-----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, SJ2M9+dQ/mUhzwUYE0fTHM4eJlkjUFC8wHEmmtHdxI+wCrk1OSH8JASXgafwfDvB zwsPhd66XVBgz2Q++ezCZw== 0000810481-98-000008.txt : 19980817 0000810481-98-000008.hdr.sgml : 19980817 ACCESSION NUMBER: 0000810481-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND XXVII LP CENTRAL INDEX KEY: 0000810481 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE DEALERS (FOR THEIR OWN ACCOUNT) [6532] IRS NUMBER: 330214387 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17173 FILM NUMBER: 98688004 BUSINESS ADDRESS: STREET 1: 13760 NOEL ROAD STREET 2: SUITE 700 LB70 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144485800 MAIL ADDRESS: STREET 2: 13760 NOEL ROAD SUITE 700 LB 70 CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHMARK PRIME PLUS L P 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 June 30, 1998 -------------------------------------------- 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 0-17173 --------- MCNEIL REAL ESTATE FUND XXVII, L.P. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 33-0214387 - -------------------------------------------------------------------------------- (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 XXVII, L.P. BALANCE SHEETS (Unaudited)
June 30, December 31, 1998 1997 ------------ ------------ ASSETS - ------ Real estate investments: Land .................................................. $ 4,196,277 $ 4,196,277 Buildings and improvements ............................ 23,831,080 23,241,031 ------------ ------------ 28,027,357 27,437,308 Less: Accumulated depreciation and amortization ...... (9,487,079) (8,806,732) ------------ ------------ 18,540,278 18,630,576 Assets held for sale ..................................... 4,552,257 4,549,881 Mortgage loan investments - affiliates ................... 1,306,488 6,956,487 Cash and cash equivalents ................................ 4,466,858 2,440,084 Cash segregated for security deposits and repurchase of limited partnership units .......................... 194,654 442,193 Accounts receivable ...................................... 213,300 426,825 Accrued interest receivable .............................. 11,812 64,991 Prepaid expenses and other assets ........................ 173,263 170,077 ------------ ------------ $ 29,458,910 $ 33,681,114 ============ ============ LIABILITIES AND PARTNERS' EQUITY (DEFICIT) - ------------------------------------------ Revolving credit agreement ............................... $ - $ 3,437,648 Accounts payable and accrued expenses .................... 49,037 107,549 Accrued property taxes ................................... 177,372 - Payable to limited partners .............................. - 332,928 Payable to affiliates .................................... 843,055 542,045 Security deposits and deferred rental revenue ............ 266,914 261,767 ------------ ------------ 1,336,378 4,681,937 ------------ ------------ Partners' equity (deficit): Limited partners - 10,000,000 limited partnership units authorized; 5,199,901 limited partnership units out- standing at June 30, 1998 and December 31, 1997 .... 28,185,777 29,076,126 General Partner ....................................... (63,245) (76,949) ------------ ------------ 28,122,532 28,999,177 ------------ ------------ $ 29,458,910 $ 33,681,114 ============ ============
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 XXVII, L.P. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ---------------------------- ---------------------------- 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Revenue: Rental revenue ................... $2,314,188 $2,111,197 $4,517,365 $4,200,342 Interest income on mortgage loan investments - affiliates... 147,631 194,757 337,919 378,080 Other interest income ............ 40,064 34,641 79,152 73,075 ---------- ---------- ---------- ---------- Total revenue .................. 2,501,883 2,340,595 4,934,436 4,651,497 ---------- ---------- ---------- ---------- Expenses: Interest ......................... 66,292 53,621 162,327 114,618 Depreciation and amortization ................... 348,139 372,486 680,347 744,972 Property taxes ................... 282,851 249,306 566,687 498,552 Personnel costs .................. 171,121 165,502 395,819 360,535 Utilities ........................ 91,549 104,080 197,951 220,879 Repairs and maintenance .......... 150,730 139,797 289,725 321,942 Property management fees - affiliates .............. 131,826 114,676 253,321 228,598 Other property operating expenses ....................... 129,309 152,093 277,121 319,901 General and administrative ....... 152,794 17,232 281,222 38,969 General and administrative - affiliates ..................... 232,128 228,171 459,501 436,354 ---------- ---------- ---------- ---------- Total expenses ................. 1,756,739 1,596,964 3,564,021 3,285,320 ---------- ---------- ---------- ---------- Net income .......................... $ 745,144 $ 743,631 $1,370,415 $1,366,177 ========== ========== ========== ========== Net income allocable to limited partners .............. $ 737,693 $ 736,194 $1,356,711 $1,352,515 Net income allocable to General Partner ............... 7,451 7,437 13,704 13,662 ---------- ---------- ---------- ---------- Net income .......................... $ 745,144 $ 743,631 $1,370,415 $1,366,177 ========== ========== ========== ========== Net income per weighted average hundred limited partnership units ................ $ 14.19 $ 14.06 $ 26.09 $ 25.83 ========== ========== ========== ========== Distributions per weighted average hundred limited partnership units ................ $ - $ - $ 43.21 $ 38.19 ========== ========== ========== ==========
