UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K405
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
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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_____________
Commission file number 0-10743
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McNEIL REAL ESTATE FUND XII, LTD.
- --------------------------------------------------------------------------------
(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
------------------------------
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: 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 ]
228,276 of the registrant's 229,828 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 39
TOTAL OF 42 PAGES
<PAGE>
PART I
ITEM 1. BUSINESS
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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 ("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"). Prior to
September 6, 1991, Pacific Investors Corporation (the prior "Corporate General
Partner"), a wholly-owned subsidiary of Southmark Corporation ("Southmark"), and
McNeil were the general partners of the Partnership, which was governed by an
agreement of limited partnership, dated February 2, 1981 (the "Original
Partnership Agreement") as amended May 13, 1981. 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 1994 and 1993, 223 and
111 Units were relinquished, respectively. An additional 614 Units were
relinquished in 1995 leaving 229,980 Units outstanding at December 31, 1995.
Subsequent to year end, 152 Units were relinquished, leaving 229,828 Units
outstanding as of February 16, 1996.
SOUTHMARK BANKRUPTCY AND CHANGE IN GENERAL PARTNER
- --------------------------------------------------
On July 14, 1989, Southmark filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. Neither the Partnership, McNeil nor the
Corporate General Partner were included in the filing. Southmark's
reorganization plan became effective August 10, 1990. Under the plan, most of
Southmark's assets, which included Southmark's interests in the Corporate
General Partner, are being sold or liquidated for the benefit of creditors.
In accordance with Southmark's reorganization plan, Southmark, McNeil and
various of their affiliates entered into an asset purchase agreement on October
12, 1990, providing for, among other things, the transfer of control to McNeil
or his affiliates of 34 limited partnerships (including the Partnership) in the
Southmark portfolio.
On February 14, 1991, pursuant to the asset purchase agreement as amended on
that date: (a) an affiliate of McNeil purchased the Corporate General Partner's
economic interest in the Partnership; (b) McNeil became the managing general
partner of the Partnership pursuant to an agreement with the Corporate General
Partner that delegated management authority to McNeil; and (c) McNeil Real
Estate Management, Inc. ("McREMI"), an affiliate of McNeil, acquired the assets
relating to the property management and partnership administrative business of
Southmark and its affiliates and commenced management of the Partnership's
properties pursuant to an assignment of the existing property management
agreements from the Southmark affiliates.
<PAGE>
On September 6, 1991, the limited partners approved a restructuring proposal
that provided for (i) the replacement of the Corporate General Partner and
McNeil with the General Partner; (ii) the adoption of the Amended Partnership
Agreement, which substantially alters the provisions of the Original Partnership
Agreement relating to, among other things, compensation, reimbursement of
expenses, and voting rights; and (iii) the approval of a new property management
agreement with McREMI, the Partnership's property manager.
The Amended Partnership Agreement provides for a Management Incentive
Distribution ("MID") to replace all other forms of general partner compensation
other than property management fees and reimbursement of certain costs.
Additional Units may be issued in connection with the payment of the MID
pursuant to the Amended Partnership Agreement. See Item 8 - Note 2
- -"Transactions with Affiliates". For a discussion of the methodology for
calculating and distributing the MID, see Item 13 - Certain Relationships and
Related Transactions.
Settlement of Claims:
The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark for damages relating to improper overcharges, breach of contract and
breach of fiduciary duty. The Partnership settled these claims in 1991, and such
settlement was approved by the Bankruptcy Court.
An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995 the Partnership received in full satisfaction of its claims, $49,818 in
cash, and common and preferred stock in the reorganized Southmark which
represents the Partnership's pro-rata share of Southmark assets available for
Class 8 Claimants. The Partnership sold the Southmark common and preferred stock
in May 1995 for $16,039, which combined with the cash proceeds from Southmark,
resulted in a gain on legal settlement of $65,857.
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, 1995, the Partnership
owned seven properties, of which six are real estate investments and one asset
is currently 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.
<PAGE>
Business Plan:
The Partnership's anticipated plan of operations for 1996 is to preserve or
increase the net operating income of its properties 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 is evaluating market and other economic
conditions to determine the optimum time to commence an orderly liquidation of
the Partnership's properties in accordance with the terms of the Amended
Partnership Agreement. In conjunction therewith, the General Partner will
continue to explore potential avenues to enhance the value of the Units in the
Partnership, which may include, among other things, asset sales or refinancings
of the Partnership's properties which may result in distributions to the limited
partners. See Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
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,
1995. 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 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 1995 Date
Property Description of Property Debt Property Tax Acquired
- -------- ----------- ----------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Real Estate Investments:
Brendon Way (1) Apartments
Indianapolis, IN 770 units $10,263,107 $18,002,757 $ 396,633 1/82
Buccaneer
Village (2) Apartments
Denver, CO 284 units 4,618,167 5,496,384 64,437 2/82
Castle Bluff (3) Apartments
Kentwood, MI 241 units 2,445,812 4,459,417 129,669 1/82
Channingway Apartments
Columbus, OH 770 units 9,949,626 12,988,079 258,769 12/82
Palisades at the
Galleria (4) Apartments
Atlanta, GA 370 units 7,448,014 10,593,002 135,464 7/82
Plaza Westlake (5)
Glendale Retail Center
Heights, IL 121,464 sq. ft. 4,373,342 3,638,288 89,836 3/82
Asset held for sale:
Millwood Park (6)
Kansas City, Apartments
MO 301 units 3,164,323 3,982,499 69,117 1/82
---------- ---------- ---------
$42,262,391 $59,160,426 $1,143,925
========== ========== =========
</TABLE>
- -----------------------------------------
Total: Apartments - 2,736 units
Retail Center - 121,464 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.
(2) Buccaneer Village Apartments is owned by Buccaneer Fund XII, Ltd. which is
wholly-owned by the Partnership.
<PAGE>
(3) Castle Bluff Apartments is owned by Castle Bluff Fund XII Associates, L.P.
which is wholly-owned by the Partnership and the General Partner.
(4) Palisades at the Galleria Apartments is owned by Palisades Fund XII
Associates, L.P. which is wholly-owned by the Partnership.
(5) Plaza Westlake is owned by Plaza Westlake Fund XII, Ltd. which is
wholly-owned by the Partnership.
(6) Millwood Park Apartments is owned by Millwood Park Fund XII, Ltd. which is
wholly-owned by the Partnership.
The following table sets forth the properties' occupancy rate and rent per
square foot for each of the last five years:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Brendon Way
Occupancy Rate............ 86% 90% 90% 85% 88%
Rent Per Square Foot...... $6.12 $6.05 $5.60 $5.68 $5.73
Buccaneer Village
Occupancy Rate............ 94% 95% 96% 97% 94%
Rent Per Square Foot...... $7.92 $7.42 $7.00 $6.25 $5.82
Castle Bluff
Occupancy Rate............ 96% 98% 93% 93% 91%
Rent Per Square Foot...... $7.28 $6.92 $6.62 $6.37 $6.29
Channingway
Occupancy Rate............ 86% 89% 91% 89% 87%
Rent Per Square Foot...... $5.88 $5.88 $5.75 $5.46 $4.96
Millwood Park
Occupancy Rate............ 84% 92% 96% 86% 89%
Rent Per Square Foot...... $5.75 $5.78 $5.11 $4.90 $4.84
Palisades at the Galleria
Occupancy Rate............ 97% 99% 98% 92% 83%
Rent Per Square Foot...... $8.20 $7.83 $7.04 $6.22 $5.08
Plaza Westlake
Occupancy Rate............ 98% 99% 100% 85% 90%
Rent Per Square Foot...... $7.75 $7.73 $7.92 $7.84 $6.60
</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 is competing against newer properties as well as some that have
recently been renovated. The property's occupancy is currently below the average
market occupancy rate of 93%. Rental rates at Brendon Way are averaging $.59 per
square foot, which is comparable to the competitors. Minor renovations have
improved the curb appeal of the property. The lack of funds to complete a major
renovation of the aging property creates a challenge for Brendon Way to stay
competitive.
Since 1991, the rental rates at Buccaneer Village have increased by 36% due to
improved market conditions. The market maintains a strong occupancy level at
96%. 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 the 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 is in a highly competitive market with the occupancy rates running
between 97% and 98%. Castle Bluff is currently competing in a robust 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 is located in an area east of Columbus, Ohio with a market of 28,355
apartment units. The property is currently below the market average occupancy
rate of 94%; however, monthly rental rates have stayed higher than market. In
1996, the property will continue to cure the deferred maintenance items to add
value and marketability to the community.
Millwood Park finished the year below the market occupancy rate of 91%. There
has been no new construction within a three mile radius of the property over the
last two years, and the population has increased less than 1% during the last 10
years. Rental rates at Millwood Park are averaging $.55 to $.57 per square foot,
which is in line with the market rate. It is anticipated that the occupancy rate
will stabilize at approximately 90% during 1996. Millwood is currently on the
market for sale.
Occupancy rates at Palisades at the Galleria have remained strong 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 average occupancy level at 95%. Palisades at the
Galleria is located in Atlanta, Georgia and with the 1996 Olympics, the market
should remain strong throughout 1996. The market, however, may remain flat in
1997 due to the oversupply of new construction.
Plaza Westlake enters 1996 with an occupancy rate of 98%, higher than the market
average of 93%. Plaza Westlake is located in a high traffic area with a proven
anchor. The rental rate per square foot approximates the average rate charged by
the seven centers competing directly with Plaza Westlake.
<PAGE>
The following schedule shows lease expirations for the Partnership's commercial
property for 1996 through 2005:
<TABLE>
<CAPTION>
Number of Annual % of Gross
Expirations Square Feet Rent Annual Rent
----------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Plaza Westlake
1996 4 10,236 $111,024 13%
1997 3 5,963 63,312 7%
1998 3 27,184 251,864 30%
1999 3 70,452 338,582 40%
2000 2 3,690 47,142 6%
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 the commercial property:
<TABLE>
<CAPTION>
Nature of
Business Square Footage Lease
Use Leased Annual Rent Expiration
- -------------- -------------- ----------- ----------
<S> <C> <C> <C>
Plaza Westlake
Entertainment 17,584 $ 149,464 1998
Retail 68,020 310,857 1999
</TABLE>
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.
For a discussion of the Southmark bankruptcy, see Item 1 - Business. See also
Item 8 - Note 10 - "Gain on Legal Settlement."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None.
<PAGE>
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 13,759 as of February 16, 1996
(C) No distributions were made to the limited partners in 1995 or 1994, and
none are anticipated in 1996. The Partnership accrued distributions of
$1,044,865 and $1,164,549 for the benefit of the General Partner for the
years ended December 31, 1995 and 1994, respectively. Total distributions
of $4,798,846 remain unpaid as of December 31, 1995. These distributions
are the contingent portion of the MID pursuant to the Amended Partnership
Agreement. The Partnership anticipates making additional distributions to
the General Partner for the contingent MID in 1996. 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.
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>
Years Ended December 31,
--------------------------------------------------------------------------
Statements of
Operations 1995 1994 1993 1992 1991
- ------------------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Rental revenue............... $ 17,533,914 $ 21,295,696 $ 24,228,119 $ 23,603,862 $ 24,067,446
Total revenue................ 21,195,706 27,701,373 32,481,572 24,837,444 24,240,414
Gain (loss) on disposition
of real estate.............. 3,427,513 6,307,885 8,193,880 714,048 (1,667,056)
Income (loss) before
extraordinary item.......... 1,183,425 3,220,934 4,178,756 (3,917,231) (9,057,704)
Extraordinary gain on
extinguishment of debt, net 1,304,587 246,149 - 79,639 5,684,818
Net income (loss)............ 2,488,012 3,467,083 4,178,756 (3,837,592) (3,372,886)
Net income (loss) per limited
partnership unit:
Income (loss) before
extraordinary item $ 4.89 $ 13.27 $ 17.20 $ (16.11) $ (37.29)
Extraordinary gain on
extinguishment of debt 5.25 1.01 - .33 23.39
----------- ----------- ----------- ----------- -----------
Net income (loss)............ $ 10.14 $ 14.28 $ 17.20 $ (15.78) $ (13.90)
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
--------------------------------------------------------------------------
Balance Sheets 1995 1994 1993 1992 1991
- -------------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Real estate investments, net... $ 39,098,068 $ 40,915,017 $ 52,304,839 $ 65,885,322 $ 75,552,691
Assets held for sale........... 3,164,323 12,724,693 11,421,936 7,484,189 1,626,350
Total assets................... 52,112,866 60,189,348 72,830,100 78,455,373 83,546,776
Mortgage notes payable, net.... 59,160,426 68,152,522 79,867,507 90,732,765 94,217,264
Partners' deficit.............. (17,849,184) (19,292,331) (21,594,865) (24,581,787) (19,785,168)
</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
----------------------------- -----------------------
<S> <C>
Lamar Plaza July 1995 - Sold
Sundance Apartments June 1995 - Sold
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
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
FINANCIAL CONDITION
- -------------------
The Partnership was formed to acquire, operate and ultimately dispose of a
portfolio of income-producing real properties. As of December 31, 1995, the
Partnership owned seven properties. All of the Partnership properties are
subject to mortgage notes.
During 1995, the Partnership refinanced the mortgage notes on four properties
and sold two properties. These refinancings and sales resulted in net cash
proceeds to the Partnership of $5,194,651.
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
1995 compared to 1994
Revenue:
Total Partnership revenues decreased in 1995 by $6,505,667 or 23% as compared to
the same period in 1994. Rental revenue decreased by $3,761,782 or 18% while
interest income increased $91,507. In 1994 the Partnership incurred gains on
involuntary conversion and disposition of real estate totalling $6,328,762,
while in 1995 gains on legal settlement and disposition of real estate totaled
$3,493,370.
Rental revenue for the year ended 1995 was $17,533,914 as compared to
$21,295,696 in 1994. The decrease of $3,761,782 is due to the loss in rental
revenue generated by Village East and Fox Run, which were sold in November and
December of 1994 and Sundance and Lamar Plaza, which were sold in June and July
of 1995. This decrease was partially offset by the increase in rental revenue at
six of the Partnership's properties.
Interest income increased by $91,506 as compared to the same period in 1994.
This increase is due to larger average cash balances being invested in
interest-bearing accounts.
Expenses:
Partnership expenses decreased by $4,468,158 for the year ended 1995 as compared
to 1994 primarily due to the sale of Fox Run and Village East in 1994 and
Sundance and Lamar Plaza in 1995. The effects from these transactions were
declines of $1,596,275 for interest, $798,669 for depreciation, $222,028 for
property taxes, $524,486 for personnel expenses, $350,785 for utilities,
$543,305 for repair and maintenance, $204,565 for property management fees, and
$261,979 for other operating expenses.
In addition to the sale of Fox Run, Village East, Sundance, and Lamar, other
factors affected the level of expenses reported by the remaining properties.
Interest expense - affiliates increased by $22,025 or 16% due to an increase in
the prime rate used to calculate interest expense on the advances.
General and administrative expenses decreased $64,728 or 39% in 1995 compared
to 1994 due to a reduction in legal and consulting fees and tax preparation.
General and administrative - affiliate expenses decreased $61,078 or 12% for the
year ended 1995 as compared to 1994. This decrease is due to a decrease in the
percentage of the Partnership's portion of reimbursable costs which is based on
the number of properties owned.
1994 compared to 1993
Revenue:
Total Partnership revenues in 1994 decreased by $4,780,199 or 15% 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.
<PAGE>
Rental revenue for 1994 was $21,295,696 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.
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 eliminated the fixed portion of the 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>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At December 31, 1995, the Partnership held cash and cash equivalents of
$5,791,363, up $2,477,598 as compared to 1994.
The Partnership has experienced positive cash flow from operations of $7,061,543
for the three years ended December 31, 1995. During 1995 and 1993, the
Partnership received net cash proceeds of $6,601,232 for the refinancing of
Millwood Park, Buccaneer Village, Palisades at the Galleria and Plaza Westlake.
The Partnership also sold six properties in the last three years and has
received $7,876,885 in proceeds along with insurance proceeds of $40,441 from
the 1994 fire at Brendon Way and $1,691,188 in advances and mortgage notes from
affiliates. Over the last three years the Partnership has used cash to fund
$6,127,461 in additions to real estate investments, $5,893,293 in principal
payments, $1,007,138 for additions to deferred borrowing costs, $4,754,479 for
the repayment of advances and mortgage notes from affiliates and $300,000 for
the payment of the Contingent MID.
