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, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to_____________
Commission file number 0-7162
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McNEIL PACIFIC INVESTORS FUND 1972
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(Exact name of registrant as specified in its charter)
California 94-6279375
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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
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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 ]
13,702.5 of the registrant's 13,752.5 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 27.
TOTAL OF 29 PAGES
<PAGE>
PART I
ITEM 1. BUSINESS
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ORGANIZATION
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McNeil Pacific Investors Fund 1972 (the "Partnership") was organized September
30, 1971 as a limited partnership under 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 General Partner was elected at a
meeting of limited partners on March 30, 1992, at which time the Partnership's
restated certificate and agreement of limited partnership (the "Partnership
Agreement") was amended. Prior to March 30, 1992, Pacific Investors Corporation
(the "Corporate General Partner"), an affiliate of Southmark Corporation
("Southmark"), and McNeil were the general partners of the Partnership. The
principal place of business for the Partnership and the General Partner is 13760
Noel Road, Suite 600, LB70, Dallas, Texas, 75240.
On March 8, 1972, a Registration Statement on Form S-11 was declared effective
by the Securities and Exchange Commission whereby the Partnership offered for
sale $15,000,000 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 April 30, 1973 with 13,795 Units sold for gross proceeds
of $13,795,000 to the Partnership, including 50 Units purchased by the original
general partners. 37.5 and 5 Units were relinquished in 1994 and 1995,
respectively, leaving 13,752.5 Units outstanding at December 31, 1998.
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, including Southmark's interest 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.
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.
<PAGE>
On March 30, 1992, the limited partners approved a proposal to (i) replace
McNeil and the Corporate General Partner as general partners of the Partnership
with the General Partner, and (ii) amend the Partnership Agreement to (a) extend
the term of the Partnership from December 31, 1992, until December 31, 2002, (b)
provide for a limitation on administrative operating expenses equal to 2% of
tangible asset value, as defined, and (c) provide for the establishment of an
oversight committee that will review and report on the Partnership's compliance
with the 2% limitation on administrative operating expenses.
CURRENT OPERATIONS
- ------------------
General:
The Partnership was engaged in real estate activities, including the ownership,
operation and management of residential rental real estate and other real estate
related assets. On September 30, 1997, the Partnership sold its last real estate
asset, Palm Bay Apartments. The Partnership is in the process of liquidating its
assets, satisfying its remaining creditors, and terminating its operations. At
December 31, 1998, the Partnership did not own any income-producing properties.
The Partnership does not directly employ any personnel. The General Partner
conducts the business of the Partnership directly and through its affiliates.
The Partnership is managed by the General Partner. In accordance with the
Partnership Agreement, the Partnership reimburses affiliates of the General
Partner for certain expenses incurred by the affiliates in connection with the
management of the Partnership. 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 its plan to liquidate its remaining properties, the Partnership sold
its last real estate asset, Palm Bay Apartments, on September 30, 1997. The
Partnership is currently in the process of liquidating its assets, satisfying
all remaining creditors, and terminating its operations. See Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Forward-Looking Information:
Within this document, certain statements are made as to expected Partnership
developments, including the ultimate termination of the Partnership's business,
satisfaction of the Partnership's creditors, and distributions to limited
partners. 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 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 outcome of litigation in which the
Partnership is a defendant.
<PAGE>
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.
Under such environmental laws, a current or previous owner or operator of real
estate may be required to investigate and clean up certain hazardous or toxic
substances and may be held liable to a governmental entity or third parties for
property damage and for investigation and cleanup costs incurred by such parties
in connection with the contamination whether or not the owner or operator knew
of, or was responsible for, the contamination. In addition, some environmental
laws create a lien on the contaminated site in favor of the government for
damages and costs it incurs in connection with the contamination. The presence
of contamination or the failure to remediate contaminations may adversely affect
the owner's ability to sell or lease real estate or to borrow using the real
estate as collateral. The owner or operator of a site may be liable under common
law to third parties for damages and injuries resulting from environmental
contamination emanating from the site. Such costs or liabilities could exceed
the value of the affected real estate.
