-----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, LOV0bPggQBJMWkDSX91emtFeaLoZlYpeEXLdkh3J2/dvDRHsnsJ7DDGhZPIvYXa2 9W5vCJplD1fPP0oFJhzSoA== 0000793307-99-000004.txt : 19990518 0000793307-99-000004.hdr.sgml : 19990518 ACCESSION NUMBER: 0000793307-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND XXVI LP CENTRAL INDEX KEY: 0000793307 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330168395 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15460 FILM NUMBER: 99625864 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 EQUITY 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 quarterly period ended March 31, 1999 ----------------------------------------- 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 0-15460 --------- MCNEIL REAL ESTATE FUND XXVI, L.P. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 33-0168395 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (972) 448-5800 ----------------------------- Indicate by check mark whether the registrant, (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- MCNEIL REAL ESTATE FUND XXVI, L.P. BALANCE SHEETS (Unaudited)
March 31, December 31, 1999 1998 ------------ ------------ ASSETS - ------ Real estate investments: Land ...................................................... $ 6,750,456 $ 6,750,456 Buildings and improvements ................................ 55,882,777 55,757,865 ------------ ------------ 62,633,233 62,508,321 Less: Accumulated depreciation and amortization .......... (27,551,024) (26,899,633) ------------ ------------ 35,082,209 35,608,688 Cash and cash equivalents .................................... 2,220,734 2,256,842 Cash segregated for security deposits ........................ 232,886 232,083 Accounts receivable, net of allowance for doubtful accounts of $203,657 at March 31, 1999 and December 31, 1998 ......................................... 1,206,783 1,123,136 Prepaid commissions .......................................... 369,552 387,092 Prepaid expenses and other assets ............................ 294,032 254,614 Deferred borrowing costs, net of accumulated amortization of $266,403 and $255,443 at March 31, 1999 and December 31, 1998, respectively .............................................. 184,758 186,238 ------------ ------------ $ 39,590,954 $ 40,048,693 ============ ============ LIABILITIES AND PARTNERS' EQUITY (DEFICIT) - ------------------------------------------ Mortgage notes payable ....................................... $ 18,902,015 $ 18,981,387 Accounts payable and accrued expenses ........................ 234,869 247,764 Accrued property taxes ....................................... 161,098 40,161 Payable to affiliates - General Partner ...................... 1,044,323 931,891 Security deposits and deferred rental revenue ................ 281,176 219,345 ------------ ------------ 20,623,481 20,420,548 ------------ ------------ Partners' equity (deficit): Limited Partners - 90,000,000 Units authorized; 86,530,671 Units issued and outstanding at March 31, 1999 and December 31, 1998 ................. 19,386,947 20,046,031 General Partner ........................................... (419,474) (417,886) ------------ ------------ 18,967,473 19,628,145 ------------ ------------ $ 39,590,954 $ 40,048,693 ============ ============
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 XXVI, L.P. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ------------------------------- 1999 1998 ----------- ----------- Revenue: Rental revenue .............................................. $ 2,167,694 $ 2,305,260 Interest .................................................... 22,335 29,888 ----------- ----------- Total revenue ............................................. 2,190,029 2,335,148 ----------- ----------- Expenses: Interest .................................................... 370,219 431,508 Depreciation and amortization ............................... 651,391 617,090 Property taxes .............................................. 188,591 190,233 Personnel expenses .......................................... 192,505 226,794 Utilities ................................................... 244,676 233,841 Repairs and maintenance ..................................... 233,765 231,502 Property management fees -affiliates ........................ 128,494 131,038 Other property operating expenses ........................... 111,723 121,798 General and administrative .................................. 56,090 122,726 General and administrative - affiliates ..................... 171,369 192,692 ----------- ----------- Total expenses ............................................ 2,348,823 2,499,222 ----------- ----------- Net loss ........................................................ $ (158,794) $ (164,074) =========== =========== Net loss allocable to limited partners .......................... $ (157,206) $ (162,433) Net loss allocable to General Partner ........................... (1,588) (1,641) ----------- ----------- Net loss ........................................................ $ (158,794) $ (164,074) =========== =========== Net loss per thousand limited partnership units ................. $ (1.82) $ (1.88) =========== =========== Distributions per thousand limited partnership units ............ $ 5.80 $ 17.33 =========== ===========
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 XXVI, L.P. STATEMENTS OF PARTNERS' EQUITY (DEFICIT) (Unaudited) For the Three Months Ended March 31, 1999 and 1998
Total Partners' General Limited Equity Partner Partners (Deficit) ------------- ------------ ------------ Balance at December 31, 1997 ............... $ (410,929) $ 23,273,176 $ 22,862,247 Net loss ................................... (1,641) (162,433) (164,074) Distributions to limited partners .......... -- (1,499,992) (1,499,992) ------------ ------------ ------------ Balance at March 31, 1998 .................. $ (412,570) $ 21,610,751 $ 21,198,181 ============ ============ ============ Balance at December 31, 1998 ............... $ (417,886) $ 20,046,031 $ 19,628,145 Net loss ................................... (1,588) (157,206) (158,794) Distributions to limited partners .......... -- (501,878) (501,878) ------------ ------------ ------------ Balance at March 31, 1999 .................. $ (419,474) $ 19,386,947 $ 18,967,473 ============ ============ ============
