UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 September 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 0-9325
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MCNEIL REAL ESTATE FUND X, LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2577781
- --------------------------------------------------------------------------------
(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 (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 X, LTD.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
--------------- --------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 8,836,045 $ 10,464,914
Buildings and improvements............................... 70,725,463 78,886,121
-------------- -------------
79,561,508 89,351,035
Less: Accumulated depreciation.......................... (48,936,124) (52,651,505)
-------------- -------------
30,625,384 36,699,530
Assets held for sale, net................................... 5,274,349 2,237,733
Cash and cash equivalents................................... 2,058,796 1,813,594
Cash segregated for security deposits....................... 338,081 317,834
Accounts receivable......................................... 406,554 432,618
Insurance proceeds receivable............................... 526,472 -
Prepaid expenses and other assets........................... 328,949 332,665
Escrow deposits............................................. 1,189,652 625,344
Deferred borrowing costs, net of accumulated amorti-
zation of $400,670 and $306,342 at September 30,
1996 and December 31, 1995, respectively................. 1,197,244 1,179,331
-------------- -------------
$ 41,945,481 $ 43,638,649
============== =============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net................................. $ 41,960,038 $ 44,454,316
Mortgage note payable - affiliates.......................... 800,000 800,000
Accounts payable............................................ 38,375 186,785
Accrued property taxes...................................... 935,714 522,951
Accrued interest............................................ 311,775 370,294
Accrued interest - affiliates............................... 6,625 6,625
Other accrued expenses...................................... 300,676 318,324
Deferred gain on involuntary conversion..................... 350,927 -
Payable to affiliates - General Partner..................... 3,267,982 2,907,490
Security deposits and deferred rental revenue............... 386,961 385,231
-------------- -------------
48,359,073 49,952,016
-------------- -------------
Partners' deficit:
Limited partners - 135,200 limited partnership units
authorized; 135,030 limited partnership units out-
standing at September 30, 1996 and December 31, 1995... (1,137,892) (1,788,928)
General Partner.......................................... (5,275,700) (4,524,439)
-------------- -------------
(6,413,592) (6,313,367)
-------------- -------------
$ 41,945,481 $ 43,638,649
============== =============
</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 X, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1996 1995 1996 1995
-------------- --------------- -------------- --------------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue................ $ 4,018,935 $ 4,295,445 $ 12,036,573 $ 12,994,603
Interest...................... 25,597 22,668 103,112 87,793
Gain on legal settlement...... - - - 91,517
Gain on disposition of real
estate...................... 275,424 3,183,698 275,424 3,183,698
------------- ------------- ------------- -------------
Total revenue............... 4,319,956 7,501,811 12,415,109 16,357,611
------------- ------------- ------------- -------------
Expenses:
Interest...................... 1,053,271 1,269,547 3,206,206 3,881,412
Interest - affiliates......... 18,652 21,201 56,263 59,162
Depreciation and
amortization................ 840,207 934,260 2,479,389 2,791,758
Property taxes................ 217,702 287,406 760,406 878,453
Personnel expenses............ 439,855 539,390 1,317,699 1,572,907
Utilities..................... 324,528 357,228 933,530 1,043,367
Repair and maintenance........ 465,713 624,105 1,385,359 1,637,040
Property management
fees - affiliates........... 195,232 214,259 599,730 650,583
Other property operating
expenses.................... 237,979 289,319 742,399 842,299
General and administrative.... 77,526 229,726 183,828 309,738
General and administrative -
affiliates.................. 94,139 162,549 334,595 496,838
------------- ------------- ------------- -------------
Total expenses.............. 3,964,804 4,928,990 11,999,404 14,163,557
------------- ------------- ------------- -------------
Income before extraordinary
item.......................... 355,152 2,572,821 415,705 2,194,054
Extraordinary gain on
extinguishment of debt........ - - 269,596 -
------------- ------------- ------------- -------------
Net income....................... $ 355,152 $ 2,572,821 $ 685,301 $ 2,194,054
============= ============= ============= =============
Net income allocated to
limited partners.............. $ 337,394 $ 2,444,180 $ 651,036 $ 2,084,351
Net income allocated to
General Partner............... 17,758 128,641 34,265 109,703
------------- ------------- ------------- -------------
Net income....................... $ 335,152 $ 2,572,821 $ 685,301 $ 2,194,054
============= ============= ============= =============
Net income per limited
partnership unit:
Income before extraordinary
item........................ $ 2.50 $ 18.10 $ 2.92 $ 15.44
Extraordinary gain on
extinguishment of debt...... - - 1.90 -
------------- ------------- ------------- -------------
Net income....................... $ 2.50 $ 18.10 $ 4.82 $ 15.44
============= ============= ============= =============
</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 X, LTD.
STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
For the Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1994.............. $ (3,569,840) $ (3,872,434) $ (7,442,274)
Net income................................ 109,703 2,084,351 2,194,054
Management Incentive Distribution......... (810,159) - (810,159)
------------- ------------- -------------
Balance at September 30, 1995............. $ (4,270,296) $ (1,788,083) $ (6,058,379)
============= ============= =============
Balance at December 31, 1995.............. $ (4,524,439) $ (1,788,928) $ (6,313,367)
Net income................................ 34,265 651,036 685,301
Management Incentive Distribution......... (785,526) - (785,526)
------------- ------------- -------------
Balance at September 30, 1996............. $ (5,275,700) $ (1,137,892) $ (6,413,592)
============= ============= =============
</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 X, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------------
1996 1995
---------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants............................... $ 11,977,570 $ 12,904,628
Cash paid to suppliers................................... (4,742,603) (4,989,477)
Cash paid to affiliates.................................. (1,359,359) (642,613)
Interest received........................................ 103,112 87,793
Cash received from legal settlement...................... - 91,517
Interest paid............................................ (2,970,669) (3,595,770)
Interest paid to affiliates.............................. (56,263) (57,957)
Property taxes paid and escorted......................... (829,448) (592,049)
-------------- --------------
Net cash provided by operating activities................... 2,122,340 3,206,072
-------------- --------------
Cash flows from investing activities:
Additions to real estate investments..................... (1,848,813) (1,697,590)
Additions to assets held for sale........................ (7,775) -
Proceeds from sale of real estate investment............. 2,828,051 7,905,804
-------------- --------------
Net cash provided by investing activities................... 971,463 6,208,214
-------------- --------------
Cash flows from financing activities:
Net proceeds from refinancing mortgage
note payable........................................... 475,775 -
Principal payments on mortgage notes
payable................................................ (667,669) (927,403)
Deferred borrowing costs paid............................ (112,241) (24,613)
Retirement of mortgage notes payable..................... (2,544,466) (6,616,232)
-------------- --------------
Net cash used in financing activities....................... (2,848,601) (7,569,248)
-------------- --------------
Net increase in cash and cash equivalents................... 245,202 1,846,038
Cash and cash equivalents at beginning of
period................................................... 1,813,594 574,589
-------------- --------------
Cash and cash equivalents at end of period.................. $ 2,058,796 $ 2,420,627
============== ==============
</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 X, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Income to Net Cash Provided By Operating Activities
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Net income.................................................. $ 685,301 $ 2,194,054
-------------- --------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................ 2,479,389 2,791,758
Amortization of discounts on mortgage
notes payable.......................................... 115,898 140,110
Amortization of deferred borrowing costs................. 94,328 107,283
Gain on disposition of real estate....................... (275,424) (3,183,698)
Extraordinary gain on extinguishment of debt............. (269,596) -
Changes in assets and liabilities:
Cash segregated for security deposits.................. (20,247) (3,011)
Accounts receivable.................................... (36,563) (31,632)
Prepaid expenses and other assets...................... 3,716 18,723
Escrow deposits........................................ (569,618) 35,800
Accounts payable....................................... (148,410) 25,960
Accrued property taxes................................. 412,763 451,995
Accrued interest....................................... 25,311 38,249
Accrued interest - affiliates.......................... - 1,205
Other accrued expenses................................. 48,796 151,904
Payable to affiliates - General Partner................ (425,034) 504,808
Security deposits and deferred rental
revenue.............................................. 1,730 (37,436)
-------------- --------------
Total adjustments.................................... 1,437,039 1,012,018
-------------- --------------
Net cash provided by operating activities................... $ 2,122,340 $ 3,206,072
============== ==============
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 X, LTD.
