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 September 30, 1997
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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 0-14258
MCNEIL REAL ESTATE FUND XV, LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2941516
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240
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(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
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MCNEIL REAL ESTATE FUND XV, LTD.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
September 30, December 31,
1997 1996
---------------- ---------------
ASSETS
- ------
Real estate investments:
Land..................................................... $ 6,220,730 $ 7,087,195
Buildings and improvements............................... 41,138,168 45,563,139
-------------- -------------
47,358,898 52,650,334
Less: Accumulated depreciation.......................... (21,569,600) (22,398,841)
-------------- -------------
25,789,298 30,251,493
Asset held for sale......................................... 3,317,484 -
Cash and cash equivalents................................... 671,709 1,362,812
Cash segregated for security deposits....................... 204,256 263,255
Accounts receivable......................................... 318,445 188,831
Prepaid expenses and other assets........................... 39,386 43,266
Escrow deposits............................................. 654,281 310,888
Deferred borrowing costs (net of accumulated
amortization of $320,780 and $248,892 at
September 30, 1997 and December 31, 1996,
respectively)............................................ 688,552 760,440
-------------- -------------
$ 31,683,411 $ 33,180,985
============== =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable, net................................. $ 23,573,479 $ 23,857,021
Accrued property taxes...................................... 504,302 149,324
Accrued expenses............................................ 123,796 166,600
Accrued interest............................................ 164,389 170,447
Deferred gain - involuntary conversion...................... 97,210 97,210
Payable to affiliates - General Partner..................... 67,990 99,892
Security deposits and deferred rental revenue............... 253,079 247,849
-------------- -------------
24,784,245 24,788,343
-------------- -------------
Partners' equity (deficit):
Limited partners - 120,000 limited partnership units
authorized; 102,796 and 102,836 limited partnership
units issued and outstanding at September 30, 1997
and December 31, 1996, respectively...................... 7,314,957 8,812,479
General Partner.......................................... (415,791) (419,837)
-------------- -------------
6,899,166 8,392,642
-------------- -------------
$ 31,683,411 $ 33,180,985
============== =============
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 XV, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1997 1996 1997 1996
-------------- --------------- -------------- --------------
Revenue:
Rental revenue................ $ 2,036,475 $ 2,023,161 $ 5,973,958 $ 5,997,714
Interest...................... 13,158 27,240 42,734 79,687
------------- ------------- ------------- -------------
Total revenue............... 2,049,633 2,050,401 6,016,692 6,077,401
------------- ------------- -------------- -------------
Expenses:
Interest...................... 531,398 527,252 1,600,870 1,609,136
Depreciation.................. 476,071 509,947 1,510,549 1,524,348
Property taxes................ 111,285 112,947 333,855 341,173
Personnel expenses............ 253,046 233,629 702,811 676,194
Utilities..................... 107,207 91,517 288,206 263,333
Repair and maintenance........ 307,694 253,491 826,995 702,750
Property management
fees - affiliates........... 102,171 101,305 303,694 303,788
Other property operating
expenses.................... 128,793 110,276 358,694 340,807
General and administrative.... 34,186 54,512 106,103 108,961
General and administrative -
affiliates.................. 37,401 54,523 113,136 165,604
------------- ------------- ------------- -------------
Total expenses.............. 2,089,252 2,049,399 6,144,913 6,036,094
------------- ------------- ------------- -------------
Net income (loss)................ $ (39,619) $ 1,002 $ (128,221) $ 41,307
============= ============= ============= =============
Net loss allocable to limited
partners...................... $ (141,150) $ (122,824) $ (497,514) $ (323,449)
Net income allocable to
General Partner............... 101,531 123,826 369,293 364,756
------------- ------------- ------------- -------------
Net income (loss)................ $ (39,619) $ 1,002 $ (128,221) $ 41,307
============= ============= ============= =============
Net loss per limited
partnership unit.............. $ (1.37) $ (1.19) $ (4.84) $ (3.15)
============= ============= ============= =============
Distribution per limited
partnership unit.............. $ 4.86 $ 4.86 $ 9.73 $ 9.72
============= ============= ============= =============
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 XV, LTD.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Nine Months Ended September 30, 1997 and 1996
Total
General Limited Partners'
Partner Partners Equity
--------------- ---------------- ----------------
Balance at December 31, 1995.............. $ (356,792) $ 10,394,645 $ 10,037,853
Net income (loss)......................... 364,756 (323,449) 41,307
Management Incentive Distribution......... (390,278) - (390,278)
Limited partner distribution.............. - (999,981) (999,981)
------------- ------------- -------------
Balance at September 30, 1996............. $ (382,314) $ 9,071,215 $ 8,688,901
============= ============= =============
Balance at December 31, 1996.............. $ (419,837) $ 8,812,479 $ 8,392,642
Net income (loss)......................... 369,293 (497,514) (128,221)
Management Incentive Distribution......... (365,247) - (365,247)
Limited partner distribution.............. - (1,000,008) (1,000,008)
------------- ------------- -------------
Balance at September 30, 1997............. $ (415,791) $ 7,314,957 $ 6,899,166
============= ============= =============
