1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------
MCNEIL REAL ESTATE FUND IX, LTD. MCNEIL REAL ESTATE FUND XX, L.P.
MCNEIL REAL ESTATE FUND X, LTD. MCNEIL REAL ESTATE FUND XXIV, L.P.
MCNEIL REAL ESTATE FUND XI, LTD. MCNEIL REAL ESTATE FUND XXV, L.P.
MCNEIL REAL ESTATE FUND XIV, LTD. MCNEIL REAL ESTATE FUND XXVI, L.P.
MCNEIL REAL ESTATE FUND XV, LTD. MCNEIL REAL ESTATE FUND XXVII, L.P.
(NAME OF SUBJECT COMPANY)
MCNEIL PARTNERS, L.P.
(NAME OF PERSON FILING STATEMENT)
Units of Limited Partnership Interests
(TITLE OF CLASS OF SECURITIES)
582568 10 1 None
582568 20 0 582568 88 7
582568 30 9 582568 87 9
582568 88 7 None
582568 50 7 810481
(CUSIP NUMBERS OF CLASSES OF SECURITIES)
--------------------
Donald K. Reed
MCNEIL PARTNERS, L.P.
13760 Noel Road, Suite 700, LB70
Dallas, Texas 75240
(214) 448-5800
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
Copies to:
Patrick J. Foye, Esq. Scott Wallace, Esq.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM HAYNES AND BOONE, L.L.P.
919 Third Avenue 901 Main Street, Suite 3100
New York, New York 10022 Dallas, Texas 75202
(212) 735-2274 (214) 651-5587
================================================================================
2
ITEM 1. SECURITY AND SUBJECT COMPANY
The subject companies are McNeil Real Estate Fund IX, Ltd.,
McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real
Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate
Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV,
L.P. and McNeil Real Estate Fund XXVI, L.P., each a California limited
partnership, and McNeil Real Estate Fund XXVII, L.P., a Delaware limited
partnership (each individually, a "Partnership" and collectively, the
"Partnerships"). The address of the principal executive offices of each
Partnership and McNeil Partners, L.P., a Delaware limited partnership and the
general partner of each Partnership ("McNeil Partners"), is 13760 Noel Road,
Suite 700, LB70, Dallas, Texas 75240. The title of the class of equity
securities to which this statement relates is the outstanding limited
partnership units (the "Units") of each Partnership.
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the unsolicited tender offers being
made by High River Limited Partnership, a Delaware limited partnership ("High
River"), Riverdale LLC, a New York limited liability company ("Riverdale"),
Unicorn Associates Corporation, a New York corporation ("Unicorn"), and Carl C.
Icahn ("Mr. Icahn" and together with High River, Riverdale and Unicorn (except
in respect of McNeil Real Estate Fund XXVI, L.P. and McNeil Real Estate Fund
XXVII, L.P.), the "Bidders") disclosed in ten Tender Offer Statements on
Schedule 14D-1, each dated September 20, 1996, as amended (the "Schedules
14D-1"), to purchase from holders of Units ("Unitholders") any and all of the
outstanding Units of each Partnership, upon the terms and subject to the
conditions set forth in the Offers to Purchase dated September 20, 1996, as
amended (the "Offers to Purchase"), and the related Assignments of Partnership
Interest (collectively with the Offers to Purchase, the "HR Offers"). The
Partnerships did not solicit the HR Offers. The Schedules 14D-1 state that the
business address of Mr. Icahn is 114 West 47th Street, New York, NY 10036 and
the address of the principal offices of High River, Riverdale and Unicorn is
100 South Bedford Road, Mount Kisco, New York 10549.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of McNeil Partners, which is
the person filing this statement on behalf of each of the Partnerships, are set
forth in Item 1 above.
(b)(1) The sole general partner responsible for the management
of each Partnership's business is McNeil Partners. McNeil Investors, Inc., a
Delaware corporation ("McNeil Investors"), is the sole general partner of
McNeil Partners. Robert A. McNeil ("Mr. McNeil") is the sole stockholder of
McNeil Investors. Except as described below, there are no material contracts,
agreements, arrangements and understandings or any actual or potential
conflicts of interest between McNeil Partners or its affiliates and the
Partnerships, their executive officers, directors or affiliates. Neither the
Partnerships nor McNeil Partners has any directors or executive officers.
2
3
Through 1999, the Partnerships pay an asset management fee to
McNeil Partners calculated as 1% of each Partnership's tangible asset value
(the "MID"), however, with regard to McNeil Real Estate Fund IX, Ltd., McNeil
Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real
Estate Fund XIV, Ltd. and McNeil Real Estate Fund XV, Ltd., the MID is
payable only to the extent of the lesser of each Partnership's excess cash flow
or net operating income. Tangible asset value is determined by using the
greater of (i) an amount calculated by applying a capitalization rate of 9
percent 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 MID percentage decreases
subsequent to 1999.
The Partnerships pay property management fees equal to 5% of
gross rental receipts of residential and self-storage properties and 5% (6% in
respect of 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.) of gross rental receipts of commercial properties to McNeil Real Estate
Management, Inc. ("McREMI"), an affiliate of McNeil Partners, for providing
property management services. Additionally, the Partnerships reimburse McREMI
for its costs, including overhead, of administering the Partnerships' affairs.
