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 September 30, 1995
-------------------------------------------------
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 0-9783
MCNEIL REAL ESTATE FUND XI, LTD.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2669577
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (214) 448-5800
---------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
<PAGE>
MCNEIL REAL ESTATE FUND XI, LTD.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ -------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 5,938,464 $ 5,938,464
Buildings and improvements............................... 57,768,580 56,588,508
----------- -----------
63,707,044 62,526,972
Less: Accumulated depreciation.......................... (36,453,804) (34,610,759)
----------- -----------
27,253,240 27,916,213
Cash and cash equivalents................................... 1,947,811 1,932,351
Cash segregated for security deposits....................... 368,322 363,849
Accounts receivable......................................... 22,558 24,577
Prepaid expenses and other assets........................... 160,502 361,909
Escrow deposits............................................. 1,413,461 983,972
Deferred borrowing costs (net of accumulated
amortization of $470,867 and $361,743 at
September 30, 1995 and December 31, 1994,
respectively)............................................ 1,664,003 1,773,127
----------- -----------
$ 32,829,897 $ 33,355,998
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net................................. $ 39,791,063 $ 40,090,432
Accounts payable............................................ 110,867 112,735
Accrued interest............................................ 303,174 240,267
Accrued property taxes...................................... 642,639 95,268
Accrued expenses............................................ 430,842 223,360
Deferred gain - storm damage................................ 67,016 67,016
Payable to affiliates - General Partner..................... 2,596,492 2,919,444
Security deposits and deferred rental revenue............... 415,342 367,044
----------- -----------
44,357,435 44,115,566
----------- -----------
Partners' deficit:
Limited partners - 159,813 and 159,917 limited
partnership units authorized and outstanding
at September 30, 1995 and December 31, 1994,
respectively........................................... (5,420,799) (5,275,373)
General Partner.......................................... (6,106,739) (5,484,195)
----------- -----------
(11,527,538) (10,759,568)
----------- -----------
$ 32,829,897 $ 33,355,998
=========== ===========
</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 XI, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ------------------------------
1995 1994 1995 1994
---------- ---------- ----------- ----------
Revenue:
<S> <C> <C> <C> <C>
Rent revenue.................. $3,612,685 $3,347,642 $10,626,590 $9,913,795
Interest...................... 34,841 21,146 101,357 57,020
Deferred gain on
involuntary conversion...... - - - 28,109
--------- --------- ---------- ---------
Total revenue............... 3,647,526 3,368,788 10,727,947 9,998,924
--------- --------- ---------- ---------
Expenses:
Interest...................... 968,784 984,138 2,922,581 2,946,666
Interest - affiliates......... - - - 3,589
Depreciation.................. 628,271 647,527 1,843,045 1,756,153
Property taxes................ 240,570 263,412 721,710 790,236
Personnel expenses............ 434,980 466,705 1,336,845 1,315,538
Utilities..................... 292,631 275,569 782,775 747,935
Repair and maintenance........ 456,882 397,127 1,358,462 1,223,765
Property management
fees - affiliates........... 179,532 172,454 531,451 501,254
Other property operating
expenses.................... 237,267 209,917 682,065 621,500
General and administrative.... 261,894 55,380 316,988 108,882
General and administrative -
affiliates.................. 113,309 107,499 385,105 323,861
--------- --------- ---------- ----------
Total expenses.............. 3,814,120 3,579,728 10,881,027 10,339,379
--------- --------- ---------- ----------
Net loss......................... $ (166,594) $ (210,940) $ (153,080) $ (340,455)
========= ========= ========== ==========
Net loss allocable to limited
partners...................... $ (158,264) $ (200,393) $ (145,426) $ (812,682)
Net loss allocable to General
Partner....................... (8,330) (10,547) (7,654) 472,227
--------- --------- ---------- ----------
Net loss......................... $ (166,594) $ (210,940) $ (153,080) $ (340,455)
========= ========= ========== ==========
Net loss per limited
partnership unit.............. $ (.99) $ (1.25) $ (.91) $ (5.08)
========= ========= ========= ==========
</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 XI, LTD.
STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
For the Nine Months Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
------------ ------------ -------------
<S> <C> <C> <C>
Balance at December 31, 1993.............. $(5,157,708) $(4,638,590) $ (9,796,298)
Net income (loss)......................... 472,227 (812,682) (340,455)
Contingent Management Incentive
Distribution........................... (557,476) - (557,476)
---------- ----------- -----------
Balance at September 30, 1994............. $(5,242,957) $(5,451,272) $(10,694,229)
========== ========== ===========
Balance at December 31, 1994.............. $(5,484,195) $(5,275,373) $(10,759,568)
Net loss.................................. (7,654) (145,426) (153,080)
Contingent Management Incentive
Distribution........................... (614,890) - (614,890)
---------- ----------- -----------
Balance at September 30, 1995............. $(6,106,739) $(5,420,799) $(11,527,538)
========== ========== ===========
</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 XI, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1995 1994
----------- -----------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants........................ $10,662,495 $ 9,922,737
Cash paid to suppliers............................ (3,928,592) (3,673,390)
Cash paid to affiliates........................... (1,854,398) (479,151)
Interest received................................. 101,357 57,020
Interest paid..................................... (2,734,299) (2,849,878)
Interest paid to affiliates....................... - (4,308)
Property taxes paid............................... (735,411) (514,747)
---------- ----------
Net cash provided by operating activities............ 1,511,152 2,458,283
---------- ----------
Cash flows from investing activities:
Additions to real estate investments.............. (1,180,072) (1,546,649)
---------- ----------
Cash flows from financing activities:
Principal payments on mortgage notes
payable......................................... (315,620) (285,861)
Repayment of advances from affiliates............. - (935,658)
Additions to deferred borrowing costs............. - (128,401)
Contingent Management Incentive
Distribution.................................... - (560,035)
---------- ----------
Net cash used in financing activities................ (315,620) (1,909,955)
---------- ----------
Net increase (decrease) in cash and cash
equivalents....................................... 15,460 (998,321)
Cash and cash equivalents at beginning of
period............................................ 1,932,351 2,920,957
---------- ----------
Cash and cash equivalents at end of period........... $ 1,947,811 $ 1,922,636
========== ===========
</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 XI, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Loss to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Net loss............................................. $ (153,080) $ (340,455)
--------- ---------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation...................................... 1,843,045 1,756,153
Amortization of discounts on mortgage
notes payable................................... 16,251 17,991
Amortization of deferred borrowing costs.......... 109,124 108,539
Changes in assets and liabilities:
Cash segregated for security deposits........... (4,473) (24,407)
Accounts receivable............................. 2,019 31,290
Prepaid expenses and other assets............... 201,407 152,923
Escrow deposits................................. (429,489) (189,231)
Accounts payable................................ (1,868) (105,125)
Accrued interest................................ 62,907 (30,461)
Accrued property taxes.......................... 547,371 629,943
Accrued expenses................................ 207,482 99,528
Payable to affiliates - General Partner......... (937,842) 345,964
Deferred gain - storm damage.................... - (28,109)
Security deposits and deferred rental
revenue....................................... 48,298 33,740
--------- ---------
Total adjustments............................. 1,664,232 2,798,738
--------- ---------
Net cash provided by operating activities............ $1,511,152 $2,458,283
========= =========
</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 XI, LTD.
Notes to Financial Statements
(Unaudited)
September 30, 1995
NOTE 1.
- -------
McNeil Real Estate Fund XI, Ltd. (the "Partnership") was organized June 2, 1980
as a limited partnership under the provisions of the California Uniform Limited
Partnership Act. 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 amended and restated limited
partnership agreement, dated August 6, 1991 (the "Amended Partnership
Agreement"). The principal place of business for the Partnership and for 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 financial position and results of
operations of the Partnership. All adjustments were of a normal recurring
nature. However, the results of operations for the nine months ended September
30, 1995 are not necessarily indicative of the results to be expected for the
year ending December 31, 1995.
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, 1994, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund XI, Ltd. c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240.
NOTE 3.
- -------
Certain reclassifications have been made to prior period amounts to conform with
the current year presentation.
NOTE 4.
- -------
The Partnership pays property management fees equal to 5% of 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.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
Under terms of the Amended Partnership Agreement, the Partnership is paying a
Management Incentive Distribution ("MID") to the General Partner. The maximum
MID is calculated as 1% of the tangible asset value of the Partnership. The
maximum MID percentage decreases subsequent to 1999. Tangible asset value is
determined by using the greater of (i) an amount calculated by applying a
capitalization rate of 9% to the annualized net operating income of each
property or (ii) a value of $10,000 per apartment unit for residential property
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. Prior to July 1, 1993, the MID consisted of two components: (i) the fixed
portion which was payable without respect to the net income of the Partnership
and was equal to 25% of the maximum MID (the "Fixed MID") and (ii) a contingent
portion which was payable only to the extent of the lesser of the Partnership's
excess cash flow, as defined, or net operating income (the "Entitlement Amount")
and is equal to up to 75% of the maximum MID (the "Contingent MID").
