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, 1997
-----------------------------------------------------
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 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>
McNEIL REAL ESTATE FUND XIV, LTD.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---------------- ----------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 4,663,828 $ 4,663,828
Buildings and improvements............................... 36,324,866 35,944,879
-------------- --------------
40,988,694 40,608,707
Less: Accumulated depreciation.......................... (20,359,661) (18,951,741)
-------------- --------------
20,629,033 21,656,966
Assets held for sale, net................................... 1,931,823 7,942,855
Cash and cash equivalents................................... 3,298,659 1,903,902
Cash segregated for security deposits....................... 403,329 399,366
Accounts receivable......................................... 248,667 385,721
Prepaid expenses and other assets........................... 145,421 173,908
Escrow deposits............................................. 653,332 681,430
Deferred borrowing costs, net of accumulated
amortization of $417,998 and $346,255 at
September 30, 1997, and December 31, 1996,
respectively............................................. 972,994 1,044,737
-------------- --------------
$ 28,283,258 $ 34,188,885
============== ==============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable, net................................. $ 23,992,176 $ 27,423,689
Accounts payable............................................ 69,223 103,747
Accrued interest............................................ 165,550 197,124
Accrued property taxes...................................... 124,853 100,981
Other accrued expenses...................................... 66,970 82,329
Payable to affiliates - General Partner..................... 26,791 1,388,371
Security deposits and deferred rental revenue............... 398,454 411,318
-------------- --------------
24,844,017 29,707,559
-------------- --------------
Partners' equity (deficit):
Limited partners - 100,000 limited partnership
units authorized; 86,534 limited partnership
units outstanding...................................... 3,982,385 7,648,141
General Partner.......................................... (543,144) (3,166,815)
-------------- --------------
3,439,241 4,481,326
-------------- --------------
$ 28,283,258 $ 34,188,885
============== ==============
</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,
--------------------------------- ---------------------------------
1997 1996 1997 1996
-------------- --------------- -------------- --------------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue................ $ 2,235,232 $ 2,394,794 $ 6,898,514 $ 7,015,762
Interest...................... 65,661 26,676 167,760 83,826
Gain on sale of real estate... 873,396 - 3,081,755 -
------------- ------------- ------------- -------------
Total revenue............... 3,174,289 2,421,470 10,148,029 77,099,588
------------- ------------- ------------- --------------
Expenses:
Interest...................... 593,552 668,854 1,857,424 2,016,545
Depreciation and
amortization................ 470,606 578,013 1,407,920 1,724,329
Property taxes................ 154,836 203,574 511,065 589,515
Personnel expenses............ 248,530 243,055 744,303 716,281
Utilities..................... 121,549 130,435 366,973 376,826
Repair and maintenance........ 295,169 226,062 854,200 871,051
Property management
fees - affiliates........... 114,687 116,222 345,280 343,407
Other property operating
expenses.................... 131,856 112,884 401,079 384,713
General and administrative.... 24,907 47,079 77,051 87,161
General and administrative -
affiliates.................. 58,512 63,269 181,240 225,032
------------- ------------- ------------- -------------
Total expenses.............. 2,214,204 2,389,447 6,746,535 7,334,860
------------- ------------- ------------- -------------
Net income (loss)................ $ 960,085 $ 32,023 $ 3,401,494 $ (235,272)
============= ============= ============= =============
Net income (loss) allocated to
limited partners.............. $ 334,246 $ 31,703 $ 334,246 $ (232,919)
Net income (loss) allocated to
General Partner............... 625,839 320 3,067,248 (2,353)
------------- ------------- ------------- -------------
Net income (loss)................ $ 960,085 $ 32,023 $ 3,401,494 $ (235,272)
============= ============= ============= =============
Net income (loss) per limited
partnership unit.............. $ 3.86 $ .37 $ 3.86 $ (2.69)
============= ============= ============= =============
Distributions per limited
partnership unit.............. $ 46.22 $ - $ 46.22 $ -
============= ============= ============= =============
</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, 1997 and 1996
<TABLE>
<CAPTION>
Total
Partners'
General Limited Equity
Partner Partners (Deficit)
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1995.............. $ (2,546,836) $ 7,766,250 $ 5,219,414