Pursuant to each Partnership's partnership agreement, McNeil
Partners or McREMI, as applicable, is entitled to receive upon the removal of
McNeil Partners as the general partner of each such Partnership: (i) a
terminating distribution in cash equal to the aggregate amount of the MID
distributed during the 12 months preceding the effective date of such removal
(except in respect of McNeil Real Estate Fund XX, L.P.), (ii) within 30 days of
removal as stated in a written notice of removal, any portion of the property
management fee, overhead reimbursements or MID which is then accrued and due,
but not yet paid, and (iii) within 30 days of removal as stated in a written
notice of removal, any unpaid loans or advances (together with accrued, but
unpaid interest). As of June 30, 1996, such amounts were in aggregate
approximately $2,189,000, $5,366,237, $4,944,109, $2,574,423, $975,349,
$37,195, $368,104, $746,270, $569,798 and $814,577 for McNeil Real Estate Fund
IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd.,
McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil
Real Estate Fund XX, 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., respectively.
McNeil Partners, as general partner of each Partnership, is
entitled to indemnification under certain circumstances from the Partnerships
pursuant to provisions of each respective partnership agreement. As a result
of such provisions, a Unitholder may be entitled to a more limited right of
action than he or she would otherwise have if such provisions were not included
in the partnership agreement.
Certain of the directors and executive officers of McNeil
Investors and McREMI have employment agreements with such entities that contain
provisions granting such directors and executive officers the right to
terminate their employment agreements and receive three years annual
compensation upon a change of control of such entities. Any compensation
payable to such directors or executive officers upon a change of control is not
payable from funds of the Partnerships and such agreements are not obligations
of the Partnerships.
3
4
If any one of the HR Offers is successful, High River may be in a
position to cause the amendment of the applicable Partnership's partnership
agreement and the removal of McNeil Partners as the general partner of such
Partnership. If McNeil Partners is removed by High River as the general
partner of any Partnership, the respective asset or partnership management fee
and property management fee payable to McNeil Partners and McREMI will no
longer be received by McNeil Partners or McREMI, as the case may be, and
therefore, McNeil Partners has a conflict of interest in recommending that
Unitholders reject the HR Offers.
(b)(2) To the best knowledge of the Partnerships, there are no
material contracts, agreements, arrangements and understandings or any actual
or potential conflicts of interest between any Partnership or its affiliates
and the Bidders, their executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Following the Partnerships' receipt of the HR Offers, McNeil
Partners met with the financial and legal advisors of the Partnerships to
review and consider the HR Offers and to explore various possible alternative
courses of action which might be available in response to the HR Offers. BASED
ON EACH PARTNERSHIP'S ANALYSIS AND ITS CONSULTATION WITH SUCH ADVISORS, EACH
PARTNERSHIP, IN LIGHT OF ALL RELEVANT CIRCUMSTANCES, DETERMINED THAT THE
RESPECTIVE HR OFFER IS INADEQUATE, NOT IN THE BEST INTERESTS OF EITHER SUCH
PARTNERSHIP OR ITS UNITHOLDERS AND STRONGLY RECOMMENDS THAT ITS UNITHOLDERS
REJECT IT.
(b) Each of the Partnerships reached the conclusions set forth
in Item 4(a) after considering a variety of factors, including, but not limited
to, the following:
(i) The opinions of Crosson Dannis, Inc., the Partnerships'
financial advisor ("Crosson Dannis"), dated October 3, 1996, which state
that the consideration offered in the HR Offers is inadequate from a
financial point of view to Unitholders compared to the Present Estimated
Liquidation Values (as defined below). Crosson Dannis prepared
estimates of the range of present values (the "Present Estimated
Liquidation Values") of the Units based on the assumption that the
Partnerships commence theoretical orderly liquidations in January 1997
and complete those liquidations by 1998 for McNeil Real Estate Fund XX,
L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund
XXVI, L.P.; 1999 for McNeil Real Estate Fund XXV, L.P. and McNeil Real
Estate Fund XXVII, L.P.; and 2001 for McNeil Real Estate Fund IX, Ltd.,
McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd.,
McNeil Real Estate Fund XIV, Ltd. and McNeil Real Estate Fund XV, Ltd.
