-----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, L26m8+XrPK54mKR42SwN1g7Mki9ylYldFLHavALnLCI2agWoNNGcCLhFwO8gWrq6 q/Xc7cD3W5rnj9VVA0ZNaA== 0000783414-95-000016.txt : 19951119 0000783414-95-000016.hdr.sgml : 19951119 ACCESSION NUMBER: 0000783414-95-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 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: 95591548 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, 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 0-15459 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 (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 XXIII, L.P. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------ -------------------- BALANCE SHEETS (Unaudited) September 30, December 31, 1995 1994 ---------- ---------- ASSETS Real estate investments: Land..................................................... $ 239,966 $ 239,966 Buildings and improvements............................... 5,793,757 5,711,776 --------- --------- 6,033,723 5,951,742 Less: Accumulated depreciation.......................... (2,585,603) (2,405,420) --------- --------- 3,448,120 3,546,322 Asset held for sale......................................... - 2,373,130 Cash and cash equivalents ($192,645 and $79,303 restricted by the Bankruptcy Court at September 30, 1995 and December 31, 1994, respectively)................ 271,337 107,815 Cash segregated for security deposits....................... 59,887 76,307 Accounts receivable......................................... 20,674 17,033 Escrow deposits............................................. 56,221 364,419 Prepaid expenses and other assets........................... 8,019 35,382 --------- --------- $ 3,864,258 $ 6,520,408 ========= ========= LIABILITIES AND PARTNERS' EQUITY (DEFICIT) - ------------------------------------------ Mortgage notes payable, net of discounts.................... $ 3,794,821 $ 3,814,667 Accounts payable and accrued expenses....................... 90,233 75,624 Accrued property taxes...................................... 22,682 123,773 Payable to affiliates - General Partner..................... 61,840 4,986 Security deposits and deferred rental income................ 57,178 56,348 --------- ---------- 4,026,754 4,075,398 --------- --------- Liabilities subject to compromise (including $37,228 and $1,341,606 payable to affiliates at September 30, 1995 and December 31, 1994, respectively)................ 160,997 4,184,977 --------- --------- Partners' equity (deficit): Limited partners - 45,000,000 Units authorized; 16,108,041 and 16,088,041 Units issued and outstanding at September 30, 1995 and December 31, 1994, respectively, (9,399,080 and 9,419,080 Current Income Units at September 30, 1995 and December 31, 1994, respectively and 6,688,961 Growth/Shelter Units at September 30, 1995 and December 31, 1994)..................................... (5,177,426) (6,579,736) General Partner.......................................... 4,853,933 4,839,769 --------- --------- (323,493) (1,739,967) --------- --------- $ 3,864,258 $ 6,520,408 ========== ==========
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, -------------------------- ---------------------------- 1995 1994 1995 1994 ------- -------- --------- --------- Revenue: Rental revenue................ $ 335,469 $ 498,090 $1,255,358 $1,416,152 Interest...................... 3,856 1,744 10,109 4,453 Gain on sale of real estate... - - 554,047 - --------- -------- --------- --------- Total revenue............... 339,325 499,834 1,819,514 1,420,605 --------- -------- --------- --------- Expenses: Interest...................... 92,155 149,281 358,760 457,264 Interest - affiliates......... (6,329) 11,063 17,846 191,451 Depreciation.................. 68,439 95,484 243,923 283,365 Property taxes................ 27,938 52,275 105,674 156,825 Personnel costs............... 51,720 72,929 198,953 218,894 Utilities..................... 20,830 33,586 119,394 136,214 Repairs and maintenance....... 24,404 63,141 168,978 194,588 Property management fees - affiliates........... 16,084 23,983 56,435 68,548 Other property operating expenses.................... 44,912 52,446 122,301 164,823 General and administrative.... 9,384 9,532 73,434 23,532 General and administrative - affiliates.................. 43,914 61,131 136,269 164,928 Reorganization expense........ 29,432 - 199,998 - Write-down for permanent impairment of real estate... - - - 661,921 --------- -------- --------- --------- Total expenses.............. 422,883 624,851 1,801,965 2,722,353 --------- -------- --------- --------- Income (loss) before extraordinary item............ $ (83,558) $(125,017) $ 17,549 $(1,301,748) Extraordinary item............... 1,398,925 - 1,398,925 - --------- -------- --------- ---------- Net income (loss)................ $1,315,367 $(125,017) $1,416,474 $(1,301,748) ========= ======== ========= ========== Net income (loss) allocable to limited partners - Current Income Unit................... $ 118,383 $ (11,251) $ 127,483 $ (117,157) Net income (loss) allocable to limited partners - Growth/ Shelter Unit.................. 1,183,831 (112,515) 1,274,827 (1,171,573) Net income (loss) allocable to General Partner............... 