-----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, JpEqZk2KDdHyDhoh4e3qf+gC03ix57hQGhgEc9VK0SzCnxymjemUcLRm+gDEhWu0 ce4gBfhXTvfpiTk0lFBTSA== 0000783414-96-000009.txt : 19961118 0000783414-96-000009.hdr.sgml : 19961118 ACCESSION NUMBER: 0000783414-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND XXIII LP CENTRAL INDEX KEY: 0000783414 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330139793 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15459 FILM NUMBER: 96663913 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 III 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, 1996 ------------------------------------------------------ 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 0-15459 -------- McNEIL REAL ESTATE FUND XXIII, L.P. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 33-0139793 - -------------------------------------------------------------------------------- (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 (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 XXIII, L.P. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- --------------------
BALANCE SHEETS (Unaudited) September 30, December 31, 1996 1995 --------------- --------------- ASSETS - ------ Real estate investments: Land..................................................... $ 239,966 $ 239,966 Buildings and improvements............................... 5,950,265 5,836,474 -------------- -------------- 6,190,231 6,076,440 Less: Accumulated depreciation.......................... (2,845,209) (2,648,343) -------------- -------------- 3,345,022 3,428,097 Cash and cash equivalents................................... 154,350 233,222 Cash segregated for security deposits....................... 43,075 54,921 Accounts receivable......................................... 1,653 11,395 Escrow deposits............................................. 69,642 91,296 Prepaid expenses and other assets........................... 6,917 6,893 -------------- -------------- $ 3,620,659 $ 3,825,824 ============== ============== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) - ------------------------------------------ Mortgage note payable, net of discount...................... $ 3,766,062 $ 3,787,802 Accounts payable and accrued expenses....................... 35,841 93,165 Accrued interest............................................ 27,231 27,446 Accrued property taxes...................................... 34,104 43,142 Payable to affiliates - General Partner..................... 217,052 114,218 Security deposits and deferred rental revenue............... 42,494 50,820 -------------- -------------- 4,122,784 4,116,593 -------------- -------------- Partners' equity (deficit): Limited partners - 45,000,000 Units authorized; 11,622,696 and 16,108,041 Units outstanding at September 30, 1996 and December 31, 1995, respectively (6,681,985 and 9,419,080 Current Income Units outstanding, and 4,940,711 and 6,688,961 Growth/Shelter Units outstanding at September 30, 1996 and December 31, 1995, respectively).......................................... (5,354,317) (5,145,030) General Partner.......................................... 4,852,192 4,854,261 -------------- -------------- (502,125) (290,769) -------------- -------------- $ 3,620,659 $ 3,825,824 ============== ==============
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 XXIII, L.P. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------- --------------------------------- 1996 1995 1996 1995 -------------- --------------- -------------- -------------- Revenue: Rental revenue................ $ 341,968 $ 335,469 $ 986,535 $ 1,255,358 Interest...................... 1,291 3,856 5,511 10,109 Gain on sale of real estate... - - - 554,047 ------------- ------------- ------------- ------------- Total revenue............... 343,259 339,325 992,046 1,819,514 ------------- ------------- ------------- ------------- Expenses: Interest...................... 91,447 92,155 274,990 358,760 Interest - affiliates......... - (6,329) - 17,846 Depreciation.................. 66,330 68,439 196,866 243,923 Property taxes................ 32,124 27,938 91,876 105,674 Personnel expenses............ 51,638 51,720 152,418 198,953 Utilities..................... 15,777 20,830 78,626 119,394 Repair and maintenance........ 67,416 24,404 157,626 168,978 Property management fees - affiliates........... 16,966 16,084 49,238 56,435 Other property operating expenses.................... 22,527 44,912 57,863 122,301 General and administrative.... 9,961 9,384 31,407 73,434 General and administrative - affiliates.................. 31,794 43,914 102,650 136,269 Reorganization expenses....... - 29,432 5,362 199,998 ------------- ------------- ------------- ------------- Total expenses.............. 405,980 422,883 1,198,922 1,801,965 ------------- ------------- ------------- ------------- Income (loss) before extraordinary item............ (62,721) (83,558) (206,876) 17,549 Extraordinary item............... - 1,398,925 - 1,398,925 ------------- ------------- ------------- ------------- Net income (loss)................ $ (62,721) $ 1,315,367 $ (206,876) $ 1,416,474 ============= ============= ============ ============== Net income (loss) allocated to limited partners - Current Income Units.................. $ (5,645) $ 118,383 $ (18,619) $ 127,483 Net income (loss) allocated to limited partners - Growth/ Shelter Units................. (56,449) 1,183,831 (186,188) 1,274,827 Net income (loss) allocated to General Partner............... (627) 13,153 (2,069) 14,164 ------------- ------------- ------------- ------------- Net income (loss)................ $ (62,721) $ 1,315,367 $ (206,876) $ 1,416,474 ============= ============= ============= ============= Net income (loss) per thousand limited partnership units: Current Income Units: Income (loss) before extraordinary item........ $ (.85) $ (.81) $ (2.79) $ .16 Extraordinary item.......... - 13.40 - 13.40 ------------- ------------ ------------- ------------- Net income (loss)........... $ (.85) $ 12.59 $ (2.79) $ 13.56 ============= ============ ============= ============= Growth/Shelter Units: Income (loss) before extraordinary item........ $ (11.42) $ (11.24) $ (37.68) $ 2.36 Extraordinary item.......... - 188.23 - 188.23 ------------- ------------ ------------- ------------- Net income (loss)........... $ (11.42) $ 176.99 $ (37.68) $ 190.59 ============= ============ ============= =============
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 XXIII, L.P. STATEMENTS OF PARTNERS' EQUITY (DEFICIT) (Unaudited) For the Nine Months Ended September 30, 1996 and 1995
Total General Limited Partners' Partner Partners Equity (Deficit) -------------- --------------- ---------------- Balance at December 31, 1994.............. $ 4,839,769 $ (6,579,736) $ (1,739,967) Net income: General Partner........................ 14,164 - 14,164 Current Income Units................... - 127,483 127,483 Growth/Shelter Units................... - 1,274,827 1,274,827 ------------- ------------- ------------- Total net income..................... 14,164 1,402,310 1,416,474 ------------- ------------- ------------- Balance at September 30, 1995............. $ 4,853,933 $ (5,177,426) $ (323,493) ============= ============= ============= Balance at December 31, 1995.............. $ 4,854,261 $ (5,145,030) $ (290,769) Redemption of limited partner units: Current Income Units................... - (2,737) (2,737) Growth/Shelter Units................... - (1,743) (1,743) ------------- ------------- ------------- Total redemption..................... - (4,480) (4,480) Net loss: General Partner........................ (2,069) - (2,069) Current Income Units................... - (18,619) (18,619) Growth/Shelter Units................... - (186,188) (186,188) ------------- ------------- ------------- Total net loss....................... (2,069) (204,807) (206,876) ------------- ------------- ------------- Balance at September 30, 1996............. $ 4,852,192 $ (5,354,317) $ (502,125) ============= ============= =============
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 XXIII, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Increase (Decrease) in Cash and Cash Equivalents
Nine Months Ended September 30, ------------------------------------ 1996 1995 ---------------- ---------------- Cash flows from operating activities: Cash received from tenants............................... $ 1,003,726 $ 1,241,767 Cash paid to suppliers................................... (540,114) (570,775) Cash paid to affiliates.................................. (49,054) (59,149) Reorganization costs paid, net........................... (5,362) (199,998) Interest received........................................ 5,511 10,109 Interest paid............................................ (262,578) (351,902) Property taxes paid and escrowed......................... (78,363) (96,639) -------------- -------------- Net cash provided by (used in) operating activities......... 73,766 (26,587) -------------- -------------- Cash flows from investing activities: Additions to real estate investments..................... (113,791) (81,981) Proceeds from sale of real estate........................ - 319,672 -------------- -------------- Net cash provided by (used in) investing activities......... (113,791) 237,691 -------------- -------------- Cash flows from financing activities: Principal payments on mortgage notes payable................................................ (34,367) (47,582) Redemption of limited partner units...................... (4,480) - -------------- -------------- Net cash used in financing activities....................... (38,847) (47,582) -------------- -------------- Net increase (decrease) in cash and cash equivalents.............................................. (78,872) 163,522 Cash and cash equivalents at beginning of period................................................... 233,222 107,815 -------------- -------------- Cash and cash equivalents at end of period.................. $ 154,350 $ 271,337 ============== ==============
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 XXIII, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities
