UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended September 30, 1995
----------------------------------------------------
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 0-12915
MCNEIL REAL ESTATE FUND XIV, LTD.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2822299
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (214) 448-5800
----------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
<PAGE>
MCNEIL REAL ESTATE FUND XIV, LTD.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 6,833,471 $ 6,833,471
Buildings and improvements............................... 45,252,651 44,237,251
----------- -----------
52,086,122 51,070,722
Less: Accumulated depreciation.......................... (21,258,248) (19,674,640)
----------- -----------
30,827,874 31,396,082
Cash and cash equivalents................................... 1,931,346 1,045,158
Cash segregated for security deposits....................... 394,166 372,157
Accounts receivable......................................... 384,095 394,285
Prepaid expenses and other assets........................... 214,369 230,521
Escrow deposits............................................. 813,534 655,767
Deferred borrowing costs, net of accumulated amorti-
zation of $225,947 and $170,822 at September 30,
1995 and December 31, 1994, respectively................. 1,168,296 1,120,896
----------- -----------
$ 35,733,680 $ 35,214,866
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable, net................................. $ 27,978,584 $ 27,161,556
Accounts payable............................................ 173,199 79,005
Accrued interest............................................ 202,263 203,282
Accrued property taxes...................................... 276,085 84,880
Other accrued expenses...................................... 148,519 157,671
Payable to affiliates - General Partner..................... 1,101,790 991,530
Security deposits and deferred rental revenue............... 385,540 384,769
----------- -----------
30,265,980 29,062,693
----------- -----------
Partners' equity (deficit):
Limited partners - 100,000 limited partnership
units authorized; 86,534 limited partnership
units outstanding...................................... 7,866,091 8,094,114
General Partner.......................................... (2,398,391) (1,941,941)
----------- -----------
5,467,700 6,152,173
----------- -----------
$ 35,733,680 $ 35,214,866
=========== ===========
</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 REAL ESTATE FUND XIV, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue................ $2,305,697 $2,256,271 $6,886,211 $6,607,223
Interest...................... 25,850 9,202 80,005 21,414
Gain on legal settlement...... - - 39,841 -
--------- --------- --------- ---------
Total revenue............... 2,331,547 2,265,473 7,006,057 6,628,637
--------- --------- --------- ---------
Expenses:
Interest...................... 680,161 680,013 2,019,180 2,048,520
Depreciation and
amortization................ 521,427 478,377 1,583,608 1,435,131
Property taxes................ 193,390 179,517 559,998 542,635
Personnel expenses............ 251,719 253,827 765,204 729,446
Utilities..................... 124,667 113,111 350,929 351,206
Repair and maintenance........ 257,856 238,115 733,479 748,589
Property management
fees - affiliates........... 115,579 115,506 343,552 332,609
Other property operating
expenses.................... 142,144 138,062 428,287 410,582
General and administrative.... 139,667 11,127 173,418 46,572
General and administrative -
affiliates.................. 90,517 107,514 278,728 278,344
--------- --------- --------- ---------
Total expenses.............. 2,517,127 2,315,169 7,236,383 6,923,634
--------- --------- --------- ---------
Net loss......................... $ (185,580) $ (49,696) $ (230,326) $ (294,997)
========= ========= ========= =========
Net loss allocated to
limited partners.............. $ (183,724) $ (49,199) $ (228,023) $ (292,047)
Net loss allocated to
General Partner............... (1,856) (497) (2,303) (2,950)
--------- --------- --------- ---------
Net loss......................... $ (185,580) $ (49,696) $ (230,326) $ (294,997)
========= ========= ========= =========
Net loss per limited
partnership unit.............. $ (2.12) $ (0.57) $ (2.64) $ (3.37)
========= ========= ========= =========
</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 REAL ESTATE FUND XIV, LTD.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Nine Months Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Total
Partners'
General Limited Equity
Partner Partners (Deficit)
------------ ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1993.............. $(1,365,025) $8,391,866 $7,026,841
Net loss.................................. (2,950) (292,047) (294,997)
Contingent Management Incentive
Distribution........................... (408,381) - (408,381)
--------- --------- ---------
Balance at September 30, 1994............. $(1,776,356) $8,099,819 $6,323,463
========== ========= =========
