UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
---------------------------------------------
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 600, LB70, Dallas, Texas 75240
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (972) 448-5800
------------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
MCNEIL REAL ESTATE FUND XI, LTD.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land ................................................. $ 4,407,325 $ 4,407,325
Buildings and improvements ........................... 47,772,762 47,211,527
------------ ------------
52,180,087 51,618,852
Less: Accumulated depreciation ...................... (31,968,496) (30,941,665)
------------ ------------
20,211,591 20,677,187
Assets held for sale .................................... 4,658,935 5,910,865
Cash and cash equivalents ............................... 4,106,010 3,045,785
Cash segregated for security deposits ................... 453,455 413,487
Accounts receivable ..................................... 112,927 40,018
Prepaid expenses and other assets ....................... 99,058 242,961
Escrow deposits ......................................... 954,175 683,785
Deferred borrowing costs (net of accumulated
amortization of $704,747 and $677,649 at
June 30, 1998 and December 31, 1997,
respectively) ........................................ 1,198,803 1,355,831
------------ ------------
$ 31,794,954 $ 32,369,919
============ ============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net ............................. $ 36,034,801 $ 36,207,678
Mortgage note payable - affiliate ....................... - 2,588,971
Accrued interest ........................................ 247,572 271,877
Accrued interest - affiliate ............................ - 20,889
Accrued expenses ........................................ 588,503 382,446
Payable to affiliates - General Partner ................. 2,724,034 2,231,389
Security deposits and deferred rental revenue ........... 459,176 460,567
------------ ------------
40,054,086 42,163,817
------------ ------------
Partners' deficit:
Limited partners - 159,813 limited partnership units
authorized and outstanding at June 30, 1998
and December 31, 1997 .............................. (1,811,577) (3,602,274)
General Partner ...................................... (6,447,555) (6,191,624)
------------ ------------
(8,259,132) (9,793,898)
------------ ------------
$ 31,794,954 $ 32,369,919
============ ============
</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 Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Revenue:
<S> <C> <C> <C> <C>
Rent revenue ................... $ 3,692,186 $ 3,763,175 $ 7,582,411 $ 7,513,324
Interest ....................... 46,357 26,967 96,122 52,861
Gain on sale of real estate .... 3,319,137 - 3,319,137 -
Gain on involuntary
conversion ................... - 172,987 - 172,987
----------- ----------- ----------- -----------
Total revenue ................ 7,057,680 3,963,129 10,997,670 7,739,172
----------- ----------- ----------- -----------
Expenses:
Interest ....................... 836,384 885,338 1,708,089 1,772,553
Interest - affiliate mortgage... 39,318 61,444 99,964 120,875
Depreciation ................... 517,436 523,065 1,026,831 1,046,130
Property taxes ................. 226,420 217,794 457,603 435,588
Personnel expenses ............. 456,974 418,305 946,396 914,639
Utilities ...................... 278,184 269,997 547,775 546,678
Repair and maintenance ......... 500,605 550,002 926,316 1,054,106
Property management
fees - affiliates ............ 183,376 187,546 376,829 373,869
Other property operating
expenses ..................... 182,667 172,256 395,026 375,354
General and administrative ..... 202,065 44,538 348,077 101,220
General and administrative -
affiliates ................... 93,793 66,130 174,542 132,009
----------- ----------- ----------- -----------
Total expenses ............... 3,517,222 3,396,415 7,007,448 6,873,021
----------- ----------- ----------- -----------
Net income ........................ $ 3,540,458 $ 566,714 $ 3,990,222 $ 866,151
=========== =========== =========== ===========
Net income (loss) allocable to
limited partners ............... $ 3,363,435 $ 442,417 $ 3,790,711 $ (132,442)
Net income allocable
to General Partner ............. 177,023 124,297 199,511 998,593
----------- ----------- ----------- -----------
Net income ........................ $ 3,540,458 $ 566,714 $ 3,990,222 $ 866,151
=========== =========== =========== ===========
Net income (loss) per limited
partnership unit ............... $ 21.05 $ 2.77 $ 23.72 $ (.83)
=========== =========== =========== ===========
Distribution per limited
partnership unit ............... $ - $ - $ 12.51 $ -
=========== =========== =========== ===========
</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 Six Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
------------- ------------- -------------
<S> <C> <C> <C>
Balance at December 31, 1996 .... $ (6,454,008) $ (4,179,456) $(10,633,464)
Net income (loss) ............... 998,593 (132,442) 866,151
Management Incentive Distribution (441,640) - (441,640)
------------ ------------ ------------
Balance at June 30, 1997 ........ $(5,897,055) $ (4,311,898) $(10,208,953)
============ ============ ============
Balance at December 31, 1997 .... $(6,191,624) $ (3,602,274) $ (9,793,898)
Net income ...................... 199,511 3,790,711 3,990,222
Management Incentive Distribution (455,442) - (455,442)
Distributions to limited partners - (2,000,014) (2,000,014)
------------ ------------ ------------