Net loss.................................. (2,353) (232,919) (235,272)
Management Incentive Distribution......... (452,443) - (452,443)
------------- ------------- -------------
Balance at September 30, 1996............. $ (3,001,632) $ 7,533,331 $ 4,531,699
============= ============= =============
Balance at December 31, 1996.............. $ (3,166,815) $ 7,648,141 $ 4,481,326
Net income................................ 3,067,248 334,246 3,401,494
Management Incentive Distribution......... (443,577) - (443,577)
Distributions to limited partners......... - (4,000,002) (4,000,002)
------------- ------------- -------------
Balance at September 30, 1997............. $ (543,144) $ 3,982,385 $ 3,439,241
============= ============= =============
</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,
------------------------------------
1997 1996
---------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants............................... $ 6,900,605 $ 6,899,382
Cash paid to suppliers................................... (2,457,038) (2,352,159)
Cash paid to affiliates.................................. (556,800) (576,605)
Interest received........................................ 167,760 83,826
Interest paid............................................ (1,738,869) (1,842,529)
Property taxes paid and escrowed......................... (475,286) (405,409)
-------------- --------------
Net cash provided by operating activities................... 1,840,372 1,806,506
-------------- --------------
Cash flows from investing activities:
Additions to real estate investments..................... (390,094) (488,322)
Proceeds from sale of real estate........................ 9,868,594 -
-------------- --------------
Net cash provided by (used in) investing activities......... 9,478,500 (488,322)
-------------- --------------
Cash flows from financing activities:
Principal payments on mortgage notes
payable................................................ (426,868) (436,854)
Retirement of mortgage notes payable..................... (3,722,368) -
Management incentive distribution paid................... (1,774,877) (500,000)
Distributions to limited partners........................ (4,000,002) -
-------------- --------------
Net cash used in financing activities....................... (9,924,115) (936,854)
-------------- --------------
Net increase in cash and cash equivalents................... 1,394,757 381,330
Cash and cash equivalents at beginning of
period................................................... 1,903,902 1,417,948
-------------- --------------
Cash and cash equivalents at end of period.................. $ 3,298,659 $ 1,799,278
============== ==============
</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 Income (Loss) to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------------
1997 1996
--------------- ----------------
<S> <C> <C>
Net income (loss)........................................... $ 3,401,494 $ (235,272)
-------------- --------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................ 1,407,920 1,724,329
Amortization of deferred borrowing costs................. 71,743 71,743
Amortization of discounts on mortgage
notes payable.......................................... 78,386 105,391
Gain on sale of real estate.............................. (3,081,755) -
Changes in assets and liabilities:
Cash segregated for security deposits.................. (3,963) (39,092)
Accounts receivable.................................... 25,029 (96,716)
Prepaid expenses and other assets...................... 14,149 17,918
Escrow deposits........................................ 28,098 89,508
Accounts payable....................................... (34,524) (84,280)
Accrued interest....................................... (31,574) (3,118)
Accrued property taxes................................. 23,872 247,556
Other accrued expenses................................. (15,359) (2,161)
Payable to affiliates - General Partner................ (30,280) (8,166)
Security deposits and deferred rental
revenue.............................................. (12,864) 18,866
-------------- --------------
Total adjustments.................................... (1,561,122) 2,041,778
-------------- --------------
Net cash provided by operating activities................... $ 1,840,372 $ 1,806,506
============== ==============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.
Notes to Financial Statements
(Unaudited)
September 30, 1997
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, an affiliate of 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 600, LB70, Dallas, Texas 75240.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair presentation of the Partnership's financial position and
results of operations. All adjustments were of a normal recurring nature.
However, the results of operations for the nine months ended September 30, 1997
are not necessarily indicative of the results to be expected for the year ending
December 31, 1997.
