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 June 30, 1998
-------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to_____________
Commission file number 0-12915
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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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
McNEIL REAL ESTATE FUND XIV, LTD.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land ................................................................ $ 4,663,828 $ 4,663,828
Buildings and improvements .......................................... 36,888,803 36,220,158
------------ ------------
41,552,631 40,883,986
Less: Accumulated depreciation ..................................... (21,557,013) (20,632,796)
------------ ------------
19,995,618 20,251,190
Asset held for sale, net ............................................... 1,987,110 1,932,910
Cash and cash equivalents .............................................. 1,246,909 1,292,615
Cash segregated for security deposits .................................. 393,499 431,148
Accounts receivable .................................................... 372,482 663,087
Prepaid expenses and other assets ...................................... 140,014 141,281
Escrow deposits ........................................................ 753,380 664,294
Deferred borrowing costs, net of accumulated
amortization of $489,741 and $441,912 at
June 30, 1998, and December 31, 1997,
respectively ........................................................ 901,251 949,080
------------ ------------
$ 25,790,263 $ 26,325,605
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable, net ............................................ $ 23,681,727 $ 23,891,012
Accounts payable ....................................................... 67,852 69,128
Accrued interest ....................................................... 163,149 164,766
Accrued property taxes ................................................. 221,021 101,200
Other accrued expenses ................................................. 60,747 73,912
Payable to affiliates - General Partner ................................ 493,278 211,757
Deferred gain on involuntary conversion ................................ 180,386 346,114
Security deposits and deferred rental revenue .......................... 379,876 368,672
------------ ------------
25,248,036 25,226,561
------------ ------------
Partners' equity (deficit):
Limited partners - 100,000 limited partnership units authorized;
86,534 limited partnership units outstanding at June 30, 1998 and
December 31, 1997 ................................................. 1,475,741 1,763,445
General Partner ..................................................... (933,514) (664,401)
------------ ------------
542,227 1,099,044
------------ ------------
$ 25,790,263 $ 26,325,605
============ ============
</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 Six Months Ended
June 30, June 30,
-------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue ............. $ 2,119,480 $ 2,236,551 $ 4,279,436 $ 4,663,282
Interest ................... 17,282 63,945 36,941 102,099
Gain on sale of real estate - 2,208,359 - 2,208,359
Gain on involuntary conver-
sions .................... 15,366 - 204,641 -
----------- ----------- ----------- -----------
Total revenue ............ 2,152,128 4,508,855 4,521,018 6,973,740
----------- ----------- ----------- -----------
Expenses:
Interest ................... 541,962 601,749 1,084,949 1,263,872
Depreciation and
amortization ............. 467,626 468,657 924,217 937,314
Property taxes ............. 161,565 163,053 323,112 356,229
Personnel expenses ......... 214,104 218,827 470,298 495,773
Utilities .................. 107,863 119,328 228,516 245,424
Repair and maintenance ..... 307,074 312,061 503,646 559,031
Property management
fees - affiliates ........ 105,153 113,236 210,131 230,593
Other property operating
expenses ................. 113,045 132,496 234,475 269,223
General and administrative . 126,538 21,093 216,815 52,144
General and administrative -
affiliates ............... 57,428 61,577 110,423 122,728
----------- ----------- ----------- -----------
Total expenses ........... 2,202,358 2,212,077 4,306,582 4,532,331
----------- ----------- ----------- -----------
Net income (loss) ............. $ (50,230) $ 2,296,778 $ 214,436 $ 2,441,409
=========== =========== =========== ===========
Net income (loss) allocated to
limited partners ........... $ (49,728) $ - $ 2,144 $ -
Net income (loss) allocated to
General Partner ............ (502) 2,296,778 212,292 2,441,409
----------- ----------- ----------- -----------
Net income (loss) ............. $ (50,230) $ 2,296,778 $ 214,436 $ 2,441,409
=========== =========== =========== ===========
Net income (loss) per limited
partnership unit ........... $ (.57) $ - $ 2.45 $ -
=========== =========== =========== ===========
Distributions per limited
partnership unit ........... $ - $ - $ 5.78 $ -
=========== =========== =========== ===========
</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 Six Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
Total
Partners'
General Limited Equity
Partner Partners (Deficit)
-------------- ------------- --------------
