<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-10743
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McNEIL REAL ESTATE FUND XII, LTD.
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(Exact name of registrant as specified in its charter)
California 94-2717957
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (214) 448-5800
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
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Limited partnership units
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ X ]
229,072 of the registrant's 230,594 limited partnership units are
held by non-affiliates of this registrant. The aggregate market
value of units held by non-affiliates is not determinable since
there is no public trading market for limited partnership units
and transfers of units are subject to certain restrictions.
Documents Incorporated by Reference: See Item 14, Page 47
TOTAL OF 50 PAGES
<PAGE>
PART I
ITEM 1. BUSINESS
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ORGANIZATION
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McNeil Real Estate Fund XII, Ltd. (the "Partnership") was
organized February 2, 1981, 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 partnership agreement of limited partnership dated
September 6, 1991, as amended (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.
On June 8, 1981, a Registration Statement on Form S-11 was
declared effective by the Securities and Exchange Commission
whereby the Partnership offered for sale $120,000,000 of limited
partnership units ("Units"). The Units represent equity
interests in the Partnership and entitle the holders thereof to
participate in certain allocations and distributions of the
Partnership. The sale of Units closed on September 30, 1982,
with 230,728 Units sold at $500 each, or gross proceeds of
$115,364,000 to the Partnership. In addition, the original
general partners purchased a total of 200 Units for $100,000. In
1993, 111 Units were relinquished. An additional 223 Units were
relinquished in 1994 leaving 230,594 Units outstanding at
December 31, 1994.
CURRENT OPERATIONS
------------------
General:
The Partnership is engaged in diversified real estate activities,
including the ownership, operation and management of residential
and commercial real estate and other real estate related assets.
At December 31, 1994, the Partnership owned nine properties, of
which six are real estate investments and three are currently
assets held for sale, as described in Item 2 - Properties.
The Partnership does not directly employ any personnel. The
Partnership is managed by the General Partner, and, in accordance
with the Amended Partnership Agreement, the Partnership
reimburses affiliates of the General Partner for certain costs
incurred by affiliates of the General Partner in connection with
the management of the Partnership's business. See Item 8 - Note
2 - "Transactions with Affiliates."
The business of the Partnership to date has involved only one
industry segment. See Item 8 - Financial Statements and
Supplementary Data. The Partnership has no foreign operations.
The business of the Partnership is not seasonal.
Business Plan:
The Partnership's anticipated plan of operations for 1995 is to
preserve or increase the properties' net operating income
whenever possible, while at the same time making whatever capital
expenditures are reasonable under the circumstances in order to
preserve and enhance the value of the Partnership's properties.
The General Partner sold two of the Partnership's properties, Fox
Run and Village East, for approximately $2.8 million during 1994.
In February 1995, proceeds from the sales were used to pay off
the second mortgage note and interest in net profits on Buccaneer
Village at a discount. Additionally, three other properties are
held for sale as of December 31, 1994. Unless the General
Partner determines that it is otherwise in the best interest of
the Partnership, any further sale of properties is only expected
to occur at such time as the real estate market improves. See
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
<PAGE>
It appears that the Partnership's original schedule for meeting
its objectives of, among other things, preservation of capital,
current cash distributions and capital gains through potential
appreciation of Partnership properties is unlikely to be
achieved. In light of the depressed real estate market, the
Partnership has not been (and does not expect to be) able to
liquidate all of its properties within the originally expected
time frame of from six to eight years after their acquisition
(i.e., between 1987 and 1990). The General Partner now expects
to hold the Partnership's portfolio of real estate investments
until such time as the real estate market and the performance of
the Partnership's investments improves and permits the
Partnership to achieve its capital preservation and capital gains
objectives. There can be no assurance, however, that the
properties' values will increase over an extended holding period.
Competitive Conditions:
Since the principal business of the Partnership is to own and
operate real estate, the Partnership is subject to all of the
risks incident to ownership of real estate and interests therein,
many of which relate to the illiquidity of this type of
investment. These risks include changes in general or local
economic conditions, changes in supply or demand for competing
properties in an area, changes in interest rates and availability
of permanent mortgage funds which may render the sale or
refinancing of a property difficult or unattractive, changes in
real estate and zoning laws, increases in real property tax rates
and Federal or local economic or rent controls. The illiquidity
of real estate investments generally impairs the ability of the
Partnership to respond promptly to changed circumstances. The
Partnership competes with numerous established companies, private
investors (including foreign investors), real estate investment
trusts, limited partnerships and other entities (many of which
have greater resources than the Partnership) in connection with
the sale, financing and leasing of properties. The impact of
these risks on the Partnership, including losses from operations
and foreclosures of the Partnership's properties, is described in
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations. See Item 2 - Properties for
discussion of competitive conditions at the Partnership's
properties.
Other Information:
The environmental laws of the Federal government and of certain
state and local governments impose liability on current property
owners for the clean-up of hazardous and toxic substances
discharged on the property. This liability may be imposed
without regard to the timing, cause or person responsible for the
release of such substances onto the property. The Partnership
could be subject to such liability in the event that it owns
properties having such environmental problems. The Partnership
has no knowledge of any pending claims or proceedings regarding
such environmental problems.
<PAGE>
ITEM 2. PROPERTIES
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The following table sets forth the properties of the Partnership
at December 31, 1994. The buildings and the land on which they
are located are owned by the Partnership in fee, subject in each
case to a first lien deed of trust and, in some cases, one or
more junior mortgages as set forth more fully in Item 8 - Note 5
- "Mortgage Notes Payable". See also Item 8 - Note 4 - "Real
Estate Investments" and Schedule III - "Real Estate Investments
and Accumulated Depreciation and Amortization." In the opinion
of management, the properties are adequately covered by
insurance.
<TABLE>
<CAPTION>
Net Basis 1994 Date
Property Description of Property Debt Property Tax Acquired
-------- ----------- ----------- ---- ------------ --------
<C> <C> <C> <C> <C>
<S>
Real Estate Investments:
Brendon Way (1) Apartments
Indianapolis, IN 770 units $ 10,777,403 $ 18,162,469 $ 434,612 1/82
Buccaneer Village Apartments
Denver, CO 284 units 4,820,107 5,797,570 60,501 2/82
Castle Bluff (2) Apartments
Kentwood, MI 241 units 2,566,280 4,488,555 134,722 1/82
Channingway Apartments
Columbus, OH 770 units 10,370,432 13,181,124 255,767 12/82
Palisades at the
Galleria (3) Apartments
Atlanta, GA 370 units 7,968,984 8,392,910 165,914 7/82
Plaza Westlake
Glendale Retail Center
Heights, IL 121,464 sq. ft. 4,411,811 3,355,308 48,456 3/82
Assets held for sale:
Lamar Plaza Retail Center
Rosenberg, TX 151,759 sq. ft. 3,150,925 3,895,333 123,215 9/81
Millwood Park
Kansas City, Apartments
MO 301 units 3,369,783 2,940,990 114,983 1/82
Sundance Apartments
Wichita, KS 496 units 6,203,985 7,938,263 124,133 9/81
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$ 53,639,710 $ 68,152,522
============ ============
</TABLE>
_________________________________________
Total: Apartments - 3,232 units
Retail Centers - 273,223 sq. ft.
(1) Brendon Way Apartments is owned by Brendon Way Fund XII
Associates which is wholly-owned by the Partnership and the
General Partner.
<PAGE>
(2) Castle Bluff Apartments is owned by Castle Bluff Fund XII
Associates which is wholly-owned by the Partnership and the
General Partner.
(3) Palisades at the Galleria Apartments is owned by Palisades
Fund XII Associates, L.P. which is wholly-owned by the
Partnership and the General Partner.
The following table sets forth the properties' occupancy rate and
rent per square foot for each of the last five years:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
--------- ------- ------- ------- ------
<C> <C> <C> <C> <C>
<S>
Brendon Way
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Occupancy Rate 90% 90% 85% 88% 92%
Rent Per Square Foot $ 6.05 $ 5.60 $ 5.68 $ 5.73 $ 5.73
Buccaneer Village
-----------------
Occupancy Rate 95% 96% 97% 94% 100%
Rent Per Square Foot $ 7.42 $ 7.00 $ 6.25 $ 5.82 $ 6.39
Castle Bluff
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Occupancy Rate 98% 93% 93% 91% 86%
Rent Per Square Foot $ 6.92 $ 6.62 $ 6.37 $ 6.29 $ 6.54
Channingway
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Occupancy Rate 89% 91% 89% 87% 83%
Rent Per Square Foot $ 5.88 $ 5.75 $ 5.46 $ 4.96 $ 5.22
Lamar Plaza
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Occupancy Rate 84% 83% 93% 92% 93%
Rent Per Square Foot $ 4.67 $ 5.02 $ 5.32 $ 5.04 $ 4.71
Millwood Park
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Occupancy Rate 92% 96% 86% 89% 87%
Rent Per Square Foot $ 5.78 $ 5.11 $ 4.90 $ 4.84 $ 5.15
Palisades at the Galleria
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Occupancy Rate 99% 98% 92% 83% 85%
Rent Per Square Foot $ 7.83 $ 7.04 $ 6.22 $ 5.08 $ 5.01
Plaza Westlake
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Occupancy Rate 99% 100% 85% 90% 84%
Rent Per Square Foot $ 7.73 $ 7.92 $ 7.84 $ 6.60 $ 6.93
Sundance
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Occupancy Rate 89% 94% 96% 97% 94%
Rent Per Square Foot $ 6.45 $ 6.72 $ 6.54 $ 6.17 $ 6.06
</TABLE>
Occupancy rate represents all units leased divided by the total
number of units for residential properties and square footage
leased divided by total square footage for other properties as of
December 31 of the given year. Rent per square foot represents
all revenue, except interest, derived from the property's
operations divided by the leasable square footage of the
property.
<PAGE>
Competitive Conditions at Properties
------------------------------------
Brendon Way
-----------
Brendon Way is competing against newer properties as well as some
that have recently been renovated. The property is currently
below the average market rate of 93%. Rental rates at Brendon
Way are averaging $.57 to $.68 per square foot, while many
competitors are averaging $.43 to $.70 per square foot. Minor
renovations have improved the curb appeal of the property.
To continue to stay competitive, the property has initiated a
capital improvements program in 1995.
Buccaneer Village
-----------------
Over the last four years the rental rates at Buccaneer Village
have increased by 27% due to improved market conditions. The
market maintains a strong occupancy level at 97% and anticipates
3,200 additional units to be built in 1995. In addition to the
new units, a major rehabilitation project is occurring across the
street from the property. Although Buccaneer Village will not
compete directly with the new construction, the new construction
will tend to slow the increase in rental rates that older
property may expect in the coming years. Buccaneer Village will
continue with ongoing capital improvements to allow the property
to compete effectively in the market place.
Castle Bluff
------------
Castle Bluff is in a highly competitive market with the occupancy
rates running between 97% and 98%. Castle Bluff is currently
competing with new apartment properties in a soft economy. The
property has done some renovations to remain aggressive in the
market and anticipates raising the rental rates to $.63 per
square foot.
Channingway
-----------
Channingway is located in an area east of Columbus, Ohio with a
market of 27,648 apartment units. The property is currently
below the market average occupancy rate of 94%, however, monthly
rental rates have stayed higher than market. The property is
located in a desirable area with new shopping and entertainment
facilities. This will increase competition from new development.
The property's exteriors are dated and lack curb appeal.
In 1995, the property will begin a capital improvement program to
remain competitive in the market.
Millwood Park
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Through an aggressive marketing campaign, Millwood Park has
maintained occupancy rates and rental rates higher than the local
submarket. There has been no new construction within a three mile
radius of the property over the last two years. However,
occupancy trends are anticipated to decline 2% during 1995 from
the market average of 92%, but rental rates should remain stable.
Millwood is currently on the market for sale.
Palisades
---------
Occupancy rates at Palisades at the Galleria have increased by
16% since the 1991 renovation program began. The $3 million
renovation program included new interiors, signage, exterior
painting, asphalt and upgrading the clubhouse. The market
continues to maintain an occupancy level at 95%. Palisades at
the Galleria is located in Atlanta and with the 1996 Olympics,
the market should remain strong throughout 1996. The market,
however, may remain flat in 1997 due to the over supply of new
construction.
