-----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, U/oI+gZceQ9z38X9REY5J38csBHphpaYWKNk0l216mtjIGS0Z65RofQZxZfLAxyl tkpxEZM4zCfARkpXLFNnrA== 0000778921-95-000009.txt : 19951119 0000778921-95-000009.hdr.sgml : 19951119 ACCESSION NUMBER: 0000778921-95-000009 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 XXV LP CENTRAL INDEX KEY: 0000778921 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330120335 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15446 FILM NUMBER: 95590613 BUSINESS ADDRESS: STREET 1: 13760 NOEL RD SUITE 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: MCNEIL REAL ESTATE FUND XXV DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHMARK EQUITY 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 0-15446 MCNEIL REAL ESTATE FUND XXV, L.P. - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) California 33-0120335 - ------------------------------------------------------------------------------ (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 XXV, L.P. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------ -------------------- BALANCE SHEETS (Unaudited) September 30, December 31, 1995 1994 ----------- ---------- ASSETS - ------ Real estate investments: Land..................................................... $ 5,524,462 $ 5,524,462 Buildings and improvements............................... 68,139,824 66,918,459 ---------- ---------- 73,664,286 72,442,921 Less: Accumulated depreciation and amortization......... (28,310,179) (25,759,358) ---------- ---------- 45,354,107 46,683,563 Cash and cash equivalents................................... 3,703,999 3,125,937 Cash segregated for security deposits....................... 293,831 283,793 Note receivable............................................. 344,225 344,225 Accounts receivable, net of allowance for doubtful accounts of $532,477 and $561,426 at September 30, 1995 and December 31, 1994, respectively................. 887,459 1,169,888 Escrow deposits............................................. 946,721 1,155,277 Deferred borrowing costs, net of accumulated amortization of $65,340 and $58,491 at September 30, 1995 and December 31, 1994, respectively................. 253,410 260,259 Prepaid expenses and other assets........................... 477,758 409,620 ---------- ---------- $52,261,510 $53,432,562 ========== ========== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) - ----------------------------------------- Mortgage note payable....................................... $ 7,381,507 $ 7,381,507 Accounts payable and accrued expenses....................... 321,172 175,019 Accrued interest............................................ 697,639 554,342 Accrued property taxes...................................... 338,457 858,300 Payable to affiliates - General Partner..................... 73,763 82,427 Land lease obligation....................................... 289,911 320,135 Deferred gain............................................... 344,225 348,340 Security deposits and deferred rental income................ 335,064 303,624 ---------- ---------- 9,781,738 10,023,694 ---------- ---------- Partners' equity (deficit): Limited partners - 84,000,000 limited partnership units authorized; 83,894,648 and 83,900,527 limited partnership units issued and outstanding at September 30, 1995 and December 31, 1994, respectively... 42,863,223 43,783,028 General Partner.......................................... (383,451) (374,160) ---------- ---------- 42,479,772 43,408,868 ---------- ---------- $52,261,510 $53,432,562 ========== ==========
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 XXV, L.P. STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 1995 1994 1995 1994 --------- --------- --------- --------- Revenue: Rental revenue................ $2,392,656 $2,461,292 $6,681,341 $6,749,964 Interest...................... 53,396 30,721 154,050 94,820 Gain on legal settlement...... - - 96,731 - --------- --------- --------- --------- Total revenue............... 2,446,052 2,492,013 6,932,122 6,844,784 --------- --------- --------- --------- Expenses: Interest...................... 202,256 207,491 614,570 614,816 Depreciation and amortization................ 889,789 790,141 2,550,821 2,326,569 Property taxes................ 160,402 196,665 582,730 595,374 Personnel costs............... 186,184 177,306 543,507 476,249 Utilities..................... 281,524 268,057 644,555 649,216 Repairs and maintenance....... 299,979 305,104 895,662 851,608 Property management fees - affiliates........... 132,964 128,560 400,327 408,489 Other property operating expenses.................... 193,651 181,160 630,957 580,961 General and administrative.... 258,683 26,255 314,456 80,509 General and administrative - affiliates.................. 229,385 219,943 683,633 655,719 --------- --------- --------- --------- Total expenses.............. 2,834,817 2,500,682 7,861,218 7,239,510 --------- --------- --------- --------- Net loss......................... $ (388,765) $ (8,669) $ (929,096) $ (394,726) ========= ========= ========= ========= Net loss allocable to limited partners........... $ (384,877) $ (8,582) $ (919,805) $ (390,779) Net loss allocable to General Partner............ (3,888) (87) (9,291) (3,947) --------- ---------- --------- --------- Net loss......................... $ (388,765) $ (8,669) $ (929,096) $ (394,726) ========= ========== ========= ========= Net loss per thousand limited partnership units..... $ (4.59) $ (.10) $ (10.96) $ (4.66) ========= ========== ========= ========= Distributions per thousand limited partnership units..... $ - $ - $ - $ 4.77 ========= ========== ========= =========
