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, 1997
------------------------------------------------
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 600, LB70, Dallas, Texas, 75240
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (972) 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 ]
228,138 of the registrant's 229,690 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 37
TOTAL OF 41 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 600, 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. During 1993 to 1996, a
total of 1,100 Units were relinquished. In 1997, 138 Units were relinquished
leaving 229,690 Units outstanding at December 31, 1997.
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, were 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.
<PAGE>
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.
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, 1997, the Partnership
owned six income-producing properties as described in Item 2 - Properties.
<PAGE>
The Partnership does not directly employ any personnel. The Partnership is
managed by the General Partner, and, in accordance with the Amended Partnership
Agreement, the Partnership reimburses affiliates of the General Partner for
certain costs incurred by affiliates of the General Partner in connection with
the management of the Partnership's business. See Item 8 - Note 2 -
"Transactions with Affiliates."
The business of the Partnership to date has involved only one industry segment.
See Item 8 - Financial Statements and Supplementary Data. The Partnership has no
foreign operations. The business of the Partnership is not seasonal.
Business Plan:
Pursuant to the Partnership's previously announced liquidation plans, the
Partnership has recently retained PaineWebber, Incorporated as its exclusive
financial advisor to explore alternatives to maximize the value of the
Partnership. The alternatives being considered by the Partnership include,
without limitation, a transaction in which limited partnership interests in the
Partnership are converted into cash. The General Partner of the Partnership or
entities or persons affiliated with the General Partner will not be involved as
a purchaser in any of the transactions contemplated above. Any transaction will
be subject to certain conditions including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory firm as to the fairness of the consideration received by the
Partnership pursuant to such transaction. Finally, there can be no assurance
that any transaction will be consummated, or as to the terms thereof.
The Partnership has placed Channingway Apartments on the market for sale
effective August 1, 1997. In February 1998, the Partnership received an offer
from an unaffiliated buyer for the purchase of Channingway for $19.15 million
and is currently evaluating the terms and conditions of this offer.
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.
<PAGE>
Forward Looking Information:
Within this document, certain statements are made as to the expected occupancy
trends, financial condition, results of operations, and cash flows of the
Partnership for periods after December 31, 1997. All of these statements are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements are not
historical and involve risks and uncertainties. The Partnership's actual
occupancy trends, financial condition, results of operations, and cash flows for
future periods may differ materially due to several factors. These factors
include, but are not limited to, the Partnership's ability to control costs,
make necessary capital improvements, negotiate sales or refinancings of its
properties and respond to changing economic and competitive factors
Environmental Matters:
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
against the Partnership regarding such environmental problems.
The Partnership has become aware of the existence of certain underground
solvent-based contamination at a portion of the Lodge at Aspen Grove. The
Partnership understands the source of the contamination is related to
underground storage tanks located at a Colorado Department of Transportation
("CDOT") facility nearby. The Partnership has been informed that CDOT, as the
responsible party, has agreed to remediate the property to comply with state and
federal standards. The Partnership believes that CDOT has submitted a corrective
action plan to the Colorado Department of Public Health and Environment and that
implementation of the plan is ongoing. CDOT has obtained an access agreement
from the Partnership to perform its corrective action plan and monitor its
progress.
Other Information:
Management has begun to review its information technology infrastructure to
identify any systems that could be affected by the year 2000 problem. The year
2000 problem is the result of computer programs being written using two digits
rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major systems failure or
miscalculations. The information systems used by the Partnership for financial
reporting and significant accounting functions were made year 2000 compliant
during recent systems conversions. The Partnership is in the process of
evaluating the computer systems at the various properties. The Partnership also
intends to communicate with suppliers, financial institutions and others to
coordinate year 2000 issues. Management believes that the remediation of any
outstanding year 2000 conversion issues will not have a material or adverse
effect on the Partnership's operations.
<PAGE>
ITEM 2. PROPERTIES
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The following table sets forth the properties of the Partnership at December 31,
1997. 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 1997 Date
Property Description of Property Debt Property Tax Acquired
- -------- ----------- ----------- ---- ------------ --------
Real Estate Investments:
<S> <C> <C> <C> <C> <C>
Brendon Way (1) Apartments
Indianapolis, IN 770 units $ 9,197,112 $ 17,642,466 $ 454,442 1/82
Castle Bluff (2) Apartments
Kentwood, MI 241 units 2,214,376 4,392,431 136,126 1/82
Lodge at
Aspen Grove (3) Apartments
Denver, CO 284 units 4,574,353 5,401,881 73,304 2/82
Palisades at the
Galleria (4) Apartments
Atlanta, GA 370 units 6,223,616 10,410,165 154,828 7/82
Plaza Westlake (5)
Glendale Retail Center
Heights, IL 120,370 sq. ft. 3,923,824 3,773,779 95,804 3/82
--------------- ------------- ------------
$ 26,133,281 $ 41,620,722 $ 914,504
=============== ============= ============
Asset Held for Sale:
Channingway Apartments
Columbus, OH 770 units $ 9,303,533 $ 12,579,650 $ 253,461 12/82
=============== ============= ============
</TABLE>
- -----------------------------------------
Total: Apartments - 2,435 units
Retail Center - 120,370 sq. ft.
(1) Brendon Way Apartments is owned by Brendon Way Fund XII Associates,
a general partnership, which is wholly-owned by the Partnership and
the General Partner.
(2) Castle Bluff Apartments is owned by Castle Bluff Fund XII Associates,
L.P. which is wholly-owned by the Partnership and the General Partner.
<PAGE>
(3) Lodge at Aspen Grove is owned by Buccaneer Fund XII, Ltd. which is
wholly-owned by the Partnership.
(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.
The following table sets forth the properties' occupancy rate and rent per
square foot for each of the last five years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------------- ------------- -------------- ------------- -------
Real Estate Investments:
<S> <C> <C> <C> <C> <C>
Brendon Way
Occupancy Rate............ 83% 82% 86% 90% 90%
Rent Per Square Foot...... $5.85 $5.97 $6.12 $6.05 $5.60
Castle Bluff
Occupancy Rate............ 95% 97% 96% 98% 93%
Rent Per Square Foot...... $7.56 $7.55 $7.28 $6.92 $6.62
Lodge at Aspen Grove
Occupancy Rate............ 96% 97% 94% 95% 96%
Rent Per Square Foot...... $8.75 $8.14 $7.92 $7.42 $7.00
Palisades at the Galleria
Occupancy Rate............ 96% 96% 97% 99% 98%
Rent Per Square Foot...... $7.35 $7.39 $6.97 $6.65 $5.98
Plaza Westlake
Occupancy Rate............ 97% 100% 98% 99% 100%
Rent Per Square Foot...... $8.04 $8.60 $7.75 $7.73 $7.92
Asset Held for Sale:
Channingway
Occupancy Rate............ 86% 88% 86% 89% 91%
Rent Per Square Foot...... $6.55 $6.35 $5.88 $5.88 $5.75
</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
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Real Estate Investments:
Brendon Way
- -----------
Brendon Way is competing in an increasingly soft market with many lease
incentives available to renters. The property's occupancy is currently below the
average Indianapolis sub-market occupancy rate of 90%. Rental rates at Brendon
Way are slightly below the rates offered by competitors in the Indianapolis
sub-market in which Brendon Way is located. 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.
