UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended June 30, 1995
---------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to_____________
Commission file number 0-14007
MCNEIL REAL ESTATE FUND XX, L.P.
------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 33-0050225
------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (214) 448-5800
---------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
MCNEIL REAL ESTATE FUND XX, L.P.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
------ --------------------
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
--------- --------
ASSETS
------
Real estate investments:
Land..................................................... $ 699,697 $ 699,697
Buildings and improvements............................... 6,033,727 6,001,172
---------- ---------
6,733,424 6,700,869
Less: Accumulated depreciation.......................... (925,089) (762,675)
---------- ---------
5,808,335 5,938,194
Mortgage loan investments, net of allowance of
$792,013 at June 30, 1995 and
December 31, 1994........................................ 3,602,448 3,684,406
Mortgage loan investment - affiliate........................ 733,900 733,900
Cash and cash equivalents .................................. 3,739,083 3,734,020
Cash segregated for security deposits....................... 75,660 56,480
Interest and other accounts receivable...................... 57,373 50,244
Escrow deposits............................................. 84,076 128,642
Deferred borrowing costs, net of accumulated
amortization of $23,484 and $18,137 at June 30,
1995 and December 31, 1994, respectively................. 138,010 143,357
Prepaid expenses and other assets........................... 8,302 14,868
---------- ----------
$14,247,187 $14,484,111
========== ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
-----------------------------------------
Mortgage note payable, net.................................. $ 2,781,464 $ 2,802,303
Accounts payable and other accrued expenses................. 56,724 79,726
Accrued property taxes...................................... 61,990 112,216
Payable to affiliates - General Partner..................... 23,350 19,449
Deferred gain............................................... 175,994 150,053
Security deposits and deferred rental income................ 61,913 54,851
---------- ----------
3,161,435 3,218,598
---------- ----------
Partners' equity (deficit):
Limited partners - 60,000 limited partnership units
authorized; 49,512 limited partnership units issued
and outstanding at June 30, 1995 and
December 31, 1994...................................... 11,405,721 11,586,184
General Partner.......................................... (319,969) (320,671)
---------- ----------
11,085,752 11,265,513
---------- ----------
$14,247,187 $14,484,111
========== ==========
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 XX, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ------------------------
1995 1994 1995 1994
------- ------- ------- -------
Revenue:
Rental revenue................ $335,573 $282,404 $664,556 $554,854
Interest income on mortgage
loan investments............ 72,954 122,004 141,174 263,625
Interest income on mortgage
loan investment - affiliate. 15,305 15,306 30,442 30,442
Other interest income......... 57,972 34,840 108,425 63,789
------- ------- ------- -------
Total revenue............... 481,804 454,554 944,597 912,710
------- ------- ------- -------
Expenses:
Interest...................... 61,585 61,894 125,006 123,265
Depreciation.................. 81,207 71,886 162,414 134,627
Property taxes................ 46,788 40,629 93,576 78,000
Personnel costs............... 35,775 31,184 85,318 66,947
Utilities..................... 21,088 17,930 41,421 41,998
Repairs and maintenance....... 27,476 30,339 57,259 54,291
Property management
fees - affiliates........... 17,343 14,194 32,843 27,061
Other property operating
expenses.................... 22,753 14,639 42,424 28,570
General and administrative.... 25,913 16,972 42,523 32,709
General and administrative -
affiliates.................. 96,094 89,726 191,573 181,879
------- ------- ------- -------
Total expenses.............. 436,022 389,393 874,357 769,347
------- ------- ------- -------
Net income....................... $ 45,782 $ 65,161 $ 70,240 $143,363
======= ======= ======= =======
Net income allocable
to limited partners........... $ 45,325 $ 64,509 $ 69,538 $141,929
Net income allocable
to General Partner............ 457 652 702 1,434
------- ------- ------- -------
Net income....................... $ 45,782 $ 65,161 $ 70,240 $143,363
======= ======= ======= =======
Net income per limited
partnership unit.............. $ .92 $ 1.30 $ 1.40 $ 2.87
======= ======= ======= =======
Distributions per limited
partnership unit.............. $ - $ - $ 5.05 $ -
======= ======= ======= =======
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 XX, L.P.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Six Months Ended June 30, 1995 and 1994
Total
General Limited Partners'
Partner Partners Equity
---------- ----------- -----------
Balance at December 31, 1993.............. $(321,560) $11,748,097 $11,426,537
Net income................................ 1,434 141,929 143,363
-------- ---------- ----------
Balance at June 30, 1994.................. $(320,126) $11,890,026 $11,569,900
======== ========== ==========
Balance at December 31, 1994.............. $(320,671) $11,586,184 $11,265,513
Net income................................ 702 69,538 70,240
Distributions............................. - (250,001) (250,001)
-------- ---------- ----------
Balance at June 30, 1995.................. $(319,969) $11,405,721 $11,085,752
======== ========== ==========
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 XX, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase in Cash and Cash Equivalents
Six Months Ended
June 30,
--------------------------------
1995 1994
-------- --------
Cash flows from operating activities:
Cash received from tenants........................ $ 652,466 $ 541,091