In connection with the proposed sale transaction as more fully described above,
Phase I environmental site assessments have been completed for each property
owned by the Partnership. Such environmental assessments performed on the
properties have not revealed any environmental liability that the Partnership
believes would have a material adverse effect on the Partnership's business,
assets, or results of operations. The Partnership has not been notified by any
governmental authority of any non-compliance, liability or other claim in
connection with any of its properties. There can be no assurances, however, that
environmental liabilities have not developed since such environmental
assessments were prepared, or that future uses or conditions (including, without
limitation, changes in applicable environmental laws and regulations) will not
result in imposition of environmental liability.
Other Information:
In August 1995, High River Limited Partnership, a Delaware limited partnership
controlled by Carl C. Icahn ("High River") made an unsolicited tender offer to
purchase from holders of Units up to approximately 45% of the outstanding Units
of the Partnership for a purchase price of $110 per Unit. In September 1996,
High River made another unsolicited tender offer to purchase any and all of the
outstanding Units of the Partnership for a purchase price of $224.50 per Unit.
In addition, High River made unsolicited tender offers for certain other
partnerships controlled by the General Partner. The Partnership made no
recommendation to the limited partners concerning the tender offers made with
respect to the Partnership. The General Partner believes that as of February 1,
1999, High River has purchased approximately 11.7% of the outstanding Units
pursuant to the tender offers. In addition, all litigation filed by High River,
Mr. Icahn and his affiliates in connection with the tender offers have been
dismissed without prejudice.
<PAGE>
ITEM 2. PROPERTY
- ------- --------
The Partnership's last remaining property, Palm Bay Apartments, was sold to an
unaffiliated purchaser on September 30, 1997.
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 XXIII, 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., Hearth Hollow Associates, McNeil Midwest Properties I, L.P. and
Regency North Associates, L.P., - 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 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. The case was stayed pending settlement discussions. A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties. Preliminary
Court approval was received on October 6, 1998. A hearing for Final Approval of
Settlement, initially scheduled for December 17, 1998, has been continued to May
25, 1999.
<PAGE>
Because McNeil Real Estate Fund XXIII, L.P., Hearth Hollow Associates, McNeil
Midwest Properties I, L.P. and Regency North Associates, L.P. would be part of
the transaction contemplated in the settlement and Plaintiffs claim that an
effort should be made to sell the McNeil Partnerships, Plaintiffs have included
allegations with respect to McNeil Real Estate Fund XXIII, L.P., Hearth Hollow
Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P.
in the third consolidated and amended complaint.
Plaintiff's counsel intends to seek an order awarding attorney's fees and
reimbursements of their out-of-pocket expenses. The amount of such award is
undeterminable until final approval is received from the court. Fees and
expenses shall be allocated amongst the Partnerships on a pro rata basis, based
upon tangible asset value of each such partnership, less total liabilities,
calculated in accordance with the Amended Partnership Agreements for the quarter
most recently ended.
For discussion of the Southmark bankruptcy, see Item 1 - Business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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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 1,165 as of February 1, 1999
(C) In December 1997, the Partnership distributed $4,772,400 to its
partners. No distributions were made in 1998 or 1996. See Item 7 -
Management's Discussion and Analysis of Financial Condition and Results
of Operations for a discussion of the Partnership's plan to pay a
liquidating distribution to the partners.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
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The following table sets forth a summary of certain financial data for the
Partnership. This summary should be read in conjunction with the Partnership's
financial statements and notes thereto appearing in Item 8 - Financial
Statements and Supplementary Data.
<TABLE>
<CAPTION>
Statements of Years Ended December 31,
Operations 1998 1997 1996 1995 1994
- ------------------ ---------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Rental revenue ..................... $ -- $ 1,350,389 $ 1,688,524 $ 1,376,148 $ 1,475,264
Gain on sale of
real estate ..................... -- 151,141 -- -- 574,701
Total revenue ...................... 20,070 1,585,977 1,715,535 1,439,428 2,095,660
Net income (loss) .................. (33,429) 367,198 104,539 (285,886) 433,544
Net income (loss) per
limited partnership unit......... $ (2.43) $ 17.81 $ 7.60 $ (20.79) $ 48.52
========= =========== =========== ============ ===========
Distributions per limited
partnership unit ................ $ -- $ 315.59 $ -- $ -- $ --
========= =========== =========== =========== ===========
As of December 31,
Balance Sheets 1998 1997 1996 1995 1994
- -------------- --------- --------- ----------- ----------- -----------
Real estate investment, net ........ $ -- $ -- $ -- $ 6,335,493 $ 6,239,081
Asset held for sale ................ -- -- 6,253,753 -- --
Total assets ....................... 397,954 451,506 6,957,388 6,993,903 7,516,368
Mortgage notes payable ............. -- -- 2,023,577 2,161,204 2,287,341
Partners' equity ................... 380,890 414,319 4,819,521 4,714,982 5,000,868
</TABLE>
See Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations. The Partnership sold Palm Bay Apartments on September 30,
1997. Pacesetter Apartments was sold on March 17, 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
FINANCIAL CONDITION
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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. As of the end of 1998, the Partnership's sole remaining asset consisted of
$397,954 of cash and cash equivalents. At the end of 1998, the Partnership's
liabilities consisted of $17,064 of accrued expenses, $12,362 of which were due
to affiliates of the General Partner.