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 XXVII, L.P. STATEMENTS OF PARTNERS' EQUITY (DEFICIT) (Unaudited) For the Six Months Ended June 30, 1998 and 1997
Total General Limited Partners' Partner Partners Equity (Deficit) -------------- -------------- ---------------- Balance at December 31, 1996 ....... $ (104,836) $ 30,648,258 $ 30,543,422 Net income ......................... 13,662 1,352,515 1,366,177 Distributions to limited partners... - (1,999,970) (1,999,970) ------------ ------------ ------------ Balance at June 30, 1997 ........... $ (91,174) $ 30,000,803 $ 29,909,629 ============ ============ ============ Balance at December 31, 1997 ....... $ (76,949) $ 29,076,126 $ 28,999,177 Net income ......................... 13,704 1,356,711 1,370,415 Distributions to limited partners... - (2,247,060) (2,247,060) ------------ ------------ ------------ Balance at June 30, 1998 ........... $ (63,245) $ 28,185,777 $ 28,122,532 ============ ============ ============
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 XXVII, L.P. STATEMENTS OF CASH FLOWS (Unaudited) (Increase) Decrease in Cash and Cash Equivalents
Six Months Ended June 30, -------------------------------- 1998 1997 ------------ ------------ Cash flows from operating activities: Cash received from tenants ..................... $ 4,713,734 $ 4,152,183 Cash paid to suppliers ......................... (1,481,619) (1,222,637) Cash paid to affiliates ........................ (411,812) (704,832) Interest received .............................. 79,152 73,075 Interest received from affiliates .............. 391,098 357,914 Interest paid .................................. (162,327) (75,856) Property taxes paid ............................ (389,315) (327,627) ----------- ----------- Net cash provided by operating activities ......... 2,738,911 2,252,220 ----------- ----------- Cash flows from investing activities: Additions to real estate investments and assets held for sale ......................... (592,425) (226,114) Proceeds from collection of mortgage loans...... 5,724,999 - Mortgage loan investments - affiliates ......... (75,000) (2,336,029) ----------- ----------- Net cash provided by (used in) investing activities ..................................... 5,057,574 (2,562,143) ----------- ----------- Cash flows from financing activities: Net decrease in cash segregated for repurchase of limited partnership units ...... 247,925 246,766 Proceeds from revolving credit agreement ....... - 2,336,029 Repayment of revolving credit agreement ........ (3,437,648) - Repurchase of limited partnership units ........ (332,928) (332,928) Distributions to limited partners .............. (2,247,060) (1,999,970) ----------- ----------- Net cash provided by (used in) financing activities ..................................... (5,769,711) 249,897 ----------- ----------- Net increase (decrease) in cash and cash equivalents .................................... 2,026,774 (60,026) Cash and cash equivalents at beginning of period ......................................... 2,440,084 3,022,851 ----------- ----------- Cash and cash equivalents at end of period ........ $ 4,466,858 $ 2,962,825 =========== ===========
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 XXVII, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Income to Net Cash Provided by Operating Activities
Six Months Ended June 30, ------------------------------- 1998 1997 ----------- ----------- Net income .............................................. $ 1,370,415 $ 1,366,177 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................ 680,347 744,972 Amortization of deferred borrowing costs ............. - 48,765 Changes in assets and liabilities: Cash segregated for security deposits .............. (386) (1,189) Accounts receivable ................................ 213,525 (29,985) Accrued interest receivable ........................ 53,179 (20,166) Prepaid expenses and other assets .................. (3,186) 28,657 Accounts payable and accrued expenses .............. (58,512) (47,642) Accrued property taxes ............................. 177,372 170,925 Payable to affiliates .............................. 301,010 (39,880) Security deposits and deferred rental revenue .......................................... 5,147 31,586 ----------- ----------- Total adjustments ................................ 1,368,496 886,043 ----------- ----------- Net cash provided by operating activities ............... $ 2,738,911 $ 2,252,220 =========== ===========