13,153 (1,251) 14,164 (13,018) --------- -------- --------- --------- Net income (loss)................ $1,315,367 $(125,017) $1,416,474 $(1,301,748) ========= ======== ========= ========== Net income (loss) per thousand limited partnership units: Current Income Units: Income (loss) before extraordinary item.......... $ (.81) $ (1.19) $ .16 $ (12.44) Extraordinary item............ 13.40 - 13.40 - --------- -------- --------- ---------- Net income (loss)............. $ 12.59 $ (1.19) $ 13.56 $ (12.44) ========= ======== ========= ========== Growth/Shelter Units: Income (loss) before extraordinary item.......... $ (11.24) $ (16.77) $ 2.36 $ (174.63) Extraordinary item............ 188.23 - 188.23 - --------- -------- --------- ---------- Net income (loss)............. $ 176.99 $ (16.77) $ 190.59 $ (174.63) ========= ======== ========= ==========
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, 1995 and 1994 Total General Limited Partners' Partner Partners Equity (Deficit) --------- ----------- --------------- Balance at December 31, 1993.............. $ (225,716) $(5,128,564) $(5,354,280) Contribution of advances purchased by General Partner and accrued interest............................... 5,080,143 - 5,080,143 Net loss General Partner........................ (13,018) - (13,018) Current Income Units................... - (117,157) (117,157) Growth/Shelter Units................... - (1,171,573) (1,171,573) --------- ---------- ---------- Total net loss............................ (13,018) (1,288,730) (1,301,748) --------- ---------- ---------- Balance at September 30, 1994............. $4,841,409 $(6,417,294) $(1,575,885) ========= ========== ========== 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) ========= ========== ==========
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 in Cash and Cash Equivalents Nine Months Ended September 30, --------------------------------- 1995 1994 --------- ---------- Cash flows from operating activities: Cash received from tenants........................ $1,241,767 $1,383,157 Cash paid to suppliers............................ (770,773) (679,382) Cash paid to affiliates........................... (59,149) (81,561) Interest received................................. 10,109 4,453 Interest paid..................................... (351,902) (384,330) Property taxes escrowed........................... (96,639) (131,721) --------- --------- Net cash provided by (used in) operating activities.............................. (26,587) 110,616 --------- --------- Cash flows from investing activities: Additions to real estate investments.............. (81,981) (62,113) Proceeds from sale of real estate................. 319,672 - --------- --------- Net cash provided by (used in) investing activities.............................. 237,691 (62,113) --------- --------- Cash flows from financing activities: Principal payments on mortgage notes payable......................................... (47,582) (63,004) Advances from affiliates - General Partner........ - 57,904 --------- --------- Net cash used in financing activities................ (47,582) (5,100) --------- --------- Net increase in cash and cash equivalents............ 163,522 43,403 Cash and cash equivalents at beginning of period............................................ 107,815 89,311 --------- --------- Cash and cash equivalents at end of period........... $ 271,337 $ 132,714 ========= =========
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, --------------------------------- 1995 1994 --------- ---------- Net income (loss).................................... $1,416,474 $(1,301,748) --------- ---------- Adjustments to reconcile net income (loss) to net cash provided by (used in)operating activities: Depreciation...................................... 243,923 283,365 Amortization of discounts on mortgage notes payable................................... 19,845 24,976 Interest added to advances from affiliates - General Partner................................. 17,846 191,451 Gain on sale of real estate....................... (554,047) - Write-down for permanent impairment of real estate.................................. - 661,921 Extraordinary item................................ (1,398,925) - Changes in assets and liabilities: Cash segregated for security deposits........... 16,420 (16,251) Accounts receivable............................. (3,641) 13,967 Escrow deposits................................. 308,198 69,904 Prepaid expenses and other assets............... 27,363 (7,501) Accounts payable and accrued expenses........... (1,227) 5,744 Accrued property taxes.......................... (118,699) 26,156 Claims settlement payable....................... (113,162) 5,226 Payable to affiliates - General Partner......... 133,555 151,915 Security deposits and deferred rental income........................................ (20,510) 1,491 ---------- --------- Total adjustments............................. (1,443,061) 1,412,364 ---------- --------- Net cash provided by (used in) operating activities.............................. $ (26,587) $ 110,616 ========== =========