(the "Assumed Liquidations"). THE PRESENT ESTIMATED LIQUIDATION VALUES
PER UNIT FOR THE PARTNERSHIPS AS OF OCTOBER 3, 1996 ARE BETWEEN $256 AND
$270 FOR MCNEIL REAL ESTATE FUND IX, LTD.; $134 AND $145 FOR MCNEIL REAL
ESTATE FUND X, LTD.; $152 AND $161 FOR MCNEIL REAL ESTATE FUND XI, LTD.;
$161 AND $171 FOR MCNEIL REAL ESTATE FUND XIV, LTD.; $174 AND $184 FOR
MCNEIL REAL ESTATE FUND XV, LTD.; $230 AND $236 FOR MCNEIL REAL ESTATE
FUND XX, L.P.; $335 AND $343 FOR MCNEIL REAL ESTATE FUND XXIV, L.P.;
$0.357 AND $0.366 FOR MCNEIL REAL ESTATE FUND XXV, L.P.; $0.236 AND
$0.243 FOR MCNEIL REAL ESTATE FUND XXVI, L.P.; AND $8.37 AND $8.64 FOR
MCNEIL REAL ESTATE FUND XXVII, L.P. The Present Estimated Liquidation
Values represent Crosson Dannis' estimate of the present
4
5
value of the gross cash distributions that a Unitholder would receive
between now and the completion of the Assumed Liquidations. It should
be noted that the Present Estimated Liquidation Values do not represent
an estimate by Crosson Dannis of the fair market value of a Unit. A
copy of the Crosson Dannis opinion dated October 3, 1996 is filed as
exhibit (c) (2).
(ii) In April 1996, the Partnerships (other than McNeil Real
Estate Fund XXVI, L.P. and McNeil Real Estate Fund XXVII, L.P.)
announced that they had determined to evaluate market and other economic
conditions to establish the optimum time to commence orderly
liquidations of the Partnerships' assets in accordance with the terms of
their respective partnership agreements. Taking such conditions as well
as other pertinent information into account, each Partnership has
determined to begin orderly liquidations of all its assets. Although
there can be no assurance made as to the timing of any liquidations
due to real estate market conditions, the general difficulty of disposing
of real estate, and other general economic factors, it is anticipated
that such liquidations would result in the dissolution of the
Partnerships followed by a liquidating distribution to Unitholders
following the completion of the Assumed Liquidations.
(iii) Last August, the Bidders offered $400 per unit for McNeil
Real Estate Fund V, Ltd., which was significantly below the
partnership's estimate of the pro forma liquidation value of $667.30 per
unit as of June 30, 1995. In response, McNeil Real Estate Fund V, Ltd.
recommended that unitholders reject the offer because it did not reflect
the inherent value of the units and was not in the best interests of
either McNeil Real Estate Fund V, Ltd. or its unitholders. Holders of
approximately 97.5% of McNeil Real Estate Fund V, Ltd.'s units agreed in
the fall of 1995 that Mr. Icahn's offer was inadequate, rejected his
offer and did not tender their units. Since then, McNeil Real Estate
Fund V, Ltd. distributed $83.40 cash to unitholders (including Mr.
Icahn) and, on September 10, 1996, holders of more than 75% of McNeil
Real Estate Fund V, Ltd.'s units which voted approved the liquidation
and dissolution of McNeil Real Estate Fund V, Ltd., pursuant to which it
is anticipated that all unitholders will receive a cash distribution of
approximately $643.07 per unit, subject to reserves and adjustment,
which closely approximates McNeil Real Estate Fund V, Ltd.'s estimate of
pro forma liquidation value. TAKEN TOGETHER WITH THE CASH DISTRIBUTIONS
TO UNITHOLDERS, SUCH AMOUNT IS APPROXIMATELY $326.47 PER UNIT (82%)
HIGHER THAN THE BIDDERS' 1995 OFFER PRICE FOR MCNEIL REAL ESTATE FUND V,
LTD. Although there can be no assurance that a similar result will
occur with a particular Partnership or that any particular distribution
per Unit will be obtained, THE LIQUIDATION AND DISSOLUTION OF MCNEIL
REAL ESTATE FUND V, LTD. AND THE OPINIONS OF CROSSON DANNIS PROVIDE
SOLID SUPPORT FOR THE PARTNERSHIPS' VIEW THAT THE HR OFFERS ARE
INADEQUATE AND NOT IN THE BEST INTERESTS OF EITHER THE RESPECTIVE
PARTNERSHIP OR UNITHOLDERS.
(iv) The prices offered by the Bidders are between approximately
66.7% and 70.3% for McNeil Real Estate Fund IX, Ltd.; 59.0% and 63.8%
for McNeil Real Estate Fund X, Ltd.; 64.9% and 68.8% for McNeil Real
Estate Fund XI, Ltd.; 55.6% and 59.0% for McNeil Real Estate Fund XIV,
Ltd.; 54.5% and 57.6% for McNeil Real Estate Fund XV, Ltd.; 72.2% and
74.1% for McNeil Real Estate Fund XX, L.P.; 78.2% and 80.0% for McNeil
Real Estate Fund XXIV, L.P.; 68.9% and 70.6% for McNeil Real Estate Fund
XXV, Ltd.; 37.7% and 38.8% for McNeil Real Estate Fund XXVI, L.P.; and
5
6
65.1% and 67.2% for McNeil Real Estate Fund XXVII, L.P., of the high and
low end of the range in the Present Estimated Liquidation Values.
(v) Each of the Partnerships believes that the Units are a
long-term, illiquid investment and the full value of an investment in
the Units can only be realized by a Unitholder who retains his or her
Units through the liquidation of the respective Partnership.
(vi) The Bidders are making the HR Offers with a view to making
a profit. Accordingly, there is a conflict of interest between their
desire to purchase the Units at a low price and Unitholders' desire to
sell their Units at a high price. In fact, High River concedes that its
own estimates of net asset value per Unit are above the prices it is
offering for Units in the HR Offers.