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 XXV, L.P. STATEMENTS OF PARTNERS' EQUITY (DEFICIT) (Unaudited) For the Nine Months Ended September 30, 1995 and 1994 Total General Limited Partners' Partner Partners Equity --------- ---------- ---------- Balance at December 31, 1993.............. $(368,845) $44,709,417 $44,340,572 Net loss.................................. (3,947) (390,779) (394,726) Distributions............................. - (400,207) (400,207) -------- ---------- ---------- Balance at September 30, 1994............. $(372,792) $43,918,431 $43,545,639 ======== ========== ========== Balance at December 31, 1994.............. $(374,160) $43,783,028 $43,408,868 Net loss.................................. (9,291) (919,805) (929,096) -------- ---------- ---------- Balance at September 30, 1995............. $(383,451) $42,863,223 $42,479,772 ======== ========== ==========
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 XXV, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Increase in Cash and Cash Equivalents Nine Months Ended September 30, ---------------------------------- 1995 1994 ---------- ---------- Cash flows from operating activities: Cash received from tenants........................ $ 6,965,389 $ 6,957,234 Cash paid to suppliers............................ (2,949,167) (2,865,686) Cash paid to affiliates........................... (1,092,624) (1,071,462) Interest received................................. 154,050 94,820 Interest paid..................................... (464,424) (317,059) Property taxes paid and escrowed.................. (880,304) (598,849) Cash received from legal settlement............... 96,731 - --------- --------- Net cash provided by operating activities............ 1,829,651 2,198,998 --------- --------- Cash flows from investing activities: Additions to real estate investments.............. (1,221,365) (1,414,808) --------- --------- Cash flows from financing activities: Principal payments on mortgage note payable......................................... - (9,346) Payments on capitalized land lease obligation...................................... (30,224) (27,317) Distributions paid................................ - (400,207) --------- --------- Net cash used in financing activities................ (30,224) (436,870) --------- --------- Net increase in cash and cash equivalents............ 578,062 347,320 Cash and cash equivalents at beginning of period............................................ 3,125,937 2,759,887 --------- --------- Cash and cash equivalents at end of period........... $3,703,999 $ 3,107,207 ========= ==========
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 XXV, 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............................................. $(929,096) $ (394,726) -------- --------- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization..................... 2,550,821 2,326,569 Amortization of deferred borrowing costs.......... 6,849 6,849 Amortization of deferred gain..................... (4,115) (58,003) Changes in assets and liabilities: Cash segregated for security deposits........... (10,038) (16,056) Note receivable................................. - 64,756 Accounts receivable, net........................ 282,429 175,106 Escrow deposits................................. 208,556 (61,238) Prepaid expenses and other assets............... (68,138) (106,822) Accounts payable and accrued expenses........... 146,153 (129,865) Accrued interest................................ 143,297 290,908 Accrued property taxes.......................... (519,843) 87,794 Payable to affiliates - General Partner......... (8,664) (7,254) Security deposits and deferred rental income........................................ 31,440 20,980 --------- --------- Total adjustments............................. 2,758,747 2,593,724 --------- --------- Net cash provided by operating activities............ $1,829,651 $2,198,998 ========= =========
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 XXV, L.P. Notes to Financial Statements September 30, 1995 (Unaudited) NOTE 1. - ------ McNeil Real Estate Fund XXV, L.P. (the "Partnership"), formerly known as Southmark Equity Partners II, Ltd., was organized on February 15, 1985 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 XXV, L.P., c/o McNeil Real Estate Management, Inc., Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240. NOTE 3. - ------ Certain prior period amounts have been reclassified to conform to the current period presentation. NOTE 4. - ------ The Partnership pays property management fees equal to 5% of the gross rental receipts for its residential property and 6% of gross rental receipts for its commercial properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management services for the Partnership's residential and commercial properties and leasing services for its residential properties. McREMI may also choose to provide leasing services for the Partnership's commercial properties, in which case McREMI will receive property management fees from such commercial properties equal to 3% of the property's gross rental receipts plus leasing commissions based on the prevailing market rate for such services where the property is located. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. The Partnership is paying an asset management fee which is payable to the General Partner. Through 1999, the asset management fee is calculated as 1% of the Partnership's tangible asset value. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $10,000 per apartment unit for residential property and $50 per gross square foot for commercial properties to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible items. The fee percentage decreases subsequent to 1999. Compensation and reimbursements paid to or accrued for the benefit of the General Partner or its affiliates are as follows: Nine Months Ended September 30, 1995 1994 Property management fees............................. $ 400,327 $ 408,489 Charged to general and administrative expense: Partnership administration........................ 216,369 201,366 Asset management fee.............................. 467,264 454,353 --------- --------- $1,083,960 $1,064,208 ========= =========
Payable to affiliates - General Partner at September 30, 1995 and December 31, 1994 consisted primarily of unpaid property management fees, Partnership general and administrative expenses and asset management fees and are due and payable from current operations. NOTE 5. - ------ 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, $73,122 in cash, and common and preferred stock in the reorganized Southmark subsequently sold for $23,609, 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 - ------------------- There has been no significant change in the operations of the Partnership's properties since December 31, 1994. The Partnership reported a net loss of $929,096 for the first nine months of 1995 as compared to a net loss of $394,726 for the first nine months of 1994. Revenues in 1995 were $6,932,122 as compared to $6,844,784 in 1994, while expenses increased to $7,861,218 from $7,239,510. Net cash provided by operating activities was $1,829,651 for the nine months ended September 30, 1995, a change from $2,198,998 provided during the same nine month period in 1994. The Partnership expended $1,221,365 for capital improvements and $30,224 for payments on the capitalized land lease obligation. The balance in cash and cash equivalents increased to $3,703,999 at September 30, 1995, a net increase of $578,062 from the balance at December 31, 1994. Harbour Club I Apartments has continued to experience financial difficulties. The cash flow from operations of the property has not been sufficient to fund necessary capital improvements and to make the required monthly debt service payments. Effective January 1, 1993, the Partnership ceased making regularly scheduled debt service and escrow payments. In lieu of the aforementioned payments, the Partnership is funding debt service with the excess cash flow of the property. The Partnership has been notified that the mortgage note payable is in default and that the servicing agent has assigned the mortgage to the Department of Housing and Urban Development ("HUD"). If the Partnership is unable to successfully cure the default, the mortgagee could declare the entire indebtedness due and proceed with foreclosure on the property or pursue other actions such as gaining control of the property or placing it in receivership. Harbour Club I is part of a four-phase apartment complex located in Belleville, Michigan. Phases II and III of the complex are also owned by partnerships of 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. The Partnership had previously applied for an additional loan from HUD for a significant capital improvement program that is essential to the operation of the property. During 1993, this loan was denied and management is developing an alternative plan for funding necessary capital improvements. RESULTS OF OPERATIONS - --------------------- Revenue: Total revenue decreased by $45,961 and increased by $87,338 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods in 1994. The year to date increase was due to an increase in interest income and a gain on legal settlement in the second quarter of 1995. These increases were partially offset by a decrease in rental revenue, as discussed below. Rental revenue for the three and nine months ended September 30, 1995 decreased by $68,636 and $68,623, respectively, as compared to the three and nine months ended September 30, 1994. The decreases were mainly due to decreases of approximately $101,000 and $95,000 at Northwest Plaza Shopping Center and Kellogg Office Building, respectively. The decrease at Northwest Plaza was mainly the result of lower rents based on sales volume of tenants due to the restructuring of a major tenant's lease. A large tenant vacated Kellogg Building in late 1994 and the space was not released until the second quarter of 1995. These decreases were partially offset by an increase of approximately $107,000 at Harbour Club Apartments due to an increase in occupancy from 91% at September 30, 1994 to 95% at September 30, 1995. Interest income earned on short-term investments of cash and cash equivalents increased by $22,675 and $59,230 for the three and nine month periods ended September 30, 1995, respectively, as compared to the respective periods in 1994. The increase was due to greater average cash balances invested in these accounts during the first nine months of 1995. The Partnership held $3.7 million of cash and cash equivalents at September 30, 1995 as compared to $3.1 million at September 30, 1994. In addition, there was an increase in interest rates