FORT MEIGS PLAZA
BALANCE SHEET AS OF DECEMBER 31, 1997 AND
STATEMENTS OF OPERATIONS, OWNER'S DEFICIT AND CASH FLOWS
FOR THE YEAR THEN ENDED
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
BALANCE SHEET AS OF DECEMBER 31, 1996 AND
STATEMENTS OF OPERATIONS, OWNER'S DEFICIT AND CASH FLOWS
FOR EACH OF THE TWO YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
UNAUDITED
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owner of
Fort Meigs Plaza:
We have audited the accompanying balance sheet of Fort Meigs Plaza (a property
wholly-owned by McNeil Real Estate Fund XXI, L.P., the "Owner") as of December
31, 1997, and the related statements of operations, changes in owner's deficit
and cash flows for the year then ended. These financial statements are the
responsibility of the Property's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fort Meigs Plaza as of December
31, 1997, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Property will continue as a going concern. As discussed in Note 2 to the
financial statements, the Property's Owner is in default on approximately $3.7
million in mortgage note debt that is secured by the Property, and for which no
extensions, modifications, or refinancings have yet been negotiated. There is no
guarantee that such negotiations can be completed. The Owner's plans in regard
to these matters are also described in Note 2. This condition raises substantial
doubt about the Property's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Arthur Andersen LLP
Dallas, Texas
March 20, 1998
FORT MEIGS PLAZA
BALANCE SHEETS
December 31,
-----------------------------------------
1997 1996
----------------- ----------------
(Unaudited)
ASSETS
------
Asset held for sale:
Land $ 367,193 $ 367,193
Buildings and tenant improvements 4,594,690 4,530,376
---------------- ---------------
4,961,883 4,897,569
Less: Accumulated depreciation
and amortization (2,165,895) (2,165,895)
----------------- ----------------
2,795,988 2,731,674
Cash 18,953 10,291
Cash segregated for tenant security deposits 10,358 8,383
Accounts receivable 100,314 104,137
Prepaid expenses and other assets 11,654 6,478
---------------- ---------------
$ 2,937,267 $ 2,860,963
================ ===============
LIABILITIES AND OWNER'S DEFICIT
-------------------------------
Mortgage note payable $ - $ 3,011,293
Mortgage notes payable - affiliate 3,730,076 733,900
Accrued interest payable 105,655 93,146
Accrued property taxes 75,992 74,880
Accounts payable and other accrued expenses 536 -
Accounts payable - affiliate 3,200 3,004
Tenant security deposits and deferred rental revenue 8,850 7,980
--------------- ---------------
3,924,309 3,924,203
Commitments and contingencies
Owner's deficit (987,042) (1,063,240)
--------------- ---------------
$ 2,937,267 $ 2,860,963
================ ===============
See accompanying notes to financial statements.
FORT MEIGS PLAZA
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
----------------------------------------------------
1997 1996 1995
(Unaudited) (Unaudited)
-------------- --------------- ----------------
REVENUE:
Rental revenue $ 682,906 $ 684,195 $ 669,565
------------- -------------- ---------------
EXPENSES:
Interest 368,996 386,939 388,851
Interest - affiliates 77,380 61,556 61,388
Depreciation and amortization - 149,474 193,711
Property taxes 74,894 72,539 69,682
Personnel expenses 11,848 8,580 9,855
Repairs and maintenance 41,473 38,454 45,329
Property management fees 41,403 39,308 40,575
Utilities 20,159 20,639 20,717
Other property operating expenses 54,004 22,401 23,640
------------- ------------- --------------
Total expenses 690,157 799,890 853,748
------------- ------------- --------------
Net loss $ (7,251) $ (115,695) $ (184,183)
============= ============= ==============
See accompanying notes to financial statements.