(vii) The Partnerships have, from time to time, received
inquiries from other parties that may be considering making tender
offers for the Units. In anticipation of the HR Offers, the
Partnerships have determined to make confidential information available
to responsible parties who express a bona fide interest in considering
making a tender offer for Units in the Partnerships pursuant to the
requirements of federal securities laws. While it is possible that
additional offers for Units in the Partnerships on more favorable terms
than the HR Offers may be forthcoming, there can be no assurance as to
whether any such offers will be made, the terms thereof, or, if made,
whether any such offer will be subsequently amended or withdrawn.
(viii) The HR Offers do not fully disclose Mr. Icahn's
intentions to seek control of the Partnerships. Last year Mr. Icahn
commenced similar tender offers for Units after McNeil Partners rejected
his proposal to acquire the general partner interest of McNeil Partners
and thereby control the Partnerships. In addition, Mr. Icahn negotiated
with McNeil Partners during the period of last year's tender offers in
an effort to acquire control of the Partnerships.
(ix) As stated in the Offers to Purchase, if any one of the HR
Offers is successful, High River may be in a position to influence
control of the respective Partnership and to influence voting decisions
and may seek to remove the Partnership's general partner and/or McREMI.
In considering the possibility of High River influencing voting
decisions with respect to the Partnerships and whether High River or one
of its affiliates would be suitable in such a role, the Partnerships
further considered the following:
(A) McNeil Partners and McREMI presently manage the
businesses of the Partnerships. McREMI is a fully integrated
real estate service organization performing property management,
asset management, investor services, partnership administration
and a wide range of other real estate-related services for 19
limited partnerships with more than 79,000 limited partners.
McNeil Investors, with its affiliates and subsidiaries, is one of
the largest managers of multifamily residential properties in the
United States and a large manager of commercial properties.
6
7
(B) The Offers to Purchase do not adequately disclose
information regarding Mr. Icahn's plans in the event he acquires
control of the businesses of the Partnerships. In fact, the
Offers to Purchase state that High River has never acted as the
general partner or property manager of a limited partnership,
such as the Partnerships, which is engaged in the business of
owning real estate and, to date, High River has not sought to
negotiate any arrangements with other parties to act in such
capacities. As a result, McNeil Partners believes that High
River's lack of experience in managing real estate limited
partnerships similar to the Partnerships would adversely effect
any such Partnership were Mr. Icahn to acquire control thereof.
(C) Certain of the Partnerships could be liable for large
accelerated mortgage payments, prepayment interest penalties, or
substantial yield maintenance payments in the event that High River
takes control of the Partnerships and replaces McNeil Partners and/or
McREMI. Such payments or penalties would have a negative impact on such
Partnerships. Pursuant to the terms of such indebtedness, the consent
of the lenders would be required in respect of any transaction
in which High River removes McNeil Partners as the general partner in
order to avoid such payments and penalty.
(x) Carl C. Icahn controls High River. Each Partnership
considered the background of Mr. Icahn, his past investment practices,
his reputation in the investment and business communities, and various
lawsuits and proceedings, both private and by government agencies,
involving Mr. Icahn and affiliated companies. Each Partnership is aware
that the strategy Mr. Icahn has employed in the HR Offers, as well as,
last year's offers, is similar to strategies he has repeated in numerous
previous unsolicited offers for corporate and partnership securities.
(xi) The HR Offers are conditioned upon the McNeil Partners
consenting in writing to the admission of High River as a substitute
limited partner of each of the Partnerships; however, each of the HR
Offers fails to disclose that McNeil Partners may, in its sole
discretion under certain circumstances set forth in each Partnership's
partnership agreement, refuse such admission. McNeil Partners has not
determined whether or not to admit High River as a substitute limited
partner. Any such determination will be made depending on a number of
factors including the effect of such admission on the tax status of the
Partnership.
Present Estimated Liquidation Value Analysis
High River is offering to purchase the Units, which are
relatively illiquid investments, and is not offering to purchase the
Partnerships' underlying assets or assume any of their liabilities. Although
each Partnership does not believe that the amount per Unit which might be
distributed to Unitholders following a future sale of all such Partnership's
properties necessarily reflects the present fair value of a Unit, the
realizable value of such Partnership's assets clearly is a relevant factor in
determining the price a prudent purchaser would offer for Units.
Crosson Dannis prepared an estimate of the Present Estimated
Liquidation Values based on the assumptions that each Partnership commences a
theoretical orderly liquidation in
7
8
January 1997 and completes such liquidations in 1998 for McNeil Real Estate
Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund
XXVI, L.P.; 1999 for McNeil Real Estate Fund XXV, L.P. and McNeil Real Estate
Fund XXVII, L.P.; and 2001 for McNeil Real Estate Fund IX, Ltd., McNeil Real
Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund
XIV, Ltd. and McNeil Real Estate Fund XV, Ltd. The Present Estimated
Liquidation Values as of October 3, 1996, gross distributions per Unit through
the completion of the Assumed Liquidations and the Bidders' offer price per
Unit are set forth in the chart below. The Present Estimated Liquidation
Values represent Crosson Dannis' estimate of the gross cash distributions that
a Unitholder would receive between January 1997 and the completion of the
Assumed Liquidations, discounted to reflect the present value of such
distributions. It should be noted that the Present Estimated Liquidation
Values do not represent an estimate by Crosson Dannis of the fair market value
of a Unit.
