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 March 31, 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
<TABLE>
<CAPTION>
BALANCE SHEETS
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
ASSETS
Real estate investments:
Land..................................................... $ 5,938,464 $ 5,938,464
Buildings and improvements............................... 56,925,303 56,588,508
----------- -----------
62,863,767 62,526,972
Less: Accumulated depreciation.......................... (35,209,016) (34,610,759)
----------- -----------
27,654,751 27,916,213
Cash and cash equivalents................................... 2,404,911 1,932,351
Cash segregated for security deposits....................... 347,579 363,849
Accounts receivable......................................... 25,563 24,577
Prepaid expenses and other assets........................... 186,054 361,909
Escrow deposits............................................. 1,110,399 983,972
Deferred borrowing costs (net of accumulated
amortization of $398,118 and $361,743 at
March 31, 1995 and December 31, 1994,
respectively)............................................ 1,736,752 1,773,127
----------- -----------
$ 33,466,009 $ 33,355,998
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Mortgage notes payable, net................................. $ 39,975,844 $ 40,090,432
Accounts payable............................................ 155,573 112,735
Accrued interest............................................ 304,795 240,267
Accrued property taxes...................................... 209,621 95,268
Accrued expenses............................................ 220,720 223,360
Deferred gain - fire damage................................. 67,016 67,016
Payable to affiliates - General Partner..................... 3,051,748 2,919,444
Security deposits and deferred rental revenue............... 378,713 367,044
----------- -----------
44,364,030 44,115,566
----------- -----------
Partners' deficit:
Limited partners - 159,813 and 159,917 limited
partnership units authorized and outstanding at
March 31, 1995 and December 31, 1994, respectively..... (5,215,182) (5,275,373)
General Partner.......................................... (5,682,839) (5,484,195)
----------- -----------
(10,898,021) (10,759,568)
----------- -----------
$ 33,466,009 $ 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
March 31,
-----------------------------
1995 1994
---------- ----------
<S> <C> <C>
Revenue:
Rental revenue................................... $3,489,989 $3,261,845
Interest......................................... 31,101 19,752
Deferred gain on involuntary conversion.......... - 28,109
--------- ---------
Total revenue.................................. 3,521,090 3,309,706
--------- ---------
Expenses:
Interest......................................... 946,754 991,953
Interest - affiliates............................ - 3,589
Depreciation..................................... 598,257 554,313
Property taxes................................... 240,570 263,412
Personnel expenses............................... 504,772 423,636
Utilities........................................ 233,537 249,233
Repair and maintenance........................... 399,274 375,794
Property management fees - affiliates............ 176,227 163,608
Other property operating expenses................ 207,464 196,461
General and administrative....................... 34,294 26,416
General and administrative - affiliates.......... 116,582 110,975
--------- ---------
Total expenses................................. 3,457,731 3,359,390
--------- ---------
Net income (loss)................................... $ 63,359 $ (49,684)
========= =========
Net income (loss) allocable to limited partners..... $ 60,191 $ (526,597)
Net income (loss) allocable to General Partner...... 3,168 476,913
--------- ---------
Net income (loss)................................... $ 63,359 $ (49,684)
========= =========
Net income (loss) per limited partnership unit...... $ .38 $ (3.29)
========= =========
</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 Three Months Ended March 31, 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)......................... 476,913 (526,597) (49,684)
Contingent Management Incentive
Distribution........................... (190,545) - (190,545)
---------- ---------- -----------
Balance at March 31, 1994................. $(4,871,340) $(5,165,187) $(10,036,527)
========== ========== ===========
Balance at December 31, 1994.............. $(5,484,195) $(5,275,373) $(10,759,568)
Net (income) loss......................... 3,168 60,191 63,359
Contingent Management Incentive
Distribution........................... (201,812) - (201,812)
--------- ---------- -----------
Balance at March 31, 1995................. $(5,682,839) $(5,215,182) $(10,898,021)
========== ========== ===========
</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>
Three Months Ended
March 31,
------------------------------------
1995 1994
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from tenants........................ $ 3,522,186 $ 3,215,270
Cash paid to suppliers............................ (1,084,546) (1,274,105)
Cash paid to affiliates........................... (362,317) (150,487)
Interest received................................. 31,101 19,752
Interest paid..................................... (840,434) (948,426)
Interest paid to affiliates....................... - (4,306)
Property taxes paid............................... (336,630) (165,897)
Additions to deferred borrowing costs............. - (1,320)
---------- ----------
Net cash provided by operating activities............ 929,360 690,481
---------- ----------
Cash flows from investing activities:
Additions to real estate investments.............. (336,795) (359,063)
---------- ----------
Cash flows from financing activities:
Principal payments on mortgage notes
payable......................................... (120,005) (103,463)
Repayment of advances from affiliates............. - (935,658)
Contingent Management Incentive
Distribution.................................... - (560,035)
---------- ----------
Net cash used in financing activities................ (120,005) (1,599,156)
---------- ----------
Net increase (decrease) in cash and cash
equivalents....................................... 472,560 (1,267,738)
Cash and cash equivalents at beginning of
period............................................ 1,932,351 2,920,957
---------- ----------
Cash and cash equivalents at end of period........... $ 2,404,911 $ 1,653,219
========== ==========
</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 Income (Loss) to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1995 1994
--------- ---------
<S> <C> <C>
Net income (loss).................................... $ 63,359 $(49,684)
-------- -------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation...................................... 598,257 554,313
Amortization of discounts on mortgage
notes payable................................... 5,417 5,997
Amortization of deferred borrowing costs.......... 36,375 36,179
Changes in assets and liabilities:
Cash segregated for security deposits........... 16,270 (13,652)
Accounts receivable............................. (986) (45,011)
