-----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, D4LjGkkjO6EN1v0TAE/hxP9M9gVKCcZeY+fLr16XI293F04D4NOIbMwe6GuCjv0s AyNEjo/qCaPTLIAy+roHOQ== 0000758745-95-000011.txt : 19951119 0000758745-95-000011.hdr.sgml : 19951119 ACCESSION NUMBER: 0000758745-95-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND XXII L P CENTRAL INDEX KEY: 0000758745 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330085680 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14268 FILM NUMBER: 95590898 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 REALTY PARTNERS II LTD DATE OF NAME CHANGE: 19920413 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended September 30, 1995 ------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to_____________ Commission file number 0-14268 MCNEIL REAL ESTATE FUND XXII, L.P. - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) California 33-0085680 - ------------------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (214) 448-5800 -------------------------- 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 --- --- MCNEIL REAL ESTATE FUND XXII, L.P. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ---------------------------- BALANCE SHEETS (Unaudited) September 30, December 31, 1995 1994 ---------- ---------- ASSETS - ------ Real estate investments: Land..................................................... $ 380,414 $ 380,414 Buildings and improvements............................... 9,780,820 9,579,406 10,161,234 9,959,820 Less: Accumulated depreciation and amortization......... (4,619,676) (4,327,711) 5,541,558 5,632,109 Asset held for sale......................................... - 4,393,157 Cash and cash equivalents .................................. 444,634 589,211 Cash segregated for security deposits....................... 78,150 87,838 Accounts receivable......................................... 4,196 141,268 Escrow deposits............................................. 141,308 357,858 Prepaid expenses and other assets, net...................... 17,418 112,720 --------- ---------- $6,227,264 $11,314,161 ========= ========== LIABILITIES AND PARTNERS' DEFICIT - --------------------------------- Mortgage notes payable, net................................. $6,037,765 $ 9,534,751 Accrued property taxes ..................................... 38,412 234,143 Accounts payable and accrued expenses....................... 124,374 147,771 Payable to affiliates - General Partner..................... 1,446,859 1,501,947 Advances from affiliates - General Partner.................. - 915,129 Security deposits and deferred rental income................ 81,789 91,066 --------- ---------- 7,729,199 12,424,807 --------- ---------- Partners' deficit: Limited partners - 55,000,000 Units authorized; 33,208,117 and 33,268,117 Units issued and outstanding at September 30, 1995 and December 31, 1994, respectively (19,825,588 and 19,875,588 Current Income Units outstanding at September 30, 1995 and December 31, 1994, respectively, and 13,382,529 and 13,392,529 Growth/Shelter Units outstanding at September 30, 1995 and December 31, 1994 respectively). (1,250,397) (863,021) General Partner.......................................... (251,538) (247,625) --------- --------- (1,501,935) (1,110,646) --------- --------- $ 6,227,264 $11,314,161 ========== ==========
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 XXII, L.P. STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, -------------------------- ---------------------------- 1995 1994 1995 1994 ------- ------- --------- --------- Revenue: Rental revenue................ $555,388 $764,224 $1,897,441 $2,203,177 Interest...................... 6,041 4,843 18,983 10,051 Gain on legal settlement...... - - 38,749 - ------- ------- --------- --------- Total revenue............... 561,429 769,067 1,955,173 2,213,228 Expenses: Interest...................... 146,345 241,904 537,671 736,954 Interest - affiliates......... - 18,691 18,568 51,665 Depreciation and amortization................ 112,055 166,407 366,571 495,173 Property taxes................ 53,901 84,837 175,906 256,181 Personnel costs............... 77,176 90,563 250,021 264,753 Utilities..................... 24,609 32,617 103,791 128,979 Repairs and maintenance....... 50,167 96,335 185,176 246,266 Property management fees - affiliates........... 27,846 38,341 99,459 116,016 Other property operating expenses.................... 39,816 27,065 111,495 131,788 General and administrative.... 14,103 16,949 53,783 52,908 General and administrative - affiliates.................. 67,832 75,021 198,384 216,850 Loss on disposition of real estate...................... - - 245,637 - ------- ------- --------- --------- Total expenses.............. 613,850 888,730 2,346,462 2,697,533 Net loss......................... $(52,421) $(119,663) $ (391,289) $ (484,305) ======= ======== ========= ========= Net loss allocable to limited partners - Current Income Unit.......................... $ (4,718) $ (10,769) $ (35,216) $ (43,587) Net loss allocable to limited partners - Growth/Shelter Unit.......................... (47,179) (107,697) (352,160) (435,875) Net loss allocable to General Partner............... (524) (1,197) (3,913) (4,843) ------- -------- --------- --------- Net loss......................... $(52,421) $(119,663) $ (391,289) $ (484,305) ======= ======== ========= ========= Net loss per thousand limited partnership units: Current Income Units............. $ (.24) $ (.54) $ (1.78) $ (2.19) Growth/Shelter Units............. $ (3.53) $ (8.04) $ (26.31) $ (32.53)
