-----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, TSQ4ChbqG9iePreA3fqbppc490z4uAYIs06o+Pk7eJ8SIW5dz6LXqBLEfZpAB8yS +8GS7Yac7tx7+TOT5eS0Vw== 0000758745-98-000006.txt : 19980515 0000758745-98-000006.hdr.sgml : 19980515 ACCESSION NUMBER: 0000758745-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 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: SEC FILE NUMBER: 000-14268 FILM NUMBER: 98619758 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 quarterly period ended March 31, 1998 ------------------------------------------- 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 --- --- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MCNEIL REAL ESTATE FUND XXII, L.P. BALANCE SHEETS (Unaudited)
March 31, December 31, 1998 1997 --------------- -------------- ASSETS - ------ Real estate investments: Land..................................................... $ 380,414 $ 380,414 Buildings and improvements............................... 10,669,180 10,595,887 -------------- ------------- 11,049,594 10,976,301 Less: Accumulated depreciation.......................... (5,724,438) (5,586,872) -------------- ------------- 5,325,156 5,389,429 Cash and cash equivalents................................... 861,920 794,630 Cash segregated for security deposits....................... 68,087 67,510 Accounts receivable......................................... 11,626 11,508 Escrow deposits............................................. 54,543 68,310 Prepaid expenses and other assets........................... 9,000 9,953 -------------- ------------- $ 6,330,332 $ 6,341,340 ============== ============= LIABILITIES AND PARTNERS' DEFICIT - --------------------------------- Mortgage note payable, net.................................. $ 5,914,149 $ 5,928,021 Accounts payable and accrued expenses....................... 118,904 114,584 Accrued property taxes ..................................... 42,501 68,129 Payable to affiliates - General Partner..................... 1,989,552 1,933,837 Security deposits and deferred rental revenue............... 88,808 69,670 -------------- ------------- 8,153,914 8,114,241 -------------- ------------- Partners' deficit: Limited partners - 55,000,000 Units authorized; 32,736,117 and 32,815,117 Units issued and out- standing at March 31, 1998 and December 31, 1997, respectively (19,493,088 and 19,567,088 Current Income Units outstanding at March 31, 1998 and December 31, 1997, respectively, and 13,243,029 and 13,248,029 Growth/Shelter Units outstanding at March 31, 1998 and December 31, 1997, respectively)................... (1,570,370) (1,520,196) General Partner.......................................... (253,212) (252,705) -------------- ------------- (1,823,582) (1,772,901) -------------- ------------- $ 6,330,332 $ 6,341,340 ============== =============
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, --------------------------------- 1998 1997 ------------- --------------- Revenue: Rental revenue ............................................ $ 601,864 $ 558,423 Interest................................................... 12,061 8,704 ------------- ------------- Total revenue............................................. 613,925 567,127 ------------- ------------- Expenses: Interest.................................................... 134,178 138,763 Depreciation................................................ 137,566 106,760 Property taxes.............................................. 42,501 50,250 Personnel expenses.......................................... 83,875 78,956 Utilities................................................... 41,201 48,504 Repair and maintenance...................................... 55,591 64,828 Property management fees -affiliates........................ 30,071 27,965 Other property operating expenses........................... 18,521 26,966 General and administrative.................................. 65,657 21,513 General and administrative - affiliates..................... 55,445 47,904 ------------- ------------- Total expenses............................................ 664,606 612,409 ------------- ------------- Net loss....................................................... $ (50,681) $ (45,282) ============= ============== Net loss allocable to limited partners - Current Income Unit......................................... (4,561) $ (4,075) Net loss allocable to limited partners - Growth/Shelter Unit......................................... (45,613) (40,754) Net loss allocable to General Partner.......................... (507) (453) ------------- ------------- Net loss....................................................... $ (50,681) $ (45,282) ============= ============== Net loss per thousand limited partnership units: Current Income Units........................................... $ (.23) $ (.21) ============= ============== Growth/Shelter Units........................................... $ (3.44) $ (3.08) ============= ==============
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, 1998 and 1997
Total General Limited Partners' Partner Partners Deficit -------------- -------------- --------------- 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) ============= ============= ============= Balance at December 31, 1997.............. $ (252,705) $ (1,520,196) $ (1,772,901) Net loss General Partner........................ (507) - (507) Current Income Units................... - (4,561) (4,561) Growth/Shelter Units................... - (45,613) (45,613) ------------- ------------- ------------- Total net loss............................ (507) (50,174) (50,681) ------------- ------------- ------------- Balance at March 31, 1998................. $ (253,212) $ (1,570,370) $ (1,823,582) ============= ============= =============
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
