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 March 31, 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 0-12915
MCNEIL REAL ESTATE FUND XIV, LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2822299
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240
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(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 XIV, LTD.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
March 31, December 31,
1996 1995
--------------- ---------------
ASSETS
- ------
Real estate investments:
Land..................................................... $ 6,833,471 $ 6,833,471
Buildings and improvements............................... 46,021,877 45,953,575
-------------- --------------
52,855,348 52,787,046
Less: Accumulated depreciation.......................... (22,408,261) (21,836,162)
-------------- --------------
30,447,087 30,950,884
Cash and cash equivalents................................... 1,702,818 1,417,948
Cash segregated for security deposits....................... 393,957 370,097
Accounts receivable......................................... 400,450 350,823
Prepaid expenses and other assets........................... 190,085 200,574
Escrow deposits............................................. 815,309 844,622
Deferred borrowing costs, net of accumulated amorti-
zation of $274,511 and $250,597 at March 31 1996,
and December 31, 1995, respectively...................... 1,116,481 1,140,395
-------------- --------------
$ 35,066,187 $ 35,275,343
============== ==============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable, net................................. $ 27,764,579 $ 27,871,969
Accounts payable............................................ 105,322 166,434
Accrued interest............................................ 200,250 201,267
Accrued property taxes...................................... 203,574 100,877
Other accrued expenses...................................... 55,824 79,725
Payable to affiliates - General Partner..................... 1,393,308 1,255,290
Security deposits and deferred rental revenue............... 392,689 380,367
-------------- --------------
30,115,546 30,055,929
-------------- --------------
Partners' equity (deficit):
Limited partners - 100,000 limited partnership
units authorized; 86,534 limited partnership
units outstanding...................................... 7,643,722 7,766,250
General Partner.......................................... (2,693,081) (2,546,836)
-------------- --------------
4,950,641 5,219,414
-------------- --------------
$ 35,066,187 $ 35,275,343
============== ==============
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 XIV, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
-----------------------------------
1996 1995
--------------- ---------------
Revenue:
Rental revenue........................................... $ 2,302,657 $ 2,276,099
Interest................................................. 29,984 25,153
-------------- --------------
Total revenue.......................................... 2,332,641 2,301,252
-------------- --------------
Expenses:
Interest................................................. 675,387 668,013
Depreciation and amortization............................ 572,099 521,427
Property taxes........................................... 200,950 188,336
Personnel expenses....................................... 254,906 283,458
Utilities................................................ 120,046 110,296
Repair and maintenance................................... 284,734 227,826
Property management fees - affiliates.................... 112,192 111,363
Other property operating expenses........................ 131,331 144,326
General and administrative............................... 23,820 16,563
General and administrative - affiliates.................. 80,942 96,503
-------------- --------------
Total expenses......................................... 2,456,407 2,368,111
-------------- --------------
Net loss.................................................... $ (123,766) $ (66,859)
============== ==============
Net loss allocated to limited partners...................... $ (122,528) $ (66,190)
Net loss allocated to General Partner....................... (1,238) (669)
-------------- --------------
Net loss.................................................... $ (123,766) $ (66,859)
============== ==============
Net loss per limited partnership unit....................... $ (1.42) $ (.76)
============== ==============
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 XIV, LTD.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Three Months Ended March 31, 1996 and 1995
Total
Partners'
General Limited Equity
Partner Partners (Deficit)
--------------- ---------------- ---------------
Balance at December 31, 1994.............. $ (1,941,941) $ 8,094,114 $ 6,152,173
Net loss.................................. (669) (66,190) (66,859)
Management Incentive Distribution......... (147,785) - (147,785)
------------- ------------- -------------
Balance at March 31, 1995................. $ (2,090,395) $ 8,027,924 $ 5,937,529
============= ============== =============
Balance at December 31, 1995.............. $ (2,546,836) $ 7,766,250 $ 5,219,414
Net loss.................................. (1,238) (122,528) (123,766)
Management Incentive Distribution......... (145,007) - (145,007)
------------- ------------- -------------
Balance at March 31, 1996................. $ (2,693,081) $ 7,643,722 $ 4,950,641
============= ============== =============
