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 September 30, 1999
--------------------------------------------
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>
September 30, December 31,
1999 1998
------------- ------------
ASSETS
- ------
<S> <C> <C>
Cash and cash equivalents ..................................... $411,860 $397,954
-------- --------
$411,860 $397,954
======== ========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Other accrued expenses ........................................ $ 2,820 $ 4,702
Payable to affiliates - General Partner ....................... 12,362 12,362
-------- --------
15,182 17,064
-------- --------
Partners' equity:
Limited partners - 15,000 limited partnership units
authorized; 13,752.5 limited partnership units
issued and outstanding at September 30, 1999 and
December 31, 1998 ........................................ 396,678 380,890
General Partner ............................................ -- --
-------- --------
396,678 380,890
-------- --------
$411,860 $397,954
======== ========
</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 CHANGES IN NET ASSETS IN LIQUIDATION
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Revenue:
<S> <C> <C> <C> <C>
Interest .......................... $ 4,394 $ 6,032 $ 12,822 $ 14,561
Other revenue ..................... 150 -- 12,030 --
--------- --------- --------- ---------
Total revenue ................... 4,544 6,032 24,852 14,561
--------- --------- --------- ---------
Expenses:
Personnel expenses ................ -- -- -- 73
Repair and maintenance ............ -- -- -- 8,592
Other property operating
expenses ........................ -- -- -- 1,494
General and administrative ........ 3,223 3,690 9,064 40,796
General and administrative -
affiliates ...................... -- -- -- (3,550)
--------- --------- --------- ---------
Total expenses .................. 3,223 3,690 9,064 47,405
--------- --------- --------- ---------
Net increase (decrease) in
net assets in liquidation ......... 1,321 2,342 15,788 (32,844)
Net assets in liquidation at
beginning of period ............... 395,357 379,133 380,890 414,319
--------- --------- --------- ---------
Net assets in liquidation at
end of period ..................... $ 396,678 $ 381,475 $ 396,678 $ 381,475
========= ========= ========= =========
Net increase (decrease) in net
assets in liquidation per
limited partnership unit .......... $ .10 $ .17 $ 1.15 $ (2.39)
========= ========= ========= =========
</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)
September 30, 1999
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. All
adjustments were of a normal recurring nature.
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
September 30, 1999 and December 31, 1998 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, 1998, 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 reimbursed McNeil Real Estate Management, Inc. ("McREMI") for
its costs, including overhead, of administering the Partnership's affairs.
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 or nine month periods ended
September 30, 1999 and 1998.
<PAGE>
Compensation and reimbursements accrued for the benefit of the General Partner
and its affiliates are as follows:
Nine Months Ended
September 30,
-----------------------
1999 1998
--------- -----------
Charged to general and administrative affiliates:
Partnership administration..................... $ - $ (3,550)
======= =========
NOTE 4.
- -------
During 1999, the Partnership received refunds from its general liability
insurance carrier and from its workers' compensation insurance carrier. The
refunds are the result of cancellation of the Partnership's insurance policies
after the sale of Palm Bay Apartments, and the result of adjustments in the
amount of premiums the insurance carriers charged the Partnership based on the
insurance carriers' audit of Partnership operations. The refunds are included in
other revenue on the Statements of Changes in Net Assets in Liquidation.
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 $411,860 of cash and
cash equivalents. At September 30, 1999, the Partnership's liabilities consist
of $15,182 of accrued expenses, $12,362 of which are due to affiliates of the
General Partner.
The Partnership has settled the litigation discussed in Part II, Item 1, Legal
Proceedings. However, in connection with the litigation, the Partnership is
still obligated to pay its prorata share of litigation costs. The amount of
these costs have not yet been determined. The General Partner intends to use the
Partnership's remaining funds for the payment of costs associated with the
litigation. After all litigation and other costs have been provided for,
remaining Partnership funds, if any, will be distributed to the partners.
RESULTS OF OPERATIONS
- ---------------------
Revenues:
The Partnership's interest revenue decreased $1,739 to $12,822 for the nine
month period ended September 30, 1999 as compared to the same period of 1998.
For the third quarter of 1999, interest revenue decreased $1,638 to $4,394 as
compared to the third quarter of 1998. The varied amounts of interest revenue
received are attributable to the variable amounts of Partnership cash and cash
equivalents invested in interest-bearing accounts for the periods in question.
<PAGE>
The Partnership also recorded $12,030 of other revenue for the nine months ended
September 30, 1999, which consists principally of refunds of general liability
insurance and workers' compensation insurance premiums from the Partnership's
insurance carriers.
Expenses:
Partnership expenses for the first nine months of 1998 include $10,159 of
expenses related to prior operations at Palm Bay Apartments. The Partnership
sold Palm Bay Apartments on September 30, 1997. No such expenses were incurred
during 1999.
General and administrative expenses for the nine month period ended September
30, 1999 decreased $31,732 to $9,064 as compared to the same period in 1998. The
Partnership continues to incur costs related to the litigation discussed below.