Castle Bluff
- ------------
Castle Bluff is in a highly competitive market with the occupancy rates running
at 95%. Castle Bluff is currently competing in a robust economy. During 1997,
construction permits increased by 35%. The Kentwood, Michigan property has done
some renovations to remain aggressive in the market and anticipates raising the
rental rates by 3% in 1998.
Lodge at Aspen Grove
- --------------------
Since 1993, the rental rates at Lodge at Aspen Grove have increased by 25% due
to improved market conditions. The market maintains a strong occupancy level at
96%. The Denver economy is still expanding and creating job growth that is
fueling new construction. During 1997, 3,500 units were added to the
metropolitan area.
Palisades at the Galleria
- -------------------------
Occupancy rates at Palisades at the Galleria have dropped since 1994 due to
increased multi-family construction and road construction in the area. As a
result, no rental rate increase was implemented in 1997. The property plans a
3.5% rental rate increase in May 1998. The Atlanta sub-market continues to
maintain average occupancy rates running between 90% and 92%.
Plaza Westlake
- --------------
Plaza Westlake enters 1998 with an occupancy rate of 97%, well above the market
average of 89%. Plaza Westlake is located in Glendale Heights, Illinois, in a
high traffic area with a proven anchor. Planned improvements for 1998 include
sidewalk replacement and landscaping.
<PAGE>
Asset Held for Sale:
Channingway
- -----------
Channingway is located in an area east of Columbus, Ohio with a sub-market of
28,355 apartment units. The property is currently below the market average
occupancy rate of 94% and monthly rental rates are slightly lower than market.
The Partnership has placed this asset on the market for sale effective August 1,
1997. If a sale is not consummated, the Partnership will continue to cure the
deferred maintenance items of the property to add value and marketability to the
community.
The following schedule shows lease expirations for the Partnership's commercial
property for 1998 through 2007:
<TABLE>
<CAPTION>
Number of Annual % of Gross
Expirations Square Feet Rent Annual Rent
----------- ----------- ----------- -----------
Plaza Westlake
- --------------
<C> <C> <C> <C> <C>
1998 4 22,790 $ 212,685 25%
1999 5 73,295 377,551 45%
2000 2 3,690 50,963 6%
2001 3 9,438 111,138 13%
2002-2007 2 5,600 72,880 9%
</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
- --------- -------------- ----------- ----------
Plaza Westlake
<S> <C> <C> <C>
Entertainment 17,584 $ 149,464 1998
Retail 68,020 310,857 1999
</TABLE>
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
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The Partnership is not party to, nor are any of the Partnership's properties the
subject of, any material pending legal proceedings, other than ordinary, routine
litigation incidental to the Partnership's business, except for the following:
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of
the State of California for the County of Los Angeles, Case No. BC133799 (Class
and Derivative Action Complaint).
The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. Defendants must move, answer or otherwise respond to the second
consolidated and amended complaint by June 30, 1998.
For a discussion of the Southmark bankruptcy, see Item 1 - Business.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND
- ------- ------------------------------------------------------------
RELATED SECURITY HOLDER MATTERS
-------------------------------
(A) There is no established public trading market for limited partnership
units, nor is one expected to develop.
(B) Title of Class Number of Record Unit Holders
Limited partnership units 2,284 as of January 31, 1998
(C) No distributions were made to the limited partners in 1997 or 1996, and
none are anticipated in 1998. The Partnership accrued distributions for
the MID of $855,907 and $924,117 for the benefit of the General Partner
for the years ended December 31, 1997 and 1996, respectively. Total MID
distributions of $4,368,319 remain unpaid as of December 31, 1997. 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 that
they will be resumed to the limited partners.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
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 - Financial
Statements and Supplementary Data.
<TABLE>
<CAPTION>
Statements of Years Ended December 31,
Operations 1997 1996 1995 1994 1993
- ------------------ ------------- ------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Rental revenue............... $ 15,427,506 $ 16,327,181 $ 17,533,914 $ 21,295,696 $ 24,228,119
Total revenue................ 15,542,127 18,046,806 21,195,706 27,701,373 32,481,572
Gain on disposition of
real estate................. - 1,506,169 3,247,513 6,307,885 8,193,880
Income (loss) before
extraordinary item.......... (1,506,270) 391,871 1,183,425 3,220,934 4,178,756
Extraordinary gain on
extinguishment of debt, net. - - 1,304,587 246,149 -
Net income (loss)............ (1,506,270) 391,871 2,488,012 3,467,083 4,178,756
Net income (loss) per limited
partnership unit:
Income (loss) before
extraordinary item.......... $ (6.23) $ (7.12) $ 4.89 $ 13.27 $ 17.20
Extraordinary gain on
extinguishment of debt...... - - 5.25 1.01 -
------------- ----------- ----------- ---------- -----------
Net income (loss)............ $ (6.23) $ (7.12) $ 10.14 $ 14.28 $ 17.20
============= =========== =========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
Balance Sheets 1997 1996 1995 1994 1993
- -------------- -------------- -------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Real estate investments, net... $ 26,133,281 $ 37,221,352 $ 39,098,068 $ 40,915,017 $ 52,304,839
Assets held for sale........... 9,303,533 - 3,164,323 12,724,693 11,421,936
Total assets................... 40,517,097 42,666,935 52,112,866 60,189,348 72,830,100
Mortgage notes payable......... 54,200,372 54,859,073 59,160,426 68,152,522 79,867,507
Partners' deficit.............. (20,743,607) (18,381,430) (17,849,184) (19,292,331) (21,594,865)
</TABLE>
See Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations. The following properties have been sold during the five
years ended December 31, 1997.
Property Date Sold
-------- ---------
Millwood Park October 1996
Lamar Plaza July 1995
Sundance Apartments June 1995
Fox Run Apartments December 1994
Village East Apartments November 1994
Cedar Mill Crossing Apartments December 1993
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, 1997, the
Partnership owned six properties. All of the Partnership properties are subject
to mortgage notes.
RESULTS OF OPERATIONS
- ---------------------
1997 compared to 1996
Revenue:
Total Partnership revenue decreased by $2,504,679 or 14% in 1997 as compared to
1996. This decrease can be attributed to sale of Millwood in 1996. Excluding the
effects of the Millwood sale, rental revenue increased $138,097 in 1997 compared
to the same period in 1996. Rental rates increased at four of the Partnerships
properties but this was offset by a decrease in the average occupancy rate for
the year at all of the Partnership's properties. Interest income in 1997
decreased by $98,835 or 46% as compared the same period last year due to smaller
average cash balances being invested in interest bearing accounts. The
Partnership also recorded a $1,506,169 gain on disposition of asset as a result
of the sale of Millwood during 1996. No such gain was recorded in 1997.