<PAGE>
The Partnership remains subject to litigation as discussed in Item 3 - "Legal
Proceedings." The General Partner intends to use the Partnership's remaining
funds for the payment of costs associated with the litigation. After the
remaining 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
- ---------------------
1998 compared to 1997:
Revenue:
Due to the sale of the Partnership's last property on September 30, 1997, the
Partnership earned no rental revenue for the year ended December 31, 1998.
Similarly, no gain on sale of real estate was recorded during 1998.
Interest revenue decreased 76% to $20,070 for the year ended December 31, 1998.
Interest revenue decreased after the Partnership distributed most of its cash
reserves to its partners in December 1997.
Expenses:
The Partnership incurred a total of $11,114 of residual expenses related to Palm
Bay Apartments during the year ended December 31, 1998.
General and administrative expenses decreased 48% to $45,935 in 1998 as compared
to 1997. The Partnership continues to incur costs related to the litigation
discussed below. However, the amount of litigation-related costs decreased for
the twelve month period ended December 31, 1998, as compared to 1997.
General and administrative expenses paid to affiliates during 1998 reflects a
$3,550 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 the first quarter of 1998 the
Partnership received a refund from an affiliate.
1997 compared to 1996:
Revenue:
Rental revenue decreased $338,135 or 20% in 1997 as compared to 1996. Rental
revenue decreased due to the September 30, 1997 sale of Palm Bay Apartments.
Prior to the sale, rental revenues from Palm Bay Apartments were up 7.7% due to
an improving occupancy rate. Vacancy losses for the period from January 1, 1997
through the date of sale decreased 11.9% as compared to the same period of 1996,
while other rental discounts and concessions had decreased 77%.
The Partnership reported a $151,141 gain on the sale of Palm Bay Apartments. No
such gain was realized in 1996. Proceeds from the sale of Palm Bay Apartments
were invested in interest-bearing cash accounts. As a result, interest revenue
increased to $84,447 for 1997 as compared to $27,011 of interest earned in 1996.
<PAGE>
Expenses:
Expenses decreased $392,217 or 24% for 1997 as compared to 1996. Interest,
property taxes, personnel expenses, property management fees, utilities and
other operating expenses all decreased as a result of the September 30, 1997
sale of Palm Bay Apartments.
Repairs and maintenance, however, increased despite the sale of Palm Bay
Apartments. Repairs and maintenance increased $1,104 to $312,631. Expenditures
for replacement of floor covering and appliances, due to their magnitude, were
capitalized in 1996. Such expenditures did not qualify for capitalization in
1997 and were, as a consequence, expensed.
General and administrative expenses increased $11,064 or 14.4% in 1997 compared
to 1996. Beginning in 1997, investor services were provided by an independent
contractor instead of by affiliates of the General Partner. $8,971 of the
increase in general and administrative expenses is due to investor services
costs.
General and administrative expenses paid to affiliates increased $42,189 to
$88,126 in 1997 as compared to $45,937 in 1996. Included in general and
administrative expenses paid to affiliates for 1997 is a $23,368 partnership
management fee. Partnership management fees are equal to 9.5% of distributions
of cash from operations paid to the limited partners. No such fee was incurred
in 1996. Partnership administrative fees also increased because of expenses
incurred as the Partnership begins to wind up its business affairs. Such
increases were partially offset by decreased costs for investor services as
explained in the preceding paragraph.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership used $53,552 in operating activities in 1998, as compared to
providing $261,558 from operating activities in 1997. The September 30, 1997
sale of Palm Bay Apartments, the Partnership's last real estate asset, accounts
for the decrease. The Partnership realized $4,549,786 of cash from the sale of
Palm Bay Apartments, after retirement of the Palm Bay mortgage note. The cash
realized from the sale of Palm Bay Apartments, as well as some cash reserves of
the Partnership, were distributed to the partners in December 1997.