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 XV, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
Nine Months Ended
September 30,
-------------------------------------------
1997 1996
------------------- ----------------
Cash flows from operating activities:
Cash received from tenants........................ $ 5,905,883 $ 5,977,043
Cash paid to suppliers............................ (2,357,937) (2,163,646)
Cash paid to affiliates........................... (429,581) (462,743)
Interest received................................. 42,734 79,687
Interest paid..................................... (1,490,656) (1,516,055)
Property taxes paid............................... (287,223) (315,631)
----------------- --------------
Net cash provided by operating activities............ 1,383,220 1,598,655
----------------- --------------
Net cash used in investing activities:
Additions to real estate investments.............. (365,838) (582,212)
----------------- --------------
Cash flows from financing activities:
Principal payments on mortgage notes
payable......................................... (324,079) (298,681)
Management Incentive Distribution................. (384,398) (379,999)
Limited partner distribution...................... (1,000,008) (999,981)
----------------- --------------
Net cash used in financing activities................ (1,708,485) (1,678,661)
----------------- --------------
Net decrease in cash and cash equivalents............ (691,103) (662,218)
Cash and cash equivalents at beginning of
period............................................ 1,362,812 2,079,352
----------------- --------------
Cash and cash equivalents at end of period........... $ 671,709 $ 1,417,134
================= ==============
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 XV, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Income (Loss) to Net Cash Provided by
Operating Activities
Nine Months Ended
September 30,
----------------------------------------
1997 1996
----------------- ---------------
Net income (loss).................................... $ (128,221) $ 41,307
--------------- --------------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation...................................... 1,510,549 1,524,348
Amortization of discounts on mortgage
notes payable................................... 40,537 34,354
Amortization of deferred borrowing costs.......... 71,888 60,765
Changes in assets and liabilities:
Cash segregated for security deposits........... 58,999 (40,512)
Accounts receivable............................. (129,614) (8,338)
Prepaid expenses and other assets............... 3,880 (20,930)
Escrow deposits................................. (343,393) (9,333)
Accounts payable................................ - (36,034)
Accrued property taxes.......................... 333,855 128,244
Accrued expenses................................ (25,528) (103,582)
Accrued interest................................ (2,211) (2,038)
Payable to affiliates - General Partner......... (12,751) 6,649
Security deposits and deferred rental
revenue....................................... 5,230 23,755
--------------- --------------
Total adjustments............................. 1,511,441 1,557,348
--------------- --------------
Net cash provided by operating activities............ $ 1,383,220 $ 1,598,655
=============== ==============
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 XV, LTD.
Notes to Financial Statements
(Unaudited)
September 30, 1997
NOTE 1.
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McNeil Real Estate Fund XV, Ltd. (the "Partnership") was organized June 26, 1984
as a limited partnership organized under the provisions of the California
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. The Partnership is governed by an amended and
restated limited partnership agreement, dated October 11, 1991 (the "Amended
Partnership Agreement"). The principal place of business for the Partnership and
the General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair presentation of the Partnership's financial position and
results of operations. All adjustments were of a normal recurring nature.
However, the results of operations for the nine months ended September 30, 1997
are not necessarily indicative of the results to be expected for the year ending
December 31, 1997.
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, 1996, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund XV, Ltd., c/o The Herman Group, 2121 San Jacinto St.,
26th Floor, Dallas, Texas 75201.
NOTE 3.
- -------
The Partnership pays property management fees equal to 5% of 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 and leasing services.
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 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 limited
partnership units ("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:
Nine Months Ended
September 30,
--------------------------
1997 1996
---------- -----------
Property management fees - affiliates.......... $ 303,694 $ 303,788
Charged to general and administrative -
affiliates:
Partnership administration.................. 113,136 165,604
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$ 416,830 $ 469,392
========= ==========
Charged to General Partner's deficit:
MID......................................... $ 365,247 $ 390,278
========= ===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
The Partnership is engaged in real estate activities, including the ownership,
operation and management of residential and other real estate related assets. At
September 30, 1997, the Partnership owned four apartment properties. Three of
the four Partnership's properties are subject to mortgage notes.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Partnership revenues decreased by $768 and $60,709 for the three and nine months
ended September 30, 1997, respectively, as compared to the same period last
year. Rental revenue and interest income decreased by $23,756 and $36,953,
respectively.
Rental revenue for the first nine months of 1997 was $5,973,958 as compared to
$5,997,714 for the same period in 1996. The decrease in rental revenue of
$23,756 is due to reduced rental rates at Mountain Shadows and a decrease in the
occupancy rate at Arrowhead and Cedar Run.