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 XIV, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase in Cash and Cash Equivalents
Three Months Ended
March 31,
------------------------------------
1996 1995
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Cash flows from operating activities:
Cash received from tenants............................... $ 2,241,353 $ 2,226,224
Cash paid to suppliers................................... (817,612) (986,148)
Cash paid to affiliates.................................. (200,123) (371,059)
Interest received........................................ 29,984 25,153
Interest paid............................................ (617,360) (643,131)
Property taxes paid and escrowed......................... (140,550) (136,449)
-------------- --------------
Net cash provided by operating activities................... 495,692 114,590
-------------- --------------
Cash flows from investing activities:
Additions to real estate investments..................... (68,302) (238,887)
-------------- --------------
Cash flows from financing activities:
Principal payments on mortgage notes
payable................................................ (142,520) (128,979)
Deferred borrowing costs paid............................ - (99,375)
Proceeds from refinancing of mortgage
note payable........................................... - 1,115,766
-------------- --------------
Net cash provided by (used in) financing
activities............................................... (142,520) 887,412
-------------- --------------
Net increase in cash and cash equivalents................... 284,870 763,115
Cash and cash equivalents at beginning of
period................................................... 1,417,948 1,045,158
-------------- --------------
Cash and cash equivalents at end of period.................. $ 1,702,818 $ 1,808,273
============== ==============
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 XIV, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Loss to Net Cash Provided by
Operating Activities
Three Months Ended
March 31,
------------------------------------
1996 1995
---------------- ----------------
Net loss.................................................... $ (123,766) $ (66,859)
-------------- --------------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................ 572,099 521,427
Amortization of deferred borrowing costs................. 23,914 17,949
Amortization of discounts on mortgage
notes payable.......................................... 35,130 32,897
Changes in assets and liabilities:
Cash segregated for security deposits.................. (23,860) (2,051)
Accounts receivable.................................... (49,627) (40,954)
Prepaid expenses and other assets...................... 10,489 (61,328)
Escrow deposits........................................ 29,313 (173,296)
Accounts payable....................................... (61,112) 7,856
Accrued interest....................................... (1,017) (25,964)
Accrued property taxes................................. 102,697 103,385
Other accrued expenses................................. (23,901) (28,693)
Payable to affiliates - General Partner................ (6,989) (163,193)
Security deposits and deferred rental
revenue.............................................. 12,322 (6,586)
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Total adjustments.................................... 619,458 181,449
-------------- --------------
Net cash provided by operating activities................... $ 495,692 $ 114,590
============== ==============
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 XIV, LTD.
Notes to Financial Statements
(Unaudited)
March 31, 1996
NOTE 1.
- -------
McNeil Real Estate Fund XIV, Ltd. (the "Partnership") is a limited partnership
organized under the laws of the State of California to invest in real property.
The general partner of the Partnership is McNeil Partners, L.P. (the "General
Partner"), a Delaware limited partnership affiliated with Robert A. McNeil. The
Partnership is governed by an agreement of limited partnership ("Amended
Partnership Agreement") that was adopted September 20, 1991. 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 three months ended March 31, 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 Fund XIV, Ltd., 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.
- -------
The Partnership pays property management fees equal to 5% of the gross rental
receipts of the Partnership's 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 properties. 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.
Under terms of the Amended Partnership Agreement, the Partnership is paying a
Management Incentive Distribution ("MID") to the General Partner. The maximum
MID is calculated as 1% of the tangible asset value of the Partnership. The
maximum MID percentage decreases subsequent to 1999. 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.
MID will be paid to the extent of the lesser of the Partnership's excess cash
flow, as defined, or net operating income, as defined (the "Entitlement
Amount"), and may be paid (i) in cash, unless there is insufficient cash to pay
the distribution in which event any unpaid portion not taken in Units will be
deferred and is payable, without interest, from the first available cash and/or
(ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of
Units issued in payment of the MID is based on the greater of $50 per Unit or
the net tangible asset value, as defined, per Unit.
