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 June 30, 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 0-9026
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McNEIL REAL ESTATE FUND IX, LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2491437
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240
- --------------------------------------------------------------------------------
(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
--- ---
<PAGE>
McNEIL REAL ESTATE FUND IX, LTD.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------------- ---------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 6,370,834 $ 6,716,099
Buildings and improvements............................... 80,364,304 83,847,294
-------------- --------------
86,735,138 90,563,393
Less: Accumulated depreciation.......................... (47,667,168) (48,129,231)
-------------- --------------
39,067,970 42,434,162
Asset held for sale 2,042,384 -
Cash and cash equivalents................................... 2,387,931 3,059,582
Cash segregated for security deposits....................... 561,024 534,609
Accounts receivable......................................... 137,470 114,367
Insurance proceeds receivable............................... 529,799 -
Prepaid expenses and other assets........................... 223,765 223,959
Escrow deposits............................................. 1,311,931 1,418,389
Deferred borrowing costs, net of accumulated amorti-
zation of $796,841 and $689,693 at June 30,
1996 and December 31, 1995, respectively................. 2,078,670 2,185,818
-------------- --------------
$ 48,340,944 $ 49,970,886
============== ==============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net................................. $ 51,007,280 $ 51,390,822
Accounts payable............................................ 146,292 266,777
Accrued property taxes...................................... 843,093 962,251
Accrued interest............................................ 370,562 374,740
Other accrued expenses...................................... 173,578 306,022
Deferred gain on involuntary conversion..................... 440,506 -
Payable to affiliates - General Partner..................... 146,556 508,369
Security deposits and deferred rental revenue............... 612,690 562,665
-------------- --------------
53,740,557 54,371,646
-------------- --------------
Partners' deficit:
Limited partners - 110,200 limited partnership units
authorized; 110,170 limited partnership units
outstanding............................................ (2,820,543) (1,574,003)
General Partner.......................................... (2,579,070) (2,826,757)
-------------- --------------
(5,399,613) (4,400,760)
-------------- --------------
$ 48,340,944 $ 49,970,886
============== ==============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND IX, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue................ $ 4,952,897 $ 4,742,374 $ 9,825,930 $ 9,421,015
Interest...................... 33,536 55,781 68,910 122,235
Gain on legal settlement...... - 70,817 - 70,817
------------- ------------- ------------- -------------
Total revenue............... 4,986,433 4,868,972 9,894,840 9,614,067
------------- ------------- ------------- -------------
Expenses:
Interest...................... 1,203,827 1,211,547 2,414,626 2,420,993
Depreciation.................. 1,062,465 952,702 2,110,773 1,886,857
Property taxes................ 374,506 355,179 765,500 710,814
Personnel expense............. 582,883 586,725 1,249,690 1,297,172
Repair and maintenance........ 690,263 656,747 1,238,660 1,158,058
Property management
fees - affiliates........... 245,380 234,804 487,835 468,088
Utilities..................... 412,478 364,057 889,133 804,955
Other property operating
expenses.................... 305,588 306,518 602,620 619,215
General and administrative.... 35,411 36,153 80,179 75,077
General and administrative -
affiliates.................. 150,272 244,236 301,133 427,405
Loss on impairment of value... 220,157 - 220,157 -
------------- ------------- ------------- -------------
Total expenses.............. 5,283,230 4,948,668 10,360,306 9,868,634
------------- ------------- ------------- -------------
Net loss......................... $ (296,797) $ (79,696) $ (465,466) $ (254,567)
============= ============= ============= =============
Net loss allocated to limited
partners...................... $ (1,086,305) $ (146,061) $ (1,246,540) $ (612,218)
Net income allocated to
General Partner............... 789,508 66,365 781,074 357,651
------------- ------------- ------------- -------------
Net loss......................... $ (296,797) $ (79,696) $ (465,466) $ (254,567)
============= ============= ============= =============
Net loss per limited
partnership unit.............. $ (9.86) $ (1.33) $ (11.31) $ (5.56)
============= ============= ============= =============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND IX, LTD.
STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
For the Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1994.............. $ (2,439,996) $ (561,005) $ (3,001,001)
Net income (loss)......................... 357,651 (612,218) (254,567)
Management Incentive Distribution......... (482,002) - (482,002)
------------- ------------- -------------
Balance at June 30, 1995.................. $ (2,564,347) $ (1,173,223) $ (3,737,570)
============= ============= =============
Balance at December 31, 1995.............. $ (2,826,757) $ (1,574,003) $ (4,400,760)
Net income (loss)......................... 781,074 (1,246,540) (465,466)
Management Incentive Distribution......... (533,387) - (533,387)
------------- ------------- -------------
Balance at June 30, 1996.................. $ (2,579,070) $ (2,820,543) $ (5,399,613)
============= ============= =============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND IX, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Decrease in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1996 1995
---------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants............................... $ 9,800,417 $ 9,441,598
Cash received from legal settlement...................... - 70,817
Cash paid to suppliers................................... (4,333,511) (4,099,304)
Cash paid to affiliates.................................. (797,555) (840,132)
Interest received........................................ 68,910 122,235
Interest paid............................................ (2,290,451) (2,226,786)
Property taxes paid and escrowed......................... (731,686) (679,522)
-------------- --------------
Net cash provided by operating activities................... 1,716,124 1,788,906
-------------- --------------
Cash flows from investing activities:
Additions to real estate investments..................... (1,096,415) (1,431,834)
-------------- --------------
Cash flows from financing activities:
Principal payments on mortgage notes
payable................................................ (404,747) (360,497)
Management Incentive Distribution........................ (886,613) (451,994)
-------------- --------------
Net cash used in financing activities....................... (1,291,360) (812,491)
-------------- --------------
Decrease in cash and cash equivalents....................... (671,651) (455,419)
Cash and cash equivalents at beginning of
period................................................... 3,059,582 4,199,844
-------------- --------------
Cash and cash equivalents at end of period.................. $ 2,387,931 $ 3,744,425
============== ==============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND IX, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Loss to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Net loss.................................................... $ (465,466) $ (254,567)
-------------- --------------
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation............................................. 2,110,773 1,886,857
Amortization of deferred borrowing costs................. 107,148 100,958
Amortization of mortgage discounts....................... 21,205 20,086
Loss on impairment of value.............................. 220,157 -
Changes in assets and liabilities:
Cash segregated for security deposits.................. (26,415) 5,926
Accounts receivable.................................... (23,103) (6,496)
Prepaid expenses and other assets...................... 194 74,395
Escrow deposits........................................ 106,458 (66,007)
Accounts payable....................................... (120,485) (228,901)
Accrued property taxes................................. (119,158) 144,310
Accrued interest....................................... (4,178) 73,163
Other accrued expenses................................. (132,444) (54,473)
Payable to affiliates - General Partner................ (8,587) 55,361
Security deposits and deferred rental
revenue.............................................. 50,025 38,294
-------------- --------------
Total adjustments.................................... 2,181,590 2,043,473
-------------- --------------
Net cash provided by operating activities................... $ 1,716,124 $ 1,788,906
============== ==============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND IX, LTD.
Notes to Financial Statements
(Unaudited)
June 30, 1996
NOTE 1.
- -------
McNeil Real Estate Fund IX, Ltd. (the "Partnership") is a limited partnership
organized under the laws of the State of California to invest in real property.
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 Partnership is governed by an amended and restated limited
partnership agreement ("Amended Partnership Agreement") that was adopted
September 20, 1991. 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 six months ended June 30, 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 Fund IX, Ltd., c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240.
NOTE 3.
- -------
The Partnership pays property management fees equal to 5% of the gross rental
receipts of the Partnership's properties to McNeil Real Estate Management, Inc.