Cash provided from operating activities increased slightly in 1995 as compared
to 1994. This increase can be attributed to the cash received from legal
settlement and the increase in interest received. With the sale of four
properties the past two years, the amount received from tenants has declined
$3,727,847 while the amount of cash paid for all operating activities has also
declined by $3,509,609.
The Partnership generated cash from operating activities of $2,103,456 in 1994
as compared to $2,834,505 in 1993. This decrease can be attributed to the
increase in the amount paid to affiliates during 1994, which consisted of
repayment of accrued interest and the fixed portion of the MID.
The Partnership continues to invest substantial sums into improvements at its
properties. A total of 6.1 million of improvements have been added to the
Partnership's properties over the past three years. An additional $1.35 million
of improvements have been budgeted for 1996.
Short-term liquidity:
The Partnership expended considerable resources during the past three years to
restore its properties to good operating condition. These expenditures have been
necessary to maintain the competitive position of the Partnership's aging
properties in each of their markets. The capital improvements made during the
past three years have enabled the Partnership to increase its rental revenues
and reduce certain of its repairs and maintenance expenses. The Partnership has
budgeted an additional $1.35 million of capital improvements for 1996, to be
funded from property operations and cash reserves.
At December 31, 1995, the Partnership held cash and cash equivalents of
$5,791,363. The General Partner considers this level of cash reserves to be
adequate to meet the Partnership's operating needs. The General Partner
anticipates using reserves to repay affiliate advances and a portion of the
affiliate payables. The General Partner believes that anticipated operating
results for 1996 will be sufficient to fund the Partnership's budgeted capital
improvements for 1996 and to repay the current portion of the Partnership's
mortgage notes.
<PAGE>
The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships if certain conditions
are met. Borrowings under the facility may be used to fund deferred maintenance,
refinancing obligations and working capital needs. There is no assurance that
the partnership will be able to receive additional funds from the facility
because no amount will be reserved for any particular partnership. As of
December 31, 1995, $2,662,819 was available from the facility. However,
additional funds could become available as other partnerships repay borrowings.
This commitment by the General Partner will terminate on September 6, 1996. The
Partnership has borrowed $1,419,339 which will be repaid from available cash
reserves of the Partnership. These borrowings are not due upon termination of
the revolving credit facility.
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 1995, 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.
For the long-term, property operations will remain the primary source of funds.
In this regard, the General Partner expects that the $6 million of capital
improvements made by the Partnership during the past three years will yield
improved cash flow from property operations in the future. If the Partnership's
cash position deteriorates, the General Partner may elect to defer certain of
the capital improvements, except where such improvements are expected to
increase the competitiveness or marketability of the Partnership's properties.
As an additional source of liquidity, the General Partner may attempt to sell
Partnership properties judged to be mature considering the circumstances of the
market where the properties are located, as well as the Partnership's need for
liquidity. However, there can be no guarantee that the Partnership will be able
to sell any of its properties for an amount sufficient to retire the related
mortgage note and still provide cash proceeds to the Partnership, or that such
cash proceeds could be timed to coincide with the liquidity needs of the
Partnership. In this regard, the Partnership has placed Millwood Park on
the market.
Income allocation and distributions:
Terms of the Amended Partnership Agreement specify that income before
depreciation is allocated to the General Partner to the extent of Contingent MID
paid in cash. Depreciation is allocated in the ratio of 95:5 to the limited
partners and the General Partner, respectively. Therefore, for the three year
period ended December 31, 1995, $124,401, $173,354, and $208,938, respectively,
were allocated to the General Partner. The limited partners received allocations
of net income of $2,363,611, $3,293,729 and $3,969,818 for the three year period
ended December 31, 1995, respectively.
<PAGE>
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 $1,044,865 for the contingent MID has been accrued by the
Partnership for the year ended December 31, 1995 for the General Partner.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
<TABLE>
<CAPTION>
Page
Number
INDEX TO FINANCIAL STATEMENTS ------
- -----------------------------
Financial Statements:
<S> <C>
Report of Independent Public Accountants............... 15
Balance Sheets at December 31, 1995 and 1994........... 16
Statements of Operations for each of the three years
in the period ended December 31, 1995............... 17
Statements of Partners' Deficit for each of the three
years in the period ended December 31, 1995......... 18
Statements of Cash Flows for each of the three years
in the period ended December 31, 1995................ 19
Notes to Financial Statements.......................... 21
Financial Statement Schedule -
Schedule III - Real Estate Investments and
Accumulated Depreciation and Amortization........ 34
</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, 1995 and 1994, and
the related statements of operations, partners' deficit and cash flows for each
of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
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 13, 1996
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------
1995 1994
--------------------------------
<S> <C> <C>
ASSETS
- ------
Real estate investments:
Land..................................................... $ 6,280,580 $ 6,280,580
Buildings and improvements............................... 73,318,763 71,739,632
----------- -----------
79,599,343 78,020,212
Less: Accumulated depreciation and amortization......... (40,501,275) (37,105,195)
----------- -----------
39,098,068 40,915,017
Assets held for sale........................................ 3,164,323 12,724,693
Cash and cash equivalents................................... 5,791,363 3,313,765
Cash segregated for security deposits....................... 316,665 303,436
Accounts receivable......................................... 206,847 317,559
Prepaid expenses and other assets........................... 149,212 258,668
Escrow deposits............................................. 1,459,480 896,234
Deferred borrowing costs, net of accumulated
amortization of $476,661 and $652,691 at
December 31, 1995 and 1994, respectively................. 1,926,908 1,459,976
----------- -----------
$ 52,112,866 $ 60,189,348
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net................................. $ 59,160,426 $ 68,152,522
Accounts payable............................................ 86,164 220,341
Accrued expenses............................................ 146,379 146,722
Accrued interest............................................ 411,489 1,680,833
Accrued property taxes...................................... 935,318 961,459
Advances from Southmark..................................... 35,147 32,690
Advances from affiliates - General Partner.................. 1,474,968 1,814,115
Payable to affiliates - General Partner..................... 7,196,483 5,926,684
Security deposits and deferred rental income................ 515,676 546,313
----------- -----------
69,962,050 79,481,679
----------- -----------
Partners' deficit:
Limited partners - 240,000 limited partnership units
authorized; 229,980 and 230,594 limited partnership
units issued and outstanding at December 31, 1995 and
1994, respectively............... (7,513,252) (9,844,782)
General Partner.......................................... (10,335,932) (9,447,549)
----------- -----------
(17,849,184) (19,292,331)
----------- -----------
$ 52,112,866 $ 60,189,348
=========== ===========
</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,
--------------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Rental revenue.......................... $ 17,533,914 $ 21,295,696 $ 24,228,119
Interest................................ 168,422 76,915 59,573
Gain on disposition of real estate...... 3,427,513 6,307,885 8,193,880
Gain on involuntary conversion.......... - 20,877 -
Gain on legal settlement................ 65,857 - -
----------- ----------- -----------
Total revenue......................... 21,195,706 27,701,373 32,481,572
----------- ----------- -----------
Expenses:
Interest................................ 6,204,096 7,642,760 9,211,571
Interest - affiliates................... 160,853 138,828 408,717
Depreciation and amortization........... 4,019,174 4,619,944 4,816,282
Property taxes.......................... 1,222,545 1,515,606 2,052,574
Personnel expenses...................... 2,077,845 2,696,563 2,901,362
Repairs and maintenance................. 2,321,887 2,956,539 3,020,635
Property management fees -
affiliates............................ 877,423 1,067,967 1,207,684
Utilities............................... 1,346,961 1,729,864 2,037,982
Other property operating expenses....... 1,232,640 1,437,705 1,513,130
General and administrative.............. 99,149 163,877 387,379
General and administrative -
affiliates............................ 449,708 510,786 745,500
----------- ----------- -----------
Total expenses........................ 20,012,281 24,480,439 28,302,816
----------- ----------- -----------
Income before extraordinary item........... 1,183,425 3,220,934 4,178,756
Extraordinary gain on extinguishment
of debt, net............................ 1,304,587 246,149 -
----------- ----------- -----------
Net income................................. $ 2,488,012 $ 3,467,083 $ 4,178,756
=========== =========== ===========
Net income allocable to limited
partners................................ $ 2,331,530 $ 3,293,729 $ 3,969,818
Net income allocable to General
Partner................................ 156,482 173,354 208,938
----------- ----------- -----------
Net income................................. $ 2,488,012 $ 3,467,083 $ 4,178,756
=========== =========== ===========
Net income per limited partnership unit:
Income before extraordinary item........ $ 4.89 $ 13.27 $ 17.20
Extraordinary gain on extinguishment
of debt............................... 5.25 1.01 -
----------- ----------- -----------
Net income.............................. $ 10.14 $ 14.28 $ 17.20
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
STATEMENTS OF PARTNERS' DEFICIT
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
------------- ------------- -------------
<S> <C> <C> <C>
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)
Net income................................ 156,482 2,331,530 2,488,012
Contingent Management Incentive
Distribution........................... (1,044,865) - (1,044,865)
----------- ----------- -----------
Balance at December 31, 1995.............. $(10,335,932) $ (7,513,252) $(17,849,184)
=========== =========== ===========
</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,
-------------------------------------------------
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from tenants..................... $17,504,409 $ 21,232,256 $ 24,214,841
Cash received from legal settlement............ 65,857 - -
Cash paid to suppliers......................... (7,827,222) (8,698,900) (9,274,750)
Cash paid to affiliates........................ (1,102,197) (1,809,129) (1,199,948)
Interest received.............................. 168,422 76,915 59,573
Interest paid.................................. (5,428,928) (6,643,256) (8,493,337)
Interest paid to affiliates.................... (264,854) (470,490) (210,778)
Property taxes paid............................ (991,905) (1,583,940) (2,261,096)
---------- ----------- ----------
Net cash provided by operating activities......... 2,123,582 2,103,456 2,834,505
---------- ----------- ----------
Cash flows from investing activities:
Additions to real estate investments........... (1,646,416) (1,968,318) (2,512,727)
Net proceeds from disposition of
real estate investments...................... 45,000 2,791,434 5,040,451
Insurance proceeds from fire................... - 40,441 -
---------- ----------- ----------
Net cash provided by (used in)
investing activities........................... (1,601,416) 863,557 2,527,724
---------- ----------- ----------
Cash flows from financing activities:
Principal payments on mortgage
notes payable................................ (2,489,684) (1,442,587) (1,961,022)
Reinstatement of mortgage principal
due to note modification..................... - - 258,586
Proceeds from refinancing of
mortgage notes payable....................... 5,317,966 - 1,283,267
Deferred borrowing costs paid.................. (637,704) (44,891) (324,543)
Mortgage loans from affiliate.................. - - 1,556,670
Repayment of mortgage loans from
affiliate.................................... - (1,603,135) (1,709,535)
Advances from affiliates - General
Partner...................................... - 6,000 128,518
Repayment of advances from
affiliates - General Partner................. (235,146) (1,206,664) -
Contingent Management Incentive
Distribution................................. - (300,000) -
---------- ----------- ----------
Net cash provided by (used in) financing
activities..................................... 1,955,432 (4,591,277) (768,059)
---------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents............................. 2,477,598 (1,624,264) 4,594,170
Cash and cash equivalents at
beginning of year............................ 3,313,765 4,938,029 343,859
---------- ----------- ----------
Cash and cash equivalents at end of year.......... $ 5,791,363 $ 3,313,765 $ 4,938,029
========== =========== ==========
</TABLE>
See discussion of noncash investing and financing activities in Notes 6 and 7.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
STATEMENTS OF CASH FLOWS
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net income................................. $ 2,488,012 $ 3,467,083 $ 4,178,756
---------- ---------- ----------
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization........... 4,019,174 4,619,944 4,816,282
Amortization of discounts on
mortgage notes payable................ 217,857 308,183 305,006
Amortization of deferred
borrowing costs....................... 170,772 226,604 257,640
Net interest added to advances
from Southmark........................ 2,457 2,035 1,750
Net interest added to advances
from affiliates - General Partner..... 27,726 131,727 197,939
Gain on disposition of real estate...... - (6,307,885) (8,193,880)
Gain on involuntary conversion.......... (3,427,513) (20,877) -
Extraordinary gain on extinguish-
ment of debt.......................... (1,304,587) (246,149) -
Changes in assets and liabilities:
Cash segregated for security
deposits............................ (13,229) 44,550 (26,685)
Accounts receivable................... 110,712 64,178 60,079
Prepaid expenses and other
assets.............................. 109,456 30,607 45,907
Escrow deposits....................... (563,246) 608,375 324,729
Accounts payable...................... (134,177) (427,528) 58,914
Accrued expenses...................... (343) 98,033 (47,486)
Accrued interest...................... 252,355 (705) 153,838
Accrued property taxes................ (26,141) (186,427) (114,031)
Payable to affiliates - General
Partner............................. 224,934 (230,376) 753,236
Security deposits and deferred
rental income....................... (30,637) (77,916) 62,511
---------- ---------- ----------
Total adjustments................. (364,430) (1,363,627) (1,344,251)
---------- ---------- ----------
Net cash provided by operating
activities............................ $ 2,123,582 $ 2,103,456 $ 2,834,505
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
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.
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, 1995, the Partnership
owned seven income-producing properties. One of these properties is currently
held for sale, as described in Note 4 - Real Estate Investments.
Basis of Presentation
- ---------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Partnership's financial statements include the accounts of the following
listed tier partnerships. These single asset tier partnerships were formed to
accommodate the refinancing of the respective property. The Partnership's and
the General Partner's ownership interest in each tier partnership is detailed
below. The Partnership retains effective control of each tier partnership. The
General Partner's minority interest is not presented as it is either negative or
immaterial.
<TABLE>
<CAPTION>
% of Ownership Interest
Tier Partnership Partnership General Partner
---------------- ----------- ---------------
<S> <C> <C>
Limited Partnerships:
Buccaneer Fund XII, Ltd. (a)(c) 100 -
Castle Bluff Fund XII Associates, L.P. (b) 99 1
Millwood Park Fund XII, Ltd. (a)(c) 100 -
Palisades Fund XII Associates, L.P. (a)(b) 100 -
Plaza Westlake Fund XII, Ltd. (a)(c) 100 -
General Partnerships:
Brendon Way Fund XII Associates (b) 99 1
</TABLE>
<PAGE>
(a) The general partner of these partnerships is a corporation whose stock is
100% owned by the Partnership.
(b) Included in financial statements for years ended December 31, 1995, 1994 and
1993.
(c) Included in financial statements for years ended December 31, 1995.
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.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. This statement is effective for financial statements for fiscal
years beginning after December 15, 1995. The Partnership has not adopted the
principles of this statement within the accompanying financial statements;
however, it is not anticipated that adoption will have a material effect on the
carrying value of the Partnership's long-lived assets.
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.
Carrying amounts for cash and cash equivalents approximate fair value.
<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. Carrying amounts
for escrow deposits approximate fair value.
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 property 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;
<PAGE>
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.
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 1995, 1994 and 1993 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 distributions were made to the limited partners in 1995, 1994 or 1993. The
Partnership accrued distributions of $1,044,865, $1,164,549 and $1,191,834 for
the benefit of the General Partner for the years ended December 31, 1995, 1994
and 1993, respectively. These distributions are the contingent portion of the
MID pursuant to the Amended Partnership Agreement.
Net Income Per Limited Partnership Unit
- ---------------------------------------
Net income per Unit is computed by dividing net income allocated to the limited
partners by the weighted average number of Units outstanding. Per Unit
information has been computed based on 229,980, 230,594 and 230,817 Units
outstanding in 1995, 1994 and 1993.
Reclassifications
- -----------------
Certain reclassifications have been made to prior period amounts to conform with
the current year presentation.
<PAGE>
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 property, in which
case McREMI will receive property management fees from the commercial property
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.
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 was 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 eliminated
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
1995, 1994 or 1993.
<PAGE>
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 can 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. The amendment of the capitalization policy did not materially
affect the MID for 1995, 1994 or 1993 because the Entitlement Amount was
sufficient to pay Contingent MID notwithstanding the amendment to 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.
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,
------------------------------------------------
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Property management fees - affiliates...... $ 877,423 $ 1,067,967 $ 1,207,684
Charged to interest expense:
Interest expense on affiliate
loans and advances.................... 160,853 138,828 408,717
Charged to general and
administrative - affiliates:
Partnership administration.............. 449,708 510,786 592,477
Fixed MID............................... - - 153,023
---------- ---------- ----------
$ 1,487,984 $ 1,717,581 $ 2,361,901
========== ========== ==========
Charged to General Partner's deficit:
Contingent MID $ 1,044,865 $ 1,164,549 $ 1,191,834
========== ========== ==========
</TABLE>
Payable to affiliates - General Partner at December 31, 1995 and 1994 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.