Prepaid expenses and other assets............... 175,855 46,139
Escrow deposits................................. (126,427) (206,703)
Deferred borrowing costs........................ - (1,320)
Accounts payable................................ 42,838 (4,670)
Accrued interest................................ 64,528 632
Accrued property taxes.......................... 114,353 316,723
Accrued expenses................................ (2,640) (96,580)
Payable to affiliates - General Partner......... (69,508) 124,096
Security deposits and deferred rental
revenue....................................... 11,669 24,022
-------- --------
Total adjustments............................. 866,001 740,165
-------- --------
Net cash provided by operating activities............ $ 929,360 $ 690,481
======== ========
</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)
March 31, 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 three months ended March 31,
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>
Three Months Ended
March 31,
-------------------------------
1995 1994
-------- --------
<S> <C> <C>
Property management fees - affiliates................ $176,227 $163,608
Charged to interest expense:
Interest - affiliate.............................. - 3,589
Charged to general and administrative -
affiliates:
Partnership administration........................ 116,582 110,975
------- -------
$292,809 $278,172
======= =======
Charged to General Partner's deficit:
Contingent MID.................................... $201,812 $190,545
======= =======
</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 March 31, 1995, the
Partnership owned eight apartment properties, which are all subject to mortgage
notes.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total Partnership revenues increased by $211,384 or 6% for the first three
months of 1995 as compared to the same period last year. Rental revenue and
interest income increased $228,144 or 7% and $11,349 or 57%, 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 three months of 1995 was $3,489,989, as compared to
$3,261,845 for the same period in 1994. The increase in rental revenue of
$228,144 or 7% for the three months ended March 31, 1995, respectively, is due
to an increase in the rental rates at all of the Partnership's properties and
increases in the occupancy rate at six of the Partnership's properties. Of the
six properties that experienced increase in their occupancy, Rock Creek showed
the largest increases of 3% from 96% at March 31, 1994 to 99% at March 31, 1995.
Interest income for the three months ended March 31, 1995 increased $11,349 or
57% due to an increase in the cash balances being invested in interest-bearing
accounts and an increase in the interest rates.
Expenses:
Total Partnership expenses increased by $98,341 or 3% for the period ending
March 31, 1995 as compared to the period ending March 31, 1994.
Interest expense - affiliates for the three months ended March 31, 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 three months ended March 31, 1995 increased by
$43,944 or 8%. The increase is due to capital improvements made at the
properties. During the first quarter of 1995, the Partnership made $320,204 in
capital improvements.
Property taxes decreased $22,842 or 9% for the three months ended March 31,
1995. This is due to an decrease in the estimated tax liability at Acacia Lakes,
Knollwood, Rock Creek, Sun Valley and The Village.
Personnel expenses increased $81,136 or 19% for the three months ended March 31,
1995 as compared to the same period in 1994. This increase is due to an increase
in overall compensation at all the properties. In addition, there was an
increase in the cost of workers' compensation insurance at all the properties
except Gentle Gale and Villa Del Rio.
Property management fees - affiliates for the three months ended March 31, 1995
increased by $12,619 or 8% due to the increase in the rental receipts at the
properties, the basis for computing such fees.
General and administrative increased $7,878 or 30% for the first quarter of
1995. Fees paid for professional services were higher for the period ended March
31, 1995 compared to the period ended March 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $929,360 through operating activities for the period
ending March 31, 1995 as compared to $690,481 for the same period in 1994. This
increase of $222,288 can be attributed to the increase in the cash received from
tenants as a result of the increase in rental rates at all of the properties as
well as the reduction in the amount paid to suppliers.
The Partnership funded $336,795 in additions to real estate investments for the
three months ending March 31, 1995. All of the Partnership's properties began
capital improvements projects to enhance the value of the properties so they can
remain competitive in the market.
There was a net use of cash from financing activities of $120,005 and $1,599,156
for the three months ended March 31,1995 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, which payments were not made in 1995.
Short Term Liquidity:
At March 31, 1995, the Partnership held cash and cash equivalents of $2,404,911
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.
<PAGE>
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 additional 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 March 31, 1995, $2,102,530 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 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 $201,813 for the Contingent MID has been accrued by the
Partnership for the three month period ending March 31, 1995 for the General
Partner.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
<TABLE>
<CAPTION>
(a) Exhibits.
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.
EX-27 Financial Data Schedule for the year ended
December 31, 1994 and the quarter ended
March 31, 1995.
</TABLE>
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended March 31, 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>
May 12, 1995 By: /s/ Donald K. Reed
- --------------------------- --------------------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
May 12, 1995 By: /s/ Robert C. Irvine
- --------------------------- --------------------------------------------------
Date Robert C. Irvine
Chief Financial Officer of McNeil Investors, Inc.
Principal Financial Officer
May 12, 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> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995
<PERIOD-END> DEC-31-1994 MAR-31-1995
<CASH> 2,404,911 1,932,351
<SECURITIES> 0 0
<RECEIVABLES> 24,577 25,563
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 62,863,767 62,526,972
<DEPRECIATION> (34,610,759) (35,209,016)
<TOTAL-ASSETS> 33,355,998 33,466,009
<CURRENT-LIABILITIES> 0 0
<BONDS> 40,090,432 39,975,844
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 33,355,998 33,466,009
<SALES> 13,313,091 3,489,989
<TOTAL-REVENUES> 13,425,413 3,521,090
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 9,717,535 2,510,977
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,901,700 946,754
<INCOME-PRETAX> (193,822) 63,359
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (193,822) 63,359
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (193,822) 63,359
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
