UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended September 30, 1995
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________to_____________
Commission file number 0-10743
MCNEIL REAL ESTATE FUND XII, LTD.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2717957
- -------------------------------------------------------------------------------
(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 XII, LTD.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
ASSETS ------------- ------------
- ------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 6,280,580 $ 6,280,580
Buildings and improvements............................... 72,418,940 71,739,632
----------- -----------
78,699,520 78,020,212
Less: Accumulated depreciation and amortization......... (39,609,984) (37,105,195)
----------- ------------
39,089,536 40,915,017
Assets held for sale........................................ 3,207,264 12,724,693
Cash and cash equivalents................................... 2,590,184 3,313,765
Cash segregated for security deposits ...................... 309,241 303,436
Accounts receivable, less allowance for doubtful
accounts of $5,629 and $36,410 at September 30,
1995 and December 31, 1994, respectively................. 182,680 317,559
Prepaid expenses and other assets........................... 407,859 258,668
Escrow deposits............................................. 1,034,505 896,234
Deferred borrowing costs, net of accumulated amorti-
zation of $737,939 and $652,691 at September 30,
1995 and December 31, 1994, respectively................. 1,454,919 1,459,976
----------- -----------
$ 48,276,188 $ 60,189,348
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net................................. $ 53,545,919 $ 68,152,522
Accounts payable............................................ 185,249 220,341
Accrued expenses............................................ 154,556 146,722
Accrued interest............................................ 327,661 1,680,833
Accrued property taxes...................................... 1,090,843 961,459
Advances from Southmark..................................... 34,535 32,690
Advances from affiliates - General Partner.................. 1,938,254 1,814,115
Payable to affiliates - General Partner..................... 6,832,215 5,926,684
Security deposits and deferred rental income................ 524,659 546,313
----------- -----------
64,633,891 79,481,679
----------- -----------
Partners' deficit:
Limited partners - 240,000 limited partnership units
authorized; 229,980 and 230,594 limited partnership
units issued and outstanding at March 30, 1995 and
December 31, 1994, respectively............... (6,325,644) (9,844,782)
General Partner.......................................... (10,032,059) (9,447,549)
----------- -----------
(16,357,703) (19,292,331)
----------- -----------
$ 48,276,188 $ 60,189,348
=========== ===========
</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 XII, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ------------------------------
1995 1994 1995 1994
---------- ---------- ----------- -----------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue................ $4,144,714 $5,466,449 $13,466,770 $16,280,905
Interest...................... 47,465 10,036 104,625 39,236
Gain on disposition of
real estate................. 1,164,231 - 3,427,513 -
Gain on legal settlement...... - - 65,856 -
--------- --------- ---------- ----------
Total revenue............... 5,356,410 5,476,485 17,064,764 16,320,141
--------- --------- ---------- ----------
Expenses:
Interest...................... 1,247,512 1,856,914 4,696,851 5,607,494
Interest - affiliates......... 41,426 36,021 124,139 100,132
Depreciation and
amortization................ 920,480 1,181,244 3,059,738 3,472,998
Property taxes................ 350,240 448,749 1,024,026 1,346,247
Personnel expenses............ 551,899 762,345 1,666,178 2,101,150
Utilities..................... 277,300 368,702 1,051,646 1,394,611
Repair and maintenance........ 651,063 888,546 1,818,350 2,221,327
Property management
fees - affiliates........... 205,204 273,323 674,514 812,796
Other property operating
expenses.................... 313,216 402,313 918,037 1,061,391
General and administrative.... 16,845 50,481 86,270 122,735
General and administrative -
affiliates.................. 103,474 120,015 347,284 372,097
--------- --------- ---------- ----------
Total expenses.............. 4,678,659 6,388,653 15,467,033 18,612,978
--------- --------- ---------- ----------
Net income (loss) before
extraordinary item............ 677,751 (912,168) 1,597,731 (2,292,837)
Extraordinary gain on
extinguishment of debt........ - - 2,106,625 -
--------- --------- ---------- ----------
Net income (loss)................ $ 677,751 $ (912,168) $ 3,704,356 $(2,292,837)
========= ========= ========== ==========
Net income (loss) allocable
to limited partners........... $ 643,864 $ (866,560) $ 3,519,138 $(2,178,195)
Net income (loss) allocable
to General Partner............ 33,887 (45,608) 185,218 (114,642)
--------- --------- ---------- ----------
Net income (loss)................ $ 677,751 $ (912,168) $ 3,704,356 $(2,292,837)
========= ========= ========== ==========
Net income (loss) per limited
partnership unit:
Income (loss) before
extraordinary item............ $ 2.80 $ (3.76) $ 6.60 $ (9.45)
Extraordinary gain from
extinguishment of debt........ - - 8.70 -
--------- --------- ----------- ----------
Net income (loss) per limited
partnership unit.............. $ 2.80 $ (3.76) $ 15.30 $ (9.45)
========= ========= =========== ==========
</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 XII, LTD.
STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
For the Nine Months Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
------------- ------------- -------------
<S> <C> <C> <C>
Balance at December 31, 1993.............. $ (8,456,354) $(13,138,511) $(21,594,865)
Net loss.................................. (114,642) (2,178,195) (2,292,837)
Contingent Management Incentive
Distribution........................... (869,037) - (869,037)
----------- ----------- -----------
Balance at September 30, 1994............. $ (9,440,033) $(15,316,706) $(24,756,739)
=========== =========== ===========
Balance at December 31, 1994.............. $ (9,447,549) $ (9,844,782) $(19,292,331)
Net income................................ 185,218 3,519,138 3,704,356
Contingent Management Incentive
Distribution........................... (769,728) - (769,728)
----------- ----------- -----------
Balance at September 30, 1995............. $(10,032,059) $ (6,325,644) $(16,357,703)
=========== =========== ===========
</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 XII, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1995 1994
----------- -----------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants........................ $13,514,491 $16,359,986
Cash received from legal settlement............... 65,856 -
Cash paid to suppliers............................ (5,677,208) (6,634,407)
Cash paid to affiliates........................... (885,995) (1,541,405)
Interest received................................. 104,625 39,236
Interest paid..................................... (4,047,664) (5,105,188)
Interest paid to affiliates....................... - (470,489)
Property taxes paid............................... (1,012,936) (1,384,293)
Deferred borrowing costs paid..................... (131,246) -
---------- ----------
Net cash provided by (used in)
operating activities.............................. 1,929,923 1,263,440
---------- ----------
Cash flows used in investing activities:
Additions to real estate investments.............. (721,389) (1,537,331)
Net proceeds from disposition of real estate...... 45,000 -
---------- ----------
Net cash used in investing activities................ (676,389) (1,537,331)
---------- ----------
Cash flows from financing activities:
Proceeds from refinancing of mortgage
notes payable................................... 334,062 -
Principal payments on mortgage notes
payable......................................... (2,311,177) (1,154,293)
Additions to deferred borrowing costs............. - (36,992)
Repayment of mortgage loans from affiliates....... - (1,603,135)
Advances from affiliates - General Partner........ - 6,000
Repayment of advances from affiliates -
General Partner................................. (1,206,664)
---------- ----------
Net cash used in financing activities................ (1,977,115) (3,995,084)
---------- ----------
Net decrease in cash and cash equivalents............ (723,581) (4,268,975)
Cash and cash equivalents at beginning of
period............................................ 3,313,765 4,938,029
---------- ----------
Cash and cash equivalents at end of period........... $ 2,590,184 $ 669,054
========== ==========
</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 XII, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1995 1994
---------- ------------
<S> <C> <C>
Net income (loss).................................... $ 3,704,356 $(2,292,837)
--------- ----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization..................... 3,059,738 3,472,998
Amortization of deferred borrowing costs.......... 136,303 87,779
Amortization of discounts on mortgage
notes payable................................... 210,785 147,288
Net interest added on advances from
affiliates - General Partner.................... 124,139 93,032
Net interest added on advances from
Southmark....................................... 1,845 1,460
Extraordinary gain on extinguishment
of debt......................................... (2,106,625) -
Gain on disposition of real estate................ (3,427,513) -
Changes in assets and liabilities:
Cash segregated for security deposits........... (5,805) 131,025
Accounts receivable............................. 134,879 47,626
Prepaid expenses and other assets............... (149,191) 2,830
Escrow deposits................................. (138,271) (144,289)
Deferred borrowing costs........................ (131,246) -
Accounts payable................................ (35,092) (155,432)
Accrued expenses................................ 7,834 112,387
Accrued interest................................ 300,254 (197,608)
Accrued property taxes.......................... 129,384 331,667
Payable to affiliates - General Partner......... 135,803 (356,512)
Security deposits and deferred rental ..........