<PAGE>
Effective July 1, 1993 the General Partner amended the Amended Partnership
Agreement as a settlement to a class action complaint. This amendment eliminates
the Fixed MID portion and makes the entire MID payable to the extent of the
Entitlement Amount. In all other respects the calculation and payment of the MID
remain the same.
Fixed MID was payable in limited partnership units ("Units") unless the
Entitlement Amount exceeded the amount necessary to pay the Contingent MID, in
which case, at the General Partner's option, the Fixed MID was paid in cash to
the extent of such excess.
Contingent MID will be paid to the extent of 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 per Unit, as defined.
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 Fixed MID was treated as a fee
payable to the General Partner by the Partnership for services rendered. 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:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1995 1994
-------- --------
<S> <C> <C>
Property management fees - affiliates................ $531,451 $501,254
Charged to interest expense:
Interest - affiliate.............................. - 3,589
Charged to general and administrative -
affiliates:
Partnership administration........................ 385,105 323,861
------- --------
$916,556 $828,704
======= =======
Charged to General Partner's deficit:
Contingent MID.................................... $614,890 $557,476
======= =======
</TABLE>
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, 1995, the
Partnership owned eight apartment properties, which are all subject to mortgage
notes.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total Partnership revenues increased by $729,023 or 7% and $278,738 or 8%,
respectively, for the nine months and three months ended September 30, 1995.
Rental revenue and interest income increased $712,795 or 7% and $44,337 or 78%,
respectively. The Partnership also recognized a gain on involuntary conversion
of $28,109 in 1994 as a result of a fire at Sun Valley in 1993.
<PAGE>
Rental revenue for the first nine months of 1995 was $10,626,590, as compared to
$9,913,795 for the same period in 1994. The increase in rental revenue for the
nine months ended September 30, 1995 is due to an increase in the rental rates
at all of the Partnership's properties and increases in the occupancy rate at
five of the Partnership's properties. Of the five properties that experienced
increases in their occupancy, Rock Creek and The Village showed the largest
increases of 4%.
Interest income for the nine months and three months ended September 30, 1995
increased $44,337 or 78% and $13,695 or 65%, respectively, due to an increase in
the interest rates.
Expenses:
Total Partnership expenses increased by $541,648 or 5% for the period ending
September 30, 1995 as compared to the period ending September 30, 1994.
Interest expense - affiliates for the nine months ended September 30, 1995
decreased by $3,589 or 100%. This is due to the repayment of all affiliate
advances and mortgage loans during 1994.
Depreciation expense for the nine months ended September 30, 1995 increased by
$86,892 or 5%. The increase is due to capital improvements made at the
properties. During 1995, the Partnership has made $1,180,072 in capital
improvements of which $344,716 of the improvements were made during the third
quarter of 1995.
Property taxes decreased $68,526 or 9% and $22,842 or 9%, respectively, for the
nine months and the three months ended September 30, 1995. This is due to an
decrease in the estimated tax liability at Acacia Lakes, Knollwood, Sun Valley,
Rock Creek, and The Village.
Personnel expenses for the nine months ended September 30, 1995 remained
comparable to the same period in 1994. For the three months ended September 30,
1995, personnel expenses decreased by $31,725 or 7% because of additional
temporary maintenance personnel hired at Knollwood in 1994 to assist with a
capital improvements project, which has been completed. In addition, there was a
decrease in the cost of workers' compensation insurance at all the properties.
Repairs and maintenance increased by $134,697 or 11% for the nine months ended
September 30, 1995 and $59,755 or 15% for the three months ended September 30,
1995. This increase can be attributed to increases in ground maintenance,
exterminating, carpet cleaning and sheet rock repairs.
Property management fees - affiliates for the nine months and the three months
ended September 30, 1995 increased by $30,197 or 6% and $7,078 or 4%,
respectively, due to the increase in the rental receipts at the properties, the
basis for computing such fees.
General and administrative increased $208,106 and $206,514, respectively, for
the nine and the three months ended September 30, 1995 as compared to the same
period in 1994. The increase was due to costs incurred by the Partnership in the
third quarter of 1995 to evaluate and disseminate information regarding an
unsolicited tender offer, as discussed in Item 5 - Other Information.