("McREMI"), an affiliate of the General Partner, for providing property
management and leasing services for the Partnership's properties.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
Under terms of the Amended Partnership Agreement, the Partnership is paying a
Management Incentive Distribution ("MID") to the General Partner. The maximum
MID is calculated as 1% of the tangible asset value of the Partnership. The
maximum MID percentage decreases subsequent to 1999. Tangible asset value is
determined by using the greater of (i) an amount calculated by applying a
capitalization rate of 9% to the annualized net operating income of each
property or (ii) a value of $10,000 per apartment unit for residential property
and $50 per gross square foot for commercial property 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.
<PAGE>
MID will be paid to the extent of the lesser of the Partnership's excess cash
flow, as defined, or net operating income, as defined ("the Entitlement
Amount"), and may be paid (i) in cash, unless there is insufficient cash to pay
the distribution in which event any unpaid portion not taken in Units will be
deferred and is payable, without interest, from the first available cash and/or
(ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of
Units issued in payment of the MID is based on the greater of $50 per Unit or
the net tangible asset value, as defined, per Unit.
Any amount of the MID that is paid to the General Partner in Units will be
treated as if cash is distributed to the General Partner and is then contributed
to the Partnership by the General Partner. The Contingent MID represents a
return of equity to the General Partner for increasing cash flow, as defined,
and accordingly is treated as a distribution.
Compensation, reimbursements and distributions paid to or accrued for the
benefit of the General Partner and its affiliates are as follows:
Six Months Ended
June 30,
--------------------------
1996 1995
---------- ----------
Property management fees - affiliates....... $ 487,835 $ 468,088
Charged to general and administrative -
affiliates:
Partnership administration............... 301,133 427,405
--------- ---------
$ 788,968 $ 895,493
========= =========
Charged to General Partner's deficit:
Management Incentive Distribution........ $ 533,387 $ 482,002
========= =========
NOTE 4.
- -------
The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark for damages relating to improper overcharges, breach of contract and
breach of fiduciary duty. The Partnership settled these claims in 1991, and such
settlement was approved by the Bankruptcy Court.
An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995, the Partnership received in full satisfaction of its claims, $53,574
in cash, and common and preferred stock in the reorganized Southmark. The cash
and stock represent the Partnership's pro-rata share of Southmark assets
available for Class 8 claimants. The Partnership sold the Southmark common and
preferred stock in May 1995, for $17,243 which, when combined with the cash
proceeds from Southmark, resulted in a gain on legal settlement of $70,817.
<PAGE>
NOTE 5.
- -------
On April 24, 1996, a fire destroyed or damaged 12 units at Sheraton Hills
Apartments. The estimated cost to repair the fire damage is $529,799. Insurance
proceeds will reimburse the Partnership for all costs incurred as a result of
the fire. A deferred involuntary conversion gain of $440,506 has been recorded
on the Partnership's June 30, 1996 Balance Sheet. The deferred involuntary
conversion gain equals the insurance proceeds receivable less the adjusted basis
of the property destroyed or damaged by the fire. The deferred involuntary
conversion gain will be recognized as the insurance proceeds are received.
Reconstruction of the destroyed or damaged units will likely be completed during
the third quarter of 1996.
NOTE 6.
- -------
On July 30, 1996, the Partnership sold Westridge Apartments to an unaffiliated
purchaser for a cash sales price of $2,110,500. The Partnership agreed to
finance a portion of the sales price by accepting a short-term, $1,550,000
mortgage note from the purchaser. The mortgage note bears interest at 10.0% per
annum and requires monthly interest-only payments. The mortgage note matures
nine months from the date of sale, by which time the purchaser is to have
arranged permanent financing. Cash proceeds from the sale, as well as the loss
on sale of Westridge Apartments are detailed below.
Loss on Sale Cash Proceeds
------------- -------------
Cash sales price............... $ 2,110,500 $ 2,110,500
Selling costs.................. (68,117) (68,117)
Basis of real estate sold...... (2,262,540)
-----------
Loss on sale................... $ (220,157)
===========
Mortgage note retained by
the Partnership.............. (1,550,000)
-----------
Net cash proceeds.............. $ 492,383
===========
Due to the sale of Westridge Apartments in July, the Partnership's investment in
Westridge Apartments is classified as an asset held for sale on the
Partnership's June 30, 1996 Balance Sheet. The reclassification of Westridge
Apartments from real estate investment to asset held for sale is effective June
1, 1996.