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 XXII, L.P. STATEMENTS OF PARTNERS' DEFICIT (Unaudited) For the Nine Months Ended September 30, 1995 and 1994 Total General Limited Partners' Partner Partners Deficit -------- --------- ---------- Balance at December 31, 1993.............. $(241,965) $ (302,688) $ (544,653) Net loss General Partner........................ (4,843) - (4,843) Current Income Units................... - (43,587) (43,587) Growth/Shelter Units................... - (435,875) (435,875) -------- --------- --------- Total net loss............................ (4,843) (479,462) (484,305) -------- --------- --------- Balance at September 30,1994.............. $(246,808) $ (782,150) (1,028,958) ======== ========= ========= Balance at December 31, 1994.............. $(247,625) $ (863,021) $(1,110,646) Net loss General Partner........................ (3,913) - (3,913) Current Income Units................... - (35,216) (35,216) Growth/Shelter Units................... - (352,160) (352,160) -------- --------- ---------- Total net loss............................ (3,913) (387,376) (391,289) -------- --------- ---------- Balance at September 30, 1995............. $(251,538) $(1,250,397) $(1,501,935) ======== ========== ==========
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 XXII, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Increase (Decrease) in Cash and Cash Equivalents Nine Months Ended September 30, --------------------------------- 1995 1994 --------- --------- Cash flows from operating activities: Cash received from tenants........................ $1,975,284 $2,217,737 Cash received from legal settlement............... 38,749 Cash paid to suppliers............................ (691,320) (798,293) Cash paid to affiliates........................... (352,931) (115,402) Interest received................................. 18,983 10,051 Interest paid..................................... (539,765) (703,251) Interest paid to affiliates....................... (149,043) - Property taxes paid and escrowed.................. (118,904) (243,183) --------- --------- Net cash provided by operating activities............ 181,053 367,659 --------- --------- Cash flows from investing activities: Additions to real estate investments.............. (208,526) (63,104) Proceeds from sale of real estate................. 738,914 - --------- --------- Net cash provided by (used in) investing activities.............................. 530,388 (63,104) --------- --------- Cash flows from financing activities: Principal payments on mortgage notes payable......................................... (71,364) (90,336) Repayment of advances from affiliates - General Partner................................. (784,654) (20,874) --------- --------- Net cash used in financing activities................ (856,018) (111,210) --------- --------- Net increase (decrease) in cash and cash equivalents. (144,577) 193,345 Cash and cash equivalents at beginning of period............................................ 589,211 378,420 --------- --------- Cash and cash equivalents at end of period........... $ 444,634 $ 571,765 ========= =========
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 XXII, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Loss to Net Cash Provided by Operating Activities Nine Months Ended September 30, -------------------------------- 1995 1994 -------- -------- Net loss............................................. $(391,289) $(484,305) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization..................... 366,571 495,173 Amortization of deferred borrowing costs.......... 2,936 8,808 Amortization of discounts on mortgage notes payable................................... 26,715 25,538 Interest added to advances from affiliates - General Partner, net of payments................ (130,475) 51,665 Loss on disposition of real estate................ 245,637 - Changes in assets and liabilities: Cash segregated for security deposits........... 9,688 (3,649) Accounts receivable............................. 55,323 35,942 Escrow deposits................................. 216,550 (48,895) Prepaid expenses and other assets............... 2,420 8,848 Accrued property taxes.......................... (157,842) 38,279 Accounts payable and accrued expenses........... (23,397) 12,326 Payable to affiliates - General Partner......... (55,088) 217,464 Security deposits and deferred rental income........................................ 13,304 10,465 -------- -------- Total adjustments............................. 572,342 851,964 -------- -------- Net cash provided by operating activities............ $ 181,053 $ 367,659 ======== ========
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 XXII, L.P. Notes to Financial Statements (Unaudited) September 30, 1995 NOTE 1. - ------ McNeil Real Estate Fund XXII, L.P., (the "Partnership"), formerly known as Southmark Realty Partners II, Ltd., was organized on November 30, 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 700, 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 nine months ended September 30, 1995 are not necessarily indicative of the results to be expected for the year ending December 31, 1995. 