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, 1997
-----------------------------------------------------
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 600, LB70, Dallas, Texas 75240
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (972) 448-5800
-----------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
<PAGE>
McNEIL REAL ESTATE FUND IX, LTD.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------- ---------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 6,370,834 $ 6,370,834
Buildings and improvements............................... 82,557,443 81,666,317
-------------- --------------
88,928,277 88,037,151
Less: Accumulated depreciation.......................... (51,858,676) (49,728,546)
-------------- --------------
37,069,601 38,308,605
Cash and cash equivalents................................... 2,287,850 3,001,521
Cash segregated for security deposits....................... 617,738 571,749
Accounts receivable......................................... 72,974 59,871
Insurance proceeds receivable............................... 562,560 562,560
Prepaid expenses and other assets........................... 169,523 214,497
Escrow deposits............................................. 1,508,637 1,401,648
Mortgage note receivable.................................... - 1,550,000
Deferred borrowing costs, net of accumulated
amortization of $1,010,568 and $895,853 at
June 30, 1997 and December 31, 1996,
respectively............................................. 1,864,943 1,979,658
-------------- --------------
$ 44,153,826 $ 47,650,109
============== ==============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net................................. $ 50,180,774 $ 50,600,006
Accrued interest............................................ 364,783 368,556
Accrued property taxes...................................... 888,577 928,103
Other accrued expenses...................................... 168,274 271,227
Payable to affiliates - General Partner..................... 166,956 279,716
Deferred gain on involuntary conversion..................... 57,352 474,376
Security deposits and deferred rental revenue............... 598,533 556,428
-------------- --------------
52,425,249 53,478,412
-------------- --------------
Partners' deficit:
Limited partners - 110,200 limited partnership units
authorized; 110,170 limited partnership units
outstanding............................................ (5,450,650) (3,029,682)
General Partner.......................................... (2,820,773) (2,798,621)
-------------- --------------
(8,271,423) (5,828,303)
-------------- --------------
$ 44,153,826 $ 47,650,109
============== ==============
</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,
--------------------------------- ---------------------------------
1997 1996 1997 1996
-------------- --------------- -------------- --------------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue................ $ 4,965,754 $ 4,952,897 $ 9,834,677 $ 9,825,930
Interest...................... 32,738 33,536 91,219 68,910
Gain on involuntary
conversion.................. 417,024 - 417,024 -
------------- ------------- ------------- -------------
Total revenue............... 5,415,516 4,986,433 10,342,920 9,894,840
------------- ------------- ------------- -------------
Expenses:
Interest...................... 1,189,734 1,203,827 2,388,561 2,414,626
Depreciation.................. 1,089,565 1,062,465 2,130,130 2,110,773
Property taxes................ 362,454 374,506 715,757 765,500
Personnel expense............. 555,388 582,883 1,223,973 1,249,690
Repair and maintenance........ 706,491 690,263 1,364,548 1,238,660
Property management
fees - affiliates........... 248,578 245,380 490,757 487,835
Utilities..................... 365,045 412,478 858,314 889,133
Other property operating
expenses.................... 230,165 305,588 499,429 602,620
General and administrative.... 38,421 35,411 91,633 80,179
General and administrative -
affiliates.................. 119,404 150,272 226,628 301,133
Loss on sale of real estate... - 220,157 - 220,157
------------- ------------- -------------- -------------
Total expenses.............. 4,905,245 5,283,230 9,989,730 10,360,306
------------- ------------- ------------- -------------
Net income (loss)................ $ 510,271 $ (296,797) $ 353,190 $ (465,466)
============= ============= ============= =============
Net income (loss) allocated to
limited partners.............. $ 243,979 $ (1,086,305) $ (170,965) $ (1,246,540)
Net income allocated to
General Partner............... 266,292 789,508 524,155 781,074
------------- ------------- ------------- -------------
Net income (loss)................ $ 510,271 $ (296,797) $ 353,190 $ (465,466)
============= ============= ============= =============
Net income (loss) per limited
partnership unit.............. $ 2.22 $ (9.86) $ (1.55) $ (11.31)
============= ============= ============= =============
Distributions per limited
partnership unit.............. $ - $ - $ 20.42 $ -
============= ============= ============= =============
