UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
-------------------------------------------
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>
March 31, December 31,
1999 1998
------------ -------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land ....................................................... $ 4,407,325 $ 4,407,325
Buildings and improvements ................................. 48,383,085 48,327,237
------------ ------------
52,790,410 52,734,562
Less: Accumulated depreciation ............................ (33,578,927) (33,063,795)
------------ ------------
19,211,483 19,670,767
Asset held for sale ........................................... 4,806,811 4,765,942
Cash and cash equivalents ..................................... 2,962,122 2,397,968
Cash segregated for security deposits ......................... 440,554 459,382
Cash restricted for mortgage payments ......................... 262,840 286,160
Accounts receivable ........................................... 47,339 149,681
Prepaid expenses and other assets ............................. 232,779 233,791
Escrow deposits ............................................... 685,549 617,502
Deferred borrowing costs (net of accumulated
amortization of $726,733 and $682,223 at
March 31, 1999 and December 31, 1998,
respectively) .............................................. 1,120,676 1,165,186
------------ ------------
$ 29,770,153 $ 29,746,379
============ ============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net ................................... $ 35,832,593 $ 36,064,590
Accrued interest .............................................. 212,582 240,794
Accrued expenses .............................................. 586,943 414,875
Payable to affiliates - General Partner ....................... 3,157,846 2,950,388
Deferred gain - fire .......................................... -- 25,037
Security deposits and deferred rental revenue ................. 474,803 466,504
------------ ------------
40,264,767 40,162,188
------------ ------------
Partners' deficit:
Limited partners - 159,813 limited partnership unit
authorized and outstanding at March 31, 1999
and December 31, 1998 .................................... (3,489,199) (3,598,672)
General Partner ............................................ (7,005,415) (6,817,137)
------------ ------------
(10,494,614) (10,415,809)
------------ ------------
$ 29,770,153 $ 29,746,379
============ ============
</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,
----------------------------
1999 1998
---------- ----------
Revenue:
<S> <C> <C>
Rental revenue .................................... $3,763,677 $3,890,225
Interest .......................................... 16,454 49,765
Gain on involuntary conversion .................... 36,012 --
---------- ----------
Total revenue ................................... 3,816,143 3,939,990
---------- ----------
Expenses:
Interest .......................................... 751,505 871,705
Interest - affiliate mortgage ..................... -- 60,646
Depreciation ...................................... 515,132 509,395
Property taxes .................................... 221,373 231,183
Personnel expenses ................................ 434,547 489,422
Utilities ......................................... 261,778 269,591
Repair and maintenance ............................ 438,324 425,711
Property management fees - affiliates ............. 186,141 193,453
Other property operating expenses ................. 182,046 212,359
General and administrative ........................ 94,730 146,012
General and administrative - affiliates ........... 73,482 80,749
---------- ----------
Total expenses .................................. 3,159,058 3,490,226
---------- ----------
Net income ........................................... $ 657,085 $ 449,764
========== ==========
Net income allocable to limited partners ............. $ 609,687 $ 427,276
Net income allocable to General Partner .............. 47,398 22,488
---------- ----------
Net income ........................................... $ 657,085 $ 449,764
========== ==========
Net income per limited partnership unit .............. $ 3.82 $ 2.67
========== ==========
Distribution per limited partnership unit ............ $ 3.13 $ 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 Three Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
--------------- ------------- -------------
<S> <C> <C> <C>
Balance at December 31, 1997 ................... $ (6,191,624) $ (3,602,274) $ (9,793,898)
Net income ..................................... 22,488 427,276 449,764
Management Incentive Distribution .............. (239,111) -- (239,111)
Distributions to limited partners .............. -- (2,000,014) (2,000,014)
-------------- ------------ ------------
Balance at March 31, 1998 ...................... $ (6,408,247) $ (5,175,012) $(11,583,259)
============== ============ ============
Balance at December 31, 1998 ................... $ (6,817,137) $ (3,598,672) $(10,415,809)
Net income ..................................... 47,398 609,687 657,085
Management Incentive Distribution .............. (235,676) -- (235,676)
