UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
------------------------------------------
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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
McNEIL REAL ESTATE FUND IX, LTD.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- -------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land ........................................................ $ 6,074,303 $ 6,074,303
Buildings and improvements .................................. 78,644,829 78,522,699
------------ ------------
84,719,132 84,597,002
Less: Accumulated depreciation ............................. (54,315,306) (53,347,242)
------------ ------------
30,403,826 31,249,760
Asset held for sale ............................................ 3,142,720 3,140,461
Cash and cash equivalents ...................................... 3,177,607 3,166,577
Cash segregated for security deposits .......................... 644,455 627,813
Cash restricted for mortgage payments .......................... 401,969 545,624
Accounts receivable ............................................ 54,775 46,633
Prepaid expenses and other assets .............................. 145,244 150,907
Escrow deposits ................................................ 1,442,085 1,126,898
Deferred borrowing costs, net of accumulated
amortization of $952,409 and $899,576 at
March 31, 1999 and December 31, 1998,
respectively ................................................ 1,265,800 1,318,633
------------ ------------
$ 40,678,481 $ 41,373,306
============ ============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net .................................... $ 48,716,934 $ 49,189,188
Accounts payable ............................................... 41,586 110
Accrued interest ............................................... 253,736 333,927
Accrued property taxes ......................................... 1,172,726 989,317
Other accrued expenses ......................................... 278,223 357,506
Payable to affiliates - General Partner ........................ 2,334,632 2,042,507
Security deposits and deferred rental revenue .................. 620,545 585,356
------------ ------------
53,418,382 53,497,911
------------ ------------
Partners' deficit:
Limited partners - 110,200 limited partnership units
authorized; 110,170 limited partnership units out-
standing at March 31, 1999 and December 31, 1998 .......... (8,090,180) (7,734,963)
General Partner ............................................. (4,649,721) (4,389,642)
------------ ------------
(12,739,901) (12,124,605)
$ 40,678,481 $ 41,373,306
============ ============
</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
March 31,
----------------------------
1999 1998
---------- ----------
Revenue:
<S> <C> <C>
Rental revenue ................................... $5,214,238 $5,086,709
Interest ......................................... 41,135 43,409
---------- ----------
Total revenue .................................. 5,255,373 5,130,118
---------- ----------
Expenses:
Interest ......................................... 1,063,110 1,166,525
Depreciation ..................................... 968,064 961,125
Property taxes ................................... 400,896 395,283
Personnel expenses ............................... 628,576 693,435
Repair and maintenance ........................... 525,513 516,425
Property management fees - affiliates ............ 261,112 254,458
Utilities ........................................ 471,280 449,533
Other property operating expenses ................ 242,538 292,938
General and administrative ....................... 123,789 184,641
General and administrative - affiliates .......... 123,712 121,570
---------- ----------
Total expenses ................................. 4,808,590 5,035,933
---------- ----------
Net income .......................................... $ 446,783 $ 94,185
========== ==========
Net income allocated to limited partners ............ $ 393,939 $ 89,476
Net income allocated to General Partner ............. 52,844 4,709
---------- ----------
Net income .......................................... $ 446,783 $ 94,185
========== ==========
Net income per limited partnership unit ............. $ 3.58 $ .81
========== ==========
Distributions per limited partnership unit .......... $ 6.80 $ 20.88
========== ==========
</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 Three Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
-------------- ------------- -------------
<S> <C> <C> <C>
Balance at December 31, 1997 .............. $ (3,229,030) $ (5,509,025) $ (8,738,055)
Net income ................................ 4,709 89,476 94,185
Management Incentive Distribution ......... (285,876) -- (285,876)
Distributions to limited partners ......... -- (2,300,008) (2,300,008)
-------------- ------------ ------------
Balance at March 31, 1998 ................. $ (3,510,197) $ (7,719,557) $(11,229,754)
============== ============ ============
Balance at December 31, 1998 .............. $ (4,389,642) $ (7,734,963) $(12,124,605)
Net income ................................ 52,844 393,939 446,783
