-----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, LItSQj+9fhux9iyJTjhgGeEsjVFU836w+RtPR7BnUxEajvKb1gHhlGLtWpW3Mb0F t3J3RmLYnGi6I+sxh+JahA== 0000783414-96-000006.txt : 19960816 0000783414-96-000006.hdr.sgml : 19960816 ACCESSION NUMBER: 0000783414-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 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: 96612211 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 June 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 (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)
June 30, December 31, 1996 1995 ---------------- --------------- ASSETS - ------ Real estate investments: Land..................................................... $ 239,966 $ 239,966 Buildings and improvements............................... 5,938,477 5,836,474 -------------- -------------- 6,178,443 6,076,440 Less: Accumulated depreciation.......................... (2,778,879) (2,648,343) -------------- -------------- 3,399,564 3,428,097 Cash and cash equivalents................................... 133,578 233,222 Cash segregated for security deposits....................... 42,843 54,921 Accounts receivable......................................... 4,066 11,395 Escrow deposits............................................. 102,904 91,296 Prepaid expenses and other assets........................... 6,893 6,893 -------------- -------------- $ 3,689,848 $ 3,825,824 ============== ============== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) - ------------------------------------------ Mortgage note payable, net of discount...................... $ 3,773,524 $ 3,787,802 Accounts payable and accrued expenses....................... 40,274 93,165 Accrued interest............................................ 27,304 27,446 Accrued property taxes...................................... 59,752 43,142 Payable to affiliates - General Partner..................... 185,037 114,218 Security deposits and deferred rental revenue............... 43,361 50,820 -------------- -------------- 4,129,252 4,116,593 -------------- -------------- Partners' equity (deficit): Limited partners - 45,000,000 Units authorized; 11,622,696 and 16,108,041 Units outstanding at June 30, 1996 and December 31, 1995, respectively (6,681,985 and 9,419,080 Current Income Units out- standing, and 4,940,711 and 6,688,961 Growth/Shelter Units outstanding at June 30, 1996 and December 31, 1995, respectively)...................... (5,292,223) (5,145,030) General Partner.......................................... 4,852,819 4,854,261 -------------- -------------- (439,404) (290,769) -------------- -------------- $ 3,689,848 $ 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 Six Months Ended June 30, June 30, --------------------------------- --------------------------------- 1996 1995 1996 1995 -------------- -------------- -------------- -------------- Revenue: Rental revenue................ $ 325,699 $ 429,061 $ 644,567 $ 919,889 Interest...................... 2,078 4,499 4,220 6,253 Gain on sale of real estate... - 554,047 - 554,047 ------------- ------------- ------------- ------------- Total revenue............... 327,777 987,607 648,787 1,480,189 ------------- ------------- ------------- ------------- Expenses: Interest...................... 91,665 115,425 183,543 266,605 Interest - affiliates......... - 11,480 - 24,175 Depreciation.................. 66,639 81,368 130,536 175,484 Property taxes................ 31,000 35,976 59,752 77,736 Personnel expenses............ 45,339 73,896 100,780 147,233 Utilities..................... 25,990 42,694 62,849 98,564 Repair and maintenance........ 58,639 67,713 90,210 144,574 Property management fees - affiliates........... 16,311 19,673 32,272 40,351 Other property operating expenses.................... 17,612 27,287 35,336 77,389 General and administrative.... 10,559 54,424 21,446 64,050 General and administrative - affiliates.................. 35,023 43,268 70,856 92,355 Reorganization expenses....... 999 170,566 5,362 170,566 ------------- ------------- ------------- ------------- Total expenses.............. 399,776 743,770 792,942 1,379,082 ------------- ------------- ------------- ------------- Net income (loss)................ $ (71,999) $ 243,837 $ (144,155) $ 101,107 ============= ============= ============= ============= Net income (loss) allocated to limited partners - Current Income Units.................. $ (6,480) $ 21,945 $ (12,974) $ 9,100 Net income (loss) allocated to limited partners - Growth/ Shelter Units................. (64,799) 219,453 (129,739) 90,996 Net income (loss) allocated to General Partner............... (720) 2,439 (1,442) 1,011 ------------- ------------- ------------- ------------- Net income (loss)................ $ (71,999) $ 243,837 $ (144,155) $ 101,107 ============= ============= ============= ============= Net income (loss) per thousand limited partnership units: Current Income Units.......... $ (.97) $ 2.33 $ (1.94) $ .97 ============= ============= ============= ============= Growth/Shelter Units.......... $ (13.12) $ 32.81 $ (26.26) $ 13.60 ============= ============= ============= =============