Cash paid to suppliers............................ (312,578) (253,746)
Cash paid to affiliates........................... (220,515) (234,486)
Interest received................................. 275,641 278,112
Interest received from affiliates................. 24,443 24,443
Interest paid..................................... (116,861) (118,742)
Property taxes paid............................... (31,586) (15,854)
Property taxes escrowed........................... (68,504) (50,934)
--------- ---------
Net cash provided by operating activities............ 229,460 169,884
--------- ---------
Cash flows from investing activities:
Additions to real estate investments.............. (32,555) (110,174)
Collection of principal on mortgage loan
investments..................................... 81,958 17,552
--------- ---------
Net cash provided by (used in) investing
activities........................................ 49,403 (92,622)
--------- ---------
Cash flows from financing activities:
Principal payments on mortgage note payable....... (23,799) (21,917)
Distributions paid................................ (250,001) -
--------- -
Net cash used in financing activities................ (273,800) (21,917)
--------- ---------
Net increase in cash and cash equivalents............ 5,063 55,345
Cash and cash equivalents at beginning of
period............................................ 3,734,020 3,811,021
--------- ---------
Cash and cash equivalents at end of period........... $3,739,083 $3,866,366
========= =========
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 XX, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
Six Months Ended
June 30,
--------------------------------
1995 1994
-------- -------
Net income........................................... $ 70,240 $143,363
------- -------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................... 162,414 134,627
Amortization of deferred borrowing costs.......... 5,347 2,994
Amortization of discount on mortgage note
payable......................................... 2,960 1,677
Changes in assets and liabilities:
Mortgage loan investments....................... - (94,692)
Cash segregated for security deposits........... (19,180) (21,929)
Interest and other accounts receivable.......... (7,129) 30,990
Escrow deposits................................. 44,566 (26,595)
Prepaid expenses and other assets............... 6,566 (19,735)
Accounts payable and other accrued
expenses...................................... (23,002) (34,189)
Accrued property taxes.......................... (50,226) 62,146
Payable to affiliates - General Partner......... 3,901 (25,546)
Deferred gain................................... 25,941
Security deposits and deferred rental
income........................................ 7,062 16,773
------- -------
Total adjustments............................. 159,220 26,521
------- -------
Net cash provided by operating activities............ $229,460 $169,884
======= =======
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 XX, L.P.
Notes to Financial Statements
June 30, 1995
(Unaudited)
NOTE 1.
------
McNeil Real Estate Fund XX, L.P. (the "Partnership"), formerly known as
Southmark Income Investors, Ltd., was organized on July 19, 1984 as a limited
partnership under the provisions of the California Revised Uniform Limited
Partnership Act. The general partner of the Partnership is McNeil Partners, L.P.
(the "General Partner"), a Delaware limited partnership, an affiliate of Robert
A. McNeil ("McNeil"). The principal place of business for the Partnership and
the General Partner is 13760 Noel Road, Suite 700, 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, 1995 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1995.
NOTE 2.
------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1994, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund XX, L.P., c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, Dallas, Texas 75240.
NOTE 3.
------
Certain prior period amounts have been reclassified to conform to the current
period presentation.
NOTE 4.
------
The Partnership pays property management fees equal to 5% of the gross rental
receipts for its properties to McNeil Real Estate Management, Inc. ("McREMI"),
an affiliate of the General Partner, for providing property management services.
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
$10,000 per apartment unit to arrive at the property tangible asset value or
(iii) on 1130 Sacramento, the net book value of the property is used. 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 and its affiliates are as follows:
Six Months Ended
June 30,
-------------------------------
1995 1994
------- ------
Property management fees............................. $ 32,843 $ 27,061
Charged to general and administrative -
affiliates:
Partnership administration........................ 106,249 98,508
Asset management fee.............................. 85,324 83,371
------- -------
$224,416 $208,940
======= =======
Payable to affiliates - General Partner at June 30, 1995 and December 31, 1994
consisted primarily of unpaid property management fees, Partnership general and
administrative expenses and asset management fees and are due and payable from
current operations.
NOTE 5.
------
In May 1994, the Idlewood Nursing Home mortgage loan investment was modified,
extending the maturity date to March 1999 and reducing the interest rate on the
loan from 12% to 8.5%. Unpaid accrued interest of $82,566 for November 1993
through February 1994 was added to the principal balance at March 1, 1994 and is
no longer considered interest. Monthly payments of principal and interest were
reduced from $25,067 to $17,286 beginning April 1, 1994. In February 1995, the
Idlewood Nursing Home mortgage loan investment was again modified. The interest
rate remained at 8.5% and the maturity date was changed to February 1, 1998. The
borrower paid the Partnership $33,200 in cash at the date of modification and
the monthly payments on the loan were changed such that cash flow from
operations of the property, with a minimum payment of $9,130, are due monthly.
