UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 ----------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to_____________ Commission file number 0-14267 -------- MCNEIL REAL ESTATE FUND XXIV, L.P. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 74-2339537 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (972) 448-5800 ------------------------------ Indicate by check mark whether the registrant, (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- MCNEIL REAL ESTATE FUND XXIV, L.P. BALANCE SHEETS (Unaudited) June 30, December 31, 1998 1997 ------------ ------------- ASSETS - ------ Real estate investments: Land ................................................... $ 1,624,347 $ 1,624,347 Buildings and improvements ............................. 17,974,940 17,771,163 ------------ ------------ 19,599,287 19,395,510 Less: Accumulated depreciation and amortization........ (8,385,690) (7,997,592) ------------ ------------ 11,213,597 11,397,918 Assets held for sale ...................................... 2,715,644 10,935,647 Cash and cash equivalents ................................. 4,196,605 2,180,029 Cash segregated for security deposits ..................... 84,569 84,737 Accounts receivable, net of allowance for doubtful accounts of $5,597 and $24,095 at June 30, 1998 and December 31, 1997, respectively .................... 467,187 588,578 Prepaid expenses and other assets, net .................... 107,452 114,823 ------------ ------------ $ 18,785,054 $ 25,301,732 ============ ============ LIABILITIES AND PARTNERS' EQUITY (DEFICIT) - ------------------------------------------ Mortgage note payable ..................................... $ 1,650,000 $ 5,293,017 Accounts payable and accrued expenses ..................... 184,934 181,540 Payable to tenant ......................................... -- 1,622,873 Payable to affiliates ..................................... 596,089 192,735 Security deposits and deferred rental revenue ............. 69,508 100,283 ------------ ------------ 2,500,531 7,390,448 ------------ ------------ Partners' equity (deficit): Limited partners - 40,000 limited partnership units authorized and outstanding at June 30, 1998 and December 31, 1997 ........................... 16,310,351 17,935,844 General Partner ........................................ (25,828) (24,560) ------------ ------------ 16,284,523 17,911,284 ------------ ------------ $ 18,785,054 $ 25,301,732 ============ ============ 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 XXIV, L.P. STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Revenue: Rental revenue ................... $ 709,441 $ 1,051,996 $ 1,808,837 $ 2,109,737 Interest ......................... 39,871 23,320 68,429 44,300 Gain on involuntary conversion ..................... - 94,480 - 94,480 ----------- ----------- ----------- ----------- Total revenue .................. 749,312 1,169,796 1,877,266 2,248,517 ----------- ----------- ----------- ----------- Expenses: Interest ......................... 10,314 94,544 108,671 198,468 Depreciation and amortization ................... 189,384 229,953 388,098 459,906 Property taxes ................... 65,113 107,274 164,357 217,446 Personnel costs .................. 66,067 67,322 142,426 154,538 Utilities ........................ 50,017 52,259 119,517 117,152 Repairs and maintenance .......... 88,568 104,413 174,374 206,866 Property management fees - affiliates .............. 42,999 56,410 102,725 115,959 Other property operating expenses ....................... 33,558 94,696 100,662 161,148 General and administrative ....... 117,427 15,623 202,978 45,189 General and administrative - affiliates ..................... 119,127 129,756 255,389 251,892 Loss on disposition of real estate ......................... 2,403 - 118,750 - Write-down for impairment of real estate ................. - - 126,080 - ----------- ----------- ----------- ----------- Total expenses ................. 784,977 952,250 2,004,027 1,928,564 ----------- ----------- ----------- ----------- Net income (loss) ................... $ (35,665) $ 217,546 $ (126,761) $ 319,953 =========== =========== =========== =========== Net income (loss) allocable to limited partners ................. $ (35,308) $ 215,370 $ (125,493) $ 316,753 Net income (loss) allocable to General Partner .................. (357) 2,176 (1,268) 3,200 ----------- ----------- ----------- ----------- Net income (loss) ................... $ (35,665) $ 217,546 $ (126,761) $ 319,953 =========== =========== =========== =========== Net income (loss) per limited partnership unit ................. $ (0.89) $ 5.39 $ (3.14) $ 7.92 =========== =========== =========== =========== Distributions per limited partnership unit ................. $ - $ - $ 37.50 $ - =========== =========== =========== =========== 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 XXIV, L.P. STATEMENTS OF PARTNERS' EQUITY (DEFICIT) (Unaudited) For the Six Months Ended June 30, 1998 and 1997 Total General Limited Partners' Partner Partners Equity (Deficit) ------------- ------------ ---------------- Balance at December 31, 1996 ........... $ (28,862) $ 18,009,967 $ 17,981,105 Net income ............................. 