Management Incentive Distribution ......... (312,923) -- (312,923)
Distribution to limited partners .......... -- (749,156) (749,156)
-------------- ------------ ------------
Balance at March 31, 1999 ................. $ (4,649,721) $ (8,090,180) $(12,739,901)
============== ============ ============
</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>
Three Months Ended
March 31,
--------------------------------
1999 1998
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants .............................. $ 5,212,953 $ 5,141,699
Cash paid to suppliers .................................. (2,031,147) (2,236,320)
Cash paid to affiliates ................................. (304,375) (254,434)
Interest received ....................................... 41,135 43,409
Interest paid ........................................... (1,078,312) (1,137,238)
Property taxes paid and escrowed ........................ (513,677) (356,394)
----------- -----------
Net cash provided by operating activities .................. 1,326,577 1,200,722
----------- -----------
Cash flows from investing activities:
Additions to real estate investments .................... (124,389) (232,202)
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage notes payable ............ (484,410) (223,345)
Cash restricted for mortgage payments ................... 143,655 --
Retirement of mortgage note payable ..................... -- (5,830,964)
Proceeds from mortgage note payable ..................... -- 5,925,000
Additions to deferred borrowing costs ................... -- (71,805)
Management Incentive Distribution ....................... (101,247) --
Distributions to limited partners ....................... (749,156) (2,300,008)
----------- -----------
Net cash used in financing activities ...................... (1,191,158) (2,501,122)
----------- -----------
Increase (decrease) in cash and cash equivalents ........... 11,030 (1,532,602)
Cash and cash equivalents at beginning of period ........... 3,166,577 3,330,836
----------- -----------
Cash and cash equivalents at end of period ................. $ 3,177,607 $ 1,798,234
=========== ===========
</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 to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net income .................................................... $ 446,783 $ 94,185
----------- -----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ............................................... 968,064 961,125
Amortization of deferred borrowing costs ................... 52,833 48,784
Amortization of mortgage discounts ......................... 12,156 11,773
Changes in assets and liabilities:
Cash segregated for security deposits .................... (16,642) (17,473)
Accounts receivable ...................................... (8,142) 63,484
Prepaid expenses and other assets ........................ 5,663 13,934
Escrow deposits .......................................... (315,187) 376,423
Accounts payable ......................................... 41,476 (43,493)
Accrued interest ......................................... (80,191) (31,270)
Accrued property taxes ................................... 183,409 (370,144)
Other accrued expenses ................................... (79,283) (41,641)
Payable to affiliates - General Partner .................. 80,449 121,594
Security deposits and deferred rental
revenue ................................................ 35,189 13,441
----------- -----------
Total adjustments ...................................... 879,794 1,106,537
----------- -----------
Net cash provided by operating activities ..................... $ 1,326,577 $ 1,200,722
=========== ===========
</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)
March 31, 1999
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 three months ended March 31, 1999 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1999.
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, 1998, 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 600, 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. Tangible
asset value is determined by using the greater of (i) an amount calculated by
applying a capitalization rate of 9% to the annualized net operating income of
each property or (ii) a value of $10,000 per apartment unit to arrive at the
property tangible asset value. The property tangible asset value is then added
to the book value of all other assets excluding intangible items. The maximum
MID percentage decreases to .75% in 2000, .50% in 2001 and .25% thereafter.
<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, 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 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:
Three Months Ended
March 31,
-----------------------
1999 1998
---------- ----------
Property management fees - affiliates............ $ 261,112 $ 254,458
Charged to general and administrative -
affiliates:
Partnership administration..................... 123,712 121,570
--------- ---------
$ 384,824 $ 376,028
========= =========
Charged to General Partner's deficit:
Management Incentive Distribution.............. $ 312,923 $ 285,876
========= =========
NOTE 4.