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, 1994, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Real Estate Fund XXII, L.P., c/o McNeil Real Estate Management, Inc., Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240. NOTE 3. - ------ The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. The Partnership has suffered recurring losses from operations and has a net Partners' deficit that raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE 4. - ------ Certain reclassifications have been made to prior period amounts to conform to the current period presentation. NOTE 5. - ------ The Partnership pays property management fees equal to 5% of the gross rental receipts for its residential property and 6% of gross rental revenues for its commercial property to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of McNeil, for providing property management and leasing services. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. The Partnership is incurring 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 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 items. The fee percentage decreases subsequent to 1999. Total accrued but unpaid asset management fees of $934,611 were outstanding at September 30, 1995. The Partnership pays a disposition fee to an affiliate of 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 $138,750 of such fees in connection with the sale of Wyoming Mall on March 31, 1995. The General Partner has established a revolving credit facility not to exceed $5,000,000 in the aggregate which is available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships, if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. There is no assurance that the Partnership will receive any additional funds under the facility because no amounts have been reserved for any particular partnership. As of September 30, 1995, $2,362,004 remained available for borrowing under the facility; however, additional funds could be available as other partnerships repay existing borrowings. The General Partner has, in its discretion, advanced funds to enable the Partnership to meet its working capital requirements. These advances, which were unsecured and due on demand, accrued interest at a rate equal to the prime lending rate plus 1%. McNeil Real Estate Fund XXI, L.P., an affiliate of the General Partner and joint owner of Wyoming Mall had advanced funds to the Partnership for tenant improvements and operations at Wyoming Mall. The advances were unsecured and due on demand and accrued interest at a rate of prime plus 3 1/2%. In April 1995, the Partnership utilized the proceeds from the sale of Wyoming Mall to repay all outstanding affiliate advances and the related accrued interest. The total advances from affiliates at September 30, 1995 and December 31, 1994 consist of the following: September 30, December 31, 1995 1994 ---------- --------- Advance from General Partner - revolving credit facility........................................ $ - $167,102 Advances from General Partner - other..................... - 301,155 Advances purchased by General Partner..................... - 16,397 Advances from McNeil Real Estate Fund XXI, L.P............ - 300,000 Accrued interest payable.................................. - 130,475 --------- ------- $ - $915,129 ========= =======
Compensation and reimbursements paid to or accrued for the benefit of the General Partner and its affiliates are as follows: Nine Months Ended September 30, -------------------------------- 1995 1994 -------- -------- Property management fees.................................. $ 99,459 $116,016 Charged to interest - affiliates: Interest on advances from affiliates - General Partner.............................................. 18,568 51,665 Charged to loss on disposition of real estate: Disposition fee........................................ 138,750 - Charged to general and administrative - affiliates: Partnership administration............................. 86,930 85,649 Asset management fee................................... 111,454 131,201 ------- ------- $455,161 $384,531 ======= =======
NOTE 6. - ------ On March 31, 1995, Wyoming Mall was sold to an unrelated third party for a cash price of $9,250,000. The Partnership had a 50% undivided interest in the assets, liabilities and operations of Wyoming Mall, owned jointly with McNeil Real Estate Fund XXI, L.P. Cash proceeds and the loss on the disposition is detailed below: Loss on Sale Cash Proceeds ----------- ----------- Sales Price.......................................... $4,625,000 $4,625,000 Selling costs........................................ (234,838) (234,838) Mortgage note prepayment penalty..................... (138,441) (138,441) Carrying value....................................... (4,325,663) Accounts receivable.................................. (81,749) Deferred borrowing costs............................. (49,910) Prepaid expenses..................................... (40,036) --------- Loss on disposition of real estate................... $ (245,637) ========= Retirement of mortgage note.......................... (3,452,337) Payment of 1994 taxes at closing..................... (23,735) Real estate tax proration............................ (14,154) Credit for security deposit liability................ (22,581) ---------- Net cash proceeds.................................... $ 738,914 ==========