Balance at June 30, 1998 ........ $(6,447,555) $ (1,811,577) $ (8,259,132)
============ ============ ============
</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>
Six Months Ended
June 30,
---------------------------
1998 1997
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants ...................... $ 7,477,862 $ 7,484,507
Cash paid to suppliers .......................... (2,979,370) (2,968,518)
Cash paid to affiliates ......................... (514,168) (539,730)
Interest received ............................... 96,122 52,861
Interest paid ................................... (1,633,619) (1,678,278)
Interest paid - affiliates ...................... (120,853) (123,899)
Property taxes paid ............................. (560,097) (513,947)
----------- -----------
Net cash provided by operating activities .......... 1,765,877 1,712,996
----------- -----------
Cash flow from investing activities:
Additions to real estate investments ............ (561,235) (436,979)
Additions to assets held for sale ............... (97,399) -
Proceeds from sale of real estate ............... 4,787,389 -
Insurance proceeds from fire .................... - 172,987
----------- -----------
Net cash provided by (used in)
investing activities ............................ 4,128,755 (263,992)
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage notes
payable ....................................... (254,380) (235,597)
Proceeds from mortgage note payable ............. 2,635,000 -
Repayment of mortgage note payable - affiliate... (2,588,971) -
Retirement of mortgage note payable ............. (2,565,604) -
Deferred borrowing costs paid ................... (60,438) -
Management Incentive Distribution ............... - (1,050,900)
Distributions to limited partners ............... (2,000,014) -
----------- -----------
Net cash used in financing activities .............. (4,834,407) (1,286,497)
----------- -----------
Net increase in cash and cash equivalents .......... 1,060,225 162,507
Cash and cash equivalents at beginning of
period .......................................... 3,045,785 2,351,879
----------- -----------
Cash and cash equivalents at end of period ......... $ 4,106,010 $ 2,514,386
=========== ===========
</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>
Six Months Ended
June 30,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net income .................................... $ 3,990,222 $ 866,151
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ............................... 1,026,831 1,046,130
Amortization of deferred borrowing costs ... 86,668 80,973
Amortization of discounts on mortgage
notes payable ............................ 12,107 11,766
Gain on sale of real estate ................ (3,319,137) -
Gain on involuntary conversion ............. - (172,987)
Changes in assets and liabilities:
Cash segregated for security deposits .... (39,968) (27,008)
Accounts receivable ...................... (72,909) (32,493)
Prepaid expenses and other assets ........ 143,903 135,182
Escrow deposits .......................... (270,390) (344,110)
Accounts payable ......................... - (37,907)
Accrued interest ......................... (24,305) 1,536
Accrued interest-affiliates .............. (20,889) (3,024)
Accrued expenses ......................... 217,932 204,321
Payable to affiliates - General Partner .. 37,203 (33,852)
Security deposits and deferred rental
revenue ................................ (1,391) 18,318
----------- -----------
Total adjustments ...................... (2,224,345) 846,845
----------- -----------
Net cash provided by operating activities ..... $ 1,765,877 $ 1,712,996
=========== ===========
</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)
June 30, 1998
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 600, 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 six months ended June 30,
1998 are not necessarily indicative of the results to be expected for the year
ending December 31, 1998.
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, 1997, 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 600, LB70, Dallas, Texas 75240.
NOTE 3.
- -------
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 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.
<PAGE>
MID will be paid to the extent of the lesser of the Partnership's excess cash
flow, as defined, or net operating income, as defined ("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 limited
partnership units ("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.
In November 1996, the Partnership obtained a loan from McNeil Real Estate Fund
XXVII, L.P., an affiliate of the General Partner, for $2,588,971. The note is
secured by The Village Apartments and requires monthly interest-only payments
equal to the prime lending rate of Bank of America plus 1% with the principal
balance due November 25, 1999. This mortgage note was paid off on May 13, 1998.
Compensation, reimbursements and distributions paid to or accrued for the
benefit of the General Partner and its affiliates are as follows:
Six Months Ended
June 30,
-----------------------
1998 1997
-------- -------
Property management fees - affiliates ........... $376,829 $373,869
Interest - affiliates ........................... 99,964 120,875
Charged to general and administrative affiliates:
Partnership administration ................... 174,542 132,009
-------- --------
$651,335 $626,753
======== ========
Charged to General Partner's deficit:
MID .......................................... $455,442 $441,640
======== ========
<PAGE>
NOTE 4.