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, 1996, 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 The Herman Group, 2121 San Jacinto
St., 26th Floor, Dallas, Texas 75201.
NOTE 3.
- -------
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.
<PAGE>
Under 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. The
maximum MID percentage decreases subsequent to 1999. 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 items.
MID will be paid to the extent of the lesser of the Partnership's excess cash
flow, as defined, or net operating income, as defined (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 is distributed to the General Partner and is then contributed
to the Partnership by the General Partner. The MID represents a return of equity
to the General Partner for increasing cash flow, as defined, and accordingly is
treated as a distribution.
Compensation, reimbursements and distributions paid to or accrued for the
benefit of the General Partner and its affiliates are as follows:
Nine Months Ended
September 30,
----------------------
1997 1996
--------- ---------
Property management fees - affiliates................ $ 345,280 $ 343,407
Charged to general and administrative - affiliates:
Partnership administration......................... 181,240 225,032
-------- --------
$ 164,520 $ 568,439
======== ========
Charged to General Partner's deficit:
Management Incentive Distribution.................. $ 443,577 $ 452,443
======== ========
<PAGE>
NOTE 4.
- -------
On October 1, 1996, the Partnership placed Country Hills Plaza, Midvale Plaza
and Redwood Plaza on the market for sale. Country Hills Plaza was sold to an
unaffiliated purchaser on April 8, 1997. Midvale Plaza was sold to an
unaffiliated purchaser on September 24, 1997. These three properties are shown
as assets held for sale on the accompanying financial statements. In accordance
with the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," the Partnership ceased
recording depreciation charges on these three properties effective October 1,
1996.
NOTE 5.
- -------
On April 8, 1997, the Partnership sold Country Hills Plaza to an unaffiliated
purchaser for a cash sales price of $6,610,000. Cash proceeds from the sale, as
well as the gain on sale are detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
--------------- ----------------
<S> <C> <C>
Cash sales price....................................... $ 6,610,000 $ 6,610,000
Selling costs.......................................... (185,306) (185,306)
Mortgage discount written off.......................... (397,559)
Straight-line rent receivables written off............. (26,828)
Basis of real estate sold.............................. (3,791,948)
-------------- --------------
Gain on sale of real estate............................ $ 2,208,359
==============
Proceeds from sale of real estate...................... 6,424,694
Retirement of mortgage note payable.................... (2,231,438)
--------------
Net cash proceeds...................................... $ 4,193,256
==============
</TABLE>
<PAGE>
On September 24, 1997, the Partnership sold Midvale Plaza to an unaffiliated
purchaser for a cash sales price of $3,500,000. Cash proceeds from the sale, as
well as the gain on sale are detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
---------------- ----------------
<S> <C> <C>
Cash sales price....................................... $ 3,500,000 $ 3,500,000
Selling costs.......................................... (56,100) (56,100)
Mortgage discount written off.......................... (241,778)
Straight-line rent receivables written off............. (85,197)
Prepaid leasing commissions written off................ (14,338)
Basis of real estate sold.............................. (2,229,191)
-------------- --------------
Gain on sale of real estate............................ $ 873,396
==============
Proceeds from sale of real estate...................... 3,443,900
Retirement of mortgage note payable.................... (1,490,930)
--------------
Net cash proceeds...................................... $ 1,952,970
==============
</TABLE>
NOTE 6.
- -------
In accordance with the Amended Partnership Agreement, proceeds from sales are to
be distributed in proportionately larger shares to "Group A" and "Group B"
unitholders. Group A unitholders purchased the first $10 million of units during
the Partnership's offering period. Group B unitholders purchased the second $10
million of units. Limited partners who purchased the remaining units are Group C
unitholders. Subsequent transfers and resale of units did not change the group
designation to which such units belonged. Distribution of sales proceeds to
Group A units receive a premium of 5.556% over sales proceeds distributed to
Group B units, while distributions to Group C units receive a discount of 5.556%
to sales proceeds distributed to Group B units.