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 XXVII, L.P. Notes to Financial Statements June 30, 1998 (Unaudited) NOTE 1. - ------- McNeil Real Estate Fund XXVII, L.P. (the "Partnership"), formerly known as Southmark Prime Plus, L.P., was organized by affiliates of Southmark Corporation ("Southmark") on January 16, 1987, as a limited partnership under the provisions of the Delaware Revised Uniform Limited Partnership Act to make short-term loans to affiliates of the general partner. 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, 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, 1998 are not necessarily indicative of the results to be expected for the year ending December 31, 1998. 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, 1997, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Real Estate Fund XXVII, 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 the gross rental receipts for its mini-storage warehouses 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 mini-storage warehouses and commercial properties and leasing services for its mini-storage warehouses. McREMI may also choose to provide leasing services for the Partnership's commercial properties, in which case McREMI will receive property management fees from such commercial properties equal to 3% of the property's gross rental receipts plus leasing commissions based on the prevailing market rate for such services where the property is located. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. The Partnership is paying an asset management fee, which is payable to the General Partner. Through 1999, the asset management fee is calculated as 1% of the Partnership's tangible asset value. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $30 per gross square foot for mini-storage warehouses and $50 per gross square foot for commercial properties to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible items. The fee percentage decreases subsequent to 1999. Compensation and reimbursements paid to or accrued for the benefit of the General Partner or its affiliates are as follows: Six Months Ended June 30, ------------------------- 1998 1997 ---------- ---------- Property management fees......................... $ 253,321 $ 228,598 Charged to general and administrative - affiliates: Partnership administration.................... 147,977 132,895 Asset management fee.......................... 311,524 303,459 --------- --------- $ 712,822 $ 664,952 ========= ========= Under the terms of its amended partnership agreement, the Partnership is expressly permitted to make loans to affiliates of the General Partner, so long as such loans meet certain conditions, including that such loans bear interest at a rate of prime plus 2.5%, or prime plus 3.5% if the loan is junior to other indebtedness. These loans are secured by income-producing real estate and may be either junior or senior to other indebtedness secured by such property. The Partnership made loans to affiliates of $75,000 during the first six months of 1998 and $2,336,029 during the first six months of 1997. The Partnership received repayments from affiliates of $5,724,999 during the first six months of 1998. No repayments were received during the first six months of the prior year. In order to induce the Partnership to lend funds to affiliates of the General Partner, the General Partner agreed to pay (i) the difference between the interest rate required by the Partnership's amended partnership agreement to be charged to affiliates and the interest rate actually paid by certain of those affiliates, and (ii) all points (1.5% or 2% if the loan is junior to other indebtedness), closing costs and expenses. The Partnership recorded interest income on affiliate loans of $337,919 and $378,080 for the six months ended June 30, 1998 and 1997, respectively, of which $49,179 and $50,682, respectively, was paid or payable by the General Partner. Payable to affiliates at June 30, 1998 and December 31, 1997 consisted primarily of a performance incentive fee of $141,647 accrued in prior years, Partnership general and administrative expenses, asset management fees and prepaid interest. Except for the performance incentive fee and prepaid interest, all accrued fees are due and payable from current operations. NOTE 4. - ------- On May 1, 1992, the Partnership agreed to loan an aggregate of $1.115 million to McNeil Pension Investment Fund, Ltd. ("McPIF"), an affiliate of the General Partner, at an interest rate of prime plus 1% per annum (the maximum rate allowed to be incurred by McPIF in connection with borrowings from affiliates pursuant to McPIF's partnership agreement). A total of $483,364 was borrowed by McPIF pursuant to this commitment, $72,302 of which was repaid in September 1997. This loan was secured by a first lien on Brice Road Office Building located in Reynoldsburg, Ohio. Interest on the loan was payable monthly, with principal payable in May 1998. In May 1998, McPIF repaid the $411,062 balance of the loan with proceeds received from a new loan from the Partnership secured by Verre Center Office Building, as