Any amount of the MID that is paid to the General Partner in Units will be
treated as if cash is distributed to the General Partner and is then contributed
to the Partnership by the General Partner. The MID represents a return of equity
to the General Partner for increasing cash flow, as defined, and accordingly is
treated as a distribution.
Compensation, reimbursements and distributions paid to or accrued for the
benefit of the General Partner and its affiliates are as follows:
Three Months Ended
March 31,
-----------------------------------
1996 1995
--------------- ---------------
Property management fees - affiliates....................... $ 112,192 $ 111,363
Charged to general and administrative -
affiliates:
Partnership administration............................... 80,942 96,503
-------------- --------------
$ 193,134 $ 207,866
============== ==============
Charged to General Partner's deficit:
Management Incentive Distribution $ 145,007 $ 147,785
============== ==============
NOTE 5.
- -------
On March 13, 1995, the Partnership refinanced the Windrock mortgage note. The
new mortgage note, in the amount of $3,450,000, bears interest at 9.44% per
annum, and requires monthly principal and interest payments of $28,859. The
maturity date of the new mortgage note is April 1, 2002. Cash proceeds from the
refinancing transaction are as follows:
New loan proceeds........................ $ 3,450,000
Existing first lien retired.............. (1,894,234)
Existing second lien retired............. (440,000)
--------------
Cash proceeds from refinancing............ $ 1,115,766
==============
The Partnership incurred $107,525 of deferred borrowing costs related to the
refinancing of the Windrock mortgage note. The Partnership was also required to
fund $184,172 into various escrows for capital improvements, property taxes and
insurance.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The Partnership was formed to acquire, operate and ultimately dispose of a
portfolio of income-producing real properties. At March 31, 1996, the
Partnership owned four apartment properties and three shopping centers. All of
the Partnership's properties are subject to mortgage notes.
On March 13, 1995, the Partnership refinanced Windrock Apartments with a new
$3,450,000 mortgage note. Proceeds from the new mortgage were used to payoff the
prior first and second mortgage notes encumbering Windrock Apartments, to fund
various escrows for the payment of property taxes, insurance, repairs and
replacements, and to pay for loan fees and other costs associated with obtaining
the new mortgage note. Residual proceeds of approximately $824,000 were added to
the Partnership's cash reserves. The Partnership's next maturing mortgage note
does not come due until April 1, 2002.
RESULTS OF OPERATIONS
- ---------------------
For the first quarter 1996, the Partnership's net loss increased $56,907 to
$123,766. Net loss for the first quarter of 1995 totaled $66,859.
Revenues:
Rental revenue for the first quarter of 1996 increased $26,558 or 1.2% over
rental revenue earned during the first quarter of 1995.
Rental revenue increased at three of the Partnership's four residential
properties. Increased rental rates and increased occupancy rates resulted in a
3.2% increase in rental revenue at Embarcadero Club Apartments. Embarcadero Club
continues to benefit from capital improvements placed in service at the property
over the past several years. Tanglewood Village Apartments and Thunder Hollow
Apartments also recorded increases in rental rates, but the increased rental
rates were partially offset by decreased occupancy. Rental revenue increased
1.1% and 2.7% at the two properties, respectively. Windrock Apartments continues
to experience difficulty maintaining its occupancy at acceptable levels.
Occupancy at the end of the first quarter was 75%, unchanged from December 1995,
but down from 85% at March 1995. A weak local economy and the lack of certain
amenities compared to Windrock's newer competition continue to be the principal
factors behind Windrock's decreased occupancy. For the quarter, Windrock's
rental revenue decreased 10.8% from the first quarter of 1995.