3,200 316,753 319,953 ------------ ------------ ------------ Balance at June 30, 1997 ............... $ (25,662) $ 18,326,720 $ 18,301,058 ============ ============ ============ Balance at December 31, 1997 ........... $ (24,560) $ 17,935,844 $ 17,911,284 Net loss ............................... (1,268) (125,493) (126,761) Distributions to limited partners - (1,500,000) (1,500,000) ------------ ------------ ------------ Balance at June 30, 1998 ............... $ (25,828) $ 16,310,351 $ 16,284,523 ============ ============ ============ 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 XXIV, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Increase (Decrease) in Cash and Cash Equivalents Six Months Ended June 30, --------------------------- 1998 1997 ------------ ------------ Cash flows from operating activities: Cash received from tenants .............................. $ 1,764,567 $ 1,990,376 Cash paid to suppliers .................................. (785,273) (691,240) Cash paid to affiliates ................................. (214,260) (418,752) Interest received ....................................... 68,429 44,300 Interest paid ........................................... (128,618) (191,161) Property taxes paid ..................................... (130,630) (166,253) ----------- ----------- Net cash provided by operating activities .................. 574,215 567,270 ----------- ----------- Cash flows from investing activities: Additions to real estate investments and assets held for sale .................................. (1,853,152) (296,654) Proceeds from disposition of real estate ................ 8,438,530 - Net proceeds received from insurance company ............................................... - 145,046 ----------- ----------- Net cash provided by (used in) investing activities......... 6,585,378 (151,608) ----------- ----------- Cash flows from financing activities: Principal payments on mortgage note payable ............................................... (31,075) (65,589) Retirement of mortgage note payable ..................... (5,261,942) - Proceeds from mortgage note payable ..................... 1,650,000 - Distributions to limited partners ....................... (1,500,000) - ----------- ----------- Net cash used in financing activities ...................... (5,143,017) (65,589) ----------- ----------- Net increase in cash and cash equivalents .................. 2,016,576 350,073 Cash and cash equivalents at beginning of period .................................................. 2,180,029 1,615,604 ----------- ----------- Cash and cash equivalents at end of period ................. $ 4,196,605 $ 1,965,677 =========== =========== 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 XXIV, L.P. STATEMENTS OF CASH FLOWS (Unaudited) Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities Six Months Ended June 30, --------------------------- 1998 1997 ---------- --------- Net income (loss) ....................................... $(126,761) $ 319,953 --------- --------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Gain on involuntary conversion ....................... - (94,480) Depreciation and amortization ........................ 388,098 459,906 Loss on disposition of real estate ................... 118,750 - Write-down for impairment of real estate ............. 126,080 - Amortization of deferred borrowing costs ............. 2,225 7,770 Changes in assets and liabilities: Cash segregated for security deposits .............. 168 (820) Accounts receivable, net ........................... (8,782) (132,317) Prepaid expenses and other assets, net ............. (42,036) 5,019 Accounts payable and accrued expenses .............. 3,394 22,183 Payable to affiliates .............................. 143,854 (50,901) Security deposits and deferred rental revenue .......................................... (30,775) 30,957 --------- --------- Total adjustments ................................ 