Short-term Liquidity:
At December 31, 1998, the Partnership held $397,954 of cash and cash
equivalents. The Partnership owns no other assets. The Partnership intends to
use its remaining funds to pay the remaining accrued expenses owed by the
Partnership, in the amount of $17,064 as of December 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, any 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.
<PAGE>
Long-term Liquidity:
Because the Partnership is terminating its affairs, long-term liquidity no
longer remains as an issue for the Partnership.
Distributions:
In December 1997, the Partnership distributed $4,772,400 to its partners.
No distributions were paid to the partners during 1998. 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.
YEAR 2000 DISCLOSURE
- --------------------
State of readiness
- ------------------
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.
Management has assessed its information technology ("IT") infrastructure to
identify any systems that could be affected by the year 2000 problem. The IT
used by the Partnership for financial reporting and significant accounting
functions was made year 2000 compliant during recent systems conversions. The
software utilized for these functions are licensed by third party vendors who
have warranted that their systems are year 2000 compliant.
Cost
- ----
The cost of IT upgrades is not expected to be material to the Partnership.
Because all the IT systems have been upgraded over the last three years, all
such systems were compliant, or made compliant at no additional cost by third
party vendors.
Risks
- -----
Ultimately, the potential impact of the year 2000 issue will depend not only on
the corrective measures the Partnership undertakes, but also on the way in which
the year 2000 issue is addressed by government agencies and entities that
provide services or supplies to the Partnership. Management has not determined
the most likely worst case scenario to the Partnership. Management believes that
progress on all areas is proceeding and that the Partnership will experience no
adverse effect as a result of the year 2000 issue. However, there is no
assurance that this will be the case.
<PAGE>
Contingency plans
- -----------------
Management is developing contingency plans to address potential year 2000
non-compliance of IT. Management believes that alternative systems are available
that could be utilized to minimize such impact. Management will assess these
risks and develop plans to mitigate possible failures by June, 1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------- ----------------------------------------------------------
Not Applicable.
<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....................................... 11
Statements of Net Assets in Liquidation as of
December 31, 1998 and 1997.................................................. 12
Statement of Changes in Net Assets in Liquidation for the year
ended December 31, 1997..................................................... 13
Statements of Operations for each of the two years in the period
ended December 31, 1997..................................................... 14
Statements of Partners' Equity for each of the two years in the
period ended December 31, 1997.............................................. 16
Statements of Cash Flows for each of the two years in the period
ended December 31, 1997..................................................... 17
Notes to Financial Statements.................................................. 19
</TABLE>
All schedules are omitted because they are not applicable or the financial
information required is included in the financial statements or the notes
thereto.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
McNeil Pacific Investors Fund 1972:
We have audited the accompanying statements of net assets in liquidation of
McNeil Pacific Investors Fund 1972 (a California limited partnership) as of
December 31, 1998 and 1997, and the related statement of changes in net assets
in liquidation for the year ended December 31, 1998. In addition, we have
audited the statements of operations, partners' equity and cash flows for each
of the two years in the period ended December 31, 1997. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements 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.
As described in Note 1 to the financial statements, on August 12, 1997, the sale
of Palm Bay Apartments and the dissolution of the Partnership were approved at a
meeting of the limited partners. After the September 30, 1997 sale of Palm Bay
Apartments, the General Partner commenced the dissolution and termination of the
Partnership. As a result, the Partnership has changed its basis of accounting as
of and for the periods subsequent to December 31, 1997, from the going-concern
basis to the liquidation basis. Accordingly, the carrying value of the remaining
assets as of December 31, 1998, are presented at estimated realizable values and
all liabilities are presented at estimated settlement amounts.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets in liquidation of McNeil Pacific Investors
Fund 1972 as of December 31, 1998 and 1997, the changes in its net assets in
liquidation for the year ended December 31, 1998, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles
applied on the bases described in the preceding paragraph.