Nine Months Ended September 30, ----------------------------------- 1996 1995 ---------------- --------------- Net income (loss)........................................... $ (206,876) $ 1,416,474 -------------- -------------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation............................................. 196,866 243,923 Amortization of discount on mortgage notes payable.......................................... 12,627 19,845 Interest added to advances from affiliates - General Partner........................................ - 17,846 Gain on sale of real estate.............................. - (554,047) Extraordinary item....................................... - (1,398,925) Changes in assets and liabilities: Cash segregated for security deposits.................. 11,846 16,420 Accounts receivable.................................... 9,742 (3,641) Escrow deposits........................................ 21,654 308,198 Prepaid expenses and other assets...................... (24) 27,363 Accounts payable and accrued expenses.................. (57,324) (1,227) Accrued interest....................................... (215) - Accrued property taxes................................. (9,038) (118,699) Claims settlement payable.............................. - (113,162) Payable to affiliates - General Partner................ 102,834 133,555 Security deposits and deferred rental revenue.............................................. (8,326) (20,510) -------------- -------------- Total adjustments.................................... 280,642 (1,443,061) -------------- -------------- Net cash provided by (used in) operating activities......... $ 73,766 $ (26,587) ============== ==============
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 XXIII, L.P. Notes to Financial Statements (Unaudited) September 30, 1996 NOTE 1. - ------- McNeil Real Estate Fund XXIII, L.P. (the "Partnership"), formerly known as Southmark Realty Partners III, Ltd., was organized on March 4, 1985 as a limited partnership under provisions of the California Revised Limited Partnership Act to acquire and operate 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, 1996, are not necessarily indicative of the results to be expected for the year ending December 31, 1996. 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, 1995, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Real Estate XXIII, 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 within the accompanying financial statements have been reclassified to conform with current year presentation. NOTE 4. - ------- On June 30, 1994, the Partnership filed a voluntary petition for Chapter 11 reorganization. (The petition for Chapter 11 reorganization excluded the Partnership's interest in Beckley Associates, the owner of Harbour Club II Apartments.) The Partnership continued to conduct its affairs as a debtor-in-possession, subject to the jurisdiction and supervision of the Bankruptcy Court. The Partnership's First Amended Plan of Reorganization ("Reorganization Plan"), which contemplated a sale of Woodbridge Apartments, was submitted to the Bankruptcy Court on February 13, 1995. The Partnership's Disclosure Statement of Debtor-in-Possession ("Disclosure Statement") was approved by the Bankruptcy Court on February 14, 1995. The Partnership's Reorganization Plan and Disclosure Statement were submitted February 20, 1995, to a vote of the impaired creditors, as defined. The impaired creditors included a class of creditors who had filed a judgment lien against Woodbridge Apartments in connection with the Illinois rescission suit. The judgment lien creditors filed objections to confirmation of the Reorganization Plan. On April 18, 1995, the Bankruptcy Court did grant an order to sell Woodbridge Apartments but denied confirmation of the Reorganization Plan. The Partnership filed an appeal of the Bankruptcy Court's ruling and, in the meantime, attempted to settle the matter with the judgment lien creditors, which would allow for confirmation of the Reorganization Plan. On May 10, 1995, the Reorganization Plan was amended to provide for full payment to the judgment lien creditors. The Reorganization Plan, as amended, was subsequently confirmed by the Bankruptcy Court on May 17, 1995. Woodbridge Apartments was sold on May 25, 1995, and, in accordance with the Reorganization Plan, the first and second mortgage notes payable and the related outstanding accrued interest were paid. The Partnership also utilized $156,566 of the proceeds from the sale to pay the settlement and legal fees to the judgment lien creditors, as discussed above. On September 11, 1995, the Bankruptcy Court entered an Order Regarding Objections to Claims that allowed the Partnership to pay outstanding pre-petition claims totaling approximately $124,000 in October 1995. The Reorganization Plan specified that advances and fees owed to affiliates of the General Partner were limited to remaining cash, after the pre-petition liabilities and reorganization expenses were paid. The Partnership had $37,228 of cash available