Plaza Westlake
--------------
Plaza Westlake enters 1995 with an occupancy rate of 99%, higher
than the market average of 93%. Plaza Westlake is located in a
high traffic area with a proven anchor. The property anticipates
to be fully leased by mid-1995. The rental rates per square foot
approximates the average rates charged by the seven centers
competing directly with Plaza Westlake.
Lamar Plaza
-----------
Lamar Plaza finished the year below the market average occupancy
rate of 86% Built in 1974, Lamar Plaza is competing against newer
properties. The most recent being the 1994 development of a K-Mart
Super Store and the opening of a major grocery store just down the
street. The property is current on the market for sale.
Sundance
--------
Sundance is located in a depressed rental market as a result of a
record level of home sales over the last four years. The
property, however, has been able to remain above the 87% average
occupancy rate for the market. Sundance needs capital
improvements to continue to remain competitive in the market.
The property is currently on the market for sale.
<PAGE>
The following schedule shows lease expirations for each of the
Partnership's commercial properties for 1995 through 2004:
<TABLE>
<CAPTION>
Number of Annual % of Gross
Expirations Square Feet Rent Annual Rent
----------- ----------- ------ ------------
<C> <C> <C> <C>
<S>
Lamar Plaza
-----------
1995 9 47,768 $171,484 28%
1996 5 22,455 93,003 16%
1997 1 4,431 32,125 5%
1998 1 6,088 17,364 3%
1999 1 797 6,774 1%
2000 - - - -
2001 1 43,925 287,187 47%
Thereafter - - - -
Plaza Westlake
--------------
1995 2 8,000 $ 74,360 9%
1996 4 10,236 110,824 14%
1997 4 7,580 84,460 11%
1998 2 20,784 175,872 22%
1999 2 69,645 330,357 41%
2000 1 2,080 28,038 3%
Thereafter - - - -
</TABLE>
No residential tenant leases 10% or more of the available rental
space. The following schedule reflects information on commercial
tenants occupying 10% or more of the leasable square feet for
each property:
<TABLE>
<CAPTION>
Nature of
Business Square Footage Lease
Use Leased Annual Rent Expiration
-------- -------------- ----------- ----------
<C> <C> <C>
<S>
Lamar Plaza
-----------
Retail 29,864 $ 61,312 1995
Grocery 43,925 $287,187 2001
Plaza Westlake
--------------
Entertainment 17,584 $140,672 1998
Retail 68,020 $310,857 1999
</TABLE>
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
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The Partnership is not party to, nor are any of the Partnership's
properties the subject of, any material pending legal
proceedings, other than ordinary, routine litigation incidental
to the Partnership's business, except for the following:
HCW Pension Real Estate Fund, Ltd. et al. v. Gene E. Phillips,
William S. Friedman, Thomas C. Walker, James H. Flinchum,
Ernst & Young and BDO Seidman (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 seeks recovery against the Partnership's former
auditors for negligence and fraud in failing to detect and/or
report overcharges of fees/expenses by Southmark, the former
general partner. The Partnership is seeking to recover
$1,886,545 in actual damages plus exemplary damages, interest
and costs. The former auditors have 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 seek 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 judgement in favor of Ernst &
Young and BDO Seidman on the fraud and negligence claims based
on the statute of limitations. The Affiliated Partnerships
have appealed the summary judgement to the Dallas Court of
Appeals. Briefs have been filed and the parties are awaiting
oral arguments. A ruling is expected by July 1995. The
Affiliated Partnerships are pursuing these claims vigorously
on appeal. The ultimate outcome of this litigation cannot be
determined at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------- ---------------------------------------------------
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP
--------------------------------------------------------
AND RELATED SECURITY HOLDER MATTERS
-----------------------------------
(A) There is no established public trading market for limited
partnership units, nor is one expected to develop.
(B) Title of Class Number of Record Unit Holders
-------------- -----------------------------
Limited partnership units 13,947 as of February 28, 1995
(C) No cash distributions were made to the limited partners in
1994 or 1993, and none are anticipated in 1995. The
Partnership accrued distributions of $1,164,549 and
$1,191,834 for the benefit of the General Partner for the
years ended December 31, 1994 and 1993, respectively of
which $3,753,981 remains unpaid as of December 31, 1994.
These distributions are the contingent portion of the
Management Incentive Distribution ("MID") pursuant to the
Amended Partnership Agreement. The Partnership anticipates
making additional distributions to the General Partner for
the Contingent MID in 1995. See Item 8 - Note 2 -
"Transactions with Affiliates." See Item 7 - Management's
Discussion and Analysis of Financial Condition and Results
of Operations for a discussion of distributions and the
likelihood they will be resumed to the limited partners.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
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The following table sets forth a summary of certain financial data for
the Partnership. This summary should be read in conjunction with the
Partnership's financial statements and notes thereto appearing in Item 8.
<TABLE>
<CAPTION>
Statements of Years Ended December 31,
--------------------------------------------------------------------------------
Operations 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
<C> <C> <C> <C> <C>
<S>
Rental revenue $ 21,295,696 $ 24,228,119 $ 23,603,862 $ 24,067,446 $ 24,909,877
Total revenue 27,701,373 32,481,572 24,837,444 24,240,414 25,257,318
Gain (loss) on disposition of
real estate 6,307,885 8,193,880 714,048 (1,667,056) (3,251,835)
Income (loss) before
extraordinary item 3,220,934 4,178,756 (3,917,231) (9,057,704) (9,345,980)
Extraordinary gain on
extinguishment of debt 246,149 - 79,639 5,684,818 4,001,608
Net income (loss) 3,467,083 4,178,756 (3,837,592) (3,372,886) (5,344,372)
Net income (loss) per limited
partnership unit:
Income (loss) before
extraordinary item $ 13.27 $ 17.20 $ (16.11) $ (37.29) $ (39.01)
Extraordinary gain on
extinguishment of debt 1.01 - .33 23.39 17.15
----------- ----------- ------------ ------------ -----------
Net income (loss) $ 14.28 $ 17.20 $ (15.78) $ (13.90) $ (21.86)
=========== =========== ============ ============ ===========
As of December 31,
---------------------------------------------------------------------------------
Balance Sheets 1994 1993 1992 1991 1990
-------------- ------------ ------------ ------------- ------------- -------------
Real estate investments, net $ 40,915,017 $ 52,304,839 $ 65,885,322 $ 75,552,691 $ 87,087,385
Assets held for sale 12,724,693 11,421,936 7,484,189 1,626,350 -
Total assets 60,189,348 72,830,100 78,455,373 83,546,776 94,583,299
Mortgage notes payable, net 68,152,522 79,867,507 90,732,765 94,217,264 103,826,676
Partners' deficit (19,292,331) (21,594,865) (24,581,787) (19,785,168) (15,673,712)
</TABLE>
See Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations. The following properties
were sold or foreclosed on by the lender.
<TABLE>
<CAPTION>
Property Date Sold or Foreclosed
-------- -----------------------
<C> <C>
Fox Run Apartments December 1994 - Sold
Village East Apartments November 1994 - Sold
Cedar Mill Crossing Apartments December 1993 - Sold
Valley Fair Shopping Center May 1992 - Sold
Tennessee Ridge Apartments October 1991 - Foreclosed
Channingway Commercial Center September 1991 - Foreclosed
Mesa Ridge Apartments May 1990 - Foreclosed
Silver Fox Apartments January 1990 - Foreclosed
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
------- ------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The accompanying financial statements have been prepared assuming
that the partnership will continue as a going concern.
At December 31, 1994, the Partnership held cash and cash
equivalents of $3,313,765, down $1,624,264 as compared to 1993.
In January 1994, with the cash proceeds from the sale of Cedar
Mill Crossing, the Partnership paid $2,400,000 to the General
Partner for repayment of advances, accrued interest and Fixed
MID. The Partnership also repaid all mortgage loans to McNeil
Real Estate Fund XXVII, L.P. ("Fund XXVII") totaling $1,603,135
and paid $300,000 in Contingent MID in 1994.
The Partnership has experienced positive cash flow from
operations of $5,437,381 for the three years ended December 31,
1994. The Partnership generated $2,058,565 through operating
activities in 1994 as compared to $2,509,962 in 1993. This
decrease can be attributed to the increase in the amount paid to
affiliates during 1994.
In 1993, the Partnership generated $2,059,962 through operating
activities as compared to $868,854 in 1992. This increase is
primarily due to an increase in the cash received from tenants
due to an increase in the rental rates and the reduction in the
amount of interest paid during 1993. The reduction interest paid
is due to the refinancing of the mortgage note on Palisades at
the Galleria and the pay off of the second and third mortgages
notes on Plaza Westlake.
The Partnership expended $1,968,318, $2,512,727 and $2,308,624
for capital improvements to the properties in 1994, 1993 and
1992, respectively. The Partnership has received net cash
proceeds from the disposition of real estate of $9,005,627 over
the last three years and insurance proceeds of $40,441 as a
result of the fire at Brendon Way in 1994.
In 1993, the Partnership received net cash proceeds of $1,283,267
for refinancing the mortgage note on Palisades at the Galleria.
The Partnership has received advances and mortgage notes from
affiliates of $4,158,819 during the three years ended
December 31, 1994. However, due to the cash proceeds of
$10,288,894 from the disposition of real estate investments and
the refinancing, the Partnership has been able to repay
$4,519,334 in advances and mortgage notes from affiliates. The
Partnership also began paying the General Partner the Contingent
MID in 1994.
Short Term Liquidity:
At December 31, 1994, the Partnership held cash and cash
equivalents of $3,313,765 as compared to $4,938,029 in 1993. 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 in addition to the $6.8 million of capital improvements made
during the past three years. 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 is faced with mortgage principal
payments and mortgage maturities on Buccaneer Village, Lamar
Plaza, Millwood Park, Palisades at the Galleria, Plaza Westlake
and Sundance, totaling approximately $28,144,000. It is
management's policy to negotiate extensions or arrange
refinancings for the mortgage notes that are due. Subsequent
to year end, the Partnership paid off the interest in net
profits on Buccaneer Village at a discounted payoff of
$1,750,000 for retirement of $3,571,229 of debt. Additionally,
management successfully refinanced Plaza Westlake on March 24,
1995. The new 5 year mortgage note in the amount of $4,000,000
retired the maturing mortgage of $3,366,000 and yielded
approximately $248,000 in proceeds to the Partnership. Manage-
ment is currently negotiating the refinancing of Buccaneer
Village's first mortgage and Palisades at the Galleria.
Management anticipates closing on the refinancings by mid-year
with expected proceeds to the Partnership of approximately
$3,500,000.
The remaining three properties with 1995 maturities, Lamar Plaza,
Millwood Park and Sundance, have maturing debt of $12,692,000
and are currently on the market for sale. The General Partner
believes that Lamar Plaza and Sundance cannot be refinanced given
their current level of debt. The General Partner does not
believe it would be in the Partnership's best interest to
invest additional money into these properties. Therefore in
the event the Partnership is unable to arrange a sale or
extension of these loans, the Partnership may allow foreclosure
of these properties for full settlement of the debt. The
foreclosure of these properties would not have an adverse effect
on the Partnership. The mortgage note payable balance and net
book value of Lamar Plaza are $3,895,333 and $3,150,925,
respectively. The mortgage note payable balance and net book
value of Sundance are $7,938,263 and $6,203,985, respectively.
The General Partner believes it is in the best interest of the
Partnership to market Millwood Park for sale instead of
refinancing the maturing mortgage. The property would yield
lesser proceeds through a refinancing and require additional
capital which would be a burden to cash reserves. The mortgage
note payable balance and the net book value of Millwood Park are
$2,940,990 and $3,369,783, respectively. The carrying value of
all of these properties is below what the General Partner
estimates the net realizable value to be. There can be no
assurance that these sales/refinancings will occur to coincide
with the Partnership's cash needs.
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 has begun
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.
The Partnership borrowed $6,000 from this facility during 1994.
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 December 31, 1994,
$1,743,530 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.
<PAGE>
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.
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
$1,164,549 for the Contingent MID has been accrued by the
Partnership for the year ended December 31, 1994 for the General
Partner.
FINANCIAL CONDITION
-------------------
The Partnership was formed to acquire, operate and ultimately
dispose of a portfolio of income-producing real properties. As
of December 31, 1994, the Partnership owned nine properties. All
of the Partnership properties are subject to mortgage notes.