income........................................ (21,654) (17,974)
---------- ----------
Total adjustments............................. (1,774,433) 3,556,277
---------- ----------
Net cash provided by operating activities............ $ 1,929,923 $ 1,263,440
========== ==========
</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 XII, LTD.
Notes to Financial Statements
(Unaudited)
September 30, 1995
NOTE 1.
- -------
McNeil Real Estate Fund XII, Ltd. (the "Partnership") was organized February 2,
1981 as a limited partnership organized 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 September 6, 1991 (the "Amended
Partnership Agreement"). The principal place of business for the Partnership and
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 Partnership's financial position and
results of operations. All adjustments were of a normal recurring nature.
However, the results of operations for the nine months ended September 30, 1995
are not necessarily indicative of the results to be expected for the year ending
December 31, 1995.
NOTE 2.
- -------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1994, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund XII, Ltd. c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240.
NOTE 3.
- -------
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. The Partnership has suffered
recurring losses from operations and has a net Partners' deficit that raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
NOTE 4.
- -------
Certain reclassifications have been made to prior period amounts to conform with
current period presentation.
NOTE 5.
- -------
The Partnership pays property management fees equal to 5% of the 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 services for the Partnership's residential and commercial properties
and leasing services for its residential properties. McREMI may choose to
provide leasing services for the Partnership's commercial properties, in which
case McREMI will receive a property management fee from such commercial
properties equal to 3% of the property's gross rental receipts plus commissions
based on the prevailing market rate for such services where the property is
located.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
Affiliates of the General Partner have advanced funds to the Partnership to meet
working capital requirements. These advances and mortgage loans accrue interest
at a rate equal to the prime lending rate plus 1%.
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. Prior to July 1,
1993, the MID consists of two components: (i) the fixed portion which is payable
without respect to the net income of the Partnership and is equal to 25% of the
maximum MID (the "Fixed MID") and (ii) a contingent portion which is payable
only to the extent of the lesser of the Partnership's excess cash flow, as
defined, or net operating income (the "Entitlement Amount") and is equal to up
to 75% of the maximum MID (the "Contingent MID").
Effective July 1, 1993, the General Partner amended the Amended Partnership
Agreement as a settlement to a class action complaint. This amendment eliminates
the Fixed MID portion and makes the entire MID payable to the extent of the
Entitlement Amount. In all other respects the calculation and payment of the MID
will remain the same.
Fixed MID was payable in limited partnership units ("Units") unless the
Entitlement Amount exceeded the amount necessary to pay the Contingent MID in
which case, at the General Partner's option, the Fixed MID was paid in cash to
the extent of such excess.
Contingent MID will be paid to the extent of the Entitlement Amount, and may be
paid (i) in cash, unless there is insufficient cash to pay the distribution in
which event any unpaid portion not taken in Units will be deferred and is
payable, without interest, from the first available cash and/or (ii) in Units. A
maximum of 50% of the MID may be paid in Units. The number of Units issued in
payment of the MID is based on the greater of $50 per Unit or the net tangible
asset value, 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 Fixed MID was treated as a fee
payable to the General Partner by the Partnership for services rendered. The
Contingent MID represents a return of equity to the General Partner for
increasing cash flow, as defined, and accordingly is treated as a distribution.