Distributions to limited partners .............. -- (500,214) (500,214)
-------------- ------------ ------------
Balance at March 31, 1999 ...................... $ (7,005,415) $ (3,489,199) $(10,494,614)
============== ============ ============
</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,
1999 1998
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants ........................... $ 3,856,531 $ 3,913,739
Cash paid to suppliers ............................... (1,362,432) (1,590,983)
Cash paid to affiliates .............................. (214,686) (191,881)
Interest received .................................... 16,454 49,765
Interest paid ........................................ (728,554) (829,995)
Interest paid - affiliates ........................... -- (60,646)
Property taxes paid .................................. (163,013) (288,204)
----------- -----------
Net cash provided by operating activities ............... 1,404,300 1,001,795
----------- -----------
Cash flow from investing activities:
Additions to real estate investments and
assets held for sale ............................... (96,717) (179,837)
Insurance proceeds from fire ......................... 45,270 --
----------- -----------
Net cash used in investing activities ................... (51,447) (179,837)
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage notes
payable ............................................ (238,650) (127,312)
Cash restricted for mortgage payments ................ 23,320 --
Management Incentive Distribution .................... (73,155) --
Distributions to limited partners .................... (500,214) (2,000,014)
----------- -----------
Net cash used in financing activities ................... (788,699) (2,127,326)
----------- -----------
Net increase (decrease) in cash and cash
equivalents .......................................... 564,154 (1,305,368)
Cash and cash equivalents at beginning of
period ............................................... 2,397,968 3,045,785
----------- -----------
Cash and cash equivalents at end of period .............. $ 2,962,122 $ 1,740,417
=========== ===========
</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,
-------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net income ............................................. $ 657,085 $ 449,764
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ........................................ 515,132 509,395
Amortization of deferred borrowing costs ............ 44,510 36,877
Amortization of discounts on mortgage
notes payable ..................................... 6,653 5,785
Gain on involuntary conversion ...................... (36,012) --
Changes in assets and liabilities:
Cash segregated for security deposits ............. 18,828 (26,448)
Accounts receivable ............................... 68,047 21,013
Prepaid expenses and other assets ................. 1,012 76,645
Escrow deposits ................................... (68,047) (306,914)
Accrued interest .................................. (28,212) (952)
Accrued expenses .................................. 172,068 131,095
Payable to affiliates - General Partner ........... 44,937 82,321
Security deposits and deferred rental
revenue ......................................... 8,299 23,214
----------- -----------
Total adjustments ............................... 747,215 552,031
----------- -----------
Net cash provided by operating activities .............. $ 1,404,300 $ 1,001,795
=========== ===========
</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, 1999
NOTE 1.
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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 three months ended March 31,
1999 are not necessarily indicative of the results to be expected for the year
ending December 31, 1999.
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, 1998, 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. 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. The maximum
MID percentage decreases to .75% in 2000, .50% in 2001 and .25% thereafter.
<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, 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 was
secured by The Village Apartments and required 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 April 27,
1998.
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,
1999 1998
-------- --------
<S> <C> <C>
Property management fees - affiliates .................. $186,141 $193,453
Interest - affiliates .................................. -- 60,646
Charged to general and administrative affiliates:
Partnership administration .......................... 73,482 80,749
-------- --------
$259,623 $334,848
======== ========
Charged to General Partner's deficit:
MID ................................................. $235,676 $239,111
======== ========
</TABLE>
NOTE 4.
- -------
On November 5, 1998, a fire destroyed two units and damaged four units at Gentle
Gale Apartments. The Partnership received $45,270 in insurance reimbursements to
cover the cost of repairs. Insurance reimbursements received in excess of the
basis of the property damage were recorded as a gain on involuntary conversion.
The Partnership recorded a gain of $36,012.