Notes to Financial Statements
(Unaudited)
September 30, 1996
NOTE 1.
- -------
McNeil Real Estate Fund X, 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. The
Partnership is governed by an agreement of limited partnership (the "Amended
Partnership Agreement") that was adopted October 9, 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 nine months ended September 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 X, Ltd., c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240.
NOTE 3.
- -------
Certain prior period amounts within the accompanying financial statements have
been reclassified to conform with current year presentation.
NOTE 4.
- -------
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 services for the Partnership's residential and commercial properties
and leasing services for its residential properties. McREMI may also choose to
provide leasing services for the Partnership's commercial properties, in which
case McREMI will receive property management fees from such commercial
properties equal to 3% of the property's gross rental receipts plus leasing
commissions based on the prevailing market rate for such services where the
property is located.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
<PAGE>
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.
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 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:
Nine Months Ended
September 30,
-------------------------
1996 1995
----------- -----------
Property management fees - affiliates....... $ 599,730 $ 650,583
Charged to general and administrative -
affiliates:
Partnership administration............... 334,595 496,838
---------- ----------
$ 934,325 $ 1,147,421
========== ==========
Charged to General Partner's deficit:
Management Incentive Distribution........ $ 785,526 $ 810,159
========== ==========
<PAGE>
NOTE 5.
- -------
On January 26, 1996, the Partnership refinanced the Spanish Oaks mortgage note.
The new mortgage note, in the amount of $4,000,000, bears interest at 7.71%,
requires monthly principal and interest payments of $28,546, and matures on
January 26, 2003. In connection with the refinancing, the Partnership negotiated
a discounted payoff of the prior mortgage note that resulted in a $269,596
extraordinary gain on extinguishment of debt. The remainder of the prior
mortgage note balance has been placed in escrow pending negotiations concerning
the amount of the payoff of the prior mortgage note. Cash proceeds from the
refinancing transaction are as follows:
New loan proceeds............... $ 4,000,000
Existing debt retired........... (3,524,225)
-----------
Proceeds from refinancing....... $ 475,775
===========
The Partnership incurred $154,007 of deferred borrowing costs related to the
refinancing of the Spanish Oaks mortgage note. The Partnership was also required
to fund $165,291 into various escrows for property taxes, hazard insurance and
deferred maintenance.
NOTE 6.
- -------
On March 31, 1996, a fire destroyed or damaged 16 units and 2 laundry rooms at
Regency Park Apartments. The total cost to repair the fire damage was $530,148.
The Partnership's insurance carrier will reimburse the Partnership for all costs
incurred as a result of the fire less a standard deductible. A deferred
involuntary conversion gain of $350,927 has been recorded on the Partnership's
September 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 was completed during the third quarter of 1996.
<PAGE>
NOTE 7.
- -------
On September 18, 1996, the Partnership sold Parkway Plaza to an unaffiliated
buyer for a cash sales price of $2,900,000. Cash proceeds from this transaction,
as well as the gain on sale are detailed below.
Gain on Sale Cash Proceeds
------------ -------------
Cash sales price............................ $ 2,900,000 $ 2,900,000
Selling costs............................... (71,949) (71,949)
Mortgage discount written off............... (250,817)
Straight-line rent receivables written off.. (56,303)
Basis of real estate sold................... (2,245,507)
----------
Gain on sale................................ $ 275,424
========== ----------
Proceeds from disposition of real estate
investment................................. 2,828,051
Retirement of mortgage note payable......... (2,544,466)
----------
Net cash proceeds....................... $ 283,585
===========
On September 14, 1995, the Partnership sold The Courts Apartments to an
unaffiliated buyer for a cash sales price of $8,050,000. The buyer also assumed
the improvement district liens that encumbered the property. Cash proceeds from
this transaction, as well as the gain on sale are detailed below.