On December 19, 1994, the Partnership sold its investment in Fox
Run to an unrelated third party for a cash sales price of $54,947
and assumption of the first and second liens by the purchaser. On
November 18, 1994, the Partnership sold its investment in Village
East to an unaffiliated buyer for a sales price of $8,625,000.
The sale of these two properties resulted in net cash proceeds to
the Partnership of $2,791,434 and a gain on disposition of real
estate of $6,307,885.
RESULTS OF OPERATIONS
---------------------
1994 compared to 1993
Revenue:
Total Partnership revenues in 1994 decreased by $4,780,199 or
14.7% as compared to 1993. This decrease is due to the sale of
Cedar Mill Crossing in 1993. Revenues also declined as a result
of a reduction in the gain on disposition of real estate from
$8,193,880 in 1993 to $6,307,885 in 1994. Rental revenue
decreased by $2,932,423 while interest income increased by
$17,342.
Rental revenue for 1994 was $21,295,656 as compared to
$24,228,119 in 1993. The decrease is due to the sale of Cedar
Mill Crossing, which reduced rental revenue by $3,471,915. This
decline was partially offset by a $539,492 increase in rental
revenue at the remaining properties due to increases in rental
rates at six of the Partnership's properties.
Interest income increased due to higher interest rates earned in
1994 as compared to 1993.
<PAGE>
Expenses:
Partnership expenses decreased by $3,822,377 or 14% for the year
ended December 31, 1994 as compared to 1993.
During 1993, Cedar Mill Crossing was sold and the effects from
the sale were declines of $1,298,509 in interest, $435,502 in
depreciation and amortization, $308,509 in property taxes,
$353,596 in personnel expenses, $174,804 in property management
fees, $335,001 in utilities, $371,953 in repairs and maintenance
and $175,041 in other property operating expenses.
In addition to the sale of Cedar Mill Crossing, other factors
affected the level of expenses reported by the remaining
properties. Interest expense - affiliates decreased by $269,889
or 66% in 1994 as compared to the same period last year. This
decrease is due to paying off the affiliate loans and paying down
on the advances outstanding in January 1994.
Depreciation and amortization on the properties increased by
$239,164 or 5% due to the substantial capital improvements made
at the properties over the last few years.
Property taxes decreased by $228,459 or 13% due to a decrease in
the estimated tax liability at Castle Bluff, a reduction in the
appraised value at Lamar Plaza, and a refund of taxes resulting
from the sale of Fox Run.
Expenses for personnel, repairs and maintenance, utilities, and
other property operating increased $583,153 for 1994 as compared
to 1993. Personnel expenses increased by $148,797 or 6% due to
increases in maintenance employee hours and incentive bonus paid.
Repairs and maintenance increased by $307,857 or 12% due to
increases in roof repair, electrical, and HVAC supplies. This
increase is also due to repairs and expenses associated with
preparing vacated units for occupancy. Other property operating
increased by $99,616 or 7% primarily due to an increase in other
professional expenses associated with a real estate tax appeal on
Plaza Westlake and an increase in resident pre-qualification at
all the properties.
General and administrative decreased by $223,502 or 58% primarily
due to a reduction in tax preparation, legal costs and
professional fees.
General and administrative - affiliates decreased by $234,714 or
31% as compared to the same period last year due to an amendment
to the Amended Partnership Agreement which eliminates the Fixed
MID effective July 1993. This decrease was partially offset by
an increase in reimbursements to affiliates because of fewer
partnerships over which overhead costs are allocated.
1993 compared to 1992
Revenue:
Total Partnership revenues in 1993 increased by $7,644,128 or 31%
as compared to 1992. This increase is due to a gain on
disposition of real estate of $8,193,880 recognized in 1993.
Rental revenue increased by $624,257 while interest income
decreased by $19,580. In 1992 the Partnership recognized a
$440,381 gain on settlement of legal expenses. See Item 8 -
Note 12 "Gain on Settlement of Legal Expenses."
Rental revenue for 1993 was $24,228,119 as compared to
$23,603,862 in 1992. The increase is due to increased occupancy
at six of the Partnership's properties along with the increase in
rental rates at a majority of the properties.
Interest income decreased due to lower invested cash balances in
1993 as compared to 1992.
Expenses:
Partnership expenses decreased by $451,859 for the year ended
December 31, 1993 as compared to 1992.
<PAGE>
During 1992, Valley Fair was sold and the effects from the sale
were declines of $64,307 in interest, $45,955 in depreciation and
amortization, $28,319 in property taxes, $12,586 in personnel
expenses, $12,913 in property management fees, $11,908 in
utilities, $10,368 in repairs and maintenance and $19,492 in
other property operating expenses.
In addition to changes due to the sale, other factors affected
the level of expenses reported by the remaining properties.
Interest expense decreased by $776,920 due to the refinancing of
the Palisades at the Galleria note, the payoff of the second and
third Plaza Westlake notes, and the reduction in the Treasury
bill rate, which is the basis on which interest expense for the
mortgage note on Channingway is calculated.
Interest expense - affiliates increased in 1993 as compared to
the same period last year due to the increase in the average
amount of affiliate loans and advances outstanding during the
year.
Depreciation and amortization on the properties increased by
$364,390 or 8% due to the substantial capital improvements at the
properties over the last few years.
Property taxes decreased by $205,651 or 9% due to a reduction in
the estimated tax liability on Buccaneer Village, Cedar Mill
Crossing, and Channingway.
Utilities increased by $232,920 or 13% due to an increase in
electricity at Brendon Way and The Village and increase in water
at Cedar Mill Crossing and Channingway. Also, all the
Partnership's properties experienced an increase in natural gas.
General and administrative - affiliates decreased by $110,275 as
compared to the same period last year due to an amendment to the
Amended Partnership Agreement which eliminates the Fixed MID
effective July 1993. This decrease was partially offset by an
increase in reimbursements to affiliates because of fewer
partnerships over which overhead costs are allocated.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------- -------------------------------------------
<TABLE>
<CAPTION>
Page
Number
------
<C>
<S>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Financial Statements:
Report of Independent Public Accountants 17
Balance Sheets at December 31, 1994 and 1993 18
Statements of Operations for each of the
three years in the period ended December 31, 1994 19
Statements of Partners' Deficit for each of the
three years in the period ended December 31, 1994 20
Statements of Cash Flows for each of the three
years in the period ended December 31, 1994 21
Notes to Financial Statements 23
Financial Statement Schedule -
Schedule III - Real Estate Investments and
Accumulated Depreciation and Amortization 40
</TABLE>
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
McNeil Real Estate Fund XII, Ltd.:
We have audited the accompanying balance sheets of McNeil Real
Estate Fund XII, Ltd. (a California limited partnership) as of
December 31, 1994 and 1993, and the related statements of
operations, partners' deficit and cash flows for each of the
three years in the period ended December 31, 1994. These
financial statements and the schedule referred to below are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of McNeil Real Estate Fund XII, Ltd. as of December 31, 1994 and
1993, and the results of its operations and its cash flows for
each of the three years in the period ended
December 31, 1994, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming
that the Partnership will continue as a going concern. As
discussed in Note 10 to the financial statements, the Partnership
has previously relied on advances from affiliates to meet its
debt obligations and to fund capital improvements. Additionally,
the Partnership has previously had to defer payment of payables
to affiliates in order to meet its working capital needs.
Although management does not anticipate the need for additional
advances, payments of such advances and payables can only be made
if certain pending sales are closed or mortgage balances
refinanced. Additionally, the Partnership is faced with mortgage
principal payments and mortgage note maturities of approximately
$22.8 million in 1995 for which no extensions, modifications,
or refinancings have yet been negotiated. There is no guarantee
that such negotiations can be completed or that the sale of any
properties can be closed to coincide with the Partnership's cash
needs. Management's plans in regard to these matters are also
described in Note 10. 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.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed
in the index to financial statements is presented for purposes of
complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be
set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen LLP
Dallas, Texas
March 24, 1995
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------
1994 1993
------------ ------------
<C> <C>
<S>
ASSETS
------
Real estate investments:
Land $ 6,280,580 $ 7,108,968
Buildings and improvements 71,739,632 89,085,041
------------ ------------
78,020,212 96,194,009
Less: Accumulated depreciation and amortization (37,105,195) (43,889,170)
------------ ------------
40,915,017 52,304,839
Assets held for sale 12,724,693 11,421,936
Cash and cash equivalents 3,313,765 4,938,029
Cash segregated for security deposits 303,436 347,986
Accounts receivable, net of allowance for
doubtful accounts of $5,629 and $36,410 at
December 31, 1994 and 1993, respectively 317,559 381,737
Prepaid expenses and other assets 258,668 289,275
Escrow deposits 896,234 1,504,609
Deferred borrowing costs, net of accumulated
amortization of $652,691 and $715,830 at
December 31, 1994 and 1993, respectively 1,459,976 1,641,689
------------ ------------
$ 60,189,348 $ 72,830,100
============ ============
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Mortgage notes payable, net $ 68,152,522 $ 79,867,507
Mortgage notes payable - affiliate - 1,603,135
Accounts payable 220,341 647,869
Accrued expenses 146,722 128,240
Accrued interest 1,680,833 1,599,238
Accrued property taxes 961,459 1,224,990
Advances from Southmark 32,690 30,655
Advances from affiliates - General Partner 1,814,115 3,346,441
Payable to affiliates - General Partner 5,926,684 5,292,511
Security deposits and deferred rental income 546,313 684,379
------------ ------------
79,481,679 94,424,965
------------ ------------
Partners' deficit:
Limited partners - 240,000 limited partnership
units authorized; 230,594 and 230,817 limited
partnership units issued and outstanding at
December 31, 1994 and 1993, respectively (9,844,782) (13,138,511)
General Partner (9,447,549) (8,456,354)
------------ ------------
(19,292,331) (21,594,865)
------------ ------------
$ 60,189,348 $ 72,830,100
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1994 1993 1992
------------- ------------- ------------
<C> <C> <C>
<S>
Revenue:
Rental revenue $ 21,295,696 $ 24,228,119 $ 23,603,862
Interest 76,915 59,573 79,153
Gain on disposition of real estate 6,307,885 8,193,880 714,048
Gain on involuntary conversion 20,877 - -
Gain on settlement of legal expenses - - 440,381
------------ ------------ ------------
Total revenue 27,701,373 32,481,572 24,837,444
------------ ------------ ------------
Expenses:
Interest 7,642,760 9,211,571 10,052,798
Interest - affiliates 138,828 408,717 204,211
Depreciation and amortization 4,619,944 4,816,282 4,497,847
Property taxes 1,515,606 2,052,574 2,286,544
Personnel expenses 2,696,563 2,901,362 2,843,087
Property management fees - affiliates 1,067,967 1,207,684 1,167,150
Utilities 1,729,864 2,037,982 1,816,970
Repairs and maintenance 2,956,539 3,020,635 3,048,566
Other property operating expenses 1,437,705 1,513,130 1,574,547
General and administrative 163,877 387,379 407,180
General and administrative -
affiliates 510,786 745,500 855,775
------------ ------------ ------------
Total expenses 24,480,439 28,302,816 28,754,675
------------ ------------ ------------
Income (loss) before extraordinary item 3,220,934 4,178,756 (3,917,231)
Extraordinary gain on extinguishment
of debt 246,149 - 79,639
------------ ------------ ------------
Net income (loss) $ 3,467,083 $ 4,178,756 $ (3,837,592)
============ ============ ============
Net income (loss) allocable to limited
partners $ 3,293,729 $ 3,969,818 $ (3,645,712)
Net income (loss) allocable to General
Partner 173,354 208,938 (191,880)
------------ ------------ ------------
Net income (loss) $ 3,467,083 $ 4,178,756 $ (3,837,592)
============ ============ ============
Net income (loss) per limited
partnership unit:
Income (loss) before extraordinary
item $ 13.27 $ 17.20 $ (16.11)
Extraordinary gain on extinguishment
of debt 1.01 - .33
------------ ----------- ------------
Net income (loss) $ 14.28 $ 17.20 $ (15.78)
============ =========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
STATEMENTS OF PARTNERS' DEFICIT
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
------------ ------------- -------------
<C> <C> <C>
<S>
Balance at December 31, 1991 $ (6,322,551) $ (13,462,617) $ (19,785,168)
Net loss (191,880) (3,645,712) (3,837,592)
Contingent Management Incentive
Distribution (959,027) - (959,027)
------------ ------------- -------------