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 Six Months Ended June 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........................ 1,011 - 1,011 Current Income Units................... - 9,100 9,100 Growth/Shelter Units................... - 90,996 90,996 ------------- ------------- ------------- Total net income..................... 1,011 100,096 101,107 ------------- ------------- ------------- Balance at June 30, 1995.................. $ 4,840,780 $ (6,479,640) $ (1,638,860) ============= ============= ============= 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........................ (1,442) - (1,442) Current Income Units................... - (12,974) (12,974) Growth/Shelter Units................... - (129,739) (129,739) ------------- ------------- ------------- Total net loss....................... (1,442) (142,713) (144,155) ------------- ------------- ------------- Balance at June 30, 1996.................. $ 4,852,819 $ (5,292,223) $ (439,404) ============= ============= =============
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
Six Months Ended June 30, ------------------------------------ 1996 1995 ---------------- --------------- Cash flows from operating activities: Cash received from tenants............................... $ 658,764 $ 918,867 Cash paid to suppliers................................... (372,490) (522,201) Cash paid to affiliates.................................. (32,309) (42,718) Interest received........................................ 4,220 6,253 Interest paid............................................ (175,267) (263,695) Property taxes paid and escrowed......................... (53,383) (77,026) -------------- -------------- Net cash provided by operating activities................... 29,535 19,480 -------------- -------------- Cash flows from investing activities: Additions to real estate investments..................... (102,003) (24,417) Proceeds from sale of real estate........................ - 319,672 -------------- -------------- Net cash provided by (used in) investing activities......... (102,003) 295,255 -------------- -------------- Cash flows from financing activities: Principal payments on mortgage notes payable................................................ (22,696) (36,752) Redemption of limited partner units...................... (4,480) - -------------- -------------- Net cash used in financing activities....................... (27,176) (36,752) -------------- -------------- Net increase (decrease) in cash and cash equivalents.............................................. (99,644) 277,983 Cash and cash equivalents at beginning of period................................................... 233,222 107,815 -------------- -------------- Cash and cash equivalents at end of period.................. $ 133,578 $ 385,798 ============== ==============
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 Operating Activities
Six Months Ended June 30, ----------------------------------- 1996 1995 ---------------- --------------- Net income (loss)........................................... $ (144,155) $ 101,107 -------------- -------------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation............................................. 130,536 175,484 Amortization of discount on mortgage notes payable.......................................... 8,418 15,830 Interest added to advances from affiliates - General Partner........................................ - 24,175 Gain on sale of real estate.............................. - (554,047) Changes in assets and liabilities: Cash segregated for security deposits.................. 12,078 17,981 Accounts receivable.................................... 7,329 3,921 Escrow deposits........................................ (11,608) 263,771 Prepaid expenses and other assets...................... - (159) Accounts payable and accrued expenses.................. (52,891) 89,775 Accrued interest....................................... (142) - Accrued property taxes................................. 16,610 (77,679) Claims settlement payable.............................. - (113,162) Payable to affiliates - General Partner................ 70,819 89,988 Security deposits and deferred rental revenue.............................................. (7,459) (17,505) -------------- -------------- Total adjustments.................................... 173,690 (81,627) -------------- -------------- Net cash provided by operating activities................... $ 29,535 $ 19,480 ============== ==============
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) June 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 six months ended June 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 (the "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 (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. 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 $1,435,024 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 $83,245 were outstanding at June 30, 1996. Compensation and reimbursements paid to or accrued for the benefit of the General Partner and its affiliates are as follows: Six Months Ended June 30, -------------------------- 1996 1995 ---------- ---------- Property management fees........................ $ 32,272 $ 40,351 Charged to interest - affiliates: Interest on advances from affiliates - General Partner............................ - 24,175 Charged to general and administrative - affiliates: Partnership administration................... 