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 quarterly period ended March 31, 1998
-------------------------------------------
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
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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 600, LB70, Dallas, Texas 75240
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (972) 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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
McNEIL PACIFIC INVESTORS FUND 1972
(a California limited partnership in the process of liquidation)
STATEMENTS OF NET ASSETS IN LIQUIDATION
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- --------------
ASSETS
- ------
<S> <C> <C>
Cash and cash equivalents................................... $ 417,100 $ 451,506
-------------- -------------
$ 417,100 $ 451,506
============== =============
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Other accrued expenses...................................... $ 2,563 $ 19,702
Payable to affiliates - General Partner..................... 17,485 17,485
-------------- -------------
20,048 37,187
-------------- -------------
Partners' equity:
Limited partners - 15,000 limited partnership units
authorized; 13,752.5 limited partnership units issued
and outstanding at March 31, 1998 and December 31, 1997. 397,052 414,319
General Partner.......................................... - -
-------------- -------------
397,052 414,319
-------------- -------------
$ 417,100 $ 451,506
============== =============
</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
(a California limited partnership in the process of liquidation)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1998 1997
-------------- --------------
Revenue:
<S> <C> <C>
Rental revenue................................... $ - $ 446,579
Interest......................................... 4,910 7,517
------------- -------------
Total revenue.................................. 4,910 454,096
------------- -------------
Expenses:
Interest......................................... - 46,334
Property taxes................................... - 29,762
Personnel expenses............................... 73 87,783
Utilities........................................ - 18,267
Repair and maintenance........................... 8,592 92,529
Property management fees - affiliates............ - 26,687
Other property operating expenses................ 1,494 40,642
General and administrative....................... 15,568 10,089
General and administrative - affiliates.......... (3,550) 12,759
------------- -------------
Total expenses................................. 22,177 364,852
------------- -------------
Net income (loss)................................... $ (17,267) $ 89,244
============= =============
Net income (loss) allocated to limited partners..... $ (17,267) $ 89,244
Net income (loss) allocated to General Partner...... - -
------------- -------------
Net income (loss)................................... $ (17,267) $ 89,244
============= =============
Net income (loss) per limited partnership unit...... $ (1.26) $ 6.49
============= =============
</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
(a California limited partnership in the process of liquidation)
STATEMENTS OF PARTNERS' EQUITY
(Unaudited)
For the Three Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
--------------- --------------- --------------
<S> <C> <C> <C>
Balance at December 31, 1996.............. $ 309,944 $ 4,509,477 $ 4,819,521
Net income................................ - 89,244 89,244
------------- ------------- -------------
Balance at March 31, 1997................. $ 309,944 $ 4,598,821 $ 4,908,765
============= ============= =============
Balance at December 31, 1997.............. $ - $ 414,319 $ 414,319
Net loss.................................. - (17,267) (17,267)
------------- ------------- -------------
Balance at March 31, 1998................. $ - $ 397,052 $ 397,052
============= ============= =============
</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
(a California limited partnership in the process of liquidation)
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
1998 1997
--------------- ---------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants....................... $ - $ 452,488
Cash paid to suppliers........................... (42,866) (263,524)
Cash received from (paid to) affiliates.......... 3,550 (33,905)
Interest received................................ 4,910 7,517
Interest paid.................................... - (44,004)
Property taxes paid and escrowed................. - (27,887)
------------- -------------
Net cash provided by (used in) operating
activities....................................... (34,406) 90,685
------------- -------------
Cash flows from investing activities:
Additions to real estate investments............. - (58,308)
------------- -------------
Cash flows from financing activities:
Principal payments on mortgage notes
payable........................................ - (36,323)
------------- -------------
Net decrease in cash and cash equivalents........... (34,406) (3,946)
Cash and cash equivalents at beginning
of period........................................ 451,506 581,031
------------- -------------
Cash and cash equivalents at end of period.......... $ 417,100 $ 577,085
============= =============
</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
(a California limited partnership in the process of liquidation)
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Income (Loss) to Net Cash Provided by (Used in)
Operating Activities
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Net income (loss)................................... $ (17,267) $ 89,244
------------- -------------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Amortization of deferred borrowing costs......... - 2,595
Changes in assets and liabilities:
Cash segregated for security deposits.......... - (308)
Accounts receivable............................ - 3,865
Prepaid expenses and other assets.............. - 2,866
Escrow deposits................................ - (27,887)
Accounts payable............................... - -
Accrued interest............................... - (265)
Accrued property taxes......................... - 29,762
Other accrued expenses......................... (17,139) (18,816)
Payable to affiliates - General Partner........ - 5,541
Security deposits and deferred rental
revenue...................................... - 4,088
------------- -------------
Total adjustments............................ (17,139) 1,441
------------- -------------
Net cash provided by (used in) operating
activities....................................... $ (34,406) $ 90,685
============= =============
</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
(a California limited partnership in the process of liquidation)
Notes To Financial Statements
(Unaudited)
March 31, 1998
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 600, 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, 1998,
are not necessarily indicative of the results to be expected for the year ending
December 31, 1998.
At a meeting of the limited partners on August 12, 1997, the limited partners
approved the sale of Palm Bay Apartments and the dissolution of the Partnership.
After the September 30, 1997 sale of Palm Bay Apartments, the General Partner
commenced the dissolution and termination of the Partnership. The assets and
liabilities in the accompanying statements of net assets in liquidation at March
31, 1998 and December 31, 1997 are valued at their estimated realizable values
and estimated settlement amounts, respectively. The Partnership is in the
process of liquidating its assets, satisfying all creditors and claims against
the Partnership, distributing its remaining assets to its partners, and
terminating its existence.
