,595) (65,365) Interest received ............................... 10,657 28,558 Interest paid ................................... (28,728) (97,349) Property taxes paid ............................. (90,562) (107,659) ----------- ----------- Net cash provided by (used in) operating activities ...................................... (24,743) 488,153 ----------- ----------- Cash flows from investing activities: Additions to real estate investments and assets held for sale .......................... (4,437) (40,508) ----------- ----------- Cash flows from financing activities: Principal payments on mortgage note payable ....................................... -- (31,076) Distributions to limited partners ............... (250,000) (1,500,000) ----------- ----------- Net cash used in financing activities .............. (250,000) (1,531,076) ----------- ----------- Net decrease in cash and cash equivalents .......... (279,180) (1,083,431) Cash and cash equivalents at beginning of period .......................................... 1,103,846 2,180,029 ----------- ----------- Cash and cash equivalents at end of period ......... $ 824,666 $ 1,096,598 =========== ===========
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. McNEIL REAL ESTATE FUND XXIV, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Loss to Net Cash Provided by (Used in) Operating Activities
Three Months Ended March 31, ---------------------------- 1999 1998 ---------- ---------- Net loss ............................................... $ (18,377) $ (91,096) --------- --------- Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization ....................... 264,197 198,714 Loss on disposition of real estate .................. -- 116,347 Write-down for impairment of real estate ............ -- 126,080 Amortization of deferred borrowing costs ............ 3,533 -- Changes in assets and liabilities: Cash segregated for security deposits ............. (145) 570 Accounts receivable, net .......................... (46,641) 45,865 Prepaid expenses and other assets, net ............ (75) 5,259 Accounts payable and accrued expenses ............. (50,692) (18,508) Payable to affiliates ............................. (177,587) 130,623 Security deposits and deferred rental revenue ......................................... 1,044 (25,701) --------- --------- Total adjustments ............................... (6,366) 579,249 --------- --------- Net cash provided by (used in) operating activities .... $ (24,743) $ 488,153 ========= =========
The financial information included herein has been prepared by management without audit by independent public accountants. See accompanying notes to financial statements. MCNEIL REAL ESTATE FUND XXIV, L.P. Notes to Financial Statements March 31, 1999 (Unaudited) NOTE 1. - ------- McNeil Real Estate Fund XXIV, L.P. (the "Partnership"), formerly known as Southmark Equity Partners, Ltd., was organized on October 19, 1984, as a limited partnership under the provisions of the California Revised Limited Partnership Act to acquire and operate commercial and residential properties. The general partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil ("McNeil"). The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240. In the opinion of management, the financial statements reflect all adjustments necessary for a fair presentation of the Partnership's financial position and results of operations. All adjustments were of a normal recurring nature. However, the results of operations for the three months ended March 31, 1999 are not necessarily indicative of the results to be expected for the year ending December 31, 1999. NOTE 2. - ------- The financial statements should be read in conjunction with the financial statements contained in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1998, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Real Estate Fund XXIV, L.P., c/o McNeil Real Estate Management, Inc., Investor Services, 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240. NOTE 3. - ------- Certain reclassification have been made to prior period amounts to conform with the current period presentation. NOTE 4. The Partnership pays property management fees equal to 5% of the gross rental receipts for its residential properties and 6% of gross rental receipts for its commercial properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management services for the Partnership's residential and commercial properties and leasing services for its residential properties. McREMI may also choose to provide leasing services for the Partnership's commercial properties, in which case McREMI will receive property management fees from such commercial properties equal to 3% of the property's gross rental receipts plus leasing commissions based on the prevailing market rate for such services where the property is located. Under the terms of its partnership agreement, the Partnership pays a disposition fee to the General Partner equal to 3% of the gross sales price for brokerage services performed in connection with the sale of the Partnership's properties. The fee is due and payable at the time the sale closes. The Partnership incurred $204,000 of such fees during the first quarter of 1998 and $55,500 of such fees during the second quarter of 1998 in connection with the sale of Southpointe Plaza and Island Plaza shopping centers, respectively. These fees were paid by the Partnership in the first quarter of 1999 and were included in payable to affiliates on the Balance Sheet at December 31, 1998. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. The Partnership is paying an asset management fee which is payable to the General Partner. Through 1999, the asset management fee is calculated as 1% of the Partnership's tangible asset value. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $10,000 per apartment unit for residential properties and $50 per gross square foot for commercial properties to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible items. The fee percentage decreases to .75% in 2000, .50% in 2001 and .25% thereafter. Total accrued but unpaid asset management fees of $383,816 and $325,851 were outstanding at March 31, 1999 and December 31, 1998, respectively. Compensation and reimbursements paid to or accrued for the benefit of the General Partner or its affiliates are as follows: Three Months Ended March 31, ---------------------- 1999 1998 --------- --------- Property management fees............................. $ 40,798 $ 59,726 Charged to general and administrative - affiliates: Partnership administration........................ 42,959 56,816 Asset management fee.............................. 76,251 79,446 Charged to loss on disposition of real estate: Disposition fee................................... -- 204,000 -------- -------- $ 160,008 $ 399,988 ======== ======== Payable to affiliates at March 31, 1999 and December 31, 1998 consisted primarily of unpaid property management fees, disposition fee (1998 only), Partnership general and administrative expenses and asset management fees and is due and payable from current operations. NOTE 5. - ------- On March 31, 1998, the Partnership sold Southpointe Plaza Shopping Center, located in Sacramento, California, to an unaffiliated purchaser for a cash purchase price of $6,800,000. Cash proceeds from the sale were not received until April 1, 1998. Sales proceeds receivable, as well as the loss on sale, are detailed below.