Interest income for the nine months decreased due to smaller average cash
balances invested in interest-bearing accounts.
Expenses:
Partnership expenses increased by $39,853 and $108,819 for the three and nine
months ended September 30, 1997, respectively. An increase in repairs and
maintenance was offset by a decrease in general and administrative-affiliates
expense.
Utilities for the nine months ended September 30, 1997 increased by $24,873 or
9% as compared to the same period in 1996. This increase is due to an increase
in gas and oil rates and usage at Arrowhead Apartments in Kansas City.
Repairs and maintenance expense for the nine months ended September 30, 1997
increased by $124,245 or 18% compared to the same period in 1996. The increase
is primarily due to the replacement of carpeting, which met the Partnership's
criteria for capitalization based on the magnitude of replacements in 1996, but
were expensed in 1997.
General and administrative - affiliates expense decreased by $52,468 or 32% for
the first nine months of 1997 as compared to the same period last year due to
the reduction of overhead expenses allocable to the Partnership. Allocated
expenses decreased in part due to investor services being performed by an
unrelated third party in 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership's primary source of cash flows is from operating activities
which generated $1,383,220 of cash in the first nine months of 1997 as compared
to $1,598,655 for the same period in 1996. The decrease in cash of $215,435 was
mainly the result of an increase in cash paid to suppliers.
The Partnership expended $365,838 and $582,212 for capital improvements to its
properties in the first nine months of 1997 and 1996, respectively.
During the first nine months of 1997, the Partnership paid $324,079 in principal
payments on the mortgage notes, distributions of $1,000,008 to the limited
partners and MID payments of $384,398.
Short-term liquidity:
At September 30, 1997, the Partnership held cash and cash equivalents of
$671,709, down $691,103 from the balance at December 31, 1996. This balance
provides a comfortable level of working capital for the Partnership's
operations.
During 1997, operations of the Partnership's properties are expected to provide
positive cash flow from operations. Management will perform routine repairs and
maintenance on the properties to preserve and enhance their value in the market.
In 1997, the Partnership has budgeted to spend approximately $547,000 on capital
improvements, which are expected to be funded from operations of the properties.
Long-term liquidity:
For the long-term, property operations will remain the primary source of funds.
While the present outlook for Partnership's liquidity is favorable, market
conditions may change and property operations can deteriorate. In that event,
the Partnership would require other sources of working capital. No such other
sources have been identified, and the Partnership has no established lines of
credit. Other possible actions to resolve working capital deficiencies include
refinancing or renegotiating terms of existing loans, deferring major capital
expenditures on Partnership properties except where improvements are expected to
enhance the competitiveness or marketability of the properties, or arranging
working capital support from affiliates. All or a combination of these steps may
be inadequate or unfeasible in resolving such potential working capital
deficiencies. No affiliate support has been required in the past, and there is
no assurance that support would be provided in the future, since neither the
General Partner nor any affiliates have any obligation in this regard.
The Partnership has determined to begin orderly liquidation of all its assets.
Although there can be no assurance as to the timing of the liquidation due to
real estate market conditions, the general difficulty of disposing of real
estate, and other general economic factors, it is anticipated that such
liquidation would result in the dissolution of the Partnership followed by a
liquidating distribution to Unitholders by December 2001. In this regard, the
Partnership has placed Cedar Run Apartments on the market for sale as of August
1, 1997.
Income allocations and distributions:
Terms of the Amended Partnership Agreement specify that income before
depreciation is allocated to the General Partner to the extent of MID paid in
cash. Depreciation is allocated in the ratio of 99:1 to the limited partners and
the General Partner, respectively. Therefore, for the nine months ended
September 30, 1997 and 1996, $368,881 and $364,756, respectively, was allocated
to the General Partner. The limited partners received allocations of $(538,270)
and $(323,449) for the nine months ended September 30, 1997 and 1996,
respectively.
During 1997, the limited partners received a cash distribution of $1,000,008.
The distribution consisted of funds from operations. A distribution of $365,247
for the MID was accrued by the Partnership for the period ended September 30,
1997 for the General Partner.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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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. Defendants intend to file a demurrer to the second consolidated and
amended complaint on or before December 1, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Description
------- -----------
3.1 Amended and Restated Partnership Agreement
dated October 11, 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
102,796 and 102,836 limited partnership
units outstanding in 1997 and 1996,
respectively.
27. Financial Data Schedule for the quarter
ended September 30, 1997.
(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 September 30, 1997.
McNEIL REAL ESTATE FUND XV, 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 XV, Ltd.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
November 13, 1997 By: /s/ Ron K. Taylor
- ------------------ ----------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
November 13, 1997 By: /s/ Brandon K. Flaming
- ------------------ -----------------------------------------
Date Brandon K. Flaming
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)