- -------
On April 30, 1998, the Partnership sold to Park Associates, L.P., an
unaffiliated buyer, The Park, a 192 unit apartment complex in Joplin, Missouri,
for a cash purchase price of $4,900,000. Net cash proceeds to the Partnership,
after payoff of the first mortgage note and various closing costs, amounted to
approximately $2,161,000. Cash proceeds from this transaction, as well as the
gain on sale are detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
---------------- -------------
<S> <C> <C>
Cash sales price..................................... $ 4,900,000 $ 4,900,000
Selling costs........................................ (112,611) (112,611)
Basis of real estate sold............................ (1,337,454)
Basis of deferred borrowing costs
written off...................................... (130,798)
--------------- -------------
Gain on sale of real estate.......................... $ 3,319,137
==============
Proceeds from sale of real estate.................... 4,787,389
Retirement of mortgage note payable.................. (2,565,604)
-------------
Net cash proceeds.................................... $ 2,221,785
=============
</TABLE>
NOTE 5.
- -------
On April 27, 1998, the Partnership refinanced The Village mortgage note. The new
mortgage note, in the amount of $2,635,000 bears interest at a variable rate
equal to 1.75% plus the London Interbank Offered Rate per annum. The new
mortgage note requires monthly interest-only payments and quarterly principal
payments in an amount necessary to reduce the principal balance of the note by
5% annually. The maturity date of the new mortgage note is May 1, 2001. Cash
proceeds from the refinancing transaction are as follows:
New mortgage note proceeds........................... $2,635,000
Amount required to payoff existing debt.............. 2,588,971
----------
Cash proceeds from refinancing....................... $ 46,029
==========
The Partnership incurred $60,438 of deferred borrowing costs related to the
refinancing of The Village mortgage note.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
The Partnership is engaged in real estate activities, including the ownership,
operation and management of residential and other real estate related assets. At
June 30, 1998, the Partnership owned seven apartment properties, which are all
subject to mortgage notes.
The Partnership recorded a $3,449,935 gain on the sale of The Park Apartments.
Net proceeds from the sale, after repayment of the related mortgage note,
amounted to $2,221,785. The net proceeds from the sale were added to the
Partnership's balance of cash reserves.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Partnership revenues increased $3,049,551 and $3,431,485 for the three months
and six months ended June 30, 1998 as compared to the same period last year.
Excluding the effects of the sale of The Park Apartments, Partnership revenues
increased $234,988 or 3% for the six months ended June 30, 1998. Greater cash
reserves led to an increase of $43,261 in interest income.
Rental revenues increased at six of the Partnership's seven remaining
properties. The properties reporting the largest increases in rental revenue
were Acacia Lakes, Rock Creek and The Village. This increase in revenue on
Acacia Lakes, Rock Creek and The Village is due to an increase in the rental
rates, as compared to the prior year. The Village also recorded an increase in
the occupancy rate from 93% at June 30, 1997 to 98% at June 30, 1998.
Expenses:
Partnership expenses increased $120,807 and $134,427 for the three months and
six months ended June 30, 1998 as compared to the same period last year.
Excluding the effects of the sale of The Park Apartments, Partnership expenses
increased $314,004 or 5% for the six months ended June 30, 1998.
Decreases in interest expense - affiliates, depreciation, and repairs and
maintenance were offset by increases in property taxes, property operating
expenses and general and administrative.
General and administrative expenses increased $246,857 or 244% for the first six
months of 1998 as compared to the same period last year. The increase was mainly
due to costs incurred to explore alternatives to maximize the value of the
Partnership (see Liquidity and Capital Resources). The increase was partially
offset by decreases attributable to investor services. During 1997, charges for
investor services were provided by a third party vendor. Beginning with 1998,
these services are provided by affiliates of the General Partner.
General and administrative - affiliates expense increased by $42,533 or 32% for
the first six months of 1998 as compared to the same period last year due to the
change in investor services charges as discussed above.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $1,765,877 through operating activities for the period
ending June 30, 1998 as compared to $1,712,996 for the same period in 1997. This
increase is primarily due to an increase in interest received.
The Partnership expended $658,634 and $436,979 for capital improvements to its
properties in the first six months of 1998 and 1997, respectively. The
Partnership also received proceeds of $4,787,389 for the sale of The Park in
April 1998.
Total principal payments on mortgage notes payable were $254,380 for the six
months ended June 30, 1998 as compared to $235,597 for the same period in 1997.
The Partnership used $2,565,604 of the proceeds from The Park sale to retire the
related mortgage note payable.
On April 27, 1998, the Partnership refinanced the mortgage note payable on The
Village. The new mortgage note, in the amount of $2,635,000 bears interest at a
variable rate equal to 1.75% plus the London Interbank Offered Rate per annum.