Loss Sales Proceeds on Sale Receivable ------------ -------------- Sales price.......................................... $ 6,800,000 $ 6,800,000 Selling costs ....................................... (389,990) (185,990) Straight-line rents receivable written off........... (48,601) Prepaid leasing commissions written off.............. (43,913) Carrying value....................................... (6,436,246) ---------- Loss on disposition of real estate................... $ (118,750) ========== ----------- Proceeds from sale of real estate.................... 6,614,010 Retirement of mortgage note payable.................. (5,261,942) Accrued interest paid................................ (32,338) ---------- Net cash proceeds receivable......................... $ 1,319,730 ==========
As discussed in Note 4, the Partnership incurred a $204,000 disposition fee payable to the General Partner in connection with the sale of Southpointe Plaza. This fee increased the amount of the loss on disposition of real estate and is included in selling costs above. However, as the fee was not paid until the first quarter of 1999, it did not reduce the amount of net cash proceeds received from the sale in the first quarter of 1998. The net cash proceeds from the sale of Southpointe Plaza are $1,115,730 after payment of the disposition fee. NOTE 6. - ------- On April 1, 1998, the Partnership sold Island Plaza Shopping Center to an unaffiliated buyer for a gross sales price of $1.85 million. A $126,080 write-down for impairment of real estate was recorded in the first quarter of 1998 to record the property at its sales price less estimated costs to sell. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- On March 31, 1998, the Partnership sold Southpointe Plaza for a gross sales price of $6.8 million. The Partnership recognized a $116,347 loss on the sale. On April 1, 1998, the Partnership sold Island Plaza for a gross sales price of $1.85 million. A $126,080 write-down for impairment of real estate was recorded in the first quarter of 1998 and no gain or loss was recorded on the sale. The Partnership reported a net loss for the first three months of 1999 of $18,377 as compared to a net loss of $91,096 for the first three months of 1998. Revenues decreased to $816,627 in the first quarter of 1999 from $1,127,954 for the same period in 1998. Expenses were $835,004 in the first quarter of 1999 as compared to $1,219,050 in the first quarter of 1998. Net cash used in operating activities was $24,743 for the first three months of 1999. The Partnership expended $4,437 for additions to its real estate investments. After distributions of $250,000 to the limited partners during the first three months of 1999, cash and cash equivalents decreased by $279,180, leaving a balance of $824,666 at March 31, 1999. RESULTS OF OPERATIONS - --------------------- Revenue: Total revenue decreased by $311,327 for the three months ended March 31, 1999 as compared to the same period in 1998, mainly due to the sales of Southpointe Plaza and Island Plaza shopping centers in 1998. Excluding total revenue of Southpointe Plaza and Island Plaza, total revenue increased by $76,720. This increase was due to an increase in rental revenue, partially offset by a decrease in interest income, as discussed below. Rental revenue for the first three months of 1999 decreased by $293,426 as compared to the first three months of 1998. Excluding rental revenue of Southpointe Plaza and Island Plaza, rental revenue increased by $94,530 in 1999. The largest increases occurred at Riverbay Plaza and Towne Center shopping centers where rental revenue increased by approximately $72,000 and $32,000, respectively. The increase in rental revenue at Riverbay Plaza was mainly due to increased rent charged to an anchor tenant after its space was expanded. The increase at Towne Center was mainly due to an increase in occupancy from 55% at March 31, 1998 to 87% at March 31, 1999. Interest income decreased by $17,901 for the quarter ended March 31, 1999 as compared to the same period in the prior year. The decrease was due to a lower average amount of cash and cash equivalents available for short-term investment in 1999. The Partnership held approximately $2.18 million of cash and cash equivalents at the beginning of 1998, which decreased to approximately $0.8 million at March 31, 1999. Expenses: Total expenses decreased by $384,046 for the three months ended March 31, 1999 as compared to the same period in 1998. Excluding total expenses of Southpointe Plaza and Island Plaza, which were sold in 1998, total expenses increased by $92,263, as discussed below. Interest expense in the first quarter of 1999 decreased by $66,922 as compared to the first quarter of 1998. 