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, 1995 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 the 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, 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 XXIII, L.P., c/o McNeil Real Estate Management, Inc., Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240. NOTE 3. - ------ As discussed in Note 5, the Partnership filed a Voluntary Petition for reorganization under Chapter 11 of the United States Bankruptcy Court in June 1994. The Partnership's First Amended Plan of Reorganization (the "Reorganization Plan") was filed with the Bankruptcy Court on February 13, 1995, and the Partnership's Disclosure Statement of Debtor-in-Possession (the "Disclosure Statement") was approved by the Bankruptcy Court on February 14, 1995. The Partnership operated in this Chapter 11 proceeding as a debtor-in-possession. Accordingly, the General Partner continued to manage the business and affairs of the Partnership subject to the jurisdiction and supervision of the United States Bankruptcy Court - Northern District of Texas (the "Bankruptcy Court"). On May 24, 1995 (the "Confirmation Date"), the Partnership received an order confirming its Reorganization Plan and is currently in the process of settling the remaining liabilities. Under the bankruptcy proceedings, certain liabilities had priority and the payment of certain other liabilities existing at June 30, 1994, were deferred. Such liabilities have been set forth separately in the financial statements. 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. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE 4. - ------ The Partnership pays property management fees equal to 5% of the gross rental receipts for its residential properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management and leasing services. Due to the bankruptcy proceedings, the property management fees paid by Woodbridge Apartments were reduced to 3% beginning December 1, 1994. 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 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 5, asset management fees totaling $366,329 accrued prior to the Confirmation Date were discharged. Total accrued but unpaid asset management fees subsequent to the Confirmation Date of $25,052 were outstanding at September 30, 1995. The General Partner has established a revolving credit facility not to exceed $5,000,000 in the aggregate which is available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. There is no assurance that the Partnership will receive any additional funds under the facility because no amounts have been reserved for any particular partnership. As of September 30, 1995, $2,362,004 remained available for borrowing under the facility; however, additional funds could become available as other partnerships repay existing borrowings. The General Partner has, in its discretion, advanced funds to the Partnership to meet its working capital requirements. These advances, which are unsecured and due on demand, accrue interest at a rate equal to the prime lending rate plus 1%. McNeil Real Estate Fund XXV, L.P., an affiliate which owns a phase of Harbour Club Apartments, has advanced funds to the Partnership for working capital requirements. The advance, which is unsecured and due on demand, accrues interest at a rate equal to the prime lending rate plus 1%. The total advances from affiliates at September 30, 1995 and December 31, 1994 consist of the following: September 30, December 31, 1995 1994 ------- -------- Advances from General Partner- revolving credit facility..................................... $ - $ 65,670 Advances from General Partner - other................... - 281,823 Advance from McNeil Real Estate Fund XXV, L.P........... - 113,000 Accrued interest payable................................ 37,228 70,583 ------- ------- $ 37,228 $531,076 ======= =======
Compensation and reimbursements paid to or accrued for the benefit of the General Partner and its affiliates are as follows: Nine Months Ended September 30, ------------------------------- 1995 1994 ------- ------- Property management fees............................... $ 56,435 $ 68,548 Charged to interest - affiliates: Interest on advances from affiliates - General Partner........................................... 17,846 191,451 Charged to general and administrative - affiliates: Partnership administration.......................... 79,902 109,189 Asset management fee................................ 56,367 55,739 ------- ------- $210,550 $424,927 ======= =======