39,927 56,192 Asset management fee......................... 30,929 36,163 --------- ---------- $ 103,128 $ 156,881 ========= ========== Payable to affiliates - General Partner at June 30, 1996, and December 31, 1995, consists primarily of unpaid asset management fees, property management fees and reimbursable costs that are due and payable from current operations. NOTE 6. - ------- 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 had been managing all four phases of the complex until December 1992, when the property management agreement between McREMI and UREF 12 was canceled. Additionally, in January 1993, Phase I defaulted on its mortgage loan to the United States Department of Housing and Urban Development 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 June 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. NOTE 7. - ------- 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 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 --------------------- 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 $29,535 for the first half of 1996 as compared to $19,480 provided in the first half of 1995. With the disposition of Woodbridge Apartments on May 25, 1995, cash received from tenants, cash paid to suppliers, interest paid and property taxes paid and escrowed decreased. Cash paid to suppliers decreased further during 1996 due to the decreased reorganization expenses relating to the Partnership's bankruptcy proceeding. Cash used for additions to real estate improvements totaled $102,003 for the six months ended June 30, 1996 as compared to $24,417 for the same period of the prior year. 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. 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 $22,696 for the six months ended June 30, 1996, down from $36,752 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 half of 1996. Short-term liquidity: At June 30, 1996, the Partnership held $133,578 of cash and cash equivalents, down $99,644 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 June 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 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 June 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 June 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 during the first half 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 $327,777 and $648,787 for the three months and six months ended June 30, 1996, respectively, as compared to $987,607 and $1,480,189 for the same periods of 1995. Revenues for the three months and six months ended June 30, 1995 include a $554,047 gain from the sale of Woodbridge Apartments on May 25, 1995. Rental revenue decreased $103,362 and $275,322 for the three months and six months ended June 30, 1996, respectively, as compared to the same periods of 1995. Most of the decrease is attributable to the May 25, 1995, sale of Woodbridge Apartments. Rental revenue at Harbour Club II Apartments increased $1,516 or .2% for the first half of 1996 as compared to the same period of prior year. The occupancy rate at Harbour Club II Apartments decreased to 90% at the end of June 1996 from 96% at the end of June 1995. Increases in base rental rates were offset by increased vacancy loss. Expenses: Total Partnership expenses decreased $343,994 and $586,140 for the three months and six months ended June 30, 1996, respectively, as compared to the same periods of 1995. All line items decreased primarily due to the May 25, 1995, sale of Woodbridge Apartments. Pursuant to the Partnership's Reorganization Plan, all interest-bearing liabilities due to affiliates were discharged during 1995. Thus, no interest - affiliates was incurred during the first half 1996 as compared to $24,175 of such interest in the first half of 1995. General and administrative decreased $43,865 and $42,604 for the three months and six months ended June 30, 1996, respectively, as compared to the same periods of 1995. The decrease was due to the $41,000 legal fees paid in 1995 relating to the settlement of the judgment lien rendered in connection with the Illinois rescission suit. General and administrative - affiliates decreased $8,245 and 21,499 for the three months and six months ended June 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. The Partnership incurred $170,566 of reorganization expenses relating to the Partnership's bankruptcy proceeding during the first half of 1995. Only $5,362 of such expenses were incurred during 1996. Excluding the effects of the disposition of Woodbridge Apartments, expenses incurred by the Partnership for operating at Harbour Club II Apartments increased $12,694 during the six months ended June 30, 1996, as compared to the same period of 1995. The increases in operating expenses at Harbour Club II Apartments were concentrated in depreciation. Depreciation increased by $18,792 during the first half of 1996 as a result of $102,003 of capital improvements placed in service during the first six months of 1996. 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. (Incorpo- rated 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 Part- nership 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 June 30, 1996. b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended June 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 August 14, 1996 By: /s/ Donald K. Reed - ------------------- ------------------------------------------ Date Donald K. Reed President and Chief Executive Officer August 14, 1996 By: /s/ Ron K. Taylor - ------------------- ----------------------------------------- Date Ron K. Taylor Acting Chief Financial Officer of McNeil Investors, Inc. August 14, 1996 By: /s/ Carol A. Fahs - ------------------- ----------------------------------------- Date Carol A. Fahs Chief Accounting Officer of McNeil Real Estate Management, Inc. EX-27 2
5 6-MOS DEC-31-1996 JUN-30-1996 133,578 0 0 0 0 0 6,178,443 (2,778,879) 3,689,848 0 3,773,524 0 0 0 0 3,689,848 644,567 648,787 0 0 609,399 0 183,543 (144,155) 0 0 0 0 0 (144,155) 0 0
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