discussed below. On October 25, 1996, the Partnership agreed to loan an aggregate of $1.68 million to McPIF at an interest rate of prime plus 1% per annum (the maximum rate allowed to be incurred by McPIF in connection with borrowings from affiliates pursuant to McPIF's partnership agreement). In 1996, $820,426 was borrowed by McPIF pursuant to this commitment and an additional $75,000 was borrowed in January 1998. In May 1998, the principal balance of the loan was increased by $411,062, for total borrowings from the Partnership of $1,306,488. McPIF used the $411,062 additional proceeds to repay the balance of the mortgage loan investment secured by Brice Road Office Building, as discussed above. This loan is secured by a first lien on Verre Center Office Building located in Chamblee, Georgia. Interest on the loan is payable monthly. Principal is payable in November 1999. On February 28, 1997, the Partnership loaned $2,336,029 to McNeil Real Estate Fund X, Ltd. ("Fund X"), at an interest rate of prime plus 1% per annum (the maximum rate allowed to be incurred by Fund X in connection with borrowings from affiliates pursuant to Fund X's partnership agreement). On August 1, 1997, the mortgage note was amended and the principal balance was increased by $800,000, for total borrowings from the Partnership of $3,136,029. Fund X used the $800,000 additional proceeds to repay the $800,000 mortgage loan investment secured by Lakeview Plaza Shopping Center. This loan was secured by a first lien on La Plaza Business Center located in Las Vegas, Nevada. Interest on the loan was payable monthly, with principal payable in February 2000. The loan was repaid in full in June 1998. On October 25, 1996, the Partnership loaned $2,588,970 to McNeil Real Estate Fund XI, L.P. ("Fund XI") at an interest rate of prime plus 1% per annum (the maximum rate allowed to be incurred by Fund XI in connection with borrowings from affiliates pursuant to Fund XI's partnership agreement). This loan was secured by a first lien on The Village Apartments located in Gresham, Oregon. Interest on the loan was payable monthly, with principal payable in November 1999. The loan was repaid in full in May 1998. NOTE 5. - ------- In June 1998, the Partnership paid off the $3,437,648 balance of its revolving credit agreement. NOTE 6. - ------- In 1996, the Partnership adopted the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement requires the cessation of depreciation on assets held for sale. Since AAA Century Airport Self-Storage and Burbank Mini-Storage were placed on the market for sale, no depreciation was taken effective August 1, 1997. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- There has been no significant change in the operations of the Partnership's properties since December 31, 1997. The Partnership reported net income for the first six months of 1998 of $1,370,415, comparable to the $1,366,177 reported for the first six months of 1997. Revenues were $4,934,436 for the first six months of 1998, up from $4,651,497 for the same period in 1997. Expenses were $3,564,021 in 1998 as compared to $3,285,320 in 1997. Net cash provided by operating activities was $2,738,911 for the six months ended June 30, 1998. The Partnership expended $592,425 for capital improvements, paid $85,003 for the repurchase of limited partnership units (net of a decrease in cash segregated for the repurchase of limited partnership units) and distributed $2,247,060 to the limited partners. The Partnership received $5,649,999 in proceeds from collection of mortgage loan investments affiliates, net of loans made, and used $3,437,648 to pay off the balance of its revolving credit agreement. Cash and cash equivalents totaled $4,466,858 at June 30, 1998, a net increase of $2,206,774 from the balance at December 31, 1997. RESULTS OF OPERATIONS - --------------------- Revenue: Total revenue increased by $161,288 and $282,939 for the three and six months ended June 30, 1998, respectively, as compared to the same periods in the prior year. The increase was mainly due to an increase in rental revenue, partially offset by a decrease in interest income on mortgage loan investments - affiliates, as discussed below. Rental revenue for the three and six months ended June 30, 1998 increased by $202,991 and $317,023, respectively, in relation to the comparable periods in 1997. Rental revenue increased approximately $200,000 and $58,000 at One Corporate Center I and III office buildings, respectively, mainly due to increased rental rates. Interest income on mortgage loan investments - affiliates decreased by $47,126 for the three months and by $40,161 for the six months ended June 30, 1998 as compared to the same periods in 1997. The decrease was mainly due to the collection of approximately $5.7 million of affiliate loans in the second quarter of 1998. Expenses: Total expenses increased by $159,775 and $278,701 for the three and six months ended June 30, 1998, respectively, as compared to the same periods in the prior year, as discussed below. Interest expense for the three and six months ended June 30, 1998 