700,976 247,317 --------- --------- Net cash provided by operating activities ............... $ 574,215 $ 567,270 ========= ========= 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 XXIV, L.P. Notes to Financial Statements June 30, 1998 (Unaudited) NOTE 1. - ------- McNeil Real Estate Fund XXIV, L.P. (the "Partnership"), formerly known as Southmark Equity Partners, Ltd., was organized on October 19, 1984, as a limited partnership under the provisions of the California Revised Limited Partnership Act to acquire and operate commercial and residential properties. The general partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil ("McNeil"). The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 600, 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 six months ended June 30, 1998 are not necessarily indicative of the results to be expected for the year ending December 31, 1998. NOTE 2. - ------- The financial statements should be read in conjunction with the financial statements contained in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1997, and the notes thereto, as filed with the Securities and Exchange Commission, which is available upon request by writing to McNeil Real Estate Fund XXIV, L.P., c/o McNeil Real Estate Management, Inc., Investor Services, 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240. NOTE 3. - ------- The Partnership pays property management fees equal to 5% of the gross rental receipts for its residential properties and 6% of gross rental receipts for its commercial properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management services for the Partnership's 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. Under the terms of its partnership agreement, the Partnership pays a disposition fee to the General Partner equal to 3% of the gross sales price for brokerage services performed in connection with the sale of the Partnership's properties. The fee is due and payable at the time the sale closes. The Partnership incurred $204,000 of such fees during the first quarter of 1998 and $55,500 of such fees during the second quarter of 1998 in connection with the sale of Southpointe Plaza and Island Plaza shopping centers, respectively. These fees have not yet been paid by the Partnership and are included in payable to affiliates on the Balance Sheet at June 30, 1998. 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 for residential properties and $50 per gross square foot for commercial properties to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible items. The fee percentage decreases subsequent to 1999. Compensation and reimbursements paid to or accrued for the benefit of the General Partner or its affiliates are as follows: Six Months Ended June 30, ------------------------ 1998 1997 -------- -------- Property management fees .............................. $102,725 $115,959 Charged to general and administrative - affiliates: Partnership administration ......................... 119,241 97,257 Asset management fee ............................... 136,148 154,635 Charged to loss on disposition of real estate: Disposition fee .................................... 204,000 - Charged to write-down for impairment of real estate: Disposition fee .................................... 55,500 - -------- -------- $617,614 $367,851 ======== ======== Payable to affiliates at June 30, 1998 and December 31, 1997 consisted primarily of unpaid property management fees, disposition fee (1998 only), Partnership general and administrative expenses and asset management fees and are due and payable from current operations. NOTE 4. - ------- On March 31, 1998, the Partnership sold Southpointe Plaza Shopping Center, located in Sacramento, California, to an unaffiliated purchaser for a cash purchase price of $6,800,000. Cash proceeds from the sale were not received until April 1, 1998. Sales proceeds received, as well as the loss on sale, are detailed below. Loss Sales on Sale Proceeds ----------------- ---------------- Sales price.......................................... $ 6,800,000 $ 6,800,000 Selling costs ....................................... (389,990) (185,990) Straight-line rents receivable written off........... (48,601) Prepaid leasing commissions written off.............. (43,913) Carrying value....................................... (6,436,246) ---------------- Loss on disposition of real estate................... $ (118,750) =============== -------------- Proceeds from sale of real estate.................... 6,614,010 Retirement of mortgage note payable.................. (5,261,942) Retirement of accrued interest payable............... (32,338) -------------- Net cash proceeds.................................... $ 1,319,730 ============== As discussed in Note 3, the Partnership incurred a $204,000 disposition fee payable to the General Partner in connection with the sale of Southpointe Plaza. This fee increased the amount of the loss on disposition of real estate and is included in selling costs above. However, as the fee has not yet been paid, it did not reduce the amount of net cash proceeds received from the sale. The net cash proceeds from the sale of Southpointe Plaza will be $1,115,730 after payment of the disposition fee. NOTE 5. - ------- On April 1, 1998, the Partnership sold Island Plaza Shopping Center, located in Ft. Myers, Florida, to an unaffiliated purchaser for a cash purchase price of $1,850,000. The Partnership recorded a $126,080 write-down for impairment