to distribute to affiliate creditors. The remaining amounts owed to affiliates of the General Partner as of May 17, 1995, were discharged resulting in an extraordinary gain of $1,398,925 during the third quarter of 1995. On August 15, 1995, the Partnership sent an election form to each limited partner which allowed them to choose whether to redeem their interest in the Partnership. The redemption price was 1/1000th of a dollar per Unit. The limited partners were required to respond within 30 days, and at the close of the 30 day period, 311 limited partners had elected to redeem 4,485,345 Units. In connection with the redemption, the partnership obtained a "no-action" letter from the Securities and Exchange Commission ("SEC") that provided that (1) the redemption could be accomplished without compliance with Rule 13e-3 of the Securities Exchange Act of 1934, and (2) the SEC did not intend to pursue an enforcement action if the Reorganization Plan was consummated. Redemption of the affected Units was completed in January 1996. On November 18, 1995, the Partnership submitted a request for an Application to Close Case to the Bankruptcy Court, which was entered on December 11, 1995, and was approved on February 15, 1996. Expenses incurred by the Partnership in connection with its Chapter 11 filing have been expensed as "reorganization expenses" in the accompanying Statements of Operations. NOTE 5. - ------- The Partnership pays property management fees equal to 5% of the gross rental receipts for its properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management and leasing services. Due to the Partnership's Chapter 11 Bankruptcy filing, property management fees for Woodbridge Apartments were reduced to 3% of the property's gross rental receipts beginning December 1, 1994. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. Reimbursable costs that were incurred prior to the Partnership's bankruptcy filing, in the amount of $520,902, were discharged under terms of the Partnership's Reorganization Plan. The Partnership incurs asset management fees which are 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 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. As discussed in Note 4, asset management fees totaling $366,329 accrued prior to the confirmation of the Reorganization Plan were discharged pursuant to the Reorganization Plan. Total accrued but unpaid asset management fees incurred subsequent to confirmation of the Reorganization Plan in the amount of $99,316 were outstanding at September 30, 1996. Compensation and reimbursements paid to or accrued for the benefit of the General Partner and its affiliates are as follows: Nine Months Ended September 30, ---------------------- 1996 1995 --------- --------- Property management fees............................. $ 49,238 $ 56,435 Charged to interest - affiliates: Interest on advances from affiliates - General Partner......................................... - 17,846 Charged to general and administrative - affiliates: Partnership administration........................ 55,650 79,902 Asset management fee.............................. 47,000 56,367 --------- -------- $ 151,888 $ 210,550 ========= ========= Payable to affiliates - General Partner at September 30, 1996, and December 31, 1995, consists primarily of unpaid asset management fees and reimbursable costs that are due and payable from current operations. NOTE 6. - ------- On May 23, 1995, Woodbridge Apartments was sold to an unrelated third party for a cash price of $3,2000,000. Cash proceeds and the gain on the disposition are detailed below: Gain on Sale Cash Proceeds ------------- ------------- Sales Price............................ $ 3,200,000 $ 3,200,000 Selling costs.......................... (121,904) (121,904) Retirement of mortgage discounts....... (214,659) Basis of real estate sold.............. (2,309,390) ----------- Gain on disposition of real estate..... $ 554,047 =========== Retirement of mortgage notes........... (2,641,421) Payment of accrued interest............ (117,003) ----------- Net cash proceeds...................... $ 319,672 =========== NOTE 7. - ------- The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. The Partnership has suffered recurring losses from operations and has relied on advances from affiliates to meet its debt obligations and to fund capital improvements. There is no guarantee that such advances will continue to be available. Operations at Harbour Club II Apartments, the Partnership's sole remaining property, are expected to be sufficient to provide cash for operating expenses and debt service for 1996. However, the property is in need of major capital improvements in order to maintain occupancy and rental rates at a level sufficient to fund operating expenses and debt service in future years. The Partnership's cash reserves are inadequate to fund the needed capital improvements, and it is unlikely that cash flow from operating activities will be sufficient to provide for the needed capital improvements. No outside sources of financing have been identified. Although