increased by $12,671 and $47,709, respectively, in relation to the respective periods in the prior year, due to a greater average amount of borrowings under the Partnership's line of credit agreement in 1998. The Partnership had borrowed $1,101,619 as of December 31, 1996. The Partnership borrowed an additional $2,336,029 at the end of February 1997, resulting in total borrowing under the line of credit agreement of $3,437,648 as of June 30, 1997. The line of credit agreement was repaid in full in June 1998. Property taxes for the three and six month periods ended June 30, 1998 increased by $33,545 and $68,135, respectively, as compared to the same periods in 1997. The increase was mainly due to an increase in the assessed taxable value of One Corporate Center I and III office buildings by taxing authorities. Personnel costs increased by $5,619 and $35,284 for the three and six months ending June 30, 1998, respectively, as compared to the same periods in the prior year. The increase was mainly due to an overall increase in office and maintenance salaries at all the properties in 1998. In addition, there was an increase in bonuses paid to employees at One Corporate Center I and III office buildings for renewing tenant leases in the first quarter of 1998. Utilities expense decreased by $12,531 and $22,928 for the three and six months ending June 30, 1998, respectively, as compared to the same periods in 1997. The decrease was mainly due to a decline in electricity usage at One Corporate Center I and III office buildings as a result of energy-efficient lighting installed in the last quarter of 1997. Repairs and maintenance expense increased by $10,933 and decreased by $32,217 for the three and six months ending June 30, 1998, respectively, as compared to the same periods in 1997. The overall decrease was mainly due to lower snow removal expenses at One Corporate Center I and III office buildings in the first quarter of 1998 due to a milder winter in Minnesota, where the properties are located. This decrease was partially offset by parking lot repair expenses at One Corporate Center I and II in the second quarter of 1998. In the three and six months ended June 30, 1998, property management fees - affiliates increased by $17,150 and $24,723, respectively, in relation to the same periods in the prior year. The increase was mainly due to an increase in gross rental receipts at One Corporate Center I and III office buildings, on which the fees are based. Other property operating expenses decreased by $22,784 and $42,780 for the three and six months ending June 30, 1998, respectively, as compared to the periods in the prior year. The decrease was primarily due to a decline in bad debts at all of the properties in 1998. General and administrative expenses increased by $135,562 and $242,253 for the three and six months ended June 30, 1998, respectively, as compared to the same periods in 1997. The increase was mainly due to costs incurred to explore alternatives to maximize the value of the Partnership (see Liquidity and Capital Resources). LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership generated $2,738,911 of cash through operating activities in the first six months of 1998 as compared to $2,252,220 for the same period in 1997. Cash received from tenants increased in 1998 partially due to an increase in rental revenue, as discussed above. In addition, a tenant reimbursed One Corporate Center I approximately $183,000 in 1998 for tenant improvements completed on its behalf. There was also a decrease in cash paid to affiliates in 1998. These increases in cash provided by operating activities were partially offset by an increase in cash paid to suppliers, mainly due to an increase in general and administrative costs, as discussed above. The Partnership expended $592,425 and $226,114 for capital improvements to its properties for the first six months of 1998 and 1997, respectively. The increase in 1998 was mainly the result of the replacement of the roofs at AAA Sentry and Fountainbleau mini-storages. The Partnership loaned $75,000 to an affiliate of the General Partner and received $5,724,999 in repayments on loans to affiliates in the first six months of 1998. In June 1998, the Partnership repaid the $3,437,648 balance of its revolving credit agreement. In the first six months of 1997, the Partnership received $2,336,029 from its line of credit agreement, which it loaned to an affiliate of the General Partner. The Partnership distributed $2,247,060 and $1,999,970 to the limited partners in the first six months of 1998 and 1997, respectively. In light of the discussions relating to the sale transaction as disclosed, the Partnership is presently deferring any decision with respect to the amount or timing of distributions to limited partners. Short-term liquidity: At June 30, 1998, the Partnership held cash and cash equivalents of $4,466,858. This balance provides a reasonable level of working capital for the Partnership's immediate needs in operating its properties. For the Partnership as a whole, management projects positive cash flow from