</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, 1997 and 1996
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
--------------- --------------- ---------------
<S> <C> <C> <C>
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)
============= ============= =============
Balance at December 31, 1996.............. $ (2,798,621) $ (3,029,682) $ (5,828,303)
Net income (loss)......................... 524,155 (170,965) 353,190
Management Incentive Distribution......... (546,307) - (546,307)
Distribution to limited partners.......... - (2,250,003) (2,250,003)
------------- ------------- -------------
Balance at June 30, 1997.................. $ (2,820,773) $ (5,450,650) $ (8,271,423)
============= ============= =============
</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)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1997 1996
---------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants............................... $ 9,823,848 $ 9,800,417
Cash paid to suppliers................................... (4,123,817) (4,333,511)
Cash paid to affiliates.................................. (745,790) (797,555)
Interest received........................................ 91,219 68,910
Interest paid............................................ (2,255,144) (2,290,451)
Property taxes paid and escrowed......................... (840,489) (731,686)
-------------- --------------
Net cash provided by operating activities................... 1,949,827 1,716,124
-------------- --------------
Cash flows from investing activities:
Additions to real estate investments..................... (891,126) (1,096,415)
Proceeds from mortgage note receivable................... 1,550,000 -
-------------- --------------
Net cash provided by (used in) investing
activities............................................... 658,874 (1,096,415)
-------------- --------------
Cash flows from financing activities:
Principal payments on mortgage notes
payable................................................ (441,707) (404,747)
Management Incentive Distribution........................ (630,662) (886,613)
Distribution to limited partners......................... (2,250,003) -
-------------- --------------
Net cash used in financing activities....................... (3,322,372) (1,291,360)
-------------- --------------
Decrease in cash and cash equivalents....................... (713,671) (671,651)
Cash and cash equivalents at beginning of
period................................................... 3,001,521 3,059,582
-------------- --------------
Cash and cash equivalents at end of period.................. $ 2,287,850 $ 2,387,931
============== ==============
</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 Income (Loss) to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1997 1996
--------------- ----------------
<S> <C> <C>
Net income (loss)........................................... $ 353,190 $ (465,466)
-------------- --------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation............................................. 2,130,130 2,110,773
Amortization of deferred borrowing costs................. 114,715 107,148
Amortization of mortgage discounts....................... 22,475 21,205
Gain on involuntary conversion........................... (417,024) -
Loss on sale of real estate.............................. - 220,157
Changes in assets and liabilities:
Cash segregated for security deposits.................. (45,989) (26,415)
Accounts receivable.................................... (13,103) (23,103)
Prepaid expenses and other assets...................... 44,974 194
Escrow deposits........................................ (106,989) 106,458
Accounts payable....................................... - (120,485)
Accrued interest....................................... (3,773) (4,178)
Accrued property taxes................................. (39,526) (119,158)
Other accrued expenses................................. (102,953) (132,444)
Payable to affiliates - General Partner................ (28,405) (8,587)
Security deposits and deferred rental
revenue.............................................. 42,105 50,025
-------------- --------------
Total adjustments.................................... 1,596,637 2,181,590
-------------- --------------
Net cash provided by operating activities................... $ 1,949,827 $ 1,716,124
============== ==============
</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, 1997
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 600, LB70, Dallas, Texas 75240.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair presentation of the Partnership's financial position and
results of operations. All adjustments were of a normal recurring nature.
However, the results of operations for the six months ended June 30, 1997 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1997.
NOTE 2.
- -------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1996, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund IX, Ltd., c/o The Herman Group, 2121 San Jacinto St.,
26th Floor, Dallas, Texas 75201.
NOTE 3.