NOTE 7. - ------ 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, $29,292 in cash, and common and preferred stock in the reorganized Southmark subsequently sold for $9,457, which amounts represent the Partnership's pro-rata share of Southmark assets available for Class 8 Claimants. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------ --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- The Partnership reported a net loss of $391,289 for the first nine months of 1995 as compared to $484,305 for the same period in 1994. On March 31, 1995, Wyoming Mall was sold to an unrelated third party for a cash price of $9,250,000. The Partnership had a 50% undivided interest in the assets, liabilities and operations of Wyoming Mall, owned jointly with McNeil Real Estate Fund XXI, L.P. The Partnership received net cash proceeds of $738,914 from the sale of the property and recorded a loss on disposition of real estate of $245,637. The Partnership recorded $258,066 of revenue and $271,115 of expense during the first nine months of 1995 for Wyoming Mall. Harbour Club III is part of a four-phase apartment complex located in Belleville, Michigan. Phases I and II of the complex are owned by partnerships in which McNeil Partners, L.P. is the general partner; while Phase IV is owned by University Real Estate Fund 12, Ltd., ("UREF 12"). McREMI had been managing all four phases of the complex until December 1992, when the property management agreement between McREMI and UREF 12 was canceled. Additionally, in January 1993, Phase I defaulted on the mortgage loan to HUD and unless a refinancing agreement can be reached with the lender, the property is subject to foreclosure. If Phase I is lost to foreclosure, it would be extremely difficult to operate Phases II and III because the pool and clubhouse are located in Phase I. No additional advances from affiliates were required during the first nine months of 1995. In January 1995, the Partnership was able to repay $220,000 of affiliate advances and accrued interest. In April 1995, the proceeds from the sale of Wyoming Mall enabled the Partnership to repay the remaining $713,697 of the affiliate advances and accrued interest. RESULTS OF OPERATIONS - --------------------- Revenue: Rental revenue decreased $208,836 and $305,736 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods in 1994, primarily due to the sale of Wyoming Mall. Interest income increased $1,198 and $8,932 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods of 1994. The increase is primarily due to higher average cash balances that resulted from the sale proceeds of Wyoming Mall. The Partnership recorded $38,749 of gain on legal settlement during the first half of 1995. In May 1995, the Partnership received cash of $29,292 and common and preferred stock in the reorganized Southmark that was subsequently sold for $9,457, as full satisfaction of claims previously filed in the Bankruptcy Court. Expenses: Total expenses decreased $274,880 and $351,071 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods of 1994 primarily due to the sale of Wyoming Mall. This decrease was partially offset by the $245,637 loss on the sale of Wyoming Mall recorded in March 1995. Interest - affiliates decreased $18,691 and $33,097 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods of 1994. The sale of Wyoming Mall enabled the Partnership to repay all outstanding affiliate advances, thereby reducing affiliate interest expense. Property tax expense decreased $30,936 and $80,275 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods of 1994. A decrease of $19,011 and $58,703 for the respective three and nine months periods is due to the reduction in property tax expense at Harbour Club III Apartments that occurred from a successful tax appeal. The remaining decrease is due to the sale of Wyoming Mall. Repairs and maintenance expense decreased $46,168 and $61,090 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods of 1994 primarily due to a decrease carpet and appliance replacements at Harbour Club III Apartments. Additionally, the decrease is due to the sale of Wyoming Mall. Other property operating expense increased $12,751 and decreased $20,293 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods of 1994. During the third quarter of 1994, Abbey Lane and Lexington Green Apartments received $21,828 property insurance refunds. No such refunds were received in 1995. This increase was partially offset by a decrease in other property operating expenses at Harbour Club III Apartments. During 1994, Harbour Club III Apartments incurred approximately $11,000 of legal fees related to a golf course associated with Harbour Club Apartments, while $2,000 of such fees were incurred during 1995. Additionally, improved economic conditions in Belleville, Michigan, where Harbour Club III Apartments is located, has enabled the apartments to reduce bad debts approximately $26,000 during 1995. The remaining decrease is due to the sale of Wyoming Mall. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership was provided $181,053 of cash by operating activities during the first nine months of 1995 as compared to $367,659 for the same period in 1994. Cash received from tenants, cash paid to suppliers, interest paid and property taxes paid decreased due to the sale of Wyoming Mall. Due to the improved cash position from the sale of Wyoming Mall, the Partnership was able to pay $149,043 of interest and $352,931 of fees due to affiliates. Net cash provided by investing activities was $530,388 for the first nine months of 1995 as compared to $63,104 of cash used in investing activities for the same period of 1994. The Partnership received $738,914 of cash proceeds from the sale of Wyoming Mall on March 31, 1995. Cash used for additions to real estate totaled $208,526 during the first nine months of 1995 as compared to $63,104 during the same period of 1994. The increase in capital expenditures is primarily due to an ongoing apartment refurbishment program as well as a partial roof