General and administrative - affiliates for the nine months and the three months
ended September 30, 1995 increased by $61,244 or 19% and $5,810 or 5%,
respectively, due to an increase in reimbursements to affiliates because of
fewer partnerships over which overhead costs are allocated.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $1,511,152 through operating activities for the period
ending September 30, 1995 as compared to $2,458,283 for the same period in 1994.
This decrease of $947,131 can be attributed to the increase in the cash paid to
affiliates for Partnership administrative expenses which had previously been
deferred.
The Partnership funded $1,180,072 in additions to real estate investments for
the nine months ending September 30, 1995. All of the Partnership's properties
continued capital improvements projects to enhance the value of the properties
so they can remain competitive in the market.
<PAGE>
There was a net use of cash from financing activities of $315,620 and $1,909,955
for the nine months ended September 30, 1995 and 1994, respectively. This
decrease in cash used was due to the repayment of advances from affiliates and
the payment of the Contingent MID in 1994.
Short Term Liquidity:
At September 30, 1995, the Partnership held cash and cash equivalents of
$1,947,811 as compared to $1,932,351 at December 31, 1994. The General Partner
considers the Partnership's cash reserves adequate for operations for the
remainder of 1995.
During 1995, operations of the Partnership's properties are expected to provide
positive cash flow from operations. However, cash flow from property operations
will not be sufficient to make distributions to the General Partner for the
Contingent MID in 1995. Management will continue to address ongoing capital
improvements needs in light of the aging condition of the Partnership's
properties. The Partnership has budgeted approximately $1.2 million for capital
improvements for 1995. The General Partner believes these capital improvements
are necessary to allow the Partnership to increase its rental revenues in the
competitive markets in which the Partnership's properties operate. These
expenditures also allow the Partnership to reduce certain repairs and
maintenance expenses from amounts that would otherwise be incurred.
Long Term Liquidity:
The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships if certain conditions
are met. However, there is no assurance that the Partnership will receive
additional funds under the facility because no amounts will be reserved for any
particular partnership. As of September 30, 1995, $2,362,004 remained available
for borrowing under the facility; however, additional funds could become
available as other partnerships repay borrowings.
For the long term, property operations will remain the primary source of funds.
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. All or a combination of these steps may
be inadequate or unfeasible in resolving such potential working capital
deficiencies. Affiliate support has been required in the past, but there is no
assurance that support would be provided in the future, since neither the
General Partner nor any affiliates have any obligation in this regard in excess
of the $5,000,000 revolving credit facility discussed above.
Distributions:
With the exception of the Contingent MID, distributions to partners have been
suspended since 1986 as part of the General Partner's policy of maintaining
adequate cash reserves. Distributions to the limited partners will remain
suspended for the foreseeable future. The General Partner will continue to
monitor the cash reserves and working capital needs of the Partnership to
determine when cash flows will support distributions to the limited partners. A
distribution of $614,890 for the Contingent MID has been accrued by the
Partnership for the nine month period ending September 30, 1995 for the General
Partner.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
1) High River Limited Partnership vs. McNeil Partners, L.P., McNeil Investors,
Inc., McNeil Pacific Investors 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., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and
Carole J. McNeil (L95012) - High River ("HR") filed this action in the
United States District Court for the Southern District of New York against
McNeil Partners, McNeil Investors and Mr. and Mrs. McNeil requesting, among
other things, names and addresses of the Partnership's limited partners.
The District Court issued a preliminary injunction against the Partnerships
requiring them to commence mailing materials relating to High River tender
offer materials on August 14, 1995.
On August 18, 1995, McNeil Partners, McNeil Investors, the Partnerships,
and Mr. and Mrs. McNeil filed an Answer and Counterclaim. The Counterclaim
principally asserts (1) the HR tender offers have been undertaken in
violation of the federal securities laws, on the basis of material,
non-public, and confidential information, and (2) that the HR offer
documents omit and/or misrepresent certain material information about the
HR tender offers. The counterclaim seeks a preliminary and permanent
injunction against the continuation of the HR tender offers and,
alternatively, ordering corrective disclosure with respect to allegedly
false and misleading statements contained in the tender offer documents.
The High River tender offer expired on October 6, 1995. The Defendants
believe that the action is moot and expect the matter to be dismissed
shortly.
