-----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, B4Jvw5vPoTmymUtyQqZ7F2Uf3ka38fNxASFlLDIAx69JTbi67OcJkOVkLgE/61hv 3foX+MSlEYn+5+3H2SRpNg== 0000758745-97-000004.txt : 19970520 0000758745-97-000004.hdr.sgml : 19970520 ACCESSION NUMBER: 0000758745-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97606841 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 March 31, 1997 ------------------------------------------------------ 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 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 --- --- MCNEIL REAL ESTATE FUND XXII, L.P. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- BALANCE SHEETS (Unaudited)
March 31, December 31, 1997 1996 ---------------- -------------- ASSETS - ------ Real estate investments: Land..................................................... $ 380,414 $ 380,414 Buildings and improvements............................... 10,085,363 10,084,053 -------------- ------------- 10,465,777 10,464,467 Less: Accumulated depreciation.......................... (5,252,535) (5,145,775) -------------- ------------- 5,213,242 5,318,692 Cash and cash equivalents................................... 683,171 602,462 Cash segregated for security deposits....................... 66,846 66,510 Accounts receivable......................................... 7,877 4,614 Escrow deposits............................................. 126,642 160,642 Prepaid expenses and other assets, net...................... 10,393 11,445 -------------- ------------- $ 6,108,171 $ 6,164,365 ============== ============= LIABILITIES AND PARTNERS' DEFICIT - --------------------------------- Mortgage note payable, net.................................. $ 5,967,218 $ 5,979,501 Accounts payable and accrued expenses....................... 56,899 90,572 Accrued property taxes ..................................... 50,250 66,427 Payable to affiliates - General Partner..................... 1,804,872 1,756,367 Security deposits and deferred rental revenue............... 68,287 65,571 -------------- ------------- 7,947,526 7,958,438 -------------- ------------- Partners' deficit: Limited partners - 55,000,000 Units authorized; 32,815,117 and 33,176,117 Units issued and outstanding at March 31, 1997 and December 31, 1996, respectively (19,567,088 and 19,688,088 Current Income Units outstanding at March 31, 1997 and December 31, 1996, respectively, and 13,248,029 and 13,310,029 Growth/Shelter Units outstanding at March 31, 1997 and December 31, 1996, respectively)................... (1,585,985) (1,541,156) General Partner.......................................... (253,370) (252,917) -------------- ------------- (1,839,355) (1,794,073) -------------- ------------- $ 6,108,171 $ 6,164,365 ============== =============
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 March 31, --------------------------------- 1997 1996 -------------- --------------- Revenue: Rental revenue ............................................ $ 558,423 $ 556,155 Interest................................................... 8,704 7,694 ------------- ------------- Total revenue............................................. 567,127 563,849 ------------- ------------- Expenses: Interest.................................................... 138,763 145,934 Depreciation and amortization............................... 106,760 102,558 Property taxes.............................................. 50,250 42,972 Personnel expenses.......................................... 78,956 84,194 Utilities................................................... 48,504 42,810 Repair and maintenance...................................... 64,828 52,115 Property management fees -affiliates........................ 27,965 27,572 Other property operating expenses........................... 26,966 26,748 General and administrative.................................. 21,513 15,487 General and administrative - affiliates..................... 47,904 56,486 ------------- ------------- Total expenses............................................ 612,409 596,876 ------------- ------------- Net loss....................................................... $ (45,282) $ (33,027) ============= ============== Net loss allocable to limited partners - Current Income Unit......................................... $ (4,075) $ (2,973) Net loss allocable to limited partners - Growth/Shelter Unit......................................... (40,754) (29,724) Net loss allocable to General Partner.......................... (453) (330) ------------- ------------- Net loss....................................................... $ (45,282) $ (33,027) ============= ============== Net loss per thousand limited partnership units: Current Income Units........................................... $ (.21) $ (.15) ============= ============== Growth/shelter Units........................................... $ (3.08) $ (2.23) ============= ==============
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 Three Months Ended March 31, 1997 and 1996