- -------
The Partnership pays property management fees equal to 5% of 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 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,
------------------------
1997 1996
---------- ----------
Property management fees - affiliates........... $ 490,757 $ 487,835
Charged to general and administrative -
affiliates:
Partnership administration................... 226,628 301,133
--------- ---------
$ 717,385 $ 788,968
========= =========
Charged to General Partner's deficit:
Management Incentive Distribution............ $ 546,307 $ 533,387
========= =========
NOTE 4.
- -------
On April 24, 1996, a fire destroyed or damaged 12 units at Sheraton Hills
Apartments. The estimated cost to repair the fire damage is $562,560. Insurance
proceeds will reimburse the Partnership for all costs incurred as a result of
the fire. As a result of the fire damage and the expected insurance
reimbursements, the Partnership recorded a $474,376 deferred gain on involuntary
conversion on the Partnership's December 31, 1996 balance sheet. The deferred
gain on involuntary conversion equals the insurance proceeds receivable less the
adjusted basis of the property destroyed or damaged by the fire. The gain on
involuntary conversion is deferred pending receipt of the insurance proceeds. As
insurance proceeds are received, the Partnership will recognize the deferred
gain. In July 1997, the Partnership received $494,547 of insurance
reimbursements. Consequently, $417,024 of the deferred gain was recognized for
the quarter ending June 30, 1997 in the accompanying financial statements. The
remaining $57,352 of deferred gain will be recognized when the remainder of the
insurance proceeds are received.
<PAGE>
Reconstruction of the destroyed or damaged units was completed during the third
quarter of 1996.
NOTE 5.
- -------
On August 1, 1997, the Partnership placed Sheraton Hills Apartments on the
market for sale. In accordance with the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
the Partnership will cease recording depreciation charges effective August 1,
1997.
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 from the purchaser a
short-term, $1,550,000 mortgage note. The mortgage note accrued interest at
10.0% per annum and required monthly interest-only payments. On February 5,
1997, the purchaser repaid the $1,550,000 mortgage note to the Partnership
together with all accrued interest thereon.
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........................... (68,116) (68,116)
Basis of real estate sold............... (2,262,541)
-----------
Loss on sale of real estate............. $ (220,157)
===========
Net cash proceeds received in 1996...... 492,384
-----------
Net cash proceeds received in 1997...... $ 1,550,000
===========
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, 1997, the Partnership
owned 13 apartment properties. All of the Partnership's properties are subject
to mortgage notes. On July 30, 1996, the Partnership sold Westridge Apartments.
On February 28, 1997, the Partnership paid a $2,250,000 distribution ($20.42 per
limited partnership unit) to the limited partners. The distribution was funded
by cash proceeds from the sale of Westridge Apartments, collection of the
$1,550,000 mortgage note obtained by the Partnership in connection with the sale
of Westridge Apartments, and from cash reserves of the Partnership.
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
The Partnership's net income for the first six months of 1997 was $353,190, an
increase of $818,656 over the $465,466 loss recorded by the Partnership for the
first six months of 1996. For the second quarter, net income improved $807,068
to $510,271. Most of the improvement in net income for both the quarter and
year-to-date figures was the result of a $417,024 gain on involuntary conversion
recognized during the second quarter of 1997.
Revenue:
Rental revenue increased $8,747 or .1% for the second quarter of 1997 as
compared to the second quarter of 1996. However, 1996 rental revenue includes
rental revenue from Westridge Apartments. The Partnership sold Westridge
Apartments on July 30, 1996. After excluding the rental revenues from Westridge
Apartments from the 1996 figures, rental revenue at the remainder of the
Partnership's properties increased $350,505 or 3.7% for the first six months of
1997 as compared to the same period of 1996.
Rental revenues increased at eleven of the Partnership's thirteen properties.
The properties reporting the largest increases in rental revenue, Cherry Hills
Apartments, Meridian West Apartments, Sheraton Hills Apartments and Westgate
Apartments, achieved increases ranging from 6% to 10% primarily by improving
their occupancy rates. Two properties, Lantern Tree Apartments and Rolling Hills
Apartments, reported unchanged rental revenue. Increased rental rates at these
two properties was offset by decreased occupancy rates. The remainder of the
Partnership's properties reported small increases in rental revenue due to
increased rental rates that were partially offset by decreased occupancy rates.