FORT MEIGS PLAZA
STATEMENTS OF CHANGES IN OWNER'S DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
For the Years Ended December 31,
-------------------------------------------------------------
1997 1996 1995
(Unaudited) (Unaudited)
--------------- ---------------- -----------------
Balance at beginning of year (unaudited) $ (1,063,240) $ (979,098) $ (815,657)
Capital contributed 816,419 693,522 693,133
Capital distributed (732,970) (661,969) (672,391)
Net loss (7,251) (115,695) (184,183)
-------------- ------------- --------------
Balance at end of year $ (987,042) $ (1,063,240) $ (979,098)
============== ============= ==============
See accompanying notes to financial Statements.
FORT MEIGS PLAZA
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
For the Years Ended December 31,
----------------------------------------------------
1997 1996 1995
(Unaudited) (Unaudited)
--------------- --------------- ---------------
Cash flows from operating activities:
Cash received from tenants.............. $ 685,624 $ 652,870 $ 673,073
Cash paid to suppliers.................. (132,226) (94,652) (95,555)
Cash paid to affiliates................. (41,207) (39,772) (40,352)
Interest paid........................... (384,879) (386,688) (388,280)
Interest paid to affiliate.............. (48,886) (48,886) (48,886)
Property taxes paid..................... (73,782) (72,546) (70,697)
-------------- -------------- ---------------
Net cash provided by operating
activities.............................. 4,644 10,326 29,303
------------- ------------- --------------
Cash flows from investing activities:
Additions to buildings and tenant
Improvements.......................... (64,314) (30,956) (28,685)
------------- ------------- --------------
Cash flows from financing activities:
Principal payments on mortgage
note payable.......................... (15,117) (13,308) (11,716)
Capital contributed..................... 816,419 693,522 693,133
Capital distributed..................... (732,970) (661,969) (672,391)
-------------- ------------- --------------
Net cash provided by financing activities.. 68,332 18,245 9,026
------------- ------------- --------------
Net increase (decrease) in cash............ 8,662 (2,385) 9,644
Cash at beginning of year.................. 10,291 12,676 3,032
------------- ------------- --------------
Cash at end of year........................ $ 18,953 $ 10,291 $ 12,676
============= ============= ==============
See accompanying notes to financial statements.
FORT MEIGS PLAZA
STATEMENTS OF CASH FLOWS
Reconciliation of Net Loss to Net Cash Provided by
Operating Activities
For the Years Ended December 31,
-----------------------------------------------------
1997 1996 1995
(Unaudited) (Unaudited)
--------------- --------------- -----------------
Net loss................................... $ (7,251) $ (115,695) $ (184,183)
------------- ------------- ---------------
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization........... - 149,474 193,711
Amortization of deferred borrowing
costs................................. 102 393 360
Changes in assets and liabilities:
Cash segregated for tenant
security deposits................... (1,975) (3,447) 3,551
Accounts receivable................... 3,823 (30,123) 2,267
Prepaid expenses and other
assets.............................. (5,278) (2,022) 1,430
Accrued interest payable.............. 12,509 12,528 12,713
Accrued property taxes................ 1,112 (7) (1,015)
Accounts payable and other
accrued expenses.................... 536 (2,556) 2,556
Accounts payable - affiliates......... 196 (464) 223
Tenant security deposits and
deferred rental revenue............. 870 2,245 (2,310)
------------- ------------- ---------------
Total adjustments..................... 11,895 126,021 213,486
------------- ------------- --------------
Net cash provided by operating
activities.............................. $ 4,644 $ 10,326 $ 29,303
============= ============= ==============
See accompanying notes to financial statements.
FORT MEIGS PLAZA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 1 - Organization and Summary of Significant Accounting Policies
- --------------------------------------------------------------------
Organization
------------
Fort Meigs Plaza (the "Property") is wholly-owned by McNeil Real Estate XXI,
L.P. (the "Owner"). The Property is a 104,990 square foot strip shopping center
located in Perrysburg, Ohio, a city lying just outside of Toledo, Ohio.
Basis of Presentation
---------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The accompanying financial statements have been prepared from the records of the
Property and include its assets, liabilities, revenues and expenses. The
accompanying financial statements do not include assets, liabilities, revenues
or expenses pertaining to the operation of the Owner or of other properties in
which the Owner has an ownership interest.