/s/ Arthur Andersen LLP
Dallas, Texas
March 19, 1999
<PAGE>
McNEIL PACIFIC INVESTORS FUND 1972
(a California limited partnership in the process of liquidation)
STATEMENTS OF NET ASSETS IN LIQUIDATION
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
-------- --------
ASSETS
- ------
<S> <C> <C>
Cash and cash equivalents .................................. $397,954 $451,506
-------- --------
$397,954 $451,506
======== ========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Other accrued expenses ..................................... $ 4,702 $ 19,702
Payable to affiliates - General Partner .................... 12,362 17,485
-------- --------
17,064 37,187
-------- --------
Partners' equity (Net assets in liquidation):
Limited partners - 15,000 limited partnership units
authorized; 13,752.5 limited partnership units
issued and outstanding ................................ 380,890 414,319
General Partner ......................................... -- --
-------- --------
380,890 414,319
-------- --------
$397,954 $451,506
======== ========
</TABLE>
See accompanying notes to financial statements
<PAGE>
McNEIL PACIFIC INVESTORS FUND 1972
(a California limited partnership in the process of liquidation)
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
December 31,
1998
-------------
Revenue:
Interest and other revenue.................... $ 20,070
------------
Expenses:
Personnel expenses.............................. 73
Repairs and maintenance......................... 9,537
Other property operating expenses............... 1,504
General and administrative...................... 45,935
General and administrative - affiliates......... (3,550)
-----------
Total expenses................................ 53,499
-----------
Net decrease in net assets in liquidation.......... (33,429)
Net assets in liquidation at beginning of year.. 414,319
-----------
Net assets in liquidation at end of year........ $ 380,890
===========
Net decrease in net assets in liquidation
per limited partnership unit.................... $ 2.43
===========
See accompanying notes to financial statements.
<PAGE>
McNEIL PACIFIC INVESTORS FUND 1972
(a California limited partnership in the process of liquidation)
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
1997 1996
----------- ----------
Revenue:
Rental revenue .......................... $1,350,389 $1,688,524
Interest and other revenue .............. 84,447 27,011
Gain on sale of real estate ............. 151,141 --
---------- ----------
Total revenue ......................... 1,585,977 1,715,535
---------- ----------
Expenses:
Interest ................................ 133,196 198,739
Depreciation ............................ -- 294,001
Property taxes .......................... 90,765 121,352
Personnel expenses ...................... 245,872 263,324
Repairs and maintenance ................. 312,631 311,527
Property management fees -
affiliates ............................ 80,160 99,681
Utilities ............................... 53,794 65,901
Other property operating expenses........ 126,264 133,627
General and administrative .............. 87,971 76,907
General and administrative -
affiliates ............................ 88,126 45,937
---------- ----------
Total expenses ........................ 1,218,779 1,610,996
---------- ----------
Net income (loss) .......................... $ 367,198 $ 104,539
========== ==========
Net income (loss) allocated to
limited partners ........................ $ 244,912 $ 104,539
Net income allocated to General
Partner ................................. 122,286 --
---------- ----------
Net income (loss) .......................... $ 367,198 $ 104,539
========== ==========
Net income (loss) per limited
partnership unit ........................ $ 17.81 $ 7.60
========== ==========
Distributions per limited partnership
unit .................................... $ 315.59 $ --
========== ==========
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
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
----------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1995....... $ 309,944 $ 4,405,038 $ 4,714,982
Net income ........................ -- 104,539 104,539
----------- ----------- -----------
Balance at December 31, 1996 ...... 309,944 4,509,577 4,819,521
Net income ........................ 122,286 244,912 367,198
Distributions to partners ......... (432,230) (4,340,170) (4,772,400)
----------- ----------- -----------
Balance at December 31, 1997 ...... $ -- $ 414,319 $ 414,319
=========== =========== ===========
</TABLE>
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
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1997 1996
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants .............. $ 1,350,036 $ 1,682,397
Cash paid to suppliers .................. (803,859) (869,237)
Cash paid to affiliates ................. (167,909) (143,737)
Interest received ....................... 84,447 27,011
Interest paid ........................... (143,624) (183,673)
Property taxes paid ..................... (57,533) (105,231)
----------- -----------
Net cash provided by
operating activities ................... 261,558 407,530
----------- -----------
Cash flows from investing activities:
Additions to real estate
investments ........................... (69,821) (212,261)
Proceeds from sale of real estate
investment ............................ 6,474,715 --
----------- -----------
Net cash provided by (used in)