In February 1995, the Lakeland Nursing Home mortgage loan investment was
modified extending the maturity date to February 1, 1998. The interest rate and
monthly payment amount remain the same. The borrower paid a $25,941 extension
fee which the Partnership recorded as a deferred gain.
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 Sterling Springs
Apartments or 1130 Sacramento Condominiums since December 31, 1994.
The Partnership reported net income of $70,240 for the first six months of 1995
as compared to $143,363 for the same period in 1994. Revenues in 1995 were
$944,597 as compared to $912,710 in 1994, while expenses increased to $874,357
from $769,347.
Net cash provided by operating activities was $229,460 for the six months ended
June 30, 1995, a change from the $169,884 provided during the same six month
period in 1994. The Partnership expended $32,555 for capital improvements, made
$23,799 in principal payments on its mortgage note payable, and collected
$81,958 of principal on mortgage loan investments. After distributions of
$250,001 to the limited partners, cash and cash equivalents totaled $3,739,083
at June 30, 1995, a net increase of $5,063 from the balance at December 31,
1994.
RESULTS OF OPERATIONS
---------------------
Revenue:
Total revenue increased by $27,250 and $31,887 for the three and six month
periods ended June 30, 1995, respectively, as compared to the same periods in
1994. The increase was due to an increase in rental revenue which was partially
offset by a decrease in interest income on mortgage loan investments as
discussed below.
Rental revenue for the three and six month periods ended June 30, 1995 increased
by $53,169 and $109,702, respectively, as compared to the same periods in 1994.
The increase was mainly due to an increase in rental rates at Sterling Springs
Apartments in February 1995. Also contributing to the increase in rental revenue
was the increase in the occupancy rate at 1130 Sacramento from 50% at June 30,
1994 to 100% at June 30, 1995.
Interest income on mortgage loan investments decreased by $49,050 and $122,451
for the three and six months ended June 30, 1995, respectively, as compared to
the same periods in 1994 due to the modification of the Idlewood Nursing Home
mortgage loan investment in February 1995 (See Item 1 - Note 5). In accordance
with Statement of Financial Accounting Standards No. 114 "Accounting by
Creditors for Impairment of a Loan" ("SFAS 114"), which the Partnership adopted
in 1994, the Partnership has ceased accruing interest on the loan and all
payments received are recorded as a reduction of principal.
Other interest income earned on short-term investments of cash and cash
equivalents increased by $23,132 and $44,636 for the three and six month periods
ended June 30, 1995, respectively, as compared to the respective periods in
1994. The increase was mainly due to an increase in interest rates earned on
invested cash during the first six months of 1995.
Expenses:
Total expenses for the three and six month periods ended June 30, 1995 increased
by $46,629 and $105,010, respectively, as compared to the respective periods in
1994.
Depreciation expense increased by $9,321 and $27,787 for the three and six
months ended June 30, 1995, respectively, as compared to the same periods in
1994. The increase was primarily due to the addition of depreciable capital
improvements at Sterling Springs Apartments and 1130 Sacramento Condominiums.
Property taxes for the three and six months ended June 30, 1995 increased by
$6,159 and $15,576, respectively, as compared to the same periods in 1994. The
increase was mainly due to an increase in the property tax liability at 1130
Sacramento due to an increase in the assessed taxable value of the property
after its completion in early 1994.
Personnel costs increased by $4,591 and $18,371 for the three and six months
ended June 30, 1995, respectively, as compared to the respective periods in
1994. The increase was due to an increase in bonuses paid at Sterling Springs
and 1130 Sacramento, the result of an increase in the overall performance of the
properties in the first quarter of 1995.
Property management fees increased by $3,149 in the three months and by $5,782
in the six months ended June 30, 1995, in relation to the comparable periods in
1994, due to an increase in gross rental receipts, on which the fees are based,
at 1130 Sacramento Condominiums and Sterling Springs Apartments.
Other property operating expenses increased by $8,114 and $13,854 for the first
three and six months of 1995, respectively, as compared to the same periods in
1994. The increase was mainly due to an increase in property insurance costs in
1995.
General and administrative expenses increased by $8,941 and $9,814 for the three
and six month period ended June 30, 1995, respectively, as compared to the
respective periods in 1994. The increase was due to an increase in legal fees,
the result of the Idlewood and Lakeland note modifications.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Partnership generated $229,460 through operating activities for the first
six months of 1995 as compared to $169,884 for the first six months of 1994. The
increase in 1995 was mainly due to an increase in cash received from tenants
(see discussion of increase in rental revenue above).