<S> <C> <C> <C>
Balance at December 31, 1996.............. $ (3,166,815) $ 7,648,141 $ 4,481,326
Net income................................ 2,441,409 - 2,441,409
Management Incentive Distribution......... (316,051) - (316,051)
------------- ------------- -------------
Balance at June 30, 1997.................. $ (1,041,457) $ 7,648,141 $ 6,606,684
============= ============= =============
Balance at December 31, 1997.............. $ (664,401) $ 1,763,445 $ 1,099,044
Net income................................ 2,144 212,292 214,436
Management Incentive Distribution......... (271,257) - (271,257)
Distributions to limited partners......... - (499,996) (499,996)
------------- ------------- -------------
Balance at June 30, 1998.................. $ (933,514) $ 1,475,741 $ 542,227
============= ============= =============
</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 (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1998 1997
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants ......................... $ 4,340,548 $ 4,588,033
Cash paid to suppliers ............................. (1,656,631) (1,661,084)
Cash paid to affiliates ............................ (310,290) (382,710)
Interest received .................................. 36,941 102,099
Interest paid ...................................... (1,013,611) (1,178,054)
Property taxes paid and escrowed ................... (292,339) (308,466)
---------- -----------
Net cash provided by operating activities ............. 1,104,618 1,159,818
---------- -----------
Cash flows from investing activities:
Insurance proceeds from involuntary conversions..... 306,928 -
Proceeds from sale of real estate .................. - 6,424,696
Additions to real estate investments ............... (722,845) (210,585)
----------- -----------
Net cash provided by (used in) investing activities.... (415,917) 6,214,111
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage notes payable ....... (234,411) (289,609)
Retirement of mortgage note payable ................ - (2,231,440)
Management Incentive Distribution paid ............. - (1,613,095)
Distributions to limited partners .................. (499,996) -
----------- -----------
Net cash used in financing activities ................. (734,407) (4,134,144)
----------- -----------
Net increase (decrease) in cash and cash equivalents... (45,706) 3,239,785
Cash and cash equivalents at beginning of
period ............................................. 1,292,615 1,903,902
----------- -----------
Cash and cash equivalents at end of period ............ $ 1,246,909 $ 5,143,687
=========== ===========
</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 to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net income ............................................. $ 214,436 $ 2,441,409
----------- -----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ....................... 924,217 937,314
Amortization of deferred borrowing costs ............ 47,829 47,828
Amortization of discounts on mortgage
notes payable ..................................... 25,126 56,788
Gain on involuntary conversions ..................... (204,641) -
Gain on sale of real estate ......................... - (2,208,359)
Changes in assets and liabilities:
Cash segregated for security deposits ............. 37,649 (17,338)
Accounts receivable ............................... 22,590 (54,024)
Prepaid expenses and other assets ................. 1,267 19,872
Escrow deposits ................................... (89,086) (109,956)
Accounts payable .................................. (1,276) (34,115)
Accrued interest .................................. (1,617) (18,798)
Accrued property taxes ............................ 119,821 145,998
Other accrued expenses ............................ (13,165) (19,553)
Payable to affiliates - General Partner ........... 10,264 (29,389)
Security deposits and deferred rental revenue ..... 11,204 2,141
----------- -----------
Total adjustments ............................... 890,182 (1,281,591)
----------- -----------
Net cash provided by operating activities .............. $ 1,104,618 $ 1,159,818
=========== ===========
</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)
June 30, 1998
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 six months ended June 30, 1998 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1998.
NOTE 2.
- -------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1997, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund XIV, Ltd., c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240.
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 property, in which
case McREMI will receive property management fees from the commercial property
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:
Six Months Ended
June 30,
-------------------
1998 1997
-------- --------
Property management fees - affiliates ............. $210,131 $230,593
Charged to general and administrative - affiliates:
Partnership administration ...................... 110,423 122,728
-------- --------
$320,554 $353,321
======== ========
Charged to General Partner's deficit:
Management Incentive Distribution ............... $271,257 $316,051
======== ========
NOTE 4.