2) Robert Lewis vs. McNeil Partners, L.P., McNeil Investors, Inc., Robert
A. McNeil et al - In the District Court of Dallas County, Texas, A-14th
Judicial District, Cause No. 95-08535 (Class Action)
Plaintiff, Robert Lewis, is a limited partner with McNeil Pacific Investors
Fund 1972, McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV,
Ltd. Plaintiff brings this action on his own behalf and as a class action
on behalf of the class of all limited partners of McNeil Pacific Investors
Fund 1972, 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, Ltd. (the "Partnerships") as of August 4, 1995.
Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc.,
Robert A. McNeil and other senior officers (collectively, the "Defendants")
breached their fiduciary duties by, among other things, (1) failing to
attempt to sell the properties owned by the Partnerships ("Properties") and
extending the lives of the Partnerships indefinitely, contrary to the
Partnerships' business plans, (2) paying distributions to themselves and
generating fees for their affiliates, (3) refusing to make significant
distributions to the class members, despite the fact that the Partnerships
have positive cash flows and substantial cash balances, and (4) failing to
take steps to create an auction market for Partnership equity interests,
despite the fact that a third party bidder filed tender offers for
approximately forty-five percent (45%) of the outstanding units of each of
the Partnerships. Plaintiff also claims that Defendants have breached the
Partnership Agreements by failing to take steps to liquidate the Properties
and by their alteration of the Partnerships' primary purposes, their acts
in contravention of these agreements, and their use of the Partnership
assets for their own benefit instead of for the benefit of the
Partnerships.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
<PAGE>
3) James F. Schofield, Gerald C. Gillett and Donna S. Gillett vs. McNeil
Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management,
Inc., Robert A. McNeil, Carole J. McNeil, 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., McNeil Real Estate Fund XXV, 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) and United States
District Court, Southern District of New York, Case No. 95CIV.6711
(Class and Derivative Action Complaint)
These are corporate/securities class and derivative actions brought in
state and federal court by limited partners of each of the nine (9) limited
partnerships that are named as Nominal Defendants as listed above
("Partnerships"). Plaintiffs allege that Defendants McNeil Investors, Inc.,
its affiliate McNeil Real Estate Management, Inc. and four (4) of their
senior officers and/or directors have breached their fiduciary duties.
Specifically, Plaintiffs allege that Defendants have caused the
Partnerships to enter into several wasteful transactions that have no
business purpose or benefit to the Partnerships and which have rendered
such units highly illiquid and artificially depressed the prices that are
available for units on the limited resale market. Plaintiffs also allege
that Defendants have engaged in a course of conduct to prevent the
acquisition of units by Carl Icahn by disseminating false, misleading and
inadequate information. Plaintiffs further allege that Defendants have
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 and, thereby, have
breached the Partnership Agreements.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend these actions.
4) Alfred Napoletano vs. McNeil Partners, L.P., McNeil Investors, Inc.,
Robert A. McNeil, Carole J. McNeil, 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., McNeil Real
Estate Fund XXV, L.P. - Superior Court of the State of California, County
of Los Angeles, Case No. BC133849 (class action complaint)
Plaintiff brings this class action on behalf of a class of all persons and
entities who are current owners of units and/or are limited partners in one
or more of the partnerships referenced above ("Partnerships"). Plaintiff
alleges that Defendants have breached their fiduciary duties to the class
members by, among other things, (1) taking steps to prevent the
consummation of the High River tender offers, (2) failing to take steps to
maximize unitholders' or limited partners' values, including failure to
liquidate the properties owned by the Partnerships, (3) managing the
Partnerships so as to extend indefinitely the present fee arrangements, and
(4) paying itself and entities owned and controlled by the general partner
excessive fees and reimbursements of general and administrative expenses.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
5) Warren Heller vs. McNeil Partners, L.P., McNeil Investors, Inc., Robert A.
McNeil, Carole J. McNeil, 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., McNeil Real Estate Fund
XXV, L.P. - Superior Court of the State of California, County of Los
Angeles, Case No. BC133957 (class action complaint)
<PAGE>
Plaintiff brings this class action on behalf of a class of all persons and
entities who are current owners of units and/or are limited partners in one
or more of the partnerships referenced above ("Partnerships"). Plaintiff
alleges that Defendants have breached their fiduciary duties to the class
members by, among other things, (1) taking steps to prevent the
consummation of the High River tender offers, (2) failing to take steps to
maximize unitholders' or limited partners' values, including failure to
liquidate the properties owned by the Partnerships, (3) managing the
Partnerships so as to extend indefinitely the present fee arrangements, and
(4) paying itself and entities owned and controlled by the general partner
excessive fees and reimbursements of general and administrative expenses.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
6) High River Limited Partnership v. McNeil Partners L.P., McNeil Investors,
Inc., McNeil Pacific Investors 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., McNeil Real Estate Fund XXV, L.P., Robert A.