investing activities ................... 6,404,894 (212,261)
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage
notes payable ......................... (98,648) (137,627)
Retirement of mortgage note
payable ............................... (1,924,929) --
Distributions to partners ............... (4,772,400) --
----------- -----------
Net cash used in financing activities ...... (6,795,977) (137,627)
----------- -----------
Net increase (decrease) in cash and
cash equivalents ...................... (129,525) 57,642
Cash and cash equivalents at
beginning of year ..................... 581,031 523,389
----------- -----------
Cash and cash equivalents at end
of year ............................... $ 451,506 $ 581,031
=========== ===========
</TABLE>
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
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
For the Years Ended December 31,
--------------------------------
1997 1996
Net income ................................ $ 367,198 $ 104,539
--------- ---------
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation ........................... -- 294,001
Amortization of deferred borrowing
costs ................................ 4,327 10,387
Gain on sale of real estate ............ (151,141) --
Changes in assets and liabilities:
Cash segregated for security
deposits ........................... 57,204 (13,319)
Accounts receivable .................. 4,147 (298)
Prepaid expenses and other
assets ............................. 23,694 (474)
Escrow deposits ...................... 33,232 16,121
Accounts payable ..................... -- (20,363)
Accrued interest ..................... (14,755) 4,679
Other accrued expenses ............... (4,644) (507)
Payable to affiliates - General
Partner ............................ 377 1,881
Security deposits and deferred
rental revenue ..................... (58,081) 10,883
--------- ---------
Total adjustments ................ (105,640) 302,991
--------- ---------
Net cash provided by
operating activities ................... $ 261,558 $ 407,530
========= =========
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
December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------
Organization
- ------------
McNeil Pacific Investors Fund 1972 (the "Partnership") was organized September
30, 1971 as a limited partnership under 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 General Partner was elected at a
meeting of limited partners on March 30, 1992, at which time the Partnership's
restated certificate and agreement of limited partnership (the "Partnership
Agreement") was amended. Prior to March 30, 1992, Pacific Investors Corporation,
an affiliate of Southmark Corporation, and McNeil were the general partners of
the Partnership. The principal place of business for the Partnership and the
General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240.
The Partnership sold Palm Bay Apartments, the Partnership's sole remaining real
estate asset, on September 30, 1997.
Basis of Presentation
- ---------------------
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
December 31, 1998 and 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.
Adoption of Recent Accounting Pronouncements
- --------------------------------------------
The Partnership has adopted Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information ("SFAS
131"). SFAS 131 requires an enterprise to report financial information about its
reportable operating segments, which are defined as components of a business for
which separate financial information is evaluated regularly by the chief
decision maker in allocating resources and assessing performance. The
Partnership does not prepare such information for internal use, since it
analyzes the performance of and allocates resources for each property
individually. The Partnership's management has determined that it operates one
line of business and it would be impracticable to report segment information.
Therefore, the adoption of SFAS 131 has no impact on the Partnership's financial
statements.
<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.
Rental Revenue
- --------------
The Partnership leased its property under short-term operating leases. Lease
terms generally were less than one year in duration. Rental revenue was
recognized as earned.
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 Partnership Agreement provides that income will be allocated to the General
Partner to the extent of distributions to the General Partner of cash from
sales, refinancings, or from working capital reserves. All remaining net income
and all losses are allocated 100% to the limited partners.
An estimated gain on the ultimate disposition of Palm Bay Apartments, in the
amount of $309,944, was allocated to the General Partner in 1983 based upon a
1983 sales contract for Palm Bay Apartments. An adjustment was made in 1997 to
adjust the amount allocated to the General Partner based on the 1997 sale of
Palm Bay Apartments.
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 1998, 1997 and 1996 have been made
in accordance with these provisions.
Distributions
- -------------
At the discretion of the General Partner, distributions to partners are paid
from operations of the Partnership's property, from the sale or refinancing of
the property, or from cash maintained as working capital reserves.
Cash from operations is distributed 100% to the limited partners.