Balance at December 31, 1994.............. $(1,941,941) $8,094,114 $6,152,173
Net loss.................................. (2,303) (228,023) (230,326)
Contingent Management Incentive
Distribution........................... (454,147) - (454,147)
---------- --------- ---------
Balance at September 30, 1995............. $(2,398,391) $7,866,091 $5,467,700
========== ========= =========
</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 REAL ESTATE FUND XIV, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1995 1994
---------- -----------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants........................ $6,863,411 $ 6,640,226
Cash received from legal settlement............... 39,841 -
Cash paid to suppliers............................ (2,508,996) (2,175,673)
Cash paid to affiliates........................... (966,167) (358,238)
Interest received................................. 80,005 21,414
Interest paid..................................... (1,861,383) (1,891,068)
Deferred borrowing costs paid..................... (107,525) 5,435
Property taxes paid and escrowed.................. (355,935) (450,418)
---------- ----------
Net cash provided by operating activities............ 1,183,251 1,791,678
---------- ----------
Cash flows from investing activities:
Additions to real estate investments.............. (1,015,400) (738,600)
---------- ----------
Cash flows from financing activities:
Principal payments on mortgage notes
payable......................................... (397,430) (366,839)
Proceeds from refinancing of mortgage
note payable.................................... 1,115,767 -
---------- ----------
Net cash provided by (used in) financing
activities........................................ 718,337 (366,839)
---------- ----------
Net increase in cash and cash equivalents............ 886,188 686,239
Cash and cash equivalents at beginning of
period............................................ 1,045,158 331,350
---------- ----------
Cash and cash equivalents at end of period........... $ 1,931,346 $ 1,017,589
========== ==========
</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 REAL ESTATE FUND XIV, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Loss to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1995 1994
----------- ----------
<S> <C> <C>
Net loss............................................. $ (230,326) $(294,997)
--------- --------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization..................... 1,583,608 1,435,131
Amortization of deferred borrowing costs.......... 60,125 52,440
Amortization of discounts on mortgage
notes payable................................... 98,691 102,404
Changes in assets and liabilities:
Cash segregated for security deposits........... (22,009) (50,446)
Accounts receivable............................. 10,190 55,488
Prepaid expenses and other assets............... 16,152 18,382
Escrow deposits................................. (157,767) 11,750
Deferred borrowing costs........................ (107,525) 5,435
Accounts payable................................ 94,194 (36,301)
Accrued interest................................ (1,019) 2,608
Accrued property taxes.......................... 191,205 151,790
Other accrued expenses.......................... (9,152) 54,394
Payable to affiliates - General Partner......... (343,887) 252,714
Security deposits and deferred rental
revenue....................................... 771 30,886
--------- ---------
Total adjustments............................. 1,413,577 2,086,675
--------- ---------
Net cash provided by operating activities............ $1,183,251 $1,791,678
========= =========
</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 REAL ESTATE FUND XIV, LTD.
Notes to Financial Statements
(Unaudited)
September 30, 1995
NOTE 1.
- -------
McNeil Real Estate Fund XIV, Ltd. (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 affiliated with Robert A. McNeil. The
Partnership is governed by an agreement of limited partnership ("Amended
Partnership Agreement") that was adopted September 20, 1991. The principal place
of business for the Partnership and the General Partner is 13760 Noel Road,
Suite 700, LB70, Dallas, Texas 75240.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair presentation of the Partnership's financial position and
results of operations. All adjustments were of a normal recurring nature.
However, the results of operations for the nine months ended September 30, 1995
are not necessarily indicative of the results to be expected for the year ending
December 31, 1995.
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, 1994, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund XIV, Ltd., c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240.
NOTE 3.
- -------
Certain prior period amounts within the accompanying financial statements have
been reclassified to conform with current year presentation.
NOTE 4.
- -------
The Partnership pays property management fees equal to 5% of the gross rental
receipts of the Partnership's properties to McNeil Real Estate Management, Inc.