of real estate in the first quarter of 1998 to record the property at its sales price less estimated costs to sell. Sales proceeds are detailed below. Loss Sales on Sale Proceeds ----------------- -------------- Sales price.......................................... $ 1,850,000 $ 1,850,000 Selling costs ....................................... (80,980) (25,480) Straight-line rents receivable written off........... (81,572) Prepaid leasing commissions written off.............. (3,269) Carrying value....................................... (1,684,179) --------------- Loss on disposition of real estate................... $ - =============== ------------ Net cash proceeds.................................... $ 1,824,520 ============ As discussed in Note 3, the Partnership incurred a $55,500 disposition fee payable to the General Partner in connection with the sale of Island Plaza. This fee increased the amount of the write-down for impairment of real estate and is included in selling costs above. However, as the fee has not yet been paid, it did not reduce the amount of net cash proceeds received from the sale. The net cash proceeds from the sale of Island Plaza will be $1,769,020 after payment of the disposition fee. NOTE 6. - ------- Effective January 1, 1996, the Partnership adopted the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement requires the cessation of depreciation on assets held for sale. Since Island Plaza, Southpointe Plaza and Springwood Plaza were placed on the market for sale, no depreciation was taken effective April 1, 1996, October 1, 1996 and August 1, 1997, respectively. NOTE 7. - ------- On June 1, 1998, the Partnership received $1,650,000 in proceeds from a mortgage note payable secured by Riverbay Plaza Shopping Center. The proceeds were used to pay for improvements made in 1997 to renovate and expand an anchor tenant's space. The mortgage note, payable to an unaffiliated lender, bears interest at a variable rate equal to 1.75% plus the London Interbank Offered Rate per annum and matures on April 15, 2001. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- FINANCIAL CONDITION - ------------------- On March 31, 1998, the Partnership sold Southpointe Plaza for a gross sales price of $6.8 million. The Partnership recognized a $118,750 loss on the sale. On April 1, 1998, the Partnership sold Island Plaza for a gross sales price of $1.85 million. A $126,080 write-down for impairment of real estate was recorded in the first quarter of 1998 and no gain or loss was recorded on the sale. The Partnership reported a net loss for the first six months of 1998 of $126,761 as compared to net income of $319,953 for the first six months of 1997. Revenues were $1,877,266 in 1998 as compared to $2,248,517 for the same period in 1997. Expenses increased to $2,004,027 in 1998 from $1,928,564 in 1997. In June 1998, the Partnership received $1,650,000 in proceeds from a mortgage note payable secured by Riverbay Plaza Shopping Center. The proceeds were used to pay for improvements made in 1997 to renovate and expand an anchor tenant's space. Net cash provided by operating activities was $574,215 for the first six months of 1998. The Partnership expended $1,853,152 for capital improvements and $31,075 for regularly scheduled principal payments on its mortgage note payable. The Partnership received $8,438,530 in proceeds from the sales of Southpointe Plaza and Island Plaza shopping centers, $5,261,942 of which was used to pay off the mortgage note payable secured by Southpointe Plaza. The Partnership received $1,650,000 in proceeds from a mortgage note payable secured by Riverbay Plaza and distributed $1,500,000 to the limited partners. Cash and cash equivalents increased by $2,016,576 for the first six months of 1998, leaving a balance of $4,196,605 at June 30, 1998. RESULTS OF OPERATIONS - --------------------- Revenue: Total revenue decreased by $420,484 and $371,251 for the three and six months ended June 30, 1998, respectively, as compared to the same periods in 1997. The decrease was due to decreases in rental revenue and gain on involuntary conversion, partially offset by an increase in interest income, as discussed below. Rental revenue for the three and six months ended June 30, 1998 decreased by $342,555 and $300,900, respectively, in relation to the comparable periods in 1997. Approximately $380,000 of the decrease was due to the sales of Southpointe Plaza and Island Plaza on March 31, 1998 and April 1, 1998, respectively. In addition, rental revenue decreased by approximately $38,000 at Towne Center due to a major tenant vacating a large space in the second quarter of 1997. Rental revenue increased by approximately $69,000, $29,000 and $23,000 at Riverbay Plaza, Sleepy Hollow and Pine Hills due to increased rental rates and occupancy in the first half of 1998. Rental revenue remained relatively unchanged at