<PAGE>
Expenses:
Partnership expenses decreased by $606,538 or 3% for the year ended 1997 as
compared to 1996. The effects from the sale of Millwood in 1996 were declines of
$252,161 for interest, $65,877 for property taxes, $158,205 for personnel
expenses, $144,940 for utilities, $199,849 for repairs and maintenance, $50,915
for property management fees and $111,963 for other property operating expenses.
In addition to the sale of Millwood, other factors affected the level of
expenses reported by the remaining properties. Interest expense - affiliates
decreased by $50,980 or 95% in 1997 as compared to 1996. This decrease is due to
the repayment of affiliate advances in 1996.
Property taxes increased $162,332 or 15% for the year ended December 31, 1997
(excluding the effects of the sale of Millwood Park) as compared to the same
period in 1996. This increase can be attributed to a tax refund received in 1996
which reduced the tax expense for that year. No such refund was received in
1997.
Repairs and maintenance increased $268,606 or 14% in 1997 (excluding the effects
of the sale of Millwood Park) compared to the same period in 1996. The increase
is attributable to a $300,410 increase in appliances and floor covering
replacements during 1997. Such expenditures during 1996 were large enough to
qualify for capitalization under the Partnership's capitalization policy. These
expenditures in 1997 did not qualify for capitalization and were, accordingly,
expensed.
General and administrative expenses increased $35,529 or 21%. The increase is
attributable to charges for investor services which, beginning in 1997, were
provided by a third party vendor instead of by affiliates of the General
Partner.
General and administrative - affiliate expenses decreased $120,070 or 35% in
1997 as compared to the same period last year. This decrease is due to a
decrease in the percentage of the Partnership's portion of reimbursable costs
and to costs of investor services discussed above.
1996 compared to 1995
Revenue:
Total Partnership revenues decreased in 1996 by $3,148,900 or 15% as compared to
the same period in 1995. Rental revenue decreased by $1,206,733 or 7% while
interest income increased $45,034. In 1996, the Partnership incurred a gain on
disposition of real estate totaling $1,506,169, while in 1995, gains on legal
settlement and disposition of real estate totaled $3,493,370.
The decrease in rental revenue is due to the loss of revenue generated by
Sundance and Lamar Plaza, which were sold in June and July of 1995, and Millwood
Park, which was sold in October of 1996. See Item 8 - Note 6 - "Dispositions of
Properties". This decrease was partially offset by the increase in rental
revenue at four of the Partnership's properties.
<PAGE>
Expenses:
Partnership expenses decreased by $2,357,346 for the year ended 1996 as compared
to 1995 primarily due to the sales of Sundance and Lamar Plaza in 1995 and
Millwood Park in 1996. The effects from these transactions were declines of
$807,431 for interest, $623,094 for depreciation, $73,719 for property taxes,
$185,004 for personnel expenses, $97,043 for utilities, $133,406 for repairs and
maintenance, $84,924 for property management fees, and $137,026 for other
operating expenses.
In addition to the sales of Sundance, Lamar Plaza, and Millwood Park, other
factors affected the level of expenses reported by the remaining properties
during 1996 as compared to 1995. Interest expense - affiliates decreased by
$107,231 or 67% due to the to the repayment of affiliate advances of $235,146 in
October 1995 and $1,419,339 in May 1996.
Property tax expense decreased by $77,316 or 7% in 1996 as compared to 1995
(excluding the effects of the sales noted above) due to the successful appeal of
prior year real estate taxes at Channingway and Palisades at the Galleria.
Utilities expense increased by $109,328 or 9% (excluding the effects of the
sales noted above) in 1996 compared to 1995 due the increase in costs of gas and
oil rates with the largest increase occurring at Brendon Way.
General and administrative expenses increased $70,648 or 71% in 1996 as compared
to the same period in 1995. This increase is due to legal and professional fees
relating to the land condemnation at Palisades and the sale of Millwood Park.
General and administrative - affiliate expenses decreased $103,237 or 23% for
the year ended 1996 as compared to 1995. 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.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At December 31, 1997, the Partnership held cash and cash equivalents of
$1,423,658, down $344,591 from the balance at the end of 1996.
The Partnership has experienced positive cash flow from operations of $4,719,037
for the three years ended December 31, 1997. During 1995, the Partnership
received net cash proceeds of $5,017,966 for the refinancing of Millwood Park,
Lodge at Aspen Grove, Palisades at the Galleria and Plaza Westlake. The
Partnership also sold three properties in 1996 and 1995 and received $5,255,430
in proceeds. Over the last three years the Partnership has used cash to fund
$5,693,397 in additions to real estate investments, $3,958,288 to retire
mortgage notes related to the sold properties, $3,491,450 in principal payments,
$673,369 for additions to deferred borrowing costs, $1,654,485 for the repayment
of advances and mortgage loans from affiliates and $2,210,551 for the payment of
the MID.
The Partnership generated $2,111,743 through operating activities in 1997 as
compared to $183,712 in 1996. The increase of $1,928,031 can be attributed to
the decrease in cash paid to affiliates, suppliers and interest paid.
<PAGE>
The Partnership continues to invest substantial sums into improvements at its
properties. A total of $5,693,397 of improvements have been added to the
Partnership's properties over the past three years. An additional $1.6 million
of improvements have been budgeted for 1998.
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 on
its remaining six properties. The Partnership has budgeted an additional $1.6
million of capital improvements for 1998, to be funded from property operations
and cash reserves.
At December 31, 1997, the Partnership held cash and cash equivalents of
$1,423,658. 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 the affiliate payables. The General Partner
believes that anticipated operating results for 1998 will be sufficient to fund
the Partnership's budgeted capital improvements for 1998 and to repay the
current portion of the Partnership's mortgage notes.
During 1998, the Partnership is faced with a mortgage maturity at Channingway of
approximately $12.3 million. On August 1, 1997, the Partnership placed
Channingway on the market for sale. In February 1998, the Partnership received
an offer from an unaffiliated buyer for the purchase of Channingway for $19.15
million and is currently evaluating the terms and conditions of this offer.
Long-term liquidity:
The Partnership's working capital needs have been supported by advances from
affiliates during the past several years. Some of that support was provided on a
short-term basis to meet monthly operating requirements, with repayment
occurring as funds became available; other advances were longer term in nature
due to lack of funds for repayment. Additionally, the General Partner has
allowed the Partnership to defer payment of MID and reimbursements until such
time as the Partnership's cash reserves allow payments. During 1994, the
Partnership began to make repayments to the General Partner for advances and
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 $5.69 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.
Pursuant to the Partnership's previously announced liquidation plans, the
Partnership has recently retained PaineWebber, Incorporated as its exclusive
financial advisor to explore alternatives to maximize the value of the
Partnership. The alternatives being considered by the Partnership include,
without limitation, a transaction in which limited partnership interests in the
<PAGE>
Partnership are converted into cash. The General Partner of the Partnership or
entities or persons affiliated with the General Partner will not be involved as
a purchaser in any of the transactions contemplated above. Any transaction will
be subject to certain conditions including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory firm as to the fairness of the consideration received by the
Partnership pursuant to such transaction. Finally, there can be no assurance
that any transaction will be consummated, or as to the terms thereof.