- -------
On July 18, 1997, a fire caused $49,498 of damage to two units of Embarcadero
Club Apartments. In February 1998, the Partnership received $39,498 of insurance
reimbursements to cover the repair and restorations costs to Embarcadero Club
Apartments. The excess of the insurance proceeds received over the basis of the
property damaged was recorded as a $17,998 deferred gain on involuntary
conversion on the Partnership's December 31, 1997 Balance Sheet. The $17,998
gain on involuntary conversion was recognized in the first quarter of 1998 when
the Partnership received the insurance proceeds.
<PAGE>
On November 14, 1997, a fire caused approximately $535,000 of damage to eight
units of Thunder Hollow Apartments. The Partnership expects to receive a total
of approximately $525,000 of insurance reimbursements to cover the repair and
restoration costs at Thunder Hollow Apartments. As of June 30, 1998, the
Partnership had received $267,430 of insurance reimbursements. The excess of the
expected insurance reimbursements over the basis of the property damaged was
recorded as a deferred gain on involuntary conversion on the Partnership's
December 31, 1997 Balance Sheet. As a result of the insurance payments received
so far in 1998, $186,643 of the deferred gain was recognized during the first
two quarters of 1998. The remaining deferred gain of $180,386 will be recognized
when the Partnership receives the rest of the insurance reimbursements from its
insurance carrier.
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.......................................... (185,304) (185,304)
Mortgage discount written off.......................... (397,561)
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...................... 6,424,696
Retirement of mortgage note payable.................... (2,231,440)
----------
Net cash proceeds...................................... $4,193,256
==========
</TABLE>
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 June 30, 1998, the Partnership
owned four apartment properties and one retail shopping center. All of the
Partnership's properties are subject to mortgage notes.
<PAGE>
On October 1, 1996, the Partnership placed its three commercial properties,
County Hills Plaza, Midvale Plaza and Redwood Plaza, on the market for sale. The
Partnership sold Country Hills Plaza and Midvale Plaza on April 8, 1997 and
September 24, 1997, respectively. The Partnership distributed the net proceeds
from the sale of these two properties to the limited partners in 1997. Redwood
Plaza, the Partnership's sole remaining commercial property, remains on the
market for sale.
RESULTS OF OPERATIONS
- ---------------------
The Partnership reported net income of $214,436 for the six month period ended
June 30, 1998. For the three months ended June 30, 1998, the Partnership
incurred a loss of $50,230. The Partnership reported net income of $2,441,409
and $2,296,778 for the same periods of 1997. However, reported income for 1998
and 1997 are not comparable because net income for 1997 includes a gain on the
sale of Country Hills Plaza, the results from operations at Country Hills until
April 8, 1997, and results from operations at Midvale Plaza which was sold on
September 24, 1997. Additionally, net income for 1998 includes $204,641 of gains
from involuntary conversions. If the effects of the foregoing transactions are
eliminated from the analysis, the Partnership reported net income of $10,638 and
$61,514 for the six month periods ended June 30, 1998 and 1997, respectively.
Revenues:
Rental revenue decreased 5.2% and 8.2% for the three month and six month periods
ended June 30, 1998 as compared to the same periods of 1997. However, after
eliminating the effects of rental revenues at Country Hills Plaza and Midvale
Plaza, which were sold during 1997, rental revenue at the remainder of the
Partnership's properties increased $133,298 or 3.2% for the six month period
ended June 30, 1998 as compared to the same period of 1997.
Rental revenue increased at three of the Partnership's four residential
properties. Increased rental rates at Embarcadero Club Apartments and Thunder
Hollow Apartments led to a 5.7% and 3.9% increase in rental revenue,
respectively. Rental revenue at Windrock Apartments increased 5.8% due to a
decrease in vacancy and other rental losses. Tanglewood Village Apartments
reported a 1.6% decrease in rental revenue. The property reported a small
increase in rental rates that was exceeded by an increase in vacancy and other
rental losses. The Partnership's sole remaining commercial property, Redwood
Plaza, reported rental revenue decreased 9.1%. Rental rates were unchanged at
the property, but, expense recoveries from tenants and the occupancy rate both
decreased.