The payable to affiliates - General Partner at September 30, 1995 and December 31, 1994 consisted primarily of unpaid asset management fees, property management fees and partnership general and administrative expenses. As discussed in Note 5, Advances from affiliates - General Partner and a portion of Payable to affiliates - General Partner were classified as unsecured claims and are deferred under the Chapter 11 proceedings. As outlined in the Reorganization Plan, any payments of advances and fees owed to affiliates of the General Partner is limited to remaining cash after the pre-petition and reorganization related payables have been paid. At September 30, 1995, the Partnership had $37,228 of such cash available to distribute to affiliate creditors. The remaining amounts owed to affiliates of the General Partner at Confirmation Date were discharged. NOTE 5. - ------ One of the Partnership's properties, Woodbridge Apartments, was encumbered by two mortgage notes payable. The first lien mortgage note payable was co-insured by the Federal Housing Administration and was, therefore, regulated by the Department of Housing and Urban Development ("HUD"). The second lien mortgage note payable, in the amount of $982,260, was payable in monthly installments of interest only and payments were limited to "surplus cash", as defined by HUD, and as calculated at June 30 and December 31 of each year. No "surplus cash" had been available to make the interest payments on the second lien and therefore, the Partnership ceased making such payments in April 1994. The Partnership was unsuccessful in attempting to negotiate a restructuring of the mortgage and the second lienholder was expected to initiate foreclosure proceedings. In an effort to prevent the loss of the property, the Partnership filed a Voluntary Petition for Reorganization under Chapter 11 of the United States Bankruptcy Court, Northern District of Texas on June 30, 1994. Concurrent with the filing of the Voluntary Petition for reorganization, the General Partner contributed to the Partnership the purchased advances of $4,375,661 plus accrued interest of $704,482 owing to the General Partner from the Partnership. As a result of its Chapter 11 proceeding, the realization of assets and liquidation of liabilities attributable to the Partnership were subject to significant uncertainties. The Partnership's financial statements include adjustments and reclassifications to reflect the liabilities that were deferred under the Chapter 11 proceeding as "Liabilities subject to compromise." The Partnership's First Amended Plan of Reorganization (the "Reorganization Plan") was filed with the Bankruptcy Court on February 13, 1995, and the Partnership's Disclosure Statement of Debtor-in-Possession (the "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 (See Note 7). The judgment lien creditors filed objections to confirmation of the Reorganization Plan. On April 12, 1995, the Bankruptcy Court did grant the order to sell Woodbridge Apartments but denied confirmation of the Reorganization Plan. The Partnership filed an appeal of the 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 24, 1995. Woodbridge Apartments was sold on May 25, 1995 and, in accordance with the Reorganization Plan, the first and second mortgage notes 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 issued an Order Regarding Objections to Claims that allowed the Partnership to pay outstanding pre-petition claims totaling approximately $124,000 in October 1995. On September 14, 1995, the Partnership sent an election form for each limited partner to choose whether to redeem their interest in the Partnership. The redemption price is 1/1000th of a cent per Unit. The limited partners were required to respond within 30 days, and at the close of the thirty day period, 321 limited partners had elected to redeem 4,435,311 of the units. The Partnership is currently attempting to obtain a "no-action" letter from the Securities and Exchange Commission ("SEC"). The "no-action" letter shall, at a minimum, provide (1) that the purchase of partnership interests can be accomplished without compliance with Rule 13e-3 of the Securities Exchange Act of 1934 and (2) that the SEC has not been advised by the Division of the SEC issuing the letter to pursue an enforcement action if the Reorganization Plan is consummated. In the event that a "no-action" letter satisfactory to the Partnership is not issued by the SEC, or the General Partner of the Partnership determines that the level of redemption could potentially result in the treatment of the Partnership as a corporation for tax purposes, then this provision shall be void and the limited partners will retain their interests. The SEC is expected to respond to the Partnership's request on or before December 22, 1995. At September 30, 1995, the Partnership held $37,228 of cash available to distribute to the affiliate creditors. The remaining amounts owed to affiliates were discharged resulting in an extraordinary gain of $1,398,925. The Partnership's financial statements include the accounts of Beckley Associates Limited Partnership. Beckley Associates, which owns Harbour Club II Apartments, and is wholly-owned by the Partnership and the General Partner. Beckley Associates was not included in the bankruptcy filing. Summarized below is a statement of assets, liabilities and partners' deficit of the portion of the Partnership included in the Chapter 11 reorganization as of September 30, 1995, and the results of operations for the nine months ended September 30, 1995, prepared on a going concern basis. The assets, liabilities and transactions of Beckley Associates have been excluded. September 30, December 31, 1995 1994 ------------ ----------- ASSETS ------ Asset held for sale............................ $ - $2,373,130 Cash and cash equivalents...................... 192,645 79,303 Cash segregated for security deposits.......... - 24,059 Accounts receivable............................ - 2,642 Escrow deposits................................ - 178,078 Prepaid expenses and other assets.............. - 26,024 ------- --------- $192,645 $2,683,236 ======= ========= LIABILITIES AND PARTNERS' DEFICIT --------------------------------- Mortgage notes payable, net of discounts....... $ - $2,434,653 Accounts payable and accrued expenses.......... 146,782 256,608 Accrued property taxes......................... - 17,608 Claims settlement payable...................... - 113,162 Payable to affiliates - General Partner........ 56,527 810,530 Advances from affiliates - General Partner..... 37,228 531,076 Security deposits and deferred rental income................................ - 21,340 ------- --------- 240,537 4,184,977 ------- --------- Partners' deficit.............................. (47,892) (1,501,741) ------- ---------- $192,645 $ 2,683,236 ======= ========== For the period June 30, 1994 Nine months ended through September 30, 1995 September 30, 1994 Rental revenue................................. $ 278,894 $ 188,235 Interest....................................... 6,557 1,071 Gain on sale of real estate.................... 554,047 - --------- - Total revenues............................... 839,498 189,306 --------- -------- Interest....................................... 81,695 59,188 Interest - affiliates.......................... 17,846 11,063 Depreciation................................... 63,740 38,764 Property taxes................................. 10,121 9,423 Personnel costs................................ 55,695 30,702 Utilities...................................... 34,321 14,853 Repairs and maintenance........................ 52,898 21,726 Property management fees - affiliates.......... 8,735 9,092 Other property operating....................... 49,850 21,302 General and administrative..................... 73,406 11,703 General and administrative - affiliates........ 136,269 90,896 Reorganization expense......................... 199,998 - --------- - Total expenses............................... 784,574 318,712 --------- -------- Income (loss) before extraordinary item........ 54,924 (129,406) Extraordinary item............................. 1,398,925 - --------- - Net income (loss).............................. $1,453,849 $(129,406) ========= ========
NOTE 6. - ------ On May 25, 1995, Woodbridge Apartments was sold to an unrelated third party for a cash price of $3,200,000. Cash proceeds and the gain on the disposition is 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) Carrying value....................................... (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 ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------ --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- The Partnership had net income of $1,315,367 and $1,416,474 for the three and nine months ended September 30, 1995, respectively, as compared to net losses of $125,017 and $1,301,748 for the same periods of 1994. The Partnership recorded a $1,398,925 extraordinary gain for the discharge of affiliate fees and advances related to the Chapter 11 proceedings during the third quarter of 1995 (see Item 1 - Note 4 and Note 5). The Partnership ceased making the interest only payments on the second lien on the Woodbridge Apartments in April 1994 which constituted a default under the mortgage agreement. The Partnership was unsuccessful in attempting to negotiate a restructuring of the mortgage, and the second lienholder was expected to initiate foreclosure proceedings. Accordingly, the Partnership recorded a write-down for permanent impairment of real estate of $661,921 on Woodbridge Apartments during the first quarter of 1994, to write down the property to its estimated net realizable value. In an effort to prevent the loss of the property, the Partnership filed a Voluntary Petition for Reorganization under Chapter 11 in the United States Bankruptcy Court, Northern District of Texas on June 30, 1994. In January 1995, the Partnership received an offer to buy the property from an unaffiliated third party for a purchase price that was higher than its book value, after the write-down. The sale closed on May 25, 1995, and the