operations in 1998. The Partnership has budgeted approximately $1.2 million for necessary capital improvements for all properties in 1998 which is expected to be funded from available cash reserves or from operations of the properties. Additional efforts to maintain and improve Partnership liquidity have included continued attention to property management activities. The objective has been to obtain maximum occupancy rates while holding expenses to levels necessary to maximize cash flows. The Partnership has made capital expenditures on its properties where improvements were expected to increase the competitiveness and marketability of the properties. Long-term liquidity: While the outlook for maintenance of adequate levels of liquidity is favorable, should operations deteriorate and present cash resources be insufficient for current needs, the Partnership would require other sources of working capital. The Partnership acquired a $5 million line of credit in 1995 that may be used for property operations. Other possible actions to resolve cash deficiencies include refinancings, deferral of capital expenditures on Partnership properties except where improvements are expected to increase the competitiveness and marketability of the properties, arranging financing from affiliates or the ultimate sale of the properties. As previously announced, the Partnership has retained PaineWebber ("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. The Partnership, through PaineWebber, has provided financial and other information to interested parties and is currently conducting discussions with one such party in an attempt to reach a definitive agreement with respect to a sale transaction. 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 that any such agreement will be reached nor the terms thereof. The Partnership has placed AAA Century Airport Self-Storage and Burbank Mini-Storage on the market for sale effective August 1, 1997. 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 June 30, 1998. 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. Other Information: Management has begun to review its information technology infrastructure to identify any systems that could be affected by the year 2000 problem. 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. The information systems used by the Partnership for financial reporting and significant accounting functions were made year 2000 compliant during recent systems conversions. The Partnership is in the process of evaluating the computer systems at the various properties. The Partnership also intends to communicate with suppliers, financial institutions and others to coordinate year 2000 issues. 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. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint). The action involves purported class and derivative actions brought by limited partners of each of the fourteen limited partnerships that were named as nominal defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. Defendants filed a demurrer to the consolidated and amended complaint and a motion to strike on February 14, 1997, seeking to dismiss the consolidated and amended complaint in all respects. A hearing on Defendant's demurrer and motion to strike was held on May 5, 1997. The Court granted Defendants' demurrer, dismissing the consolidated and amended complaint with leave to amend. On October 31, 1997, the Plaintiffs filed a second consolidated and amended complaint. The case has been stayed pending settlement discussions. While actively working toward a final resolution, there can be no assurances regarding settlement. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------ --------------------------------- (a) Exhibits. Exhibit Number Document Description ------- --------------------- 4.2 Amended and Restated Partnership Agreement of McNeil XXVII, L.P. 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 Hundred Limited Partnership Units. Net income (loss) per one hundred limited partnership 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 hundreds). Per unit information has been computed based on 51,999 and 52,369 weighted average limited partnership units (in hundreds) outstanding in 1998 and 1997. 27. Financial Data Schedule for the quarter ended June 30, 1998. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended June 30, 1998. MCNEIL REAL ESTATE FUND XXVII, 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 XXVII, L.P. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner August 14, 1998 By: /s/ Ron K. Taylor - --------------- ----------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) August 14, 1998 By: /s/ Carol A. Fahs - --------------- ----------------------------------------- Date Carol A. Fahs Vice President of McNeil Investors, Inc. (Principal Accounting Officer) EX-27 2
5 6-MOS DEC-31-1998 JUN-30-1998 4,466,858 0 213,300 0 0 0 28,027,357 (9,487,079) 29,458,910 0 0 0 0 0 28,122,532 29,458,910 4,517,365 4,934,436 1,980,624 2,660,971 740,723 0 162,327 1,370,415 0 1,370,415 0 0 0 1,370,415 0 0
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