("McREMI"), an affiliate of the General Partner, for providing property
management services for the Partnership's residential and commercial properties
and leasing services for its residential properties. McREMI may also choose to
provide leasing services for the Partnership's commercial properties, in which
case McREMI will receive property management fees from such commercial
properties equal to 3% of the property's gross rental receipts plus leasing
commissions based on the prevailing market rate for such services where the
property is located.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
Under the terms of the Amended Partnership Agreement, the Partnership is paying
a Management Incentive Distribution ("MID") to the General Partner. The maximum
MID is calculated as 1% of the tangible asset value of the Partnership. Tangible
asset value is determined by using the greater of (i) an amount calculated by
applying a capitalization rate of 9% to the annualized net operating income of
each property or (ii) a value of $10,000 per apartment unit for residential
property and $50 per gross square foot for commercial property to arrive at the
property tangible asset value. The property tangible asset value is then added
to the book value of all other assets excluding intangible assets. Prior to July
1, 1993, the MID consisted of two components: (i) the fixed portion which was
payable without respect to the net income of the Partnership and was equal to
25% of the maximum MID (the "Fixed MID") and (ii) a contingent portion which is
payable only to the extent of the lesser of the Partnership's excess cash flow,
as defined, or net operating income (the "Entitlement Amount") and was equal to
up to 75% of the maximum MID (the "Contingent MID"). The maximum MID percentage
decreases subsequent to 1999.
The General Partner amended the Amended Partnership Agreement as a settlement to
a class action complaint. This amendment eliminated the Fixed MID and makes the
entire MID payable to the extent of the Entitlement Amount. In all other
respects, the calculation and payment of the MID will remain the same. This
modified MID became effective July 1, 1993.
Fixed MID was payable in limited partnership units ("Units") unless the
Entitlement Amount exceeded the amount necessary to pay the Contingent MID, in
which case, at the General Partner's option, the Fixed MID could have been paid
in cash to the extent of such excess.
Contingent MID will be paid to the extent of the Entitlement Amount, and may be
paid (i) in cash, unless there is insufficient cash to pay the distribution in
which event any unpaid portion not taken in Units will be deferred and is
payable, without interest, from the first available cash and/or (ii) in Units. A
maximum of 50% of the MID may be paid in Units. The number of Units issued in
payment of the MID is based on the greater of $50 per Unit or the net tangible
asset value, as defined, per Unit.
Any amount of the MID that is paid to the General Partner in Units will be
treated as if cash was distributed to the General Partner. The Fixed MID was
treated as a fee payable to the General Partner by the Partnership for services
rendered. The Contingent MID represents a return of equity to the General
Partner for increasing cash flow, as defined, and accordingly, is treated as a
distribution to the General Partner in compliance with the Amended Partnership
Agreement.
Compensation, reimbursements and distributions paid to or accrued for the
benefit of the General Partner and its affiliates are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1995 1994
-------- --------
<S> <C> <C>
Property management fees - affiliates................ $343,552 $332,609
Charged to general and administrative -
affiliates:
Partnership administration........................ 278,728 278,344
------- -------
$622,280 $610,953
======= =======
Charged to General Partner's deficit:
Contingent Management Incentive
Distribution.................................... $454,147 $408,381
======= =======
</TABLE>
NOTE 5.
- -------
On March 13, 1995, the Partnership refinanced the Windrock mortgage note. The
new mortgage note, in the amount of $3,450,000, bears interest at 9.44% per
annum, and requires monthly principal and interest payments of $28,859. The
maturity date of the new mortgage note is April 1, 2002. Cash proceeds from the
refinancing transaction are as follows:
<TABLE>
<CAPTION>
<S> <C>
New loan proceeds....................... $ 3,450,000
Existing first lien retired............. (1,894,233)
Existing second lien retired............ (440,000)
----------
Cash proceeds from refinancing.......... $ 1,115,767
==========
</TABLE>
The Partnership incurred $107,525 of deferred borrowing costs related to the
refinancing of the Windrock mortgage note. The Partnership was also required to
fund $184,172 into various escrows for capital improvements, property taxes and
insurance.
<PAGE>
NOTE 6.
- -------
The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark for damages relating to improper overcharges, breach of contract and
breach of fiduciary duty. The Partnership settled these claims in 1991, and such
settlement was approved by the Bankruptcy Court.
An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995, the Partnership received in full satisfaction of its claims, $30,118
in cash, and common and preferred stock in the reorganized Southmark. The cash
and stock represent the Partnership's pro-rata share of Southmark assets
available for Class 8 Claimants. The Partnership sold the Southmark common and
preferred stock in May, 1995, for $9,723 which, when combined with the cash
proceeds from Southmark, resulted in a gain on settlement of litigation of
$39,841.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The Partnership was formed to acquire, operate and ultimately dispose of a
portfolio of income-producing real properties. At September 30, 1995, the
Partnership owned four apartment properties and three shopping centers. All of
the Partnership's properties are subject to mortgage notes.