The Partnership recognized gains of $17,998 and $186,643 relating to fires at
Embarcadero Club Apartments and Thunder Hollow Apartments, respectively. The
gains are the result of insurance proceeds received in excess of the basis of
the property damaged by the fires. The Partnership will recognize an additional
gain of $180,386 relating to the Thunder Hollow fire when the Partnership
receives additional insurance reimbursements from its insurance carrier. No such
gains were recognized during the first six months of 1997.
Interest revenue decreased 64% for the first six months of 1998 as compared to
the first six months of 1997 because of decreased balances of Partnership cash
reserves invested in interest-bearing accounts.
<PAGE>
Expenses:
Partnership expenses decreased 0.4% and 5.0% for the three month and six month
periods ended June 30, 1998 as compared to the same periods of 1997. However,
after eliminating the effects of expenses pertaining to Country Hills Plaza and
Midvale Plaza, which were sold during 1997, expenses at the remainder of the
Partnership's properties increased $119,248 or 2.9% for the six month period
ended June 30, 1998 as compared to the same period of 1997. Expenses in all
categories were comparable to the year-earlier figures except for general and
administrative expenses and general and administrative expenses paid to
affiliates.
General and administrative expenses increased $105,445 and $164,671 to $126,538
and $216,815 for the three month and six month periods ended June 30, 1998,
respectively, as compared to the same periods of 1997. The increase was
attributable to costs incurred to explore alternatives to maximize the value of
the Partnership (see Liquidity and Capital Resources).
General and administrative expenses paid to affiliates decreased 6.7% and 10.0%
for the three month and six month periods ended June 30, 1998, respectively, as
compared to the same periods of 1997. The level of administrative reimbursements
paid to affiliates is partly a function of the number of properties the
Partnership owns. These expenses decreased due to the sale of Country Hills
Plaza and Midvale Plaza during the course of 1997. Costs associated with
investor relations services were charged to general and administrative during
1997. Such services, beginning in 1998, are now provided by an affiliate, and
the related increase in general and administrative expenses paid to affiliates
partially offset the decrease in expenses due to the reduced number of
properties under management.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flow from operations decreased $55,200 or 4.8% for the first six months of
1998 as compared to the same period of 1997. Increased operating cash flow at
the Partnership's remaining properties largely offset the loss of operating cash
flow due to the 1997 sales of Country Hills Plaza and Midvale Plaza.
The Partnership invested $722,845 in capital improvements during the first six
months of 1998. Most of the capital improvements related to restoration work at
Embarcadero Club Apartments and Thunder Hollow Apartments resulting from fire
damage at the two properties. Insurance proceeds received and anticipated are
expected to cover all restoration costs except a standard deductible. Besides
the restoration work at Embarcadero Club Apartments and Thunder Hollow
Apartments, the Partnership has budgeted a total of $625,000 of capital
improvements to be completed during 1998.
The Partnership has not yet made any MID payments to the General Partner during
1998. On March 30, 1998, the Partnership distributed $499,996 ($5.78 per limited
partnership unit) to the limited partners. The distribution was funded from cash
reserves of the Partnership.
<PAGE>
Short-term liquidity:
The Partnership expended considerable resources over the past several years to
restore its properties to good operating condition. These expenditures were
necessary to maintain the competitive position of the Partnership's aging
properties in each of their markets. The capital improvements enabled the
Partnership to increase its rental revenues and reduce its operating costs
beyond what would have otherwise been possible. For 1998, the Partnership has
budgeted $625,000 of capital improvements to its real estate investments. The
$625,000 budget does not include restoration work related to fire damage
discussed above. Budgeted capital improvements for 1998 will be funded from
property operations.
At June 30, 1998, the Partnership held cash and cash equivalents of $1,246,909.
The General Partner considers this level of cash reserves to be adequate to meet
the Partnership's operating needs. The General Partner resumed MID payments
during 1996, and anticipates additional MID payments will be made in 1998 if the
Partnership's properties continue to perform as projected. The General Partner
believes that anticipated operating results for 1998 will be sufficient to fund
the Partnership's budgeted capital improvements for 1998 and to repay the
current portion of the Partnership's mortgage notes.