The Partnership expended $32,555 and $110,174 for capital improvements to its
properties in the first six months of 1995 and 1994, respectively. 1994 includes
improvements to 1130 Sacramento for which construction was completed early in
1994.
The Partnership collected $81,958 of principal on its mortgage loan investments
in the first six months of 1995 as compared to $17,552 collected in the same
period in 1994. As previously discussed, in accordance with SFAS 114, all
payments received on the Idlewood Nursing Home mortgage loan investment have
been recorded as a reduction of principal in 1995.
The Partnership distributed $250,001 to the limited partners in the first
quarter of 1995 from cash from operations. No distributions were made in the
first six months of 1994.
Short-term liquidity:
--------------------
At June 30, 1995, the Partnership held cash and cash equivalents of $3,739,083.
This balance provides a reasonable level of working capital for the Partnerships
immediate needs in operating its properties.
In 1995, operations of Sterling Springs Apartments and 1130 Sacramento are
expected to provide sufficient positive cash flow for normal operations.
Management will perform routine repairs and maintenance on the properties to
preserve and enhance their value and competitiveness in the market. The
Partnership has budgeted to spend approximately $86,000 on capital improvements
to its properties in 1995, which are expected to be funded from operations of
the properties.
For 1995, management expects that cash from operations of its properties and
principal and interest collections on the mortgage loan investments, along with
the present balance of cash and cash equivalents held, will allow the
Partnership to meet its obligations as they come due.
Long-term liquidity:
-------------------
Only one property, Sterling Springs Apartments, is encumbered with mortgage
debt. The mortgage on this property is not due until 2003.
In the event that the Partnership acquires ownership of other properties through
foreclosure, the cash and cash equivalent balances presently held will provide a
source for the maintenance and improvement of the properties. Because the timing
and number of properties which may be foreclosed is uncertain, there is no
assurance that the balances presently held will be sufficient for needed capital
improvements. At present, there are no commitments nor any known needs for
improvements to the properties securing the Partnership's loans. The Partnership
has no existing lines of credit from outside sources.
The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships, if certain
conditions are met. Borrowings under the facility may be used to fund deferred
maintenance, refinancing obligations and working capital needs. There is no
assurance that the Partnership will receive any funds under the facility because
no amounts are reserved for any particular partnership. As of June 30, 1995,
$2,362,004 remained available for borrowing under the facility; however,
additional funds could become available as other partnerships repay existing
borrowings.
Another possible source of funds is the sale of the Partnership's mortgage loan
investments or properties securing the Partnership's mortgage loans. Such sales
are possibilities only, and since the Partnership does not control the
properties securing its loans, sales of those properties may occur only if
initiated by the borrower or in the event of foreclosure by the Partnership.
There is no assurance that any sales can be contracted or closed to coincide
with the Partnership's future cash needs. For the long term, the Partnership
will remain dependent on operations of the properties it owns or of the
properties securing its loans as the primary source of debt repayment, until the
properties can be sold.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
------ -----------------
On an unsolicited basis, High River Limited Partnership ("High River"), a
partnership controlled by Carl Icahn, announced that it has commenced an offer
to purchase 22,280 units of limited partnership interest in the Partnership
(approximately 45% of the Partnership's units) at $100.00 per unit. High River
has stated that the offer is being made as "an investment." The tender offer is
due to expire on August 31, 1995, unless extended.
The General Partner, with assistance from its advisors, is in the process of
evaluating the tender offer from a number of important standpoints and will
report to the limited partners its position with respect to such offer.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
------ --------------------------------
(a) Exhibits.
Exhibit
Number Document Description
4. Amended and Restated Limited Partnership Agreement dated March 30, 1992.
(Incorporated by reference to the Current Report of the registrant on Form 8-K
dated March 30, 1992, as filed on April 10, 1992).
11. Statement regarding computation of Net
Income per Limited Partnership Unit: Net
income per limited partnership unit is
computed by dividing net income allocated to
the limited partners by the weighted average
number of limited partnership units
outstanding. Per unit information has been
computed based on 49,512 and 49,524 limited
partnership units outstanding in 1995 and
1994, respectively.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended June 30, 1995.
MCNEIL REAL ESTATE FUND XX, 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 XX, L.P.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
August 14, 1995 By: /s/ Donald K. Reed
------------------------------------ ------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
August 14, 1995 By: /s/ Robert C. Irvine
------------------------------------ ------------------------------------
Date Robert C. Irvine
Chief Financial Officer of McNeil Investors, Inc.
Principal Financial Officer
August 14, 1995 By: /s/ Carol A. Fahs
------------------------------------ ------------------------------------
Date Carol A. Fahs
Chief Accounting Officer of McNeil Real Estate
Management, Inc.