Partnership recorded a gain on the sale of $554,047. The Partnership recorded $839,773 of revenue and $351,857 of expense related to Woodbridge Apartments during the first nine months of 1995. Harbour Club II 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"). McREMI had been managing all four phases of the complex until December 1992, when the property management agreement between McREMI and UREF 12 was canceled. Additionally, in January 1993, Phase I defaulted on the mortgage loan to HUD and unless a refinancing agreement can be reached with the lender, the property is subject to foreclosure. If Phase I is lost to foreclosure, it would be extremely difficult to operate Phases II and III because the pool and clubhouse are located in Phase I. Harbour Club II had an improved average occupancy of 92% for the first nine months of 1995 as compared to an average occupancy of 88% for the same period of 1994. Harbour Club II was able to provide enough cash flow from operations to meet ordinary operating expenses as well as the debt service for its related mortgage during the first nine months of 1995; however, the property is in need of major capital repairs and improvements in order to compete in its local market. The Partnership is seeking alternatives to fund the necessary improvements, but at this time no sources have been found. RESULTS OF OPERATIONS - --------------------- Revenue: Rental revenue decreased $162,621 and $160,794 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods of 1994 primarily due to the sale of Woodbridge Apartments on May 25, 1995. The Partnership recorded a $554,047 gain from the sale of Woodbridge Apartments. Expenses: Total expenses decreased $201,968 and $920,388 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods of 1994. The 1994 expenses include a $661,921 write-down for permanent impairment of real estate related to Woodbridge Apartments. As previously discussed, Woodbridge Apartments was sold on May 25, 1995; therefore the 1995 expenses include only five months of activity related to Woodbridge. Interest - affiliates decreased $17,392 and $173,605 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods of 1994. The decrease was due to the decrease in the balance of purchased advances which were contributed to the Partnership in June 1994 by the General Partner. Additionally, in accordance with the Reorganization Plan, advances due to the General Partner were discharged. The third quarter of 1995 includes an adjustment related to this settlement. Property taxes decreased $24,337 and $51,151 for the three and nine months ended September 30, 1995, respectively, primarily due to reduced tax expense at Harbour Club II Apartments that resulted from a successful tax appeal. The remaining decrease is due to the sale of Woodbridge Apartments. Repairs and maintenance expense decreased $38,737 and $25,610 for the three and nine months ended September 30, 1995, respectively, as compared to the same periods of 1994 due to a decrease in carpet and appliance replacements at Harbour Club II. The remaining decrease is due to the sale of Woodbridge Apartments. Other property operating expense decreased $7,534 and $42,522 for the three and nine months ended September 30, 1995, as compared to the same periods of 1994 primarily due to a decrease in legal and bad debt expense at Harbour Club II Apartments that has resulted from the improved economic conditions in Belleville, Michigan, where the property is located. General and administrative expense decreased $148 and increased $49,902 for the three and nine months ended September 30, 1995, as compared to the same period of 1994. During the second quarter of 1995, the Partnership incurred $41,136 for legal fees related to the settlement of the judgment lien rendered in connection with the Illinois rescission suit (see Item 1 - Note 2 and Note 7). No such fees were incurred during 1994. The remaining increase is primarily due to higher audit fees. The Partnership incurred $29,432 and $199,998 of reorganization expense during the three and nine months ended September 30, 1995, respectively, for legal and professional fees related to the Partnership's bankruptcy proceeding. No such expenses were incurred in 1994. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership used $26,587 of cash flow from operations for the nine months ended September 30, 1995 as compared to cash provided by operations of $110,616 for the same period of 1994. Cash received from tenants, interest paid and property taxes escrowed decreased primarily due to the sale of Woodbridge Apartments. Cash paid to suppliers increased due to reorganization costs relating to the pending bankruptcy proceedings. During 1994, the Partnership paid approximately $13,000 of property management fees accrued in the prior year for Harbour Club II Apartments. The remaining decrease in cash paid to affiliates is due to the sale of Woodbridge Apartments. The minimal cash balances of the Partnership have continued to limit capital