replacement at Harbour Club III Apartments. Net cash used in financing activities was $856,018 during the first nine months of 1995 as compared to $111,210 for the same period of 1994. Principal payments on mortgage notes payable decreased due to the retirement of the mortgage note related to Wyoming Mall. During the first nine months of 1995, the improved cash position enabled the Partnership to repay all outstanding advances from affiliates of the General Partner. At September 30, 1995, the Partnership held cash and cash equivalents of $444,634. Short-term liquidity: - -------------------- The sale of Wyoming Mall provided the Partnership $738,914 of net cash proceeds. In April 1995, the Partnership utilized the sale proceeds to repay all outstanding affiliate advances. McNeil Real Estate Fund XXI, L.P. has advanced funds to the Partnership for tenant improvements and operations at Wyoming Mall. The advances were unsecured, due on demand and accrued interest at a rate of prime plus 3 1/2%. In April 1995, the proceeds from the sale of Wyoming Mall were utilized to repay the advances plus the accrued interest due to McNeil Real Estate Fund XXI, L.P. The General Partner has established a revolving credit facility not to exceed $5,000,000 in the aggregate which is available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships, if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. There is no assurance that the Partnership will receive any additional funds under the facility because no amounts have been reserved for any particular partnership. As of September 30, 1995, $2,362,004 remained available for borrowing under the facility; however, additional funds could be available as other partnerships repay existing borrowings. Additionally, the General Partner has, in its discretion, advanced funds to the Partnership in addition to the revolving credit facility. The General Partner is not obligated to advance funds to the Partnership and there is no assurance that the Partnership will receive additional funds. The balance of cash and cash equivalents can be considered no more than a minimum level of cash reserves for the remaining property's operations. Harbour Club III Apartments is expected to provide sufficient positive cash flow for normal operations and debt service payments for the remainder of 1995. However, Harbour Club III is in need of major capital improvements in order to maintain occupancy and rental rates at a level to continue to support operations and debt service. The necessary capital improvements will have to be funded from outside sources. No such sources have been identified. Management is currently seeking additional financing to fund these improvements, however such financing is not assured. If the property is unable to obtain additional funds and cannot maintain operations at a level to support its current debt, the property may ultimately be foreclosed on by the lender. Long-term liquidity: - ------------------- While the outlook for maintenance of adequate levels of liquidity is adequate in the short term, should operations deteriorate and present cash resources become insufficient to fund current needs, the Partnership would require other sources of working capital. No such sources have been identified. The Partnership has no established lines of credit from outside sources. Other possible actions to resolve cash deficiencies include refinancing, deferral of capital expenditures except where improvements are expected to increase the competitiveness and marketability of the properties, arranging financing from affiliates or the ultimate sale of the property. A sale or refinancing is a possibility only, and there are at present no plans for any such sale or refinancing. These conditions raise substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. Distributions: - ------------- To maintain adequate cash balances of the Partnership, distributions to Current Income Unit holders were suspended in 1988. There have been no distributions to Growth/Shelter Units holders. Distributions to Unit holders will remain suspended for the foreseeable future. The General Partner will continue to monitor the cash reserves and working capital needs of the Partnership to determine when cash flows will support distributions to the Unit holders. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------ ----------------- 1) HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young, BDO Seidman, et al (Case #92-06560-A). This suit was filed on behalf of the Partnership and other affiliated partnerships (the "Affiliated Partnerships") on May 26, 1992, in the 14th Judicial District Court of Dallas County. The petition sought re- covery against the Partnership's former auditors, Ernst & Young, for negligence and fraud in failing to detect and/or report overcharges of fees/expenses by Southmark, the former general partner. The former auditors asserted counterclaims against the Affiliated Partnerships based on alleged fraudulent misrepresentations made to the auditors by the former management of the Affiliated Partnerships (Southmark) in the form of client representation letters executed and delivered to the auditors by Southmark management. The counterclaims sought recovery of attorneys' fees and costs incurred in defending this action. The original petition also alleged causes of action against certain former officers and directors of the Partnership's original general partner for breach of fiduciary duty, fraud and conspiracy relating to the improper assessment and payment of