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 XXVI, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Increase (Decrease) in Cash and Cash Equivalents
Three Months Ended March 31, -------------------------------- 1999 1998 ------------ ------------ Cash flows from operating activities: Cash received from tenants ........................ $ 2,144,327 $ 2,229,814 Cash paid to suppliers ............................ (872,283) (1,145,366) Cash paid to affiliates ........................... (187,431) (130,809) Interest received ................................. 22,335 29,888 Interest paid ..................................... (359,760) (408,523) Property taxes paid and escrowed .................. (67,654) (111,637) ----------- ----------- Net cash provided by operating activities ............ 679,534 463,367 ----------- ----------- Net cash used in investing activities: Additions to real estate investments and asset held for sale ............................. (124,912) (17,115) ----------- ----------- Cash flows from financing activities: Principal payments on mortgage notes payable ...... (79,372) (97,980) Deferred borrowing costs paid ..................... (9,480) -- Distributions to limited partners ................. (501,878) (1,499,992) ----------- ----------- Net cash used in financing activities ................ (590,730) (1,597,972) ----------- ----------- Net decrease in cash and cash equivalents ............ (36,108) (1,151,720) Cash and cash equivalents at beginning of period ............................................ 2,256,842 2,823,216 ----------- ----------- Cash and cash equivalents at end of period ........... $ 2,220,734 $ 1,671,496 =========== ===========
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 XXVI, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Loss to Net Cash Provided by Operating Activities
Three Months Ended March 31, ---------------------------- 1999 1998 ---------- ---------- Net loss .............................................. $(158,794) $(164,074) --------- --------- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization ...................... 651,391 617,090 Amortization of deferred borrowing costs ........... 10,960 23,449 Changes in assets and liabilities: Cash segregated for security deposits ............ (803) (3,824) Accounts receivable .............................. (83,647) (26,620) Prepaid commissions .............................. 17,540 (27,581) Prepaid expenses and other assets ................ (39,418) 6,615 Accounts payable and accrued expenses ............ (12,895) (187,355) Accrued property taxes ........................... 120,937 78,596 Payable to affiliates - General Partner .......... 112,432 192,921 Security deposits and deferred rental revenue ........................................ 61,831 (45,850) --------- --------- Total adjustments .............................. 838,328 627,441 --------- --------- Net cash provided by operating activities ............. $ 679,534 $ 463,367 ========= =========
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 XXVI, L.P. Notes to Financial Statements March 31, 1999 (Unaudited) NOTE 1. - ------- McNeil Real Estate Partners XXVI, L.P., (the "Partnership"), formerly known as Southmark Equity 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 and commercial properties. The General Partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil ("McNeil"). The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240. In the opinion of management, the financial statements reflect all adjustments necessary for a fair presentation of the Partnership's financial position and results of operations. All adjustments were of a normal recurring nature. However, the results of operations for the three months ended March 31, 1999 are not necessarily indicative of the results to be expected for the year ending December 31, 1999. NOTE 2. - ------- The financial statements should be read in conjunction with the financial statements contained in the Partnership's Report on Form 10-K for the year ended December 31, 1998, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Real Estate Fund XXVI, L.P., c/o McNeil Real Estate Management, Inc., Investor Services, 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240. NOTE 3. - ------- The Partnership pays property management fees equal to 5% of gross rental receipts for its residential property and 6% of gross rental receipts for its commercial properties to McNeil Real Estate Management, Inc., ("McREMI"), an affiliate of the General Partner, for providing property management services for the Partnership's residential and commercial properties and leasing services for its residential property. McREMI may also choose to provide leasing services for the Partnership's commercial properties, in which case McREMI will receive property management fees from such commercial properties equal to 3% of the property's gross rental receipts plus leasing commissions based on the prevailing market rate for such services where the property is located. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. The Partnership is incurring an asset management fee which is payable to the General Partner. Through 1999, the Asset Management Fee is calculated as 1% of the Partnership's tangible asset value. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $10,000 per apartment unit for residential property and $50 per gross square foot for commercial property to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible items. The fee percentage decreases to .75% in 2000, .50% in 2001 and .25% thereafter. Total accrued but unpaid asset management fees of $811,979 were outstanding at March 31, 1999. Compensation and reimbursements paid to or accrued for the benefit of the General Partner and its affiliates are as follows: Three Months Ended March 31, -------------------------- 1999 1998 ---------- ----------- Property management fees - affiliates.......... $ 128,494 $ 131,038 Charged to general and administrative - affiliates: Partnership administration.................. 43,472 42,465 Asset management fee........................ 127,897 150,227 ----------- ----------- $ 299,863 $ 323,730 =========== =========== The total payable to affiliates - General Partner at March 31, 1999 and December 31, 1998 consisted primarily of unpaid asset management fees, property management fees and partnership general and administrative expenses and are due and payable from current operations. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- The Partnership is engaged in diversified real estate activities, including the ownership, operation and management of residential and commercial real estate and other real estate related assets. At March 31, 1999, the Partnership owned one apartment property, two office buildings and one retail center. Three of the four Partnership's properties are subject to mortgage notes. RESULTS OF OPERATIONS Revenue: Total Partnership revenue decreased by $145,119 for the three months ended March 31, 1999 as compared to the same period in 1998. Excluding the effects of the sale of Edison Ford Square in April 1998, Partnership revenue decreased $9,571 for the three months ended March 31, 1999 as compared to the same period last year. Interest income for the three months ended March 31, 1999 decreased by $7,553 as compared to the same period last year due to an decrease in the average cash balance being invested in interest bearing accounts. Expenses: Total expenses decreased by $150,399 for the three months ended March 31, 1999 as compared to the same period of 1998. Excluding the effects of the sale of Edison Ford Square, Partnership expenses decreased $74,618 or 3% for the three months ended March 31, 1999. Interest expense decreased by $61,289 or 14% for the quarter ended March 31, 1999 as compared to the same period in 1998 due to the payoff of the mortgage note payable on Westwood Center. General and administrative expenses decreased for the three months ended March 31, 1999 by $66,636 as compared to the same period in 1998. The decrease was mainly due to a decrease in costs incurred to explore alternatives to maximize the value of the Partnership (see Liquidity and Capital Resources). For the three months ended March 31, 1999, general and administrative - affiliates decreased by $21,323 or 11% as compared to the same period in 1998, mainly due to a reduction in overhead expenses allocated to the Partnership by McREMI. All other remaining expenses, excluding Edison Ford Square, remained comparable to the same period last year. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership generated $679,534 of cash through operating activities for the three months ended March 31, 1999 as compared to $463,367 for the same period in 1998. The $216,167 increase is primarily due to the decrease in cash paid to suppliers. The Partnership expended $124,912 and $17,115 in capital improvements to its properties for the three months ended March 31, 1999 and 1998, respectively. Total principal payments on mortgage notes payable were $79,372 for the three months ended March 31, 1999 as compared to $97,980 for the same period of 1998. The Partnership also distributed $501,878 to the limited partners during 1999, while $1,499,992 was paid during the same period in 1998. The Partnership also paid $9,480 in deferred borrowing costs for the three months ended March 31, 1999 due to the extension on Amargosa Creek's mortgage note payable. Short-term liquidity: At March 31, 1999, the Partnership held cash and cash equivalents of $2,220,734. The present cash balance plus cash to be provided by operating activities is considered adequate to meet the Partnership's needs for debt service, normal amounts of repairs and maintenance and capital improvements to preserve and enhance the value of the properties. The Partnership has budgeted $1.3 million for necessary capital improvements for all properties in 1999. Long-term liquidity: While the present outlook for the Partnership's liquidity is favorable, market conditions may change and property operations could deteriorate. In that event, the Partnership would require other sources of working capital. No such other sources have been identified, and the Partnership has no established lines of credit. Other possible actions to resolve working capital deficiencies include refinancing or renegotiating terms of existing loans, deferring major capital expenditures on Partnership properties except where improvements are expected to enhance the competitiveness or marketability of the properties, or arranging working capital support from affiliates. There is no assurance that affiliate support could be arranged, since neither the General Partner nor any affiliates have any obligation in this regard. As previously announced, the Partnership has retained PaineWebber, Incorporated as its exclusive financial advisor to explore alternatives to maximize the value of the Partnership, including, without limitation, a transaction in which limited partnership interests in the Partnership are converted into cash. During the last full week of March, the Partnership entered into a 45 day exclusivity agreement with a well-financed bidder with whom it had commenced discussions with respect to a sale transaction. The Partnership and such party have made significant progress in negotiating the terms of a proposed transaction and are continuing to have intensive discussions with respect to a transaction. In light on these continuing negotiations, the exclusivity agreement has been extended for an additional 21 days until June 4, 1999. It is possible that the General Partner and its affiliates will