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, 1997, the
Partnership owned four apartment properties and one shopping center. All of the
Partnership's properties are subject to mortgage notes.
On October 1, 1996, the Partnership placed its three commercial properties,
County Hills Plaza, Midvale Plaza and Redwood Plaza, on the market for sale.
Consequently, the Partnership's investment in these three properties is shown as
assets held for sale on the accompanying financial statements.
<PAGE>
On April 8, 1997, the Partnership sold Country Hills Plaza for $6,610,000 to an
unaffiliated buyer. On September 24, 1997, the Partnership sold Midvale Plaza
for $3,500,000 to an unaffiliated buyer. Proceeds from the sale of Country Hills
Plaza and Midvale Plaza were used first to repay the mortgage notes encumbering
the properties. The remaining proceeds from sale were used to pay a $4,000,000
distribution to the limited partners in September 1996, and will be used to pay
an additional $2,146,226 distribution to the limited partners during the fourth
quarter of 1997.
RESULTS OF OPERATIONS
- ---------------------
The Partnership earned $3,401,494 for the first nine months of 1997, an increase
over the $235,272 loss incurred by the Partnership for the first nine months of
1996. For the third quarter, net income increased to $960,085 in 1997 from
$32,023 in 1996. Included in the 1997 net income figures are the $2,208,359 gain
on the sale of Country Hills Plaza and the $873,396 gain on the sale of Midvale
Plaza. After excluding the gains and the effects of rental revenues and expenses
related to Country Hills Plaza, the Partnership's net income increased to
$254,603 for the first nine months of 1997, up from a loss of $370,478 for the
first nine months of 1996.
Revenues:
Rental revenue for the first nine months of 1997 decreased $117,248 or 1.7% over
rental revenue earned for the first nine months of 1996. Excluding rental
revenue from Country Hills Plaza, rental revenue increased $333,083 or 5.3% for
the first nine months of 1997 compared to the same period of 1996.
Rental revenue increased at all of the Partnership's properties except for
Midvale Plaza. The largest increase in percentage terms was provided by Windrock
Apartments. After struggling with depressed occupancy rates for three years,
Windrock's occupancy rate improved to 96% at September 30, 1997, up from 75% at
the end of 1995. Windrock's rental revenue increased 14.7% for the first nine
months of 1997 compared to the same period of 1996. Increased rental rates
provided rental revenue increases ranging from 4% to 6% at Embarcadero Club
Apartments, Thunder Hollow Apartments and Redwood Plaza. Rental revenues
increased approximately 1.1% at both Tanglewood Village Apartments and decreased
4.4% at Midvale Plaza. An increase in base rental rates at Tanglewood Village
was mostly offset by decreased occupancy, while a decrease in base rental rates
caused the decrease in Midvale Plaza's revenues.
The sale of Country Hills Plaza on April 8, 1997 provided a one-time gain on
sale of real estate totaling $2,208,359. An additional gain of $873,396 was
realized with the September 24, 1997 sale of Midvale Plaza.
Expenses:
Partnership expenses decreased $588,325 or 8.0% and $175,243 or 7.3% for the
nine month and three month periods ended September 30, 1997 as compared to the
same periods of 1996. Expenses decreased primarily because of the sale of
Country Hills Plaza on April 8, 1997. After excluding expenses related to
Country Hills Plaza, the Partnership's expenses decreased $207,966 or 3.1% for
the first nine months of 1997 compared to the same period of 1996. Excluding
expenses related to Country Hills Plaza, decreased expenses were recorded
primarily in depreciation and amortization, general and administrative expenses,
and general and administrative expenses paid to affiliates.
<PAGE>
Depreciation and amortization expense decreased 9.5% for the first nine months
of 1997 as compared to the same period of 1996. The Partnership ceased
depreciating its investment in its three commercial properties, Country Hills
Plaza, Midvale Plaza and Redwood Plaza, effective October 1, 1996, the date the
Partnership placed these properties on the market for sale. Properties being
marketed for sale are classified as "assets held for sale." Accounting
regulations specify that depreciation on assets held for sale should cease
effective the date the properties are placed on the market for sale.