<PAGE>
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 notes 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, 1995, $2,662,819 remained available for
borrowing under the facility; however, additional funds could become available
as other partnerships repay existing borrowings. This commitment will terminate
on September 6, 1996. The Partnership has borrowed $1,419,339 which will be
repaid from available cash reserves of the Partnership. These borrowings are not
due upon termination of the revolving credit facility.
The total advances from affiliates at December 31, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Advances from General Partner- revolving
credit facility $ 1,419,339 $ 1,654,485
Advances purchased by General Partner 27,903 27,903
Accrued interest payable 27,726 131,727
---------- ----------
$ 1,474,968 $ 1,814,115
========== ==========
</TABLE>
The advances are unsecured, due on demand and accrue interest at the prime
lending rate of the Bank of America plus 1%. The prime lending rate was 8.5% at
December 31, 1995 and 1994.
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 $1,939,981 in 1995,
$8,345,846 in 1994 and $12,981,815 in 1993.
<PAGE>
NOTE 4 - REAL ESTATE INVESTMENTS
- --------------------------------
The basis and accumulated depreciation of the Partnership's real estate
investments held at December 31, 1995 and 1994 are set forth in the following
tables:
<TABLE>
<CAPTION>
Accumulated
Buildings and Depreciation Net Book
1995 (a) Land Improvements and Amortization Value
-------- ----------- ------------- ---------------- ------------
<S> <C> <C> <C> <C>
Brendon Way
Indianapolis, IN $ 1,067,661 $ 20,754,167 $ (11,558,721) $ 10,263,107
Buccaneer Village
Denver, CO 996,813 8,770,558 (5,149,204) 4,618,167
Castle Bluff
Kentwood, MI 239,839 5,180,700 (2,974,727) 2,445,812
Channingway
Columbus, OH 1,544,716 18,036,789 (9,631,879) 9,949,626
Palisades at the Galleria
Atlanta, GA 975,967 14,101,466 (7,629,419) 7,448,014
Plaza Westlake
Glendale Heights, IL 1,455,584 6,475,083 (3,557,325) 4,373,342
---------- ----------- ------------ -----------
$ 6,280,580 $ 73,318,763 $ (40,501,275) $ 39,098,068
========== =========== ============ ===========
Accumulated
Buildings and Depreciation Net Book
1994 (a) Land Improvements and Amortization Value
-------- ----------- ------------- ---------------- ------------
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 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>
(a) During 1994, management placed Millwood Park on the market for sale.
Therefore, at December 31, 1995 and 1994, Millwood Park is recorded as an
asset held for sale.
<PAGE>
The Partnership leases its commercial property under various non-cancelable
operating lease agreements. Future minimum rents to be received as of December
31, 1995, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996.................................... $ 743,000
1997.................................... 684,000
1998.................................... 462,000
1999.................................... 361,000
2000.................................... 47,000
Thereafter.............................. -
---------
Total............................... $2,297,000
=========
</TABLE>
Future minimum rents do not include contingent rents or operating expense
reimbursements. Contingent rents and operating expense reimbursements amounted
to $191,814 in 1995, $251,475 in 1994 and $340,026 in 1993, and are included in
rental income on the Statements of Operations.
The Partnership's properties are encumbered by mortgage indebtedness as
discussed in Note 5.
NOTE 5 - MORTGAGE NOTES PAYABLE
- -------------------------------
The following table sets forth mortgage notes payable of the Partnership at
December 31, 1995 and 1994. All mortgage notes are secured by real estate
investments or the assets held for sale.
<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rates % Maturity Date (l) 1995 1994
- -------- ------------ -------- ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Brendon Way First 8.00 $133,911 05/24 $ 18,002,757 $ 18,162,469
----------- -----------
Buccaneer
Village First (b) 8.10 40,741 10/02 5,496,384 -
First 9.50 28,853 04/07 - 2,508,392
Second 10.75 9,335 07/95 - 988,077
Interest in net
profits (d) - 2,688,068
Discount (c) - (386,967)
----------- -----------
5,496,384 5,797,570
----------- -----------
Castle Bluff First 9.25 36,926 12/24 4,459,417 4,488,555
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rates % Maturity Date (l) 1995 1994
- -------- ------------ -------- ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Channingway(k) First Variable (e) Variable (e) 08/98 $ 12,988,079 $ 13,181,124
----------- -----------
Lamar Plaza Wrap (f) (f) (f) 07/95 - 3,980,606
Discount (c) - (85,273)
----------- -----------
- 3,895,333
----------- -----------
Millwood Park First (g) 8.10 29,500 10/02 3,982,499 -
First 8.50 30,671 09/04 - 2,579,310
Second 10.00 6,115 07/95 - 733,856
Discount (c) - (372,176)
----------- -----------
3,982,499 2,940,990
----------- -----------
Palisades at the
Galleria First (h) 8.08 78,371 10/02 10,593,002 -
First Variable Variable 10/95 - 8,392,910
----------- -----------
10,593,002 8,392,910
----------- -----------
Plaza Westlake First (i) 9.50 37,285 01/00 3,638,288 -
First 9.50 44,548 03/95 - 3,383,827
Discount (c) - (28,519)
----------- -----------
3,638,288 3,355,308
----------- -----------
Sundance Wrap (j) (j) (j) 07/95 - 7,780,557
Interest in
profits 7.43 - 196,569
Discount (c) - (38,863)
----------- -----------
- 7,938,263
----------- -----------
$ 59,160,426 $ 68,152,522
=========== ===========
</TABLE>
(a) The debt, except for Plaza Westlake, is non-recourse to the Partnership.
(b) On October 20, 1995, the Partnership refinanced the mortgage note payable
on Buccaneer Village. See Note 7.
(c) Discounts were based on effective interest rates of 11% to 14%.
(d) 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
recognized a gain on early extinguishment of debt of $1,838,192.
<PAGE>
(e) Interest on the Channingway mortgage note is 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, 1995 and 1994 was
8.5% and 7.875%, respectively.
(f) The wrap mortgage note on Lamar Plaza consisted of two separate principal
portions - equity and junior. The mortgage note required principal and
interest payments of $32,672 on the equity portion based on a 10.75%
interest rate. The junior portion bore interest at 7.43%. Payments on the
junior portion would be made only when the amount of net cash flow was in
excess of payments made on the equity portion as calculated on a quarterly
basis. On July 27, 1995, Lamar Plaza was sold. See Note 6.
(g) On October 31, 1995, the Partnership refinanced the mortgage note payable
on Millwood Park. See Note 7.
(h) On October 13, 1995, the Partnership refinanced the mortgage note payable
on Palisades at the Galleria. See Note 7.
(i) On March 24, 1995, the Partnership refinanced the mortgage note payable on
Plaza Westlake. See Note 7.
(j) The wrap mortgage note on Sundance consisted of three separate principal
portions - wrap, equity and junior. The mortgage note required principal
and interest payments of $63,408 on the wrap portion based on an interest
rate of 10.375% and interest only payments of $11,837 on the equity portion
based on an interest rate of 10.75%. Payments on the junior portion would
be made only when the amount of net cash flow was in excess of payments
made on the wrap and equity portion as calculated on a quarterly basis. The
junior portion bore interest of 7.43%. The modified balance of the note
included $172,430 of accrued and unpaid interest at the date of
modification. On June 19, 1995, the Partnership sold Sundance and all
mortgage debt was relieved. See Note 6.
(k) 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 lender waive its
right to accelerate the mortgage debt. The lender may require the payment
of fees or additional interest as a condition to granting such waiver. In
the event the waiver is not obtained, and the mortgage debt is accelerated,
the Partnership will be required to satisfy the outstanding mortgage debt
which approximated $13 million at December 31, 1995. 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,
the lender could foreclose on the property securing the mortgage.
Management believes the likelihood of this outcome is remote and
accordingly has not reflected this balance as currently due.
<PAGE>
(l) Balloon payments on the mortgage notes are due as follows:
<TABLE>
<CAPTION>
Property Balloon Payment Date
-------- --------------- ----
<S> <C> <C>
Channingway $12,293,000 08/98
Plaza Westlake 3,145,640 01/00
Buccaneer Village 5,099,378 10/02
Millwood Park 3,696,959 10/02
Palisades at the Galleria 9,825,319 10/02
</TABLE>
Principal maturities of the mortgage notes payable are as follows:
<TABLE>
<CAPTION>
Real Estate Asset Held
Investments For Sale
----------- ----------
<S> <C> <C>
1996.................................... $ 635,643 $ 32,614
1997.................................... 692,824 35,356
1998.................................... 13,096,545 38,329
1999.................................... 566,433 41,551
2000.................................... 3,636,362 45,045
Thereafter.............................. 36,550,120 3,789,604
---------- ---------
Total $55,177,927 $3,982,499
========== =========
</TABLE>
Based on borrowing rates currently available to the Partnership for mortgage
loans with similar terms and average maturities, the fair value of notes payable
was approximately $58,903,000 as of December 31, 1995.
NOTE 6 - SALES AND DISPOSITIONS OF PROPERTIES
- ---------------------------------------------
On July 27, 1995, the Partnership sold its investment in Lamar Plaza to an
unaffiliated buyer for assumption of the first and second liens by the
purchaser. The gain on disposition is detailed below:
<TABLE>
<CAPTION>
Gain on Sale
-------------
<S> <C>
Mortgage and accrued interest assumed by
purchaser......................................... $ 4,195,215
Basis of real estate sold............................ (3,030,994)
----------
Gain on disposition of real estate................... $ 1,164,221
==========
</TABLE>
<PAGE>
On June 19, 1995 the Partnership sold its investment in Sundance to an
unaffiliated buyer for a cash sales price of $45,000 and assumption of the
first, second and third liens by the purchaser. Cash proceeds and the gain on
disposition are detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
------------ -------------
<S> <C> <C>
Sales price.......................................... $ 45,000 $ 45,000
Mortgages and accrued interest assumed by
purchaser......................................... 8,191,859
Basis of real estate sold............................ (5,973,567)
----------
Gain on disposition of real estate................... $ 2,263,292
==========
-------
Net cash proceeds.................................... $ 45,000
=======
</TABLE>
Also related to the sale of Sundance, the Partnership recognized a $268,433 gain
on early extinguishment of debt related to the interest in net profits portion
of the debt.
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
------------ -------------
<S> <C> <C>
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 related to the interest in net
profits portion of the debt.
<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
------------- -------------
<S> <C> <C>
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
------------ -------------
<S> <C> <C>
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.
<PAGE>
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
------------ -------------
<S> <C> <C>
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>
NOTE 7 - REFINANCING OF MORTGAGE NOTES PAYABLE
- ----------------------------------------------
On October 31, 1995, the Partnership refinanced the mortgage note payable on
Millwood Park. The new loan bears an interest rate of 8.1%, requires monthly
principal and interest payments of $29,500, and will mature October 31, 2002.
Following is a summary of the transaction:
<TABLE>
<CAPTION>
<S> <C>
New loan proceeds......................... $ 3,982,500
Existing debt retired..................... (3,172,754)
----------
Cash proceeds from refinancing............ $ 809,746
==========
</TABLE>
The Partnership deposited $460,348 into property tax and deferred maintenance
escrows and incurred costs of $112,810 relating to the refinancing. Also
relating to the refinancing, the Partnership recognized a $333,080 loss on early
extinguishment of debt due to the unamortized mortgage discount related to the
retired mortgage.
<PAGE>
On October 20, 1995, the Partnership refinanced the mortgage note payable on
Buccaneer Village. The new loan bears an interest rate of 8.1%, requires monthly
principal and interest payments of $40,741, and will mature October 24, 2002.
Following is a summary of the transaction:
<TABLE>
<CAPTION>
<S> <C>
New loan proceeds......................... $ 5,500,000
Existing debt retired..................... (3,398,218)
Prepayment penalty........................ (113,650)
----------
Cash proceeds from refinancing............ $ 1,988,132
==========
</TABLE>
The Partnership deposited $149,217 into property tax and deferred maintenance
escrows and incurred loan costs of $149,892 relating to the refinancing. Also
relating to the refinancing, the Partnership recognized a $468,958 loss on early
extinguishment of debt due to the unamortized mortgage discount and prepayment
penalties related to the retired mortgage.
On October 13, 1995, the Partnership refinanced the mortgage note payable on
Palisades at the Galleria. The new loan bears an interest rate of 8.08%,
requires monthly principal and interest payments of $78,371 and will mature
October 16, 2002. Following is a summary of the transaction:
<TABLE>
<CAPTION>
<S> <C>
New loan proceeds......................... $10,600,000
Existing debt retired..................... (8,413,974)
----------
Cash proceeds from refinancing............ $ 2,186,026
==========
</TABLE>
The Partnership deposited $290,726 into property tax, insurance and deferred
maintenance escrows and incurred loan costs of $242,099 relating to the
refinancing.
On March 24, 1995, the Partnership refinanced the mortgage note payable on Plaza
Westlake. The new loan bears an interest rate of 9.5%, requires monthly
principal and interest payments of $37,285, and will mature January 31, 2000.
Following is a summary of the transaction:
<TABLE>
<CAPTION>
<S> <C>
New loan proceeds......................... $ 4,000,000
Capital improvement account............... (300,000)
Existing debt retired..................... (3,365,938)
----------
Cash proceeds from refinancing............ $ 334,062
==========
</TABLE>
<PAGE>
In addition, the Partnership incurred loan costs of $132,903 relating to the
refinancing.
On February 6, 1995, the Partnership paid off the interest in net profits on
Buccaneer Village for retirement of $3,588,192 of debt and accrued interest. The
debt was retired at a discounted payoff of $1,750,000, which resulted in an
extraordinary gain on extinguishment of debt of $1,838,192.
During 1993, the Partnership received additional proceeds of $1,283,267 that
were withheld at the time of the November 1992 refinancing of the mortgage note
on Palisades at the Galleria.
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 monthly payments from $164,969 to $133,911.
NOTE 8 - 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, 1995, 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 9 - 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. Ernst & Young BDO Seidman et al
(Case #92-06560-A). This suit was filed on behalf of the Partnership and other
affiliated partnerships (the "Affiliated Partnerships") on May 26, 1992, in the
14th Judicial District Court of Dallas County. The petition sought recovery
against the Partnership's former auditors, BDO Seidman, for negligence and fraud
in failing to detect and/or report overcharges of fees/expenses by Southmark,
the former general partner. The former auditors asserted counterclaims against
the Affiliated Partnerships based on alleged fraudulent misrepresentations made
to the auditors by the former management of the Affiliated Partnerships
(Southmark) in the form of client representation letters executed and delivered
to the auditors by Southmark management. The counterclaims sought recovery of
attorneys' fees and costs incurred in defending this action. The original
petition also alleged causes of action against certain former officers and
directors of the Partnership's original general partner for breach of fiduciary
duty, fraud and conspiracy relating to the improper assessment and payment of
certain administrative fees/expenses. On January 11, 1994 the allegations
against the former officers and directors were dismissed.
The trial court granted summary judgment in favor of Ernst & Young and BDO
Seidman on the fraud and negligence claims based on the statute of limitations.
The Affiliated Partnerships appealed the summary judgment to the Dallas Court of
Appeals. In August 1995, the Appeals Court upheld all of the summary judgments
in favor of BDO Seidman. In exchange for the plaintiff's agreement not to file
any motions for rehearing or further appeals, BDO Seidman agreed that it will
not pursue the counterclaims against the Partnership.
<PAGE>
NOTE 10 - GAIN ON LEGAL SETTLEMENT
- ----------------------------------
The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark Corporation ("Southmark"), an affiliate of a previous general partner,
for damages relating to improper overcharges, breach of contract and breach of
fiduciary duty. The Partnership settled these claims in 1991, and such
settlement was approved by the Bankruptcy Court.
An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995 the Partnership received in full satisfaction of its claims, $49,818 in
cash, and common and preferred stock in the reorganized Southmark which
represents the Partnership's pro-rata share of Southmark assets available for
Class 8 Claimants. The Partnership sold the Southmark common and preferred stock
in May 1995 for $16,039, which combined with the cash proceeds from Southmark,
resulted in a gain on legal settlement of $65,857.
NOTE 11 - SUBSEQUENT EVENT
- --------------------------
On February 23, 1996, the Partnership was awarded $499,000 as payment for
condemnation of 6.45 acres at Palisades at the Galleria by Cobb County, Georgia.