Total General Limited Partners' Partner Partners Deficit --------------- --------------- --------------- Balance at December 31, 1995.............. $ (250,709) $ (1,168,315) $ (1,419,024) Net loss General Partner........................ (330) - (330) Current Income Units................... - (2,973) (2,973) Growth/Shelter Units................... - (29,724) (29,724) ------------- ------------- ------------- Total net loss............................ (330) (32,697) (33,027) ------------- ------------- ------------- Balance at March 31, 1996................. $ (251,039) $ (1,201,012) $ (1,452,051) ============= ============= ============= Balance at December 31, 1996.............. $ (252,917) $ (1,541,156) $ (1,794,073) Net loss General Partner........................ (453) - (453) Current Income Units................... - (4,075) (4,075) Growth/Shelter Units................... - (40,754) (40,754) ------------- ------------- ------------- Total net loss............................ (453) (44,829) (45,282) ------------- ------------- ------------- Balance at March 31, 1997................. $ (253,370) $ (1,585,985) $ (1,839,355) ============= ============= =============
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 in Cash and Cash Equivalents
Three Months Ended March 31, ------------------------------------------ 1997 1996 ------------------ ---------------- Cash flows from operating activities: Cash received from tenants........................ $ 557,202 $ 561,968 Cash paid to suppliers............................ (275,692) (271,782) Cash paid to affiliates........................... (27,364) (28,132) Interest received................................. 8,704 7,694 Interest paid..................................... (129,182) (136,749) Property taxes paid and escrowed.................. (29,656) (36,792) ---------------- -------------- Net cash provided by operating activities............ 104,012 96,207 ---------------- -------------- Cash flows from investing activities: Additions to real estate investments.............. (1,310) (18,362) ----------------- -------------- Cash flows from financing activities: Principal payments on mortgage note payable......................................... (21,993) (20,511) ----------------- -------------- Net increase in cash and cash equivalents............ 80,709 57,334 Cash and cash equivalents at beginning of period............................................ 602,462 629,747 ---------------- -------------- Cash and cash equivalents at end of period........... $ 683,171 $ 687,081 ================ ==============
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
Three Months Ended March 31, ----------------------------------------- 1997 1996 ----------------- ---------------- Net loss............................................. $ (45,282) $ (33,027) --------------- -------------- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization..................... 106,760 102,558 Amortization of discounts on mortgage note payable.................................... 9,710 9,305 Changes in assets and liabilities: Cash segregated for security deposits........... (336) 7,560 Accounts receivable............................. (3,263) (5,900) Escrow deposits................................. 34,000 31,458 Prepaid expenses and other assets............... 1,052 1,102 Accounts payable and accrued expenses........... (33,673) (50,949) Accrued property taxes.......................... (16,177) (22,929) Payable to affiliates - General Partner......... 48,505 55,926 Security deposits and deferred rental revenue....................................... 2,716 1,103 --------------- -------------- Total adjustments............................. 149,294 129,234 --------------- -------------- Net cash provided by operating activities............ $ 104,012 $ 96,207 =============== ==============
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) March 31, 1997 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 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, 1997 are not necessarily indicative of the results to be expected for the year ending December 31, 1997. 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, 1996, 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 The Herman Group, 2121 San Jacinto St., 26th Floor, Dallas, Texas 75201. NOTE 3. - ------- Certain reclassifications have been made to prior period amounts to conform to the current presentation. NOTE 4. - ------- 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 the Partnership's only property 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. 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") whose general partner is an affiliate of Southmark. 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 its mortgage loan to the United States Department of Housing and Urban Development ("HUD"), the former mortgage holder, and, unless a refinancing agreement can be reached with the new mortgage holder, 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. As of March 31, 1997, no steps have been taken towards the foreclosure of Phase I. 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. NOTE 5. - ------- The Partnership pays property management fees equal to 5% of the gross rental receipts for its residential 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 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 $1,167,515 were outstanding at March 31, 1997. Compensation and reimbursements paid to or accrued for the benefit of the General Partner and its affiliates are as follows: Three Months Ended March 31, ------------------------- 1997 1996 ---------- ---------- Property management fees.................... $ 27,965 $ 27,572 Charged to general and administrative - affiliates: Partnership administration............... 