The Partnership has placed Channingway Apartments on the market for sale
effective August 1, 1997.
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 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, 1997, $(75,314), $2,027,598 and $156,482, respectively, of net
income (loss) was allocated to the General Partner. The limited partners
received allocations of net income (loss) of $(1,430,956), $(1,635,727) and
$2,331,530 for the three year period ended December 31, 1997, respectively.
With the exception of the 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
$855,907 for the MID has been accrued by the Partnership for the year ended
December 31, 1997 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, 1997 and 1996................................... 16
Statements of Operations for each of the three years in the period
ended December 31, 1997..................................................... 17
Statements of Partners' Deficit for each of the three years in the
period ended December 31, 1997.............................................. 18
Statements of Cash Flows for each of the three years in the period
ended December 31, 1997..................................................... 19
Notes to Financial Statements.................................................. 21
Financial Statement Schedule -
Schedule III - Real Estate Investments and Accumulated
Depreciation and Amortization............................................ 32
</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, 1997 and 1996, and
the related statements of operations, partners' deficit and cash flows for each
of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997, 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 20, 1998
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1997 1996
--------------- ---------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 4,534,618 $ 6,079,334
Buildings and improvements............................... 58,352,857 75,302,352
-------------- -------------
62,887,475 81,381,686
Less: Accumulated depreciation and amortization......... (36,754,194) (44,160,334)
-------------- -------------
26,133,281 37,221,352
Asset held for sale......................................... 9,303,533 -
Cash and cash equivalents................................... 1,423,658 1,768,249
Cash segregated for security deposits....................... 456,356 433,750
Accounts receivable......................................... 165,311 242,360
Prepaid expenses and other assets........................... 139,468 138,853
Escrow deposits............................................. 1,350,788 1,167,732
Deferred borrowing costs, net of accumulated
amortization of $767,891 and $617,954 at
December 31, 1997 and 1996, respectively................. 1,544,702 1,694,639
-------------- -------------
$ 40,517,097 $ 42,666,935
============== =============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable...................................... $ 54,200,372 $ 54,859,073
Accounts payable............................................ 9,996 16,402
Accrued expenses............................................ 277,958 142,099
Accrued interest............................................ 378,010 383,990
Accrued property taxes...................................... 932,545 837,798
Deferred gain - land condemnation........................... 297,754 297,754
Advances from Southmark..................................... 39,839 37,472
Advances from affiliates - General Partner.................. 32,136 29,494
Payable to affiliates - General Partner..................... 4,573,052 3,941,378
Security deposits and deferred rental income................ 519,042 502,905
-------------- -------------
61,260,704 61,048,365
-------------- -------------
Commitments and Contingencies
Partners' deficit:
Limited partners - 240,000 limited partnership units
authorized; 229,690 and 229,828 limited partnership
units issued and outstanding at December 31, 1997
and 1996, respectively................................... (10,579,935) (9,148,979)
General Partner.......................................... (10,163,672) (9,232,451)
-------------- -------------
(20,743,607) (18,381,430)
-------------- -------------
$ 40,517,097 $ 42,666,935
============== =============
</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,
----------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
Revenue:
<S> <C> <C> <C>
Rental revenue.......................... $ 15,427,506 $ 16,327,181 $ 17,533,914
Interest................................ 114,621 213,456 168,422
Gain on dispositions of real estate..... - 1,506,169 3,427,513
Gain on legal settlement................ - - 65,857
------------- ------------- --------------
Total revenue......................... 15,542,127 18,046,806 21,195,706
------------- ------------- --------------
Expenses:
Interest................................ 4,828,851 5,112,770 6,204,096
Interest - affiliates................... 2,642 53,622 160,853
Depreciation and amortization........... 3,582,171 3,659,059 4,019,174
Property taxes.......................... 1,167,965 1,071,510 1,222,545
Personnel expenses...................... 1,746,287 1,842,298 2,077,845
Repairs and maintenance................. 2,254,008 2,185,251 2,321,887
Property management fees -
affiliates............................ 768,159 811,532 877,423
Utilities............................... 1,243,260 1,359,246 1,346,961
Other property operating expenses....... 1,023,327 1,043,379 1,232,640
General and administrative.............. 205,326 169,797 99,149
General and administrative -
affiliates............................ 226,401 346,471 449,708
------------- ------------- --------------
Total expenses........................ 17,048,397 17,654,935 20,012,281
------------- ------------- --------------
Income (loss) before extraordinary item.... (1,506,270) 391,871 1,183,425
Extraordinary gain on extinguishment
of debt, net............................ - - 1,304,587
------------- ------------- --------------
Net income (loss).......................... $ (1,506,270) $ 391,871 $ 2,488,012
============= ============= ==============
Net income (loss) allocable to limited
partners................................ $ (1,430,956) $ (1,635,727) $ 2,331,530
Net income (loss) allocable to General
Partner................................ (75,314) 2,027,598 156,482
------------- ------------- --------------
Net income (loss).......................... $ (1,506,270) $ 391,871 $ 2,488,012
============= ============= ==============
Net income (loss) per limited partnership unit:
Income (loss) before extraordinary item. $ (6.23) $ (7.12) $ 4.89
Extraordinary gain on extinguishment
of debt............................... - - 5.25
------------- ------------- -------------
Net income (loss)....................... $ (6.23) $ (7.12) $ 10.14
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
STATEMENTS OF PARTNERS' DEFICIT
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
---------------- ---------------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1994.............. $ (9,447,549) $ (9,844,782) $ (19,292,331)
Net income................................ 156,482 2,331,530 2,488,012
Management Incentive Distribution......... (1,044,865) - (1,044,865)
-------------- -------------- --------------
Balance at December 31, 1995.............. (10,335,932) (7,513,252) (17,849,184)
Net income (loss)......................... 2,027,598 (1,635,727) 391,871
Management Incentive Distribution......... (924,117) - (924,117)
-------------- -------------- --------------
Balance at December 31, 1996.............. (9,232,451) (9,148,979) (18,381,430)
Net loss.................................. (75,314) (1,430,956) (1,506,270)
Management Incentive Distribution......... (855,907) - (855,907)
-------------- -------------- --------------
Balance at December 31, 1997.............. $ (10,163,672) $ (10,579,935) $ (20,743,607)
============== ============== ==============
</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,
---------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
Cash flows from operating activities:
<S> <C> <C> <C>
Cash received from tenants..................... $ 15,462,328 $ 16,089,650 $ 17,504,409
Cash received from legal settlement............ - - 65,857
Cash paid to suppliers......................... (6,379,022) (6,855,751) (7,527,222)
Cash paid to affiliates........................ (1,218,793) (3,126,674) (1,102,197)
Interest received.............................. 114,621 213,456 168,422
Interest paid.................................. (4,682,527) (4,985,617) (5,428,928)
Interest paid to affiliates.................... - (79,757) (264,854)