PRESENT ESTIMATED GROSS
LIQUIDATION VALUES DISTRIBUTIONS BIDDERS' OFFER PRICE
PARTNERSHIP (PER UNIT) (PER UNIT) (PER UNIT)
McNeil Real Estate Fund IX, Ltd. $256 - $270 $404.00 $180.00
McNeil Real Estate Fund X, Ltd. $134 - $145 $250.00 $85.50
McNeil Real Estate Fund XI, Ltd. $152 - $161 $251.00 $104.50
McNeil Real Estate Fund XIV, Ltd. $161 - $171 $271.00 $95.00
McNeil Real Estate Fund XV, Ltd. $174 - $184 $288.00 $100.24
McNeil Real Estate Fund XX, L.P. $230 - $236 $285.00 $170.38
McNeil Real Estate Fund XXIV, L.P. $335 - $343 $416.00 $268.13
McNeil Real Estate Fund XXV, L.P. $0.357 - $0.366 $0.45 $0.252
McNeil Real Estate Fund XXVI, L.P. $0.236 - $0.243 $0.30 $0.092
McNeil Real Estate Fund XXVII, L.P. $8.37 - $8.64 $10.94 $5.62
The Present Estimated Liquidation Values are based in part upon
certain estimated cash receipts and disbursements of the Partnerships through
the Assumed Liquidations. As a business planning tool, the Partnerships
prepare near and long-term projections of cash flow on an annual basis for the
next succeeding year and the remaining life of the particular Partnership (the
"Draft Projections"). The Draft Projections were reviewed by various operating
personnel for, among other things, appropriateness of assumptions, timing of
expected cash receipts and disbursements, cash reserves, timing of scheduled
loan repayments, and levels of cash flow generally. The Draft Projections are
considered by the management of each Partnership as the most current long-term
business plan of the particular Partnership. The Draft Projections are
prepared to estimate the level of cash flow each asset of each Partnership will
produce and the related expenditures and timing of the expenditures to achieve
the potential cash flow. The Draft Projections are utilized as a management
tool to determine the appropriate methods of operating
8
9
the Partnerships' businesses, which include, but are not limited to, the amount
of invested capital in assets, appropriate development plans for assets, level
of indebtedness for each Partnership, cash reserves and appropriate
distribution levels. The Draft Projections may be updated during any
particular year for identified, material change(s) to estimated cash receipts
and/or disbursements. The summary of the Draft Projections, which have been
prepared on the basis of the most current knowledge of the Partnerships'
personnel, are attached hereto as Annex A.
The Draft Projections are based on the above and other
assumptions and on other general factors relating to the Partnerships'
businesses or to more general economic conditions. THERE IS NO ASSURANCE THAT
THE DRAFT PROJECTIONS WILL BE ACHIEVED DUE TO, AMONG OTHER THINGS, ADVERSE
GENERAL NATIONAL OR LOCAL ECONOMIC CONDITIONS; CHANGES IN INTEREST RATES OR
RESTRICTIONS IN FINANCING; UNANTICIPATED EXPENDITURES; CHANGES IN ENVIRONMENTAL
LAWS, REGULATIONS OR CONDITIONS AND UNANTICIPATED EXPENDITURES FOR
ENVIRONMENTAL MATTERS; CHANGES IN BUILDING CODES; INCREASED COMPETITION;
ADVERSE CHANGES IN LAWS, GOVERNMENTAL RULES OR FISCAL POLICIES; AND OTHER
FACTORS AFFECTING THE SALE OF REAL ESTATE.
ACCORDINGLY, THE ACTUAL OPERATIONS AND CASH FLOWS OF THE
PARTNERSHIPS ARE LIKELY TO VARY FROM THOSE INCLUDED IN THE DRAFT PROJECTIONS
AND SUCH VARIATIONS MAY BE MATERIAL. CONSEQUENTLY, SUCH PROJECTIONS OF
RESULTS OF OPERATIONS AND CASH FLOWS OF THE PARTNERSHIPS AND THE PRESENT
ESTIMATED LIQUIDATION VALUES ARE NOT GUARANTEES OF ACTUAL RESULTS OF OPERATIONS
OR CASH FLOWS OF THE PARTNERSHIPS AND SHOULD NOT BE CONSIDERED AS THE ACTUAL
RESULTS OF THE PARTNERSHIPS OR THE AMOUNT THAT WILL NECESSARILY BE REALIZED BY
AN UNITHOLDER WHO RETAINS AN INTEREST IN THE PARTNERSHIP THROUGH ITS RESPECTIVE
ACTUAL LIQUIDATION.