Balance at December 31, 1992 (7,473,458) (17,108,329) (24,581,787)
Net income 208,938 3,969,818 4,178,756
Contingent Management Incentive
Distribution (1,191,834) - (1,191,834)
------------ ------------- -------------
Balance at December 31, 1993 (8,456,354) (13,138,511) (21,594,865)
Net income 173,354 3,293,729 3,467,083
Contingent Management Incentive
Distribution (1,164,549) - (1,164,549)
------------ ------------- -------------
Balance at December 31, 1994 $ (9,447,549) $ (9,844,782) $ (19,292,331)
============ ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------
1994 1993 1992
-------------- ------------- -------------
<C> <C> <C>
<S>
Cash flows from operating activities:
Cash received from tenants $ 21,232,256 $ 24,214,841 $ 23,198,168
Cash paid to suppliers (8,698,900) (9,274,750) (9,701,386)
Cash paid to affiliates (1,809,129) (1,199,948) (1,153,820)
Interest received 76,915 59,573 79,153
Interest paid (6,643,256) (8,493,337) (9,526,498)
Deferred borrowing costs paid (44,891) (324,543) (255,130)
Interest paid to affiliates (470,490) (210,778) (28,608)
Property taxes paid (1,583,940) (2,261,096) (1,743,025)
------------ ------------ ------------
Net cash provided by operating activities 2,058,565 2,509,962 868,854
------------ ------------ ------------
Cash flows from investing activities:
Additions to real estate investments (1,968,318) (2,512,727) (2,308,624)
Net proceeds from disposition of
real estate investments 2,791,434 5,040,451 1,173,742
Insurance proceeds from fire 40,441 - -
------------ ------------ ------------
Net cash provided by (used in)
investing activities 863,557 2,527,724 (1,134,882)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments on mortgage
notes payable (1,442,587) (1,961,022) (2,434,083)
Reinstatement of mortgage principal
due to note modification - 258,586 -
Net cash paid for refinancing of
mortgage note payable - - (157,127)
Cash proceeds from refinancing
of mortgage notes payable - 1,283,267 -
Mortgage loans from affiliate - 1,556,670 1,756,000
Repayment of mortgage loans from
affiliate (1,603,135) (1,709,535) -
Advances from affiliates - General
Partner 6,000 128,518 711,631
Repayment of advances from
affiliates - General Partner (1,206,664) - -
Contingent Management Incentive
Distribution (300,000) - -
-------------- ------------- --------------
Net cash used in financing activities (4,546,386) (443,516) (123,579)
-------------- ------------- --------------
Net increase (decrease) in cash and
cash equivalents (1,624,264) 4,594,170 (389,607)
Cash and cash equivalents at
beginning of year 4,938,029 343,859 733,466
-------------- ------------- --------------
Cash and cash equivalents at end of year $ 3,313,765 $ 4,938,029 $ 343,859
============== ============= ==============
</TABLE
See discussion of noncash investing and financing activities in Note 7.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
STATEMENTS OF CASH FLOWS
Reconciliation of Net Income (Loss) to Net Cash Provided by
Operating Activities
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------
1994 1993 1992
------------ ------------- -------------
<C> <C> <C>
<S>
Net income (loss) $ 3,467,083 $ 4,178,756 $ (3,837,592)
----------- ----------- ------------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 4,619,944 4,816,282 4,497,847
Amortization of discounts on
mortgage notes payable 308,183 305,006 308,754
Amortization of deferred
borrowing costs 226,604 257,640 221,043
Net interest added to advances
from Southmark 2,035 1,750 1,587
Net interest added to advances
from affiliates - General Partner 131,727 197,939 174,016
Loss on disposition of real estate (6,307,885) (8,193,880) (714,048)
Gain on involuntary conversion (20,877) - -
Extraordinary gain on extinguishment
of debt (246,149) - (79,639)
Changes in assets and liabilities:
Cash segregated for security
deposits 44,550 (26,685) (70,716)
Accounts receivable, net 64,178 60,079 (154,120)
Prepaid expenses and other
assets 30,607 45,907 174,593
Escrow deposits 608,375 324,729 947,299
Deferred borrowing costs (44,891) (324,543) (255,130)
Accounts payable (427,528) 58,914 (641,733)
Accrued expenses 98,033 (47,486) (462,240)
Accrued interest (705) 153,838 (3,497)
Accrued property taxes (186,427) (114,031) (98,502)
Payable to affiliates - Southmark - - (34,159)
Payable to affiliates - General
Partner (230,376) 753,236 869,105
Security deposits and deferred
rental income (77,916) 62,511 25,986
------------ ------------ ------------
Total adjustments (1,408,517) (1,668,794) 4,706,446
------------ ------------ ------------
Net cash provided by operating
activities $ 2,058,565 $ 2,509,962 $ 868,854
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
Organization
------------
McNeil Real Estate Fund XII, Ltd. (the "Partnership") was
organized February 2, 1981, 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 partnership agreement of limited partnership dated
September 6, 1991, as amended (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.
Basis of Presentation
---------------------
The Partnership's financial statements include the accounts of
Brendon Way Fund XII Associates, Castlebluff Fund XII Associates,
and Palisades Fund XII Associates, L.P. as of December 31, 1994
and 1993. These single asset Partnerships are wholly-owned by
the Partnership and the General Partner. The General Partner's
minority interest is not reflected in the accompanying financial
statements due to immateriality. All intercompany transactions
have been eliminated.
Real Estate Investments
-----------------------
Real estate investments are generally stated at the lower of cost
or net realizable value. Real estate investments are monitored
on an ongoing basis to determine if the property has sustained a
permanent impairment in value. At such time, a write-down is
recorded to reduce the basis of the property to its net
realizable value. A permanent impairment is determined to have
occurred when a decline in property value is considered to be
other than temporary based upon management's expectations with
respect to projected cash flows and prevailing economic
conditions.
Improvements and betterments are capitalized and expensed through
depreciation charges. Repairs and maintenance are charged to
operations as incurred.
Assets Held for Sale
--------------------
Assets held for sale are stated at the lower of cost or estimated
realizable value.
Depreciation and Amortization
-----------------------------
Buildings and improvements are depreciated using the straight-
line method over the estimated useful lives of the assets,
ranging from 3 to 25 years. Tenant improvements are amortized
over the terms of the related tenant lease using the straight-
line method.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash on hand and cash on
deposit with financial institutions with original maturities of
three months or less.
<PAGE>
Escrow Deposits
---------------
The Partnership is required to maintain escrow accounts in
accordance with the terms of various mortgage indebtedness
agreements. These escrow accounts are controlled by the mortgagee
and are used for payment of property taxes, hazard insurance,
capital improvements and/or property replacements.
Deferred Borrowing Costs
------------------------
Loan fees and other related costs incurred to obtain long-term
financing on real property are capitalized and amortized using a
method that approximates the effective interest method over the
terms of the related mortgage notes payable. Amortization of
deferred borrowing costs is included in interest expense on the
Statements of Operations.
Discounts on Mortgage Notes Payable
-----------------------------------
Discounts on mortgage notes payable are being amortized over the
remaining terms of the related mortgage notes using the effective
interest method. Amortization of discounts on mortgage notes
payable is included in interest expense on the Statements of
Operations.
Rental Revenue
--------------
The Partnership leases its residential properties under short-
term operating leases. Lease terms generally are less than one
year in duration. Rental revenue is recognized as earned.
The Partnership leases its commercial properties under non-
cancelable operating leases. Certain leases provide concessions
and/or periods of escalating or free rent. Rental revenue is
recognized on a straight-line basis over the term of the related
leases. The excess of the rental revenue recognized over the
contractual rental payments is recorded as accrued rent
receivable and included in accounts receivable on the Balance
Sheets.
Income Taxes
------------
No provision for Federal income taxes is necessary in the
financial statements of the Partnership because, as a
partnership, it is not subject to Federal income tax, and the tax
effect of its activities accrues to the partners.
Allocation of Net Income and Net Loss
-------------------------------------
The Amended Partnership Agreement provides for net income of the
Partnership for both financial statement and income tax purposes
to be allocated as indicated below. For allocation purposes, net
income and net loss of the Partnership are determined prior to
deductions for depreciation.
a) first, 5% of all deductions for depreciation shall be
allocated to the General Partner and 95% to the limited
partners;
b) then, net income in an amount equal to the cumulative amount
paid to the General Partner for the contingent portion of
the Management Incentive Distribution ("MID") for which no
previous income allocations have been made, shall be
allocated to the General Partner; provided, however, that if
all or a portion of such payment consists of limited
partnership units ("Units"), the amount of net income
allocated shall be equal to the amount of cash the General
Partner would have otherwise received; and
c) then, any remaining net income shall be allocated to achieve
the ratio of 5% to the General Partner and 95% to the
limited partners.
<PAGE>
The Amended Partnership Agreement also provides that net losses,
other than those arising from a sale or refinancing, shall be
allocated 5% to the General Partner and 95% to the limited
partners. Net losses arising from a sale or refinancing shall be
allocated 1% to the General Partner and 99% to the limited
partners.
Federal income tax law provides that the allocation of loss to a
partner will not be recognized unless the allocation is in
accordance with a partner's interest in the partnership or the
allocation has substantial economic effect. Internal Revenue Code
Section 704(b) and accompanying Treasury Regulations establish
criteria for allocations of Partnership deductions attributable
to debt. The Partnership's tax allocations for 1994, 1993 and
1992 have been made in accordance with these provisions.
Distributions
-------------
Pursuant to the Amended Partnership Agreement and at the
discretion of the General Partner, distributions during each
taxable year shall be made as follows:
(a) first, to the General Partner, an amount equal to the
contingent portion of the MID; and
(b) any remaining distributable cash, as defined, shall be
distributed 100% to the limited partners.
No cash distributions were made to the limited partners in 1994,
1993 or 1992. The Partnership accrued distributions of
$1,164,549, $1,191,834 and $959,027 for the benefit of the
General Partner for the years ended December 31, 1994, 1993 and
1992, respectively. These distributions are the contingent
portion of the MID pursuant to the Amended Partnership Agreement.
Net Income (Loss) Per Limited Partnership Unit
----------------------------------------------
Net income (loss) per Unit is computed by dividing net income
(loss) allocated to the limited partners by the weighted average
number of Units outstanding. Per Unit information has been
computed based on 230,594, 230,817 and 230,928 Units outstanding
in 1994, 1993 and 1992.
Reclassifications
-----------------
Certain reclassifications have been made to prior period amounts
to conform with the current year presentation.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
-------------------------------------
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 also
choose to provide leasing services for the Partnership's
commercial properties, in which case McREMI will receive property
management fees from such commercial properties equal to 3% of
the property's gross rental receipts plus leasing 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.
<PAGE>
The Partnership reimbursed an affiliate of the General Partner
for costs incurred in connection with refinancing and
modification of mortgage notes payable. These costs are
capitalized as deferred borrowing costs and amortized over the
remaining term of the related mortgage note payable.
Under terms of the Amended Partnership Agreement, the Partnership
is paying the 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 consisted of
two components: (i) the fixed portion which was payable without
respect to the net income of the Partnership and was equal to 25%
of the maximum MID (the "Fixed MID") and (ii) a contingent
portion which was payable only to the extent of the lesser of the
Partnership's excess cash flow, as defined, or net operating
income (the "Entitlement Amount") and is equal to up to 75% of
the maximum MID (the "Contingent MID").
Effective July 1, 1993, the General Partner amended the Amended
Partnership Agreement as a settlement to a class action
complaint. This amendment eliminates the Fixed MID portion and
makes the entire MID payable to the extent of the Entitlement
Amount. In all other respects, the calculation and payment of
the MID remain the same.
Fixed MID was payable in 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.
No Units were issued in payment of the MID in 1994, 1993 or 1992.