Property taxes paid............................ (1,184,864) (1,071,595) (991,905)
------------- ------------- -------------
Net cash provided by operating activities......... 2,111,743 183,712 2,423,582
------------- ------------- -------------
Cash flows from investing activities:
Additions to real estate investments and
asset held for sale.......................... (1,797,633) (2,249,348) (1,646,416)
Proceeds from disposition of
real estate investments...................... - 5,210,430 45,000
Land condemnation escrow....................... - 499,000 -
------------- ------------- -------------
Net cash provided by (used in)
investing activities........................... (1,797,633) 3,460,082 (1,601,416)
------------- ------------- -------------
Cash flows from financing activities:
Principal payments on mortgage
notes payable................................ (658,701) (343,065) (2,489,684)
Net proceeds from refinancing of
mortgage notes payable....................... - - 5,017,966
Principal addition to mortgage note payable
from release of capital improvements
escrow....................................... - 300,000 -
Retirement of mortgage notes due to
dispositions of real estate.................. - (3,958,288) -
Deferred borrowing costs paid.................. - (35,665) (637,704)
Repayment of advances from
affiliates - General Partner................. - (1,419,339) (235,146)
Management Incentive Distribution.............. - (2,210,551) -
------------- ------------- -------------
Net cash provided by (used in) financing
activities..................................... (658,701) (7,666,908) 1,655,432
------------- ------------- -------------
Net increase (decrease) in cash and
cash equivalents............................. (344,591) (4,023,114) 2,477,598
Cash and cash equivalents at
beginning of year............................ 1,768,249 5,791,363 3,313,765
------------- ------------- -------------
Cash and cash equivalents at end of year.......... $ 1,423,658 $ 1,768,249 $ 5,791,363
============= ============= =============
</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 (Loss) to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1997 1996 1995
--------------- -------------- ---------------
<S> <C> <C> <C>
Net income (loss).......................... $ (1,506,270) $ 391,871 $ 2,488,012
------------- ------------- --------------
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization........... 3,582,171 3,659,059 4,019,174
Amortization of discounts on
mortgage notes payable................ - - 217,857
Amortization of deferred
borrowing costs....................... 149,937 152,327 170,772
Net interest added to advances
from Southmark........................ 2,367 2,325 2,457
Net interest added to advances
from affiliates - General Partner..... 2,642 - 27,726
Gain on disposition of real estate...... - (1,506,169) -
Gain on involuntary conversion.......... - - (3,427,513)
Extraordinary gain on extinguish-
ment of debt.......................... - - (1,304,587)
Changes in assets and liabilities:
Cash segregated for security
deposits............................ (22,606) (117,085) (13,229)
Accounts receivable................... 77,049 (35,513) 110,712
Prepaid expenses and other
assets.............................. (615) 10,359 109,456
Escrow deposits....................... (183,056) (166,824) (263,246)
Accounts payable...................... (6,406) (69,762) (134,177)
Accrued expenses...................... 135,859 (4,280) (343)
Accrued interest...................... (5,980) (53,634) 252,355
Accrued property taxes................ 94,747 (97,520) (26,141)
Payable to affiliates - General
Partner............................. (224,233) (1,968,671) 224,934
Security deposits and deferred
rental income....................... 16,137 (12,771) (30,637)
------------- ------------- --------------
Total adjustments................. 3,618,013 (208,159) (64,430)
------------- ------------- --------------
Net cash provided by operating
activities............................ $ 2,111,743 $ 183,712 $ 2,423,582
============= ============= ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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
600, 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, 1997, the Partnership
owned six income-producing properties as described in Note 4 - Real Estate
Investments.
Pursuant to the Partnership's previously announced liquidation plans, the
Partnership has recently retained PaineWebber, Incorporated as its exclusive
financial advisor to explore alternatives to maximize the value of the
Partnership. The alternatives being considered by the Partnership include,
without limitation, a transaction in which limited partnership interests in the
Partnership are converted into cash. The General Partner of the Partnership or
entities or persons affiliated with the General Partner will not be involved as
a purchaser in any of the transactions contemplated above. Any transaction will
be subject to certain conditions including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory firm as to the fairness of the consideration received by the
Partnership pursuant to such transaction. Finally, there can be no assurance
that any transaction will be consummated, or as to the terms thereof.
The Partnership has placed Channingway Apartments on the market for sale
effective August 1 1997. In February 1998, the Partnership received an offer
from an unaffiliated buyer for the purchase of Channingway for $19.15 million
and is currently evaluating the terms and conditions of this offer.
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.
<PAGE>
The Partnership's financial statements include the accounts of the following
listed tier partnerships for the years ended December 31, 1997, 1996 and 1995.
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 both negative and immaterial.
% of Ownership Interest
Tier Partnership Partnership General Partner
---------------- ----------- ---------------
Limited Partnerships:
Buccaneer Fund XII, Ltd.* 100% -%
Castle Bluff Fund XII Associates, L.P. 99 1
Palisades Fund XII Associates, L.P.* 100 -
Plaza Westlake Fund XII, Ltd.* 100 -
General Partnerships:
Brendon Way Fund XII Associates 99 1
* The general partner of these partnerships is a corporation whose stock is
100% owned by the Partnership.
Real Estate Investments
- -----------------------
Real estate investments are generally stated at the lower of depreciated cost or
fair value. Real estate investments are reviewed for impairment whenever events
or changes in circumstances indicate that their carrying amounts may not be
recoverable. When the carrying value of a property exceeds the sum of all
estimated future cash flows, an impairment loss is recognized. At such time, a
write-down is recorded to reduce the basis of the property to its estimated fair
value.
The Partnership's method of accounting for real estate investments is in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" ("SFAS 121"), which the Partnership adopted effective January 1, 1996. The
adoption of SFAS 121 did not have a material impact on the accompanying
financial statements.
Improvements and betterments are capitalized and expensed through depreciation
charges. Repairs and maintenance are charged to operations as incurred.
Asset Held for Sale
- -------------------
The asset held for sale is stated at the lower of depreciated cost or fair
value less costs to sell. Depreciation on this asset ceased at the time it was
placed on the market for sale.
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.
<PAGE>
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.
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.
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 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 1997, 1996 and 1995 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 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 1997, 1996 or 1995. The
Partnership paid or accrued distributions of $855,907, $924,117 and $1,044,865
for the benefit of the General Partner for the years ended December 31, 1997,
1996 and 1995, respectively. These distributions are the MID pursuant to the
Amended Partnership Agreement.
Net Income (Loss) Per Limited Partnership Unit
- ----------------------------------------------
Net income (loss) per Unit is computed by dividing net income (loss) allocated
to the limited partners by the weighted average number of Units outstanding. Per
Unit information has been computed based on 229,690, 229,828 and 229,980 Units
outstanding in 1997, 1996 and 1995.
<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.
