UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 1996
-------------------------------------------------------
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 0-7162
MCNEIL PACIFIC INVESTORS FUND 1972
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-6279375
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (214) 448-5800
------------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
<PAGE>
MCNEIL PACIFIC INVESTORS FUND 1972
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------------- ---------------
ASSETS
- ------
<S> <C> <C>
Real estate investment:
Land..................................................... $ 2,336,000 $ 2,336,000
Buildings and improvements............................... 5,034,042 5,010,483
-------------- --------------
7,370,042 7,346,483
Less: Accumulated depreciation.......................... (1,106,666) (1,010,990)
-------------- --------------
6,263,376 6,335,493
Cash and cash equivalents................................... 522,778 523,389
Cash segregated for security deposits....................... 50,117 43,885
Accounts receivable......................................... 565 3,849
Prepaid expenses and other assets........................... 22,548 23,220
Escrow deposits............................................. 73,738 49,353
Deferred borrowing costs, net of accumulated amorti-
zation of $39,816 and $37,220 at March 31, 1996
and December 31, 1995, respectively...................... 12,118 14,714
-------------- --------------
$ 6,945,240 $ 6,993,903
============== ==============
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgage note payable....................................... $ 2,127,914 $ 2,161,204
Accounts payable............................................ 14,147 20,363
Accrued interest............................................ 15,516 10,076
Accrued property taxes...................................... 28,974 -
Other accrued expenses...................................... 4,414 24,853
Payable to affiliates - General Partner..................... 13,986 15,227
Security deposits and deferred rental revenue............... 65,785 47,198
-------------- --------------
2,270,736 2,278,921
-------------- --------------
Partners' equity:
Limited partners - 15,000 limited partnership units
authorized; 13,752.5 limited partnership units
issued and outstanding................................. 4,364,560 4,405,038
General Partner.......................................... 309,944 309,944
-------------- --------------
4,674,504 4,714,982
-------------- --------------
$ 6,945,240 $ 6,993,903
============== ==============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL PACIFIC INVESTORS FUND 1972
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Revenue:
Rental revenue................................... $ 390,949 $ 374,979
Interest......................................... 6,550 8,969
------------- -------------
Total revenue.................................. 397,499 383,948
------------- -------------
Expenses:
Interest......................................... 55,071 52,188
Depreciation..................................... 95,676 77,844
Property taxes................................... 28,974 29,475
Personnel expenses............................... 72,786 56,458
Utilities........................................ 16,879 21,551
Repair and maintenance........................... 87,105 65,878
Property management fees - affiliates............ 23,867 21,372
Other property operating expenses................ 30,198 44,023
General and administrative....................... 10,435 8,122
General and administrative - affiliates.......... 16,986 20,730
------------- -------------
Total expenses................................. 437,977 397,641
------------- -------------
Net loss............................................ $ (40,478) $ (13,693)
============= =============
Net loss allocated to limited partners.............. $ (40,478) $ (13,693)
Net loss allocated to General Partner............... - -
------------- -------------
Net loss............................................ $ (40,478) $ (13,693)
============= =============
Net loss per Limited Partnership Unit............... $ (2.94) $ (1.00)
============= =============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL PACIFIC INVESTORS FUND 1972
STATEMENTS OF PARTNERS' EQUITY
(Unaudited)
For the Three Months Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
-------------- -------------- --------------
<S> <C> <C> <C>
Balance at December 31, 1994.............. $ 309,944 $ 4,690,924 $ 5,000,868
Net loss.................................. - (13,693) (13,693)
------------- ------------- -------------
Balance at March 31, 1995................. $ 309,944 $ 4,677,231 $ 4,987,175
============= ============= =============
Balance at December 31, 1995.............. $ 309,944 $ 4,405,038 $ 4,714,982
Net loss.................................. - (40,478) (40,478)
------------- ------------- -------------
Balance at March 31, 1996................. $ 309,944 $ 4,364,560 $ 4,674,504
============= ============= =============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL PACIFIC INVESTORS FUND 1972
STATEMENTS OF CASH FLOWS
(Unaudited)
Decrease in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from tenants....................... $ 405,624 $ 351,291
Cash paid to suppliers........................... (242,422) (168,845)
Cash paid to affiliates.......................... (42,094) (119,369)
Interest received................................ 6,550 8,969
Interest paid.................................... (47,035) (66,270)
Property taxes paid and escrowed................. (24,385) 5,011
-------------- -------------
Net cash provided by operating activities........... 56,238 10,787
------------- -------------
Cash flows from investing activities:
Additions to real estate investments............. (23,559) (186,580)
------------- -------------
Cash flows from financing activities:
Principal payments on mortgage notes
payable........................................ (33,290) (40,830)
------------- -------------
Net decrease in cash and cash equivalents........... (611) (216,623)
Cash and cash equivalents at beginning
of period........................................ 523,389 1,062,361
------------- -------------
Cash and cash equivalents at end of period.......... $ 522,778 $ 845,738
============= =============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL PACIFIC INVESTORS FUND 1972
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Loss to Net Cash Provided by Operating Activities
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Net loss............................................ $ (40,478) $ (13,693)
------------- -------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation..................................... 95,676 77,844
Amortization of deferred borrowing costs......... 2,596 2,597
Changes in assets and liabilities:
Cash segregated for security deposits.......... (6,232) (10,478)
Accounts receivable............................ 3,284 (29,201)
Prepaid expenses and other assets.............. 672 3,053
Escrow deposits................................ (24,385) 5,017
Accounts payable............................... (6,216) 71,725
Accrued interest............................... 5,440 (16,679)
Accrued property taxes......................... 28,974 29,469
Other accrued expenses......................... (20,439) (29,668)
Payable to affiliates - General Partner........ (1,241) (77,267)
Security deposits and deferred rental
revenue...................................... 18,587 (1,932)
------------- -------------
Total adjustments............................ 96,716 24,480
------------- -------------
Net cash provided by operating activities........... $ 56,238 $ 10,787
============= =============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL PACIFIC INVESTORS FUND 1972
Notes To Financial Statements
(Unaudited)
March 31, 1996
NOTE 1.