<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
March 31, 1999, the Partnership owned seven apartment properties, which are all
subject to mortgage notes.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total Partnership revenues decreased $123,847 or 3% for the three months ended
March 31, 1999 as compared to the same period last year. Excluding the effects
of the sale of The Park in April 1998, Partnership revenue increased $79,928 or
2% for the three months ended March 31, 1999 as compared to the same period last
year.
Interest income decreased $30,335 for the three months ended
March 31, 1999 as compared to the same period last year. During the first
quarter of 1999, the Partnership recognized a gain on involuntary conversion of
$36,012 related to the fire at Gentle Gale. No such gain was recognized in 1998.
Expenses:
Total expenses decreased $331,168 or 10% for the three months ended March 31,
1999 as compared to the same period last year. Excluding the effects of the sale
of The Park, Partnership expenses decreased $171,675 or 5% for the three months
ended March 31, 1999.
Interest- affiliate mortgage expense decreased by $60,046 for the three months
ended March 31, 1999. This decrease is due to the refinancing of the mortgage
loan at The Village in April 1998, which replaced affiliate debt with a third
party mortgage note payable. When combined with interest expense paid to
unaffiliated lenders, the Partnership's total interest expense, excluding The
Park, decreased $12,595 for the first quarter of 1999.
General and administrative expenses decreased $51,282 or 35% for the first three
months of 1999 as compared to the same period last year. The decrease is mostly
due to costs incurred in 1998 to explore alternatives to maximize the value of
the Partnership (see Liquidity and Capital Resources).
All other remaining expenses, excluding The Park Apartments, remained comparable
to the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $1,404,300 through operating activities for the three
month period ended March 31, 1999 as compared to $1,001,795 for the same period
in 1998. This increase is primarily due to decreases in cash paid to suppliers,
interest paid and property taxes paid.
<PAGE>
The Partnership expended $96,717 and $179,837 for capital improvements to its
properties in the first three months of 1999 and 1998, respectively. The
Partnership also received insurance proceeds of $45,270 for fire at Gentle Gale
in during the first quarter of 1999.
During the first three months of 1999, the Partnership paid $238,650 in
principal payments on the mortgage notes and made distributions of $500,214 to
the limited partners. During the first quarter of 1999, the Partnership also
paid $73,155 in MID to the General Partner.
The Partnership used its cash flow from operations as well as its cash reserves
to distribute $500,214 to the limited partners during the first quarter of 1999.
The distribution amounted to $3.13 per limited partnership unit.
Short-term liquidity:
At March 31, 1999, the Partnership held cash and cash equivalents of $2,962,122.
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 1999 will be sufficient to fund the Partnership's budgeted
$1.03 million in capital improvements for 1999 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.
As previously announced, the Partnership has retained 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. During
the last full week of March, the Partnership entered into a 45 day exclusivity
agreement with a well-financed bidder with whom it had commenced discussions
with respect to a sale transaction. The Partnership and such party have made
significant progress in negotiating the terms of a proposed transaction and are
continuing to have intensive discussions with respect to a transaction. In light
on these continuing negotiations, the exclusivity agreement has been extended
for an additional 21 days until June 4, 1999. 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 regarding whether any such agreement will be reached nor the terms
thereof.
The Partnership placed Rock Creek Apartments on the market for sale on October
1, 1996.
<PAGE>
Income/Loss 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, 1999 and 1998, net income of $47,398 and $22,488, respectively, was
allocated to the General Partner. The limited partners received net income
allocations of $609,687 and $427,276 for the three months ended March 31, 1999
and 1998, respectively.
The Partnership distributed $500,214 to the limited partners in 1999. A
distribution of $235,676 for the MID has been accrued by the Partnership for the
three month period ended March 31, 1999 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 March 31, 1999. 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.
YEAR 2000 DISCLOSURE
- --------------------
State of readiness
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.
