UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 1996
-------------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number 0-15459
MCNEIL REAL ESTATE FUND XXIII, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 33-0139793
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (214) 448-5800
------------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
MCNEIL REAL ESTATE FUND XXIII, L.P.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
March 31, December 31,
1996 1995
--------------- ---------------
ASSETS
- ------
Real estate investments:
Land..................................................... $ 239,966 $ 239,966
Buildings and improvements............................... 5,852,115 5,836,474
-------------- --------------
6,092,081 6,076,440
Less: Accumulated depreciation.......................... (2,712,240) (2,648,343)
-------------- --------------
3,379,841 3,428,097
Cash and cash equivalents................................... 215,865 233,222
Cash segregated for security deposits....................... 48,555 54,921
Accounts receivable......................................... 10,319 11,395
Escrow deposits............................................. 72,968 91,296
Prepaid expenses and other assets........................... 6,218 6,893
-------------- --------------
$ 3,733,766 $ 3,825,824
============== ==============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage note payable, net of discount...................... $ 3,780,767 $ 3,787,802
Accounts payable and accrued expenses....................... 67,282 93,165
Accrued interest............................................ 27,375 27,446
Accrued property taxes...................................... 28,752 43,142
Payable to affiliates - General Partner..................... 149,730 114,218
Security deposits and deferred rental revenue............... 47,235 50,820
-------------- --------------
4,101,141 4,116,593
-------------- --------------
Partners' equity (deficit):
Limited partners - 45,000,000 Units authorized;
11,622,696 and 16,108,041 Units outstanding at
March 31, 1996 and December 31, 1995, respectively
(6,681,985 and 9,419,080 Current Income Units
outstanding at March 31, 1996 and December 31, 1995,
respectively; 4,940,711 and 6,688,961 Growth/Shelter
Units outstanding at March 31, 1996 and
December 31, 1995, respectively)....................... (5,220,914) (5,145,030)
General Partner.......................................... 4,853,539 4,854,261
-------------- --------------
(367,375) (290,769)
-------------- --------------
$ 3,733,766 $ 3,825,824
============== ==============
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 XXIII, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
-----------------------------------
1996 1995
--------------- ---------------
Revenue:
Rental revenue .......................................... $ 318,868 $ 490,828
Interest................................................. 2,142 1,754
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Total revenue.......................................... 321,010 492,582
-------------- --------------
Expenses:
Interest................................................. 91,878 151,180
Interest - affiliates.................................... - 12,695
Depreciation............................................. 63,897 94,116
Property taxes........................................... 28,752 41,760
Personnel expenses....................................... 55,441 73,337
Utilities................................................ 36,859 55,870
Repairs and maintenance.................................. 31,571 76,861
Property management fees - affiliates.................... 15,961 20,678
Other property operating expenses........................ 17,724 50,102
General and administrative............................... 10,887 9,626
Reorganization expenses.................................. 4,363 -
General and administrative - affiliates.................. 35,833 49,087
-------------- --------------
Total expenses......................................... 393,166 635,312
-------------- --------------
Net loss.................................................... $ (72,156) $ (142,730)
============== =============
Net loss allocated to limited
partners - Current Income Units.......................... $ (6,494) $ (12,846)
Net loss allocated to limited
partners - Growth/Shelter Units.......................... (64,940) (128,457)
Net loss allocated to General Partner....................... (722) (1,427)
--------------- --------------
Net loss.................................................... $ (72,156) $ (142,730)
============== =============
Net loss per thousand limited partnership units:
Current Income Units..................................... $ (.97) $ (1.36)
============== =============
Growth/Shelter Units..................................... $ (13.14) $ (19.20)
============== =============
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 XXIII, L.P.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Three Months Ended March 31, 1996 and 1995
Total
General Limited Partners'
Partner Partners Equity (Deficit)
--------------- --------------- ----------------
Balance at December 31, 1994.............. $ 4,839,769 $ (6,579,736) $ (1,739,967)
Net loss:
General Partner........................ (1,427) - (1,427)
Current Income Units................... - (12,846) (12,846)
Growth/Shelter Units................... - (128,457) (128,457)
------------- ------------- -------------
Total net loss....................... (1,427) (141,303) (142,730)
------------- ------------- -------------
Balance at March 31, 1995................. $ 4,838,342 $ (6,721,039) $ (1,882,697)
============= ============= =============
Balance at December 31, 1995.............. $ 4,854,261 $ (5,145,030) $ (290,769)
Redemption of limited partner units:
Current Income Units................... - (2,722) (2,722)
Growth/Shelter Units................... - (1,728) (1,728)
------------- ------------- -------------
Total redemption..................... - (4,450) (4,450)
Net loss:
General Partner........................ (722) - (722)
Current Income Units................... - (6,494) (6,494)
Growth/Shelter Units................... - (64,940) (64,940)
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Total net loss....................... (722) (71,434) (72,156)
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Balance at March 31, 1996................. $ 4,853,539 $ (5,220,914) $ (367,375)
============= ============= =============
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 XXIII, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
Three Months Ended
March 31,
------------------------------------
1996 1995
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Cash flows from operating activities:
Cash received from tenants............................... $ 324,018 $ 486,844
Cash paid to suppliers................................... (179,756) (238,626)
Cash paid to affiliates.................................. (16,282) (21,345)
Interest received........................................ 2,142 1,754
Interest paid............................................ (87,740) (146,402)
Property taxes paid and escrowed......................... (28,404) (30,150)
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Net cash provided by operating activities................... 13,978 52,075
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Cash flows from investing activities:
Additions to real estate investments..................... (15,641) (1,556)
-------------- --------------
Cash flows from financing activities:
Principal payments on mortgage notes
payable................................................ (11,244) (22,166)
Redemption of limited partner units...................... (4,450) -
-------------- --------------
Net cash used in financing activities....................... (15,694) (22,166)
-------------- --------------
Net increase (decrease) in cash and cash
equivalents.............................................. (17,357) 28,353
Cash and cash equivalents at beginning of
period................................................... 233,222 107,815
-------------- --------------
Cash and cash equivalents at end of period.................. $ 215,865 $ 136,168
============== ==============
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 XXIII, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Loss to Net Cash Provided by Operating Activities
Three Months Ended
March 31,
------------------------------------
1996 1995
---------------- ----------------
Net loss.................................................... $ (72,156) $ (142,730)
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Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation............................................. 63,897 94,116
Amortization of discount on mortgage
note payable........................................... 4,209 8,695
Interest added to advances from affiliates -
General Partner........................................ - 12,695
Changes in assets and liabilities:
Cash segregated for security deposits.................. 6,366 (5,332)
Accounts receivable.................................... 1,076 920
Escrow deposits........................................ 18,328 90,758
Prepaid expenses and other assets...................... 675 (1,289)
Accounts payable and accrued expenses.................. (25,883) 22,301
Accrued interest....................................... (71) -
Accrued property taxes................................. (14,390) (82,013)
Claims settlement payable.............................. - 1,354
Payable to affiliates - General Partner................ 35,512 48,420
Security deposits and deferred rental
revenue.............................................. (3,585) 4,180
-------------- --------------
Total adjustments.................................... 86,134 194,805
-------------- --------------
Net cash provided by operating activities................... $ 13,978 $ 52,075
============== ==============
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 XXIII, L.P.
Notes to Financial Statements
(Unaudited)
March 31, 1996
NOTE 1.
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McNeil Real Estate Fund XXIII, L.P., (the "Partnership"), formerly known as
Southmark Realty Partners III, Ltd., was organized on March 4, 1985 as a limited
partnership under provisions of the California Revised Limited Partnership Act
to acquire and operate 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
700, LB70, Dallas, Texas 75240.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair presentation of the Partnership's financial position and
results of operations. All adjustments were of a normal recurring nature.
However, the results of operations for the three months ended March 31, 1996,
are not necessarily indicative of the results to be expected for the year ending
December 31, 1996.
NOTE 2.
- -------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1995, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate XXIII, L.P., c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240.
NOTE 3.
- -------
Certain prior period amounts within the accompanying financial statements have
been reclassified to conform with current year presentation.
NOTE 4.
- -------
On June 30, 1994, the Partnership filed a voluntary petition for Chapter 11
reorganization. (The petition for Chapter 11 reorganization excluded the
Partnership's interest in Beckley Associates, the owner of Harbour Club II
Apartments.) The Partnership continued to conduct its affairs as a
debtor-in-possession, subject to the jurisdiction and supervision of the
Bankruptcy Court.