The county required the right-of-way to this property for highway construction.
The condemnation of this parcel will not materially affect the operations of the
property. The $499,000 is being held in escrow by the mortgagee pending
completion of construction. Upon receipt of the $499,000, the Partnership will
recognize a gain of approximately $298,000.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 1995
<TABLE>
<CAPTION>
Cumulative Costs
Initial Cost (b) Write-down Capitalized
Related (b) Buildings and and Permanent Subsequent
Description Encumbrances Land Improvements Impairment To Acquisition
- ----------- ------------ ---- ------------- ------------- --------------
Apartments:
<S> <C> <C> <C> <C> <C>
Brendon Way
Indianapolis, IN $18,002,757 $ 1,067,661 $17,490,677 $ - $ 3,263,490
Buccaneer Village
Denver, CO 5,496,384 996,813 8,058,534 - 712,024
Castle Bluff
Kentwood, MI 4,459,417 239,839 4,650,535 - 530,165
Channingway
Columbus, OH 12,988,079 1,544,716 16,438,004 - 1,598,785
Palisades at the
Galleria
Atlanta, GA 10,593,002 975,967 10,920,268 - 3,181,198
Plaza Westlake
Glendale Heights, IL 3,638,288 1,635,485 6,222,137 (746,424) 819,469
---------- ---------- ---------- -------- ----------
$55,177,927 $ 6,460,481 $63,780,155 $(746,424) $10,105,131
========== ========== ========== ======== ==========
Asset Held for Sale:
Millwood Park
Kansas City, MO $ 3,982,499
==========
</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, 1995
<TABLE>
<CAPTION>
Gross Amount at
Which Carried at Close of Period Accumulated
Buildings and Depreciation
Description Land Improvements Total (a) and Amortization
- ----------- ---- ------------- --------- ----------------
Apartments:
<S> <C> <C> <C> <C>
Brendon Way
Indianapolis, IN $ 1,067,661 $20,754,167 $21,821,828 $(11,558,721)
Buccaneer Village
Denver, CO 996,813 8,770,558 9,767,371 (5,149,204)
Castle Bluff
Kentwood, MI 239,839 5,180,700 5,420,539 (2,974,727)
Channingway
Columbus, OH 1,544,716 18,036,789 19,581,505 (9,631,879)
Palisades at the
Galleria
Atlanta, GA 975,967 14,101,466 15,077,433 (7,629,419)
Plaza Westlake
Glendale Heights, IL 1,455,584 6,475,083 7,930,667 (3,557,325)
---------- ---------- ---------- -----------
$ 6,280,580 $73,318,763 $79,599,343 $(40,501,275)
========== ========== ========== ===========
Asset Held for Sale:
Millwood Park
Kansas City, MO $ (c) $ (c) $ 3,164,323 $ (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
$96,560,742 and accumulated depreciation was $76,179,570 December 31, 1995.
(c) Asset held for sale is 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, 1995
<TABLE>
<CAPTION>
Date of Date Depreciable
Description Construction Acquired lives (years)
- ----------- ------------ -------- -------------
Apartments:
<S> <C> <C> <C>
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
Asset Held for Sale:
Millwood Park
Kansas City, MO 1973 01/82
</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,
--------------------------------------------------
1995 1994 1993
----------- ------------ -------------
Real Estate Investments:
- ------------------------
<S> <C> <C> <C>
Balance at beginning of year............... $ 78,020,212 $ 96,194,009 $114,069,986
Improvements............................... 1,579,131 1,869,162 2,010,640
Reclassification to assets held for sale... - (4,916,139) (19,796,667)
Dispositions of real estate................ - (15,084,622) (89,950)
Replacement of assets...................... - (42,198) -
----------- ----------- -----------
Balance at end of year..................... $ 79,599,343 $ 78,020,212 $ 96,194,009
=========== =========== ===========
Accumulated Depreciation and Amortization:
- ------------------------------------------
Balance at beginning of year............... $ 37,105,195 $ 43,889,170 $ 48,184,664
Depreciation............................... 3,396,080 3,683,991 3,647,465
Reclassification to assets held for sale... - (2,776,585) (7,942,959)
Dispositions of real estate................ - (7,668,747) -
Replacement of assets...................... - (22,634) -
----------- ----------- -----------
Balance at end of year..................... $ 40,501,275 $ 37,105,195 $ 43,889,170
=========== =========== ===========
Assets Held for Sale:
- ---------------------
Balance at beginning of year............... $ 12,724,693 $ 11,421,936 $ 7,434,149
Reclassification to assets held for sale... - 2,139,554 11,853,708
Improvements............................... 67,285 99,156 502,087
Depreciation............................... (623,094) (935,953) (1,168,817)
Sale ...................................... (9,004,561) - (7,199,191)
----------- ----------- -----------
Balance at end of year..................... $ 3,164,323 $ 12,724,693 $ 11,421,936
=========== =========== ===========
</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
- ----------------- --- -------------------------------------
<S> <C> <C>
Robert A. McNeil, 75 Mr. McNeil is also Chairman of the
Chairman of the Board and Director of McNeil Real
Board and Director Estate Management, Inc. ("McREMI")
which is an affiliate of the General
Partner. He has 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. McNeil 52 Mrs. McNeil is Co-Chairman, with
Co-Chairman of the husband Robert A. McNeil, of McNeil
Board Investors, Inc. Mrs. McNeil has
twenty years of real estate experience,
most recently as a 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
- ----------------- --- -------------------------------------
<S> <C> <C>
Donald K. Reed, 50 Mr. Reed is President, Chief Executive
Director, President, Officer and Director of McREMI which
and Chief Executive is an affiliate of the General Partner.
Officer Prior to joining McREMI in March 1993,
Mr. Reed was President, Chief Operating
Officer and 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.
Ron K. Taylor 38 Mr. Taylor is a Senior Vice President
Vice President of McREMI and has been in this capacity
since McREMI commenced active operations
in 1991. He also serves as Acting Chief
Financial Officer of McREMI since the
resignation of Robert C. Irvine on
January 31, 1996. Mr. Taylor is
primarily responsible for Asset
Management functions at McREMI,
including property dispositions,
commercial leasing, real estate finance
and portfolio management. Prior to
joining McREMI, Mr. Taylor served as
an Executive Vice President for a
national syndication/property management
company. Mr. Taylor has been involved
in the real estate industry since 1983.
</TABLE>
Each director shall serve until his successor shall have been duly elected and
qualified.
<PAGE>
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, 1995, 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, 1995. 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.
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 1,552 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 was 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 eliminated
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.
<PAGE>
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, 1995, the
Partnership paid or accrued for the General Partner Contingent MID in the amount
of $1,044,865.
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,
1995, the Partnership paid or accrued $1,327,131 in property management fees and
reimbursements.
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 year ended December
31, 1995, no funds were borrowed from this 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.
<TABLE>
<CAPTION>
(A) Exhibits
--------
Exhibit
Number Description
------- -----------
<S> <C>
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)
10.8 Property Management Agreement, dated September 6,
1991, between Brendon Way Fund XII Associates and
McNeil Real Estate Management, Inc.(2)
</TABLE>
<PAGE>
Exhibit
Number Description
------- -----------
<TABLE>
<CAPTION>
<S> <C>
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 Second Modification of Deed of Trust Note, dated
June 30, 1993, between American Mortgages, Inc. and
Brendon Way XII Associates. (4)
10.17 Mortgage Note, dated March 24, 1995, between Plaza
Westlake Fund XII, Ltd. and Bank One.
10.18 Promissory Note, dated October 13, 1995,
between Palisades Fund XII Associates, L.P. and
Fleet Real Estate Capital, Inc.
10.19 Mortgage Note, dated October 20, 1995, between
Buccaneer Village Fund XII, Ltd. and Fleet Real
Estate Capital, Inc.
10.20 Mortgage Note, dated October 31, 1995, between
Millwood Park Fund XII, Ltd. and Fleet Real Estate
Capital, Inc.
11. Statement regarding computation of Net Income per
limited partnership unit (see Note 1 to Financial
Statements)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
22. Following is a list of subsidiaries of the
Partnership:
</TABLE>
<TABLE>
<CAPTION>
Names Under
Jurisdiction Which It Is
Name of Subsidiary Incorporation Doing Business
------------------ ------------- --------------
<S> <C> <C>
Brendon Way Fund XII Indiana None
Associates
Buccaneer Fund XII, Ltd. Texas None
Castle Bluff Fund XII Georgia None
Associates
Millwood Park Fund Texas None
Fund XII, Ltd.
Palisades Fund XII Texas None
Associates, L.P.
Plaza Westlake Fund Texas None
XII, Ltd.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(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.
(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.
</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, 1995.
<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
<S> <C>
March 29, 1996 By: /s/ Robert A. McNeil
- ------------------ ------------------------------------------------
Date Robert A. McNeil
Chairman of the Board and Director
(Principal Executive Officer)
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C>
March 29, 1996 By: /s/ Donald K. Reed
- -------------- ------------------------------------------------
Date Donald K. Reed
President and Director of McNeil Investors, Inc.
March 29, 1996 By: /s/ Ron K. Taylor
- -------------- -------------------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer
of McNeil Investors, Inc.
March 29, 1996 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-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,791,363
<SECURITIES> 0
<RECEIVABLES> 212,476
<ALLOWANCES> (5,629)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 79,599,343
<DEPRECIATION> (40,501,275)
<TOTAL-ASSETS> 52,112,866
<CURRENT-LIABILITIES> 0
<BONDS> 59,160,426
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 52,112,866
<SALES> 17,533,914
<TOTAL-REVENUES> 21,195,706
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,647,332
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,364,949
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,183,425
<DISCONTINUED> 0
<EXTRAORDINARY> 1,304,587
<CHANGES> 0
<NET-INCOME> 2,488,012
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
MORTGAGE NOTE
Re: Plaza Westlake Shopping Center
$4,000,000.00 March 24, 1995
Chicago, Illinois
FOR VALUE RECEIVED, PLAZA WESTLAKE FUND XII, LTD., a Texas
limited partnership ("Maker") hereby jointly and severally
promises to pay to the order of Bank One, Chicago, NA, a national
bank ("Lender") the principal sum of Four Million and no/100
Dollars ($4,000,000.00) ("Loan") (or so much thereof as shall
have been disbursed by Lender from time-to-time to or on behalf
of Maker), at the place and in the manner hereinafter provided,
together with interest from the date hereof on the balance of the
principal remaining from time-to-time unpaid at the rates
described below.
During the period commencing as of the date of the initial
disbursement of the proceeds of the Loan ("Loan Opening Date")
and continuing thereafter through January 31, 2000 ("Maturity
Date"), unless Maker otherwise elects as provided below interest
shall accrue on the outstanding principal balance of the Loan
remaining from time-to-time unpaid under this Note prior to the
Maturity Date at a rate per annum ("Initial Interest Rate") equal
to the Prime Rate (as hereinafter defined), plus one percent
(1.00%).
For the purposes hereof, the term "Prime Rate" shall mean
and refer to the annual rate of interest announced by Lender from
time-to-time as its "Prime Rate," which is neither represented
nor warranted by Lender to be the lowest or most advantageous
rate of interest charged by Lender to its customers. The Initial
Interest Rate shall change concurrently with each change in the
Prime Rate, without Lender being required to give prior notice to
Maker or any guarantor of this Note.
Maker shall have a one time right, but not the obligation,
to fix the interest rate at the Loan Opening Date ("Interest Rate
Election"), at a fixed rate per annum equal to the level of the
five-year Treasury issue maturing closest to the Maturity Date as
designated by Lender, plus Two Hundred Fifty (250) basis points,
i.e. two and one-half percent ("Election Interest Rate") and
after such election the Loan shall bear interest at the Election
Interest Rate. The Initial Interest Rate and/or the Election
Interest Rate are sometimes referred to as the "Loan Rate".
Interest accruing on the principal outstanding under either
the Initial Interest Rate or the Election Interest Rate shall be:
(a) computed on the basis of a year consisting of 360 days and
(b) charged for the actual number of days within each monthly
period in which any amounts remain outstanding under the Loan.
The Loan shall be repaid on the first day of each month in
equal monthly installments of principal, calculated on a twenty
(20) year amortization of the original principal balance of the
Loan, together with interest on the principal balance from time
to time remaining unpaid at the applicable Loan Rate, with a
balloon payment of all principal, plus accrued and unpaid
interest and all fees and expenses due and payable to Lender on
the Maturity Date.
<PAGE>
This Note evidences an arrangement, pursuant to which Lender
may from time-to-time make loans or advances to or for the
account of the Maker through means of drafts, items, orders for
the payment of money, evidences of debt or similar written
instruments, whether negotiable or nonnegotiable, signed by the
Maker or a person authorized or permitted to do so on behalf of
the Maker, which loans or advances are charged to an account in
respect of which the Lender renders bills or statements to Maker
at regular intervals, the amount of which statements are payable
by Maker as herein provided. All advances shall have the
priority of the original advance of funds evidenced by the Note.
Lender shall not be obligated to advance sums in excess of the
amount of the Loan hereunder.
Any prepayments of the Loan, including, without limitation
any amount of the Loan deemed by Lender to be repaid as a result
of any partial repayments of the Loan, shall incur a prepayment
penalty during the first twelve (12) months after the Loan
Opening Date of one percent (1%) of the committed amount of the
Loan (the "Prepayment Premium"). Thereafter, from the thirteenth
(13th) month through the Maturity Date, Borrower may upon ten
(10) days prior written notice prepay the entire amount of the
Loan at par without premium. All payments on account of the
indebtedness evidenced by this Note shall be first applied to
accrued and unpaid interest on the unpaid principal balance of
this Note, secondly, to all other sums then due Lender hereunder
or under any of the Loan Documents, and the remainder, if any, to
said unpaid principal balance. Any partial prepayments shall be
applied to the installments due hereunder in the inverse order of
their due date.
After the Maturity Date, or the earlier acceleration of the
indebtedness evidenced by this Note, or if said indebtedness has
not been accelerated, during any period in which an Event of
Default (as hereinafter defined) exists under this Note or any of
the Loan Documents, Maker shall pay interest on the balance of
principal remaining unpaid during any such period at an annual
rate equal to four percent (4%) plus the applicable Loan Rate
then in effect under this Note. The interest accruing under this
paragraph shall be immediately due and payable by Maker to the
holder of this Note and shall be additional indebtedness
evidenced by this Note.
In the event any payment of interest or principal due
hereunder or any escrow fund payment or deposit for taxes or
insurance due under the Mortgage (as hereinafter defined), other
than amounts unpaid after maturity, is not made within fifteen
(15) days after the date when any such payment is due in
accordance with the terms hereof or thereof, then, in addition to
the payment of the amount so due, Maker shall pay to Lender a
"late charge" of five cents ($.05) for each whole dollar so
overdue to defray part of the cost of collection and handling
such late charge. Maker agrees that the damages to be
sustained by the holder hereof for the detriment caused by any
late payment is extremely difficult and impractical to
ascertain, and that the amount of five cents ($.05) for each
$1.00 due is a reasonable estimate of such damages, does not
constitute interest, and is not a penalty.
<PAGE>
All payments of principal and interest hereunder shall be
paid in coin or currency which, at the time or times of payment,
is the legal tender for public and private debts in the United
States of America and shall be made at such place as Lender or
the legal holder or holders of this Note may from time to time
appoint, and in the absence of such appointment, then at the
offices of Lender at 14 South LaGrange Road, LaGrange, Illinois
60525-2491. Payment submitted in funds not available until
collected shall continue to bear interest until collected. If
payment hereunder becomes due and payable on a Saturday, Sunday
or legal holiday under the laws of the State of Illinois, the due
date thereof shall be extended to the next succeeding business
day. and interest shall be payable thereon at the then applicable
interest rate during such extension.
Notwithstanding any provisions of this Note or any
instrument securing payment of the indebtedness evidenced by this
Note to the contrary, it is the intent of Maker and Lender that
Lender shall never be entitled to receive, collect or apply as
interest on principal of the indebtedness, any amount in excess
of the maximum rate of interest permitted to be charged by
applicable law; and if under any circumstance whatsoever,
fulfillment of any provision of this Note, at the time
performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by applicable law,
then, ipso facto, the obligation to be fulfilled shall be reduced
to the limit of such validity; and in the event Lender ever
receives, collects or applies as interest any such excess, such
amount which would be excess interest shall be deemed a permitted
partial prepayment of principal and treated hereunder as such;
and if the principal of the indebtedness secured hereby is paid
in full, any remaining excess funds shall forthwith be paid to
Maker. In determining whether or not interest of any kind
payable hereunder, under any specific contingency, exceeds the
highest lawful rate, Maker and Lender shall, to the maximum
extent permitted under applicable law, (1) characterize any
non-principal payment as an expense, fee or premium rather than
as interest and (2) amortize, prorate, allocate and spread, to
the end that the interest on account of such indebtedness does
not exceed the maximum amount permitted by applicable law;
provided that if the amount of interest received for the
actual period of existence thereof exceeds the maximum lawful
rate, Lender shall refund to Maker the amount of such excess.