Buildings and Tenant Improvements
---------------------------------
The Property's buildings and tenant improvements are stated at cost less
accumulated depreciation and amortization through October 1, 1996. Depreciation
and amortization were computed principally on a straight-line basis over the
estimated useful lives of the related assets, which ranged from 5 to 25 years.
Tenant improvements were amortized over the life of the respective lease or the
estimated useful lives of the improvements, whichever was shorter.
The Owner placed the Property on the market for sale October 1, 1996. In
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," depreciation and amortization ceased on that date.
Revenue Recognition
-------------------
The Property leases its units under non-cancelable operating leases. Certain
leases provide concessions and/or periods of escalating or free rent. Rental
revenue is recognized on a straight-line basis over the term of the related
leases. The excess of the rental revenue recognized over the contractual rental
payments is recorded as accrued rent receivable and is included in accounts
receivable on the Balance Sheet.
Future minimum rents to be received as of December 31, 1997 are as follows:
1998.............................. $ 573,846
1999.............................. 498,124
2000.............................. 375,223
2001.............................. 337,222
2002.............................. 60,201
Thereafter........................ 362,875
--------------
Total........................... $ 2,207,491
==============
Future minimum rents do not include contingent rentals based on sales volume of
tenants. Contingent rents amounted to $50,026 for the year ended December 31,
1997. Future minimum rents also do not include expense reimbursements for common
area maintenance, property taxes, and other expenses. These expense
reimbursements amounted to $65,786 for the year ended December 31, 1997. These
contingent rents and expense reimbursements are included in rental revenue on
the Statements of Operations.
Note 2 - Mortgage Notes Payable - Affiliate
- -------------------------------------------
The following sets forth the mortgage notes payable - affiliate of the Owner of
the Property at December 31, 1997. The mortgage notes are in the Owner's name
and are secured by the Property.
Mortgage Annual Monthly
Lien Interest Payments/
Position(a) Rates % Maturity
- ----------- -------- ----------
First 12.81 $33,333 03/98 $ 2,996,176
Second 8.25 $4,073(b) 09/97 733,900
--------------
$ 3,730,076
==============
(a) The debt is non-recourse to the Owner.
(b) Payments are interest-only equal to an effective interest rate of
6.66%. All accrued interest is due at maturity.
In December 1997, McNeil Real Estate Fund XX, L.P. ("Fund XX"), the affiliated
partnership of the Owner that holds the second lien mortgage secured by the
Property, purchased the first lien mortgage note from the unaffiliated lender.
The Owner is in default on payment of both the first and second liens on the
Property as the notes matured on March 1, 1998 and September 1, 1997,
respectively. The Property is currently on the market for sale and the Owner has
received an offer from a non-affiliate to purchase the property for $3.8
million. The Owner will continue to make regularly scheduled debt service
payments on the first and second lien mortgage notes until the Property can be
sold.
If the pending sales transaction is not completed, the Owner will attempt to
renegotiate the terms of the affiliate debt. However, such refinancing may be at
an interest rate which is higher, or otherwise on terms which are less favorable
than those provided by the current mortgage. Furthermore, if alternative
financing cannot be obtained, the affiliate lender could foreclose on the
Property which secures the mortgage. Management believes the possibility of this
outcome is unlikely.
Note 3 - Transactions with Affiliates
- -------------------------------------
Property Management Fees
------------------------
The Owner pays property management fees of 6% of gross receipts of the Property
to McNeil Real Estate Management, Inc., an affiliate of the Owner, for providing
property management and leasing services to the Property.
Accounts Payable - Affiliate
----------------------------
Accounts payable - affiliate at December 31, 1997 consists of property
management fees which are due and payable from current operations.
Note 4 - Commitments and Contingencies
- --------------------------------------
The Property is engaged in legal actions arising from the normal course of
business. In management's opinion, the Property has adequate legal defenses with
respect to these actions, and the resolution of these matters should have no
material adverse effects upon the results of operations or financial condition
of the Property.