affiliates of the Partnership have previously provided working capital for the Partnership, there can be no assurance that the Partnership will receive additional funds from the General Partner or other affiliates. Management is currently seeking additional financing to fund the needed capital improvements; however, such financing is not assured. If the property is unable to obtain additional funds and cannot maintain operations at a level to pay operating expenses and debt service, the property may ultimately be foreclosed on by the lender. Harbour Club II Apartments is part of a four-phase apartment complex located in Belleville, Michigan. Phases I and III 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 Corporation, the parent corporation of the Partnership's former general partner. McREMI managed 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 and, unless a refinancing agreement can be reached with the lender, the property is subject to foreclosure. If Phase I is lost to foreclosure, it would be extremely difficult to operate Phases II and III because the pool and clubhouse are located in Phase I. As of September 30, 1996, 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. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The accompanying financial statements have been prepared assuming the Partnership will continue as a going concern. The Partnership has suffered recurring losses from operations and has relied on advances from affiliates to meet its debt obligations and to fund capital improvements. The Partnership's operating activities provided $73,766 for the first nine months of 1996 as compared to $26,587 of cash used by operating activities in the first nine months of 1995. The disposition of Woodbridge Apartments on May 25, 1995, is the principal cause of decreases in cash received from tenants, cash paid to suppliers, interest paid, and property taxes paid and escrowed. Reorganization costs paid in 1996 decreased to $5,362 from $199,998 in 1995. The Partnership should have no further reorganization costs to pay in connection with its Chapter 11 reorganization. Cash used for additions to real estate improvements totaled $113,791 for the nine months ended September 30, 1996 as compared to $81,981 for the same period of 1995. The Partnership's capital budget will continue only at a bare minimum until additional financing can be arranged. The Partnership received $319,672 of proceeds from the sale of Woodbridge Apartments in 1994. The use of these proceeds was restricted by the Bankruptcy Court for payment of bankruptcy claims. Scheduled principal payments through monthly debt service payments totaled $34,367 for the nine months ended September 30, 1996, down from $47,582 for the same period of 1995. The decrease is due to the sale of Woodbridge Apartments in May 1995. In accordance with terms of the Partnership's Reorganization Plan, the Partnership redeemed 4,485,345 limited partnership units from the limited partners for a total of $4,480 during the first quarter of 1996. Short-term liquidity: At September 30, 1996, the Partnership held $154,350 of cash and cash equivalents, down $78,872 from the balance at December 31, 1995. For the balance of 1996, the General Partner anticipates rental operations at Harbour Club II Apartments will provide sufficient rental revenue to pay for the operating expenses of the property and debt service payments on the property's mortgage note. However, rental operations at Harbour Club II Apartments are not expected to be sufficient to fund necessary capital improvements to the property nor to pay the Partnership's other expenses. To the extent available, the Partnership will use its cash reserves to fund limited capital improvements and the Partnership's other expenses. Although the sale of Woodbridge Apartments provided some additional cash reserves for the Partnership, the Partnership still faces liquidity problems because of urgently needed capital improvements at Harbour Club II Apartments, for which no financing has been secured. Operating activities at Harbour Club II Apartments for 1996 are expected to provide sufficient positive cash flow for normal operating expenses and debt service payments. However, the needed capital improvements will require the use of other sources of cash. No such sources have been identified. The Partnership has no established lines of credit from outside sources. Other possible actions to provide financing for the capital improvements may include refinancing or modifying the property's mortgage debt. Should such refinancing or modification of Harbour Club II's mortgage debt prove unfeasible, the Partnership could be forced to either sell the property or to relinquish control of the property to the mortgage note holder. 