Compensation, reimbursements and distributions paid to or accrued for the
benefit of the General Partner and its affiliates are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1995 1994
---------- ----------
Charged to other assets:
<S> <C> <C>
Property management fees - affiliates................ $ 674,514 $ 812,796
Interest - affiliates................................ 124,139 100,132
Charged to general and administrative - affiliates:
Partnership administration........................ 347,284 372,097
--------- ---------
$1,145,937 $1,285,025
========= =========
Charged to General Partner's deficit:
Contingent MID.................................... $ 769,728 $ 869,037
========= =========
</TABLE>
<PAGE>
NOTE 6.
- -------
The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark for damages relating to improper overcharges, breach of contract and
breach of fiduciary duty. The Partnership settled these claims in 1991, and such
settlement was approved by the Bankruptcy Court.
An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995 the Partnership received in full satisfaction of its claims, $49,818 in
cash, and common and preferred stock in the reorganized Southmark currently
valued at approximately $16,000, which amounts represent the Partnership's
pro-rata share of Southmark assets available for Class 8 Claimants. The
Partnership sold the Southmark common and preferred stock in May for $16,038,
which combined with the cash proceeds from Southmark, resulted in a gain on
legal settlement of $65,856.
NOTE 7.
- -------
On March 24, 1995, the Partnership refinanced the mortgage note payable on Plaza
Westlake. The new loan bears an interest rate of 9.5% and will mature January
31, 2000. Following is a summary of the transaction:
<TABLE>
<CAPTION>
<S> <C>
New loan proceeds...................... $ 4,000,000
Capital improvement account............ (300,000)
Existed debt retired................... (3,365,938)
----------
Cash proceeds from refinancing......... $ 334,062
==========
</TABLE>
In addition, the Partnership incurred loan costs of $131,246 relating to the
refinancing.
On February 26, 1995, the Partnership paid off the interest in net profits on
Buccaneer Village for retirement of $3,588,192 of debt. The debt was retired at
a discounted payoff of $1,750,000, which resulted in an extraordinary gain on
extinguishment of debt of $1,838,192.
NOTE 8.
- -------
On June 19, 1995 the Partnership sold its investment in Sundance to an
unaffiliated buyer for a cash sales price of $45,000 and assumption of the
first, second and third liens by the purchaser. Cash proceeds and the gain on
disposition are detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
------------- -------------
<S> <C> <C>
Sales price.......................................... $ 45,000 $ 45,000
Mortgages and accrued interest assumed by
purchaser......................................... 8,191,859
Basis of real estate sold............................ (5,973,567)
----------
Gain on disposition of real estate................... $ 2,263,292
==========
Net cash proceeds.................................... $ 45,000
========
</TABLE>
Also related to the sale of Sundance, the Partnership recognized a $268,433 gain
on early extinguishment of debt.
<PAGE>
NOTE 9.
=======
On July 27, 1995, the Partnership sold its investment in Lamar Plaza to an
unaffiliated buyer for assumption of the first and second liens by the
purchaser. The gain on disposition is detailed below:
<TABLE>
<CAPTION>
Gain on Sale
------------
<S> <C>
Mortgage and accrued interest by purchaser........... $ 4,195,215
Basis of real estate sold............................ (3,030,994)
-----------
Gain on disposition of real estate................... $ 1,164,221
==========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
The Partnership was formed to acquire, operate and ultimately dispose of a
portfolio of income-producing properties. At September 30, 1995, the Partnership
owned six apartment properties and one shopping centers. On June 19 and July 27,
1995, the Partnership sold Sundance Apartments and Lamar Plaza, respectively.