earned on invested cash in 1995. As discussed in Item 1 - Note 5, in 1995 the Partnership received cash and common and preferred stock in the reorganized Southmark in settlement of its bankruptcy claims against Southmark. The Partnership recognized a $96,731 gain in the second quarter of 1995 as a result of this settlement. No such gain was recognized in 1994. Expenses: Total expenses increased by $334,135 and $621,708 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods in 1994. The increase was primarily due to an increase in depreciation and amortization and general and administrative expenses, as discussed below. Depreciation and amortization increased by $99,648 and $224,252 for the three and nine month periods ended September 30, 1995, respectively, in relation to the comparable period in 1994. The increase was primarily due to the addition of depreciable capital improvements at the Partnership's properties, the majority being at Kellogg and Fidelity Federal office buildings. Personnel costs increased by $8,878 and $67,258 for the three and nine months ended September 30, 1995, respectively, in relation to the comparable periods in 1994. The increase was due to the addition of maintenance technicians at Fidelity Plaza and Century Park office buildings. In addition, there was an increase in compensation paid to on-site employees at all of the properties in 1995. For the three and nine months ended September 30, 1995, general and administrative expenses increased by $232,428 and $233,947, respectively. The increase was due to costs incurred by the Partnership in the third quarter of 1995 relating to evaluation and dissemination of information regarding an unsolicited tender offer as discussed in Item 5 - Other Information. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership's primary source of cash flows is from operating activities which generated $1,829,651 of cash in the first nine months of 1995 as compared to $2,198,998 for the same period in 1994. The decrease in cash provided by operating activities in 1995 was mainly the result of an increase in cash paid for delinquent property taxes in 1995 on parcels of land adjacent to the Harbour Club I Apartments which were acquired by the Partnership in November 1994, as the result of a legal settlement. The Partnership expended $1,221,365 and $1,414,808 for capital additions to its real estate investments in the first nine months of 1995 and 1994, respectively. The decrease in 1995 was mainly the result of the reduction of tenant improvements at Fidelity Plaza in 1995. The Partnership distributed $400,207 to the limited partners in the nine months ended September 30, 1994. No distributions were paid in the nine months ended September 30, 1995. Short-term liquidity: - -------------------- At September 30, 1995, the Partnership held cash and cash equivalents of $3,703,999. This balance provides a reasonable level of working capital for the Partnership's immediate needs in operating its properties. For the remainder of 1995, Partnership properties are expected to provide positive cash flow from operations after payment of debt service and capital improvements. Only one property, Harbour Club I Apartments, is encumbered with mortgage debt and another property, Fidelity Plaza, is encumbered with lease obligations. The Partnership has budgeted $2,398,000 for necessary capital improvements for all properties in 1995 which is expected to be funded from available cash reserves or from operations of the properties. An escrow account restricted to the funding of priority capital needs is held by the lender for Harbour Club I in the amount of $494,725, which is included in escrow deposits on the Balance Sheets. The present cash balance is believed to provide an adequate reserve for property operations. At the present time, the Partnership does not anticipate making distributions to the limited partners in 1995. There can be no assurance as to when the Partnership will rebuild cash reserves judged adequate to resume distributions to the partners. Long-term liquidity: - ------------------- While the outlook for maintenance of adequate levels of liquidity is favorable, 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 refinancings, deferral of capital expenditures on Partnership properties except where improvements are expected to increase the competitiveness and marketability of the properties, arranging financing from affiliates or the ultimate sale of the properties. Sales and refinancings are possibilities only, and there are at present no plans for any such sales or refinancings. 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 funds under the facility because no amounts are reserved for any particular partnership. As of September 30, 1995, $2,362,004 remained available for borrowing under the facility; however, additional funds could become available as other partnerships repay existing borrowings. 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 recovery 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, the 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) High River Limited Partnership vs. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil (L95012) - High River ("HR") filed this action in the United States District Court for the Southern District of New York against McNeil Partners, McNeil Investors and Mr. and Mrs. McNeil requesting, among other things, names and addresses of the Partnership's limited partners. The District Court issued a preliminary injunction against the Partnerships requiring them to commence mailing materials relating to High River tender offer materials on August 14, 1995. On August 18, 1995, McNeil Partners, McNeil Investors, the Partnerships, and Mr. and Mrs. McNeil filed an Answer and Counterclaim. The Counterclaim principally asserts (1) the HR tender offers have been undertaken in violation of the federal securities laws, on the basis of material, non-public, and confidential information, and (2) that the HR offer documents omit and/or misrepresent certain material information about the HR tender offers. The counterclaim seeks a preliminary and permanent injunction against the continuation of the HR tender offers and, alternatively, ordering corrective disclosure with respect to allegedly false and misleading statements contained in the tender offer documents. The High River tender offer expired on October 6, 1995. The Defendants believe that the action is moot and expect the matter to be dismissed shortly. 3) 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, the 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, the plaintiffs filed a Motion for Class Certification. In September 1995, the court granted the plaintiffs' Motion to File an Amended Complaint, to Consolidate and for Class Certification. The 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. 4) Robert Lewis vs. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, et al - In the District Court of Dallas County, Texas, A-14th Judicial District, Cause No. 95-08535 (Class Action). The plaintiff, Robert Lewis, is a limited partner with McNeil Pacific Investors Fund 1972, McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV, Ltd. The plaintiff brings this action on his own behalf and as a class action on behalf of the class of all limited partners of McNeil Pacific Investors Fund 1972, McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund XXV, L.P. (the "Partnerships") as of August 4, 1995. The plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, and other senior officers (collectively, the "Defendants") breached their fiduciary duties by, among other things, (1) failing to attempt to sell the properties owned by the Partnerships ("Properties") and extending the lives of the Partnerships indefinitely, contrary to the Partnerships' business plans, (2) paying distributions to themselves and generating fees for their affiliates, (3) refusing to make significant distributions to the class members, despite the fact that the Partnerships have positive cash flows and substantial cash balances, and (4) failing to take steps to create an auction market for Partnership equity interests, despite the fact that a third party bidder filed tender offers for approximately forty-five percent (45%) of the outstanding units of each of the Partnerships. The plaintiff also claims that the Defendants have breached the partnership agreements by failing to take steps to liquidate the Properties and by their alteration of the Partnerships' primary purposes, their acts in contravention of these agreements, and their use of the Partnership assets for their own benefit instead of for the benefit of the Partnerships. The Defendants deny that there is any merit to the plaintiff's allegations and intend to vigorously defend this action. 5) James F. Schofield, Gerald C. Gillett and Donna S. Gillett vs. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, et al, McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint), United States District Court, Southern District of New York, Case No. 95CIV.6711 (Class and Derivative Action Complaint). These are corporate/securities class and derivative actions brought in state and federal court by limited partners of each of the nine limited partnerships that are named as Nominal Defendants as listed above ("Partnerships"). The plaintiffs allege that defendants McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and four of their senior officers and/or directors have breached their fiduciary duties. Specifically, the plaintiffs allege that the defendants have caused the Partnerships to enter into several wasteful transactions that have no business purpose or benefit to the Partnerships and which have rendered such units highly illiquid and artificially depressed the prices that are available for units on the limited resale market. The plaintiffs also allege that the defendants have engaged in a course of conduct to prevent the acquisition of units by Carl Icahn by disseminating false, misleading and inadequate information. The plaintiffs further allege that the defendants have 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 and, thereby, have breached the partnership agreements. The defendants deny that there is any merit to the plaintiffs' allegations and intend to vigorously defend these actions. 6) Alfred Napoletano vs. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133849 (class action complaint). The plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above ("Partnerships"). The plaintiff alleges that the Defendants have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River Limited Partnership ("High River") tender offers (see Item 5 - Other Information), (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The defendants deny that there is any merit to the plaintiff's allegations and intend to vigorously defend this action. 