Three Months Ended March 31, ------------------------------------------ 1998 1997 ----------------- ---------------- Cash flows from operating activities: Cash received from tenants........................ $ 625,993 $ 557,202 Cash paid to suppliers............................ (265,121) (275,692) Cash paid to affiliates........................... (29,801) (27,364) Interest received................................. 12,061 8,704 Interest paid..................................... (124,605) (129,182) Property taxes paid and escrowed.................. (54,362) (29,656) ---------------- -------------- Net cash provided by operating activities............ 164,165 104,012 ---------------- -------------- Cash used in investing activities: Additions to real estate investments.............. (73,293) (1,310) ----------------- -------------- Cash used in financing activities: Principal payments on mortgage note payable......................................... (23,582) (21,993) ----------------- -------------- Net increase in cash and cash equivalents............ 67,290 80,709 Cash and cash equivalents at beginning of period............................................ 794,630 602,462 ---------------- -------------- Cash and cash equivalents at end of period........... $ 861,920 $ 683,171 ================ ==============
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, ----------------------------------------- 1998 1997 ----------------- ---------------- Net loss............................................. $ (50,681) $ (45,282) --------------- -------------- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation...................................... 137,566 106,760 Amortization of discounts on mortgage note payable.................................... 9,710 9,710 Changes in assets and liabilities: Cash segregated for security deposits........... (577) (336) Accounts receivable............................. (118) (3,263) Escrow deposits................................. 13,767 34,000 Prepaid expenses and other assets............... 953 1,052 Accounts payable and accrued expenses........... 4,320 (33,673) Accrued property taxes.......................... (25,628) (16,177) Payable to affiliates - General Partner......... 55,715 48,505 Security deposits and deferred rental revenue....................................... 19,138 2,716 --------------- -------------- Total adjustments............................. 214,846 149,294 --------------- -------------- Net cash provided by operating activities............ $ 164,165 $ 104,012 =============== ==============
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, 1998 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, 1998 are not necessarily indicative of the results to be expected for the year ending December 31, 1998. 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, 1997, 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 600, LB70, Dallas, Texas 75240. NOTE 3. - ------- 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 $1,337,207 were outstanding at March 31, 1998. 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, ---------------------------------------- 1998 1997 ---------------- --------------- Property management fees.................................. $ 30,071 $ 27,965 Charged to general and administrative - affiliates: Partnership administration............................. 15,842 15,667 Asset management fee................................... 39,603 32,237 --------------- -------------- $ 85,516 $ 75,869 =============== ==============
NOTE 4. - ------- Dick and Aloma Anderson v. McNeil Real Estate Fund XXII, L.P. , McNeil Partners, L.P., Wayne T. Shipp, the Wayne Shipp Agency, Inc., Southmark Investment Group, Inc. and Southmark Realty Partners, Ltd. This lawsuit was filed in November 1993, in Washington State in the Clark County Superior Court. In 1985, the plaintiffs apparently spent $22,000 to purchase limited partnership interests in Southmark Realty Partners Ltd. II , (not named by them as a defendant ) whose name is now McNeil Real Estate Fund XXII, L.P. (the "Partnership"). Plaintiffs allege that in connection with the transactions by which McNeil Partners, L.P. became general partner of the Partnership, and by which certain changes were made in the Partnership, the McNeil entities engaged in the offer and/or sale of unregistered securities in violation of Washington law. The plaintiffs have alleged that certain of the other defendants -- specifically Mr. Shipp and the Shipp Insurance Agency -- engaged in fraud in connection with the sale of limited partnership interests in the Partnership to plaintiffs. The plaintiffs have not made fraud allegations against any of the McNeil or Southmark entities. The majority of plaintiffs' claims against the Partnership are based on allegations that the securities are not registered in the State of Washington. Although it is the Partnership's position that it did not violate Washington law, in order to avoid any claims of successor liability and to avoid further legal costs, the Partnership and the Shipp defendants agreed to settle with the plaintiffs by each paying $15,000 to plaintiffs in exchange for a release of all claims. This amount was paid by the Partnership on April 27, 1998 and is included in general and administrative expenses on the Statement of Operations. Settlement documents have been executed. An Order of Dismissal issued by the Court is expected by May 15, 1998. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- The occupancy rate at Harbour Club III Apartments was 95% at March 31, 1998. The occupancy rate at March 31, 1997, was 94%. Harbour Club III Apartments was able to provide enough cash flow from operations to meet ordinary operating expenses as well as the debt service for its related mortgage note for the first three months of 1998. The property is in need of major capital improvements in order to compete in its local market, and the Partnership has begun a program to complete such capital improvements to be funded from existing cash reserves. However, there can be no assurances that such reserves will be sufficient to complete all needed improvements. RESULTS OF OPERATIONS - --------------------- Revenue: Total Partnership revenues increased by $46,798 or 8% for the three months ended March 31, 1998 as compared to the same period of 1997. Rental revenue increased $43,441 or 8% for the three months ended March 31, 1998 compared the same period in 1997. Interest income for the first three months of 1998 increased by $3,357 as compared to prior period. Expenses: Total expenses increased by $52,197 or 9% for the three months ended March 31, 1998. Depreciation expense increased $30,806 or 29% for the three months ended March 31, 1998 as compared to the same period of last year. The increase can be attributed to depreciation of the more than $511,000 of capital improvements added during 1997, being amortized over useful lives ranging from five to ten years. Property tax expense is based on estimates during the year. When the actual tax bill is