In 1996, the Partnership adopted 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 accounting standard requires that assets held
for sale be valued at the lesser of the assets' carrying value or the sum of the
expected future cash flows of the assets. Consequently, the loss on sale
incurred by the Partnership during the third quarter is recognized as a second
quarter loss on impairment of value in the Partnership's Statements of
Operations for the three month and six month periods ended June 30, 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
The Partnership was formed to acquire, operate and ultimately dispose of a
portfolio of income-producing real properties. At June 30, 1996, the Partnership
owned fourteen apartment properties. All but one of the Partnership's properties
are subject to mortgage notes. On July 30, 1996, the Partnership sold Westridge
Apartments. Proceeds from the sale of Westridge Apartments will be added to the
Partnership's cash reserves.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Rental revenue increased $210,523 or 4.4% and $404,915 or 4.3% for the three
month and six month periods ended June 30, 1996 as compared to the same periods
of 1995. Rental revenues increased at thirteen of the Partnership's fourteen
properties. The sole exception, Westgate Apartments, reported a 6% decrease in
rental revenue. Base rental rates increased an average of 4% at the
Partnership's various properties. Increases in base rental rates were partially
offset by lower occupancy rates at eight of the Partnership's properties. The
six remaining properties reported increased or stable occupancy rates. Cherry
Hills Apartments reported the best improvement in occupancy, raising its
occupancy rate to 97.1% from 91.4% at the end of 1995.
Interest revenue decreased by 40% and 44% for the three month and six month
periods ended June 30, 1996 as compared to the same periods of 1995. The decline
in interest revenue reflects decreased balances in interest-bearing escrow
accounts maintained by mortgagees as well as a decrease in cash and cash
equivalents invested in interest bearing accounts.
Revenues for 1995 also reflect a $70,187 gain on settlement of the Partnership's
claims against Southmark Corporation's (the parent of the former general partner
of the Partnership) bankruptcy estate. No such revenue was received in 1996.
Expenses:
Partnership expenses increased $334,562 or 6.8% and $491,672 or 5.0% for the
three month and six month periods ended June 30, 1996 as compared to the same
periods of 1995. The principal factor behind the increased expenses was the loss
on impairment of value of Westridge Apartments recognized by the Partnership as
a consequence of putting Westridge Apartments on the market for sale. Excluding
the loss on impairment of value, expenses decreased 2.9% at Westridge
Apartments, but increased at all of the Partnership's remaining properties. The
increased expenses were concentrated in depreciation and utilities. These
increases were partially offset by a 30% decrease in general and administrative
expenses paid to affiliates.
Depreciation expense increased 11.5% and 11.9% for the three month and six month
periods ended June 30, 1996 as compared to the same periods of 1995. The
Partnership added approximately $3.25 million of capital improvements to its
properties in the twelve months ended June 30, 1996. The improvements are being
depreciated over lives ranging from five to ten years. Depreciation charges on
the new improvements accounts for the increased depreciation expense.
<PAGE>
Utilities increased 13.3% and 10.5% for the three month and six month periods
ended June 30, 1996 as compared to the same periods of 1995. Utilities increased
at ten of the Partnership's fourteen properties. Four properties in particular,
Berkley Hills Apartments, Forest Park Village Apartments, Westgate Apartments
and Williamsburg Apartments, reported increases in excess of 20% due to a
combination of factors such as increased utility rates, mix of vacant to
occupied units, and adverse weather conditions.
General and administrative expenses paid to affiliates decreased 38% and 30% for
the three month and six month periods ended June 30, 1996 as compared to the
same periods of 1995. Partnership administrative expenses charged to the
Partnership by affiliates of the General Partner decreased in 1996 compared to
1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership reported a loss of $465,466 for the first six months of 1996.
Except for the charge for impairment of value on Westridge Apartments, the net
loss for the first six months of 1996 would have been slightly better than the
$254,567 loss reported by the Partnership for the six month period ended June
30, 1995. Cash provided by operations decreased $72,782 or 4.1% to $1,716,124.