On March 13, 1995, the Partnership refinanced Windrock Apartments with a new
$3,450,000 mortgage note. Proceeds from the new mortgage were used to payoff the
prior first and second mortgage notes encumbering Windrock Apartments, to fund
various escrows for the payment of property taxes, insurance, repairs and
replacements, and to pay for loan fees and other costs associated with obtaining
the new mortgage note. Residual proceeds of approximately $824,000 were added to
the Partnership's cash reserves. The Partnership's next maturing mortgage note
does not come due until April 1, 2002.
RESULTS OF OPERATIONS
- ---------------------
For the first nine months of 1995, the Partnership incurred a loss of $230,326,
an improvement over the $294,997 loss for the first nine months of 1994. For the
third quarter of 1995, the Partnership recorded a net loss of $185,580 as
opposed to a loss of $49,696 in the year earlier quarter. As discussed below,
the net loss for the third quarter of 1995 was impacted be increased general and
administrative expenses. For year-to-date results, improving property operations
achieved higher rental revenues while limiting the increase in operating
expenses.
Revenues:
Rental revenue for the first nine months of 1995 increased $278,988 or 4.2% over
rental revenue earned during the first nine months of 1994. Rental revenue
increased at five of the Partnership's seven properties. Increased rental rates
and improving occupancy rates led to increases ranging from 20% at Redwood Plaza
to 2.8% at Country Hills Plaza. Redwood Plaza became fully leased during the
second quarter of 1995. New tenants in 1994 and 1995 have boosted base rental
rates, the occupancy rate, and expense recoveries at the Salt Lake City
property. Particularly noteworthy was the $126,000 or 7.6% increase in rental
revenue at Embarcadero Club Apartments. The Partnership has invested substantial
resources in capital improvements at Embarcadero Club Apartments that are
increasing rental revenue at the property. Rental revenue realized at Midvale
Plaza decreased 2.8%. Although occupancy remains high at the Utah property, 1995
rental rates decreased compared to 1994 rates. A decrease in average occupancy
was responsible for a 4.3% decrease in rental revenue achieved at Windrock
Apartments. Several new apartment communities have been completed in the
sub-market in which Windrock Apartments is located. The General Partner intends
to use some of the proceeds from the refinancing of the Windrock mortgage note
to make capital improvements at Windrock Apartments that will, hopefully, allow
the El Paso property to compete effectively against the newer apartment
communities.
Interest revenue increased four-fold to $80,005 during the first nine months of
1995. Steps taken during the course of 1994 to raise the Partnership's cash
reserves have resulted in increased funds invested in interest-bearing accounts.
During the second quarter, the Partnership received $39,841 in cash and
securities from Southmark Corporation in settlement of the Partnership's claims
in the Southmark bankruptcy case. Proceeds from the settlement were recorded as
a gain in the second quarter of 1995.
Expenses:
Partnership expenses increased $312,749 or 4.5% for the first nine months of
1995 compared to the same period of 1994. For the third quarter, expenses
increased $201,958 or 8.7% compared to the third quarter of 1994. Expenses
increased at five of the Partnership's seven properties. Expenses were unchanged
at Midvale Plaza, and decreased 2.7% at Thunder Hollow Apartments. The increased
expenses were concentrated in depreciation and amortization, and general and
administrative expenses.
Depreciation and amortization expense increased $148,477 or 10.3% in the first
nine months of 1995 compared to the first nine months of 1994. Increased
depreciation and amortization expense is due to the continuing investment of
Partnership resources into capital improvements. In the year since September 30,
1994, the Partnership has invested $1.4 million in capital improvements. These
capital improvements are generally being depreciated over lives ranging from
five to ten years.
General and administrative increased $126,846 and $128,540, respectively, for
the nine month and three month periods ended September 30, 1995 compared to the
same periods of 1994. The Partnership incurred approximately $122,000 of costs
relating to evaluation and dissemination of information with regards to an
unsolicited tender offer. See Item 5 - Other Information.