improvements. Additions to real estate totaled $81,981 for the first nine months of 1995 as compared to $62,113 for the same period of 1994. The Partnership received $319,672 of proceeds from the sale of Woodbridge Apartments. The use of these proceeds is restricted by the Bankruptcy Court. During the first nine months of 1994, the Partnership received $57,904 of advances from affiliates of the General Partner to fund operating cash shortfalls. The Partnership has received no such advances during the first nine months of 1995. At September 30, 1995, the Partnership held cash and cash equivalents of $271,337, of which $192,645 was in segregated accounts which have been restricted by the Bankruptcy Court, and accordingly was not available for general use by the Partnership. Short-term liquidity - -------------------- As previously discussed in Item 1 - Note 5, the Partnership was operating under Chapter 11 proceedings as a debtor-in-possession. On May 25, 1995, in accordance with the Reorganization Plan, the Partnership sold Woodbridge Apartments. A portion of the net proceeds from the sale of the property were used to pay the settlement and related legal fees of the judgment lien creditors. In September 1995, the Partnership received an Order Regarding Objections to Claims and a Final Resolution of Fees & Expenses which allowed the Partnership to distribute funds to the remaining creditors as outlined in the Reorganization Plan in October 1995. The General Partner has established a revolving credit facility not to exceed $5,000,000 in the aggregate which is available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. There is no assurance that the Partnership will receive any additional funds under the facility because no amounts have been reserved for any particular partnership. As of September 30, 1995, $2,362,004 remained available for borrowing under the facility; however, additional funds could become available as other partnerships repay existing borrowings. Additionally, the General Partner has, at its discretion, advanced funds to the Partnership in addition to the revolving credit facility. The General Partner is not obligated to advance funds to the Partnership and there is no assurance that the Partnership will receive additional funds. The balance of cash and cash equivalents can be considered no more than a minimum level of cash reserves for the properties operations. For the rest of 1995, operations of Harbour Club II Apartments is expected to provide sufficient positive cash flow for normal operating expenses and debt service payments. However, any needed capital improvements will require the use of existing cash reserves or other sources of cash. No such sources have been identified. The Partnership has no established lines of credit from outside sources. Although affiliates of the Partnership have previously funded such cash deficits, there can be no assurance that the Partnership will receive additional funds Other possible actions to resolve cash deficiencies include refinancings, deferring capital expenditures on the Partnership property except where improvements are expected to enhance the competitiveness and marketability of the property, or property sale. A sale or refinancing of the property is only a possibility. Long-term liquidity - ------------------- The Partnership has been in a distressed cash situation for several years. After the sale of Woodbridge Apartments, the Partnership has one remaining property, Harbour Club II Apartments. Although Harbour Club II is able to operate in such a manner 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 general and administrative 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. These conditions raise substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. Distributions - ------------- To maintain adequate cash balances of the Partnership, distributions to Current Income Unit holders were suspended in 1988. There have been no distribution to Growth/Shelter Units holders. Distributions to Unit holders will remain suspended for the foreseeable future. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------ ----------------- 1) Robert and Jeanette Kotowski, et al, v. Southmark Realty Partners III, Ltd. (presently known as McNeil Real Estate Fund XXIII, L.P.) and Southmark Investment Group 85, Inc. The plaintiffs sought rescission, pursuant to the Illinois Securities Act, of principal invested in McNeil Real Estate Fund XXIII, L.P. and other relief including damages for breach of fiduciary duty and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The defendants filed an answer denying all of the allegations set forth in the plaintiff's complaint. The defendants filed a motion to dismiss the case, and two out of the three counts were dismissed. The remaining count was limited to the plaintiffs who purchased the securities within three years of the date the suit was filed. In this regard, the Partnership agreed to rescind 76,000 Units and settled claims totaling $116,374. The claims consisted of the $76,000 original purchase price of the units plus $51,395 interest less distributions of $11,021 previously paid. The $64,979 original purchase price net of distributions paid was charged to limited partners' deficit in 1991 and accrued interest was charged to interest expense in 1993, 1992 and 1991. On September 15, 1992, the Partnership entered into an agreement with the plaintiffs whereby the Partnership agreed to pay the settled claims over 60 months at an interest rate of 8%, and pursuant to terms and conditions as outlined in the agreement. The Partnership made the first two payments due under the agreement; however, the October 1993 installment and both installments due during 1994 were not made due to the lack of funds available to the Partnership. An appeal had been filed by the plaintiffs who lost on the two dismissed counts. On November 30, 1992, the Court dismissed all but $116,374 of claims that had previously been agreed to by the Partnership. The plaintiffs presented, on February 3, 1995, their motion to file an amended consolidated class action complaint and, on February 15, 1995, their motion to certify a class. The Partnership's Reorganization Plan and Disclosure Statement were submitted February 20, 1995 to a vote of the impaired creditors, as defined. The plaintiffs filed objections to confirmation of the Partnership's First Amended Plan of Reorganization. On April 12, 1995, the Bankruptcy Court did grant the order to sell Woodbridge Apartments but denied confirmation of the Reorganization Plan. The Partnership filed an appeal of the Court's ruling and, in the meantime, attempted to settle the matter with the plaintiffs, 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 plaintiffs, including legal costs. The Reorganization Plan, as amended, was subsequently confirmed by the Bankruptcy Court on May 24, 1995 and on June 2, 1995 the Partnership paid $156,566 to the plaintiffs. 2) Martha Hess, et. al. v. Southmark Equity Partners II, Ltd., Southmark Income Investors, Ltd., Southmark Equity Partners, Ltd., Southmark Realty Partners III, Ltd. (presently known as McNeil Real Estate Fund XXIII, L.P.), 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. Proceedings against the Partnership were stayed pursuant to the voluntary petition for reorganization filed by the Partnership on June 30, 1994. Plaintiffs have agreed that all claims against the Partnership have been fully satisfied in the bankruptcy. They have agreed to dismiss those claims with prejudice. ITEM 2. CHANGES IN SECURITIES - ------ ---------------------- In accordance with the Partnership's Reorganization Plan, on September 14, 1995, the Partnership sent an election form for each limited partner to choose whether to redeem their interest in the Partnership. The redemption price is 1/1000th of a cent per Unit. The limited partners were required to respond within 30 days, and at the close of the thirty day period, 321 limited partners had elected to redeem 4,435,311 of the units. The Partnership is currently attempting to obtain a "no-action" letter from the Securities and Exchange Commission ("SEC"). The "no-action" letter shall, at a minimum, provide (1) that the purchase of partnership interests can be accomplished without compliance with Rule 13e-3 of the Securities Exchange Act of 1934 and (2) that the SEC has not been advised by the Division of the SEC issuing the letter to pursue an enforcement action if the Reorganization Plan is consummated. In the event that a "no-action" letter satisfactory to the Partnership is not issued by the SEC, or the General Partner of the Partnership determines that the level of redemption could potentially result in the treatment of the Partnership as a corporation for tax purposes, then this provision shall be void and the limited partners will retain their interests. The SEC is expected to respond to the Partnership's request on or before December 22, 1995. 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 9,399 and 9,419 Current Income Units (in thousands) outstanding in 1995 and 1994 and 6,689 and 6,709 Growth/Shelter Units (in thousands) outstanding in 1995 and 1994, respectively.
b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended September 30, 1995. MCNEIL REAL ESTATE FUND 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 , 1995 By: /s/ Donald K. Reed - ----------------------------------- --------------------------------------- Date Donald K. Reed President and Chief Executive Officer November 14, 1995 By: /s/ Robert C. Irvine - ----------------------------------- --------------------------------------- Date Robert C. Irvine Chief Financial Officer of McNeil Investors, Inc. Principal Financial Officer November 14, 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 331,224 0 20,674 0 0 0 6,033,723 (2,585,603) 3,864,258 0 3,794,821 0 0 0 0 3,864,258 1,255,358 1,819,514 0 0 1,425,359 0 376,606 0 0 0 0 1,398,925 0 1,416,474 0 0
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