Excluding the $70,817 of cash received from the 1995 legal settlement involving
Southmark's bankruptcy, cash flow from operating activities is virtually
identical in 1996 compared to 1995.
Although the Partnership continues to invest significant resources into capital
improvements at its properties, the scope of such investments has decreased in
1996. The budgeted capital improvements for 1996 total $1.56 million,
approximately one half the amount invested during each of the past three years.
Management Incentive Distributions ("MID") paid by the Partnership increased
$434,619 to $886,613 for the first six months of 1996. The Partnership paid MID
accrued but unpaid from 1995 as well as MID from 1996. Principal payment on the
Partnership's mortgage notes round out the financing activity of the
Partnership. Such repayments generally will increase modestly over the years as
the Partnership continues to pay down the balances on its mortgage notes.
Short-term liquidity:
The Partnership began 1996 with adequate cash reserves. These reserves will be
needed to address continuing capital improvement needs in light of aging
condition of the Partnership's properties. The Partnership has budgeted $1.56
million for capital improvements for 1996 in addition to the $10.5 million of
capital improvements made during the past three years. The General Partner
believes these capital improvements are necessary to allow the Partnership to
increase its rental revenues in the competitive markets in which the
Partnership's properties operate. These expenditures also allow the Partnership
to reduce certain repair and maintenance expenses from amounts that would
otherwise be incurred.
<PAGE>
At June 30, 1996, the Partnership held $2,387,931 of cash and cash equivalents,
down $671,651 from the balance at the beginning of 1996. The General Partner
anticipates that cash generated from operations for the remainder of 1996 will
be sufficient to fund the Partnership's budgeted capital improvements and to
repay the current portion of the Partnership's mortgage notes. However, 1996
cash flow from operations likely will not be adequate to pay the MID due to the
General Partner. The Partnership will use its cash reserves to pay the MID. The
General Partner considers the Partnership's cash reserves adequate for
anticipated operations for the remainder of 1996.
On July 30, 1996, the Partnership sold its investment in Westridge Apartments.
Proceeds from the sale amounted to approximately $492,000 of cash and a
$1,550,000 short-term mortgage note. The mortgage note bears interest at 10% per
annum, and matures nine months from the date of sale. The Partnership will use
the proceeds from the sale of Westridge Apartments to increase its reserves of
cash and cash equivalents.
The General Partner has established a revolving credit facility, not to exceed
$5,000,000 in the aggregate, which will be 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. There
is no assurance that the Partnership will receive additional funds from the
facility because no amount will be reserved for any particular partnership. As
of June 30, 1996, $4,082,159 remained available from the facility; however,
additional funds could become available as other partnerships repay borrowings.
This commitment will terminate on November 12, 1996.
Long-term liquidity:
For the long term, property operations will remain the primary source of funds.
In this regard, the General Partner expects that the capital improvements made
by the Partnership during the past three years will yield improved cash flow
from operations in 1996 and beyond. Furthermore, the General Partner has
budgeted $1.56 million of capital improvements for 1996. If the Partnership's
cash position deteriorates, the General Partner may elect to defer some of the
capital improvements, except where such improvements are expected to increase
the competitiveness or marketability of the Partnership's properties.
As an additional source of liquidity, the General Partner may, from time to
time, attempt to sell Partnership properties judged to be mature considering the
circumstances of the market in which the properties are located, as well as the
Partnership's need for liquidity. However, there can be no guarantee that the
Partnership will be able to sell any of its properties for an amount sufficient
to retire the related mortgage note and still provide cash proceeds to the
Partnership, or that such proceeds could be timed to coincide with the liquidity
needs of the Partnership. In this regard, the Partnership sold Westridge
Apartments on July 30, 1996.
Income Allocations and Distributions:
Terms of the Amended Partnership Agreement specify that income before
depreciation is allocated to the General Partner to the extent of MID paid in
cash. Depreciation is allocated in the ratio of 95:5 to the limited partners and
the General Partner, respectively. Therefore, for the three month and six month
periods ended June 30, 1996, net income of 789,508 and 781,074, respectively,
was allocated to the General Partner. The limited partners received allocations
of net loss of ($1,086,305) and ($1,246,540) for the three month and six month
periods ended June 30, 1996, respectively.