All other expense line items, both individually and as a group, increased less
than 5% in 1995 compared to 1994.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership's net loss for the first nine months was $230,326, an
improvement from the $294,997 loss reported for the first nine months of 1994.
Cash flow from operating activities decreased to $1,183,251 from $1,791,678 in
the first nine months of 1994. The principal cause of the decrease in cash flow
from operating activities was a $607,929 increase in cash paid to affiliates.
During 1994, the General Partner determined not to collect the Management
Incentive Distribution or the reimbursable administrative costs due to an
affiliate of the General Partner until such time as the Partnership's cash
position improved. Due to these measures, cash reserves increased to $1,045,158
at the end of 1994 from $331,350 at the beginning of 1994. With the additional
cash reserves provided by the March 1995 refinancing of the Windrock mortgage
note, the General Partner determined to resume payments of reimbursable costs.
As a result, the Partnership paid, in addition to reimbursable costs incurred
during 1995, $294,446 of reimbursable costs incurred by the Partnership during
the course of 1994. Payments of Management Incentive Distribution remain
suspended.
Another factor in the decrease in cash flow from operating activities in the
first half was the refinancing of the Windrock mortgage note. The Partnership
expended $107,525 in loan fees and related costs to obtain the new Windrock
mortgage note. Additionally, $184,172 of the increase in cash paid to suppliers
was the result of various escrows funded with loan proceeds for recurring
replacements and other repairs to Windrock Apartments. Net of the retired
mortgages, loan costs and funded escrows, the Windrock refinancing yielded
proceeds of $824,070 for the Partnership.
The balance of changes in cash flow from operating activities is attributable to
the generally improving performance of the Partnership's properties.
The Partnership continues to invest significant resources into capital
improvements at its properties. During the first nine months of 1995, capital
improvement expenditures increased to $1,014,400 from $738,600 during the first
nine months of 1994. The Partnership has budgeted an additional $185,000 of
capital improvements for the balance of 1995.
<PAGE>
Short Term Liquidity:
Due to the General Partner's decision to postpone collection of the Management
Incentive Distribution and proceeds received from the refinancing of the
Windrock mortgage note, the Partnership currently enjoys a substantially better
cash position that it did in 1994. The Partnership's cash reserves will be
needed in light of the aging condition of the Partnership's properties. The
Partnership will continue to invest in capital improvements for its properties.
The General Partner believes that capital improvements are necessary to allow
the Partnership to increase its rental revenues in the competitive markets in
which the Partnership's properties operate. These expenditures also allow the
Partnership to reduce certain repair and maintenance expenses from amounts that
would otherwise be incurred.
At September 30, 1995, the Partnership held $1,931,346 of cash and cash
equivalents, up $886,188 from the balance at the end of 1994. The General
Partner considers this level of cash reserves to be adequate to meet the
Partnership's operating needs for the balance of 1995. The General Partner
anticipates that cash generated from operations for the remainder of 1995 will
be sufficient to fund the Partnership's budgeted capital improvements and debt
service requirements. However, 1995 cash flow from operations likely will not be
adequate to pay the Management Incentive Distribution due to the General
Partner. For now, the General Partner is electing to defer collection of the
Management Incentive Distribution.
Long Term Liquidity:
For the long term, property operations will remain the primary source of funds.
In this regard, the General Partner expects that the capital improvements made
by the Partnership during the past two years will yield improved cash flow from
property operations for the balance of 1995. Furthermore, the General Partner
had budgeted an additional $185,000 of capital improvements for 1995. If the
Partnership's cash position deteriorates, the General Partner may elect to defer
certain of the capital improvements, except where such improvements are expected
to increase the competitiveness or marketability of the Partnership's
properties.
The General Partner has established a revolving credit facility, not to exceed
$5,000,000 in the aggregate, which will be available on a "first-come,
first-served" basis to the Partnership and other affiliated partnerships if
certain conditions are met. Borrowings under the facility may be used to fund
deferred maintenance, refinancing obligations and working capital needs. There
is no assurance that the Partnership will receive additional funds from the
facility because no amount will be reserved for any particular partnership. As
of September 30, 1995, $2,362,004 remained available from the facility; however,
additional funds could become available as other partnerships repay borrowings.