Lender shall not be subject to any penalties provided by any
laws for contracting for, charging or receiving interest in
excess of the maximum lawful rate.
This Note and any and all other liabilities and obligations
and indebtedness of Maker to Lender, whether such liabilities,
obligation or indebtedness are now existing or hereafter created,
direct or indirect, absolute or contingent, joint or several, due
or to become due, howsoever created, arising or evidenced, and
howsoever acquired by Lender, are secured, inter alia, by the
Security Agreement of even date herewith made by Maker, the
Assignment of Rents and Leases of even date herewith made by
Maker, and the Mortgage (the "Mortgage") of even date herewith
<PAGE>
made by the Maker to Lender creating a first mortgage lien on
certain real property (the "Premises") legally described in
Exhibit 1 attached to the Mortgage (the Mortgage and said
security documents and any other document or instrument securing
this Note or delivered to induce Lender to disburse the proceeds
evidenced hereby are hereinafter collectively referred to as the
"Loan Documents"). Reference is hereby made to the Loan
Documents (which are incorporated herein by reference as fully
and with the same effect as if set forth herein at length) for a
legal description of the Premises, a statement of the covenants
and agreements contained therein, a statement of the rights,
remedies, and security afforded thereby, and all matters therein
contained.
The occurrence of any one or more of the following events
shall constitute an "Event of Default" under this Note:
(a) the failure by Maker to make payment of principal
or interest as same becomes due and payable or payment of
any other amount due to Lender under this Note, within ten
(10) days after the date when any such payment is due in
accordance with the terms hereof, or the failure of Maker to
make payment of any amounts due to Lender under the Mortgage
or any of the other Loan Documents within ten (10) days
after written notice from Lender that any such payment is
due in accordance with the terms thereof; or
(b) the occurrence of any one or more of the "Events
of Default" under paragraph 14 of the Mortgage; or
(c) the occurrence of an "Event of Default" under the
Certificate and Agreement or any other of the Loan Documents
other than the Mortgage; or
(d) the sale, assignment or other disposition of all
or any portion of the Premises, or any interest in the Maker
(including without limitation, the sale of any shares or any
partnership interest, if any) in violation of paragraph 27
of the Mortgage.
At the election of the holder hereof, and without notice,
the principal balance remaining unpaid under this Note, and all
unpaid interest accrued thereon, shall be and become immediately
due and payable in full in the case of the occurrence of any
Event of Default. Failure to exercise this option shall not
constitute a waiver of the right to exercise same in the event of
any subsequent Event of Default. No holder hereof shall, by any
act of omission or commission, be deemed to waive any of its
rights, remedies or powers hereunder or otherwise unless such
waiver is in writing and signed by the holder hereof, and then
only to the extent specifically set forth therein. The rights,
remedies and powers of the holder hereof, as provided in this
Note, the Mortgage and in all of the other Loan Documents are
cumulative and concurrent, and may be pursued against Maker, any
guarantor, the Premises and any other security given at any time
to secure the repayment hereof, all at the sole discretion of the
holder hereof. If any suit or action is instituted or attorneys
are employed to collect this Note or any part thereof, or for the
protection or enforcement of any or all of the security for this
Note, whether or not any lawsuit is filed with respect thereto,
Maker promises and agrees to pay all costs and expenses of every
kind and nature of collection, protection and enforcement
including reasonable attorneys' fees and court costs.
<PAGE>
Maker, any guarantor, and all others who now or may at any
time become liable for all or any part of the obligations
evidenced hereby, expressly agree hereby to be jointly and
severally bound, and jointly and severally: (i) waive and
renounce any and all homestead, redemption and exemption rights
and the benefit of all valuation and appraisement privileges
against the indebtedness evidenced by this Note or by any
extension or renewal hereof; (ii) waive presentment and demand
for payment, notices of nonpayment and of dishonor, protest of
dishonor, and notice of protest; (iii) waive any and all notices
in connection with the delivery and acceptance hereof and all
other notices in connection with the performance, default, or
enforcement of the payment hereof or hereunder, except as
otherwise expressly provided in the Loan Documents; (iv) waive
any and all lack of diligence and delays in the enforcement of
the payment hereof; (v) agree that the liability of each Maker,
guarantor, endorser or obligor shall be unconditional and without
regard to the liability of any other person or entity for the
payment hereof, and shall not in any manner be affected by any
indulgence or forbearance granted or consented to by Lender to
any of them with respect hereto; (vi) consent to any and all
extensions of time, renewals, waivers, or modifications that may
be granted by Lender with respect to the payment or other
provisions hereof, and to the release of any security at any time
given for the payment hereof, or any part thereof, with or
without substitution, and to the release of any person or entity
liable for the payment hereof; and (vii) consent to the addition
of any and all other makers, endorsers, guarantors, and other
obligors for the payment hereof, and to the acceptance of any and
all other security for the payment hereof, and agree that the
addition of any such makers, endorsers, guarantors or other
obligors, or security shall not affect the liability of Maker.
The proceeds of the loan evidenced by this Note will be used
solely for the purposes specified in 815 ILCS 205/4 (1993), as
amended, and the principal sum advanced is for a business loan
which comes within the purview of such section. Maker agrees
that the obligation evidenced by this Note is an exempted
transaction under the Truth-In-Lending Act, 15 U.S.C., Section
1601, et seq.
Time is of the essence hereof.
This Note is governed and controlled as to validity,
enforcement, interpretation, construction, effect and in all
other respects by the statutes, substantive laws and decisions of
the State of Illinois. This Note may not be changed or amended
orally but only by an instrument in writing signed by the party
against whom enforcement of the change or amendment is sought.
Lender shall in no event be construed for any purpose to be
a partner, joint venturer, agent or associate of Maker or any
beneficiary thereof or of any lessee, operator, concessionaire or
licensee of Maker or any beneficiary thereof in the conduct of
their respective businesses, and by the execution of this Note,
Maker agrees to indemnify, defend, and hold Lender harmless from
and against any and all damages, costs, expenses and liability
that may be incurred by Lender as a result of a claim that Lender
is such partner, joint venturer, agent or associate.
<PAGE>
This Note has been made and delivered at Chicago, Illinois
and all funds disbursed to or for the benefit of Maker will be
disbursed in Chicago, Illinois.
In the event one or more of the provisions contained in this
Note shall for any reason be held to be invalid, illegal or
unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision of this Note, and this Note
shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein or therein.
Maker has executed this Note as of the day and year first
written above.
PLAZA WESTLAKE FUND XII, LTD., a Texas
limited partnership
By: PLAZA WESTLAKE CORP., a
Delaware corporation
By: /s/ Donald K. Reed
-----------------------------------
Its: President
Attest: /s/ Harriet C. Yates
------------------------------
Its: Secretary
PROMISSORY NOTE
$10,600,000.00 October 13, 1995
FOR VALUE RECEIVED, PALISADES FUND XII ASSOCIATES,
L.P., a Georgia limited partnership having its principal office
at 13760 Noel Road, Suite 700, Dallas, Texas 75240 ("Maker")
promises to pay to the order of FLEET REAL ESTATE CAPITAL, INC.,
a Rhode Island corporation, or its assigns ("Payee") having its
principal office at 4275 Executive Square, Suite 200, La Jolla,
California 92037, the Principal Amount (as defined below),
together with interest from the date hereof at the Interest Rate
(as defined below). Interest accruing hereunder shall be
calculated on the basis of a 360-day year of twelve 30-day
months.
WHEN USED HEREIN, the following capitalized terms shall
have the following meanings:
"Commencement Date" shall be December 1, 1995.
"Closing Date" shall be October 16, 1995.
"Default Rate" shall be the Interest Rate plus five
percent (5%) per annum.
"Interest Rate" shall be eight and eight one hundredths
percent (8.08%) per annum.
"Lockout Period" shall be the period from October 16,
1995 through November 1, 1999.
"Maturity Date" shall be October 16, 2002.
"Monthly Amount" shall be the sum of Seventy-Eight
Thousand Three Hundred Seventy-One and 01/100 Dollars
($78,371.01).
"Payment Date" shall be the first business day of each
month commencing on the first business day of the second full
month after the Closing Date and continuing to and including the
Maturity Date.
"Principal Amount" shall be Ten Million Six Hundred
Thousand and No/100 United States Dollars.
<PAGE>
The Principal Amount and interest thereon shall be due
and payable in lawful money of the United States as follows:
(a) On the date hereof, all accrued and unpaid
interest on the unpaid balance through the end of the
month in which the Closing Date occurs shall be due and
payable. Thereafter, commencing on the Commencement
Date, eighty-three (83) equal monthly installments of
principal and interest at the Monthly Amount each shall
be due and payable. Each installment of principal and
interest shall be applied first to interest and the
remainder thereof to reduction of principal. Each
monthly installment shall be due on each Payment Date.
In addition, all amounts advanced by Payee pursuant to
applicable provisions of the Security Documents (as
hereinafter defined), together with any interest at the
Default Rate or other charges as therein provided,
shall be immediately due and payable hereunder. In the
event any such advance is not so repaid by Maker, Payee
may, at its option, first apply any payments received
hereunder to repay said advances together with any
interest thereon or other charges as provided in the
Security Documents, and the balance, if any, shall be
applied in payment of any installment then due. The
entire remaining unpaid balance of principal of this
Note, all interest accrued thereon and all other sums
payable hereunder or under the Security Documents shall
be due and payable in full on the Maturity Date.
(b) Amounts due on this Note shall be payable,
without any counterclaim, setoff or deduction
whatsoever, at the office of Payee or its agent or
designee at the address set forth in Exhibit 1 or at
such other place as Payee or its agent or designee may
from time to time designate in writing.
(c) This Note is secured by a Deed to Secure
Debt, Security Agreement and Assignment of Rents and
Leases of even date herewith (the "Mortgage") from
Maker to Payee and by an Assignment of Rents and Leases
of even date herewith (the "Assignment") from Maker to
Payee. The Mortgage, the Assignment and any other
instrument given at any time to secure this Note are
hereinafter collectively called the "Security
Documents."
(d) This Note may not be prepaid prior to the end
of the Lockout Period, except as set forth herein. Any
prepayment of this Note, in whole or in part, prior to
the end of the Lockout Period, except as permitted
herein, shall constitute an "Event of Default" under
the Mortgage. Maker has the right to prepay the
principal of this Note in full or in part on any
Payment Date after the end of the Lockout Period, upon
sixty days' prior written notice and payment, together
with the portion of the principal to be prepaid, of a
prepayment premium in an amount calculated as specified
<PAGE>
in Appendix 1. The calculation of the prepayment
premium shall be made by Payee and shall, absent
manifest error, be conclusive. In the event this Note
is prepaid from the proceeds of insurance or
condemnation awards in accordance with Sections 10, 11
and 12 of the Mortgage either prior to or after the end
of the Lockout Period, a prepayment premium shall be
payable calculated as specified in Appendix 1.
Notwithstanding the foregoing, this Note may be prepaid
without a prepayment premium during the one hundred
eighty (180) day period prior to the Maturity Date.
Upon acceleration of this Note in accordance with its
terms and the terms of the Security Documents, Maker
agrees to pay the prepayment premium described above in
the amount that would be due if a voluntary payment
were made on the date of such acceleration. A tender
of payment of the amount necessary to pay and satisfy
the entire unpaid principal balance of this Note or any
portion thereof at any time after an Event of Default
under the Mortgage or an acceleration by Payee of the
indebtedness evidenced hereby, whether such payment is
tendered voluntarily, during or after foreclosure of
the Mortgage, or pursuant to realization upon other
security, shall constitute a purposeful evasion of the
prepayment terms of this Note, shall be deemed to be a
voluntary prepayment hereof, and Maker shall be
required to pay the prepayment premium as described
above. Partial prepayments of principal shall not
change the Payment Dates or amounts of subsequent
monthly installments, unless Payee shall otherwise
agree in writing. Notwithstanding the foregoing,
nothing in this paragraph (d) shall vary or negate the
provisions of Section 18(c) of the Mortgage.
(e) If Maker defaults in the payment of any
installment of principal and interest on the date on
which it shall fall due or in the performance of any of
the agreements, conditions, covenants, provisions or
stipulations contained in this Note or in the Security
Documents, and if such default shall continue beyond
any grace period provided for in the Mortgage so as to
constitute an Event of Default thereunder, then Payee,
at its option and without further notice to Maker, may
declare immediately due and payable the entire unpaid
principal balance of this Note, together with interest
thereon at an annual rate after the date of such
default equal to the Default Rate, together with all
sums due by Maker under the Security Documents,
anything herein or in the Security Documents to the
contrary notwithstanding. The foregoing provision
shall not be construed as a waiver by Payee of its
right to pursue any other remedies available to it
under the Mortgage, this Note or any other Security
Document, nor shall it be construed to limit in any way
the application of the Default Rate. Any payment
hereunder may be enforced and recovered in whole or in
part at such time by one or more of the remedies
provided to Payee in this Note or in the Security
Documents. In the event that: (i) this Note or any
<PAGE>
Security Document is placed in the hands of an attorney
for collection or enforcement or is collected or
enforced through any legal proceeding; (ii) an attorney
is retained to represent Payee in any bankruptcy,
reorganization, receivership, or other proceedings
affecting creditors' rights and involving a claim under
this Note or any Security Document; (iii) an attorney
is retained to protect or enforce the lien of the
Mortgage or any Security Document; or (iv) an attorney
is retained to represent Payee in any other proceedings
whatsoever in connection with this Note, the Mortgage,
any of the Security Documents or any portion of the
Mortgaged Property (as defined in the Mortgage), then
Maker shall pay to Payee all reasonable attorney's
fees, costs and expenses incurred in connection
therewith, including costs of appeal, together with
interest on any judgment obtained by Payee at the
Default Rate.
(f) If Maker defaults in the payment of any
monthly installment on the Payment Date, and such
default is not cured within five days thereafter, then
Maker shall pay to Payee a late payment charge in an
amount equal to five percent (5%) of the amount of the
installment not paid as aforesaid. Said late charge
payments, if payable, shall be secured by the Mortgage
and the other Security Documents, shall be payable
without notice or demand by Payee, and are independent
of and have no effect upon the rights of Payee under
paragraph (e) above; provided, further Maker
acknowledges and agrees that the late charge payments
herein provided are not charges in the nature of
interest imposed for the use of money advanced under
this Note; rather, the late charge payment is imposed
to compensate Payee for the expense, inconvenience and
economic frustration experienced by Payee as a result
of Maker's failure to make timely payments due
hereunder, and are a reasonable forecast and estimate
of Payee's actual damages and loss on account of such
delinquent payments.
(g) Maker and all endorsers, sureties and
guarantors hereby jointly and severally waive all
applicable exemption rights, valuation and
appraisement, presentment for payment, demand, notice
of demand, notice of nonpayment or dishonor, protest
and notice of protest of this Note, and all other
notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of
this Note. Maker and all endorsers, sureties and
guarantors consent to any and all extensions of time,
renewals, waivers or modifications that may be granted
by Payee with respect to the payment or other
provisions of this Note and to the release of the
collateral or any part thereof, with or without
substitution, and agree that additional makers,
endorsers, guarantors or sureties may become parties
hereto without notice to them or affecting their
liability hereunder.
<PAGE>
(h) Payee shall not be deemed, by any act of
omission or commission, to have waived any of its
rights or remedies hereunder unless such waiver is in
writing and signed by Payee, and then only to the
extent specifically set forth in writing. A waiver of
one event shall not be construed as continuing or as a
bar to or waiver of any right or remedy to a subsequent
event.
(i) This Note shall be governed by and construed
in accordance with the laws of the State in which the
Mortgaged Property is located (the "State").