The Partnership's First Amended Plan of Reorganization (the "Reorganization
Plan"), which contemplated a sale of Woodbridge Apartments, was submitted to the
Bankruptcy Court on February 13, 1995. The Partnership's Disclosure Statement of
Debtor-in-Possession (the "Disclosure Statement") was approved by the Bankruptcy
Court on February 14, 1995.
The Partnership's Reorganization Plan and Disclosure Statement were submitted
February 20, 1995, to a vote of the impaired creditors, as defined. The impaired
creditors included a class of creditors who had filed a judgment lien against
Woodbridge Apartments in connection with the Illinois rescission suit (see Part
II, Item I - Legal Proceedings). The judgment lien creditors filed objections to
confirmation of the Reorganization Plan. On April 18, 1995, the Bankruptcy Court
did grant an order to sell Woodbridge Apartments but denied confirmation of the
Reorganization Plan. The Partnership filed an appeal of the Bankruptcy Court's
ruling and, in the meantime, attempted to settle the matter with the judgment
lien creditors, which would allow for confirmation of the Reorganization Plan.
On May 10, 1995, the Reorganization Plan was amended to provide for full payment
to the judgment lien creditors. The Reorganization Plan, as amended, was
subsequently confirmed by the Bankruptcy Court on May 17, 1995.
Woodbridge Apartments was sold on May 25, 1995, and, in accordance with the
Reorganization Plan, the first and second mortgage notes payable and the related
outstanding accrued interest were paid. The Partnership also utilized $156,566
of the proceeds from the sale to pay the settlement and legal fees to the
judgment lien creditors, as discussed above.
On September 11, 1995, the Bankruptcy Court entered an Order Regarding
Objections to Claims that allowed the Partnership to pay outstanding
pre-petition claims totaling approximately $124,000 in October 1995.
The Reorganization Plan specified that advances and fees owed to affiliates of
the General Partner were limited to remaining cash, after the pre-petition
liabilities and reorganization expenses were paid. The Partnership had $37,228
of cash available to distribute to affiliate creditors. The remaining amounts
owed to affiliates of the General Partner as of May 17, 1995, were discharged
resulting in an extraordinary gain of $1,435,024 during the third quarter of
1995.
On August 15, 1995, the Partnership sent an election form to each limited
partner which allowed them to choose whether to redeem their interest in the
Partnership. The redemption price was 1/1000th of a dollar per Unit. The limited
partners were required to respond within 30 days, and at the close of the 30 day
period, 311 limited partners had elected to redeem 4,485,345 Units. In
connection with the redemption, the partnership obtained a "no-action" letter
from the Securities and Exchange Commission ("SEC") that provided that (1) the
redemption could be accomplished without compliance with Rule 13e-3 of the
Securities Exchange Act of 1934, and (2) the SEC did not intend to pursue an
enforcement action if the Reorganization Plan was consummated. Redemption of the
affected Units was completed in January 1996.
On November 18, 1995, the Partnership submitted a request for an Application to
Close Case to the Bankruptcy Court, which was entered on December 11, 1995. The
Partnership was awaiting confirmation of the Order Approving the Application to
Close Case as of March 31, 1996.
Expenses incurred by the Partnership in connection with its Chapter 11 filing
have been expensed as "reorganization expenses" in the accompanying Statements
of Operations.
NOTE 5.
- -------
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 and
leasing services. Due to the Partnership's Chapter 11 Bankruptcy filing,
property management fees for Woodbridge Apartments were reduced to 3% of the
property's gross rental receipts beginning December 1, 1994.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs. Reimbursable costs that were incurred
prior to the Partnership's bankruptcy filing, in the amount of $520,902, were
discharged under terms of the Partnership's Reorganization Plan.
The Partnership incurs asset management fees which are 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. 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. As discussed in Note 4, asset management fees totaling $366,329 accrued
prior to the confirmation of the Reorganization Plan were discharged pursuant to
the Reorganization Plan. Total accrued but unpaid asset management fees incurred
subsequent to confirmation of the Reorganization Plan in the amount of $67,934
were outstanding at March 31, 1996.
