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, 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 0-9783
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>
March 31, December 31,
1996 1995
--------------- --------------
ASSETS
- ------
<S> <C> <C>
Real estate investments:
Land..................................................... $ 5,938,464 $ 5,938,464
Buildings and improvements............................... 58,714,003 58,408,551
-------------- -------------
64,652,467 64,347,015
Less: Accumulated depreciation.......................... (37,750,897) (37,095,184)
-------------- -------------
26,901,570 27,251,831
Cash and cash equivalents................................... 2,302,067 2,030,544
Cash segregated for security deposits....................... 362,617 386,125
Accounts receivable......................................... 185,158 31,327
Prepaid expenses and other assets........................... 151,537 276,785
Escrow deposits............................................. 1,132,794 904,523
Deferred borrowing costs (net of accumulated
amortization of $545,472 and $507,241 at
March 31, 1996 and December 31, 1995,
respectively)............................................ 1,589,398 1,627,629
-------------- -------------
$ 32,625,141 $ 32,508,764
============== =============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net................................. $ 39,570,372 $ 39,684,440
Accounts payable............................................ 101,871 62,056
Accrued interest............................................ 301,463 302,329
Accrued property taxes...................................... 210,687 100,959
Accrued expenses............................................ 224,422 356,025
Deferred gain - storm damage................................ 67,016 67,016
Payable to affiliates - General Partner..................... 3,105,474 2,851,851
Security deposits and deferred rental revenue............... 428,383 407,466
-------------- -------------
44,009,688 43,832,142
-------------- -------------
Partners' deficit:
Limited partners - 159,813 limited partnership
units authorized and outstanding at March 31,
1996 and December 31, 1995............................. (4,846,290) (4,983,492)
General Partner.......................................... (6,538,257) (6,339,886)
-------------- -------------
(11,384,547) (11,323,378)
-------------- -------------
$ 32,625,141 $ 32,508,764
============== =============
</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,
---------------------------------
1996 1995
-------------- --------------
Revenue:
<S> <C> <C>
Rental revenue................................... $ 3,668,760 $ 3,489,989
Interest......................................... 26,962 31,101
------------- -------------
Total revenue.................................. 3,695,722 3,521,090
------------- -------------
Expenses:
Interest......................................... 961,166 946,754
Depreciation..................................... 655,713 598,257
Property taxes................................... 224,661 240,570
Personnel expenses............................... 486,012 504,772
Utilities........................................ 269,935 233,537
Repair and maintenance........................... 432,483 399,274
Property management fees - affiliates............ 182,174 176,227
Other property operating expenses................ 191,612 207,464
General and administrative....................... 50,217 34,294
General and administrative - affiliates.......... 97,326 116,582
------------- -------------
Total expenses................................. 3,551,299 3,457,731
------------- -------------
Net income.......................................... $ 144,423 $ 63,359
============= =============
Net income allocable to limited partners............ $ 137,202 $ 60,191
Net income allocable to General Partner............. 7,221 3,168
------------- -------------
Net income.......................................... $ 144,423 $ 63,359
============= =============
Net income per limited partnership unit............. $ .86 $ .38
============= =============
</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, 1996 and 1995
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
--------------- ---------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1994.............. $ (5,484,195) $ (5,275,373) $ (10,759,568)
Net income................................ 3,168 60,191 63,359
Management Incentive Distribution......... (201,812) - (201,812)
------------- -------------- -------------
Balance at March 31, 1995................. $ (5,682,839) $ (5,215,182) $ (10,898,021)
============= ============== =============
Balance at December 31, 1995.............. $ (6,339,886) $ (4,983,492) $ (11,323,378)
Net income................................ 7,221 137,202 144,423
Management Incentive Distribution......... (205,592) - (205,592)
------------- -------------- -------------
Balance at March 31, 1996................. $ (6,538,257) $ (4,846,290) $ (11,384,547)
============= =============== =============
</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,
-------------------------------------------
1996 1995
------------------- -----------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants........................ $ 3,664,498 $ 3,522,186
Cash paid to suppliers............................ (1,542,028) (1,084,546)
Cash paid to affiliates........................... (231,469) (362,317)
Interest received................................. 26,962 31,101
Interest paid..................................... (918,084) (840,434)
Property taxes paid............................... (303,119) (336,630)
----------------- --------------
Net cash provided by operating activities............ 696,760 929,360
----------------- --------------
Net cash used in investing activities:
Additions to real estate investments.............. (305,452) (336,795)
----------------- --------------
Net cash used in financing activities:
Principal payments on mortgage notes
payable......................................... (119,785) (120,005)
----------------- --------------
Net increase in cash and cash equivalents............ 271,523 472,560
Cash and cash equivalents at beginning of
period............................................ 2,030,544 1,932,351
----------------- --------------
Cash and cash equivalents at end of period........... $ 2,302,067 $ 2,404,911
================= ==============
</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 to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
Net income........................................... $ 144,423 $ 63,359
--------------- --------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation...................................... 655,713 598,257
Amortization of discounts on mortgage
notes payable................................... 5,717 5,417
Amortization of deferred borrowing costs.......... 38,231 36,375
Changes in assets and liabilities:
Cash segregated for security deposits........... 23,508 16,270
Accounts receivable............................. (153,831) (986)
Prepaid expenses and other assets............... 125,248 175,855
Escrow deposits................................. (228,271) (126,427)
Accounts payable................................ 39,815 42,838
Accrued interest................................ (866) 64,528
Accrued property taxes.......................... 109,728 114,353
Accrued expenses................................ (131,603) (2,640)
Payable to affiliates - General Partner......... 48,031 (69,508)
Security deposits and deferred rental
revenue....................................... 20,917 11,669
--------------- --------------
Total adjustments............................. 552,337 866,001
--------------- --------------
Net cash provided by operating activities............ $ 696,760 $ 929,360
=============== ==============
</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, 1996
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,
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 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.