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, 1997, 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, 13760 Noel Road, Suite 600, LB70, Dallas,
Texas 75240.
NOTE 3.
- -------
The Partnership paid 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.
The Partnership reimbursed McREMI for its costs, including overhead, of
administering the Partnership's affairs.
<PAGE>
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 or paid during the three month periods ended March 31, 1998
and 1997.
The General Partner was entitled to receive a sales commission as compensation
for selling Partnership property equal to the lesser of 4% of the sales price of
the property sold or the customary fee charged by independent real estate
brokers in the area where the property was located.
The General Partner was also entitled to a distribution of cash from sales and
refinancings and cash from working capital reserves equal to 9.5% of such
distributions.
Compensation and reimbursements accrued for the benefit of the General Partner
and its affiliates are as follows:
Three Months Ended
March 31,
---------------------
1998 1997
--------- --------
Property management fees - affiliates............... $ - $ 26,687
Charged to general and administrative -
affiliates:
Partnership administration....................... (3,550) 12,759
------- -------
$ (3,550) $ 39,446
======= =======
NOTE 4.
- -------
On September 30, 1997, the Partnership sold Palm Bay Apartments to an
unaffiliated purchaser for a cash sales price of $6,849,500. Cash proceeds from
the transaction, as well as the gain on sale, are detailed below.
Gain on Sale Cash Proceeds
Sales price.................................. $ 6,849,500 $ 6,849,500
Selling costs................................ (374,785) (374,785)
Add back unpaid sales commission
due to the General Partner.............. - 137,000
Basis of real estate sold.................... (6,323,574)
-----------
Gain on sale................................. $ 151,141
=========== ----------
Proceeds from sale of real estate............ 6,611,715
Sales commission due to the General Partner.. (137,000)
Retirement of mortgage note.................. (1,924,929)
----------
Net cash proceeds............................ $ 4,549,786
==========
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
On September 30, 1997, the Partnership sold its last real estate asset, Palm Bay
Apartments. Proceeds from the sale were distributed to the partners in December
1997. The Partnership's sole remaining asset consists of its $417,100 balance of
cash and cash equivalents. At March 31, 1998, the Partnership's liabilities
consist of $20,048 of accrued expenses, $17,485 of which are due to affiliates
of the General Partner.
The Partnership remains subject to litigation as discussed in Part II, Item 1,
Legal Proceedings. The General Partner intends to use the Partnership's
remaining funds for the payment of costs associated with the litigation. After
the litigation is either adjudicated or otherwise settled, and all legal and
other costs have been provided for, remaining Partnership funds, if any, will be
distributed to the partners.
RESULTS OF OPERATIONS
- ---------------------
Results of operations for the first quarter of 1998 are not comparable to
results reported for the first quarter of 1997 due to the sale of Palm Bay
Apartments, and the subsequent distribution of sales proceeds to the partners.
Revenues:
Revenues for the first quarter consist solely of $4,910 of interest earned on
the Partnership's funds invested in money market accounts.
Expenses:
Partnership expenses include $10,159 of expenses related to operations at Palm
Bay Apartments. The Partnership expects that expenses arising from operations at
Palm Bay Apartments are substantially accrued or paid.
General and administrative expenses increased $5,479 or 54% due to an increase
in proxy-related expenses and legal costs associated with remaining litigation
discussed below.
General and administrative expenses paid to affiliates for the first quarter of
1998 reflects a $3,550 credit or refund from affiliates. General and
administrative expenses for 1997 exceeded the limit equal to 2% of the
Partnership's assets established by the Amended Partnership Agreement.
Consequently, in early 1998 the Partnership received a refund from an affiliate.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 31, 1998, the Partnership held $417,100 of cash and cash equivalents.
The Partnership owns no other assets. The Partnership intends to use its
remaining funds to pay the accrued expenses owed by the Partnership, in the
amount of $20,048 as of March 31, 1998, to pay all remaining expenses connected
with the termination of the Partnership, and to provide a contingency reserve to
pay all costs associated with ongoing litigation involving the Partnership as a
defendant. After all expenses have been provided for, and the litigation is
resolved through either adjudication or settlement, all remaining Partnership
funds will be distributed to the partners in accordance with terms of the
Partnership Agreement. The General Partner considers the current balance of cash
and cash equivalents adequate for all of these purposes.
Distributions:
In December 1997, the Partnership distributed $4,772,400 to its partners. This
distribution includes $4,549,786 of net cash proceeds from the sale of Palm Bay
Apartments, as well as $222,614 of cash reserves of the Partnership.
Distribution of the remaining cash reserves of the Partnership will be made from
any remaining funds of the Partnership after all liabilities of the Partnership
have been paid, including costs associated with terminating the Partnership's
affairs, and costs associated with adjudicating or settling litigation in which
the Partnership is involved.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
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.
<PAGE>
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>
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
Agreement 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
outstanding in 1998 and 1997.
27. Financial Data Schedule for the quarter
ended March 31, 1998.
(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, 1998.
<PAGE>
McNEIL PACIFIC INVESTORS FUND 1972
(a California limited partnership in the process of liquidation)
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, 1998 By: /s/ Ron K. Taylor
- ------------ ----------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
May 14, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 417,100
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 417,100
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 417,100
<SALES> 0
<TOTAL-REVENUES> 4,910
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 22,177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (17,267)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,267)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