All of the Partnership's properties are subject to mortgage notes.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total Partnership revenues increased by $744,623 or 5% and decreased by $120,075
or 2% for the nine months and three months ended September 30, 1995. Rental
revenue decreased by $2,814,135 or 17% while interest income increased by
$65,389.
Rental revenue for the nine months ended September 30, 1995 was $13,466,770 as
compared to $16,280,905 for the same period last year. This decrease of
$2,814,135 is due to the loss in rental revenue generated by Village East and
Fox Run, which were sold in November and December of 1994 and Sundance and Lamar
Plaza, which were sold in June and July of 1995. This decrease was partially
offset by the increase in rental revenue at five of the Partnership's
properties.
Interest income increased by $65,389 and $37,429 for the nine and three months
ended September 30, 1995, respectively, as compared to the same period last
year. This increase is due to larger average cash balances being invested in
interest-bearing accounts.
The Partnership also recognized a gain on disposition of real estate of
$3,427,513 as a result of the sale of Sundance in June 1995 and Lamar Plaza in
July 1995.
Expenses:
Partnership expenses decreased by $3,145,945 for the first nine months of 1995
as compared to the same period last year primarily due to the sale of Fox Run
and Village East in 1994 and Sundance and Lamar Plaza in 1995. The effects from
these transactions were declines of $1,056,832 for interest, $561,439 for
depreciation, $267,501 for property taxes, $427,479 for personnel expenses,
$279,413 for utilities, $445,475 for repair and maintenance, $151,197 for
property management fees - affiliates, and $166,528 other property operating
expenses.
<PAGE>
In addition to the sale of Fox Run, Village East, Sundance and Lamar, other
factors affected the level of expenses reported by the remaining properties.
Interest expense - affiliates increased by $24,007 or 24% and $5,405 or 15% for
the nine and three months ended September 30, 1995, respectively, due to an
increase in the prime rate used to calculate the interest expense on the
advances.
General and administrative expenses decreased $36,465 or 30% and $33,636 or 67%
for the nine and three months ended September 30, 1995 as compared to the same
period last year, respectively. This decrease is due to a reduction in fees paid
for professional services.
General and administrative - affiliate expenses decreased $24,813 or 7% and
$16,541 or 14% for the nine and three months ended September 30, 1995 as
compared to the same period last year, respectively. This decrease is due to a
decrease in the percentage of the Partnership's portion of reimbursable costs.
All other remaining expense categories remained comparable to the same period
last year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $1,929,923 through operating activities for the first
nine months of 1995 as compared to a $1,263,440 generated for the first nine
months of 1994. This increase in cash can be attributed to the reduction in
interest paid as a result of the sales of Fox Run and Village East in 1994. Also
declines in cash and interest paid to affiliates attributed to the increase in
cash. In January 1994, the Partnership used the proceeds from the sale of Cedar
Mill to pay down on the affiliate advances and the payment of the Fixed MID. The
Partnership also experienced a reduction in the cash paid to supplies and
property taxes paid.
The Partnership expended $721,389 and $1,537,331 for capital improvements to its
properties for the nine months ended September 30, 1995 and 1994, respectively.
The Partnership also received cash proceeds of $45,000 for the sale of Sundance.
During the first nine months of 1995, the Partnership expended $1,977,115 for
financing activities as compared to $3,995,084 for the same period in 1994. This
reduction is primarily due to the payoff in 1994 of the mortgage loan from
affiliates and the pay down of the advances from affiliates. During 1995, the
Partnership received cash proceeds of $334,062 for the refinancing of Plaza
Westlake. The increase in the principal payments on mortgage notes is due to
$1,750,000 discounted payoff of the interest in net profits on Buccaneer
Village.
Short Term Liquidity:
At September 30, 1995, the Partnership held cash and cash equivalents of
$2,590,184. The General Partner considers the Partnership's cash reserves
adequate for anticipated operations for 1995.