NO ASSURANCE CAN OR IS MADE THAT THE PROJECTED RESULTS OF THE
PARTNERSHIPS' OPERATIONS AND CASH FLOWS, OR THE AMOUNT SET FORTH IN THE PRESENT
ESTIMATED LIQUIDATION VALUES, WILL BE REALIZED IN WHOLE OR PART. NO ASSURANCE
CAN OR IS MADE AS TO THE ACTUAL RESULTS THAT WILL BE ACHIEVED BY A UNITHOLDER
WHO RETAINS AN INTEREST IN THE PARTNERSHIPS.
The Crosson Dannis opinions are based upon a number of factors,
including the following items and assumptions:
(i) The Partnerships hold good and, as the case may be under
applicable state laws, marketable or indefeasible title to their assets.
(ii) The Partnerships, McNeil Partners and all other pertinent
persons have fully complied with all applicable federal, state and local
laws and regulations that would otherwise adversely affect the value of
the assets of the Partnerships.
(iii) All required licenses, certificates of occupancy, consents
or legislative or administrative authority from any federal, state or
local governmental authority or agency
9
10
have been or will be obtained or renewed for any use of the assets of
the Partnerships on which the report is based, whether in whole or part.
(iv) As to the real property assets of the Partnerships, all
existing leases, subleases and other use agreements are in full force
and effect and each party to all such agreements are in full compliance
with their obligations thereunder and no default or event of default
exists with respect to any such agreements.
(v) The assets of the Partnerships are all freely transferable.
(vi) No asset of any Partnership is subject to any option, right
of first offer, right of first refusal or other encumbrance that could
result in any obligation of any Partnership to sell or otherwise dispose
of such asset for an amount less than the then fair market value of such
asset.
(vii) The Present Estimated Liquidation Values specifically
disregard the impact of litigation expenses resulting from tender offer
defense costs and/or class action litigation.
ITEM 5. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED
McNeil Partners, on behalf of each Partnership, has engaged
Crosson Dannis as their financial advisor to prepare the Present Estimated
Liquidation Values and to advise the respective Partnership of Crosson Dannis'
opinion as to the adequacy, from a financial point of view, of the
consideration offered in each of the HR Offers to Unitholders of such
Partnership compared to the Present Estimated Liquidation Value for such
Partnership. Pursuant to the engagement agreement between the McNeil Partners,
on behalf of each Partnership, and Crosson Dannis, McNeil Partners, on behalf
of the Partnerships, agreed to pay Crosson Dannis an aggregate fee of $284,600
for the preparation and presentation of its reports and the delivery of the
opinions described above. In addition, McNeil Partners, on behalf of the
Partnerships, agreed to reimburse Crosson Dannis for the direct expenses it
incurs for deliveries, travel and third party research and data in preparing
the Present Values, and indemnify it against certain expenses and liabilities
if incurred in connection with its engagement. The fee paid to Crosson Dannis
was not contingent upon the conclusions reached in, or the substance of, the
opinons.
McNeil Partners, on behalf of the Partnerships, has retained The
Herman Group, Inc. to assist with communications with Unitholders with respect
to, and to provide other services to the Partnerships in connection with, the
HR Offers. McNeil Partners, on behalf of the Partnerships, will pay The Herman
Group, Inc. reasonable and customary fees for its services, reimburse it for
reasonable expenses, and provide customary indemnities. Neither McNeil
Partners, the Partnerships nor any person acting on their behalf has employed,
retained, or compensated or intends to employ, retain, or compensate any other
person or class of persons to make solicitations or recommendations to
Unitholders on its behalf concerning the HR Offers.
10
11
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Except as described below, neither the Partnerships, McNeil
Partners nor McNeil Investors has effected any transactions in the Units during
the past 60 days. Except as described below, the Partnerships are not aware of
any other transactions in the Units during the past 60 days by any of McNeil
Investors's executive officers, directors, affiliates, or subsidiaries.
Dean J. Lontos, Vice President of McREMI, purchased 20 Units of
McNeil Real Estate Fund XIV, Ltd. for $83.05 per Unit on August 25, 1996 and
100 Units of McNeil Real Estate Fund XX, L.P. for $122.00 per Unit on August
28, 1996.
(b) Neither the Partnerships nor, to the knowledge of the
Partnerships, any of McNeil Partners' executive officers, directors,
affiliates, or subsidiaries intends to tender Units owned by them in the HR
Offers.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as disclosed in Item 4, There are no negotiations
being undertaken or underway which would result in any of the transactions
listed in Item 7(a) with respect to any Partnership.
(b) Except as disclosed in Item 4, there is no transaction,
board resolution, agreement in principle or signed contract in response to the
tender offer which relates to or would result in one or more of the matters
referred to in Item 7(a) with respect to any Partnership.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Tender Offer Litigation
On August 12, 1996, High River sent a letter to the Partnerships (except
McNeil Real Estate Fund XXVI, L.P. and McNeil Real Estate Fund XXVII, L.P.)
demanding lists of the names, current residence or business addresses and
certain other information concerning the Unitholders of such Partnerships. On
August 19, 1996, these Partnerships commenced an action against High River, Mr.