As an additional source of liquidity, the General Partner may, from time to
time, attempt to sell Partnership properties judged to be mature considering the
circumstances of the market in which the properties are located, as well as the
Partnership's need for liquidity. However, there can be no guarantee that the
Partnership will be able to sell any of its properties for an amount sufficient
to retire the related mortgage note and still provide cash proceeds to the
Partnership, or that such proceeds could be timed to coincide with the liquidity
needs of the Partnership. Currently, no Partnership properties are being
marketed for sale.
Distributions:
With the exception of the Contingent MID, distributions to Partners have been
suspended since 1986 as a part of the General Partner's policy of maintaining
adequate cash reserves. Distributions to Unit holders will remain suspended for
the foreseeable future. Although the Partnership recorded a Contingent MID of
$454,147 for the first nine months of 1995, payments of Contingent MID have been
suspended since the beginning of 1994. The General Partner will continue to
monitor the cash reserves and working capital requirements of the Partnership to
determine when cash flows will support resumption of Contingent MID payments and
distributions to Unit holders.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
1) HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young, BDO Seidman et
al (Case #92-06560-A). This suit was filed on behalf of the Partnership and
other affiliated partnerships (the "Affiliated Partnerships") on May 26,
1992, in the 14th Judicial District Court of Dallas County. The petition
sought recovery against the Partnership's former auditors, BDO Seidman, for
negligence and fraud in failing to detect and/or report overcharges of
fees/expenses by Southmark, the former general partner. The former auditors
asserted counterclaims against the Affiliated Partnerships based on alleged
fraudulent misrepresentations made to the auditors by the former management
of the Affiliated Partnerships (Southmark) in the form of client
representation letters executed and delivered to the auditors by Southmark
management. The counterclaims sought recovery of attorneys' fees and costs
incurred in defending this action. The original petition also alleged
causes of action against certain former officers and directors of the
Partnership's original general partner for breach of fiduciary duty, fraud
and conspiracy relating to the improper assessment and payment of certain
administrative fees/expenses. On January 11, 1994 the allegations against
the former officers and directors were dismissed.
The trial court granted summary judgment in favor of Ernst & Young and BDO
Seidman on the fraud and negligence claims based on the statute of
limitations. The Affiliated Partnerships appealed the summary judgment to
the Dallas Court of Appeals. In August 1995, the Appeals Court upheld all
of the summary judgments in favor of BDO Seidman. In exchange for the
plaintiff's agreement not to file any motions for rehearing or further
appeals, BDO Seidman agreed that it will not pursue the counterclaims
against the Partnership.
2) High River Limited Partnership vs. McNeil Partners, L.P., McNeil Investors,
Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil
Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and
Carole J. McNeil (L95012) - High River ("HR") filed this action in the
United States District Court for the Southern District of New York against
McNeil Partners, McNeil Investors and Mr. and Mrs. McNeil requesting, among
other things, names and addresses of the Partnership's limited partners.
The District Court issued a preliminary injunction against the Partnerships
requiring them to commence mailing materials relating to High River tender
offer materials on August 14, 1995.
On August 18, 1995, McNeil Partners, McNeil Investors, the Partnerships,
and Mr. and Mrs. McNeil filed an Answer and Counterclaim. The Counterclaim
principally asserts (1) the HR tender offers have been undertaken in
violation of the federal securities laws, on the basis of material,
non-public, and confidential information, and (2) that the HR offer
documents omit and/or misrepresent certain material information about the
HR tender offers. The counterclaim seeks a preliminary and permanent
injunction against the continuation of the HR tender offers and,
alternatively, ordering corrective disclosure with respect to allegedly
false and misleading statements contained in the tender offer documents.
The High River tender offer expired on October 6, 1995. The Defendants
believe that the action is moot and expect the matter to be dismissed
shortly.
3) Robert Lewis vs. McNeil Partners, L.P., McNeil Investors, Inc., Robert
A. McNeil et al - In the District Court of Dallas County, Texas, A-14th
Judicial District, Cause No. 95-08535 (Class Action)
Plaintiff, Robert Lewis, is a limited partner with McNeil Pacific Investors
Fund 1972, McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV,
Ltd. Plaintiff brings this action on his own behalf and as a class action
on behalf of the class of all limited partners of McNeil Pacific Investors
Fund 1972, McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX,
Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd.,
McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil
Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P. and McNeil
Real Estate Fund XXV, Ltd. (the "Partnerships") as of August 4, 1995.
Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc.,
Robert A. McNeil and other senior officers (collectively, the "Defendants")
breached their fiduciary duties by, among other things, (1) failing to
attempt to sell the properties owned by the Partnerships ("Properties") and
extending the lives of the Partnerships indefinitely, contrary to the
Partnerships' business plans, (2) paying distributions to themselves and
generating fees for their affiliates, (3) refusing to make significant
distributions to the class members, despite the fact that the Partnerships
have positive cash flows and substantial cash balances, and (4) failing to
take steps to create an auction market for Partnership equity interests,
despite the fact that a third party bidder filed tender offers for
approximately forty-five percent (45%) of the outstanding units of each of
the Partnerships. Plaintiff also claims that Defendants have breached the
Partnership Agreements by failing to take steps to liquidate the Properties
and by their alteration of the Partnerships' primary purposes, their acts
in contravention of these agreements, and their use of the Partnership
assets for their own benefit instead of for the benefit of the
Partnerships.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
4) James F. Schofield, Gerald C. Gillett and Donna S. Gillett vs. McNeil
Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management,
Inc., Robert A. McNeil, Carole J. McNeil, McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil
Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, 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) and United States District Court,
Southern District of New York, Case No. 95CIV.6711 (Class and Derivative
Action Complaint)
These are corporate/securities class and derivative actions brought in
state and federal court by limited partners of each of the nine (9) limited
partnerships that are named as Nominal Defendants as listed above
("Partnerships"). Plaintiffs allege that Defendants McNeil Investors, Inc.,
its affiliate McNeil Real Estate Management, Inc. and four (4) of their
senior officers and/or directors have breached their fiduciary duties.
Specifically, Plaintiffs allege that Defendants have caused the
Partnerships to enter into several wasteful transactions that have no
business purpose or benefit to the Partnerships and which have rendered
such units highly illiquid and artificially depressed the prices that are
available for units on the limited resale market. Plaintiffs also allege
that Defendants have engaged in a course of conduct to prevent the
acquisition of units by Carl Icahn by disseminating false, misleading and
inadequate information. Plaintiffs further allege that Defendants have
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 and, thereby, have
breached the Partnership Agreements.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend these actions.
5) Alfred Napoletano vs. McNeil Partners, L.P., McNeil Investors, Inc.,
Robert A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972,
Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd.,
McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil
Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real
Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real
Estate Fund XXV, L.P. - Superior Court of the State of California, County
of Los Angeles, Case No. BC133849 (class action complaint)
Plaintiff brings this class action on behalf of a class of all persons and
entities who are current owners of units and/or are limited partners in one
or more of the partnerships referenced above ("Partnerships"). Plaintiff
alleges that Defendants have breached their fiduciary duties to the class
members by, among other things, (1) taking steps to prevent the
consummation of the High River tender offers, (2) failing to take steps to
maximize unitholders' or limited partners' values, including failure to
liquidate the properties owned by the Partnerships, (3) managing the
Partnerships so as to extend indefinitely the present fee arrangements, and
(4) paying itself and entities owned and controlled by the general partner
excessive fees and reimbursements of general and administrative expenses.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
6) Warren Heller vs. McNeil Partners, L.P., McNeil Investors, Inc., Robert A.
McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil
Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real
Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate
Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund
XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund
XXV, L.P. - Superior Court of the State of California, County of Los
Angeles, Case No. BC133957 (class action complaint)
Plaintiff brings this class action on behalf of a class of all persons and
entities who are current owners of units and/or are limited partners in one
or more of the partnerships referenced above ("Partnerships"). Plaintiff
alleges that Defendants have breached their fiduciary duties to the class
members by, among other things, (1) taking steps to prevent the
consummation of the High River tender offers, (2) failing to take steps to
maximize unitholders' or limited partners' values, including failure to
liquidate the properties owned by the Partnerships, (3) managing the
Partnerships so as to extend indefinitely the present fee arrangements, and
(4) paying itself and entities owned and controlled by the general partner
excessive fees and reimbursements of general and administrative expenses.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
7) High River Limited Partnership v. McNeil Partners L.P., McNeil Investors,
Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V,
Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd.,
McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil
Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil
and Carole J. McNeil - United States District Court for the Southern
District of New York, (Case No. 95 Civ. 9488) (Second Action).