McNeil and Carole J. McNeil - United States District Court for the
Southern District of New York, (Case No. 95 Civ. 9488) (Second Action).
On November 7, 1995, High River commenced a second complaint which alleges,
inter alia, that McNeil's Schedule 14D-9 filed in connection with the High
River tender offers was materially false and misleading, in violation of
Sections 14(d) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C.
Section 78n(d) and (e), and the SEC Regulations promulgated thereunder; and
that High River further alleges that McNeil has wrongfully refused to admit
High River as a limited partner to the Funds. Additionally, High River
purports to assert claims derivatively on behalf of Funds IX, XI, XV, XXIV
and XXV, for breach of contract and breach of fiduciary duty, asserting
that McNeil has charged these Partnerships excessive fees. High River's
complaint seeks, inter alia, preliminary injunctive relief requiring McNeil
to admit High River as a limited partner in each of the ten Partnerships
and to transfer the tendered units of interest in the Partnerships to High
River; an unspecified award of damages payable to High River and an
additional unspecified award of damages payable to certain of the
Partnerships; an order that defendants must discharge their fiduciary
duties and must account for all fees they have received from certain of the
Partnerships; and attorneys' fees.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
ITEM 5. OTHER INFORMATION
- ------- -----------------
As previously disclosed, on an unsolicited basis, High River Limited Partnership
("High River"), a partnership controlled by Carl Icahn, announced that it had
commenced an offer to purchase 71,916 units of limited partnership interest in
the Partnership (approximately 45% of the Partnership's units) at $63 per unit.
The tender offer was originally due to expire on August 31, 1995. In connection
therewith, the parties entered into certain negotiations and discussions
regarding, among other things, possible transactions between the parties and
their affiliates, McNeil Partners, McNeil Investors, and McREMI. On September
19, 1995, the parties having not reached any resolution on the terms of the
proposed transactions, McNeil Partners terminated the parties' discussion. High
River had extended its offer several times until the final expiration date of
October 6, 1995. On October 11, 1995 High River announced that based on
preliminary information furnished by the depositary for the tender offer,
approximately 10,526 Units of the Partnership were tendered and not withdrawn
prior to the expiration of the tender offer. On October 12, 1995, McNeil
Partners announced that it would continue to explore potential avenues to
enhance the value of the Partnership units, which may include, among other
things, asset sales, refinancings of Partnership properties followed by
distributions or tender offers for units of limited partnership. There can be no
assurance that any such plans will develop or that any such transactions will be
consummated.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
4. Amended and Restated Limited Partnership
Agreement dated as of August 6, 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 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
159,813 and 159,917 limited partnership
units outstanding in 1995 and 1994,
respectively.
27. Financial Data Schedule for the quarter
ended September 30, 1995.
</TABLE>
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended September 30, 1995.
<PAGE>
McNEIL REAL ESTATE FUND XI, 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:
<TABLE>
<CAPTION>
McNEIL REAL ESTATE FUND XI, Ltd.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
<S> <C>
November 13, 1995 By: /s/ Donald K. Reed
- ------------------- --------------------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
November 13, 1995 By: /s/ Robert C. Irvine
- ------------------- --------------------------------------------------
Date Robert C. Irvine
Chief Financial Officer of McNeil Investors, Inc.
Principal Financial Officer
November 13, 1995 By: /s/ Brandon K. Flaming
- ------------------- --------------------------------------------------
Date Brandon K. Flaming
Chief Accounting Officer of McNeil Real Estate
Management, Inc.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,947,811
<SECURITIES> 0
<RECEIVABLES> 22,558
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 63,707,044
<DEPRECIATION> (36,453,804)
<TOTAL-ASSETS> 32,829,897
<CURRENT-LIABILITIES> 0
<BONDS> 39,791,063
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 32,829,897
<SALES> 10,626,590
<TOTAL-REVENUES> 10,727,947
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,958,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,922,581
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (153,080)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (153,080)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