Springwood Plaza. Interest income increased by $16,551 and $24,129 for the quarter and six months ended June 30, 1998, respectively, as compared to the same periods in the prior year. The increase was due to a higher amount of cash and cash equivalents available for short-term investment in 1998, mainly due to net cash proceeds from the sales of Southpointe Plaza and Island Plaza shopping centers received in the second quarter of 1998. A gain on involuntary conversion of $94,480 was recognized in the second quarter of 1997 relating to fire damage that occurred at Riverbay Plaza Shopping Center. The gain, which represented the insurance proceeds received in excess of the basis of the property damaged, was recognized as reimbursement proceeds were received from the insurance carrier. No such gain was recognized in the first six months of 1998. Expenses: Total expenses decreased by $167,273 for the three months and increased by $75,463 for the six months ended June 30, 1998 as compared to the same periods in 1997. The decrease for the quarter was mainly due to the sales of Southpointe Plaza and Island Plaza on March 31, 1998 and April 1, 1998, respectively. The overall increase in expenses for the six months was mainly due to a loss on disposition of real estate and a write-down for impairment of real estate recognized in the first quarter of 1998, as discussed below. In conjunction with the sale of Southpointe Plaza, the mortgage note payable secured by the property was retired. This resulted in a decrease in interest expense of $84,230 and $89,797 for the three and six months ended June 30, 1998, respectively, as compared to the same periods in 1997. Depreciation and amortization expense for the three and six months ended June 30, 1998 decreased by $40,569 and $71,808, respectively, in relation to the same periods in 1997. The decrease was due to Springwood Plaza being classified as an asset held for sale by the Partnership effective August 1, 1997. In accordance with the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Partnership ceased recording depreciation on this asset at the time it was placed on the market for sale. The sales of Southpointe Plaza and Island Plaza resulted in decreased property taxes and repairs and maintenance expenses. For the three and six months ended June 30, 1998, property taxes decreased by $42,161 and $53,089, respectively, and repairs and maintenance decreased by $15,845 and $32,492, respectively, as compared to the same periods in the prior year. Property management fees for the three and six months ended June 30, 1998 decreased by $13,411 and $13,234, respectively, in relation to the same periods in 1997. The decrease was a result of a decline in gross rental receipts, on which the fees are based, mainly due to the sales of Southpointe Plaza and Island Plaza in 1998. Other property operating expense decreased by $61,138 and $60,486 for the three and six months ended June 30, 1998, respectively, in relation to the comparable periods in the prior year. Approximately $33,000 of the decrease was due to the sales of Southpointe Plaza and Island Plaza in 1998. In addition, in 1997, a greater amount of bad debts and amortization of prepaid leasing commissions were recognized at Springwood Plaza due to a tenant vacating before the expiration of their lease. General and administrative expenses increased by $101,804 and $157,789 for the three and six months ended June 30, 1998, respectively, as compared to the same periods in 1997. The increase was mainly due to costs incurred in 1998 to explore alternatives to maximize the value of the Partnership (see Liquidity and Capital Resources). The Partnership recognized a $118,750 loss on the sale of Southpointe Plaza Shopping Center in the first six months of 1998. No such loss was recognized in the first half of 1997. Island Plaza Shopping Center was sold to an unaffiliated buyer on April 1, 1998. The Partnership recorded a $126,080 write-down for impairment of real estate in the first quarter of 1998 to record the property at its sales price less estimated costs to sell. No such write-down was recorded in the first six months of 1997. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Partnership's primary source of cash flows is from operating activities, which generated $574,215 of cash in the first six months of 1998, comparable to the $567,270 generated for the same period in 1997. The Partnership expended $1,853,152 and $296,654 for capital improvements to its properties in the first six months of 1998 and 1997, respectively. In the fourth quarter of 1997, improvements totaling approximately $1.6 million were performed at Riverbay Plaza to renovate and expand an anchor tenant's space. These costs were paid by the tenant and reimbursed by the Partnership in the second quarter of 1998. On April 1, 1998, the Partnership received a total of $8,438,530 in proceeds from the sales of Southpointe Plaza and Island Plaza shopping centers. $5,261,942 of the proceeds was used to repay the Southpointe Plaza mortgage note payable. In the first half of 1997, the Partnership received $145,046 in proceeds from the insurance company for fire damage that occurred at Riverbay Plaza Shopping Center. No such insurance proceeds were received in the first half of 1998. The Partnership made $31,075 and $65,589 in regularly scheduled principal payments on the Southpointe Plaza mortgage note payable in the first six months of 1998 and 1997, respectively. The decrease in 1998 was due to the sale of the property and the repayment of the loan on April 1, 1998. In June 1998, the Partnership received $1,650,000 in proceeds from a mortgage note payable secured by Riverbay Plaza Shopping Center. The proceeds were used to pay for improvements made in 1997 to renovate and expand an anchor tenant's space. The Partnership distributed $1,500,000 to the limited partners in the first half of 1998. No distributions were paid to the limited partners in the first half of 1997. In light of the discussions relating to the sale transaction as disclosed, the Partnership is presently deferring any decision with respect to the amount or timing of distributions to limited partners. Short-term liquidity: At June 30, 1998, the Partnership held cash and cash equivalents of $4,196,605. This balance provides a reasonable level of working capital for the Partnership's immediate needs in operating its properties. For the Partnership as a whole, management projects positive cash flow from operations in 1998. The Partnership has budgeted approximately $619,000 for necessary capital improvements for all properties in 1998 (excluding the approximately $1.6 million of tenant improvements that were completed in 1997 but not reimbursed to the tenant until 1998). These capital improvements are expected to be funded from available cash reserves or from operations of the properties. The present cash balance is believed to provide an adequate reserve for property operations. In 1997, improvements totaling approximately $1.6 million were performed at Riverbay Plaza to renovate and expand an anchor tenant's space. These costs were paid by the tenant and reimbursed by the Partnership in 1998. The Partnership obtained a mortgage loan secured by Riverbay Plaza to pay these costs and received such funds in June 1998. On March 31, 1998, the Partnership sold Southpointe Plaza Shopping Center, located in Sacramento, California, to an unaffiliated purchaser for a cash purchase price of $6,800,000. On April 1, 1998, cash proceeds totaling $6,614,010 were received and $5,294,280 was used to pay the principal and accrued interest balance of the mortgage note payable secured by the property. An additional $204,000 disposition fee is payable to the General Partner. On April 1, 1998, the Partnership sold Island Plaza Shopping Center, located in Ft. Myers, Florida, to an unaffiliated purchaser for a cash purchase price of $1,850,000. Cash proceeds totaling $1,824,520 were received after payment of various closing costs. An additional $55,500 disposition fee is payable to the General Partner. Additional efforts to maintain and improve partnership liquidity have included continued attention to property management activities. The objective has been to obtain maximum occupancy rates while holding expenses to levels necessary to maximize cash flows. The Partnership has made capital expenditures on its properties where improvements were expected to increase the competitiveness and marketability of the properties. Long-term liquidity: While the present outlook for the 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. 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. As previously announced, the Partnership has retained PaineWebber ("PaineWebber"), Incorporated as its exclusive financial advisor to explore alternatives to maximize the value of the Partnership including, without limitation, a transaction in which limited partnership interests in the Partnership are converted into cash. The Partnership, through PaineWebber, has provided financial and other information to interested parties and is currently conducting discussions with one such party in an attempt to reach a definitive agreement with respect to a sale transaction. It is possible that the General Partner and its affiliates will receive non-cash consideration for their ownership interests in connection with any such transaction. There can be no assurance that any such agreement will be reached nor the terms thereof. Forward-Looking Information: Within this document, certain statements are made as to the expected occupancy trends, financial condition, results of operations, and cash flows of the Partnership for periods after June 30, 1998. All of these statements