- -------
On March 20, 1998, the Partnership refinanced the Forest Park Village mortgage
note. The new mortgage note, in the amount of $5,925,000, bears interest at a
variable rate equal to 1.75% plus the London Interbank Offered Rate ("LIBOR")
per annum. The new mortgage note requires monthly interest-only debt service
payments and annual principal payments equal to 5% of the outstanding principal
balance of the note. Terms of the new mortgage note require the Partnership to
deposit funds into a restricted cash account on a quarterly basis. The
restricted funds will be used to pay the annual principal payment and are
included in "cash restricted for mortgage payments" on the Balance Sheets. The
new mortgage note matures on March 20, 2001. Proceeds from the refinancing of
the Forest Park Village mortgage note are as follows:
New mortgage note.................................... $ 5,925,000
Existing debt retired................................ (5,830,964)
------------
Cash proceeds from refinancing....................... $ 94,036
============
<PAGE>
The Partnership incurred $82,148 of deferred borrowing costs in connection with
the refinancing of the Forest Park Village mortgage note.
On August 31, 1998, the Partnership refinanced the Rolling Hills mortgage note.
The new mortgage note, in the amount of $6,650,000, bears interest at a variable
rate equal to 1.75% plus the LIBOR per annum. The new mortgage note requires
monthly interest-only debt service payments and annual principal payments equal
to 5% of the outstanding principal balance of the note. Terms of the new
mortgage note require the Partnership to deposit funds into a restricted cash
account on a quarterly basis. The restricted funds will be used to pay the
annual principal payment and are included in "cash restricted for mortgage
payments" on the Balance Sheets. The new mortgage note matures on September 1,
2001. Proceeds from the refinancing of the Rolling Hills mortgage note are as
follows:
New mortgage note.................................... $ 6,650,000
Existing debt retired................................ (6,545,929)
------------
Cash proceeds from refinancing....................... $ 104,071
============
The Partnership incurred $77,366 of deferred borrowing costs in connection with
the refinancing of the Rolling Hills mortgage note.
On September 1, 1998, the Partnership and the holder of the Sheraton Hills
mortgage note agreed to modify the terms of the Sheraton Hills mortgage note.
The interest rate was changed from a variable rate to a 6.9% fixed rate. The
monthly debt service payments were changed from a variable amount to $17,844.
The maturity date of the mortgage note was extended to November 1, 2001. The
Partnership incurred $29,535 of deferred borrowing costs in connection with the
modification.
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 March 31, 1999, the
Partnership owned 13 apartment properties. All of the Partnership's properties
are subject to mortgage notes.
On March 26, 1999, the Partnership distributed $749,156 ($6.80 per limited
partnership unit) to the limited partners. The distribution was funded from
operations and cash reserves of the Partnership.
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
The Partnership's net income for the first quarter of 1999 amounted to $446,783,
an increase over the $94,185 of net income for the first quarter of 1998.
Revenue:
Rental revenue increased 127,529 or 2.5% for the first quarter of 1999 as
compared to the first quarter of 1998. Rental revenues increased at eleven of
the Partnership's thirteen properties. On a percentage basis, the largest
increases in rental revenues were reported by Meridian West Apartments, Forest
Park Village Apartments, Pennbrook Apartments, and Williamsburg Apartments.
These properties achieved increased rental revenue ranging from 7.4% to 4.1% by
increasing rental rates and by decreasing rental vacancy and other rental
losses. Rental revenue was unchanged at Ruskin Place Apartments. Cherry Hills
Apartments reported a 2.4% decrease in rental revenue due to increased vacancy
losses. The rest of the Partnership's properties reported smaller percentage
increases in rental revenue, ranging between 1% and 3%, as increases in base
rental rates were partially offset by increased vacancy losses.
Expenses:
Partnership expenses decreased $227,343 or 4.5% for the first quarter of 1999 as
compared to the first quarter of 1998. The Partnership reported decreases in
interest, personnel expenses, other property operating expenses, and general and
administrative expenses.
Interest expense decreased $103,415 or 8.9% for the first quarter of 1999 as
compared to the first quarter of 1998. The Partnership refinanced the Forest
Park Village and Rolling Hills mortgage notes in 1998. The new mortgage notes
bear interest at a variable rate that is currently less than the fixed interest
rates the Partnership incurred on the former mortgage notes.