Management has assessed its information technology ("IT") infrastructure to
identify any systems that could be affected by the year 2000 problem. The IT
used by the Partnership for financial reporting and significant accounting
functions was made year 2000 compliant during recent systems conversions. The
software utilized for these functions is licensed by third party vendors who
have warranted that their systems are year 2000 compliant.
Management is in the process of evaluating the mechanical and embedded
technological systems at the various properties. Management has inventoried all
such systems and queried suppliers, vendors and manufacturers to determine year
2000 compliance. Based on this review, management believes these systems are
substantially compliant. In circumstances of non-compliance management will work
with the vendor to remedy the problem or seek alternative suppliers who will be
in compliance. 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. However, no estimates can be made as to the potential
adverse impact resulting from the failure of third party service providers and
vendors to be year 2000 compliant.
<PAGE>
Cost
- ----
The cost of IT and embedded technology systems testing and upgrades is not
expected to be material to the Partnership. Because all the IT systems have been
upgraded over the last three years, all such systems were compliant, or made
compliant at no additional cost by third party vendors. Management anticipates
the costs of assessing, testing, and if necessary replacing embedded technology
components will be less than $50,000. Such costs will be funded from operations
of the Partnership.
Risks
- -----
Ultimately, the potential impact of the year 2000 issue will depend not only on
the corrective measures the Partnership undertakes, but also on the way in which
the year 2000 issue is addressed by government agencies and entities that
provide services or supplies to the Partnership. Management has not determined
the most likely worst case scenario to the Partnership. As management studies
the findings of its property systems assessment and testing, management will
develop a better understanding of what would be the worst case scenario.
Management believes that progress on all areas is proceeding and that the
Partnership will experience no adverse effect as a result of the year 2000
issue. However, there is no assurance that this will be the case.
Contingency plans
- -----------------
Management is developing contingency plans to address potential year 2000
non-compliance of IT and embedded technology systems. Management believes that
failure of any IT system could have an adverse impact on operations. However,
management believes that alternative systems are available that could be
utilized to minimize such impact. Management believes that any failure in the
embedded technology systems could have an adverse impact on that property's
performance. Management will assess these risks and develop plans to mitigate
possible failures by July 1999.
<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 XXIII, 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., Hearth Hollow Associates, McNeil Midwest Properties I, L.P. and
Regency North Associates, L.P., - 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 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 was stayed pending settlement discussions. A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties. Preliminary
Court approval was received on October 6, 1998. A hearing for Final Approval of
Settlement, initially scheduled for December 17, 1998, has been continued to
July 2, 1999.
Because McNeil Real Estate Fund XXIII, L.P., Hearth Hollow Associates, McNeil
Midwest Properties I, L.P. and Regency North Associates, L.P. would be part of
the transaction contemplated in the settlement and Plaintiffs claim that an
effort should be made to sell the McNeil Partnerships, Plaintiffs have included
allegations with respect to McNeil Real Estate Fund XXIII, L.P., Hearth Hollow
Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P.
in the third consolidated and amended complaint.
Plaintiff's counsel intends to seek an order awarding attorney's fees and
reimbursements of their out-of-pocket expenses. The amount of such award is
undeterminable until final approval is received from the court. Fees and
expenses shall be allocated amongst the Partnerships on a pro rata basis, based
upon tangible asset value of each such partnership, less total liabilities,
calculated in accordance with the Amended Partnership Agreements for the quarter
most recently ended.
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
income per limited partnership unit: Net
income per limited partnership unit is
computed by dividing net income 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 1999 and 1998.
27. Financial Data Schedule for the quarter
ended March 31, 1999.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended March 31, 1999.
<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., and General Partner
By: McNeil Investors, Inc., General Partner
May 18, 1999 By: /s/ Ron K. Taylor
- ------------ ---------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
May 18, 1999 By: /s/ Brandon K. Flaming
- ------------ ---------------------------------------------
Date Brandon K. Flaming
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
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<SECURITIES> 0
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<DEPRECIATION> (33,578,927)
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0
0
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