Distributions of cash from sales and refinancings and cash from working capital
reserves are made in the order shown below:
(a) First to the limited partners in an amount, when added to all prior
distributions to the limited partners of disposition proceeds, that
equals 109.6% of the portion of net offering proceeds invested in
property sold; then,
<PAGE>
(b) of the remaining balance, 90.5% to the limited partners and 9.5% to the
General Partner.
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. No distributions were paid to the partners during
1998 or 1996.
Net Income (Loss) Per Limited Partnership Unit
- ----------------------------------------------
Net income (loss) per limited partnership unit ("Units") 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
13,752.5 Units outstanding in 1998, 1997, and 1996.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
- -------------------------------------
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. The Partnership incurred a
partnership management fee of $23,368 in 1997. No partnership management fees
were incurred during 1998 or 1996.
The Partnership paid property management fees equal to 6% 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 and leasing services for the Partnership's properties.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs. In 1998, the Partnership received a
$3,550 refund from McREMI for overpayments of reimbursable costs the Partnership
paid in 1997.
The General Partner is 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 is located. The Partnership paid a
$137,000 sales commission to the General Partner in connection with the sale of
Palm Bay Apartments.
<PAGE>
Compensation and reimbursements paid or accrued for the benefit of the General
Partner or its affiliates are as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------
1998 1997 1996
---------- --------- ---------
Property management fees -
<S> <C> <C> <C>
affiliates ................................ $ -- $ 80,160 $ 99,681
Charged to general and administrative -
affiliates:
Partnership administration ................ (3,550) 64,758 45,937
Charged to general and administrative -
affiliates:
Partnership management fee ................ -- 23,368 --
Charged to gain on sale of real estate:
Sales commission .......................... -- 137,000 --
--------- --------- ---------
$ (3,550) $ 305,286 $ 145,618
========= ========= =========
Charged to General Partner's equity:
Distribution of cash from sales........... $ -- $ 432,230 $ --
========= ========= =========
</TABLE>
Payable to affiliates - General Partner at December 31, 1998 and 1997 consists
of reimbursable administrative costs.
NOTE 3 - TAXABLE INCOME (LOSS)
- ------------------------------
McNeil Pacific Investors Fund 1972 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 tax purposes exceeded the net
assets and liabilities for financial reporting purposes by $36,732 in 1998 and
$24,758 in 1997. The Partnership's net assets and liabilities for financial
reporting purposes exceeded the net assets and liabilities for tax purposes by
$1,981,839 in 1996.
<PAGE>
NOTE 4 - SALE OF REAL ESTATE
- ----------------------------
On September 30, 1997, the Partnership sold its investment in Palm Bay
Apartments to an unaffiliated buyer for a cash sales price of $6,849,500. Cash
proceeds from this transaction, as well as the gain on sale are detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
----------------- ------------------
<S> <C> <C>
Sales price........................................ $ 6,849,500 $ 6,849,500
Selling costs...................................... (374,785) (374,785)
Basis of real estate sold.......................... (6,323,574)
---------------
Gain on sale....................................... $ 151,141
=============== ---------------
Proceeds from sale of real estate.................. 6,474,715
Retirement of mortgage note........................ (1,924,929)
---------------
Net cash proceeds.................................. $ 4,549,786
===============
</TABLE>
NOTE 5 - 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 XXIII, 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., Hearth Hollow Associates, McNeil Midwest Properties I, L.P. and
Regency North Associates, L.P., - 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 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
<PAGE>
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. The case was stayed pending settlement discussions. A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties. Preliminary
Court approval was received on October 6, 1998. A hearing for Final Approval of
Settlement, initially scheduled for December 17, 1998, has been continued to May
25, 1999.
Because McNeil Real Estate Fund XXIII, L.P., Hearth Hollow Associates, McNeil
Midwest Properties I, L.P. and Regency North Associates, L.P. would be part of
the transaction contemplated in the settlement and Plaintiffs claim that an
effort should be made to sell the McNeil Partnerships, Plaintiffs have included
allegations with respect to McNeil Real Estate Fund XXIII, L.P., Hearth Hollow
Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P.
in the third consolidated and amended complaint.
Plaintiff's counsel intends to seek an order awarding attorney's fees and
reimbursements of their out-of-pocket expenses. The amount of such award is
undeterminable until final approval is received from the court. Fees and
expenses shall be allocated amongst the Partnerships on a pro rata basis, based
upon tangible asset value of each such partnership, less total liabilities,
calculated in accordance with the Amended Partnership Agreements for the quarter
most recently ended.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.