Icahn and certain of their affiliates (collectively, the "Bidder Defendants")
in United States District Court for the Central District of California (the
"California Federal Action") seeking, among other things, to declare that such
Partnerships are not required to provide High River with a current list of the
Unitholders on the grounds that the Bidder Defendants commenced a tender offer
in violation of the federal securities laws by filing certain Schedule 13D
Amendments on August 5, 1996. On August 19, 1996, such Partnerships, through
their counsel, responded to High River's August 12 letter by denying High
River's demand for a current list of the Unitholders for the reasons set forth
above.
On August 23, 1996, the Bidder Defendants filed, among other documents,
(a) an answer to these Partnerships' complaint in the California Federal Action
denying the allegations contained therein and asserting four affirmative
defenses; (b) a counterclaim seeking, among other things, injunctive relief
requiring such Partnerships to either make available to High River a copy of
the lists of Unitholders or grant High River permission to inspect and copy
such lists; and (c) an application for a temporary restraining order ("TRO")
and a preliminary injunction seeking access to the lists of Unitholders. On
September 6, 1996, the Bidder Defendants' TRO application was
11
12
denied. On September 12, 1996, these Partnerships filed an answer to the
Bidder Defendants' counterclaim asserting six affirmative defenses and alleging
that the Bidder Defendants were denied access to the lists of Unitholders
because their requests for the lists were in connection with illegal tender
offers. Discovery is currently underway in the California Federal Action and
the matter is expected to go to trial in mid-October 1996.
On September 30, 1996, the Partnerships logged an amended complaint for
declaratory and injunctive relief against the Bidder Defendants seeking, among
other things, to enjoin the HR Offers on the grounds that such offers violate
the Partnerships' partnership agreements and federal securities laws and to
declare that the Partnerships are not required to provide High River with a
current list of Unitholders to facilitate its illegal tender offers.
Restrictions on Transfers; Tax Termination
The Partnerships intend that no transfer or assignment of Units
which, when considered with all other transfers or assignments during the
twelve-month period ending with such transfer or assignment, would, in the
opinion of counsel to the Partnerships, cause a termination of any Partnership
for federal income tax purposes (which termination may occur when 50% or more
of the total interest in the Partnership capital and profits is transferred by
sale or exchange in a twelve-month period) shall be effective. Depending upon
the number of Units tendered pursuant to the HR Offers, sales of Units on the
secondary market for the twelve-month period following completion of the HR
Offers may be limited. The Partnerships will not process any requests for
transfers of Units during such twelve-month period which any Partnership
believes would cause a tax termination. Because of the tax-related transfer
restrictions, in no event will an aggregate of 50% or more of the Units be
accepted for transfer by the Partnership pursuant to any of the HR Offers
(reduced to the extent of any prior transfers of Units within the preceding
twelve months).
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
99.(a)(1) Form of Letter from the Partnerships to Unitholders dated October
4, 1996.
99.(b) Not applicable.
99.(c)(1) Form of Press Release issued by McNeil Partners on October 4,
1996.
99.(c)(2) Letter dated October 3, 1996 from Crosson Dannis, Inc. to McNeil
Partners, L.P.
99.(c)(3) Letter dated August 12, 1996 from the Bidders to the Partnerships
(incorporated by reference to Exhibit 6 of Bidders' Schedule
14D-1 dated September 19, 1996).
99.(c)(4) Letter dated August 19, 1996 from counsel to the Partnerships to
counsel to the Bidders (incorporated by reference to Exhibit 7 of
Bidders' Schedule 14D-1 dated September 19, 1996).
12
13
99.(c)(5) Complaint filed by McNeil Pacific Investors Fund 1972, McNeil
Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd.,
McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV,
Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund
XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real
Estate Fund XXV, L.P., as plaintiffs, against the Bidders and
certain affiliates, as defendants (without exhibits)
(incorporated by reference to Exhibit 8 of Bidders' Schedule
14D-1 dated September 19, 1996).
99.(c)(6) Defendants' Answer to Complaint for Declaratory and Injunctive
Relief filed by High River and certain of its affiliates, as
defendants, against McNeil Pacific Investors Fund 1972, McNeil
Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd.,
McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV,
Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund
XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real
Estate Fund XXV, L.P., as plaintiffs (incorporated by reference
to Exhibit 19 of Bidders' Schedule 14D-1 dated September 19,
1996).
99.(c)(7) Counterclaim of High River for Injunctive and other Relief re:
Denial of Access to a Partner to Limited Partnership Records
filed by High River and certain of its affiliates, as defendants,
against McNeil Pacific Investors Fund 1972, McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real
Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil
Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P.,
McNeil Real Estate Fund XXIV, L.P. and McNeil Real Estate Fund
XXV, L.P., as plaintiffs (without exhibits) (incorporated by
reference to Exhibit 20 of Bidders' Schedule 14D-1 dated
September 19, 1996).
99.(c)(8) Plaintiffs/Counterclaim-Defendants' Answer to Counterclaim of
High River for Injunctive and other Relief filed by McNeil
Pacific Investors Fund 1972, McNeil Real Estate Fund IX, Ltd.,
McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund
XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P. and McNeil Real Estate Fund XXV, L.P., as
plaintiffs, against High River and certain of its affiliates
(incorporated by reference to Exhibit 21 of Bidders' Schedule
14D-1 dated September 19, 1996).