In 1995, the Partnership's properties are expected to provide positive cash flow
from operations. Management will continue to address ongoing capital improvement
needs in light of the aging condition of the Partnership's properties. The
Partnership has budgeted approximately $1,948,000 for capital improvements for
1995. The General Partner believes these capital improvements are necessary to
allow the Partnership to increase its rental revenues in the competitive markets
in which the Partnership's properties operate. These expenditures also allow the
Partnership to reduce certain repairs and maintenance expenses from amounts that
would otherwise be incurred. During 1994, the Partnership began paying the
Contingent MID and anticipates to continue to make payments to the General
Partner in 1995.
<PAGE>
During 1995, the Partnership was faced with mortgage principal payments and
mortgage maturities on Buccaneer Village, Lamar Plaza, Millwood Park, Palisades
at the Galleria, Sundance and Plaza Westlake, totaling approximately
$28,144,000. In February 1995, the Partnership paid off the interest in net
profits on Buccaneer Village at a discounted payoff of $1,750,000 for retirement
of $3,588,192 of debt which resulted in an extraordinary gain on extinguishment
of debt of $1,838,192. Additionally, management successfully refinanced the
mortgage notes on Plaza Westlake, Palisades at the Galleria, Buccaneer Village
and Millwood Park. The mortgage note on Plaza Westlake was refinanced on March
24, 1995 with a new 5 year mortgage note in the amount of $4,000,000 which
retired the maturing mortgage note of $3,366,000 and yielding proceeds of
$334,062 to the Partnership. The mortgage note on Palisades at the Galleria was
refinanced on October 13, 1995 with a new 7 year mortgage note in the amount of
$10,600,000 which retired the maturing mortgage note of $8,412,000 and yielding
proceeds of approximately $1,914,000 to the Partnership. The mortgage notes on
Buccaneer Village was refinanced on October 20, 1995 with a new 7 year mortgage
note of $5,500,000, which retired the maturing mortgage notes of $3,406,000 and
yielded proceeds of approximately $1,925,000. The mortgage notes on Millwood
Park was refinanced on November 1, 1995 with a new 7 year mortgage note of
$3,982,500, which retired the maturing notes of $3,173,000 and yielded proceeds
of approximately $136,000.
The remaining two properties with 1995 maturities, Lamar Plaza and Sundance, had
maturing debt of approximately $11,700,000 were sold on June 19, 1995 and July
23, 1995, respectively.
Long Term Liquidity:
The Partnership's working capital needs have been supported by advances from
affiliates during the past several years. Some of that support was provided on a
short-term basis to meet monthly operating requirements, with repayment
occurring as funds became available; other advances were longer term in nature
due to lack of funds for repayment. Additionally, the General Partner has
allowed the Partnership to defer payment of MID and reimbursements until such
time as the Partnership 's cash reserves allow payments. During 1994, the
Partnership began to make repayments to the General Partner for advances and has
paid some of the accrued MID. The Partnership will continue to make such
payments as is allowed by cash reserves and cash flows of the Partnership.
However, the Partnership will not be able to repay the General Partner all
payables outstanding in the foreseeable future. The General Partner will
continue to defer the unpaid sums until the Partnership's cash reserves allow
such payments.
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. There is no assurance that
the Partnership will receive additional funds under the facility because no
amounts will be reserved for any particular partnership. At September 30, 1995,
$2,362,004 remained available for borrowing under the facility; however,
additional funds could become available as other partnerships repay borrowings.
Should market conditions change and operations deteriorate, present cash
resources may be insufficient to meet current needs. Other than available
portions of the $5,000,000 revolving credit facility, discussed above, which may
not be available when required by the Partnership, the Partnership has no
existing lines of credit from outside sources. Other sources of working capital
may be required and no such other sources have been identified.
Possible actions to resolve operating deficiencies include sales of properties,
refinancing or renegotiating terms of existing loans, deferring major capital
expenditures, except where improvements are expected to enhance the
competitiveness or marketability of the properties, or arranging additional
support from affiliates. Additional affiliate support is not assured, since
neither the General Partner nor any affiliates have obligations to make advances
in excess of any unused portion of the revolving credit facility discussed
above. Sales of properties are possibilities, however there is no assurance that
a sale can be completed, nor that a closing could be timed to coincide with the
Partnership's cash needs.