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner and its affiliates are as follows:
Three Months Ended March 31,
-----------------------------------
1996 1995
--------------- ---------------
Property management fees.................................... $ 15,961 $ 20,678
Charged to interest - affiliates:
Interest on advances from affiliates - General
Partner................................................ - 12,695
Charged to general and administrative -
affiliates:
Partnership administration............................... 20,215 28,352
Asset management fee..................................... 15,618 20,735
-------------- --------------
$ 51,794 $ 82,460
============== ==============
Payable to affiliates - General Partner at March 31, 1996, and December 31,
1995, consists primarily of unpaid asset management fees, property management
fees and reimbursable costs.
NOTE 6.
- -------
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. The Partnership has suffered
recurring losses from operations and has relied on advances from affiliates to
meet its debt obligations and to fund capital improvements. There is no
guarantee that such advances will continue to be available.
Operations at Harbour Club II Apartments, the Partnership's sole remaining
property, are expected to be sufficient to provide cash for operating expenses
and debt service for 1996. However, the property is in need of major capital
improvements in order to maintain occupancy and rental rates at a level
sufficient to fund operating expenses and debt service in future years. The
Partnership's cash reserves are inadequate to fund the needed capital
improvements, and it is unlikely that cash flow from operating activities will
be sufficient to provide for the needed capital improvements. No outside sources
of financing have been identified. Although affiliates of the Partnership have
previously provided working capital for the Partnership, there can be no
assurance that the Partnership will receive additional funds from the General
Partner or other affiliates. Management is currently seeking additional
financing to fund the needed capital improvements; however, such financing is
not assured. If the property is unable to obtain additional funds and cannot
maintain operations at a level to pay operating expenses and debt service, the
property may ultimately be foreclosed on by the lender.
Harbour Club II Apartments is part of a four-phase apartment complex located in
Belleville, Michigan. Phases I and III of the complex are owned by partnerships
in which McNeil Partners, L.P. is the general partner; while Phase IV is owned
by University Real Estate Fund 12, Ltd. ("UREF 12") whose general partner is an
affiliate of Southmark Corporation, the parent corporation of the Partnership's
former general partner. McREMI had been managing all four phases of the complex
until December 1992, when the property management agreement between McREMI and
UREF 12 was canceled. Additionally, in January 1993, Phase I defaulted on its
mortgage loan to the United States Department of Housing and Urban Development
and, unless a refinancing agreement can be reached with the lender, the property
is subject to foreclosure. If Phase I is lost to foreclosure, it would be
extremely difficult to operate Phases II and III because the pool and clubhouse
are located in Phase I. As of March 31, 1996, no steps have been taken towards
the foreclosure of Phase I.
These conditions raise substantial doubt about the Partnership's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ----------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. The Partnership has suffered
recurring losses from operations and has relied on advances from affiliates to
meet its debt obligations and to fund capital improvements.
The Partnership's operating activities provided $13,978 for the first quarter of
1996, down $38,097 from the $52,075 provided in the first quarter of 1995. The
decrease in cash provided by operating activities was caused by the sale of
Woodbridge Apartments on May 25, 1995. Cash provided by operations at Woodbridge
Apartments are included in the 1995 figure, but not in the 1996 figure. The
disposition of Woodbridge Apartments decreased cash provided by tenants, cash
paid to suppliers and interest paid.
Cash used to additions to real estate improvements increased $14,085 to $15,641
in the first quarter of 1996. The Partnership capital budget will continue only
at a bare minimum until additional financing can be arranged.
Scheduled principal payments through monthly debt service payments totaled
$11,244 in the first quarter of 1996, down from $22,166 from the first quarter
of 1995. The decrease is due to the sale of Woodbridge Apartments in the second
quarter of 1995. In accordance with terms of the Partnership's Reorganization
Plan, the Partnership redeemed 4,485,345 limited partnership units from the
limited partners for a total of $4,450.
Short-term liquidity:
At March 31, 1996, the Partnership held $215,865 of cash and cash equivalents,
down $17,357 from the balance at December 31, 1995. For the balance of 1996, the
General Partner anticipates rental operations at Harbour Club II Apartments will
provide sufficient rental revenue to pay for the operating expenses of the
property and debt service payments on the property's mortgage note. However,
rental operations at Harbour Club II Apartments are not expected to be
sufficient to fund necessary capital improvements to the property nor to pay the
Partnership's other expenses. To the extent available, the Partnership will use
its cash reserves to fund limited capital improvements and the Partnership's
other expenses.