receive non-cash consideration for their ownership interests in connection with any such transaction. There can be no assurance regarding whether any such agreement will be reached nor the terms thereof. Distributions: During the first quarter of 1999, the Partnership distributed $501,878 to the limited partners. Forward-Looking Information: Within this document, certain statements are made as to the expected occupancy trends, financial condition, results of operations, and cash flows of the Partnership for periods after March 31, 1999. All of these statements are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical and involve risks and uncertainties. The Partnership's actual occupancy trends, financial condition, results of operations, and cash flows for future periods may differ materially due to several factors. These factors include, but are not limited to, the Partnership's ability to control costs, make necessary capital improvements, negotiate sales or refinancings of its properties, and respond to changing economic and competitive factors. YEAR 2000 DISCLOSURE - -------------------- State of readiness - ------------------ The year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in major systems failure or miscalculations. Management has assessed its information technology ("IT") infrastructure to identify any systems that could be affected by the year 2000 problem. The IT used by the Partnership for financial reporting and significant accounting functions was made year 2000 compliant during recent systems conversions. The software utilized for these functions is licensed by third party vendors who have warranted that their systems are year 2000 compliant. Management is in the process of evaluating the mechanical and embedded technological systems at the various properties. Management has inventoried all such systems and queried suppliers, vendors and manufacturers to determine year 2000 compliance. Based on this review, management believes these systems are substantially compliant. In circumstances of non-compliance management will work with the vendor to remedy the problem or seek alternative suppliers who will be in compliance. Management believes that the remediation of any outstanding year 2000 conversion issues will not have a material or adverse effect on the Partnership's operations. However, no estimates can be made as to the potential adverse impact resulting from the failure of third party service providers and vendors to be year 2000 compliant. Cost - ---- The cost of IT and embedded technology systems testing and upgrades is not expected to be material to the Partnership. Because all the IT systems have been upgraded over the last three years, all such systems were compliant, or made compliant at no additional cost by third party vendors. Management anticipates the costs of assessing, testing, and if necessary replacing embedded technology components will be less than $50,000. Such costs will be funded from operations of the Partnership. Risks - ----- Ultimately, the potential impact of the year 2000 issue will depend not only on the corrective measures the Partnership undertakes, but also on the way in which the year 2000 issue is addressed by government agencies and entities that provide services or supplies to the Partnership. Management has not determined the most likely worst case scenario to the Partnership. As management studies the findings of its property systems assessment and testing, management will develop a better understanding of what would be the worst case scenario. Management believes that progress on all areas is proceeding and that the Partnership will experience no adverse effect as a result of the year 2000 issue. However, there is no assurance that this will be the case. Contingency plans - ----------------- Management is developing contingency plans to address potential year 2000 non-compliance of IT and embedded technology systems. Management believes that failure of any IT system could have an adverse impact on operations. However, management believes that alternative systems are available that could be utilized to minimize such impact. Management believes that any failure in the embedded technology systems could have an adverse impact on that property's performance. Management will assess these risks and develop plans to mitigate possible failures by July 1999. PART II. OTHER INFORMATION 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 Current Report of the Registrant on Form 8-K dated March 30, 1992, as filed on April 10, 1992). 4.1 Amendment No. 1 to the Amended and Restated Limited Partnership Agreement of McNeil Real Estate Fund XXVI, L.P. dated June 1995. 11. Statement regarding computation of Net Loss per Thousand Limited Partnership Units: Net loss per thousand limited partnership units is computed by dividing net loss allocated to the limited partners by the weighted average number of limited partnership units outstanding expressed in thousands. Per unit information has been computed based on 86,531 limited partnership units (in thousands) outstanding in 1999 and 1998, respectively. 27. Financial Data Schedule for the quarter ended March 31, 1999. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended March 31, 1999. MCNEIL REAL ESTATE FUND XXVI, L.P. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized: McNEIL REAL ESTATE FUND XXVI, L.P. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner May 17, 1999 By: /s/ Ron K. Taylor - ------------ --------------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) May 17, 1999 By: /s/ Carol A. Fahs - ------------ --------------------------------------------- Date Carol A. Fahs Vice President of McNeil Investors, Inc. (Principal Accounting Officer) EX-27 2
5 3-MOS DEC-31-1999 MAR-31-1999 2,220,734 0 1,410,440 (203,657) 0 0 62,633,233 (27,551,024) 39,590,954 0 18,902,015 0 0 0 0 39,590,954 2,167,694 2,190,029 0 0 1,978,604 0 370,219 0 0 (158,794) 0 0 0 (158,794) 0 0
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