None of the partnership's properties reported decreases in rental revenue.
Interest income increased $22,309 or 32.4% for the first six months of 1997 as
compared to the same period of 1996. Interest income for 1997 includes $15,500
of interest on the $1,550,000 Westridge mortgage note obtained in connection
with the sale of Westridge Apartments. The Westridge mortgage note was collected
in full on February 5, 1997. No comparable interest was earned by the
Partnership for the same period during 1996.
Expenses:
Partnership expenses decreased $377,985 or 7.2% for the first six months of 1997
as compared to the same period of 1996. However, the 1996 figures include
expenses related to Westridge Apartments as well as a $220,157 loss on
impairment of value related to Westridge Apartments. Excluding expenses related
to Westridge Apartments, Partnership expenses increased $168,125 or 1.7% for the
first six months of 1997 as compared to the same period of 1996. The Partnership
incurred increased repair and maintenance and general and administrative
expenses that were generally offset by decreased other property operating
expenses and general and administrative expenses paid to affiliates
Excluding the effects of the sale of Westridge, repair and maintenance expense
increased $178,540 or 15% for the six months ended June 30, 1997 as compared to
the same period of 1996. The increase is attributable to the replacement of
carpeting and appliances, which met the Partnership's criteria for
capitalization based on the magnitude of replacements in 1996, but were expensed
in 1997.
<PAGE>
General and administrative expenses increased 14.3% for the six months ended
June 30, 1997 as compared to the same period of 1996. Charges for investor
services, beginning in 1997, are provided by a third party vendor instead of by
affiliates of the General Partner. This change accounts for both the increase in
general and administrative expenses and also for a portion of the 25% decrease
in general and administrative expenses paid to affiliates. In addition to the
change in investor service expenses, the Partnership incurred decreased charges
for other services provided by affiliates of the General Partner.
Other property operating expenses, excluding expenses related to Westridge
Apartments, decreased 75,448 or 13.1% for the first six months of 1997 as
compared to the same period of 1996. Improved collection procedures reduced the
level of bad debt expenses at the Partnership's properties. Also, marketing
expenses and costs for office supplies were reduced.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership reported net income of $510,271 for the second quarter of 1997,
an improvement over the $296,797 loss reported by the Partnership for the second
quarter of 1996. Year to date, net income has increased to $353,190 from a loss
of $465,466 for the first six months of 1996. Cash provided by operating
activities increased 13.6% to $1,949,827. Decreased cash paid to suppliers,
partially offset by increased property taxes paid and escrowed, accounted for
most of the increase in cash provided by operating activities.
Although the Partnership continues to invest significant resources into capital
improvements at its properties, the scope of such investments decreased
beginning in 1996. The Partnership has, on average, expended approximately $3
million annually for capital improvements over the last few years. The budgeted
capital improvements for 1997 total only $1.7 million. For the first six months
of 1997, the Partnership has expended $891,126 for capital improvements.
The Partnership paid $630,662 of Management Incentive Distributions ("MID") to
the General Partner for the first six months of 1997. The Partnership accrued
MID of $547,307 for the first six months of 1997. The Partnership paid MID
accrued but unpaid from 1996 as well as MID from 1997. Principal payments on the
Partnership's mortgage notes account for the balance of the Partnership's
financing activities. Such payments will increase modestly from year to year as
the Partnership continues to pay down its mortgage notes.
Short-term liquidity:
The Partnership has budgeted $1.7 million for capital improvements in 1997. 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 future repair and maintenance expenses from amounts that
would otherwise be incurred.
At June 30, 1997, the Partnership held $2,287,850 of cash and cash equivalents,
down $713,671 from the balance at the beginning of 1997. The General Partner
anticipates that cash generated from operations for the remainder of 1997 will
be sufficient to fund the Partnership's budgeted capital improvements and to
repay the current portion of the Partnership's mortgage notes. The General
Partner considers the Partnership's cash reserves adequate for anticipated
operations for the remainder of 1997.