General and administrative expenses paid to affiliates for the first nine months
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 the first quarter of 1998 the Partnership received a refund
from an affiliate. No such refunds were received during the first nine months of
1999.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 30, 1999, the Partnership held $411,860 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 $15,182 as of September 30, 1999, to pay all remaining expenses
connected with the termination of the Partnership, and to provide a contingency
reserve to pay all costs associated with litigation involving the Partnership as
a defendant. After all expenses have been provided for, 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:
Distribution of the Partnership's remaining cash reserves will be made from
remaining funds of the Partnership, if any, 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.
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>
YEAR 2000 DISCLOSURE
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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.
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 has assessed these
risks and expects to have contingency plans in place by December 31, 1999 for
any material potential failures.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
1) 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. ("McREMI") 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. 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.
Because the settlement contemplated a transaction which included all of the
Partnerships and plaintiffs claimed that an effort should be made to sell
all of the Partnerships, in or around September 1998, plaintiffs filed a
third consolidated and amended complaint which included allegations with
respect to the Partnerships which had not been named in previously filed
complaints.
<PAGE>
On September 15, 1998, the parties signed a Stipulation of Settlement. For
purposes of settlement, the parties stipulated to a class comprised of all
owners of limited partner units in the Partnerships during the period
beginning June 21, 1991, the earliest date that proxy materials began to be
issued in connection with the restructuring of the Partnerships, through
September 15, 1998. As structured, the Stipulation of Settlement provided
for the payment of over $35 million in distributions and the commitment to
market the Partnerships for sale, together with McREMI, through a fair and
impartial bidding process overseen by a national investment banking firm.
To ensure the integrity of that process, defendants agreed, among other
things, to involve plaintiffs' counsel in oversight of that process, and
plaintiffs' counsel retained an independent advisor to represent the
interests of limited partners of the Partnerships.
On October 6, 1998, the court gave preliminary approval to the settlement.
It granted final approval to the settlement on July 8, 1999 and entered a
Final Order and Judgment dismissing the consolidated action with prejudice.
As a condition of final approval, the court requested, and the parties
agreed to, a slight modification of the release in the Stipulation of
Settlement with respect to future claims. Plaintiffs' counsel intends to
seek an order awarding attorneys' fees and reimbursing their out-of-pocket
expenses in an amount which is as yet undetermined. 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. A Notice of Appeal was filed September 3, 1999
by High River Limited Partnership, Unicorn Associates Corporation and
Longacre Corporation.
2) High River Limited Partnership, Unicorn Associates Corporation and
Longacre Corporation, et al. v. McNeil Partners, L.P. ("MPLP"), McNeil
Investors, Inc., McNeil Real Estate Management, Inc. (McREMI"), Robert A.
McNeil and Carole J. McNeil, - Supreme Court of the State of New York,
County of New York, - Index No. 99 603526.
On July 23, 1999, High River and two other affiliates of Carl C. Icahn
(Unicorn Associates Corporation and Longacre Corporation), filed a
complaint for damages in the Supreme Court of the State of New York, County
of New York. Plaintiffs allege that the defendants improperly interfered
with tender offers made by High River for limited partner units in the
Partnership and other affiliated partnerships in which MPLP serves as
General Partner (the "McNeil Partnerships"), by, among other things, filing
purportedly frivolous litigation to delay High River's offers, issuing
purportedly false and misleading statements opposing the offers and
purportedly forcing High River itself to file litigation to enforce its
rights. High River also alleges that as a result the defendants caused High
River to incur undue expense and that the defendants ultimately prevented
High River from acquiring a greater number of limited partner units.
Plaintiffs also allege that the defendants improperly excluded High River
from participating in the auction process for the sale of the McNeil
Partnerships, and otherwise took steps to prevent its participation in the
auction. In addition, plaintiffs, who are limited partners in, among
others, McNeil Funds IX, X, XI, XII, XIV, XV, XX, XXIV, XXV, XXVI and
XXVII, have also sued the defendants based on their status as opt-outs from
the Schofield settlement. Plaintiffs seek undisclosed damages and an
accounting.
<PAGE>
On July 30, 1999, defendants filed an answer to the High River Complaint,
denying each and every material allegation contained in the High River
Complaint and asserting several affirmative defenses. Settlement
negotiations are underway.
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
increase (decrease) in net assets in
liquidation per limited partnership unit:
Net increase (decrease) in net assets in
liquidation per limited partnership unit is
computed by dividing net increase (decrease)
in net assets in liquidation 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 1999 and 1998.
27. Financial Data Schedule for the quarter
ended September 30, 1999.
(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 September 30, 1999.
<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
November 15, 1999 By: /s/ Ron K. Taylor
- ----------------- -----------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
November 15, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 411,860
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 411,860
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 411,860
<SALES> 0
<TOTAL-REVENUES> 24,852
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,064
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,788
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,788
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