99.(c)(9) Proposed Supplemental and Amended Complaint for Declaratory and
Injunctive Relief filed by McNeil Pacific Investors Fund 1972,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X,
Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund
XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate
Fund XX, 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., as plaintiffs, against High
River and certain of its affiliates (without exhibits)
(filed herewith).
13
14
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: October 4, 1996
MCNEIL PARTNERS, L.P.
General Partner of each of the Partnerships
By: McNeil Investors, Inc.
General Partner
By: /s/ Donald K. Reed
----------------------------
Donald K. Reed
President
14
15
ANNEX A
MCNEIL REAL ESTATE FUND IX
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOW PROJECTIONS 000'S 1997 1998 1999 2000 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Partnership cash flow before debt service 5,028 4,875 2,761 1,513 167
Net sales proceeds 5,509 7,002 16,960 3,991 13,091
Debt service on mortgage obligations (5,247) (4,480) (2,936) (1,791) (781)
- ------------------------------------------------------------------------------------------------------------------------------------
Partnership cash flow 5,291 7,398 16,786 3,714 12,477
Estimated distributions to LP's (5,136) (7,398) (16,786) (3,714) (15,477)
Beginning working capital cash reserves 2,845 3,000 3, 000 3,000 3,000
- ------------------------------------------------------------------------------------------------------------------------------------
Ending working capital cash reserves 3,000 3,000 3,000 3,000 0
ASSUMPTIONS:
Partnership cash flow before debt service - Represents net cash flow from
properties after capital improvements but before debt service. Also
includes all G & A costs of the partnership and payments to the GP. Based
on 1996 property budgets and estimated 1996 partnership costs.
Net sales proceeds - Estimated proceeds from sales of properties.
Calculated by taking property NOI and capping at 10% for apartments, 11%
for retail and self storage, and 12% for office buildings. This capped
value is then reduced by a 3% transaction cost and the outstanding balance
of the related mortgage indebtedness.
Debt service on mortgage obligations - Annual debt service on outstanding
mortgage notes secured by real property.
Estimated distributions to LP's - Represents distribution of total
partnership cash flow subject to maintenance of a working capital cash
reserve, which is distributed in year of termination.
Cash flow projections assume an orderly liquidation of all partnership
properties commencing with sales in 1997 and final termination in 2001 with
the final property sale.
16
EXHIBIT INDEX
Exhibit Description Page
------- ----------- ----
99.(a)(1) Form of Letter from the Partnerships to Unitholders dated
October 4, 1996.
99.(c)(1) Form of Press Release issued by McNeil Partners on October 4,
1996.
99.(c)(2) Letter dated October 3, 1996 from Crosson Dannis, Inc. to
McNeil Partners, L.P.
99.(c)(3) Letter dated August 12, 1996 from the Bidders to the
Partnerships (incorporated by reference to Exhibit 6 of Bidders'
Schedule 14D-1 dated September 19, 1996).
99.(c)(4) Letter dated August 19, 1996 from counsel to the Partnerships to
counsel to the Bidders (incorporated by reference to Exhibit 7
of Bidders' Schedule 14D-1 dated September 19, 1996).
99.(c)(5) Complaint filed by McNeil Pacific Investors Fund 1972, McNeil
Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd.,
McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV,
Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund
XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real
Estate Fund XXV, L.P., as plaintiffs, against the Bidders and
certain affiliates, as defendants (without exhibits)
(incorporated by reference to Exhibit 8 of Bidders' Schedule
14D-1 dated September 19, 1996).
99.(c)(6) Defendants' Answer to Complaint for Declaratory and Injunctive
Relief filed by High River and certain of its affiliates, as
defendants, against McNeil Pacific Investors Fund 1972, McNeil
Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd.,
McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV,
Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund
XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real
Estate Fund XXV, L.P., as plaintiffs (incorporated by reference
to Exhibit 19 of Bidders' Schedule 14D-1 dated September 19,
1996).
17
99.(c)(7) Counterclaim of High River for Injunctive and other Relief re:
Denial of Access to a Partner to Limited Partnership Records
filed by High River and certain of its affiliates, as
defendants, against McNeil Pacific Investors Fund 1972, McNeil
Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd.,
McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV,
Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund
XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil Real
Estate Fund XXV, L.P., as plaintiffs (without exhibits)
(incorporated by reference to Exhibit 20 of Bidders' Schedule
14D-1 dated September 19, 1996).
99.(c)(8) Plaintiffs/Counterclaim-Defendants' Answer to Counterclaim of
High River for Injunctive and other Relief filed by McNeil
Pacific Investors Fund 1972, McNeil Real Estate Fund IX, Ltd.,
McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund
XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P. and McNeil Real Estate Fund XXV, L.P., as
plaintiffs, against High River and certain of its affiliates
(incorporated by reference to Exhibit 21 of Bidders' Schedule
14D-1 dated September 19, 1996).
99.(c)(9) Proposed Supplemental and Amended Complaint for Declaratory and
Injunctive Relief filed by McNeil Pacific Investors Fund 1972,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X,
Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund
XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate
Fund XX, 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., as plaintiffs, against High
River and certain of its affiliates (without exhibits)
(filed herewith).