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. The Partnership had received advances under the revolving credit facility to fund additions to the Partnership's real estate investments and costs incurred in connection with the refinancing of the Partnership's mortgage note payable. Such advances were discharged as a result of the Chapter 11 proceedings. There is no assurance that the Partnership will receive any additional funds under the facility because no amounts will be reserved for any particular partnership. As of September 30, 1996, $4,082,159 remained available for borrowing under the facility; however, additional funds could become available as other partnerships repay existing borrowings. This commitment expires on March 30, 1997. Additionally, the General Partner has, at its discretion, advanced funds to the Partnership in addition to the revolving credit facility. The Partnership received other advances that were used to fund working capital requirements. Such advances were discharged as a result of the Chapter 11 proceedings. The General Partner is not obligated to advance funds to the Partnership and there is no assurance that the Partnership will receive additional funds. Long-term liquidity: The Partnership has been in a distressed cash situation for several years. Although Harbour Club II Apartments is able to operate in such a manner as to provide for operating expenses and debt service payments, the property has not proven the capability to produce the cash flow necessary for capital improvements nor to support Partnership operations. The inability to make necessary capital improvements has led to deteriorating conditions at the property. In the opinion of management, if capital improvements are not made to make the property more marketable, the net realizable value of the property may be further impaired. Harbour Club II Apartments is part of a four-phase apartment complex located in Belleville, Michigan. Phases I and III of the complex are owned by partnerships affiliated with 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 Corporation, the parent corporation of the Partnership's former general partner. McREMI managed 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 United States Department of Housing and Urban Development mortgage note. Unless a refinancing agreement can be reached with the lender, the property is subject to foreclosure. If Phase I is lost to foreclosure, it would be extremely difficult to operate Phases II and III because the pool and clubhouse used by all three phases are located on Phase I. As of September 30, 1996, no steps have been taken to foreclose on 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. Distributions To maintain adequate cash balances, the Partnership suspended distributions to Current Income Unit holders in 1988. There have been no distributions to Growth/Shelter Unit 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. FINANCIAL CONDITION - ------------------- The occupancy rate at Harbour Club II Apartments decreased to 90% at September 30, 1996. Occupancy at December 31, 1995, was 92%. Harbour Club II 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 nine months of 1996; however, as discussed above, the property is in need of major capital improvements in order to compete in its local market. The Partnership is seeking alternatives to fund the necessary capital improvements, but at this time no sources have been found. Until the Partnership is able to generate cash from operations or sales, the Partnership will be dependent on its present cash reserves, operation of its property, or financial support from affiliates. Distributions will remain suspended until cash reserves are judged adequate. RESULTS OF OPERATIONS - --------------------- Revenue: Total Partnership revenues were $343,259 and $992,046 for the three months and nine months ended September 30, 1996, respectively, as compared to $339,325 and $1,819,514 for the same periods of 1995. Revenues for the three months ended September 30, 1996 and 1995 are comparable in that both figures reflect revenues generated from Harbour Club II Apartments only. Revenue for the nine months ended September 31, 1996 also reflects only revenue generated by Harbour Club II Apartments whereas revenue for the nine months ended September 30, 1995 includes both revenue from Woodbridge Apartments through May 23, 1995 as well as a $554,047 gain from the May 23, 1995 sale of Woodbridge Apartments. Rental revenue at Harbour Club II Apartments increased $3,659 and $7,790 or 1.1% and 0.8% for the three month and nine month periods ended September 30, 1996 as compared to the same periods of 1995. Base rental rates at Harbour Club II Apartments were increased 5.2% in 1996, but most of the increase was offset by a decrease in the occupancy rate. The occupancy rate at Harbour Club II Apartments was 90% at September 30, 1996, down from 92% at December 1995. Expenses: Total Partnership expenses decreased $16,903 and $603,043 for the three month and nine month periods ended September 30, 1996, respectively, as compared to the same periods of 1995. The year-to-date figures decreased primarily because of the May 25, 1995 sale of Woodbridge Apartments. Expenses for the quarters ended September 30, 1996 and 1995 are not affected by the sale of Woodbridge Apartments. For the nine months ended September 30, 1996, expenses