The MID will be paid to the extent of the lesser of the Partnership's excess
cash flow, as defined, or net operating income, as defined (the "Entitlement
Amount"), and may be paid (i) in cash, unless there is insufficient cash to pay
the distribution in which event any unpaid portion not taken in 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 1997, 1996 or 1995.
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 MID earned. 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
1997, 1996 or 1995 because the Entitlement Amount was sufficient to pay MID
notwithstanding the amendment to the capitalization policy.
<PAGE>
Any amount of the MID that is paid to the General Partner in Units will be
treated as if cash is distributed to the General Partner and is then contributed
to the Partnership by the General Partner. The MID represents a return of equity
to the General Partner for increasing cash flow, as defined, and accordingly is
treated as a distribution.
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,
----------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Property management fees - affiliates...... $ 768,159 $ 811,532 $ 877,423
Charged to interest expense:
Interest expense on affiliate
loans and advances.................... 2,642 53,622 160,853
Charged to general and
administrative - affiliates:
Partnership administration.............. 226,401 346,471 449,708
------------- ------------- --------------
$ 997,202 $ 1,211,625 $ 1,487,984
============= ============= ==============
Charged to General Partner's deficit:
MID..................................... $ 855,907 $ 924,117 $ 1,044,865
============= ============= ==============
</TABLE>
Payable to affiliates - General Partner at December 31, 1997 and 1996 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 until the Partnership has an adequate level of cash
reserves. In 1996, the Partnership paid $2,210,551 from cash reserves for the
MID.
The total advances from affiliates at December 31, 1997 and 1996 consist of the
following:
1997 1996
--------- ---------
Advances purchased by General Partner $ 27,903 $ 27,903
Accrued interest payable 4,233 1,591
-------- --------
$ 32,136 $ 29,494
======== ========
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% and
8.25% at December 31, 1997 and 1996, respectively.
<PAGE>
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 $1,664,332 in 1997,
$3,627,641 in 1996 and $1,939,981 in 1995.
NOTE 4 - REAL ESTATE INVESTMENTS
- --------------------------------
The basis and accumulated depreciation of the Partnership's real estate
investments held at December 31, 1997 and 1996 are set forth in the following
tables:
<TABLE>
<CAPTION>
Accumulated
Buildings and Depreciation Net Book
1997 Land Improvements and Amortization Value
---- -------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C>
Brendon Way
Indianapolis, IN $ 1,067,661 $ 21,895,901 $ (13,766,450) $ 9,197,112
Castle Bluff
Kentwood, MI 239,839 5,450,627 (3,476,090) 2,214,376
Lodge at Aspen Grove
Denver, CO 996,813 9,579,207 (6,001,667) 4,574,353
Palisades at the Galleria
Atlanta, GA 774,721 14,701,750 (9,252,855) 6,223,616
Plaza Westlake
Glendale Heights, IL 1,455,584 6,725,372 (4,257,132) 3,923,824
------------- -------------- ------------- -------------
$ 4,534,618 $ 58,352,857 $ (36,754,194) $ 26,133,281
============= ============== ============= =============
Accumulated
Buildings and Depreciation Net Book
1996 Land Improvements and Amortization Value
---- -------------- ------------ ---------------- ---------------
Brendon Way $ 1,067,661 $ 21,439,074 $ (12,614,845) $ 9,891,890
Castle Bluff 239,839 5,329,617 (3,209,323) 2,360,133
Channingway (a)
Columbus, OH 1,544,716 18,357,567 (10,480,266) 9,422,017
Lodge at Aspen Grove 996,813 9,158,390 (5,550,437) 4,604,766
Palisades at the Galleria 774,721 14,354,131 (8,414,943) 6,713,909
Plaza Westlake 1,455,584 6,663,573 (3,890,520) 4,228,637
------------- -------------- ------------- -------------
$ 6,079,334 $ 75,302,352 $ (44,160,334) $ 37,221,352
============= ============== ============= =============
</TABLE>
<PAGE>
(a) On August 1, 1997, the General Partner placed Channingway Apartments on the
market for sale. Channingway Apartments is classified as such at December
31, 1997 with a net book value of $9,303,553. In February 1998, the
Partnership received an offer from an unaffiliated buyer for the purchase
of Channingway for $19.15 million and is currently evaluating the terms and
conditions of this offer.
The results of operations for the asset held for sale at December 31, 1997 are
$64,481, $(115,844) and $(476,754) for 1997, 1996 and 1995, respectively.
Results of operations are operating revenues less operating expenses including
depreciation and interest expense.
The Partnership leases its commercial property under various non-cancelable
operating lease agreements. Future minimum rents to be received as of December
31, 1997, are as follows:
1998.................................... $ 683,159
1999.................................... 536,974
2000.................................... 235,753
2001.................................... 115,435
2002.................................... 74,136
Thereafter.............................. 7,216
---------
Total............................... $1,652,673
=========
Future minimum rents do not include contingent rents or operating expense
reimbursements. Contingent rents and operating expense reimbursements amounted
to $187,775 in 1997, $147,333 in 1996 and $191,814 in 1995, and are included in
rental revenue 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, 1997 and 1996. All mortgage notes are secured by the related real
estate investments or the asset held for sale.
<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a)Rates % Maturity Date (d) 1997 1996
- -------- ------------------- -------------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Brendon Way First 8.00 $133,911 05/24 $ 17,642,466 $ 17,829,789
------------- -------------
Castle Bluff First 9.25 36,926 12/24 4,392,431 4,427,466
------------- -------------
Channingway(c) First Variable (b) Variable (b) 08/98 12,579,650 12,791,999
------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a)Rates % Maturity Date (d) 1997 1996
- -------- ------------------- -------------------- -------------- --------------
Lodge at
<S> <C> <C> <C> <C> <C> <C>
Aspen Grove First 8.10 40,741 10/02 5,401,881 5,451,038
------------- -------------
Palisades at the
Galleria First 8.08 78,371 10/02 10,410,165 10,505,263
------------- -------------
Plaza Westlake First 9.50 37,285 01/00 3,773,779 3,853,518
------------- -------------
$ 54,200,372 $ 54,859,073
============= =============
</TABLE>
(a) The debt, except for Plaza Westlake, is non-recourse to the
Partnership.
(b) 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, 1997 and
1996 was 8.5% and 8.625%, respectively.
(c) The mortgage encumbering 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 $12.6 million at December 31, 1997. 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.
(d) Balloon payments on the mortgage notes are due as follows:
Property Balloon Payment Date
-------- --------------- ----
Channingway $ 12,293,000 08/98
Plaza Westlake 3,145,640 01/00
Lodge at Aspen Grove 5,099,378 10/02
Palisades at the Galleria 9,825,319 10/02
<PAGE>
Principal maturities of the mortgage notes payable are as follows:
Real Estate Asset Held
Investments For Sale
------------ -------------
1998.................... $ 485,627 $ 12,579,650
1999.................... 527,927 -
2000.................... 4,057,252 -
2001.................... 507,477 -
2002.................... 15,437,972 -
Thereafter.............. 20,604,467 -
----------- ------------
Total................. $ 41,620,722 $ 12,579,650
=========== =============
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 $56,219,000 as of December 31, 1997 and $53,290,000 as of
December 31, 1996.