Although the sale of Woodbridge Apartments provided some additional cash
reserves for the Partnership, the Partnership still faces liquidity problems
because of urgently needed capital improvements at Harbour Club II Apartments,
for which no financing has been secured. Operating activities at Harbour Club II
Apartments for 1996 are expected to provide sufficient positive cash flow for
normal operating expenses and debt service payments. However, the needed capital
improvements will require the use of other sources of cash. No such sources have
been identified. the Partnership has no established lines of credit from outside
sources. Other possible actions to provide financing for the capital
improvements may include refinancing or modifying the property's mortgage debt.
Should such refinancing or modification of Harbour Club II's mortgage debt prove
unfeasible, the Partnership could be forced to either sell the property or to
relinquish control of the property to the mortgage note holder.
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. The Partnership had received
advances under the revolving credit facility to fund additions to the
Partnership's real estate investments and costs incurred in connection with the
refinancing of the Partnership's mortgage note payable. Such advances were
discharged as a result of the Chapter 11 proceedings. There is no assurance that
the Partnership will receive any additional funds under the facility because no
amounts will be reserved for any particular partnership. As of March 31, 1996,
$2,662,819 remained available for borrowing under the facility; however,
additional funds could become available as other partnerships repay existing
borrowings. This commitment expires on March 30, 1997.
Additionally, the General Partner has, at its discretion, advanced funds to the
Partnership in addition to the revolving credit facility. The Partnership
received other advances that were used to fund working capital requirements.
Such advances were discharged as a result of the Chapter 11 proceedings. The
General Partner is not obligated to advance funds to the Partnership and there
is no assurance that the Partnership will receive additional funds.
Long-term liquidity:
The Partnership has been in a distressed cash situation for several years.
Although Harbour Club II is able to operate in such a manner as to provide for
operating expenses and debt service payments, the property has not proven the
capability to produce the cash flow necessary for capital improvements nor to
support Partnership operations. The inability to make necessary capital
improvements has led to deteriorating conditions at the property. In the opinion
of management, if capital improvements are not made to make the property more
marketable, the net realizable value of the property may be further impaired.
Harbor Club II Apartments is part of a four-phase apartment complex located in
Belleville, Michigan. Phases I and III of the complex are owned by partnerships
affiliated with the General Partner; while Phase IV is owned by University Real
Estate Fund 12, Ltd., ("UREF 12") whose general partner is an affiliate of
Southmark Corporation, the parent corporation of the Partnership's former
general partner. McREMI managed all four phases of the complex until December
1992, when the property management agreement between McREMI and UREF 12 was
canceled. Additionally, in January 1993, Phase I defaulted on its United States
Department of Housing and Urban Development mortgage note. Unless a refinancing
agreement can be reached with the lender, the property is subject to
foreclosure. If Phase I is lost to foreclosure, it would be extremely difficult
to operate Phases II and III because the pool and clubhouse used by all three
phases are located on Phase I. As of year end, no steps have been taken to
foreclose on Phase I.
These conditions raise substantial doubt about the Partnership's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Distributions:
To maintain adequate cash balances of the Partnership, distributions to Current
Income Unit holders were suspended in 1988. There have been no distributions to
Growth/Shelter Unit holders. Distributions to Unit holders will remain suspended
for the foreseeable future. The General Partner will continue to monitor the
cash reserves and working capital needs of the Partnership to determine when
cash flows will support distributions to the Unit holders.
FINANCIAL CONDITION
- -------------------
The occupancy rate at Harbour Club II Apartments decreased to 86% at March 31,
1996. Occupancy at December 31, 1995, was 92%. Harbour Club II Apartments was
able to provide enough cash flow from operations to meet ordinary operating
expenses as well as the debt service for its related mortgage note during the
first quarter of 1996; however, as discussed above, the property is in need of
major capital improvements in order to compete in its local market. The
Partnership is seeking alternatives to fund the necessary capital improvements,
but at this time no sources have been found.