Other property operating expenses decreased $50,400 or 17.2% for the first
quarter of 1999 as compared to the first quarter of 1998. Decreased insurance
expense accounts for most of the decrease in other property operating expenses.
The decreased insurance expense for the first quarter is unlikely to persist for
the remainder of 1999, however. The Partnership also incurred decreased costs
associated with legal, audit, and other professional fees.
General and administrative expenses decreased $60,852 or 33% for the first
quarter of 1999 as compared to the first quarter of 1998. The Partnership
incurred significant costs in 1999 and 1998 to explore alternatives to maximize
the value of the Partnership (see Liquidity and Capital Resources). However, the
extent of these costs decreased in for the first quarter of 1999 as compared to
the first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash provided by operating activities increased 10.5% to $1,326,577 for the
first quarter of 1999 as compared to the first quarter of 1998. Increased cash
received from tenants and decreased cash paid to suppliers and interest paid
were partially offset by increases in cash paid to affiliates and property taxes
paid and escrowed.
<PAGE>
The Partnership expended $124,389 for capital improvements during the first
quarter of 1999, a decrease from the $232,202 expended during the first quarter
of 1998. Budgeted capital improvements for 1999 total $1,601,000, a decrease
from the $1,841,522 of capital improvement completed during 1998. 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.
The Partnership paid $101,247 of MID to the General Partner during the first
quarter of 1999. MID earned by the General Partner amounted to $312,923 for the
first quarter of 1999. Beginning in 1998, the General Partner elected to defer
payment of most administrative expenses and MID so that the Partnership can pay
distributions to the limited partners. On March 26, 1999, the Partnership paid
distributions of $749,156 ($6.80 per limited partnership unit) to the limited
partners. The distribution was funded from Partnership operations.
Short-term liquidity:
At March 31, 1999, the Partnership held $3,177,607 of cash and cash equivalents,
an increase of $11,030 from the balance at the beginning of 1999. The General
Partner anticipates that cash generated from operations for the remainder of
1999 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 1999.
The Pennbrook mortgage note matures in February 2000. The General Partner has
begun to explore refinancing options for the Pennbrook mortgage note. Although
uncertainties exist, the General Partner does not anticipate unusual
difficulties in refinancing the Pennbrook mortgage note before its maturity
date. The Partnership's next maturing mortgage note does not mature until March
2001.
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 property operations in 1998. Furthermore, the General Partner has budgeted
approximately $1,601,000 of additional capital improvements for 1999.
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.
<PAGE>
As previously announced, the Partnership has retained PaineWebber, Incorporated
as its exclusive financial advisor to explore alternatives to maximize the value
of the Partnership, including, without limitation, a transaction in which
limited partnership interests in the Partnership are converted into cash. During
the last full week of March, the Partnership entered into a 45 day exclusivity
agreement with a well-financed bidder with whom it had commenced discussions
with respect to a sale transaction. The Partnership and such party have made
significant progress in negotiating the terms of a proposed transaction and are
continuing to have intensive discussions with respect to a transaction. In light
on these continuing negotiations, the exclusivity agreement has been extended
for an additional 21 days until June 4, 1999. It is possible that the General
Partner and its affiliates will receive non-cash consideration for their
ownership interests in connection with any such transaction. There can be no
assurance regarding whether any such agreement will be reached nor the terms
thereof.
The Partnership placed Sheraton Hills Apartments on the market for sale on
August 1, 1997.
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 periods ended
March 31, 1999 and 1998, the Partnership allocated net income of $393,939 and
$89,476, respectively, to the limited partners. The Partnership allocated net
income of $52,844 and $4,709 to the General Partner for the three month periods
ended March 31, 1999 and 1998, respectively.
On March 30, 1998, the Partnership distributed $2,300,008 ($20.88 per limited
partnership unit) to the limited partners from the Partnership's cash reserves.
On March 26, 1999, the Partnership distributed $749,156 ($6.80 per limited
partnership unit) to the limited partners from the Partnership's cash reserves.