received, the expense is adjusted accordingly. During the last quarter of 1997, an approximately $42,000 adjustment to decrease the first three quarters estimate was made. After taking this adjustment into account, the expense is comparable for the first three months of 1998 and 1997. Repair and maintenance expenses were decreased by $9,237 or 14% during the three months ended March 31, 1998 as compared to the same period for 1997. This decrease is mainly attributable to lower snow removal expenses due to milder winter conditions during the first three months of 1998 as compared to the same period for 1997. Additionally, Harbour Club III replaced less carpeting and flooring during the three months ended March 31, 1998 as compared to the same period for 1997. Other property operating expenses decreased $8,445 or 31% for the period ended March 31, 1998 as compared to the same period for 1997. This is mainly attributable to bad debt collections of more than $8,700 during the first three months of 1998. General and administrative expenses increased by $44,144 for the three months ended March 31, 1998 as compared to the same period of 1997. The increase was mainly due to costs incurred to explore alternatives to maximize the value of the Partnership (see Liquidity and Capital Resources). General and administrative - affiliates increased $7,541 for the three months ended March 31, 1998 as compared to the same period of 1997 due to an increase in the asset management fee. This increase was primarily due to the increase of the net operating income on Harbour Club III on which the asset management fee is based. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership was provided $164,165 of cash by operating activities during the first three months of 1998 as compared to $104,012 for the same period in 1997. Cash received from tenants increased by $68,791 mainly due to rental income increases of more than $43,000 at Harbour Club III Apartments. Cash used for additions to real estate was $73,293 during the first three months of 1998 as compared to $1,310 during the same period of 1997. A greater amount was spent in 1998 at Harbour Club III for landscape and signage improvements, as well as electrical upgrades. In addition, hallway renovations were capitalized during the first three months of 1998. Cash used for principal payments on the mortgage note payable was $23,582 during the first three months of 1998 as compared to $21,993 for the same period of 1997. Short-term liquidity: At March 31, 1998, the Partnership held $861,920 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 1998 will be sufficient to fund the Partnership's budgeted capital improvements for 1998 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. Long-term liquidity: Pursuant to the Partnership's previously announced liquidation plans, the Partnership has recently retained PaineWebber, Incorporated as its exclusive financial advisor to explore alternatives to maximize the value of the Partnership. The alternatives being considered by the Partnership include, without limitation, a transaction in which limited partnership interests in the Partnership are converted into cash. The General Partner of the Partnership or entities or persons affiliated with the General Partner will not be involved as a purchaser in any of the transactions contemplated above. Any transaction will be subject to certain conditions including (i) approval by the limited partners of the Partnership, and (ii) receipt of an opinion from an independent financial advisory firm as to the fairness of the consideration received by the Partnership pursuant to such transaction. Finally, there can be no assurance that any transaction will be consummated, or as to the terms thereof. 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 Dick and Aloma Anderson v. McNeil Real Estate Fund XXII, L.P. , McNeil Partners, L.P., Wayne T. Shipp, the Wayne Shipp Agency, Inc., Southmark Investment Group, Inc. and Southmark Realty Partners, Ltd. This lawsuit was filed in November 1993, in Washington State in the Clark County Superior Court. In 1985, the plaintiffs apparently spent $22,000 to purchase limited partnership interests in Southmark Realty Partners Ltd. II , (not named by them as a defendant ) whose name is now McNeil Real Estate Fund XXII, L.P. (the "Partnership"). Plaintiffs allege that in connection with the transactions by which McNeil Partners, L.P. became general partner of the Partnership, and by which certain changes were made in the Partnership, the McNeil entities engaged in the offer and/or sale of unregistered securities in violation of Washington law. The plaintiffs have alleged that certain of the other defendants -- specifically Mr. Shipp and the Shipp Insurance Agency -- engaged in fraud in connection with the sale of limited partnership interests in the Partnership to plaintiffs. The plaintiffs have not made fraud allegations against any of the McNeil or Southmark entities. The majority of plaintiffs' claims against the Partnership are based on allegations that the securities are not registered in the State of Washington. Although it is the Partnership's position that it did not violate Washington law, in order to avoid any claims of successor liability and to avoid further legal costs, the Partnership and the Shipp defendants agreed to settle with the plaintiffs by each paying $15,000 to plaintiffs in exchange for a release of all claims. Settlement documents have been executed. An Order of Dismissal issued by the Court is expected by May 15, 1998. 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 19,493 and 19,567 weighted average Current Income Units (in thousands) outstanding in 1998 and 1997, respectively, and 13,243 and 13,248 weighted average Growth/Shelter Units (in thousands) outstanding in 1998 and 1997, respectively. 27. Financial Data Schedule for the quarter ended March 31, 1998. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended March 31, 1998. 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 14, 1998 By: /s/ Ron K. Taylor - ------------ ---------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) May 14, 1998 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-31-1998 MAR-31-1998 861,920 0 11,626 0 0 0 11,049,594 (5,724,438) 6,330,332 0 5,914,149 0 0 0 0 6,330,332 601,864 613,925 0 0 530,428 0 134,178 0 0 (50,681) 0 0 0 (50,681) 0 0
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