During 1991, the Partnership amended its capitalization policy
and began capitalizing certain costs of improvements and
betterments which under policies of prior management had been
expensed when incurred. The purpose of the amendment was to more
properly recognize items which were capital in nature. The
effect of the amendment standing alone was evaluated at the time
the change was made and determined not to be material to the
financial statements of the Partnership in 1991, nor was it
expected to be material in any future year. However, the
amendment does have a material effect on the calculation of the
Entitlement Amount which determines the amount of Contingent MID
earned and the amount of Fixed MID payable in cash. Capital
improvements are excluded from cash flow, as defined. The
majority of base period cash flow was measured under the previous
capitalization policy, while incentive period cash flow is
determined using the amended policy. Under the amended policy,
more items are capitalized, and cash flow increases. Had base
period cash flow been measured on a basis comparable with
incentive period cash flow, Contingent MID for the year ended
December 31, 1992 would not have been affected. The amendment of
the capitalization policy did not materially affect the MID for
1993 or 1994 as the Entitlement Amount was sufficient to pay
Contingent MID notwithstanding the amendment of the
capitalization policy.
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.
<PAGE>
Compensation and reimbursements paid or accrued for the benefit
of the General Partner or its affiliates are as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------
1994 1993 1992
----------- ------------ -----------
<C> <C> <C>
<S>
Charged to other assets:
Deferred borrowing costs $ - $ - $ 53,985
Prepaid expenses - 1,000 10,024
Property management fees 1,067,967 1,207,684 1,167,150
Charged to interest expense:
Interest expense on affiliate
loans and advances 138,828 408,717 204,211
Charged to general and
administrative - affiliates:
Partnership administration 510,786 592,477 536,099
Fixed MID - 153,023 319,676
---------- ------------ -----------
$ 1,717,581 $ 2,362,901 $ 2,291,145
========== ============ ===========
Charged to General Partner's deficit:
Contingent MID $ 1,164,549 $ 1,191,834 $ 959,027
========== ============ ===========
</TABLE>
Payable to affiliates - General Partner at December 31, 1994 and
1993 consisted primarily of accrued property management fees, MID
and cost reimbursements and are due and payable from operations.
The General Partner has waived the collection terms of the MID
and reimbursements until the Partnership has an adequate level of
cash reserves.
On February 25, 1992, the Partnership acquired certain payables
owed by the Partnership to an affiliate of Southmark Corporation,
the parent company of the former corporate general partner, in
the amount of $113,798 for a cash payment of $34,159. This
transaction resulted in a $79,639 extraordinary gain on
extinguishment of debt.
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.
As discussed below, the Partnership received advances under the
revolving credit facility to fund additions to the Partnership's
real estate investment and costs incurred in connection with the
refinancing of the Partnership's mortgage note payable. There
is no assurance that the Partnership will receive any additional
funds under the facility because no amounts will be reserved for
any particular partnership. As of December 31, 1994, $1,743,530
remained available for borrowing under the facility; however,
additional funds could become available as other partnerships
repay existing borrowings.
Additionally, the General Partner has, at its discretion,
advanced funds to the Partnership in addition to the revolving
credit facility. The Partnership received such other advances to
fund working capital requirements. The General Partner is not
obligated to advance funds to the Partnership, and there is no
assurance that the Partnership will receive additional funds.
<PAGE>
The total advances from affiliates at December 31, 1994 and 1993
consist of the following:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<C> <C>
<S>
Advances from General Partner- revolving credit $ 1,654,485 $ 2,611,968
facility
Advances from General Partner - other - 243,181
Advances purchased by General Partner 27,903 27,903
Accrued interest payable 131,727 463,389
----------- ----------
$ 1,814,115 $ 3,346,441
</TABLE>
The advances are unsecured, due on demand and accrue interest at
the prime lending rate of Bank of America plus 1%. The prime
lending rate was 8.5% and 6% at December 31, 1994 and 1993,
respectively.
NOTE 3 - TAXABLE LOSS
---------------------
McNeil Real Estate Fund XII, Ltd. is a partnership and is not
subject to Federal and state income taxes. Accordingly, no
recognition has been given to income taxes in the accompanying
financial statements of the Partnership since the income or loss
of the Partnership is to be included in the tax returns of the
individual partners. The tax returns of the Partnership are
subject to examination by Federal and state taxing authorities.
If such examinations result in adjustments to distributive shares
of taxable income or loss, the tax liability of the partners
could be adjusted accordingly.
The Partnership's net assets and liabilities for financial
reporting purposes exceeded the net assets and liabilities for
tax purposes by $8,345,846 in 1994, $12,981,815 in 1993 and
$16,366,010 in 1992.
NOTE 4 - REAL ESTATE INVESTMENTS
--------------------------------
The basis and accumulated depreciation of the Partnership's real
estate investments held at December 31, 1994 and 1993 are set forth
in the following tables:
<TABLE>
<CAPTION>
Accumulated
Buildings and Depreciation Net Book
1994 (a) Land Improvements and Amortization Value
-------- ------------ ------------- ---------------- -------------
<C> <C> <C> <C>
<S>
Brendon Way $ 1,067,661 $ 20,298,094 $ (10,588,352) $ 10,777,403
Buccaneer Village 996,813 8,615,740 (4,792,446) 4,820,107
Castle Bluff 239,839 5,082,220 (2,755,779) 2,566,280
Channingway 1,544,716 17,664,080 (8,838,364) 10,370,432
Palisades at the Galleria 975,967 13,866,792 (6,873,775) 7,968,984
Plaza Westlake (a) 1,455,584 6,212,706 (3,256,479) 4,411,811
----------- ------------ ------------- ------------
$ 6,280,580 $ 71,739,632 $ (37,105,195) $ 40,915,017
=========== ============ ============= ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accumulated
Buildings and Depreciation Net Book
1993 (b) Land Improvements and Amortization Value
-------- ------------ ------------- ---------------- -------------
<C> <C> <C> <C>
<S>
Brendon Way $ 1,067,661 $ 19,463,192 $ (9,726,927) $ 10,803,926
Buccaneer Village 996,813 8,400,778 (4,460,233) 4,937,358
Castle Bluff 239,839 5,004,470 (2,545,992) 2,698,317
Channingway 1,544,716 17,433,497 (8,078,442) 10,899,771
Fox Run (c) 692,945 7,417,725 (3,784,749) 4,325,921
Palisades at the Galleria 975,967 13,700,127 (6,140,975) 8,535,119
Sundance (a) 1,180,178 11,208,927 (5,747,839) 6,641,266
Village East (c) 410,849 6,456,325 (3,404,013) 3,463,161
----------- ------------ ------------- ------------
$ 7,108,968 $ 89,085,041 $ (43,889,170) $ 52,304,839
=========== ============ ============= ============
</TABLE>
(a) Lamar Plaza and Millwood Park remained on the market for sale
during 1994. However, management took Plaza Westlake off the
market and placed Sundance on the market for sale. Therefore,
at December 31, 1994, these properties are recorded as assets
held for sale.
(b) During 1993, management placed Lamar Plaza, Millwood Park and
Plaza Westlake on the market for sale. Therefore, at
December 31, 1993, these properties are recorded as assets held
for sale.
(c) During 1994, management sold Fox Run and Village East. See
Note 7.
The Partnership leases its commercial properties under various
non-cancelable operating lease agreements. Future minimum rents
to be received as of December 31, 1994, are as follows:
<TABLE>
<CAPTION>
Real Estate Assets Held
Investments For Sale
------------ ------------
<C> <C>
<S>
1995 $ 747,000 $ 556,000
1996 677,000 393,000
1997 600,000 342,000
1998 429,000 308,000
1999 332,000 291,000
Thereafter 30,000 431,000
---------- ----------
Total $ 2,815,000 $ 2,321,000
========== ==========
</TABLE>
Future minimum rents do not include contingent rents or operating
expense reimbursements. Contingent rents and operating expense
reimbursements amounted to $251,475 in 1994, $340,026 in 1993 and
$419,799 in 1992, and are included in rental income on the
Statements of Operations.
The Partnership's properties are encumbered by mortgage
indebtedness as discussed in Notes 5 and 6.
<PAGE>
NOTE 5 - MORTGAGE NOTES PAYABLE
-------------------------------
The following table sets forth mortgage notes payable of the
Partnership at December 31, 1994 and 1993. All mortgage notes
are secured by real estate investments or the assets held for
sale.
<TABLE>
<CAPTION>
Mortgage Annual Monthly December 31,
Lien Interest Payments/ ------------------------------
Property Position (a) Rates % Maturity Date (o) 1994 1993
-------- ------------ -------- ----------------- ------------- ------------
<C> <C> <C> <C> <C> <C>
<S>
Brendon Way First (b) 8.00 $ 133,911 05/24 $ 18,162,469 $ 18,309,940
----------- -----------
Buccaneer Village First 9.50 28,853 04/07 2,508,392 2,610,975
Second (d) 10.75 9,335 07/95 988,077 993,553
Interest in net
profits (e) 7.43 2,688,068 2,688,068
Discount (c) (386,967) (423,706)
----------- -----------
5,797,570 5,868,890
----------- -----------
Castle Bluff First 9.25 36,926 12/24 4,488,555 4,515,128
----------- -----------
Channingway (n) First Variable (f) Variable (f) 08/98 13,181,124 13,377,548
Fox Run Wrap 10.00 $ 35,328 11/94 - 3,179,170
Equity (g) 10.75 17,148 07/95 - 1,825,159
Junior 7.43 - 100,000
Interest in net
profits (e) 7.43 - 196,563
----------- -----------
- 5,300,892
----------- -----------
Lamar Plaza Wrap (h) (h) (h) 07/95 3,980,606 3,999,774
Discount (c) (85,273) (152,064)
----------- -----------
3,895,333 3,847,710
----------- -----------
Millwood Park First 8.50 30,671 09/04 2,579,310 2,733,633
Second (i) 10.00 6,115 07/95 733,856 808,856
Discount (c) (372,176) (418,743)
----------- -----------
2,940,990 3,123,746
----------- -----------
Palisades at the
Galleria First (j) Variable (j) Variable (j) 10/95 8,392,910 8,507,412
----------- -----------
Plaza Westlake (k) First 9.50 44,548 03/95 3,383,827 3,603,979
Discount (c) (28,519) (142,595)
----------- -----------
3,355,308 3,461,384
----------- -----------
Sundance Wrap (l) (j) (j) 07/95 7,780,557 7,925,528
Interest in
profits 7.43 196,569 196,569
Discount (c) (38,863) (82,873)
----------- -----------
7,938,263 8,039,224
----------- -----------
Village East First 9.25 34,773 12/04 - 2,873,476
Second Variable (m) 25,400 09/94 - 2,642,157
- 5,515,633
----------- -----------
$ 68,152,522 $ 79,867,507
=========== ===========
</TABLE>
<PAGE>
(a) The debt is non-recourse to the Partnership.
(b) On June 30, 1993, the Partnership modified the terms of the
mortgage note payable on Brendon Way by increasing the
principal balance of the note by $258,568 to $18,368,000.
The modification also reduced the interest rate from 10.50%
to 8.00% and the monthly payments from $164,969 to $133,911.
(c) Discounts are based on effective interest rates of 11% to
14%.
(d) The payment terms of the second mortgage note required
interest only payments in the amount of $8,958 from
September 1990 to August 1992. Starting September 1992 and
continuing until maturity, the note requires monthly
principal and interest payments of $9,335. The modified
balance of the note included $1,025,427 of accrued and
unpaid interest at the date of modification.
(e) The interest in net profits balance accrues interest at a
rate of 7.43%, with payments due, if any, on a quarterly
basis. The interest in net profits continues until paid
through cash flow from operations or from available cash
proceeds from sale of the property to a third party.
Modification terms also included net cash flow payments
payable, on a quarterly basis, if certain conditions were
met. Subsequent to December 31, 1994, the Partnership paid
off the interest in net profits for Buccaneer Village for
$1,750,000. See Note 13.
(f) Interest on the Channingway mortgage note payable was
initially a rate of 9.25%, adjusted annually to 2.75% over
the one year Treasury bill weekly average rate with a
ceiling of 15% and a floor of 7.25%. The interest rate at
December 31, 1994 and 1993 was 7.875% and 7.25%,
respectively.
(g) The payment terms of the equity note required interest only
payments of $16,457 from September 1990 to August 1992.
Starting September 1992 and continuing until maturity, the
note required monthly principal and interest payments of
$17,148. Payments on the junior note were required only
when the amount of net cash flow was in excess of payments
made on the wrap and equity notes as calculated on a
quarterly basis. The modified balance of the notes included
$154,364 of accrued and unpaid interest at the date of
modification. The Partnership sold Fox Run on December 19,
1994 and the related mortgages were assumed by the
purchaser. See Note 7.