Gain on Sale Cash Proceeds
------------ -------------
Cash sales price.......................... $ 8,050,000 $ 8,050,000
Improvement district liens assumed
by buyer................................ 140,358 140,358
---------- ----------
Total sales price......................... 8,190,358 8,190,358
Selling costs............................. (284,554) (284,554)
Deferred borrowing costs written off...... (48,307)
Basis of real estate sold................. (4,673,799)
----------
Gain on sale.............................. $ 3,183,698
========== ----------
Proceeds from disposition of real estate
investment.............................. 7,905,804
Retirement of mortgage note............... (6,475,873)
Assumption of improvement district liens.. (140,358)
----------
Net cash proceeds......................... $ 1,289,573
==========
<PAGE>
NOTE 8.
- -------
In 1996, the Partnership adopted 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."
This statement requires the cessation of depreciation on assets held for sale.
Parkway Plaza was placed on the market for sale in 1995. No depreciation charges
on Parkway Plaza have been incurred in 1996.
The Partnership placed Cave Spring Corners and Iberia Plaza on the market for
sale effective October 1, 1996. Consequently, the Partnership's investments in
Cave Spring Corners and Iberia Plaza are classified as assets held for sale on
the Partnership's September 30, 1996 Balance Sheet. No further depreciation will
be charged on Cave Spring Corners or Iberia Plaza effective October 1, 1996.
NOTE 9.
- -------
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, $69,234
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 $22,283 which, when combined with the cash
proceeds from Southmark, resulted in a gain on settlement of litigation of
$91,517.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
The Partnership was formed to acquire, operate and ultimately dispose of a
portfolio of income-producing real properties. At September 30, 1996, the
Partnership owned seven apartment properties, one office building and three
shopping centers. All of the Partnership's properties are subject to mortgage
notes. On September 18, 1996, the Partnership sold Parkway Plaza Shopping Center
to an unaffiliated purchaser. The Partnership recognized a $275,424 gain on the
disposition. Cash proceed to the Partnership amounted to $283,585. On September
14, 1995, the Partnership sold The Courts Apartments to an unaffiliated
purchaser. The Partnership recognized a $3,183,698 gain on the disposition. Cash
proceeds to the Partnership amounted to $1,289,573.
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
The Partnership reported net income of $335,152 and $685,301 for the three month
and nine month periods ended September 30, 1996. Included in net income for the
quarters ended September 30, 1996 and 1995 are gains on the disposition of real
estate of totaling $275,424 and $3,183,698, respectively. The 1996 gain relates
to the sale of Parkway Plaza. The 1995 gain relates to the sale of The Courts
Apartments. Also included in the net income for the current year is a $269,596
extraordinary gain relating to the refinancing of the Spanish Oaks mortgage
note. Excluding the gains on disposition of real estate and the extraordinary
gain, net income for the three month and nine month periods increased $690,605
and $1,129,925 over net income reported for the comparable year-earlier periods.
Revenues:
Although rental revenue decreased in 1996 compared to 1995, the decrease was
attributable to the sale of The Courts Apartments on September 14, 1995. After
excluding rental revenue attributable to The Courts Apartments and Parkway
Plaza, the Partnership reported increases in rental revenue of $110,239 or 2.8%
and $350,420 or 3.0% for the three month and nine month periods ended September
30, 1996 compared to the same periods of 1995.
Rental revenue increased at seven of the Partnership's eleven properties:
Particularly noteworthy were the 13.6% increase in rental revenue at La Plaza
Office Building and the 8.6% increase in rental revenue at Quail Meadows
Apartments. The increased rental revenue at these two properties is attributable
to increased occupancy rates at the properties. The other properties that
increased rental revenue did so increasing rental rates charged at the
properties while maintaining or improving their occupancy rates. Of the
remaining four Partnership properties, rental revenue was unchanged Cave Spring
Corners in 1996 compared to 1995, rental losses at Regency Park Apartments
doubled in 1996 due to the March 31, 1996 fire that destroyed 16 apartment units
at the property, and rental revenue decreased 3.5% and 3.8% at Briarwood
Apartments and Lakeview Plaza, respectively, due to decreased occupancy rates.