General and administrative expenses decreased 11.6% for the first nine months of
1997 as compared to the same period of 1996. In 1996, the Partnership incurred
costs to evaluate and disseminate information regarding an unsolicited tender
offer. The decrease was partially offset by charges for investor services, which
beginning in 1997, are provided by a third party vendor instead of by affiliates
of the General Partner. The switch of investor service expenses from affiliates
to a third party vendor also accounts for most of the 19.5% decrease in general
and administrative expenses paid to affiliates. Also contributing to the
decrease in general and administrative expenses paid to affiliates was a
decrease in partnership administrative reimbursements due to the sale of Country
Hills Apartments in April 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flow from operations increased $33,866 or 1.9% for the first nine months of
1997 as compared to the same period of 1996. Cash flow from operating expenses
managed a small increase despite the sale of one of the Partnership's properties
early in the year. Performance of the Partnership's properties continues to
improve. Windrock Apartments, which had not been contributing to the improved
Partnership performance, appears to have turned around, and is now generating
increasing amounts of cash flow. Cash flow from Partnership operations for the
first nine months of 1997 was more than adequate to fund selected capital
improvements and to repay the scheduled principal payments on the Partnership's
mortgage debt. Furthermore, the General Partner anticipates that operations for
the balance of 1997 will continue to provide more than enough cash flow to fund
needed capital improvements and debt service payments.
The sale of Country Hills Plaza and Midvale Plaza provided $6,146,226 for the
Partnership, after repayment of the related mortgage notes. The General Partner
distributed $4,000,000 of sales proceeds to the limited partners in September
1997, and is planning to distribute the remaining $2,146,226 of sales proceeds
to the limited partners before the end of the year.
The improving cash position of the Partnership allowed the General Partner to
continue payment of the Management Incentive Distribution ("MID"). The
Partnership paid $1,774,877 of MID during the first nine months of 1997 in
addition to the $500,000 payment made during the third quarter of 1996. MID
payments had been suspended since the beginning of 1994 to increase the
Partnership's cash reserves. All arrearages of MID have now been paid.
<PAGE>
Short-term liquidity:
At September 30, 1997, the Partnership held $3,298,659 of cash and cash
equivalents, up $1,394,757 from the balance at the end of 1996. The Partnership
distributed $4,000,000 to the limited partners during the third quarter of 1997.
An additional distribution of $2,146,226 is planned for the fourth quarter of
1997. The excess of cash remaining after the planned fourth quarter distribution
is an adequate level of cash reserves for the Partnership. Furthermore, the
General Partner anticipates that cash generated from operations for the
remainder of 1997 will be sufficient to fund the Partnership's budgeted capital
improvements and debt service requirements.
In addition to the sale of Country Hills Plaza and Midvale Plaza, the
Partnership has placed Redwood Plaza on the market for sale. Proceeds from the
sale of Redwood Plaza will be used to retire the Redwood Plaza mortgage note,
and, if surplus proceeds remain, provide distributions to the limited partners.
Although the General Partner anticipates being able to successfully sell Redwood
Plaza, there can be no assurance that any sale of Partnership properties will
provide sufficient cash for additional distributions to the limited partners.
Long-term liquidity:
While the present outlook for the Partnership's liquidity is favorable, market
conditions may change and property operations can deteriorate. In that event,
the Partnership would require other sources of working capital. No such other
sources have been identified, and the Partnership has no established lines of
credit. Other possible actions to resolve working capital deficiencies include
refinancing or renegotiating terms of existing loans, deferring major capital
expenditures on Partnership properties except where improvements are expected to
enhance the competitiveness or marketability of the properties, or arranging
working capital support from affiliates. No affiliate support has been required
in the past, and there is no assurance that support from affiliates would be
provided in the future, since neither the General Partner nor any affiliates
have any obligation in this regard.