- -------
McNeil Pacific Investors Fund 1972 (the "Partnership") is a limited partnership
organized under the laws of the State of California to invest in real property.
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
principal place of business for the Partnership and the General Partner is 13760
Noel Road, Suite 700, LB70, Dallas, Texas 75240.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair presentation of the Partnership's financial position and
results of operations. All adjustments were of a normal recurring nature.
However, the results of operations for the three months ended March 31, 1996,
are not necessarily indicative of the results to be expected for the year ending
December 31, 1996.
NOTE 2.
- -------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1995, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Pacific Investors Fund 1972, c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240.
NOTE 3.
- -------
The General Partner is entitled to receive a partnership management fee equal to
9.5% of distributions of cash from operations when distributable cash from
operations is distributed to the limited partners. No partnership management
fees were incurred during the three month period ended March 31, 1996 and 1995.
The Partnership pays property management fees equal to 6% of the gross rental
receipts of the Partnership's property to McNeil Real Estate Management, Inc.
("McREMI"), an affiliate of the General Partner, for providing property
management and leasing services for the Partnership's property. Prior to
December 31, 1994, the Partnership paid property management fees equal to 5% of
the gross rental receipts of the Partnership's properties.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
<PAGE>
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner and its affiliates are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Property management fees - affiliates............... $ 23,867 $ 21,372
Charged to general and administrative -
affiliates:
Partnership administration....................... 16,986 20,730
------------- -------------
$ 40,853 $ 42,102
============= =============
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Since the sale of Pacesetter Apartments in 1994, the focus of the Partnership's
efforts have been directed to the renovation program at Palm Bay Apartments
(formerly known as Greentree Apartments). During 1994 and 1995, the Partnership
completed capital improvements totaling $1,088,676. The Partnership's emphasis
in 1996 will be to improve the rental and occupancy rates at Palm Bay
Apartments. Although the occupancy rate at Palm Bay Apartments has improved, the
Partnership has not been able to increase rental rates at Palm Bay Apartments as
quickly as had been hoped.
RESULTS OF OPERATIONS
- ---------------------
Revenues:
Rental revenues increased $15,970 or 4.3% for the first three months of 1996
compared to the first three months of 1995. The Partnership implemented small
rental rate increases at Palm Bay Apartments. Meanwhile, vacancy losses have
started a downward trend as occupancy rates are beginning to improve. Occupancy
at the end of the first quarter improved to 93.4%, up from 85.5% at the end of
1995.
The Partnership has not been able to increase occupancy rates or base rental
rates as quickly as was hoped. Several apartment communities in the immediate
area have also undergone major rehabilitation, and several of the competing
apartment communities are able to offer their units at rates that have been
subsidized by various government programs. The effect of the competition has
restricted the increase in rental revenue that was otherwise expected from Palm
Bay Apartments. Management has implemented various marketing strategies to
increase occupancy and improve the revenue growth of the property.
<PAGE>
Expenses:
Partnership expenses increased $40,336 or 10.1% for the three months ended March
31, 1996. Increased expenses were concentrated in depreciation, personnel
expenses, and repair and maintenance expenses.
The largest increase, on both an absolute and percentage basis, was the increase
in repair and maintenance expense. For the three months ended March 31, 1996,
repair and maintenance expense increased $21,227 or 32%. Increased expenses for
grounds maintenance and appliance replacements were the principal reasons for
the increase.
Personnel expenses increased $16,328 or 29% for the first three months of 1996.
The Partnership has increased the level of staffing at Palm Bay Apartments in an
effort to provide a higher level of service to the tenants of Palm Bay
Apartments. One of the strategies the Partnership is using the differentiate
itself in the local market is to provide a greater level of services to its
tenants.