1998 interest expense relates to the Southpointe Plaza mortgage note payable, which was repaid on April 1, 1998 as a result of the sale of the property. In June 1998, the Partnership received $1,650,000 in proceeds from a mortgage note payable secured by Riverbay Plaza Shopping Center. The Partnership recorded $31,435 of interest expense related to this loan in the first quarter of 1999. Depreciation and amortization expense increased by $65,483 for the three months ended March 31, 1999 in relation to the same period in 1998. The increase was mainly due to the amortization of tenant improvements at Towne Center and Riverbay Plaza shopping centers. Property taxes and utilities for the first three months of 1999 decreased by $25,993 and $12,249, respectively, as compared to the same period in 1998, mainly due to the sales of Southpointe Plaza and Island Plaza in 1998. Repairs and maintenance expenses decreased by $15,715 in the first quarter of 1999 as compared to the first quarter of 1998. Excluding repairs and maintenance expenses at Southpointe Plaza and Island Plaza, repairs and maintenance expenses increased by $16,323. The increase was mainly due to increased snow removal costs incurred at Springwood Plaza due to greater snowfall in the first quarter of 1999 in Missouri, where the property is located. For the first three months of 1999, property management fees - affiliates decreased by $18,928 as compared to the same period in 1998. Excluding property management fees for Southpointe Plaza and Island Plaza, property management fees - - affiliates increased by $6,788 due to an increase in gross rental receipts, on which the fees are based. (See discussion of increase in rental revenue above). Other property operating expenses decreased by $22,202 for the three months ended March 31, 1999 in relation to the comparable period in 1998. Excluding other property operating expenses at Southpointe Plaza and Island Plaza, other property operating expenses increased by $4,200. This increase was mainly due to an increase in bad debt expense at Springwood Plaza in the first quarter of 1999. General and administrative expenses decreased by $24,914 for the three months ended March 31, 1999 as compared to the same period in 1998. There was a decrease in costs incurred in 1999 to explore alternatives to maximize the value of the Partnership (see Liquidity and Capital Resources). For the three months ended March 31, 1999, general and administrative - affiliates decreased by $17,052 as compared to the same period in 1998, mainly due to a decrease in overhead expenses allocated to the Partnership by McREMI. The amount of expenses allocated by McREMI is partly a function of the number of properties the Partnership owns, which decreased in 1999 due to the sales of Southpointe Plaza and Island Plaza in 1998. The Partnership recognized a $118,750 loss on the sale of Southpointe Plaza Shopping Center in the first three months of 1998. No such loss was recognized in the first three months of 1999. Island Plaza Shopping Center was sold to an unaffiliated buyer on April 1, 1998. The Partnership recorded a $126,080 write-down for impairment of real estate in the first quarter of 1998 to record the property at its sales price less estimated costs to sell. No such write-down was recorded in the first three months of 1999. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership's primary source of cash flows is from operating activities, which used $24,743 of cash in the first three months of 1999 as compared to the $488,153 generated for the same period in 1998. Cash flows from operating activities decreased by $512,896 in the first three months of 1999 as compared to the first three months of 1998. Excluding Southpointe Plaza and Island Plaza, cash flows from operating activities decreased by $218,847. This decrease in cash provided by operating activities was mainly due to the payment to the General Partner of disposition fees totaling $259,500 in the first quarter of 1999 (see Note 3 for discussion of disposition fees incurred as a result of the sales of Southpointe Plaza and Island Plaza in 1998). This decrease was partially offset by an increase in cash received from tenants, mainly due to an increase in rental revenue, as discussed above. The Partnership expended $4,437 and $40,508 for capital improvements to its properties in the first three months of 1999 and 1998, respectively. A greater amount was spent in the first quarter of 1998 for paving of the parking lot at Riverbay Plaza Shopping Center. The Partnership made $31,076 in regularly scheduled principal payments on the Southpointe Plaza mortgage note payable in the first three months of 1998. The property was sold and the loan was repaid on April 1, 1998. In June 1998, the Partnership received $1,650,000 in proceeds from a mortgage note payable secured by Riverbay Plaza Shopping Center. However, interest only was paid on this loan for the first three months of 1999. The Partnership distributed $250,000 and $1,500,000 to the limited partners in the first three months of 1999 and 1998, respectively. Short-term liquidity: At March 31, 1999, the Partnership held cash and cash equivalents of $824,666. This balance provides a reasonable level of working capital for the Partnership's immediate needs in operating its properties. For the Partnership as a whole, management projects positive cash flow from operations in 1999. The Partnership has budgeted approximately $382,000 