are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical and involve risks and uncertainties. The Partnership's actual occupancy trends, financial condition, results of operations, and cash flows for future periods may differ materially due to several factors. These factors include, but are not limited to, the Partnership's ability to control costs, make necessary capital improvements, negotiate sales or refinancings of its properties, and respond to changing economic and competitive factors. Other Information: Management has begun to review its information technology infrastructure to identify any systems that could be affected by the year 2000 problem. The year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in major systems failure or miscalculations. The information systems used by the Partnership for financial reporting and significant accounting functions were made year 2000 compliant during recent systems conversions. The Partnership is in the process of evaluating the computer systems at the various properties. The Partnership also intends to communicate with suppliers, financial institutions and others to coordinate year 2000 issues. Management believes that the remediation of any outstanding year 2000 conversion issues will not have a material or adverse effect on the Partnership's operations. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of the State of California for the County of Los Angeles, Case No. BC133799 (Class and Derivative Action Complaint). The action involves purported class and derivative actions brought by limited partners of each of the fourteen limited partnerships that were named as nominal defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of their senior officers and/or directors (collectively, the "Defendants") breached their fiduciary duties and certain obligations under the respective Amended Partnership Agreement. Plaintiffs allege that Defendants have rendered such Units highly illiquid and artificially depressed the prices that are available for Units on the resale market. Plaintiffs also allege that Defendants engaged in a course of conduct to prevent the acquisition of Units by an affiliate of Carl Icahn by disseminating purportedly false, misleading and inadequate information. Plaintiffs further allege that Defendants acted to advance their own personal interests at the expense of the Partnerships' public unit holders by failing to sell Partnership properties and failing to make distributions to unitholders. On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint. Plaintiffs are suing for breach of fiduciary duty, breach of contract and an accounting, alleging, among other things, that the management fees paid to the McNeil affiliates over the last six years are excessive, that these fees should be reduced retroactively and that the respective Amended Partnership Agreements governing the Partnerships are invalid. Defendants filed a demurrer to the consolidated and amended complaint and a motion to strike on February 14, 1997, seeking to dismiss the consolidated and amended complaint in all respects. A hearing on Defendant's demurrer and motion to strike was held on May 5, 1997. The Court granted Defendants' demurrer, dismissing the consolidated and amended complaint with leave to amend. On October 31, 1997, the Plaintiffs filed a second consolidated and amended complaint. The case has been stayed pending settlement discussions. While actively working toward a final resolution, there can be no assurances regarding settlement. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- ----------------------------------- (a) Exhibits. Exhibit Number 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). 4.1 Amendment No. 1 to the Amended and Restated Limited Partnership Agreement of McNeil Real Estate Fund XXIV, L.P. dated June 1995 (incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the period ended June 30,1995, as filed on August 14, 1995). 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 number of limited partnership units outstanding. Per unit information has been computed based on 40,000 limited partnership units outstanding in 1998 and 1997. 27. Financial Data Schedule for the quarter ended June 30, 1998. (b) Reports on Form 8-K. A Form 8-K with respect to Item 2 dated March 31, 1998 was filed on April 9, 1998 regarding the sales of Southpointe Plaza and Island Plaza shopping centers. McNEIL REAL ESTATE FUND XXIV, 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 XXIV, L.P. By: McNeil Partners, L.P., General Partner By: McNeil Investors, Inc., General Partner August 14, 1998 By: /s/ Ron K. Taylor - --------------- ----------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer) August 14, 1998 By: /s/ Carol A. Fahs - --------------- ----------------------------------------- Date Carol A. Fahs Vice President of McNeil Investors, Inc. (Principal Accounting Officer)