For the first three months of 1999, the Partnership recorded MID of $312,923.
The Partnership paid $101,247 of MID to the General Partner during the first
three months of 1999. The Partnership made no MID payments during 1998. The
balance of accrued MID outstanding totaled $1,730,357 at March 31, 1999.
Forward-Looking Information:
Within this document, certain statements are made as to the expected occupancy
trends, financial condition, results of operations, and cash flows of the
Partnership for periods after March 31, 1999. All of these statements are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements are not
historical and involve risks and uncertainties. The Partnership's actual
occupancy trends, financial condition, results of operations, and cash flows for
future periods may differ materially due to several factors. These factors
include, but are not limited to, the Partnership's ability to control costs,
make necessary capital improvements, negotiate sales or refinancings of its
properties, and respond to changing economic and competitive factors.
<PAGE>
YEAR 2000 DISCLOSURE
- --------------------
State of readiness
- ------------------
The year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major systems failure or
miscalculations.
Management has assessed its information technology ("IT") infrastructure to
identify any systems that could be affected by the year 2000 problem. The IT
used by the Partnership for financial reporting and significant accounting
functions was made year 2000 compliant during recent systems conversions. The
software utilized for these functions is licensed by third party vendors who
have warranted that their systems are year 2000 compliant.
Management is in the process of evaluating the mechanical and embedded
technological systems at the various properties. Management has inventoried all
such systems and queried suppliers, vendors and manufacturers to determine year
2000 compliance. Based on this review, management believes these systems are
substantially compliant. In circumstances of non-compliance management will work
with the vendor to remedy the problem or seek alternative suppliers who will be
in compliance. Management believes that the remediation of any outstanding year
2000 conversion issues will not have a material or adverse effect on the
Partnership's operations. However, no estimates can be made as to the potential
adverse impact resulting from the failure of third party service providers and
vendors to be year 2000 compliant.
Cost
- ----
The cost of IT and embedded technology systems testing and upgrades is not
expected to be material to the Partnership. Because all the IT systems have been
upgraded over the last three years, all such systems were compliant, or made
compliant at no additional cost by third party vendors. Management anticipates
the costs of assessing, testing, and if necessary replacing embedded technology
components will be less than $50,000. Such costs will be funded from operations
of the Partnership.
Risks
- -----
Ultimately, the potential impact of the year 2000 issue will depend not only on
the corrective measures the Partnership undertakes, but also on the way in which
the year 2000 issue is addressed by government agencies and entities that
provide services or supplies to the Partnership. Management has not determined
the most likely worst case scenario to the Partnership. As management studies
the findings of its property systems assessment and testing, management will
develop a better understanding of what would be the worst case scenario.
Management believes that progress on all areas is proceeding and that the
Partnership will experience no adverse effect as a result of the year 2000
issue. However, there is no assurance that this will be the case.
<PAGE>
Contingency plans
- -----------------
Management is developing contingency plans to address potential year 2000
non-compliance of IT and embedded technology systems. Management believes that
failure of any IT system could have an adverse impact on operations. However,
management believes that alternative systems are available that could be
utilized to minimize such impact. Management believes that any failure in the
embedded technology systems could have an adverse impact on that property's
performance. Management will assess these risks and develop plans to mitigate
possible failures by July 1999.
PART II. OTHER INFORMATION
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
June 30, 1991).
11. Statement regarding computation of net income per
limited partnership unit: Net income per limited
partnership unit is computed by dividing net income
allocated to the limited partners by the number of
limited partnership units outstanding. Per unit
information has been computed based on 110,170
limited partnership units outstanding in 1999 and
1998.
27. Financial Data Schedule for the quarter ended
March 31, 1999.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended March 31, 1999.
<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
May 17, 1999 By: /s/ Ron K. Taylor
- -------------- ---------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
May 17, 1999 By: /s/ Brandon K. Flaming
- -------------- ---------------------------------------------
Date Brandon K. Flaming
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,326,441
<SECURITIES> 0
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0
0
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