(j) The parties hereto intend and believe that
each provision in this Note comports with all
applicable law. However, if any provision in this Note
is found by a court of law to be in violation of any
applicable law, and if such court should declare such
provision of this Note to be unlawful, void or
unenforceable as written, then it is the intent of all
parties hereto that such provision shall be given full
force and effect to the fullest possible extent that is
legal, valid and enforceable, that the remainder of
this Note shall be construed as if such unlawful, void
or unenforceable provision were not contained therein,
and that the rights, obligations and interest of Maker
and the holder hereof under the remainder of this Note
shall continue in full force and effect; provided,
however, that if any provision of this Note which is
found to be in violation of any applicable law concerns
the imposition of interest hereunder, the rights,
obligations and interests of Maker and Payee with
respect to the imposition of interest hereunder shall
be governed and controlled by the provisions of the
following paragraph.
(k) It being the intention of Payee and Maker to
comply with the laws of the State with regard to the
rate of interest charged hereunder, it is agreed that,
notwithstanding any provision to the contrary in this
Note, the Mortgage, or any of the other Security
Documents, no such provision, including without
limitation any provision of this Note providing for the
payment of interest or other charges, shall require the
payment or permit the collection of any amount ("Excess
Interest") in excess of the maximum amount of interest
permitted by law to be charged for the use or
detention, or the forbearance in the collection, of all
or any portion of the indebtedness evidenced by this
Note. If any Excess Interest is provided for, or is
adjudicated to be provided for, in this Note, the
Mortgage, or any of the other Security Documents, then
in such event:
(i) the provisions of this paragraph shall
govern;
(ii) Maker shall not be obligated to pay any
Excess Interest;
<PAGE>
(iii) any Excess Interest that Payee may
have received hereunder shall, at the option of
Payee, be (x) applied as a credit against the
unpaid principal balance then due under this Note,
accrued and unpaid interest thereon not to exceed
the maximum amount permitted by law, or both, (y)
refunded to the payor thereof or (z) any
combination of the foregoing;
(iv) the applicable interest rate or rates
provided for herein shall be automatically subject
to reduction to the maximum lawful rate allowed to
be contracted for in writing under the applicable
usury laws of the aforesaid State, and this Note,
the Mortgage and the other Security Documents
shall be deemed to have been, and shall be,
reformed and modified to reflect such reduction in
such interest rate or rates; and
(v) in determining whether or not the rate
of interest hereunder exceeds the maximum rate
permitted by the laws of the State, Maker and
Payee agree and intend that all sums paid
hereunder which are deemed interest for the
purpose of determining usury shall be prorated,
allocated or spread in equal parts over the
longest period of time permitted under the
applicable laws of the State. Furthermore,
although prepayment premium and late charge
payments specified herein (collectively the
"Charges") are not intended to be, nor shall they
be construed to be, charges in the nature of
interest imposed for the use of money advanced
under this Note, in no event shall such Charges
exceed an amount which, when added to interest
accrued hereunder from the date of this Note to
the date of collection of such Charges, is equal
to five percent (5.0%) per month of the
outstanding principal balance from time to time of
this Note.
(vi) Maker shall not have any action or
remedy against Payee for any damages whatsoever or
any defense to enforcement of this Note, Mortgage
or any other Security Document arising out of the
payment or collection of any Excess Interest.
(l) Upon any endorsement, assignment, or other
transfer of this Note by Payee or by operation of law,
the term "Payee," as used herein, shall mean such
endorsee, assignee, or other transferee or successor to
Payee then becoming the holder of this Note. This Note
shall inure to the benefit of Payee and its successors
and assigns and shall be binding upon the undersigned
and its successors and assigns. The term "Maker" as
used herein shall include the respective successors and
assigns, legal and personal representatives, executors,
administrators, devisees, legatees and heirs of Maker.
<PAGE>
(m) Any notice, demand or other communication
which any party may desire or may be required to give
to any other party shall be in writing and shall be
given as provided in the Mortgage.
(n) To the extent that Maker makes a payment or
Payee receives any payment or proceeds for Maker's
benefit, which are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required
to be repaid to a trustee, debtor in possession,
receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to
such extent, the obligations of Maker hereunder
intended to be satisfied shall be revived and continue
as if such payment or proceeds had not been received by
Payee.
(o) Maker shall execute and acknowledge (or cause
to be executed and acknowledged) and deliver to Payee
all documents, and take all actions, reasonably
required by Payee from time to time to confirm the
rights created or now or hereafter intended to be
created under this Note and the Security Documents, to
protect and further the validity, priority and
enforceability of this Note and the Security Documents,
to subject to the Security Documents any property of
Maker intended by the terms of any one or more of the
Security Documents to be encumbered by the Security
Documents, or otherwise carry out the purposes of the
Security Documents and the transactions contemplated
thereunder; provided, however, that no such further
actions, assurances and confirmations shall increase
Maker's obligations under this Note.
(p) No modification, amendment, extension,
discharge, termination or waiver (a "Modification") of
any provision of this Note, or any one or more of the
other Security Documents, nor consent to any departure
by Maker therefrom, shall in any event be effective
unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the
specific instance, and for the purpose, for which
given. Except as otherwise expressly provided herein,
no notice to, or demand on, Maker shall entitle Maker
to any other or future notice or demand in the same,
similar or other circumstances. Payee does not hereby
agree to, nor does Payee hereby commit itself to, enter
into any Modification.
(q) Maker hereby expressly and unconditionally
waives, in connection with any suit, action or
proceeding brought by Payee on this Note, any and every
right it may have to (a) a trial by jury, (b) interpose
any counterclaim therein (other than a counterclaim
<PAGE>
which can only be asserted in the suit, action or
proceeding brought by Payee on this Note and cannot be
maintained in a separate action) and (c) have the same
consolidated with any other or separate suit, action or
proceeding.
(r) Except as hereinafter provided,
notwithstanding any provision to the contrary in the
Mortgage or this Note, Payee shall not have any
recourse to any asset of Maker or its partners other
than the Mortgaged Property in order to satisfy the
indebtedness for payment of the principal and interest
evidenced by this Note, and Payee's sole recourse for
satisfaction of the payment of principal and interest
evidenced by this Note shall be to exercise its rights
against the Mortgaged Property encumbered by the
Mortgage and the other collateral securing this Note.
The foregoing sentence shall not be deemed or construed
to be a release of the indebtedness evidenced by this
Note or in any way impair, limit or otherwise affect
the lien of the Mortgage or any such other instrument
securing repayment of this Note or prevent Payee from
naming Maker, its partners, or their successors or
assigns as a defendant to any action to enforce any
remedy for default so long as there is no personal or
deficiency money judgment sought or entered against
Maker, its partners, or their successors or assigns for
payment of principal and interest evidenced by this
Note. Notwithstanding the foregoing provisions of this
paragraph, it is expressly understood and agreed that
the aforesaid limitation of liability shall in no way
affect or apply to Maker's or its partners' continued
personal liability for the payment to Payee of:
(i) any loss or damage occurring by reason of all
or any part of the Mortgaged Property being
encumbered by a voluntary lien (other than the
Mortgage) granted by Maker;
(ii) any Rents (as defined in the Mortgage),
issues, profits and/or income collected by Maker
in excess of normal and verifiable operating
expenses from the Mortgaged Property after default
by Maker hereunder, under the Mortgage or under
any other instrument securing or referring to this
Note;
(iii) unrefunded security deposits made by
tenants of the Mortgaged Property;
(iv) payment of Taxes, as defined in Section 5 of
the Mortgage, and insurance premiums, payment of
which is required to be made by Maker under the
Mortgage;
<PAGE>
(v) Rents, security deposits with respect to
leases of the Mortgaged Property, insurance
proceeds, condemnation awards, specifically
including, but not limited to, the Condemnation
Proceeds, as defined in Section 9 of the Mortgage,
and any other payments or consideration which
Maker receives and to which Payee is entitled
pursuant to the terms of the Mortgage or of any
other Security Document;
(vi) damage to the Mortgaged Property from waste
committed or permitted by Maker;
(vii) loss or damage occurring by reason of the
failure of Maker to comply with any of the
provisions of Section 35 of the Mortgage;
(viii) any loss or claim incurred by or asserted
against Payee as a result of fraud or
misrepresentation by Maker or any of the partners
thereof with respect to any certification,
representation or warranty made by Maker or such
other persons to Payee herein or in any of the
Security Documents;
(ix) all indebtedness and obligations arising
under or pursuant to that certain Environmental
Indemnity dated of even date herewith executed by
Maker, the general partner of Maker and McNeil
Real Estate Fund XII, Ltd. for the benefit of
Payee; and
(x) reasonable attorney's fees incurred by Payee
in connection with suit filed on account of any of
the foregoing clauses (i) through (ix). Whenever
reference is made herein to payment of "reasonable
attorney's fees" or words of similar import, such
reference shall refer to and mean payment of
actual attorney's fees incurred based upon the
attorney's normal hourly rates and amount of time
expended, and not attorney's fees as defined in
O.C.G.A. 13-1-11.
Any term or provision of this Note or any of the
Security Documents to the contrary notwithstanding, in
the event Maker receives the Condemnation Proceeds (as
that term is defined in Section 9 of the Mortgage) and
fails to immediately deliver all such Condemnation
Proceeds to Payee, or its designated agent, in
accordance with Section 9 of the Mortgage, then the
outstanding principal balance of this Note, together
with all accrued and unpaid interest hereon, and
together with any and all other amounts due under any
<PAGE>
of the Security Documents, shall be immediately due and
payable by Maker to Payee, in full, without any notice
of acceleration by Payee to Maker, with interest to
accrue thereon at the Default Rate. In addition, as
specified in paragraph (r)(v) above, Maker, and its
partners, and McNeil Real Estate Fund XII, Ltd., a
California limited partnership, shall have personal
liability for the payment of any Condemnation Proceeds
received by Maker and not delivered to Payee in
accordance with Section 9 of the Mortgage.
IN WITNESS WHEREOF, Maker has caused this Note to be
executed, under seal, and delivered as of the day and year first
above written.
PALISADES FUND XII ASSOCIATES,
L.P., a Georgia limited partnership
By: Palisades Apartment Corp., a
Nevada corporation, General
Partner
By: /s/ Ron K. Taylor
---------------------
Name: Ron K. Taylor
Title: Vice President
(CORPORATE SEAL)
APPENDIX 1
Calculation of Prepayment Premium
The prepayment premium shall be equal to the greater
of (A) one percent (1%) of the portion of the principal amount
of this Note being repaid or (B) the product of (i) a fraction
whose numerator is an amount equal to the portion of the
principal balance of this Note being prepaid and whose
denominator is the entire outstanding principal balance of
this Note on the date of such prepayment (after subtracting
the amount of any scheduled principal payment due on such
Payment Date), multiplied by (ii) an amount equal to the
remainder obtained by subtracting (x) an amount equal to the
entire outstanding principal balance of this Note as of the
date of such prepayment (after subtracting the amount of any
scheduled principal payment due on such Payment Date) from (y)
the present value as of the date of such prepayment of the
remaining scheduled payments of principal and interest on this
Note (including any final installment of principal payable on
the Maturity Date) determined by discounting such payments at
the Discount Rate (as hereinafter defined).
For purposes of this Note:
(x) "Discount Rate" shall mean the rate which, when
compounded monthly, is equivalent to the Treasury
Rate (defined below); and
<PAGE>
(y) "Treasury Rate" shall mean the yield calculated by
the linear interpolation of the yield, as reported
in Federal Reserve Statistical Release H.15-Selected
Interest Rates under the heading "U.S. government
securities/Treasury constant maturities" for the
week ending prior to the date of the relevant
prepayment of this Note, of U.S. Treasury constant
maturities with a maturity date (one longer and one
shorter) most nearly approximating the Maturity Date
of this Note. In the event Release H.15 is no
longer published, the Payee shall select a
comparable publication to determine the Treasury
Rate.
EXHIBIT 1
Amounts due on this note shall be payable to Fleet
Real Estate Capital, Inc. at the following address:
Fleet Real Estate Capital, Inc.
4275 Executive Square
Suite 200
La Jolla, CA 92037
Loan No.: 55-9508024
Loan No. 55-9507022
MORTGAGE NOTE
$5,500,000.00 October 20, 1995
FOR VALUE RECEIVED, BUCCANEER VILLAGE FUND XII, LTD., a
Texas limited partnership having its principal office at 13760
Noel Road, Suite 700, Dallas, Texas 75240 ("Maker") promises to
pay to the order of FLEET REAL ESTATE CAPITAL, INC., a Rhode
Island corporation, or its assigns ("Payee") having its principal
office at 4275 Executive Square, Suite 200, La Jolla, California
92037, the Principal Amount (as defined below), together with
interest from the date hereof at the Interest Rate (as defined
below). Interest accruing hereunder shall be calculated on the
basis of a 360-day year of twelve 30-day months.
WHEN USED HEREIN, the following capitalized terms shall
have the following meanings:
"Commencement Date" shall be December 1, 1995.
"Closing Date" shall be October 24, 1995.
"Default Rate" shall be the Interest Rate plus five
percent (5%) per annum.
"Interest Rate" shall be eight and ten one hundredths
percent (8.10%) per annum.
"Lockout Period" shall be the period from October 24,
1995 through November 1, 1999.
"Maturity Date" shall be October 24, 2002.
"Monthly Amount" shall be the sum of Forty Thousand
Seven Hundred Forty-One and 12/100 Dollars ($40,741.12).
"Payment Date" shall be the first business day of each
month commencing on the first business day of the second full
month after the closing date and continuing to and including the
Maturity Date.
"Principal Amount" shall be Five Million Five Hundred
Thousand and No/100 United States Dollars.
<PAGE>
The Principal Amount and interest thereon shall be due
and payable in lawful money of the United States as follows:
(a) On the date hereof, all accrued and unpaid
interest on the unpaid balance through the end of the
month in which the Closing Date occurs shall be due and
payable. Thereafter, commencing on the Commencement
Date, eighty-three (83) equal monthly installments of
principal and interest at the Monthly Amount each shall
be due and payable. Each installment of principal and
interest shall be applied first to interest and the
remainder thereof to reduction of principal. Each
monthly installment shall be due on each Payment Date.
In addition, all amounts advanced by Payee pursuant to
applicable provisions of the Security Documents (as
hereinafter defined), together with any interest at the
Default Rate or other charges as therein provided,
shall be immediately due and payable hereunder. In the
event any such advance is not so repaid by Maker, Payee
may, at its option, first apply any payments received
hereunder to repay said advances together with any
interest thereon or other charges as provided in the
Security Documents, and the balance, if any, shall be
applied in payment of any installment then due. The
entire remaining unpaid balance of principal of this
Note, all interest accrued thereon and all other sums
payable hereunder or under the Security Documents shall
be due and payable in full on the Maturity Date.
(b) Amounts due on this Note shall be payable,
without any counterclaim, setoff or deduction
whatsoever, at the office of Payee or its agent or
designee at the address set forth in Exhibit 1 or at
such other place as Payee or its agent or designee may
from time to time designate in writing.
(c) This Note is secured by a Deed of Trust,
Mortgage, Security Agreement and Assignment of Rents
and Leases of even date herewith (the "Mortgage") from
Maker to Payee and by an Assignment of Rents and Leases
of even date herewith (the "Assignment") from Maker to
Payee. The Mortgage, the Assignment and any other
instrument given at any time to secure this Note are
hereinafter collectively called the "Security
Documents."
(d) This Note may not be prepaid prior to the end
of the Lockout Period, except as set forth herein. Any
prepayment of this Note, in whole or in part, prior to
the end of the Lockout Period, except as permitted
herein, shall constitute an "Event of Default" under
the Mortgage. Maker has the right to prepay the
principal of this Note in full or in part on any
Payment Date after the end of the Lockout Period, upon
sixty days' prior written notice and payment, together
<PAGE>
with the portion of the principal to be prepaid, of a
prepayment premium in an amount calculated as specified
in Appendix 1. The calculation of the prepayment
premium shall be made by Payee and shall, absent
manifest error, be conclusive. In the event this Note
is prepaid from the proceeds of insurance or
condemnation awards in accordance with Sections 10, 11
and 12 of the Mortgage either prior to or after the end
of the Lockout Period, a prepayment premium shall be
payable calculated as specified in Appendix 1.
Notwithstanding the foregoing, this Note may be prepaid
without a prepayment premium during the one hundred
eighty (180) day period prior to the Maturity Date.