NOTE 6 - DISPOSITIONS OF PROPERTIES
- -----------------------------------
On October 3, 1996, the Partnership sold Millwood Park Apartments to an
unaffiliated buyer for a cash sales price of $5,327,000. Cash proceeds from this
transaction, as well as the gain on sale of Millwood Park Apartments are
detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
---------------- -------------
<S> <C> <C>
Cash sales price.......................................... $ 5,327,000 $ 5,327,000
Selling costs............................................. (116,570) (116,570)
Basis of deferred borrowing costs
written off........................................... (115,607)
Basis of real estate sold................................. (3,430,082)
Basis of escrows written off.............................. (158,572)
-------------
Gain on sale.............................................. $ 1,506,169
============== -----------
Proceeds from disposition of real estate.................. 5,210,430
Retirement of mortgage note............................... (3,958,288)
-----------
Net cash proceeds......................................... $ 1,252,142
===========
</TABLE>
<PAGE>
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:
Gain on Sale
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
===========
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.
NOTE 7 - REFINANCING OF MORTGAGE NOTES PAYABLE
- -----------------------------------------------
On October 31, 1995, the Partnership refinanced the mortgage note payable on
Millwood Park. Following is a summary of the transaction:
New loan proceeds......................... $ 3,982,500
Existing debt retired..................... (3,172,754)
------------
Cash proceeds from refinancing............ $ 809,746
============
On October 3, 1996, the Partnership sold Millwood Park (See Note 6).
<PAGE>
On October 20, 1995, the Partnership refinanced the mortgage note payable on
Lodge at Aspen Grove. 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:
New loan proceeds......................... $ 5,500,000
Existing debt retired..................... (3,398,218)
Prepayment penalty........................ (113,650)
------------
Cash proceeds from refinancing............ $ 1,988,132
============
The Partnership deposited $149,217 into property tax and deferred maintenance
escrows and incurred loan costs of $161,625 related 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:
New loan proceeds......................... $ 10,600,000
Existing debt retired..................... (8,413,974)
------------
Cash proceeds from refinancing............ $ 2,186,026
============
The Partnership deposited $290,726 into property tax, insurance and deferred
maintenance escrows and incurred loan costs of $252,200 related 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:
New loan proceeds......................... $ 4,000,000
Capital improvement account............... (300,000)
Existing debt retired..................... (3,365,938)
--------------
Cash proceeds from refinancing............ $ 334,062
==============
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
Lodge at Aspen Grove 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.
<PAGE>
NOTE 8 - 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:
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of
the State of California for the County of Los Angeles, Case No. BC133799 (Class
and Derivative Action Complaint).
The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. Defendants must move, answer or otherwise respond to the second
consolidated and amended complaint by June 30, 1998.
<PAGE>
NOTE 9 - DEFERRED GAIN - LAND CONDEMNATION
- ------------------------------------------
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 and is included with escrow deposits on the Balance
Sheet. The release of the escrow is also contingent upon the property's
compliance with a prescribed debt ratio. The Partnership has recorded a deferred
gain of $297,754, which will recognized upon receipt of the $499,000.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
The Partnership has become aware of the existence of certain underground
solvent-based contamination at a portion of the Lodge at Aspen Grove. The
Partnership understands the source of the contamination is related to
underground storage tanks located at a Colorado Department of Transportation
("CDOT") facility nearby. The Partnership has been informed that CDOT, as the
responsible party, has agreed to remediate the property to comply with state and
federal standards. The Partnership believes that CDOT has submitted a corrective
action plan to the Colorado Department of Public Health and Environment and that
implementation of the plan is ongoing. CDOT has obtained an access agreement
from the Partnership to perform its corrective action plan and monitor its
progress.
<PAGE>
McNEIL REAL ESTATE FUND XII, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 1997
<TABLE>
<CAPTION>
Costs
Initial Cost (b) Cumulative Capitalized
Related (b) Buildings and Write-down Subsequent
Description Encumbrances Land Improvements For Impairment(d) To Acquisition
- ----------- ------------ ---- -------------- ------------------ ---------------
Real Estate Investments:
Apartments:
<S> <C> <C> <C> <C> <C>
Brendon Way
Indianapolis, IN $ 17,642,466 $ 1,067,661 $ 17,490,677 $ - $ 4,405,224
Castle Bluff
Kentwood, MI 4,392,431 239,839 4,650,535 - 800,092
Lodge at Aspen Grove
Denver, CO 5,401,881 996,813 8,058,534 - 1,520,673
Palisades at the
Galleria
Atlanta, GA 10,410,165 975,967 10,920,268 - 3,580,236
Plaza Westlake
Glendale Heights, IL 3,773,779 1,635,485 6,222,137 (746,424) 1,069,758
-------------- -------------- -------------- ------------ ------------
$ 41,620,722 $ 4,915,765 $ 47,342,151 $ (746,424) $ 11,375,983
============== ============== ============== ============ ============
Asset Held for Sale:
Channingway (c)
Columbus, OH $ 12,579,650
==============
</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.
(c) The asset held for sale is carried at the lower of depreciated cost or fair
value less costs to sell. Historical cost, net of accumulated depreciation
and cumulative write-downs, becomes the new cost basis when the asset is
classified as "Asset Held for Sale". Depreciation ceases at the time the
asset is placed on the market for sale.
(d) The carry value of Plaza Westlake was reduced by $746,424 in 1990.
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, 1997
<TABLE>
<CAPTION>
Gross Amount at
Which Carried at Close of Period Accumulated
Buildings and Depreciation
Description Land Improvements Total (a) and Amortization
- ----------- ---- -------------- --------- ----------------
Real Estate Investments:
Apartments:
<S> <C> <C> <C> <C>
Brendon Way
Indianapolis, IN $ 1,067,661 $ 21,895,901 $ 22,963,562 $ (13,766,450)
Castle Bluff
Kentwood, MI 239,839 5,450,627 5,690,466 (3,476,090)
Lodge at Aspen Grove
Denver, CO 996,813 9,579,207 10,576,020 (6,001,667)
Palisades at the
Galleria
Atlanta, GA 774,721 14,701,750 15,476,471 (9,252,855)
Plaza Westlake
Glendale Heights, IL 1,455,584 6,725,372 8,180,956 (4,257,132)
-------------- ------------- ---------------- -------------
$ 4,534,618 $ 58,352,857 $ 62,887,475 $ (36,754,194)
============== ============= =============== =============
Asset Held for Sale:
Channingway (c)
Columbus, OH $ 9,303,533
===============
</TABLE>
(a) For Federal income tax purposes, the properties are depreciated over lives
ranging from 5-27.5 years using ACRS or MACRS methods. The aggregate cost
of real estate investments for Federal income tax purposes was $91,089,562
and accumulated depreciation was $75,307,789 at December 31, 1997.