<PAGE>
On July 30, 1996, the Partnership sold its investment in Westridge Apartments.
Proceeds from the sale amounted to approximately $492,000 of cash received in
1996, and $1,550,000 in proceeds from collection of the short-term mortgage note
that was repaid on February 5, 1997. On February 28, 1997, the Partnership used
the funds from the sale of Westridge, collection of the $1,550,000 mortgage
note, and the Partnership's cash reserves to pay a $2,250,000 distribution
($20.42 per limited partnership unit) to the limited partners. See Income
Allocations and Distributions below.
Long-term liquidity:
While the present outlook for the Partnership's liquidity is favorable, market
conditions may change and property operations can deteriorate. In that event,
the Partnership would require other sources of working capital. No such other
sources have been identified, and the Partnership has no established lines of
credit. Other possible actions to resolve working capital deficiencies include
refinancing or renegotiating terms of existing loans, deferring major capital
expenditures on Partnership properties except where improvements are expected to
enhance the competitiveness or marketability of the properties, or arranging
working capital support from affiliates. No affiliate support has been required
in the past, and there is no assurance that support from affiliates would be
provided in the future, since neither the General Partner nor any affiliates
have any obligation in this regard.
The Partnership has determined to begin an orderly liquidation of all the
Partnership's assets. Although there can be no assurance as to the timing of any
liquidation, it is anticipated that such liquidation would result in
distributions to the limited partners of the cash proceeds from the sale of the
Partnership's properties, subject to cash reserve requirements, as they are sold
with the last property disposition before December 2001, followed by a
dissolution of the Partnership. On August 1, 1997, the Partnership placed
Sheraton Hills Apartments on the market for sale.
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 six month periods ended
June 30, 1997 and 1996, the General Partner received allocations of net income
of $524,155, and $781,074 respectively. The limited partners received
allocations of net loss of $170,965 and $1,246,540 for the six month periods
ended June 30, 1997 and 1996, respectively.
On February 28, 1997, the Partnership paid its first distribution to the limited
partners since 1986. The $2,250,000 distribution was in large measure funded by
proceeds from the 1996 sale of Westridge Apartments. For the foreseeable future,
distributions to limited partners will likely be limited to proceeds from the
sale of Partnership properties and cash reserves. The Partnership will
distribute $500,000 to the limited partners in September 1997. The General
Partner will continue to monitor the cash reserves and working capital needs of
the Partnership to determine when cash flows will support additional
distributions to the limited partners. Currently, one Partnership property,
Sheraton Hills Apartments, is being marketed for sale. However, there can be no
assurance regarding either the timing of any sale of Sheraton Hills Apartments
or whether such a sale would generate funds in excess of the balance of the
Sheraton Hills mortgage note that would be available for distribution to the
limited partners.
<PAGE>
During the second quarter, the Partnership recorded MID of $546,307. MID
payments totaling $630,662 were paid to the General Partner during the second
quarter. MID payments to the General Partner are expected to continue in 1997.
To the extent that cash flow from operations is not sufficient to fund payments
of MID along with other Partnership obligations, the Partnership will use its
cash reserves to make such payments.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of
the State of California for the County of Los Angeles, Case No. BC133799 (Class
and Derivative Action Complaint).
The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend.
<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 1997 and
1996.
27. Financial Data Schedule for the quarter ended
June 30, 1997.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended June 30, 1997.
<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 13, 1997 By: /s/ Ron K. Taylor
- --------------- ------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
August 13, 1997 By: /s/ Brandon K. Flaming
- --------------- ------------------------------------------
Date Brandon K. Flaming
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,287,850
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 88,928,277
<DEPRECIATION> (51,858,676)
<TOTAL-ASSETS> 44,153,826
<CURRENT-LIABILITIES> 0
<BONDS> 50,180,774
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 44,153,826
<SALES> 9,834,677
<TOTAL-REVENUES> 10,432,920
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,601,169
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,388,561
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 353,190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 353,190
<EPS-PRIMARY> 0
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