(h) The wrap mortgage note on Lamar Plaza consists of two
separate principal portions which are as follows:
<TABLE>
<CAPTION>
Principal Amount Interest Rate
--------- ----------- -------------
<C> <C>
<S>
Equity $ 3,458,269 10.75
Junior 522,337 7.43
</TABLE>
Starting September 1990 and continuing through August 1992,
the mortgage note required interest only payments of $31,354
on the equity portion. Starting September 1992 and
continuing until maturity, principal and interest payments
are $32,672 on the equity portion. Payments on the junior
portion shall be made only when the amount of net cash flow
is in excess of payments made on the equity portion as
calculated on a quarterly basis.
<PAGE>
(i) In July 1994, the Partnership and the second lien holder on
Millwood Park entered into an agreement to extend the debt.
The agreement extended the maturity date to July 1995 and a
principal payment of $75,000 was made changing the monthly
payments from $8,089 to $6,115.
(j) On November 5, 1992, the Partnership refinanced the mortgage
note payable on Palisades at the Galleria. The note bears
interest at the prime lending rate plus 2% which equated to
an interest rate of 10.5% and 8% at December 31, 1994 and
1993, respectively. Debt service payments adjust annually
and are based on interest rates of 10.50% and 10.25% at
December 31, 1994 and 1993, respectively. In February 1993,
the Partnership paid off the $300,000 second lien mortgage
note on Palisades at the Galleria (See Note 8).
(k) The Plaza Westlake mortgage note was refinanced in March
1995. See Note 13 - Subsequent Events.
(l) The wrap mortgage note on Sundance consists of three
separate principal portions, which are as follows:
<TABLE>
<CAPTION>
Principal Amount Interest Rate
--------- ----------- -------------
<C> <C>
<S>
Wrap $ 5,928,288 10.375
Equity 1,252,269 10.750
Junior 600,000 7.430
</TABLE>
Starting September 1990 and continuing through August 1992,
the mortgage note required principal and interest payments
of $63,408 on the wrap portion and interest only payments of
$11,360 on the equity portion. Starting September 1992 and
continuing until maturity, principal and interest payments
are $63,408 on the wrap portion and $11,837 on the equity
portion. Payments on the junior portion shall be made only
when the amount of net cash flow is in excess of payments
made on the wrap and equity portion as calculated on a
quarterly basis. The modified balance of the note included
$172,430 of accrued and unpaid interest at the date of
modification.
(m) Interest on the Village East second mortgage note payable
was initially a rate of 11.375%, adjusted annually,
beginning March 31, 1990, to 325 basis points over one year
Treasury bills with a ceiling of 17% and a floor of 10%.
The interest rate at December 31, 1993 was 10%. The
Partnership sold Village East on November 18, 1994 and the
related mortgages were paid off. See Note 7.
(n) The mortgage encumbering one of the Partnership's
properties, Channingway, contains provisions which may give
the lenders the right to accelerate the mortgage debt as a
result of the September 1991 restructuring of the
Partnership. The General Partner has requested that the
lenders waive their right to accelerate the mortgage debt.
The lenders may require the payment of fees or additional
interest as a condition to granting such waiver. In the
event the waiver is not obtained as to any mortgage, and the
mortgage debt is accelerated, the Partnership will be
required to satisfy the outstanding mortgage debt which
approximated $13.2 million at December 31, 1994. In such
event, the Partnership will arrange alternative sources of
mortgage financing. However, such refinancing may be at an
interest rate which is higher or is otherwise on terms which
are less favorable than those provided for by the current
mortgage. Furthermore, if alternative financing cannot be
obtained, each lender could foreclose on the property
securing its mortgage amount. Management believes the
likelihood of this outcome is remote and accordingly has not
reflected this balance as currently due.
<PAGE>
(o) Balloon payments on the mortgage notes are due as follows:
<TABLE>
<CAPTION
Property Balloon Payment Date
------------------------ --------------- -----
<C> <C>
<S>
Plaza Westlake $ 3,366,000 03/95
Millwood Park 734,000 07/95
Buccaneer Village 2,013,000 07/95
* Lamar Plaza 3,970,000 07/95
* Sundance 7,582,000 07/95
Palisades at the Galleria 8,166,000 10/95
Channingway 12,293,000 08/98
Millwood Park 380,000 09/04
</TABLE>
* The balloon payment amounts include the balances of
underlying first lien mortgage debt at the date the balloon
payments on the wrap-around mortgages are due. If
underlying debt is assumed by the Partnership, the balloon
payments will be less.
Principal maturities of the mortgage notes payable, before
consideration of discounts of $911,798, are as follows:
<TABLE>
<CAPTION>
Real Estate Assets Held
Investments For Sale
------------- -------------
<C> <C>
<S>
1995 $ 15,953,492 $ 12,846,033
1996 544,119 168,047
1997 591,438 182,846
1998 12,925,136 198,949
1999 426,482 217,369
Thereafter 23,352,755 1,657,654
------------ ------------
Total $ 53,793,422 $ 15,270,898
============ ============
</TABLE>
<PAGE>
NOTE 6 - MORTGAGE NOTES PAYABLE - AFFILIATE
-------------------------------------------
The following sets forth mortgage notes payable - affiliate of
the Partnership at December 31, 1994 and 1993. All mortgage
notes are secured by real estate investments or assets held for
sale.
<TABLE>
<CAPTION>
Mortgage Annual Monthly December 31,
Lien Interest Payments/ -------------------------
Property Position (a) Rates % Maturity Date 1994 1993
-------- ------------ -------- ------------- ---------- -----------
<C> <C> <C> <C> <C> <C>
<S>
Plaza Westlake (b) Second (d) (d) 12/95 $ - $ 870,000
Millwood Park (c) Third (d) (d) 06/96 - 733,135
--------- ----------
$ - $ 1,603,135
========= ==========
</TABLE>
(a) The debt was non-recourse to the Partnership.
(b) In December 1992, the Partnership obtained a mortgage note
commitment from an affiliate of the General Partner for an
amount up to $870,000. An initial amount of $56,000 was
funded in December 1992. During 1993, an additional
$814,000 was funded on the mortgage loan secured by Plaza
Westlake. On January 20, 1994, the Partnership repaid the
mortgage loan.
(c) In June 1993, the Partnership obtained a mortgage note
commitment from an affiliate of the General Partner for an
amount up to $800,000. During 1993, $733,135 was funded on
the mortgage loan secured by Millwood Park. On January 20,
1994, the Partnership repaid the mortgage loan.
(d) The notes required monthly payments of interest only equal
to the prime lending rate plus 1%. At December 31, 1993,
the prime rate was 6%.
NOTE 7 - SALES AND DISPOSITIONS OF PROPERTIES
---------------------------------------------
On December 19, 1994, the Partnership sold its investment in Fox
Run to an unrelated third party for a cash sales price of $54,947
and assumption of the first and second liens by the purchaser.
Cash proceeds and the gain on disposition are detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
------------ -------------
<C> <C>
<S>
Sales price $ 54,947 $ 54,947
Mortgages and accrued interest assumed by
purchaser 5,345,732
Basis of real estate sold (4,087,990)
-----------
Gain on disposition of real estate $ 1,312,689
===========
Credit for security deposit liability (27,438)
---------
Net cash proceeds $ 27,509
=========
</TABLE>
Also related to the sale of Fox Run Apartments, the Partnership
recognized a $246,149 gain on early extinguishment of debt as a
result of a discounted buyout of the interest in net profits.
<PAGE>
On November 18, 1994, the Partnership sold its investment in
Village East to an unaffiliated buyer for a sales price of
$8,625,000. Cash proceeds from this transaction and the gain on
sale of Village East are detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
------------ -------------
<C> <C>
<S>
Sales price $ 8,625,000 $ 8,625,000
Selling costs (301,919) (301,919)
Prorations - (216,806)
Basis of real estate sold (3,327,885) -
---------- ----------
Gain on sale $ 4,995,196 -
========== ==========
Proceeds from sale of real estate investment 8,106,275
Retirement of mortgage note assumed (5,342,350)
Net cash proceeds $ 2,763,925
==========
</TABLE>
On December 29, 1993, the Partnership sold its investment in
Cedar Mill Crossing to an unaffiliated buyer for a cash sales
price of $15,700,000. Cash proceeds from this transaction and
the gain on sale of Cedar Mill Crossing are detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
------------ -------------
<C> <C>
<S>
Sales price $ 15,700,000 $ 15,700,000
Selling costs (327,552) (327,552)
Prorations - 130,435
Basis of real estate sold (7,377,281) -
Gain on sale $ 7,995,167
=========== -----------
Proceeds from sale of real estate investment 15,502,883
Retirement of mortgage note assumed (10,751,095)
-----------
Net cash proceeds $ 4,751,788
===========
</TABLE>
In January 1994, cash proceeds were used to repay advances from
affiliates.
In August 1993, the Partnership sold its investment in a parcel
of land at Plaza Westlake to an unaffiliated buyer for a cash
sales price of $310,000. Cash proceeds from this transaction
and the gain on sale of the land parcel are detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
------------ -------------
<C> <C>
<S>
Sales price $ 310,000 $ 310,000
Selling costs (21,337) (21,337)
Basis of real estate sold (89,950) -
----------
Gain on sale $ 198,713
========== ----------
Net cash proceeds $ 288,663
==========
</TABLE>
<PAGE>
In May 1992, the Partnership sold Valley Fair Shopping Center in
Phoenix, Arizona for a sales price of $2,400,000. The carrying
value of the property was $1,726,102 and the closing costs
equaled $108,906, resulting in a gain on the sale of $564,992.
Following is a summary of the cash proceeds relating to the sale:
<TABLE>
<CAPTION>
<C>
<S>
Sales price $ 2,400,000
Mortgage note paid (1,303,019)
Tenant receivable (53,341)
Closing costs (108,906)
----------
Net cash proceeds $ 934,734
==========
</TABLE>
In April 1992, the Partnership sold a parcel of land at Plaza
Westlake Shopping Center in Glendale Heights, Illinois for a
sales price of $260,000. The carrying value of the land was
$89,952 and the closing costs equaled $20,992, resulting in a
gain on the sale of $149,056. Following is a summary of the cash
proceeds relating to the sale:
<TABLE>
<CAPTION>
<C>
<S>
Sales price $ 260,000
Closing costs (20,992)
----------
Net cash proceeds $ 239,008
==========
</TABLE>
Proceeds were then used to reduce the principal by $225,000 on
the first mortgage note, to pay interest of $7,955 on the second
and third lien notes, and to pay the 1991-1992 taxes of $6,053.
NOTE 8 - REFINANCING OF MORTGAGE NOTES PAYABLE
----------------------------------------------
On November 5, 1992, the Partnership refinanced the mortgage note
payable on Palisades at the Galleria. Following is a summary of
the transaction:
<TABLE>
<CAPTION>
<C>
<S>
New loan proceeds $ 9,100,000
Maximum interest accrual (350,000)
Net operating income earnout (909,170)
Construction holdback (452,873)
Existing debt retired (7,470,968)
Deferred borrowing costs (59,170)
Escrow (14,946)
-----------
Cash paid for refinancing $ (157,127)
===========
</TABLE>
In order to completely pay off the previous debt, an additional
promissory note in the amount of $300,000 was executed with the
previous lien holder. The note was paid in full in February
1993.
<PAGE>
During 1993, the Partnership received additional proceeds of
$1,283,267 that were withheld at the time of the refinancing of
the mortgage note on Palisades at the Galleria. These additional
proceeds are reflected above as the net operating income earnout
and construction holdback, and $442,665 of these additional
proceeds has been spent on the capital improvement project at the
property.
NOTE 9 - GAIN ON INVOLUNTARY CONVERSION
---------------------------------------
On May 25, 1994, one unit at Brendon Way Apartments was destroyed
by fire causing $49,621 in damages. The Partnership has received
$40,441 in insurance reimbursements as of December 31, 1994, to
cover the cost to repair this unit. Insurance reimbursements
received in excess of the basis of the property damaged were
recorded as a $20,877 gain on involuntary conversion.