The new mortgage note requires monthly interest only payments and quarterly
principal payments in the amount necessary to reduce the principal balance of
the note by 5% annually. The maturity date of the new mortgage note is May 1,
2001. The Partnership realized $46,029 of cash proceeds from the transaction;
however, $60,438 of the cash proceeds and cash reserves were used to fund
various deferred borrowing costs related to the transaction.
The Partnership used its cash flow from operations as well as its cash reserves
to distribute $2,000,014 to the limited partners in March 1998. The distribution
amounted to $12.51 per limited partnership unit.
Short-term liquidity:
At June 30, 1998, the Partnership held cash and cash equivalents of $4,106,010.
The General Partner considers this level of cash reserves to be adequate to meet
the Partnership's operating needs. The General Partner believes that anticipated
operating results for 1998 will be sufficient to fund the Partnership's budgeted
$1.3 million in capital improvements for 1998 and to repay the current portion
of the Partnership's mortgage notes.
Long-term liquidity:
For the long-term, property operations will remain the primary source of funds.
In this regard, the General Partner expects that the capital improvements made
by the Partnership during the past will yield improved cash flow from property
operations in the future. If the Partnership's cash position deteriorates, the
General Partner may elect to defer certain of the capital improvements, except
where such improvements are expected to increase the competitiveness or
marketability of the Partnership's properties.
<PAGE>
As previously announced, the Partnership has retained PaineWebber
("PaineWebber"), Incorporated as its exclusive financial advisor to explore
alternatives to maximize the value of the Partnership including, without
limitation, a transaction in which limited partnership interests in the
Partnership are converted into cash. The Partnership, through PaineWebber, has
provided financial and other information to interested parties and is currently
conducting discussions with one such party in an attempt to reach a definitive
agreement with respect to a sale transaction. It is possible that the General
Partner and its affiliates will receive non-cash consideration for their
ownership interests in connection with any such transaction. There can be no
assurance that any such agreement will be reached nor the terms thereof.
Income/Loss Allocation and Distributions:
Terms of the Amended Partnership Agreement specify that income/loss 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 six months ended June 30,
1998 and 1997, $199,511 and $998,593, respectively, were allocated to the
General Partner. The limited partners received net income (loss) allocations of
$3,790,711 and $(132,442) for the six months ended June 30, 1998 and 1997,
respectively.
The Partnership distributed $2,000,014 to the limited partners in March 1998. In
light of the discussions relating to the sale transaction as disclosed, the
Partnership is presently deferring any decision with respect to the amount or
timing of distributions to limited partners. A distribution of $455,442 for the
MID has been accrued by the Partnership for the six month period ending June 30,
1998 for the General Partner.
Forward-Looking Information:
Within this document, certain statements are made as to the expected occupancy
trends, financial condition, results of operations, and cash flows of the
Partnership for periods after June 30, 1998. All of these statements are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements are not
historical and involve risks and uncertainties. The Partnership's actual
occupancy trends, financial condition, results of operations, and cash flows for
future periods may differ materially due to several factors. These factors
include, but are not limited to, the Partnership's ability to control costs,
make necessary capital improvements, negotiate sales or refinancings of its
properties, and respond to changing economic and competitive factors.
<PAGE>
Other Information:
Management has begun to review its information technology infrastructure to
identify any systems that could be affected by the year 2000 problem. The year
2000 problem is the result of computer programs being written using two digits
rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major systems failure or
miscalculations. The information systems used by the Partnership for financial
reporting and significant accounting functions were made year 2000 compliant
during recent systems conversions. The Partnership is in the process of
evaluating the computer systems at the various properties. The Partnership also
intends to communicate with suppliers, financial institutions and others to
coordinate year 2000 issues. Management believes that the remediation of any
outstanding year 2000 conversion issues will not have a material or adverse
effect on the Partnership's operations.
<PAGE>
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, 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).
The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants 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.
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. The case has been stayed pending settlement discussions. While
actively working toward a final resolution, there can be no assurances regarding
settlement.
<PAGE>
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 1998 and 1997, respectively.
27. Financial Data Schedule for the quarter
ended June 30, 1998.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended June 30, 1998.
<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
August 14, 1998 By: /s/ Ron K. Taylor
- --------------- -----------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
August 14, 1998 By: /s/ Brandon K. Flaming
- --------------- -----------------------------------------
Date Brandon K. Flaming
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)
<TABLE> <S> <C>
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,106,010
<SECURITIES> 0
<RECEIVABLES> 112,927
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0
0
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<SALES> 7,582,411
<TOTAL-REVENUES> 10,997,670
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