for necessary capital improvements for all properties in 1999. These capital improvements are expected to be funded from available cash reserves or from operations of the properties. The present cash balance is believed to provide an adequate reserve for property operations. On March 31, 1998, the Partnership sold Southpointe Plaza Shopping Center, located in Sacramento, California, to an unaffiliated purchaser for a cash purchase price of $6,800,000. On April 1, 1998, cash proceeds totaling $6,614,010 were received and $5,294,280 was used to pay the principal and accrued interest balance of the mortgage note payable secured by the property. The $204,000 disposition fee accrued in 1998 was paid to the General Partner in the first quarter of 1999. On April 1, 1998, the Partnership sold Island Plaza Shopping Center, located in Ft. Myers, Florida, to an unaffiliated purchaser for a cash purchase price of $1,850,000. Cash proceeds totaling $1,824,520 were received after payment of various closing costs. The $55,500 disposition fee accrued in 1998 was paid to the General Partner in the first quarter of 1999. Additional efforts to maintain and improve partnership liquidity have included continued attention to property management activities. The objective has been to obtain maximum occupancy rates while holding expenses to levels necessary to maximize cash flows. The Partnership has made capital expenditures on its properties where improvements were expected to increase the competitiveness and marketability of the properties. Long-term liquidity: 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. 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. As previously announced, the Partnership has retained PaineWebber, Incorporated as its exclusive financial advisor to explore alternatives to maximize the value of the Partnership, including, without limitation, a transaction in which limited partnership interests in the Partnership are converted into cash. During the last full week of March, the Partnership entered into a 45 day exclusivity agreement with a well-financed bidder with whom it had commenced discussions with respect to a sale transaction. The Partnership and such party have made significant progress in negotiating the terms of a proposed transaction and are continuing to have intensive discussions with respect to a transaction. In light on these continuing negotiations, the exclusivity agreement has been extended for an additional 21 days until June 4, 1999. It is possible that the General Partner and its affiliates will receive non-cash consideration for their ownership interests in connection with any such transaction. There can be no assurance regarding whether any such agreement will be reached nor the terms thereof. Forward-Looking Information: Within this document, certain statements are made as to the expected occupancy trends, financial condition, results of operations, and cash flows of the Partnership for periods after March 31, 1999. 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. YEAR 2000 DISCLOSURE - -------------------- The year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in major systems failure or miscalculations. Management has assessed its information technology ("IT") infrastructure to identify any systems that could be affected by the year 2000 problem. The IT used by the Partnership for financial reporting and significant accounting functions was made year 2000 compliant during recent systems conversions. The software utilized for these functions is licensed by third party vendors who have warranted that their systems are year 2000 compliant. Management is in the process of evaluating the mechanical and embedded technological systems at the various properties. Management has inventoried all such systems and queried suppliers, vendors and manufacturers to determine year 2000 compliance. Based on this review, management believes these systems are substantially compliant. In circumstances of non-compliance management will work with the vendor to remedy the problem or seek alternative suppliers who will be in compliance. Management believes that the remediation of any outstanding year 2000 conversion issues will not have a material or adverse effect on the Partnership's operations. However, no estimates can be made as to the potential adverse impact resulting from the failure of third party service providers and vendors to be year 2000 compliant. Cost - ---- The cost of IT and embedded technology systems testing and upgrades is not expected to be material to the Partnership. Because all the IT systems have been upgraded over the last three years, all such systems were compliant, or made compliant at no additional cost by third party vendors. Management anticipates the costs of assessing, testing, and if necessary replacing embedded technology components will be less than $50,000. Such costs will be funded from operations of the Partnership. Risks - ----- Ultimately, the potential impact of the year 2000 issue will depend not only on the corrective measures the Partnership undertakes, but also on the