Expenses:
Excluding those expenses attributable to The Courts Apartments, Partnership
expenses decreased $548,770 or 4.4% for the nine months ended September 30, 1996
compared to the same period of 1995. Every expense category decreased in 1996
except for property management fees, which increase in tandem with rental
revenues, and other property operating expenses, which increased 0.4%. All of
the decreases were small with the exception of general and administrative
expenses, and general and administrative expenses paid to affiliates. These two
items decreased 41% and 33%, respectively.
General and administrative expenses decreased $125,910 in 1996 compared to 1995.
The Partnership or 40.7% over general and administrative expenses incurred in
1995. In 1995, the Partnership incurred $197,349 of expenses related to the
evaluation and dissemination of information with regards to an unsolicited
tender offer. Only $49,621 of such expenses have been incurred to date in 1996.
However, the Partnership expects to incur significant additional expenses during
the fourth quarter related to an additional unsolicited tender offer. See Item 5
- - Other Information.
<PAGE>
General and administrative expenses paid to affiliates decreased $162,243 in
1996 compared to 1995. The decrease represents both a reduction in the
Partnership's share of such expenses, due to the sale of The Courts Apartments,
and a reduction in the level of such expenses charged to the Partnership by
affiliates of the General Partner.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flow provided by operating activities decreased to $2,122,340 from
$3,206,072 for the first nine months of 1996. Cash received from tenants
decreased $927,055 or 7.2% due to the sale of The Courts Apartments. The
refinancing of the Spanish Oaks mortgage note accounts for much of the $237,399
increase in property taxes paid and escrowed. The Partnership was required to
fund an escrow account for the payment of property taxes for Spanish Oaks
Apartments; no such escrow account was required under terms of the previous
mortgage note.
Additions to real estate investments increased $152,000 in the first nine months
of 1996 compared to the same period of 1995. However, $530,148 of the
improvements relate to unbudgeted expenditures to repair and refurbish damage
related to the March 31, 1996 fire at Regency Park Apartments. The Partnership
expects to receive a refund of approximately $526,000 from its insurance carrier
related to the fire damage. In addition to cash expended for capital
improvements, the Partnership received $2,828,051 in proceeds from the sale of
Parkway Plaza, before repayment of the related mortgage debt.
Financing activities include the $2,544,466 retirement of the Parkway Plaza
mortgage note due to the sale of the property. In addition to the retirement of
the Parkway Plaza mortgage note, the Partnership repaid $667,669 against its
other mortgage notes through regularly scheduled monthly debt service payments.
The Partnership also received $475,775 of net proceeds from the refinancing of
the Spanish Oaks mortgage note in January, 1996. Related to the Spanish Oaks
mortgage refinancing, in 1996 the Partnership paid $112,241 of deferred
borrowing costs to obtain the new Spanish Oaks mortgage note.
Short-term liquidity:
At September 30, 1996, the Partnership held cash reserves of $2,058,796, an
increase of $245,202 from the balance at the end of 1995. Cash reserves of the
Partnership have increased significantly from depressed levels at the end of
1994. The General Partner is continuing to take steps to increase the
Partnership's liquidity. Some of these steps are discussed in the following
paragraphs.
Over the past three years, the Partnership has invested large amounts of funds
in capital improvements at the Partnership's properties. Although significant
challenges remain, total capital expenditures for 1996 are expected to decrease
from the average amount expended in each of the past three fiscal years. For the
balance of 1996, the largest capital projects of the Partnership will be
concentrated at La Plaza Office Building as the property undergoes refurbishment
to allow it to take advantage of a strong Las Vegas market.
<PAGE>
As a further source of funds, the Partnership may obtain secondary mortgage
financing from an affiliated partnership secured by La Plaza Office Building.