The Partnership's remaining commercial property, Redwood Plaza, is on the market
for sale. Although the General Partner expects to successfully sell Redwood
Plaza, there is no guarantee that the Partnership will be able to conclude a
sale of Redwood Plaza for an amount sufficient to retire the related mortgage
note and provide cash proceeds to the Partnership. The Partnership anticipates
that proceeds from the sale of Redwood Plaza, after repayment of the related
mortgage note, will be distributed to the limited partners.
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 over the past few years will yield improved cash flow from
property operations in the future. If the Partnership's cash position
deteriorates, the General Partner may elect to defer certain of the capital
improvements, except where improvements are expected to increase the
competitiveness or marketability of the Partnership's properties.
As previously announced, the Partnership has retained PaineWebber
("PaineWebber"), Incorporated as its exclusive financial advisor to explore
alternatives to maximize the value of the Partnership including, without
limitation, a transaction in which limited partnership interests in the
Partnership are converted into cash. The Partnership, through PaineWebber, has
provided financial and other information to interested parties and is currently
conducting discussions with one such party in an attempt to reach a definitive
agreement with respect to a sale transaction. It is possible that the General
Partner and its affiliates will receive non-cash consideration for their
ownership interests in connection with any such transaction. There can be no
assurance that any such agreement will be reached nor the terms thereof.
None of the Partnership's remaining mortgage notes mature before the expected
dissolution of the Partnership.
<PAGE>
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
partners. Therefore, for the six months ended June 30, 1998 and 1997, net income
of $2,144 and $2,441,409 was allocated to the General Partner, respectively. For
the period ended June 30, 1998, net income of $212,292 was allocated to the
limited partners. No income was allocated to the limited partners for the six
months ended June 30, 1997.
On March 30, 1998, the Partnership distributed $499,996 to the limited partners.
The General Partner will continue to monitor the cash reserves and working
capital needs of the Partnership to determine when cash flows will support
additional distributions to the limited partners.
The Partnership has not yet paid MID to the General Partner in 1998. The
Partnership anticipates making MID payments during 1998 if the Partnership's
properties continue to perform as projected.
Forward-Looking Information:
Within this document, certain statements are made as to the expected occupancy
trends, financial condition, results of operations, and cash flows of the
Partnership for periods after June 30, 1998. 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
occupancy trends, 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 Partnership's ability to control costs,
make necessary capital improvements, negotiate sales or refinancings of its
properties, and respond to changing economic and competitive factors.
Other Information:
Management has begun to review its information technology infrastructure to
identify any systems that could be affected by the year 2000 problem. 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. The information systems used by the Partnership for financial
reporting and significant accounting functions were made year 2000 compliant
during recent systems conversions. The Partnership is in the process of
evaluating the computer systems at the various properties. The Partnership also
intends to communicate with suppliers, financial institutions and others to
coordinate year 2000 issues. Management believes that the remediation of any
outstanding year 2000 conversion issues will not have a material or adverse
effect on the Partnership's operations.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of
the State of California for the County of Los Angeles, Case No. BC133799 (Class
and Derivative Action Complaint).
The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. The case has been stayed pending settlement discussions. While
actively working toward a final resolution, there can be no assurances regarding
settlement.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits.
Exhibit
Number Description
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4. Amended and Restated Limited Partnership Agree-
ment 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 1998 and 1997.
27. Financial Data Schedule for the quarter ended
June 30, 1998.
(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 June 30, 1998.
<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
August 14, 1998 By: /s/ Ron K. Taylor
- --------------- -----------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
August 14, 1998 By: /s/ Brandon K. Flaming
- --------------- -----------------------------------------
Date Brandon K. Flaming
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,246,909
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 41,552,631
<DEPRECIATION> (21,557,013)
<TOTAL-ASSETS> 25,790,263
<CURRENT-LIABILITIES> 0
<BONDS> 23,681,727
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,790,263
<SALES> 4,279,436
<TOTAL-REVENUES> 4,521,018
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,221,633
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,084,949
<INCOME-PRETAX> 214,436
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 214,436
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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