Until the Partnership is able to generate cash from operations or sales, the
Partnership will be dependent on its present cash reserves, operation of its
property, or financial support from affiliates. Distributions will remain
suspended until cash reserves are judged adequate.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Rental revenue decreased $171,960 to $318,868 for the first quarter of 1996
compared to the first quarter of 1995. Most of the decrease is attributable to
the May 25, 1995, sale of Woodbridge Apartments. Rental revenue at Harbour Club
II Apartments decreased $1,053 or .3%. Increases in base rental rates and other
property revenue were more than offset by increased rental losses, such as
vacancy.
Expenses:
Total Partnership expenses decreased $242,146 to $393,166 for the first quarter
of 1996 compared to the first quarter of 1995. All line items, except general
and administrative and reorganization expenses, decreased primarily due to the
May 25, 1995, sale of Woodbridge Apartments.
Pursuant to the Partnership's Reorganization Plan, all interest-bearing
liabilities due to affiliates were discharged during 1995. Thus, no interest -
affiliates was incurred during the first quarter of 1996 as compared to $12,695
of such interest in the first quarter of 1995.
General and administrative - affiliates decreased $13,254 or 27% for the first
quarter of 1996. Such expenses are allocated based on, among other criteria, the
number of properties owned by the Partnership. Due to the disposition of
Woodbridge Apartments in 1995, expenses allocated to the Partnership by McREMI
have decreased.
Excluding the effects of the disposition of Woodbridge Apartments, expenses
incurred by the Partnership for operating at Harbour Club II Apartments also
decreased $11,073 or 3.1%. Decreases in operating expenses at Harbour Club II
Apartments were concentrated in repairs and maintenance. Repairs and maintenance
decreased $16,516 or 34% in the first quarter. The decrease resulted from lower
expenditures for floor coverings and appliances in the first quarter of 1996.
The decrease in repairs and maintenance was partially offset by an $8,025 or
14.4% increase in depreciation expense. Depreciation increased as a result of
$138,783 of capital improvements placed in service in the twelve months ended
March 31, 1996. Such improvements are generally depreciated over lives ranging
from five to ten years. All other categories of expenses at Harbour Club II
Apartments decreased a total of $2,582 in the first quarter of 1996 compared to
the first quarter of 1995.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
- ------- ----------------------
In accordance with the Partnership's Reorganization Plan, on August 15, 1995,
the Partnership sent an election form to each limited partner which allowed them
to choose whether to redeem their interest in the Partnership. The redemption
price was 1/1000th of a dollar per Unit. The limited partners were required to
respond within 30 days, and at the close of the 30 day period, 311 limited
partners had elected to redeem 4,485,345 Units. In connection with the
redemption, the partnership obtained a "no-action" letter from the Securities
and Exchange Commission ("SEC") that provided that (1) the redemption could be
accomplished without compliance with Rule 13e-3 of the Securities Exchange Act
of 1934, and (2) the SEC did not intend to pursue an enforcement action if the
Reorganization Plan was consummated. Redemption of the affected Units was
completed on January 1, 1996.
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. (Incor-
porated 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 (Loss) per Thousand Limited
Partnership Units: Net income (loss) per
thousand limited partner units is computed
by dividing net income (loss) allocated to
the limited partners by the weighted average
number of limited partnership units out-
standing expressed in thousands. Per unit
information has been computed based on 6,682
and 9,419 Current Income Units (in
thousands) outstanding in 1996 and 1995,
respectively, and 4,941 and 6,689 Growth/
Shelter Units (in thousands) outstanding
in 1996 and 1995, respectively.
27. Financial Data Schedule for the quarter
ended March 31, 1996.
b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended March 31, 1996.
MCNEIL REAL ESTATE FUND XXIII, L.P.
(Debtor-in-Possession)
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 XXIII, L.P.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
May 14, 1996 By: /s/ Donald K. Reed
- ------------------- ----------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
May 14, 1996 By: /s/ Ron K. Taylor
- ------------------- ----------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer of
McNeil Investors, Inc.
May 14, 1996 By: /s/ Carol A. Fahs
- ------------------- ----------------------------------------
Date Carol A. Fahs
Chief Accounting Officer of McNeil
Real Estate Management, Inc.