way in which the year 2000 issue is addressed by government agencies and entities that provide services or supplies to the Partnership. Management has not determined the most likely worst case scenario to the Partnership. As management studies the findings of its property systems assessment and testing, management will develop a better understanding of what would be the worst case scenario. Management believes that progress on all areas is proceeding and that the Partnership will experience no adverse effect as a result of the year 2000 issue. However, there is no assurance that this will be the case. Contingency plans - ----------------- Management is developing contingency plans to address potential year 2000 non-compliance of IT and embedded technology systems. Management believes that failure of any IT system could have an adverse impact on operations. However, management believes that alternative systems are available that could be utilized to minimize such impact. Management believes that any failure in the embedded technology systems could have an adverse impact on that property's performance. Management will assess these risks and develop plans to mitigate possible failures by July 1999. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIII, 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., Hearth Hollow Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P., - 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 limited partnerships that were named as nominal defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. Defendants filed a demurrer to the consolidated and amended complaint and a motion to strike on February 14, 1997, seeking to dismiss the consolidated and amended complaint in all respects. A hearing on Defendant's demurrer and motion to strike was held on May 5, 1997. The Court granted Defendants' demurrer, dismissing the consolidated and amended complaint with leave to amend. On October 31, 1997, the Plaintiffs filed a second consolidated and amended complaint. The case was stayed pending settlement discussions. A Stipulation of Settlement dated September 15, 1998 has been signed by the parties. Preliminary Court approval was received on October 6, 1998. A hearing for Final Approval of Settlement, initially scheduled for December 17, 1998, has been continued to July 2, 1999. Because McNeil Real Estate Fund XXIII, L.P., Hearth Hollow Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P. would be part of the transaction contemplated in the settlement and Plaintiffs claim that an effort should be made to sell the McNeil Partnerships, Plaintiffs have included allegations with respect to McNeil Real Estate Fund XXIII, L.P., Hearth Hollow Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P. in the third consolidated and amended complaint. Plaintiff's counsel intends to seek an order awarding attorney's fees and reimbursements of their out-of-pocket expenses. The amount of such award is undeterminable until final approval is received from the court. Fees and expenses shall be allocated amongst the Partnerships on a pro rata basis, based upon tangible asset value of each such partnership, less total liabilities, calculated in accordance with the Amended Partnership Agreements for the quarter most recently ended. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- (a) Exhibits. Exhibit Number Description ------- ----------- 4. Amended and Restated Limited Partnership Agreement dated March 30, 1992. (Incorporated by reference to the Current Report of the registrant on Form 8-K dated March 30, 1992, as filed on April 10, 1992). 4.1 Amendment No. 1 to the Amended and Restated Limited Partnership Agreement of McNeil Real Estate Fund XXIV, L.P. dated June 1995 (incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the period ended June 30,1995, as filed on August 14, 1995). 11. Statement regarding computation of Net Loss per Limited Partnership Unit: Net loss per limited partnership unit is computed by dividing net loss allocated to the limited partners by the number of limited partnership units outstanding. Per unit information has been computed based on 40,000 limited partnership units outstanding in 1999 and 1998. 27. Financial Data Schedule for the quarter ended March 31, 1999. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended March 31, 1999. McNEIL REAL ESTATE FUND XXIV, L.P. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized: McNEIL REAL ESTATE FUND XXIV, L.P. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner May 18, 1999 By: /s/ Ron K. Taylor - -------------- --------------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) May 18, 1999 By: /s/ Carol A. Fahs - -------------- --------------------------------------------- Date Carol A. Fahs Vice President of McNeil Investors, Inc. (Principal Accounting Officer) EX-27 2
5 3-MOS DEC-31-1999 MAR-31-1999 824,666 0 392,350 (38,811) 0 0 20,198,629 (9,323,168) 15,008,779 0 1,650,000 0 0 0 12,525,484 15,008,779 805,970 816,627 359,525 623,722 179,847 0 31,435 (18,377) 0 (18,377) 0 0 0 (18,377) 0 0
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