Upon acceleration of this Note in accordance with its
terms and the terms of the Security Documents, Maker
agrees to pay the prepayment premium described above in
the amount that would be due if a voluntary payment
were made on the date of such acceleration. A tender
of payment of the amount necessary to pay and satisfy
the entire unpaid principal balance of this Note or any
portion thereof at any time after an Event of Default
under the Mortgage or an acceleration by Payee of the
indebtedness evidenced hereby, whether such payment is
tendered voluntarily, during or after foreclosure of
the Mortgage, or pursuant to realization upon other
security, shall constitute a purposeful evasion of the
prepayment terms of this Note, shall be deemed to be a
voluntary prepayment hereof, and Maker shall be
required to pay the prepayment premium as described
above. Partial prepayments of principal shall not
change the Payment Dates or amounts of subsequent
monthly installments, unless Payee shall otherwise
agree in writing. Notwithstanding the foregoing,
nothing in this paragraph (d) shall vary or negate the
provisions of Section 18(c) of the Mortgage.
(e) If Maker defaults in the payment of any
installment of principal and interest on the date on
which it shall fall due or in the performance of any of
the agreements, conditions, covenants, provisions or
stipulations contained in this Note or in the Security
Documents, and if such default shall continue beyond
any grace period provided for in the Mortgage so as to
constitute an Event of Default thereunder, then Payee,
at its option and without further notice to Maker, may
declare immediately due and payable the entire unpaid
principal balance of this Note, together with interest
thereon at an annual rate after the date of such
default equal to the Default Rate, together with all
sums due by Maker under the Security Documents,
anything herein or in the Security Documents to the
contrary notwithstanding. The foregoing provision
<PAGE>
shall not be construed as a waiver by Payee of its
right to pursue any other remedies available to it
under the Mortgage, this Note or any other Security
Document, nor shall it be construed to limit in any way
the application of the Default Rate. Any payment
hereunder may be enforced and recovered in whole or in
part at such time by one or more of the remedies
provided to Payee in this Note or in the Security
Documents. In the event that: (i) this Note or any
Security Document is placed in the hands of an attorney
for collection or enforcement or is collected or
enforced through any legal proceeding; (ii) an attorney
is retained to represent Payee in any bankruptcy,
reorganization, receivership, or other proceedings
affecting creditors' rights and involving a claim under
this Note or any Security Document; (iii) an attorney
is retained to protect or enforce the lien of the
Mortgage or any Security Document; or (iv) an attorney
is retained to represent Payee in any other proceedings
whatsoever in connection with this Note, the Mortgage,
any of the Security Documents or any portion of the
Mortgaged Property (as defined in the Mortgage), then
Maker shall pay to Payee all reasonable attorney's
fees, costs and expenses incurred in connection
therewith, including costs of appeal, together with
interest on any judgment obtained by Payee at the
Default Rate.
(f) If Maker defaults in the payment of any
monthly installment on the Payment Date, and such
default is not cured within five days thereafter, then
Maker shall pay to Payee a late payment charge in an
amount equal to five percent (5%) of the amount of the
installment not paid as aforesaid. Said late charge
payments, if payable, shall be secured by the Mortgage
and the other Security Documents, shall be payable
without notice or demand by Payee, and are independent
of and have no effect upon the rights of Payee under
paragraph (e) above.
(g) Maker and all endorsers, sureties and
guarantors hereby jointly and severally waive all
applicable exemption rights, valuation and
appraisement, presentment for payment, demand, notice
of demand, notice of nonpayment or dishonor, protest
and notice of protest of this Note, and all other
notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of
this Note. Maker and all endorsers, sureties and
guarantors consent to any and all extensions of time,
renewals, waivers or modifications that may be granted
by Payee with respect to the payment or other
provisions of this Note and to the release of the
collateral or any part thereof, with or without
substitution, and agree that additional makers,
endorsers, guarantors or sureties may become parties
hereto without notice to them or affecting their
liability hereunder.
<PAGE>
(h) Payee shall not be deemed, by any act of
omission or commission, to have waived any of its
rights or remedies hereunder unless such waiver is in
writing and signed by Payee, and then only to the
extent specifically set forth in writing. A waiver of
one event shall not be construed as continuing or as a
bar to or waiver of any right or remedy to a subsequent
event.
(i) This Note shall be governed by and construed
in accordance with the laws of the State in which the
Mortgaged Property is located (the "State").
(j) The parties hereto intend and believe that
each provision in this Note comports with all
applicable law. However, if any provision in this Note
is found by a court of law to be in violation of any
applicable law, and if such court should declare such
provision of this Note to be unlawful, void or
unenforceable as written, then it is the intent of all
parties hereto that such provision shall be given full
force and effect to the fullest possible extent that is
legal, valid and enforceable, that the remainder of
this Note shall be construed as if such unlawful, void
or unenforceable provision were not contained therein,
and that the rights, obligations and interest of Maker
and the holder hereof under the remainder of this Note
shall continue in full force and effect; provided,
however, that if any provision of this Note which is
found to be in violation of any applicable law concerns
the imposition of interest hereunder, the rights,
obligations and interests of Maker and Payee with
respect to the imposition of interest hereunder shall
be governed and controlled by the provisions of the
following paragraph.
(k) It being the intention of Payee and Maker to
comply with the laws of the State with regard to the
rate of interest charged hereunder, it is agreed that,
notwithstanding any provision to the contrary in this
Note, the Mortgage, or any of the other Security
Documents, no such provision, including without
limitation any provision of this Note providing for the
payment of interest or other charges, shall require the
payment or permit the collection of any amount ("Excess
Interest") in excess of the maximum amount of interest
permitted by law to be charged for the use or
detention, or the forbearance in the collection, of all
or any portion of the indebtedness evidenced by this
Note. If any Excess Interest is provided for, or is
adjudicated to be provided for, in this Note, the
Mortgage, or any of the other Security Documents, then
in such event:
(i) the provisions of this paragraph shall
govern;
<PAGE>
(ii) Maker shall not be obligated to pay any
Excess Interest;
(iii) any Excess Interest that Payee may
have received hereunder shall, at the option of
Payee, be (x) applied as a credit against the
unpaid principal balance then due under this Note,
accrued and unpaid interest thereon not to exceed
the maximum amount permitted by law, or both, (y)
refunded to the payor thereof or (z) any
combination of the foregoing;
(iv) the applicable interest rate or rates
provided for herein shall be automatically subject
to reduction to the maximum lawful rate allowed to
be contracted for in writing under the applicable
usury laws of the aforesaid State, and this Note,
the Mortgage and the other Security Documents
shall be deemed to have been, and shall be,
reformed and modified to reflect such reduction in
such interest rate or rates; and
(v) Maker shall not have any action or
remedy against Payee for any damages whatsoever or
any defense to enforcement of this Note, Mortgage
or any other Security Document arising out of the
payment or collection of any Excess Interest.
(l) Upon any endorsement, assignment, or other
transfer of this Note by Payee or by operation of law,
the term "Payee," as used herein, shall mean such
endorsee, assignee, or other transferee or successor to
Payee then becoming the holder of this Note. This Note
shall inure to the benefit of Payee and its successors
and assigns and shall be binding upon the undersigned
and its successors and assigns. The term "Maker" as
used herein shall include the respective successors and
assigns, legal and personal representatives, executors,
administrators, devisees, legatees and heirs of Maker.
(m) Any notice, demand or other communication
which any party may desire or may be required to give
to any other party shall be in writing and shall be
given as provided in the Mortgage.
(n) To the extent that Maker makes a payment or
Payee receives any payment or proceeds for Maker's
benefit, which are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required
to be repaid to a trustee, debtor in possession,
receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to
such extent, the obligations of Maker hereunder
intended to be satisfied shall be revived and continue
as if such payment or proceeds had not been received by
Payee.
<PAGE>
(o) Maker shall execute and acknowledge (or cause
to be executed and acknowledged) and deliver to Payee
all documents, and take all actions, reasonably
required by Payee from time to time to confirm the
rights created or now or hereafter intended to be
created under this Note and the Security Documents, to
protect and further the validity, priority and
enforceability of this Note and the Security Documents,
to subject to the Security Documents any property of
Maker intended by the terms of any one or more of the
Security Documents to be encumbered by the Security
Documents, or otherwise carry out the purposes of the
Security Documents and the transactions contemplated
thereunder; provided, however, that no such further
actions, assurances and confirmations shall increase
Maker's obligations under this Note.
(p) No modification, amendment, extension,
discharge, termination or waiver (a "Modification") of
any provision of this Note, or any one or more of the
other Security Documents, nor consent to any departure
by Maker therefrom, shall in any event be effective
unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the
specific instance, and for the purpose, for which
given. Except as otherwise expressly provided herein,
no notice to, or demand on, Maker shall entitle Maker
to any other or future notice or demand in the same,
similar or other circumstances. Payee does not hereby
agree to, nor does Payee hereby commit itself to, enter
into any Modification.
(q) Maker hereby expressly and unconditionally
waives, in connection with any suit, action or
proceeding brought by Payee on this Note, any and every
right it may have to (a) a trial by jury, (b) interpose
any counterclaim therein (other than a counterclaim
which can only be asserted in the suit, action or
proceeding brought by Payee on this Note and cannot be
maintained in a separate action) and (c) have the same
consolidated with any other or separate suit, action or
proceeding.
(r) Notwithstanding any provision to the contrary
in the Mortgage or this Note, Payee shall not have any
recourse to any asset of Maker or its partners other
than the Mortgaged Property in order to satisfy the
indebtedness for payment of the principal and interest
evidenced by this Note, and Payee's sole recourse for
satisfaction of the payment of principal and interest
evidenced by this Note shall be to exercise its rights
against the Mortgaged Property encumbered by the
Mortgage and the other collateral securing this Note.
The foregoing sentence shall not be deemed or construed
to be a release of the indebtedness evidenced by this
<PAGE>
Note or in any way impair, limit or otherwise affect
the lien of the Mortgage or any such other instrument
securing repayment of this Note or prevent Payee from
naming Maker, its partners, or their successors or
assigns as a defendant to any action to enforce any
remedy for default so long as there is no personal or
deficiency money judgment sought or entered against
Maker, its partners, or their successors or assigns for
payment of principal and interest evidenced by this
Note. Notwithstanding the foregoing provisions of this
paragraph, it is expressly understood and agreed that
the aforesaid limitation of liability shall in no way
affect or apply to Maker's or its partners' continued
personal liability for the payment to Payee of:
(i) any loss or damage occurring by reason of all
or any part of the Mortgaged Property being
encumbered by a voluntary lien (other than the
Mortgage) granted by Maker;
(ii) any Rents (as defined in the Mortgage),
issues, profits and/or income collected by Maker
in excess of normal and verifiable operating
expenses from the Mortgaged Property after default
by Maker hereunder, under the Mortgage or under
any other instrument securing or referring to this
Note;
(iii) unrefunded security deposits made by
tenants of the Mortgaged Property;
(iv) payment of Taxes, as defined in Section 5 of
the Mortgage, and insurance premiums, payment of
which is required to be made by Maker under the
Mortgage;
(v) Rents, security deposits with respect to
leases of the Mortgaged Property, insurance
proceeds, condemnation awards and any other
payments or consideration which Maker receives and
to which Payee is entitled pursuant to the terms
of the Mortgage or of any other Security Document;
(vi) damage to the Mortgaged Property from waste
committed or permitted by Maker;
(vii) loss or damage occurring by reason of the
failure of Maker to comply with any of the
provisions of Section 35 of the Mortgage;
(viii) any loss or claim incurred by or asserted
against Payee as a result of fraud or
misrepresentation by Maker or any of the partners
thereof with respect to any certification,
representation or warranty made by Maker or such
other persons to Payee herein or in any of the
Security Documents;
<PAGE>
(ix) all indebtedness and obligations arising
under or pursuant to that certain Environmental
Indemnity dated of even date herewith executed by
Maker, the general partner of Maker and McNeil
Real Estate Fund XII, Ltd. for the benefit of
Payee; and
(x) reasonable attorney's fees incurred by Payee
in connection with suit filed on account of any of
the foregoing clauses (i) through (ix).
IN WITNESS WHEREOF, Maker has caused this Note to be
executed and delivered as of the day and year first above
written.
BUCCANEER VILLAGE FUND XII, LTD. a
Texas limited partnership
By: Buccaneer Village Fund XII
Corp., a Delaware corporation,
General Partner
By:/s/ Ron K. Taylor
--------------------
Name: Ron K. Taylor
Title: Vice President
<PAGE>
APPENDIX 1
Calculation of Prepayment Premium
The prepayment premium shall be equal to the greater
of (A) one percent (1%) of the portion of the principal amount
of this Note being repaid or (B) the product of (i) a fraction
whose numerator is an amount equal to the portion of the
principal balance of this Note being prepaid and whose
denominator is the entire outstanding principal balance of
this Note on the date of such prepayment (after subtracting
the amount of any scheduled principal payment due on such
Payment Date), multiplied by (ii) an amount equal to the
remainder obtained by subtracting (x) an amount equal to the
entire outstanding principal balance of this Note as of the
date of such prepayment (after subtracting the amount of any
scheduled principal payment due on such Payment Date) from (y)
the present value as of the date of such prepayment of the
remaining scheduled payments of principal and interest on this
Note (including any final installment of principal payable on
the Maturity Date) determined by discounting such payments at
the Discount Rate (as hereinafter defined).
For purposes of this Note:
(x) "Discount Rate" shall mean the rate which, when
compounded monthly, is equivalent to the Treasury
Rate (defined below); and
(y) "Treasury Rate" shall mean the yield calculated by
the linear interpolation of the yield, as reported
in Federal Reserve Statistical Release H.15-Selected
Interest Rates under the heading "U.S. government
securities/Treasury constant maturities" for the
week ending prior to the date of the relevant
prepayment of this Note, of U.S. Treasury constant
maturities with a maturity date (one longer and one
shorter) most nearly approximating the Maturity Date
of this Note. In the event Release H.15 is no
longer published, the Payee shall select a
comparable publication to determine the Treasury
Rate.
<PAGE>
EXHIBIT 1
Amounts due on this note shall be payable to Fleet
Real Estate Capital, Inc. at the following address:
Fleet Real Estate Capital, Inc.
4275 Executive Square
Suite 200
La Jolla, CA 92037
Loan No.: 55-9507022
Loan No. 55-9509026
MORTGAGE NOTE
$3,982,500.00 October 31, 1995
FOR VALUE RECEIVED, MILLWOOD PARK FUND XII, LTD., a
Texas limited partnership having its principal office at 13760
Noel Road, Suite 700, Dallas, Texas 75240 ("Maker") promises to
pay to the order of FLEET REAL ESTATE CAPITAL, INC., a Rhode
Island corporation, or its assigns ("Payee") having its principal
office at 4275 Executive Square, Suite 200, La Jolla, California
92037, the Principal Amount (as defined below), together with
interest from the date hereof at the Interest Rate (as defined
below). Interest accruing hereunder shall be calculated on the
basis of a 360-day year of twelve 30-day months.
WHEN USED HEREIN, the following capitalized terms shall
have the following meanings:
"Commencement Date" shall be December 1, 1995.
"Closing Date" shall be October 31, 1995.
"Default Rate" shall be the Interest Rate plus five
percent (5%) per annum.
"Interest Rate" shall be eight and ten one hundredths
percent (8.10%) per annum.
"Lockout Period" shall be the period from October 31,
1995 through November 1, 1999.
"Maturity Date" shall be October 31, 2002.
"Monthly Amount" shall be the sum of Twenty Nine
Thousand Five Hundred and 28/100 Dollars ($29,500.28).
"Payment Date" shall be the first business day of each
month commencing on the first business day of the second full
month after the Closing Date and continuing to and including the
Maturity Date.
"Principal Amount" shall be Three Million Nine Hundred
Eighty-Two Thousand Five Hundred and No/100 United States
Dollars.
<PAGE>
The Principal Amount and interest thereon shall be due
and payable in lawful money of the United States as follows:
(a) On the date hereof, all accrued and unpaid
interest on the unpaid balance through the end of the
month in which the Closing Date occurs shall be due and
payable. Thereafter, commencing on the Commencement
Date, eighty-three (83) equal monthly installments of
principal and interest at the Monthly Amount each shall
be due and payable. Each installment of principal and
interest shall be applied first to interest and the
remainder thereof to reduction of principal. Each
monthly installment shall be due on each Payment Date.
In addition, all amounts advanced by Payee pursuant to
applicable provisions of the Security Documents (as
hereinafter defined), together with any interest at the
Default Rate or other charges as therein provided,
shall be immediately due and payable hereunder. In the
event any such advance is not so repaid by Maker, Payee
may, at its option, first apply any payments received
hereunder to repay said advances together with any
interest thereon or other charges as provided in the
Security Documents, and the balance, if any, shall be
applied in payment of any installment then due. The
entire remaining unpaid balance of principal of this
Note, all interest accrued thereon and all other sums
payable hereunder or under the Security Documents shall
be due and payable in full on the Maturity Date.