The Partnership's commercial properties reported mixed results for the first
quarter of 1996. Rental revenue increased at Redwood Plaza, was unchanged at
Country Hills Plaza, and decreased at Midvale Plaza. Redwood Plaza reported a
5.8% increase in rental revenue for the first quarter, continuing a trend of
improving performance at the Salt Lake City property. Improved occupancy during
the first quarter, as well as increased rental rates and expense recoveries all
contributed to Redwood Plaza's performance. First quarter rental revenue at
Country Hills Plaza is practically unchanged from the first quarter of 1995. The
Ogden property remains 100% leased. Rental revenue at Midvale Plaza decreased
4.2% for the first quarter of 1996. Midvale Plaza's anchor tenant has vacated
its space at the property, but continues to pay rent to the Partnership.
However, percentage rents earned by the Partnership based on the tenant's sales,
decreased to zero in the current quarter. The decrease in percentage rents
accounts for the entire decrease in Midvale Plaza's rental revenue.
Expenses:
Partnership expenses increased $88,296 or 3.7% for the first quarter of 1996
compared to the first quarter of 1995. Increased expenses were concentrated in
depreciation and amortization, and in repair and maintenance. The increases were
partially offset by decreased personnel expenses and decreased expenditures for
general and administrative - affiliates.
Depreciation and amortization expense increased $50,672 or 9.7% for the first
quarter of 1996 compared to the first quarter of 1995. Increased depreciation
and amortization expense is due to the continuing investment of Partnership
resources into capital improvements. In the year since March 31, 1995, the
Partnership has invested $1.57 million in capital improvements. These capital
improvements are generally being depreciated over lives ranging from five to ten
years.
Repair and maintenance expenses increased $56,908 or 25% for the first quarter
of 1996 compared to the first quarter of 1995. The increases were incurred
principally at Embarcadero Club Apartments and Thunder Hollow Apartments. The
increases are attributable to the replacement of floor and window coverings and
replacement of appliances which met the Partnership's criteria for
capitalization based on the magnitude of replacements in 1995, but were expensed
in 1996. Thunder Hollow also had a significant increase in snow removal expenses
during the first quarter of 1996.
Personnel expenses decreased $28,552 or 10.1% for the first quarter of 1996
compared to the first quarter of 1995. All of the Partnership's properties
recorded decreased personnel expenses. Part of the decrease at Windrock
Apartments was an $8,583 refund of workers' compensations insurance premiums.
The Partnership's Utah properties benefited from allocating personnel expenses
over an additional property not owned by the Partnership beginning in 1996. The
remainder of the Partnership's properties recorded smaller decreases in
personnel expenses.
General and administrative-affiliates expenses decreased $15,561 or 16.1% for
the first quarter of 1996 compared to the same quarter of 1995. Reimbursable
costs allocated to the Partnership by affiliates of the General Partner
decreased for the quarter.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Although the Partnership's net loss increased $56,907 to $123,766, cash flow
from operating activities increased substantially. Cash flow from operating
activities increased $381,102 to $495,692 in the first quarter of 1996. Reduced
payments to suppliers and to affiliates accounted for most of the increase. Due
to the increased cash flow from operating activities, the Partnership's cash
reserves increased $284,870 for the quarter.
Cash used by the Partnership for capital improvements also decreased for the
quarter. Such expenditures decreased $170,585 to $68,302. The Partnership's
capital improvement budget for 1996 totals only $623,000, approximately half of
the amount expended by the Partnership for capital improvements in each of the
past three years.
Cash flows from financing activities for the first quarter of 1996 reflect only
principal repayments on the Partnership's various mortgage notes. The first
quarter of 1995, besides mortgage principal repayments, records the effects of
the refinancing of the Windrock mortgage note.
Short-term liquidity:
At March 31, 1996, the Partnership held $1,702,818 of cash and cash equivalents,
up $284,871 from the balance at the end of 1995. The General Partner considers
this level of cash reserves to be adequate to meet the Partnership's operating
needs for the balance of 1996. The General Partner anticipates that cash
generated from operations for the remainder of 1996 will be sufficient to fund
the Partnership's budgeted capital improvements and debt service requirements.