NOTE 10 - FINANCIAL CONDITION AND GOING CONCERN CONSIDERATIONS
--------------------------------------------------------------
The accompanying financial statements have been prepared assuming
that the partnership will continue as a going concern.
During the past several years, a portion of the Partnership's
working capital needs, debt obligations and capital improvements
have been supported by advances from affiliates. Some of that
support was provided on a short-term basis to meet monthly
operating requirements, with repayment occuring 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 has begun to make repayments to the
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, and management
anticipates the properties will provide positive cash flow from
operations in 1995. 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.
<PAGE>
Additionally, during 1995, the Partnership is faced with mortgage
principal payments and mortgage maturities on Buccaneer Village,
Lamar Plaza, Millwood Park, Palisades at the Galleria, Plaza
Westlake and Sundance, totaling approximately $28,144,000. It is
management's policy to negotiate extensions or arrange
refinancings for the mortgage notes that are due. Subsequent to
year end, the Partnership paid off the interest in net profits
on Buccaneer Village at a discounted payoff of $1,750,000 for
retirement of $3,571,229 of debt. Additionally, management
successfully refinanced Plaza Westlake on March 24, 1995. The
new 5 year mortgage note in the amount of $4,000,000 retired the
maturing mortgage of $3,366,000 and yielded approximately
$248,000 in proceeds to the Partnership. Management is currently
negotiating the refinancing of Buccaneer Village's first mortgage
and Palisades at the Galleria. Management anticipates closing
on the refinancings by mid-year with expected proceeds to the
Partnership of approximately $3,500,000.
The remaining three properties with 1995 maturities, Lamar Plaza,
Millwood Park and Sundance, have maturing debt of $12,692,000 and
are currently on the market for sale. The General Partner
believes that Lamar Plaza and Sundance could not be refinanced
given their current level of debt. The General Partner does not
believe it would be in the Partnership's best interest to invest
additional money into these properties. Therefore in the event
the Partnership is unable to arrange a sale or extension of
these loans, the Partnership may allow foreclosure of these
properties for full settlement of the debt. The foreclosure of
these properties would not have an adverse effect on the
Partnership. The mortgage note payable balance and net book
value of Lamar Plaza are $3,895,333 and $3,150,925, respectively.
The mortgage note payable balance and net book value of Sundance
are $7,938,263 and $6,203,985, respectively. The General Partner
believes it is in the best interest of the Partnership to market
Millwood Park for sale instead of refinancing the maturing
mortgage. The property would yield lesser proceeds through
a refinancing and require additional capital which would be a
burden to cash reserves. The mortgage note payable balance and
the net book value of Millwood Park are $2,940,990 and
$3,369,783, respectively. The carrying value of all of these
properties is below what the General Partner estimates the
net realizable value to be. There can be no assurance that
these sales/refinancings will occur to coincide with the
Partnership's cash needs.
The General Partner has established a revolving credit facility
not to exceed $5,000,000 in the aggregate which is available on a
"first-come, first-served" basis to the Partnership and other
affiliated partnerships if certain conditions are met.
Borrowings under the facility may be used to fund deferred
maintenance, refinancing obligations and working capital needs.
The Partnership borrowed $6,000 from this facility during 1994.
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 December 31, 1994,
$1,743,530 remained available for borrowing under the facility;
however, additional funds could become available as other
partnerships repay borrowings.
Should sales or refinancings not occur, market conditions change,
any unanticipated capital improvements arise, or 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.
<PAGE>
Possible actions to resolve operating deficiencies and mortgage
maturities 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.
NOTE 11 - LEGAL PROCEEDINGS
---------------------------
The Partnership is not party to, nor is any of the Partnership's
properties the subject of, any material pending legal
proceedings, other than ordinary, routine litigation incidental
to the Partnership's business, except for the following:
HCW Pension Real Estate Fund, Ltd. et al. v. Gene E. Phillips,
William S. Friedman, Thomas C. Walker, James H. Flinchum,
Ernst & Young and BDO Seidman (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 seeks recovery against the Partnership's former
auditors for negligence and fraud in failing to detect and/or
report overcharges of fees/expenses by Southmark, the former
general partner. The Partnership is seeking to recover
$1,886,545 in actual damages plus exemplary damages, interest
and costs. The former auditors have 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 seek 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 judgement in favor of Ernst &
Young and BDO Seidman on the fraud and negligence claims based
on the statute of limitations. The Affiliated Partnerships
have appealed the summary judgement to the Dallas Court of
Appeals. Briefs have been filed and the parties are awaiting
oral arguments. A ruling is expected by July 1995. The
Affiliated Partnerships are pursuing these claims vigorously
on appeal. The ultimate outcome of this litigation cannot be
determined at this time.
NOTE 12 - GAIN ON SETTLEMENT OF LEGAL EXPENSES
----------------------------------------------
In January 1993, certain selected partnerships, including the
Partnership, settled a dispute regarding certain legal expenses
incurred during 1992 and 1991. Generally, the benefits of such
settlement were allocated to the selected partnerships based on
invoices outstanding at the time of the settlement. The
Partnership realized a gain during 1992 in the amount of $440,381
as a result of the Partnership being released from paying
previously accrued legal expenses.
NOTE 13 - SUBSEQUENT EVENTS
---------------------------
On February 6, 1995, the Partnership paid off the interest in
net profits on Buccaneer Village for a discounted amount of
$1,750,000. The Partnership will recognize a gain on early
extinguishment of debt of approximately $1.8 million in 1995.
On March 24, 1995, management successfully refinanced Plaza
Westlake. The new 5 year mortgage note in the amount of
$4,000,000 retired the maturing mortgage of $3,366,000 and
yielded approximately $248,000 in proceeds to the Partnership.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND
AMORTIZATION
December 31, 1994
<TABLE>
<CAPTION>
Initial Cost (b) Cumulative Costs
----------------------------- Write-down Capitalized
Related (b) Buildings and and Permanent Subsequent
Description Encumbrances Land Improvements Impairment To Acquisition
------------------ ------------- ------------ ------------- ------------- --------------
<C> <C> <C> <C> <C>
<S>
Apartments:
Brendon Way
Indianapolis, IN $ 18,162,469 $ 1,067,661 $ 17,490,677 $ - $ 2,807,417
Buccaneer Village
Denver, CO 5,797,570 996,813 8,058,534 - 557,206
Castle Bluff
Kentwood, MI 4,488,555 239,839 4,650,535 - 431,685
Channingway
Columbus, OH 13,181,124 1,544,716 16,438,004 - 1,226,076
Palisades at the
Galleria
Atlanta, GA 8,392,910 975,967 10,920,268 - 3,576,524
Plaza Westlake
Glendale Heights, IL 3,355,308 1,635,485 6,222,137 (746,424) 557,092
----------- ---------- ----------- --------- ----------
$ 53,377,936 $ 6,460,481 $ 63,150,155 $ (746,424) $ 9,156,000
=========== ========== =========== ========= ==========
Assets Held for Sale:
Lamar Plaza
Rosenberg, TX $ 3,895,333
Millwood Park
Kansas City, MO 2,940,990
Sundance
Wichita, KS 7,938,263
-----------
$ 14,774,586
===========
</TABLE>
(b) The initial cost and encumbrances reflect the present value
of future loan payments discounted, if appropriate, at a
rate estimated to be the prevailing interest rate at the
date of acquisition.
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND
AMORTIZATION
December 31, 1994
<TABLE>
<CAPTION>
Gross Amount at
Which Carried at Close of Period
---------------------------------------------- Accumulated
Buildings and Depreciation
Description Land Improvements Total (a) and Amortization
------------ ------------- ------------ ----------------
<C> <C> <C> <C>
<S>
Apartments:
Brendon Way
Indianapolis, IN $ 1,067,661 $ 20,298,094 $ 21,365,755 $ 10,588,352
Buccaneer Village
Denver, CO 996,813 8,615,740 9,612,553 4,792,446
Castle Bluff
Kentwood, MI 239,839 5,082,220 5,322,059 2,755,779
Channingway
Columbus, OH 1,544,716 17,664,080 19,208,796 8,838,364
Palisades at the
Galleria
Atlanta, GA 975,967 13,866,792 14,842,759 6,873,775
Plaza Westlake
Glendale Heights, IL 1,455,584 6,212,706 7,668,290 3,256,479
----------- ----------- ----------- -----------
$ 6,280,580 $ 71,739,632 $ 78,020,212 $ 37,105,195
=========== =========== =========== ===========
Assets Held for Sale:
Lamar Plaza
Rosenberg, TX 3,150,925
Millwood Park
Kansas City, MO 3,369,783
Sundance
Wichita, KS 6,203,985
-----------
$ (c) $ (c) $ 12,724,693 $ (c)
=========== =========== =========== ============
</TABLE>
(a) For Federal income tax purposes, the properties are
depreciated over lives ranging from 15-25 years using ACRS or
MACRS methods. The aggregate cost of real estate investments
for Federal income tax purposes was approximately $115,804,420
and accumulated depreciation was $88,526,145 December 31, 1994.
(c) Assets hel d for sale are stated at the lower of cost or net
realizable value. Historical cost net of accumulated
depreciation and cumulative write-downs become the new cost
basis when the asset is classified as "Held for Sale."
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND
AMORTIZATION
December 31, 1994
<TABLE>
<CAPTION>
Date of Date Depreciable
Description Construction Acquired lives (years)
------------ -------- -------------
<C> <C> <C>
<S>
Apartments:
Brendon Way
Indianapolis, IN 1968/73 01/82 3-25
Buccaneer Village
Denver, CO 1970 02/82 3-25
Castle Bluff
Kentwood, MI 1976/77 01/82 3-25
Channingway
Columbus, OH 1970/75 12/82 3-25
Palisades at the
Galleria
Atlanta, GA 1973 07/82 3-25
Plaza Westlake
Glendale Heights, IL 1980 03/82 3-25
Assets Held for Sale:
Lamar Plaza
Rosenberg, TX 1973 09/81
Millwood Park
Kansas City, MO 1973 01/82
Sundance
Wichita, KS 1979 09/81
</TABLE>
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
Notes to Schedule III
Real Estate Investments and Accumulated Depreciation and
Amortization
A summary of activity for the Partnership's real estate
investments and accumulated depreciation and amortization is as
follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1994 1993 1992
-------------- --------------- --------------
<C> <C> <C>
<S>
Real estate investments:
------------------------
Balance at beginning of year $ 96,194,009 $ 114,069,986 $ 124,737,321
Improvements 1,869,162 2,010,640 2,222,885
Reclassification to assets held for sale (4,916,139) (19,886,617) (12,800,268)
Dispositions of real estate (15,084,622) - (89,952)
Replacement of assets $(42,198) - -
------------ ------------- --------------
Balance at end of year $ 78,020,212 $ 96,194,009 $ 114,069,986
============ ============= ==============
Accumulated depreciation and amortization:
------------------------------------------
Balance at beginning of year $ 43,889,170 $ 48,184,664 $ 49,184,630
Depreciation 3,683,991 3,647,465 4,035,618
Reclassification to assets held for sale (2,776,585) (7,942,959) (5,035,584)
Dispositions of real estate (7,668,747) - -
Replacement of assets (22,634) - -
------------ ------------- -------------
Balance at end of year $ 37,105,195 $ 43,889,170 $ 48,184,664
============ ============= =============
Assets Held for Sale:
---------------------
Balance at beginning of year $ 11,421,936 $ 7,434,149 $ 1,626,349
Reclassification to assets held for sale 2,139,554 11,943,658 7,764,684
Improvements 99,156 502,087 85,739
Depreciation (935,953) (1,168,817) (4,622,229)
Sale - (7,289,141) (1,580,394)
------------ ------------- -------------
Balance at end of year $ 12,724,693 $ 11,421,936 $ 7,434,149
============ ============= =============
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------------------------------------------------------------
Neither the Partnership nor the General Partner has any directors
or executive officers. The names and ages of, as well as the
positions held by, the officers and directors of McNeil
Investors, Inc., the general partner of the General Partner, are
as follows:
<TABLE>
<CAPTION>
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
----------------- --- -------------------------------------
<C> <C>
<S>
Robert A. 74 Mr. McNeil is also Chairman of the Board
McNeil, and Director of McNeil Real Estate
Chairman of the Management, Inc. ("McREMI") which is an
Board and affiliate of the General Partner. He has
Director held the foregoing positions since the
formation of such entity in 1990. Mr.