<PAGE>
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:
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------
Robert A. McNeil, 78 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 an 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 55 Mrs. McNeil is Co-Chairman, with husband
Co-Chairman of the Robert A. McNeil, of McNeil Investors,
Board 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.
<PAGE>
Ron K. Taylor 41 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.
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, 1998, 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, 1998. The Partnership has no plans to
pay any such remuneration to any directors or officers of the general partner of
the General Partner in the future.
See Item 13 - Certain Relationships and Related Transactions for amounts of
compensation and reimbursements paid by the Partnership to the General Partner
and its affiliates.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
(A) Security ownership of certain beneficial owners.
No individual or group, as defined by Section 13(d)(3) of the
Securities Exchange Act of 1934, known to the Partnership is the
beneficial owner of more than 5% of the Partnership's securities with
the exception of the following:
1. The General Conference Corporation of Seventh Day Adventists,
12501 Old Columbia Pike, Silver Spring, Maryland, 20904, owns 950
(6.9%) of the Partnership's Units as of February 1, 1999.
<PAGE>
2. A group of ten limited partnerships affiliated with Liquidity
Financial Corporation, all of whose outstanding stock is owned by
Richard G. Wollack and Brent R. Donaldson, 2200 Powell Street,
Suite 700, Emeryville, California, 94608, collectively own 825
(6.0%) of the Partnership's Units as of February 1, 1999.
3. High River Limited Partnership, 100 S. Bedford Road, Mount
Kisco, New York, 10549, owns 1,606 (11.7%) of the Partnership's
Units as of February 1, 1999.
(B) Security ownership of management.
As of February 1, 1999, the General Partner and the officers and
directors of its general partner collectively own 50 Units, which is
less than 1% of Units outstanding.
(C) Change in control.
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
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 1998.
The Partnership pays property management fees equal to 6% of gross rental
receipts of the Partnership's property to McREMI for providing property
management and leasing services for the Partnership's property. The Partnership
reimburses McREMI for its costs, including overhead, of administering the
Partnership's affairs. No property management fees were incurred during 1998.
See Item 1 - Business, Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations, and Item 8 - Note 2 -
"Transactions with Affiliates."
<PAGE>
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
--------
The following exhibits are incorporated by reference and are an
integral part of this Form 10-K.
Exhibit
Number Description
------- -----------
3.1 Restated Certificate and Agreement of
Limited Partnership dated as of March 8,
1972. Incorporated by reference to the
Annual Report of McNeil Pacific Investors
Fund 1972 on Form 10-K for the period
ended December 31, 1990, as filed with the
Securities and Exchange Commission on
March 29, 1991.
3.2 Amendment to Restated Certificate and
Agreement of Limited Partnership dated as
of March 30, 1992. (1)
10.4 Amendment of Property Management Agree-
ment, dated January 1, 1995, between
McNeil Pacific Investors Fund 1972 and
McNeil Real Estate Management, Inc. (2)
11. Statement regarding computation of net
income (loss) per limited partnership unit
(see Note 1 to Financial Statements).
<PAGE>
(1) Incorporated by reference to the Annual
Report of McNeil Pacific Investors Fund
1972 (Commission file number 0-7162), on
Form 10-K for the period ended December
31, 1993, as filed with the Securities and
Exchange Commission on March 30, 1994.
(2) Incorporated by reference to the Annual
Report of McNeil Pacific Investors Fund
1972 (Commission file number 0-7162), on
Form 10-K for the period ended December
31, 1994, as filed with the Securities and
Exchange Commission on March 30, 1995.
27. Financial Data Schedule for the year ended
December 31, 1998.
(B) Reports on Form 8-K. There were no reports on Form 8-K filed by the
Partnership during the quarter ended December 31, 1998.
<PAGE>
McNEIL PACIFIC INVESTORS FUND 1972
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 PACIFIC INVESTORS FUND 1972
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
March 31, 1999 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, 1999 By: /s/ Ron K. Taylor
- -------------- ---------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
March 31, 1999 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-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 397,954
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 397,954
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 397,954
<SALES> 0
<TOTAL-REVENUES> 20,070
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 53,499
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (33,429)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,429)
<EPS-PRIMARY> 0
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