<PAGE>
With the exception of the MID, distributions to partners have been suspended
since 1986 as part of the General Partner's policy of maintaining adequate cash
reserves. 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. MID for the first six
months of 1996 amounted to $533,387.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
Two class action lawsuits styled Robert Lewis vs. McNeil Partners, L.P., et.
al., filed in the District Court of Dallas County, Texas, and James F.
Schofield, et. al. vs. McNeil Partners, L.P., et. al., filed in the United
States District Court, Southern District of New York, have been voluntarily
dismissed without prejudice by the respective plaintiffs in such actions.
ITEM 5. OTHER INFORMATION
- ------- -----------------
On August 5, 1996, High River Limited Partnership ("High River"), a partnership
controlled by Carl Icahn ("Icahn"), and certain Icahn's affiliates, filed
documents with the Securities and Exchange Commission disclosing that High River
had entered into a letter agreement dated August 2, 1996 with the attorneys for
the plaintiffs in the case styled James F. Schofield, et. al. ("Plaintiffs") v.
McNeil Partners, L.P., et. al. The letter agreement provided, among other
things, that (i) High River will commence, as soon as possible, but in no event
more than six months, a tender offer for any and all of the outstanding Units of
the Partnership and other affiliated partnerships (the "Partnerships") at a
price that is not less than 75% of the estimated liquidation value of the Units
(as determined by utilizing the same methodology that was used to determine the
liquidation values in High River's previous tender offers for the Partnerships,
as previously disclosed), which tender offer may be subject to such other terms
and conditions as High River determines in its sole discretion; (ii) in the
event that High River attains the position of general partner in any of the
Partnerships: (a) High River will take all actions necessary to cause a 25%
reduction of fees of such Partnerships, (b) High River will not cause such
Partnerships to take any action to discontinue the litigation with respect to
receivable claims and (c) High River and Plaintiffs' counsel will in good faith
execute an appropriate Stipulation of Settlement based upon the terms of the
letter agreement, which stipulation shall not include a settlement or provide a
release of the receivable claims; and (iii) from and after the date of the
letter agreement, Plaintiffs' counsel agreed they will not enter into any
settlement of the claims asserted in such litigation that does not provide for
all consideration contained in a demand letter dated June 24, 1996.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Description
------- -----------
4. Amended and Restated Partnership Agreement, dated
November 12, 1991. (Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1991).
11. Statement regarding computation of net loss per
limited partnership unit: Net loss per limited
partnership unit is computed by dividing net loss
allocated to the limited partners by the number of
limited partnership units outstanding. Per unit
information has been computed based on 110,170
limited partnership units outstanding in 1996 and
1995.
27. Financial Data Schedule for the quarter ended
June 30, 1996.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended June 30, 1996.
<PAGE>
McNEIL REAL ESTATE FUND IX, LTD.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
McNEIL REAL ESTATE FUND IX, Ltd.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
August 14, 1996 By: /s/ Donald K. Reed
- ----------------- ------------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
August 14, 1996 By: /s/ Ron K. Taylor
- ----------------- ------------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer of
McNeil Investors, Inc.
August 14, 1996 By: /s/ Brandon K. Flaming
- ----------------- ------------------------------------------
Date Brandon K. Flaming
Chief Accounting Officer of McNeil
eal Estate Management, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,387,931
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 86,735,138
<DEPRECIATION> 47,667,168
<TOTAL-ASSETS> 48,340,944
<CURRENT-LIABILITIES> 0
<BONDS> 51,007,280
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 48,340,944
<SALES> 9,825,930
<TOTAL-REVENUES> 9,894,840
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,725,523
<LOSS-PROVISION> 220,157
<INTEREST-EXPENSE> 2,414,626
<INCOME-PRETAX> (465,466)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (465,466)
<EPS-PRIMARY> 0
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