McNeil received his B.A. degree from
Stanford University in 1942 and his L.L.B.
degree from Stanford Law School in 1948.
He is a member of the State Bar of
California and has been involved in real
estate financing since the late 1940's and
in real estate acquisitions, syndications
and dispositions since 1960. From 1986
until active operations of McREMI and
McNeil Partners, L.P. began in February
1991, Mr. McNeil was a private investor.
Mr. McNeil is a member of the
International Board of Directors of the
Salk Institute, which promotes research in
improvements in health care.
Carole J. 51 Mrs. McNeil is Co-Chairman, with husband
McNeil Robert A. McNeil, of McNeil Investors,
Co-Chairman of Inc. Mrs. McNeil has twenty years of real
the estate experience, most recently as a
Board private investor from 1986 to 1993. In
1982, she founded Ivory & Associates, a
commercial real estate brokerage firm in
San Francisco, CA. Prior to that, she was
a commercial real estate associate with
the Madison Company and, earlier, a
commercial sales associate and analyst
with Marcus and Millichap in San
Francisco. In 1978, Mrs. McNeil
established Escrow Training Centers,
California's first accredited commercial
training program for title company escrow
officers and real estate agents needing
college credits to qualify for brokerage
licenses. She began in real estate as
Manager and Marketing Director of Title
Insurance and Trust in Marin County, CA.
Mrs. McNeil serves on the International
Board of Directors of the Salk Institute.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
----------------- --- -------------------------------------
<C> <C>
<S>
Donald K. Reed, 49 Mr. Reed is President, Chief Executive
Director, Officer and Director of McREMI which is an
President, affiliate of the General Partner. Prior
and Chief to joining McREMI in March 1993, Mr. Reed
Executive was President, Chief Operating Officer and
Officer Director of Duddlesten Management
Corporation and Duddlesten Realty
Advisors, Inc., with responsibility for a
management portfolio of office, retail,
multi-family and mixed-use land projects
representing $2 billion in asset value.
He was also Chief Operating Officer,
Director and member of the Executive
Committee of all Duddlesten affiliates.
Mr. Reed started with the Duddlesten
companies in 1976 and served as Senior
Vice President and Chief Financial Officer
and as Executive Vice President and Chief
Operating Officer of Duddlesten Management
Corporation before his promotion to
President in 1982. He was President and
Chief Operating Officer of Duddlesten
Realty Advisors, Inc., which has been
engaged in real estate acquisitions,
marketing and dispositions, since its
formation in 1989.
Robert C. 45 Mr. Irvine is Executive Vice President,
Irvine, Secretary/Treasurer, Chief Financial
Vice President Officer and a Director of McREMI, an
and affiliate of the General Partner. Mr.
Secretary Irvine was Executive Vice President-Chief
Financial Officer of Johnstown Management
from June 1989 through February 1991. He
was also responsible for the financial and
accounting areas of the partnerships for
which a Southmark entity served as general
partner since September 1990. From 1986
to 1989, Mr. Irvine held several financial
positions with Southmark including Vice
President, Corporate Development. Prior
to 1986, Mr. Irvine was an acquisition
specialist with Mason Best, a merchant
banking firm, and a Senior Manager with
Price Waterhouse.
</TABLE>
Each director shall serve until his successor shall have been
duly elected and qualified.
ITEM 11. EXECUTIVE COMPENSATION
-------- ----------------------
No direct compensation was paid or payable by the Partnership to
directors or officers (since it does not have any directors or
officers) for the year ended December 31, 1994, nor was any
direct compensation paid or payable by the Partnership to
directors or officers of the general partner of the General
Partner for the year ended December 31, 1994. The Partnership
has no plans to pay any such remuneration to any directors or
officers of the general partner of the General Partner in the
future.
See Item 13 - Certain Relationships and Related Transactions for
amounts of compensation and reimbursements paid by the
Partnership to the General Partner and its affiliates.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------- --------------------------------------------------------------
(A) Security ownership of certain beneficial owners.
No individual or group, as defined by Section 13(d)(3) of
the Securities Exchange Act of 1934, known to the
Partnership is the beneficial owner of more than 5 percent
of the Partnership's securities.
(B) Security ownership of management.
The General Partner and the officers and directors of its
general partner, collectively, own 1,522 Units, which is
less than 1% of the outstanding Units.
(C) Change in control.
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------- ----------------------------------------------
Under the terms of the Amended Partnership Agreement, the
Partnership is paying the 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. The 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 consisted of two components: (i) the fixed portion
which was payable without respect to net income of the
Partnership and was equal to 25% of the maximum MID (the "Fixed
MID") and (ii) a contingent portion which was payable only to the
extent of the lesser of the Partnership's excess cash flow, as
defined, or net operating income (the "Entitlement Amount") and
is equal to up to 75% of the maximum MID (the "Contingent MID").
Effective July 1, 1993, the General Partner amended the Amended
Partnership Agreement as a settlement to a class action
complaint. This amendment eliminates the Fixed MID portion and
makes the entire MID payable to the extent of the Entitlement
Amount. In all other respects, the calculation and payment of
the MID remain the same.
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.
For the year ended December 31, 1994, the Partnership paid on
accrued for the General Partner Contingent MID in the amount of
$1,164,549.
Any amount of the MID which 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 the 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.
The Partnership pays property management fees equal to 5% of the
gross rental receipts of the Partnership's properties to McREMI,
an affiliate of the General Partner, for providing property
management services for residential and commercial properties and
leasing services for the Partnership's residential properties.
The Partnership reimburses McREMI for its costs, including
overhead, of administering the Partnership's affairs. For the
year ended December 31, 1994, the Partnership paid or accrued
$1,578,753 in property management fees and reimbursements.
<PAGE>
A revolving credit facility has been established by the General
Partner for the benefit of the Partnership. The credit facility
may not exceed $5,000,000 in the aggregate and 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.
For the fiscal year ended December 31, 1994, the Partnership
borrowed $6,000 under this revolving credit facility.
See Item 1 - Business, Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations, and
Item 8 - Note 2 - "Transactions with Affiliates."
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
-------- -----------------------------------------------------------------
See accompanying index to financial statements at Item 8.
(A) Exhibits
--------
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C>
<S>
3.1 First Amended and Restated
Certificate of Limited Partnership dated
February 20, 1981. (1)
3.2 Limited Partnership Agreement dated
February 2, 1981 and amended March 31,
1981 and May 13, 1981. (1)
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).
3.4 Amendment No. 1 to the Amended and
Restated Partnership Agreement, dated
March 28, 1994. (4)
3.5 Amendment No. 2 to the Amended and
Restated Partnership Agreement, dated
March 28, 1994. (4)
10.1 Promissory Note, dated July 13, 1988,
between McNeil Real Estate Fund XII,
Ltd. and Transohio Savings Bank. (1)
10.2 Installment Note, dated
December 5, 1990, between McNeil Real
Estate Fund XII, Ltd. and The State of
Oregon, Public Employees' Retirement
Fund. (1)
10.3 Mortgage Note, dated April 25,
1989, between Brendon Way Fund XII
Associates and American Mortgages, Inc.
(1)
10.4 Assignment and Assumption
Agreement, dated September 6, 1991,
between Pacific Investors Corporation,
Robert A. McNeil and McNeil Partners,
L.P. regarding McNeil Real Estate Fund
XII, Ltd.(2)
10.5 Assignment and Assumption
Agreement, dated September 6, 1991,
between Pacific Investors Corporation
and McNeil Partners, L.P. regarding
Brendon Way Fund XII Associates.(2)
10.6 Assignment and Assumption
Agreement, dated September 6, 1991,
between Castle Bluff Apartments Corp.
and McNeil Partners, L.P. regarding
Castle Bluff Fund XII Associates.(2)
10.7 Property Management Agreement,
dated September 6, 1991, between McNeil
Real Estate Fund XII, Ltd. and McNeil
Real Estate Management, Inc.(2)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------
<C>
<S>
10.8 Property Management Agreement,
dated September 6, 1991, between Brendon
Way Fund XII Associates and McNeil Real
Estate Management, Inc.(2)
10.9 Property Management Agreement,
dated September 6, 1991, between Castle
Bluff Fund XII Associates and McNeil
Real Estate Management, Inc.(2)
10.10 Asset Management Agreement,
dated September 6, 1991, between McNeil
Real Estate Fund XII, Ltd. and McNeil
Partners, L.P.(2)
10.11 Termination Agreement, dated
September 6, 1991, Southmark Management
Corporation, Southmark Commercial
Management, McNeil Real Estate Fund XII,
Ltd. and McNeil Real Estate Management,
Inc.(2)
10.12 Termination Agreement, dated
September 6, 1991, between Brendon Way
Associates Fund XII and McNeil Real
Estate Management, Inc.(2)
10.13 Termination Agreement, dated
September 6, 1991, between Castle Bluff
XII Associates, L.P. and McNeil Real
Estate Management, Inc.(2)
10.14 Revolving Credit Agreement,
dated August 6, 1991, between McNeil
Partners, L.P. and certain partnerships,
including the Partnership.(2)
10.15 Amended Property Management
Agreement, dated March 5, 1993, between
McNeil Real Estate Fund XII, Ltd. and
McNeil Real Estate Management, Inc. (3)
10.16 Promissory Note, dated November
5, 1992, between Palisades Fund XII
Associates, L.P. and Heller Financial,
Inc. (3)
10.17 Second Modification of Deed of
Trust Note, dated June 30, 1993, between
American Mortgages, Inc. and Brendon Way
XII Associates. (4)
11. Statement regarding computation of
Net Income per limited partnership unit
(see Note 1 to Financial Statements)
22. List of subsidiaries of the Partnership. (3)
(1) Incorporated by reference to the
Annual Report of McNeil Real Estate Fund
XII, Ltd. (File No. 0-10743), on Form 10-
K for the period ended December 31,
1990, as filed with the Securities and
Exchange Commission on March 29, 1991.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C>
<S>
(2) Incorporated by reference to the
Annual Report of McNeil Real Estate Fund
XII, Ltd. (File No. 0-10743), on Form 10-
K for the period ended December 31,
1991, as filed with the Securities and
Exchange Commission on March 29, 1992.
(3) Incorporated by reference to the
Annual Report of McNeil Real Estate Fund
XII, Ltd. (File No. 0-10743), on Form 10-
K for the period ended December 31,
1992, as filed with the Securities and
Exchange Commission on March 30, 1993.
(4) Incorporated by reference to the
Annual Report of McNeil Real Estate Fund
XII, Ltd. (File No. 0-10743), on Form 10-
K for the period ended December 31,
1993, as filed with the Securities and
Exchange Commission on March 30, 1994.
27. Financial Data Schedule for the year ended
December 31, 1994.
</TABLE>
The Partnership has omitted instruments with respect to
long-term debt where the amount of securities authorized
thereunder does not exceed 10% of the total assets of the
Partnership and its subsidiaries on a consolidated basis.
The Partnership agrees to furnish a copy of each such
instrument to the Commission upon request.
(B) Reports on Form 8-K. There were no reports on Form 8-K
filed during the quarter ended December 31, 1994.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
A Limited Partnership
SIGNATURE PAGE
Pursuant to the requirements of Section 13 or 15(d) 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
<C>
<S>
March 30, 1995 By: /s/ Robert A. McNeil
-------------- --------------------------------------------------
Date Robert A. McNeil
Chairman of the Board and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
March 30, 1995 By: /s/ Donald K. Reed
-------------- --------------------------------------------------
Date Donald K. Reed
President and Director of McNeil Investors, Inc.
March 30, 1995 By: /s/ Robert C. Irvine
-------------- --------------------------------------------------
Date Robert C. Irvine
Chief Financial Officer of McNeil Investors, Inc.
March 30, 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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 3,313,765
<SECURITIES> 0
<RECEIVABLES> 323,188
<ALLOWANCES> 5,629
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 78,020,212
<DEPRECIATION> (37,105,195)
<TOTAL-ASSETS> 60,189,348
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 60,189,348
<SALES> 21,295,696
<TOTAL-REVENUES> 27,701,373
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,837,679
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,642,760
<INCOME-PRETAX> 3,220,934
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,220,934
<DISCONTINUED> 0
<EXTRAORDINARY> 246,149
<CHANGES> 0
<NET-INCOME> 3,467,083
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