certain administrative fees/expenses. On January 11, 1994 the allegations against the former officers and directors were dismissed. The trial court granted summary judgment in favor of Ernst & Young and BDO Seidman on the fraud and negligence claims based on the statute of limitations. The Affiliated Partnerships appealed the summary judgment to the Dallas Court of Appeals. In August 1995, the Appeals Court upheld all of the summary judgments in favor of the Defendants, except it overturned the Summary Judgment as to the fraud claim against Ernst & Young. Therefore, Plaintiffs will proceed to trial unless a reasonable settlement can be effected between the parties. The ultimate outcome of this litigation cannot be determined at this time. 2) Martha Hess, et. al. v. Southmark Equity Partners II, Ltd. (presently known as McNeil Real Estate Fund XXV, L.P.), Southmark Income Investors, Ltd., Southmark Equity Partners, Ltd., Southmark Realty Partners III, Ltd., and Southmark Realty Partners II, Ltd., et al. ("Hess"); Kotowski v. Southmark Equity Partners, Ltd. and Donald Arceri v. Southmark Income Investors, Ltd. These cases were previously pending in the Illinois Appellate Court for the First District ("Appellate Court"), as consolidated case no. 90-107. Consolidated with these cases are an additional 14 matters against unrelated partnership entities. The Hess case was filed on May 20, 1988, by Martha Hess, individually and on behalf of a putative class of those similarly situated. The original, first, second and third amended complaints in Hess sought rescission, pursuant to the Illinois Securities Act, of over $2.7 million of principal invested in five Southmark (now McNeil) partnerships, and other relief including damages for breach of fiduciary duty and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The original, first, second and third amended complaints in Hess were dismissed against the defendant-group because the Appellate Court held that they were not the proper subject of a class action complaint. Hess was, thereafter, amended a fourth time to state causes of action against unrelated partnership entities. Hess went to judgment against that unrelated entity and the judgment, along with the prior dismissal of the class action, was appealed. The Hess appeal was decided by the Appellate Court during 1992. The Appellate Court affirmed the dismissal of the breach of fiduciary duty and consumer fraud claims. The Appellate Court did, however, reverse in part, holding that certain putative class members could file class action complaints against the defendant-group. Although leave to appeal to the Illinois Supreme Court was sought, the Illinois Supreme Court refused to hear the appeal. The effect of the denial is that the Appellate Court's opinion remains standing. On June 15, 1994, the Appellate Court issued its mandate sending the case back to Trial Court. In late January 1995, Plaintiffs filed a Motion to File an Amended Consolidated Class Action Complaint, which amends the complaint to name McNeil Partners, L.P. as the successor general partner to Southmark Investment Group. In February 1995, Plaintiffs filed a Motion for Class Certification. In September 1995, the court granted Plaintiffs' Motion to File an Amended Complaint to Consolidate and for Class Certification. Defendants have answered the Complaint and have plead that the Plaintiffs did not give timely notice of their right to rescind within six months of knowing that right. The ultimate outcome of this litigation cannot be determined at this time. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------ -------------------------------- (a) Exhibits. Exhibit Number Description 4. Amended and Restated Limited Partnership Agreement dated March 26, 1992. (Incorporated by reference to the Current Report of the Registrant on Form 8-K dated March 26, 1992, as filed on April 9, 1992). 11. Statement regarding computation of Net Income (Loss) per Thousand Limited Partnership Units: Net income (loss) per thousand limited partnership units is computed by dividing net income (loss) allocated to the limited partners by the weighted average number of limited partnership units outstanding expressed in thousands. Per unit information has been computed based on 19,826 and 19,903 weighted average Current Income Units (in thousands) outstanding in 1995 and 1994, respectively, and 13,383 and 13,398 weighted average Growth/Shelter Units (in thousands) outstanding in 1995 and 1994, respectively.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended September 30, 1995. MCNEIL REAL ESTATE FUND XXII, 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 XXII, L.P. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner November 13, 1995 By: /s/ Donald K. Reed - ----------------------------- ----------------------------------------- Date Donald K. Reed President and Chief Executive Officer November 13, 1995 By: /s/ Robert C. Irvine - ----------------------------- ----------------------------------------- Date Robert C. Irvine Chief Financial Officer of McNeil Investors, Inc. Principal Financial Officer November 13, 1995 By: /s/ Carol A. Fahs - ----------------------------- ----------------------------------------- Date Carol A. Fahs Chief Accounting Officer of McNeil Real Estate Management, Inc.
EX-27 2 FDS
5 9-MOS DEC-31-1995 SEP-30-1995 522,784 0 4,196 0 0 0 10,161,234 (4,619,676) 6,227,264 0 6,037,765 0 0 0 0 6,227,264 1,897,441 1,955,173 0 0 1,790,223 0 556,239 0 0 0 0 0 0 (391,289) 0 0
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