<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:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
Property management fees - affiliates................ $ 182,174 $ 176,227
Charged to general and administrative -
affiliates:
Partnership administration........................ 97,326 116,582
--------------- --------------
$ 279,500 $ 292,809
=============== ==============
Charged to General Partner's deficit:
MID............................................... $ 205,592 $ 201,812
=============== ==============
</TABLE>
<PAGE>
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, 1996, the
Partnership owned eight apartment properties, which are all subject to mortgage
notes.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total Partnership revenues increased by $174,632 or 5% for the three months
ended March 31, 1996. Rental revenue increased $178,862 or 5%.
Rental revenue for the first three months of 1996 was $3,668,760, as compared to
$3,489,989 for the same period in 1995. The increase in rental revenue for the
three months ended March 31, 1996 is due to an increase in the rental rates at
seven of the Partnership's properties.
Expenses:
Total Partnership expenses increased by $93,568 or 3% for the period ending
March 31, 1996 as compared to the period ending March 31, 1995.
Depreciation expense for the three months ended March 31, 1996 increased by
$57,546 or 10%. The increase is due to capital improvements made at the
properties. During 1996, the Partnership has made $305,452 in capital
improvements.
Property taxes decreased $15,909 or 7% for the three months ended March 31,
1996. This is due to an decrease in the estimated tax liability at Knollwood,
The Park, and The Village.
Utilities increased $36,398 or 16% for the three months ended March 31, 1996 due
to an increase in water rates charged by local utility providers at Rock Creek
and Villa Del Rio.
Repairs and maintenance increased by $33,209 or 8% for the three months ended
March 31, 1996. This increase can be attributed to the replacement of carpeting,
which met the Partnership's criteria for capitalization based on the magnitude
of replacements in 1995, but were expensed in 1996.
General and administrative increased $15,923 for the three months ended March
31, 1996 as compared to the same period in 1995. The increase was due to costs
incurred by the Partnership to defend class action litigation.
General and administrative - affiliates for the three months ended March 31,
1996 decreased by $19,256 or 17% due to the reduction of overhead expenses
allocable to the Partnership.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $696,760 through operating activities for the period
ending March 31, 1996 as compared to $929,360 for the same period in 1995. This
decrease of $232,600 can be attributed to the increase in the cash paid to
suppliers and interest paid.
The Partnership funded $305,452 in additions to real estate investments for the
three months ending March 31, 1996. 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.
There was a net use of cash from financing activities of $119,785 for the three
months ended March 31, 1996.
Short-term liquidity:
At March 31, 1996, the Partnership held cash and cash equivalents of $2,302,067.
The General Partner considers this level of cash reserves to be adequate to meet
the Partnership's operating needs. The General Partner anticipates resuming MID
payments if the Partnership's properties continue to perform as projected. The
General Partner believes that anticipated operating results for 1996 will be
sufficient to fund the Partnership's budgeted $1.3 million in capital
improvements for 1996 and to repay the current portion of the Partnership's
mortgage notes.
During 1996, the Partnership is faced with a mortgage maturity on The Village
totaling approximately $2,564,000. It is management's policy to negotiate
extensions or arrange refinancings for the mortgage notes due.
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. Borrowings under the facility may be used to fund deferred maintenance,
refinancing obligations and working capital needs. The Partnership has repaid
all the advances received from this facility, and 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, 1996,
$2,662,819 remained available for borrowing under the facility; however,
additional funds could become available as other partnerships repay borrowings.
This commitment will terminate on August 6, 1996.
Long-term liquidity:
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.
<PAGE>
Income allocation and distributions:
Terms of the Amended Partnership Agreement specify that income before
depreciation is allocated to the General Partner to the extent of MID paid in
cash. Depreciation is allocated in the ratio of 95:5 to the limited partners and
the General Partner, respectively. Therefore, for the three months ended March
31, 1996 and 1995, $7,221 and $3,168, respectively, were allocated to the
General Partner. The limited partners received allocations of net income of
$137,202, and $60,191 for the three months ended March 31, 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 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
$205,592 for the MID has been accrued by the Partnership for the three month
period ending March 31, 1996 for the General Partner.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Description
------- -----------
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 limited partnership units
outstanding in 1996 and 1995, respectively.
27. Financial Data Schedule for the quarter
ended March 31, 1996.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended March 31, 1996.
<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:
McNEIL REAL ESTATE FUND XI, Ltd.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
May 14, 1996 By: /s/ Donald K. Reed
- ------------------- ----------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
May 14, 1996 By: /s/ Ron K. Taylor
- ------------------- ----------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer of
McNeil Investors, Inc.
May 14, 1996 By: /s/ Brandon K. Flaming
- ------------------- ----------------------------------------
Date Brandon K. Flaming
Chief Accounting Officer of McNeil
Real Estate Management, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,302,067
<SECURITIES> 0
<RECEIVABLES> 185,158
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 64,652,467
<DEPRECIATION> (37,750,897)
<TOTAL-ASSETS> 32,625,141
<CURRENT-LIABILITIES> 0
<BONDS> 39,570,372
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 32,625,141
<SALES> 3,668,760
<TOTAL-REVENUES> 3,695,722
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,590,133
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 961,166
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 144,423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,423
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