7) Warren Heller vs. McNeil Partners, L.P., McNeil Investors, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. - Superior Court of the State of California, County of Los Angeles, Case No. BC133957 (class action complaint). The plaintiff brings this class action on behalf of a class of all persons and entities who are current owners of units and/or are limited partners in one or more of the partnerships referenced above ("Partnerships"). The plaintiff alleges that the defendants have breached their fiduciary duties to the class members by, among other things, (1) taking steps to prevent the consummation of the High River tender offers, (2) failing to take steps to maximize unitholders' or limited partners' values, including failure to liquidate the properties owned by the Partnerships, (3) managing the Partnerships so as to extend indefinitely the present fee arrangements, and (4) paying itself and entities owned and controlled by the general partner excessive fees and reimbursements of general and administrative expenses. The defendants deny that there is any merit to the plaintiff's allegations and intend to vigorously defend this action. 8) High River Limited Partnership v. McNeil Partners L.P., McNeil Investors, Inc., Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and Carole J. McNeil - United States District Court for the Southern District of New York, (Case No. 95 Civ. 9488) (Second Action). On November 7, 1995, High River commenced a second complaint which alleges, inter alia, that McNeil's Schedule 14D-9 filed in connection with the High River tender offers was materially false and misleading, in violation of Sections 14(d) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(d) and (e), and the SEC Regulations promulgated thereunder; and that High River further alleges that McNeil has wrongfully refused to admit High River as a limited partner to the Funds. Additionally, High River purports to assert claims derivatively on behalf of Funds IX, XI, XV, XXIV and XXV, for breach of contract and breach of fiduciary duty, asserting that McNeil has charged these Partnerships excessive fees. High River's complaint seeks, inter alia, preliminary injunctive relief requiring McNeil to admit High River as a limited partner in each of the ten Partnerships and to transfer the tendered units of interest in the Partnerships to High River; an unspecified award of damages payable to High River and an additional unspecified award of damages payable to certain of the Partnerships; an order that defendants must discharge their fiduciary duties and must account for all fees they have received from certain of the Partnerships; and attorneys' fees. The Defendants deny that there is any merit to Plaintiff's allegations and intend to vigorously defend this action. ITEM 5. OTHER INFORMATION - ------ ----------------- As previously disclosed, on an unsolicited basis, High River, a partnership controlled by Carl Icahn, announced that it had commenced an offer to purchase 37,755,237 units of limited partnership interest in the Partnership (approximately 45% of the Partnership's units) at $0.24 per unit. The tender offer was originally due to expire on August 31, 1995. In connection therewith, the parties entered into certain negotiations and discussions regarding, among other things, possible transactions between the parties and their affiliates, McNeil Partners, L.P., McNeil Investors, Inc., and McREMI. On September 19, 1995, the parties having not reached any resolution on the terms of the proposed transactions, McNeil Partners, L.P. terminated the parties' discussion. High River had extended its offer several times until the final expiration date of October 6, 1995. On October 11, 1995 High River announced that based on preliminary information furnished by the depositary for the tender offer, approximately 4,259,342 limited partnership units of the Partnership were tendered and not withdrawn prior to the expiration of the tender offer. On October 12, 1995, McNeil Partners, L.P. announced that it would continue to explore potential avenues to enhance the value of the Partnership units, which may include, among other things, asset sales, refinancings of Partnership properties followed by distributions or tender offers for units of limited partnership. There can be no assurance that any such plans will develop or that any such transactions will be consummated. 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). 4.1 Amendment No. 1 to the Amended and Restated Limited Partnership Agreement of McNeil Real Estate Fund XXV, L.P. dated June 1995 (incorporated by reference to the Quarterly Report of the registrant on form 10-Q for the period ended June 30, 1995, as filed on August 14, 1995). 11. Statement regarding computation of Net Loss per Thousand Limited Partnership Units: Net loss per thousand limited partnership units is computed by dividing net loss allocated to the limited partners by the weighted average number of limited partnership units outstanding expressed in thousands. Per thousand unit information has been computed based on 83,895 and 83,901 weighted average thousand limited partnership units 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 XXV, 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 XXV, 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 3,703,999 0 1,419,936 (532,477) 0 0 73,664,286 (28,310,179) 52,261,510 0 7,381,507 0 0 0 0 52,261,510 6,681,341 6,932,122 0 0 7,246,648 0 614,570 0 0 (929,096) 0 0 0 (929,096) 0 0
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