These conditions raise substantial doubt about the Partnership's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
<PAGE>
Distributions
With the exception of the Contingent MID, distributions to partners have been
suspended since 1986 as part of the General Partner's policy of maintaining
adequate cash reserves. Distributions to the limited partners will remain
suspended for the foreseeable future. The General Partner will continue to
monitor the cash reserves and working capital needs of the Partnership to
determine when cash flows will support distributions to the limited partners. A
distribution of $769,728 for the Contingent MID has been accrued by the
Partnership for the period ended September 30, 1995 for the General Partner.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
1) HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young BDO Seidman et
al (Case #92-06560-A). This suit was filed on behalf of the Partnership and
other affiliated partnerships (the "Affiliated Partnerships") on May 26,
1992, in the 14th Judicial District Court of Dallas County. The petition
sought recovery against the Partnership's former auditors, BDO Seidman, for
negligence and fraud in failing to detect and/or report overcharges of
fees/expenses by Southmark, the former general partner. The former auditors
asserted counterclaims against the Affiliated Partnerships based on alleged
fraudulent misrepresentations made to the auditors by the former management
of the Affiliated Partnerships (Southmark) in the form of client
representation letters executed and delivered to the auditors by Southmark
management. The counterclaims sought recovery of attorneys' fees and costs
incurred in defending this action. The original petition also alleged
causes of action against certain former officers and directors of the
Partnership's original general partner for breach of fiduciary duty, fraud
and conspiracy relating to the improper assessment and payment of certain
administrative fees/expenses. On January 11, 1994 the allegations against
the former officers and directors were dismissed.
The trial court granted summary judgment in favor of Ernst & Young and BDO
Seidman on the fraud and negligence claims based on the statute of
limitations. The Affiliated Partnerships appealed the summary judgment to
the Dallas Court of Appeals. In August 1995, the Appeals Court upheld all
of the summary judgments in favor of BDO Seidman. In exchange for the
plaintiff's agreement not to file any motions for rehearing or further
appeals, BDO Seidman agreed that it will not pursue the counterclaims
against the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.3 Amended and Restated Partnership Agreement,
dated September 6, 1991 (Incorporated by
reference to the Quarterly Report on Form
10-Q for the quarter ended September 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
229,980 and 230,594 limited partnership
units outstanding in 1995 and 1994.
27. Financial Data Schedule for the quarter
ended September 30, 1995.
</TABLE>
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended September 30, 1995.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
<TABLE>
<CAPTION>
McNEIL REAL ESTATE FUND XII, Ltd.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
<S> <C>
November 13, 1995 By: /s/ Donald K. Reed
- ------------------ ---------------------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
November 13, 1995 By: /s/ Robert C. Irvine
- ------------------ ---------------------------------------------------
Date Robert C. Irvine
Chief Financial Officer of McNeil Investors, Inc.
Principal Financial Officer
November 13, 1995 By: /s/ Brandon K. Flaming
- ------------------ ---------------------------------------------------
Date Brandon K. Flaming
Chief Accounting Officer of McNeil Real Estate
Management, Inc.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,590,184
<SECURITIES> 0
<RECEIVABLES> 188,309
<ALLOWANCES> (5,629)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 78,699,520
<DEPRECIATION> (39,609,984)
<TOTAL-ASSETS> 48,276,188
<CURRENT-LIABILITIES> 0
<BONDS> 53,545,919
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 48,276,188
<SALES> 13,466,770
<TOTAL-REVENUES> 17,064,764
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,646,043
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,820,990
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,597,731
<DISCONTINUED> 0
<EXTRAORDINARY> 2,106,625
<CHANGES> 0
<NET-INCOME> 3,704,356
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