(c) The asset held for sale is carried at the lower of depreciated cost or fair
value less costs to sell. Historical cost, net of accumulated depreciation
and cumulative write-downs, becomes the new cost basis when the asset is
classified as "Asset Held for Sale". Depreciation ceases at the time the
asset is placed on the market 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, 1997
<TABLE>
<CAPTION>
Date of Date Depreciable
Description Construction Acquired lives (years)
- ----------- ------------ -------- -------------
Real Estate Investments:
Apartments:
<S> <C> <C> <C> <C>
Brendon Way
Indianapolis, IN 1968/73 01/82 3-25
Castle Bluff
Kentwood, MI 1976/77 01/82 3-25
Lodge at Aspen Grove
Denver, CO 1970 02/82 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:
Channingway (c)
Columbus, OH 1970/75 12/82
</TABLE>
(c) The asset held for sale is carried at the lower of depreciated cost or fair
value less costs to sell. Historical cost, net of accumulated depreciation
and cumulative write-downs, becomes the new cost basis when the asset is
classified as "Asset Held for Sale". Depreciation ceases at the time the
asset is placed on the market for sale.
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,
----------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
Real Estate Investments:
<S> <C> <C> <C>
Balance at beginning of year............... $ 81,381,686 $ 79,599,343 $ 78,020,212
Improvements............................... 1,797,633 1,983,589 1,579,131
Reclassification to asset held for sale.... (20,291,844) - -
Dispositions of real estate................ - (201,246) -
------------- ------------- -------------
Balance at end of year..................... $ 62,887,475 $ 81,381,686 $ 79,599,343
============= ============= =============
Accumulated Depreciation and Amortization:
Balance at beginning of year............... $ 44,160,334 $ 40,501,275 $ 37,105,195
Depreciation and amortization.............. 3,582,171 3,659,059 3,396,080
Reclassification to asset held for sale.... (10,988,311) - -
------------- ------------- -------------
Balance at end of year..................... $ 36,754,194 $ 44,160,334 $ 40,501,275
============= ============= =============
Asset Held for Sale:
Balance at beginning of year............... $ - $ 3,164,323 $ 12,724,693
Reclassification to asset held for sale.... 9,303,533 - -
Improvements............................... - 265,759 67,285
Depreciation............................... - - (623,094)
Sale ...................................... - (3,430,082) (9,004,561)
------------- ------------- -------------
Balance at end of year..................... $ 9,303,533 $ - $ 3,164,323
============= ============= =============
</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, 77 Mr. McNeil is also Chairman of the
Chairman of the Board and Director of McNeil Real Estate
Board and Director 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 54 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>
Ron K. Taylor 40 Mr. Taylor is the President and Chief
President and Chief Executive Officer of McNeil Real Estate
Executive Officer Management which is an affiliate of the
General Partner. Mr. Taylor has been in
this capacity since the resignation of
Donald K. Reed on March 4, 1997. Prior
to assuming his current
responsibilities, Mr. Taylor served as a
Senior Vice President of McREMI. Mr.
Taylor has been in this capacity since
McREMI commenced operations in 1991.
Prior to joining McREMI, Mr. Taylor
served as an Executive Vice President
for a national syndication/property
management firm. In this capacity, Mr.
Taylor had the responsibility for the
management and leasing of a 21,000,000
square foot portfolio of commercial
properties. Mr. Taylor has been actively
involved in the real estate industry
since 1983.
</TABLE>
Each director shall serve until his successor shall have been duly elected and
qualified.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
No direct compensation was paid or payable by the Partnership to directors or
officers (since it does not have any directors or officers) for the year ended
December 31, 1997, 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, 1997. The Partnership has no plans to
pay any such remuneration to any directors or officers of the general partner of
the General Partner in the future.
See Item 13 - Certain Relationships and Related Transactions for amounts of
compensation and reimbursements paid by the Partnership to the General Partner
and its affiliates.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- ---------------------------------------------------------------
(A) Security ownership of certain beneficial owners.
No individual or group, as defined by Section 13(d)(3) of the
Securities Exchange Act of 1934, known to the Partnership is the
beneficial owner of more than 5 percent of the Partnership's
securities.
(B) Security ownership of management.
The General Partner and the officers and directors of its general
partner, collectively, own 1,551 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.
The MID will be paid to the extent of the lesser of the Partnership's excess
cash flow, as defined, or net operating income, as defined (the "Entitlement
Amount"), and may be paid (i) in cash, unless there is insufficient cash to pay
the distribution in which event any unpaid portion not taken in 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, 1997, the Partnership paid or accrued for the General Partner MID in the
amount of $855,907.
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 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,
1997, the Partnership paid or accrued $994,560 in property management fees and
reimbursements.
<PAGE>
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."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
- -------- -----------------------------------------------------------------
See accompanying index to financial statements at Item 8 - Financial Statements
and Supplementary Data.
(A) Exhibits
<TABLE>
<CAPTION>
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)
10.3 Mortgage Note, dated April 25, 1989,
between Brendon Way Fund XII
Associates and American Mortgages,
Inc. (1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
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)
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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.13 Termination Agreement, dated
September 6, 1991, between Castle
Bluff XII Associates, L.P. and
McNeil Real Estate Management,
Inc.(2)
10.15 Amended Property Management Agree-
ment, 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. (5)
10.18 Promissory Note, dated October 13,
1995, between Palisades Fund XII
Associates, L.P. and Fleet Real
Estate Capital, Inc. (5)
10.19 Mortgage Note, dated October 20,
1995, between Buccaneer Village Fund
XII, Ltd. and Fleet Real Estate
Capital, Inc. (5)
11. Statement regarding computation of
net income per limited partnership
unit (see Item 8 - Note 1
"Organization and Summary of
Significant Accounting Policies")
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
22. Following is a list of subsidiaries
of the Partnership:
Names Under
Jurisdiction Which It Is
Name of Subsidiary of 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, L.P.
Millwood Park Fund Texas None
Fund XII, Ltd.
Palisades Fund XII Texas None
Associates, L.P.
Plaza Westlake Fund Texas None
XII, Ltd.
</TABLE>
(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.
(5) 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, 1995, as filed with the Securities
and Exchange Commission on March 29, 1996.
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, 1997.
<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.
McNEIL REAL ESTATE FUND XII, LTD.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
March 31, 1998 By: /s/ Robert A. McNeil
- -------------- --------------------------------------
Date Robert A. McNeil
Chairman of the Board and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
March 31, 1998 By: /s/ Ron K. Taylor
- -------------- --------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
March 31, 1998 By: /s/ Brandon K. Flaming
- -------------- --------------------------------------
Date Brandon K. Flaming
Vice President of McNeil
Investors, Inc.
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,423,658
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 165,311
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 62,887,475
<DEPRECIATION> (36,754,194)
<TOTAL-ASSETS> 40,517,097
<CURRENT-LIABILITIES> 0
<BONDS> 54,200,372
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 40,517,097
<SALES> 15,427,506
<TOTAL-REVENUES> 15,542,127
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,216,904
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,831,493
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,506,270)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,506,270)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