On November 7, 1995, High River commenced a second complaint which alleges,
inter alia, that McNeil's Schedule 14D-9 filed in connection with the High
River tender offers was materially false and misleading, in violation of
Sections 14(d) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C.
Section 78n(d) and (e), and the SEC Regulations promulgated thereunder; and
that High River further alleges that McNeil has wrongfully refused to admit
High River as a limited partner to the Funds. Additionally, High River
purports to assert claims derivatively on behalf of Funds IX, XI, XV, XXIV
and XXV, for breach of contract and breach of fiduciary duty, asserting
that McNeil has charged these Partnerships excessive fees. High River's
complaint seeks, inter alia, preliminary injunctive relief requiring McNeil
to admit High River as a limited partner in each of the ten Partnerships
and to transfer the tendered units of interest in the Partnerships to High
River; an unspecified award of damages payable to High River and an
additional unspecified award of damages payable to certain of the
Partnerships; an order that defendants must discharge their fiduciary
duties and must account for all fees they have received from certain of the
Partnerships; and attorneys' fees.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
<PAGE>
ITEM 5. OTHER INFORMATION
- ------- -----------------
As previously disclosed, on an unsolicited basis, High River Limited Partnership
("High River"), a partnership controlled by Carl Icahn, announced that it had
commenced an offer to purchase 38,940 units of limited partnership interest in
the Partnership (approximately 45% of the Partnership's units) at $95 per unit.
The tender offer was originally due to expire on August 31, 1995. In connection
therewith, the parties entered into certain negotiations and discussions
regarding, among other things, possible transactions between the parties and
their affiliates, McNeil Partners, McNeil Investors, and McREMI. On September
19, 1995, the parties having not reached any resolution on the terms of the
proposed transactions, McNeil Partners terminated the parties' discussion. High
River had extended its offer several times until the final expiration date of
October 6, 1995. On October 11, 1995 High River announced that based on
preliminary information furnished by the depository for the tender offer,
approximately 9,428 units of the Partnership were tendered and not withdrawn
prior to the expiration of the tender offer. On October 12, 1995, McNeil
Partners announced that it would continue to explore potential avenues to
enhance the value of the Partnership units, which may include, among other
things, asset sales, refinancings of Partnership properties followed by
distributions or tender offers for units of limited partnership. There can be no
assurance that any such plans will develop or that any such transactions will be
consummated.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
4. Amended and Restated Limited Partnership
Agreement dated September 20, 1991. (1)
11. Statement regarding computation of net loss per
limited partnership unit: net loss per limited
partnership unit is computed by dividing net
loss allocated to the limited partners by the
number of limited partnership units
outstanding. Per unit information has been
computed based on 86,534 limited partnership
units outstanding in 1995 and 1994.
27. Financial Data Schedule for the quarter ended
September 30, 1995.
</TABLE>
(1) Incorporated by reference to the Annual Report of Registrant, on
Form 10-K for the period ended December 31, 1991, as filed on March
30, 1992.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended September 30, 1995.
<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.
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:
<TABLE>
<CAPTION>
McNEIL REAL ESTATE FUND XIV, Ltd.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
<S> <C>
November 14, 1995 By: /s/ Donald K. Reed
- ------------------- -------------------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
November 14, 1995 By: /s/ Robert C. Irvine
- ------------------ -------------------------------------------------
Date Robert C. Irvine
Chief Financial Officer of McNeil Investors, Inc.
Principal Financial Officer
November 14, 1995 By: /s/ Brandon K. Flaming
- ------------------ -------------------------------------------------
Date Brandon K. Flaming
Chief Accounting Officer of McNeil Real Estate
Management, Inc.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,931,346
<SECURITIES> 0
<RECEIVABLES> 384,095
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 52,086,122
<DEPRECIATION> (21,258,248)
<TOTAL-ASSETS> 35,733,680
<CURRENT-LIABILITIES> 0
<BONDS> 27,978,584
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,733,680
<SALES> 6,886,211
<TOTAL-REVENUES> 7,006,057
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,217,203
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,019,180
<INCOME-PRETAX> (230,326)
<INCOME-TAX> 0
<INCOME-CONTINUING> (230,326)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (230,326)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