Placing a second lien on La Plaza would require the approval of the current
first lien holder, and must also comply with loan criteria of the affiliated
partnership. Proceeds from such a mortgage loan could range from $1 million to
$1.5 million, if approvals are obtained from the first lien holder and the
affiliated partnership.
Beginning in March, the Partnership resumed payment of reimbursable
administrative expenses to affiliates of the General Partner. Such payments had
been suspended since the beginning of 1994. The General Partner expects to
resume MID payments in 1996, if the Partnership continues to perform as
anticipated. MID incurred but not paid for the first nine months of 1996 totaled
$785,526.
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. 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. In this regard, the Partnership sold Parkway
Plaza on September 18, 1996, and has placed two additional properties 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 nine month periods ended
September 30, 1996 and 1995, $34,265 and 109,703, respectively, were allocated
to the General Partner. The limited partners received allocations of net income
of $651,036 and $2,084,351 for the nine months ended September 30, 1996 and
1995, respectively.
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. Payments of MID have been suspended since the beginning of
1994. The General Partner will continue to monitor the cash reserves and working
capital needs of the Partnership to determine when cash flows will support
payments of MID and distributions to the Unit holders.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real
Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund
XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P.,
and McNeil Real Estate Fund XXV, L.P. vs. High River Limited Partnership,
Riverdale Investors Corp., Carl C. Icahn, and Unicorn Associates Corporation -
United States District Court for the Central District of California, Case No.
96-5680SVW.
On August 12, 1996, High River Limited Partnership ("High River"), a partnership
controlled by Carl C. Icahn, sent a letter to the partnerships referenced above
demanding lists of the names, current residences or business addresses and
certain other information concerning the unitholders of such partnerships. On
August 19, 1996, these partnership commenced the above action seeking, among
other things, to declare that such partnerships are not required to provide High
River with a current list of unitholders on the grounds that the defendants
commenced a tender offer in violation of the federal securities laws by filing
certain Schedule 13D Amendments on August 5, 1996.
On October 17, 1996, the presiding judge denied the partnerships' requests for a
permanent and preliminary injunction to enjoin High River's tender offers and
granted the defendants request for an order directing the partnerships to turn
over current lists of unitholders to High River forthwith. On October 24, 1996,
the partnerships delivered the unitholder lists to High River.
ITEM 5. OTHER INFORMATION
- ------- -----------------
On September 20, 1996, High River announced that it had commenced a tender offer
for any and all units of the Partnership at $85.50 per unit. The tender was
originally due to expire October 18, 1996, however, this offer has been extended
until November 22, 1996.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- ---------------------------------
(a) Exhibits.
Exhibit
Number Description
------- -----------
4. Amended and Restated Partnership Agreement,
dated October 9, 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 135,030 limited
partnership units outstanding in 1996 and
1995.
27. Financial Data Schedule for the quarter ended
September 30, 1996.
Registrant has omitted instruments with respect to long-term debt where
the total amount of securities authorized thereunder does not exceed
10% of the total assets of the Registrant. Registrant agrees to furnish
a copy of each such instruments to the Commission upon request.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended September 30, 1996.
<PAGE>
McNEIL REAL ESTATE FUND X, 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 X, LTD.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
November 14, 1996 By: /s/ Donald K. Reed
- ----------------- ----------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
November 14, 1996 By: /s/ Ron K. Taylor
- ----------------- ----------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer of
McNeil Investors, Inc.
November 14, 1996 By: /s/ Brandon K. Flaming
- ----------------- ----------------------------------------
Date Brandon K. Flaming
Chief Accounting Officer of McNeil
Real Estate Management, Inc.
</TABLE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,058,796
<SECURITIES> 0
<RECEIVABLES> 406,554
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 79,561,508
<DEPRECIATION> (48,936,124)
<TOTAL-ASSETS> 41,945,481
<CURRENT-LIABILITIES> 0
<BONDS> 41,960,038
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 41,945,481
<SALES> 12,036,573
<TOTAL-REVENUES> 12,415,109
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,736,935
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,262,469
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 415,705
<DISCONTINUED> 0
<EXTRAORDINARY> 269,596
<CHANGES> 0
<NET-INCOME> 685,301
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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