15,667 22,789 Asset management fee..................... 32,237 33,697 --------- --------- $ 75,869 $ 84,058 ========= ========= ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- The Partnership reported a net loss of $45,282 for the first three months of 1997 as compared to $33,027 for the same period in 1996. 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, the former mortgage holder, and unless a refinancing agreement can be reached with the new mortgage holder, 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. RESULTS OF OPERATIONS - --------------------- Revenue: Total Partnership revenues were $567,127 for the three months ended March 31, 1997 as compared to $563,849 for the same period of 1996. Rental revenue was $558,423 for the first three months of 1997, and remained comparable to $556,155 for the same period in 1996. Interest income for the first three months of 1997 increased slightly by $1,010 as compared to prior period. Expenses: Total expenses increased to $612,409 for the three months ended March 31, 1997, as compared to $596,876 for the same period in 1996. Property taxes increased $7,278 or 17% for the three months ended March 31, 1997 as compared to the same period of 1996 due to increased property tax accrual for Harbour Club III Apartments. Repairs and maintenance expense increased by $12,713 or 24% for the three months ended March 31, 1997 as compared to the same period of last year. The increase can be attributed to an increase in the replacement of appliances, which met the Partnership's criteria for capitalization of replacements in 1996, were expensed in 1997. General and administrative expenses increased by $6,026 or 39% for the three months ended March 31, 1997 as compared to the same period of 1996. The increase was due to fees paid to a non-affiliate relating to investor services. Prior to 1997, such costs were reimbursed to McREMI and were included in general and administrative - affiliates. General and administrative - affiliates decreased $8,582 or 15% for the three months ended March 31, 1997 as compared to the same period of 1996. This was attributable to costs of investor services discussed above. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership was provided $104,012 of cash by operating activities during the first three months of 1997 as compared to $96,207 for the same period in 1996. Cash used for additions to real estate was $1,310 during the first three months of 1997 as compared to $18,362 during the same period of 1996. Cash used for principal payments on mortgage note payable was $21,993 during the first three months of 1997 as compared to $20,511 for the same period of 1996. Short-term liquidity: At March 31, 1997, the Partnership held $683,171 of cash and cash equivalents. The General Partner considers this level of cash reserves to be adequate to meet the Partnership's operating needs. The General Partner believes that anticipated operating results for 1997 will be sufficient to fund the Partnership's budgeted capital improvements for 1997 and to repay the current portion of the Partnership's mortgage note. Effective January 23, 1997, the mortgage note payable was sold by HUD to an unaffiliated buyer. The Partnership is attempting to negotiate a restructuring or refinancing of the mortgage note with the new lender. Long-term liquidity: The Partnership determined to evaluate market and other economic conditions to establish the optimum time to commence liquidation of the Partnership's asset in accordance with the terms of the Amended Partnership Agreement. 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 Unit holders by December 2001. 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 - ------- ----------------- James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint). The action involves purported class and derivative actions brought by limited partners of each of the fourteen limited partnerships that were named as nominal defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. Defendants filed a demurrer to the consolidated and amended complaint and a motion to strike on February 14, 1997, seeking to dismiss the consolidated and amended complaint in all respects. A hearing on Defendant's demurrer and motion to strike was held on May 5, 1997. The Court granted Defendants' demurrer, dismissing the consolidated and amended complaint with leave to amend. Plaintiffs have until May 27, 1997 to file a second amended complaint, unless otherwise agreed to by the parties. 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 19,567 and 19,818 weighted average Current Income Units (in thousands) outstanding in 1997 and 1996, respectively, and 13,248 and 13,358 weighted average Growth/Shelter Units (in thousands) outstanding in 1997 and 1996, respectively. 27. Financial Data Schedule for the quarter ended March 31, 1997. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended March 31, 1997. 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 May 15, 1997 By: /s/ Ron K. Taylor - -------------- ---------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) May 15, 1997 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-31-1997 MAR-31-1997 683,171 0 0 0 0 0 10,465,777 (5,252,535) 6,108,171 0 5,967,218 0 0 0 0 6,108,171 558,423 567,127 0 0 473,646 0 138,763 0 0 (45,282) 0 0 0 (45,282) 0 0
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