However, 1996 cash flow from operations likely will not be adequate to pay
previously deferred Management Incentive Distribution due to the General
Partner. The General Partner anticipates resuming payment of the Management
Incentive Distribution if the Partnership's properties continue to perform as
projected.
The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships if certain conditions
are met. Borrowings under the facility may be used to fund deferred maintenance,
refinancing obligations and working capital needs. There is no assurance that
the Partnership will be able to receive funds from the facility because no
amount will be reserved for any particular partnership. As of March 31, 1996,
$2,662,819 was available from the facility. However, additional funds could
become available as other partnerships repay borrowings. This commitment will
terminate on September 20, 1996.
Long-term liquidity:
For the long term, property operations will remain the primary source of funds.
In this regard, the General Partner expects that the capital improvements made
by the Partnership during the past two years will yield improved cash flow from
property operations for the balance of 1996. The Partnership has budgeted
$623,000 of capital improvements for 1996. If the Partnership's cash position
deteriorates, the General Partner may elect to defer certain of the capital
improvements, except where such improvements are expected to increase the
competitiveness or marketability of the Partnership's properties.
As an additional source of liquidity, the General Partner may, from time to
time, attempt to sell Partnership properties judged to be mature considering the
circumstances of the market in which the properties are located, as well as the
Partnership's need for liquidity. However, there can be no guarantee that the
Partnership will be able to sell any of its properties for an amount sufficient
to retire the related mortgage note and still provide cash proceeds to the
Partnership, or that such proceeds could be timed to coincide with the liquidity
needs of the Partnership. Currently, no Partnership properties are being
marketed for sale.
Income Allocations and Distributions:
Terms of the Amended Partnership Agreement specify that net losses for financial
reporting purposes are allocated 99% to the limited partners and 1% to the
General Partner. Net income for financial reporting purposes is allocated to the
General Partner in an amount equal to the greater of (a) 1% of net income or (b)
the cumulative amount of the MID paid for which no income allocation has
previously been made; any remaining net income is allocated to the limited
partners. Therefore, for the three month periods ended March 31, 1996 and 1995,
($1,238) and ($669), respectively, were allocated to the General Partner. The
limited partners received allocations of net loss of ($122,528) and ($66,190),
respectively.
With the exception of the MID, distributions to Partners have been suspended
since 1986 as a part of the General Partner's policy of maintaining adequate
cash reserves. Distributions to Unit holders will remain suspended for the
foreseeable future. Although the Partnership recorded a MID of $145,007 for the
first three months of 1996, payments of MID have been suspended since the
beginning of 1994. The General Partner will continue to monitor the cash
reserves and working capital requirements of the Partnership to determine when
cash flows will support resumption of MID payments and distributions to Unit
holders.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Description
------- -----------
4. Amended and Restated Limited Partnership Agree-
ment dated September 20, 1991. (1)
11. Statement regarding computation of net loss per
limited partnership unit: net loss per limited
partnership unit is computed by dividing net
loss allocated to the limited partners by the
number of limited partnership units
outstanding. Per unit information has been
computed based on 86,534 limited partnership
units outstanding in 1996 and 1995.
27. Financial Data Schedule for the quarter ended
March 31, 1996.
(1) Incorporated by reference to the Annual Report of Registrant, on
Form 10-K for the period ended December 31, 1991, as filed on March
30, 1992.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended March 31, 1996.
McNEIL REAL ESTATE FUND XIV, LTD.
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 XIV, Ltd.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
May 14, 1996 By: /s/ Donald K. Reed
- ------------------- ---------------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
May 14, 1996 By: /s/ Ron K. Taylor
- ------------------- ---------------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer of
McNeil Investors, Inc.
May 14, 1996 By: /s/ Brandon K. Flaming
- ------------------- ---------------------------------------------
Date Brandon K. Flaming
Chief Accounting Officer of McNeil
Real Estate Management, Inc.