(b) Amounts due on this Note shall be payable,
without any counterclaim, setoff or deduction
whatsoever, at the office of Payee or its agent or
designee at the address set forth in Exhibit 1 or at
such other place as Payee or its agent or designee may
from time to time designate in writing.
(c) This Note is secured by a Deed of Trust,
Mortgage, Security Agreement and Assignment of Rents
and Leases of even date herewith (the "Mortgage") from
Maker to Payee and by an Assignment of Rents and Leases
of even date herewith (the "Assignment") from Maker to
Payee. The Mortgage, the Assignment and any other
instrument given at any time to secure this Note are
hereinafter collectively called the "Security
Documents."
<PAGE>
(d) This Note may not be prepaid prior to the end
of the Lockout Period, except as set forth herein. Any
prepayment of this Note, in whole or in part, prior to
the end of the Lockout Period, except as permitted
herein, shall constitute an "Event of Default" under
the Mortgage. Maker has the right to prepay the
principal of this Note in full or in part on any
Payment Date after the end of the Lockout Period, upon
sixty days' prior written notice and payment, together
with the portion of the principal to be prepaid, of a
prepayment premium in an amount calculated as specified
in Appendix 1. The calculation of the prepayment
premium shall be made by Payee and shall, absent
manifest error, be conclusive. In the event this Note
is prepaid from the proceeds of insurance or
condemnation awards in accordance with Sections 10, 11
and 12 of the Mortgage either prior to or after the end
of the Lockout Period, a prepayment premium shall be
payable calculated as specified in Appendix 1.
Notwithstanding the foregoing, this Note may be prepaid
without a prepayment premium during the one hundred
eighty (180) day period prior to the Maturity Date.
Upon acceleration of this Note in accordance with its
terms and the terms of the Security Documents, Maker
agrees to pay the prepayment premium described above in
the amount that would be due if a voluntary payment
were made on the date of such acceleration. A tender
of payment of the amount necessary to pay and satisfy
the entire unpaid principal balance of this Note or any
portion thereof at any time after an Event of Default
under the Mortgage or an acceleration by Payee of the
indebtedness evidenced hereby, whether such payment is
tendered voluntarily, during or after foreclosure of
the Mortgage, or pursuant to realization upon other
security, shall constitute a purposeful evasion of the
prepayment terms of this Note, shall be deemed to be a
voluntary prepayment hereof, and Maker shall be
required to pay the prepayment premium as described
above. Partial prepayments of principal shall not
change the Payment Dates or amounts of subsequent
monthly installments, unless Payee shall otherwise
agree in writing. Notwithstanding the foregoing,
nothing in this paragraph (d) shall vary or negate the
provisions of Section 18(c) of the Mortgage.
(e) If Maker defaults in the payment of any
installment of principal and interest on the date on
which it shall fall due or in the performance of any of
the agreements, conditions, covenants, provisions or
stipulations contained in this Note or in the Security
Documents, and if such default shall continue beyond
any grace period provided for in the Mortgage so as to
constitute an Event of Default thereunder, then Payee,
at its option and without further notice to Maker, may
declare immediately due and payable the entire unpaid
principal balance of this Note, together with interest
<PAGE>
thereon at an annual rate after the date of such
default equal to the Default Rate, together with all
sums due by Maker under the Security Documents,
anything herein or in the Security Documents to the
contrary notwithstanding. The foregoing provision
shall not be construed as a waiver by Payee of its
right to pursue any other remedies available to it
under the Mortgage, this Note or any other Security
Document, nor shall it be construed to limit in any way
the application of the Default Rate. Any payment
hereunder may be enforced and recovered in whole or in
part at such time by one or more of the remedies
provided to Payee in this Note or in the Security
Documents. In the event that: (i) this Note or any
Security Document is placed in the hands of an attorney
for collection or enforcement or is collected or
enforced through any legal proceeding; (ii) an attorney
is retained to represent Payee in any bankruptcy,
reorganization, receivership, or other proceedings
affecting creditors' rights and involving a claim under
this Note or any Security Document; (iii) an attorney
is retained to protect or enforce the lien of the
Mortgage or any Security Document; or (iv) an attorney
is retained to represent Payee in any other proceedings
whatsoever in connection with this Note, the Mortgage,
any of the Security Documents or any portion of the
Mortgaged Property (as defined in the Mortgage), then
Maker shall pay to Payee all reasonable attorney's
fees, costs and expenses incurred in connection
therewith, including costs of appeal, together with
interest on any judgment obtained by Payee at the
Default Rate.
(f) If Maker defaults in the payment of any
monthly installment on the Payment Date, and such
default is not cured within five days thereafter, then
Maker shall pay to Payee a late payment charge in an
amount equal to five percent (5%) of the amount of the
installment not paid as aforesaid. Said late charge
payments, if payable, shall be secured by the Mortgage
and the other Security Documents, shall be payable
without notice or demand by Payee, and are independent
of and have no effect upon the rights of Payee under
paragraph (e) above.
(g) Maker and all endorsers, sureties and
guarantors hereby jointly and severally waive all
applicable exemption rights, valuation and
appraisement, presentment for payment, demand, notice
of demand, notice of nonpayment or dishonor, protest
and notice of protest of this Note, and all other
notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of
this Note. Maker and all endorsers, sureties and
guarantors consent to any and all extensions of time,
renewals, waivers or modifications that may be granted
<PAGE>
by Payee with respect to the payment or other
provisions of this Note and to the release of the
collateral or any part thereof, with or without
substitution, and agree that additional makers,
endorsers, guarantors or sureties may become parties
hereto without notice to them or affecting their
liability hereunder.
(h) Payee shall not be deemed, by any act of
omission or commission, to have waived any of its
rights or remedies hereunder unless such waiver is in
writing and signed by Payee, and then only to the
extent specifically set forth in writing. A waiver of
one event shall not be construed as continuing or as a
bar to or waiver of any right or remedy to a subsequent
event.
(i) This Note shall be governed by and construed
in accordance with the laws of the State in which the
Mortgaged Property is located (the "State").
(j) The parties hereto intend and believe that
each provision in this Note comports with all
applicable law. However, if any provision in this Note
is found by a court of law to be in violation of any
applicable law, and if such court should declare such
provision of this Note to be unlawful, void or
unenforceable as written, then it is the intent of all
parties hereto that such provision shall be given full
force and effect to the fullest possible extent that is
legal, valid and enforceable, that the remainder of
this Note shall be construed as if such unlawful, void
or unenforceable provision were not contained therein,
and that the rights, obligations and interest of Maker
and the holder hereof under the remainder of this Note
shall continue in full force and effect; provided,
however, that if any provision of this Note which is
found to be in violation of any applicable law concerns
the imposition of interest hereunder, the rights,
obligations and interests of Maker and Payee with
respect to the imposition of interest hereunder shall
be governed and controlled by the provisions of the
following paragraph.
(k) It being the intention of Payee and Maker to
comply with the laws of the State with regard to the
rate of interest charged hereunder, it is agreed that,
notwithstanding any provision to the contrary in this
Note, the Mortgage, or any of the other Security
Documents, no such provision, including without
limitation any provision of this Note providing for the
payment of interest or other charges, shall require the
payment or permit the collection of any amount ("Excess
Interest") in excess of the maximum amount of interest
permitted by law to be charged for the use or
<PAGE>
detention, or the forbearance in the collection, of all
or any portion of the indebtedness evidenced by this
Note. If any Excess Interest is provided for, or is
adjudicated to be provided for, in this Note, the
Mortgage, or any of the other Security Documents, then
in such event:
(i) the provisions of this paragraph shall
govern;
(ii) Maker shall not be obligated to pay any
Excess Interest;
(iii) any Excess Interest that Payee may
have received hereunder shall, at the option of
Payee, be (x) applied as a credit against the
unpaid principal balance then due under this Note,
accrued and unpaid interest thereon not to exceed
the maximum amount permitted by law, or both, (y)
refunded to the payor thereof or (z) any
combination of the foregoing;
(iv) the applicable interest rate or rates
provided for herein shall be automatically subject
to reduction to the maximum lawful rate allowed to
be contracted for in writing under the applicable
usury laws of the aforesaid State, and this Note,
the Mortgage and the other Security Documents
shall be deemed to have been, and shall be,
reformed and modified to reflect such reduction in
such interest rate or rates;
(v) in determining whether or not the rate
of interest hereunder exceeds the maximum rate
permitted by the laws of the State, Maker and
Payee agree and intend that all sums paid
hereunder which are deemed interest for the
purpose of determining usury shall be prorated,
allocated or spread in equal parts over the
longest period of time permitted under the
applicable laws of the State; and
(vi) Maker shall not have any action or
remedy against Payee for any damages whatsoever or
any defense to enforcement of this Note, Mortgage
or any other Security Document arising out of the
payment or collection of any Excess Interest.
(l) Upon any endorsement, assignment, or other
transfer of this Note by Payee or by operation of law,
the term "Payee," as used herein, shall mean such
endorsee, assignee, or other transferee or successor to
Payee then becoming the holder of this Note. This Note
shall inure to the benefit of Payee and its successors
<PAGE>
and assigns and shall be binding upon the undersigned
and its successors and assigns. The term "Maker" as
used herein shall include the respective successors and
assigns, legal and personal representatives, executors,
administrators, devisees, legatees and heirs of Maker.
(m) Any notice, demand or other communication
which any party may desire or may be required to give
to any other party shall be in writing and shall be
given as provided in the Mortgage.
(n) To the extent that Maker makes a payment or
Payee receives any payment or proceeds for Maker's
benefit, which are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required
to be repaid to a trustee, debtor in possession,
receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to
such extent, the obligations of Maker hereunder
intended to be satisfied shall be revived and continue
as if such payment or proceeds had not been received by
Payee.
(o) Maker shall execute and acknowledge (or cause
to be executed and acknowledged) and deliver to Payee
all documents, and take all actions, reasonably
required by Payee from time to time to confirm the
rights created or now or hereafter intended to be
created under this Note and the Security Documents, to
protect and further the validity, priority and
enforceability of this Note and the Security Documents,
to subject to the Security Documents any property of
Maker intended by the terms of any one or more of the
Security Documents to be encumbered by the Security
Documents, or otherwise carry out the purposes of the
Security Documents and the transactions contemplated
thereunder; provided, however, that no such further
actions, assurances and confirmations shall increase
Maker's obligations under this Note.
(p) No modification, amendment, extension,
discharge, termination or waiver (a "Modification") of
any provision of this Note, or any one or more of the
other Security Documents, nor consent to any departure
by Maker therefrom, shall in any event be effective
unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the
specific instance, and for the purpose, for which
given. Except as otherwise expressly provided herein,
no notice to, or demand on, Maker shall entitle Maker
to any other or future notice or demand in the same,
similar or other circumstances. Payee does not hereby
agree to, nor does Payee hereby commit itself to, enter
into any Modification.
<PAGE>
(q) Maker hereby expressly and unconditionally
waives, in connection with any suit, action or
proceeding brought by Payee on this Note, any and every
right it may have to (a) a trial by jury, (b) interpose
any counterclaim therein (other than a counterclaim
which can only be asserted in the suit, action or
proceeding brought by Payee on this Note and cannot be
maintained in a separate action) and (c) have the same
consolidated with any other or separate suit, action or
proceeding.
(r) Except as hereinafter provided,
notwithstanding any provision to the contrary in the
Mortgage or this Note, Payee shall not have any
recourse to any asset of Maker or its partners other
than the Mortgaged Property in order to satisfy the
indebtedness for payment of the principal and interest
evidenced by this Note, and Payee's sole recourse for
satisfaction of the payment of principal and interest
evidenced by this Note shall be to exercise its rights
against the Mortgaged Property encumbered by the
Mortgage and the other collateral securing this Note.
The foregoing sentence shall not be deemed or construed
to be a release of the indebtedness evidenced by this
Note or in any way impair, limit or otherwise affect
the lien of the Mortgage or any such other instrument
securing repayment of this Note or prevent Payee from
naming Maker, its partners, or their successors or
assigns as a defendant to any action to enforce any
remedy for default so long as there is no personal or
deficiency money judgment sought or entered against
Maker, its partners, or their successors or assigns for
payment of principal and interest evidenced by this
Note. Notwithstanding the foregoing provisions of this
paragraph, it is expressly understood and agreed that
the aforesaid limitation of liability shall in no way
affect or apply to Maker's or its partners' continued
personal liability for the payment to Payee of:
(i) any loss or damage occurring by reason of all
or any part of the Mortgaged Property being
encumbered by a voluntary lien (other than the
Mortgage) granted by Maker;
(ii) any Rents (as defined in the Mortgage),
issues, profits and/or income collected by Maker
in excess of normal and verifiable operating
expenses from the Mortgaged Property after default
by Maker hereunder, under the Mortgage or under
any other instrument securing or referring to this
Note;
<PAGE>
(iii) unrefunded security deposits made by
tenants of the Mortgaged Property;
(iv) payment of Taxes, as defined in Section 5 of
the Mortgage, and insurance premiums, payment of
which is required to be made by Maker under the
Mortgage;
(v) Rents, security deposits with respect to
leases of the Mortgaged Property, insurance
proceeds, condemnation awards, and any other
payments or consideration which Maker receives and
to which Payee is entitled pursuant to the terms
of the Mortgage or of any other Security Document;
(vi) damage to the Mortgaged Property from waste
committed or permitted by Maker;
(vii) loss or damage occurring by reason of the
failure of Maker to comply with any of the
provisions of Section 35 of the Mortgage;
(viii) any loss or claim incurred by or asserted
against Payee as a result of fraud or
misrepresentation by Maker or any of the partners
thereof with respect to any certification,
representation or warranty made by Maker or such
other persons to Payee herein or in any of the
Security Documents;
(ix) all indebtedness and obligations arising
under or pursuant to that certain Environmental
Indemnity dated of even date herewith executed by
Maker, the general partner of Maker and McNeil
Real Estate Fund XII, Ltd. for the benefit of
Payee; and
(x) reasonable attorney's fees incurred by Payee
in connection with suit filed on account of any of
the foregoing clauses (i) through (ix).
IN WITNESS WHEREOF, Maker has caused this Note to be
executed and delivered as of the day and year first above
written.
MILLWOOD PARK FUND XII, LTD., a
Texas limited partnership
By: Millwood Park Corp., a
Delaware corporation, General
Partner
By: /s/ Ron K. Taylor
-----------------------
Name: Ron K. Taylor
Title: Vice President
<PAGE>
APPENDIX 1
Calculation of Prepayment Premium
The prepayment premium shall be equal to the greater
of (A) one percent (1%) of the portion of the principal amount
of this Note being repaid or (B) the product of (i) a fraction
whose numerator is an amount equal to the portion of the
principal balance of this Note being prepaid and whose
denominator is the entire outstanding principal balance of
this Note on the date of such prepayment (after subtracting
the amount of any scheduled principal payment due on such
Payment Date), multiplied by (ii) an amount equal to the
remainder obtained by subtracting (x) an amount equal to the
entire outstanding principal balance of this Note as of the
date of such prepayment (after subtracting the amount of any
scheduled principal payment due on such Payment Date) from (y)
the present value as of the date of such prepayment of the
remaining scheduled payments of principal and interest on this
Note (including any final installment of principal payable on
the Maturity Date) determined by discounting such payments at
the Discount Rate (as hereinafter defined).
For purposes of this Note:
(x) "Discount Rate" shall mean the rate which, when
compounded monthly, is equivalent to the Treasury
Rate (defined below); and
(y) "Treasury Rate" shall mean the yield calculated by
the linear interpolation of the yield, as reported
in Federal Reserve Statistical Release H.15-Selected
Interest Rates under the heading "U.S. government
securities/Treasury constant maturities" for the
week ending prior to the date of the relevant
prepayment of this Note, of U.S. Treasury constant
maturities with a maturity date (one longer and one
shorter) most nearly approximating the Maturity Date
of this Note. In the event Release H.15 is no
longer published, the Payee shall select a
comparable publication to determine the Treasury
Rate.
<PAGE>
EXHIBIT 1
Amounts due on this note shall be payable to Fleet
Real Estate Capital, Inc. at the following address:
Fleet Real Estate Capital, Inc.
4275 Executive Square
Suite 200
La Jolla, CA 92037
Loan No.: 55-9508024