at Harbour Club II Apartments increased $41,550 or 4.1% compared to the same period of 1995. Changes in expenses at Harbour Club II Apartments were concentrated in repair and maintenance and other property operating expenses. Repair and maintenance expenses increased 36% at Harbour Club II Apartments for the nine month period ended September 31, 1996 compared to the same period of 1995. The increase resulted from the replacement of carpeting and appliances that met the Partnership's criteria for capitalization based on the magnitude of replacement in 1995, but were expensed in 1996. Other property operating expenses decreased 21% at Harbour Club II Apartments for the nine month period ended September 31, 1996 compared to the same period of 1995. The decrease is attributable to decreased bad debt expense and decreased advertising and marketing expenses. Besides the changes in operating expenses at Harbour Club II Apartments noted above, the Partnership had other expenses that decreased in 1996 compared to 1995. Pursuant to the Partnership's Reorganization Plan, all interest-bearing liabilities due to affiliates were discharged during 1995. Thus, no interest due to affiliates was incurred in 1996 as compared to $17,846 of such interest in 1995. Also, reorganization expenses incurred by the Partnership in connection with its Chapter 11 filing decreased to $5,362 in 1996 from $199,998 in 1995. The Partnership does not anticipate any further expenses in connection with its Chapter 11 reorganization. General and administrative decreased $42,027 or 57% for the nine month period ended September 30, 1996, respectively, as compared to the same period of 1995. The decrease was due to $41,000 of legal fees incurred in 1995 relating to a settlement of the judgment lien rendered in connection with the Illinois rescission suit. General and administrative expenses paid to affiliates decreased $12,120 or 28% and $33,619 or 25% for the three month and nine month periods ended September 30, 1996, respectively, as compared to the same periods of 1995. Such expenses are allocated based on, among other criteria, the number of properties owned by the Partnership. Due to the disposition of Woodbridge Apartments in 1995, expenses allocated to the Partnership by McREMI have decreased. PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES - ------- ---------------------- In accordance with the Partnership's Reorganization Plan, on August 15, 1995, the Partnership sent an election form to each limited partner which allowed them to choose whether to redeem their interest in the Partnership. The redemption price was 1/1000th of a dollar per Unit. The limited partners were required to respond within 30 days, and at the close of the 30 day period, 311 limited partners had elected to redeem 4,485,345 Units. In connection with the redemption, the partnership obtained a "no-action" letter from the Securities and Exchange Commission ("SEC") that provided that (1) the redemption could be accomplished without compliance with Rule 13e-3 of the Securities Exchange Act of 1934, and (2) the SEC did not intend to pursue an enforcement action if the Reorganization Plan was consummated. Redemption of the affected Units was completed on January 1, 1996. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- ------------------------------- (a) Exhibits. Exhibit Number Description ------- ----------- 4. Amended and Restated Limited Partnership Agreement dated March 30, 1992. (Incorporated by reference to the Current Report of the Registrant on Form 8-K dated March 30, 1992, as filed on April 10, 1992). 11. Statement regarding computation of Net Income (Loss) per Thousand Limited Partnership Units: Net income (loss) per thousand limited partner 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 6,682 and 9,399 Current Income Units (in thousands) outstanding in 1996 and 1995, respectively, and 4,941 and 6,689 Growth/Shelter Units (in thousands) outstanding in 1996 and 1995, respectively. 27. Financial Data Schedule for the quarter ended September 30, 1996. b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended September 30, 1996. MCNEIL REAL ESTATE FUND XXIII, L.P. (Debtor-in-Possession) 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 XXIII, L.P. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner November 14, 1996 By: /s/ Donald K. Reed - ----------------- ---------------------------------------- Date Donald K. Reed President and Chief Executive Officer November 14, 1996 By: /s/ Ron K. Taylor - ----------------- ---------------------------------------- Date Ron K. Taylor Acting Chief Financial Officer of McNeil Investors, Inc. November 14, 1996 By: /s/ Carol A. Fahs - ----------------- ---------------------------------------- Date Carol A. Fahs Chief Accounting Officer of McNeil Real Estate Management, Inc. EX-27 2
5 9-MOS DEC-31-1996 SEP-30-1996 154,350 0 1,653 0 0 0 6,190,231 (2,845,209) 3,620,659 0 3,766,062 0 0 0 0 3,620,659 985,535 992,046 0 0 923,932 0 274,990 0 0 (206,876) 0 0 0 (206,876) 0 0
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