The Partnership has determined to begin an orderly liquidation of all the
Partnership's assets. Although there can be no assurance as to the timing of any
liquidation, it is anticipated that such liquidation would result in
distributions to the limited partners of the cash proceeds from the sale of the
Partnership's properties, subject to cash reserve requirements, as they are sold
with the last property disposition before December 2001, followed by a
dissolution of the Partnership. In this regard, the Partnership sold Country
Hills Plaza on April 8, 1997, and sold Midvale Plaza on September 24, 1997. One
of the partnership's five remaining properties is currently on the market for
sale.
None of the Partnership's remaining mortgage notes mature before the expected
dissolution of the Partnership.
Income Allocations and Distributions:
Terms of the Amended Partnership Agreement specify that net losses for financial
reporting purposes are allocated 99% to the limited partners and 1% to the
General Partner. Net income for financial reporting purposes is allocated to the
General Partner in an amount equal to the greater of (a) 1% of net income or (b)
the cumulative amount of the MID paid for which no income allocation has
previously been made; any remaining net income is allocated to the limited
<PAGE>
partners. Therefore, for the nine month periods ended September 30, 1997 and
1996, net income of $3,067,248 and net loss of $2,353, respectively, were
allocated to the General Partner. For the nine month period ended September 30,
1997, net income of $334,246 was allocated to the limited partners, while
$232,919 of net loss was allocated to the limited partners for the nine months
ended September 30, 1996.
Distributions to Unit holders had been suspended since 1986 as a part of the
General Partner's policy of maintaining adequate cash reserves. However, with
the sale of Country Hills Plaza and Midvale Plaza, the General Partner
determined that the Partnership's liquidity was sufficient to justify
distribution of the net proceeds from the sale of Country Hills Plaza and
Midvale Plaza to the limited partners. Consequently, the Partnership distributed
$4,000,000 to the limited partners in September 1997, and plans to distribute an
additional $2,146,226 to the limited partners before the end of the year.
Further distributions to the limited partners will follow if the Partnership is
successful in selling its remaining properties for amounts in excess of the
mortgage debt encumbering the properties.
Payments of MID had been suspended since the beginning of 1994 to preserve the
cash reserves of the Partnership. During the third quarter of 1996, the
Partnership paid $500,000 of MID. During the first nine months of 1997, the
Partnership paid MID of $1,774,877. The 1996 payment, and the payments during
the first nine months of 1997 have completely repaid the balance of MID due to
the General Partner. The Partnership incurred MID of 443,577 for the first nine
months of 1997. The General Partner will continue to monitor the cash reserves
and working capital requirements of the Partnership to ensure that cash flows
and balances will support continued MID payments and distributions of net sales
proceeds to Unit holders.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of
the State of California for the County of Los Angeles, Case No. BC133799 (Class
and Derivative Action Complaint).
The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
<PAGE>
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. Defendants intend to file a demurrer to the second consolidated and
amended complaint on or before December 1, 1997.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Description
------- -----------
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 1997 and 1996.
27. Financial Data Schedule for the quarter ended
September 30, 1997.
(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. On September 30, 1997, the Partnership filed a
Current Report on form 8-K to report the sale of Midvale Plaza to an
unaffiliated purchaser.
<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:
McNEIL REAL ESTATE FUND XIV, Ltd.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
November 13, 1997 By: /s/ Ron K. Taylor
- ----------------- ------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
November 13, 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,298,659
<SECURITIES> 0
<RECEIVABLES> 248,667
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 40,988,694
<DEPRECIATION> (20,359,661)
<TOTAL-ASSETS> 28,283,258
<CURRENT-LIABILITIES> 0
<BONDS> 23,992,176
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28,283,258
<SALES> 6,898,514
<TOTAL-REVENUES> 10,148,029
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,889,111
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,857,424
<INCOME-PRETAX> 3,401,494
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,401,494
<EPS-PRIMARY> 0
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