Depreciation increased $17,832 or 23% for the first three months of 1996. In
1994 and 1995, the Partnership placed in service approximately $1.08 million of
capital improvements at Palm Bay Apartments. These capital improvements have
increased the depreciation expense incurred by the property. The new
improvements are generally being depreciated over lives ranging from five to ten
years.
Increases in repair and maintenance, personnel expenses and depreciation were
partially offset by a $13,825 or 31% decrease in other property operating
expenses. Most of the decrease is due to a reduction in bad debt expenses
incurred by the Partnership. In addition to improving Palm Bay's occupancy rate,
management is simultaneously increasing the credit rating requirements of
tenants leasing units at Palm Bay. The improved credit requirements have helped
to reduce bad debts incurred at the property.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flows generated by operating activities of the Partnership were $56,238 for
the first three months of 1996, compared to $10,787 for the first three months
of 1995. The Partnership anticipates that the capital renovation projects at
Palm Bay Apartments will continue to yield improved cash flow from operations as
the restored and refurbished units are leased to new tenants. However, cash flow
from Palm Bay Apartments will not be sufficient to fund all Partnership
operating expenses and debt service requirements until the occupancy rate of
Palm Bay Apartments improves. For the balance of 1996, the Partnership will use
its cash reserves to fund debt service requirements if cash flows from
operations are insufficient.
Cash flows used in investing activities decreased to $23,559 from $186,580. The
capital renovation program at Palm Bay Apartments is complete. The Partnership's
capital improvement budget for 1996 forward should remain substantially below
the amounts incurred in 1995 and 1994.
The financing activities of the Partnership consist of the repayment of the Palm
Bay mortgage note through monthly debt service payments. These payments are
scheduled to gradually increase until June 1997, when the Palm Bay mortgage note
matures.
<PAGE>
Short Term Liquidity:
At March 31, 1996, the Partnership held $522,778 of cash and cash equivalents,
down only $611 from the balance at the end of 1995. The General Partner
considers the Partnership's cash reserves adequate for anticipated Partnership
operations for the balance of 1996.
Long Term Liquidity:
For the long term, property operations will remain the primary source of funds.
While the present outlook for the Partnership's liquidity is favorable, market
conditions may change and property operations may deteriorate. The General
Partner expects that the capital improvements at Palm Bay Apartments will yield
improved cash flow from operations in 1996. The Partnership has budgeted $90,000
of capital improvements for 1996. 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 property.
The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships if certain conditions
are met. However, there is no assurance that the Partnership will receive
additional funds under the facility because no amounts will be reserved for any
particular partnership. As of March 31, 1996, $2,662,819 remained available for
borrowing under the facility; however, additional funds could become available
as other partnerships repay borrowings. This commitment will terminate on March
30, 1997.
As a additional source of liquidity, the General Partner may attempt to
refinance the Palm Bay mortgage note. The General Partner estimates that such a
refinancing could yield proceeds to the Partnership in excess of the amount
needed to retire the current mortgage note. However, there can be no guarantee
that the Partnership will be able to obtain such mortgage refinancing on terms
or in amounts favorable to the Partnership, or that the cash proceeds from such
refinancing could be timed to coincide with the liquidity needs of the
Partnership.
Distributions:
Distributions to partners have been suspended as part of the General Partner's
policy of maintaining adequate cash reserves. Distributions to Unit holders 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 Unit holders.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Description
------- -----------
3. Restated Certificate and Agreement of Limited
Partnership dated of March 8, 1972. (1)
4. Amendment to Restated Certificate and Agree-
ment of Limited Partnership dated March 30,
1992. (2)
11. Statement regarding computation of net
income per limited partnership unit: Net
income per limited partnership unit is
computed by dividing net income allocated to
the limited partners by the number of
limited partnership units outstanding. Per
unit information has been computed based on
13,752.5 limited partnership units out-
standing in 1996 and 1995.
27. Financial Data Schedule for the quarter ended
March 31, 1996.
(1) Incorporated by reference to the Annual Report of Registrant on Form
10-K for the period ended December 31, 1990, as filed on March 29,
1991.
(2) Incorporated by reference to the Current Report on Form 8-K filed by
the Registrant with the Securities and Exchange Commission on April
10, 1992.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended March 31, 1996.
<PAGE>
McNEIL PACIFIC INVESTORS FUND 1972
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
McNEIL PACIFIC INVESTORS FUND 1972
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
May 14, 1996 By: /s/ Donald K. Reed
- ------------------- ---------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
May 14, 1996 By: /s/ Ron K. Taylor
- ------------------- ---------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer of
McNeil Investors, Inc.
May 14, 1996 By: /s/ Brandon K. Flaming
- ------------------- ---------------------------------------
Date Brandon K. Flaming
Chief Accounting Officer of McNeil
Real Estate Management, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 522,778
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,370,042
<DEPRECIATION> (1,106,666)
<TOTAL-ASSETS> 6,945,240
<CURRENT-LIABILITIES> 0
<BONDS> 2,127,914
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,945,240
<SALES> 390,949
<TOTAL-REVENUES> 397,499
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 382,906
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,071
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (40,478)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (40,478)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
