UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to_____________
Commission file number 0-12915
---------
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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
McNEIL REAL ESTATE FUND XIV, LTD.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- -------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land ........................................................ $ 4,663,828 $ 4,663,828
Buildings and improvements .................................. 37,257,044 37,237,007
------------ ------------
41,920,872 41,900,835
Less: Accumulated depreciation ............................. (22,965,793) (22,502,903)
------------ ------------
18,955,079 19,397,932
Asset held for sale ............................................ 2,206,515 2,192,549
Cash and cash equivalents ...................................... 1,944,604 1,911,552
Cash segregated for security deposits .......................... 401,117 409,259
Accounts receivable ............................................ 62,212 84,539
Prepaid expenses and other assets .............................. 125,649 139,313
Escrow deposits ................................................ 732,171 607,161
Deferred borrowing costs, net of accumulated
amortization of $558,368 and $532,052 at
March 31, 1999, and December 31, 1998,
respectively ................................................ 832,624 858,940
------------ ------------
$ 25,259,971 $ 25,601,245
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable, net .................................... $ 23,353,457 $ 23,466,298
Accounts payable ............................................... 80,086 106,574
Accrued interest ............................................... 163,533 161,403
Accrued property taxes ......................................... 172,857 --
Other accrued expenses ......................................... 92,675 117,056
Payable to affiliates - General Partner ........................ 1,012,331 873,553
Provision for environmental remediation ........................ 600,000 600,000
Security deposits and deferred rental revenue .................. 409,953 390,627
------------ ------------
25,884,892 25,715,511
------------ ------------
Partners' equity (deficit):
Limited partners - 100,000 limited partnership units
authorized; 86,534 limited partnership units
outstanding at March 31, 1999 and December 31, 1998........ 691,540 1,097,737
General Partner ............................................. (1,316,461) (1,212,003)
------------ ------------
(624,921) (114,266)
------------ ------------
$ 25,259,971 $ 25,601,245
============ ============
</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
March 31,
----------------------------
1999 1998
---------- ----------
Revenue:
<S> <C> <C>
Rental revenue ................................ $2,215,072 $2,159,956
Interest ...................................... 21,944 19,659
Gain on involuntary conversions ............... -- 189,275
---------- ----------
Total revenues .............................. 2,237,016 2,368,890
---------- ----------
Expenses:
Interest ...................................... 538,676 542,987
Depreciation and amortization ................. 462,890 456,591
Property taxes ................................ 173,497 161,547
Personnel expenses ............................ 234,034 256,194
Utilities ..................................... 111,749 120,653
Repair and maintenance ........................ 214,374 196,572
Property management fees - affiliates ......... 109,020 104,978
Other property operating expenses ............. 115,718 121,430
General and administrative .................... 83,566 90,277
General and administrative - affiliates ....... 54,400 52,995
---------- ----------
Total expenses .............................. 2,097,924 2,104,224
---------- ----------
Net income ....................................... $ 139,092 $ 264,666
========== ==========
Net income allocated to limited partners ......... $ 93,972 $ 262,019
Net income allocated to General Partner .......... 45,120 2,647
---------- ----------
Net income ....................................... $ 139,092 $ 264,666
========== ==========
Net income per limited partnership unit .......... $ 1.09 $ 3.03
========== ==========
Distributions per limited partnership unit........ $ 5.78 $ 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 Three Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Total
Partners'
General Limited Equity
Partner Partners (Deficit)
------------ ------------ ------------
<S> <C> <C> <C>
Balance at December 31, 1997 ............ $ (664,401) $ 1,763,445 $ 1,099,044
Net income .............................. 2,647 262,019 264,666
Management Incentive Distribution........ (141,210) -- (141,210)
Distributions to limited partners ....... -- (499,996) (499,996)
----------- ----------- -----------
Balance at March 31, 1998 ............... $ (802,964) $ 1,525,468 $ 722,504
=========== =========== ===========
Balance at December 31, 1998 ............ $(1,212,003) $ 1,097,737 $ (114,266)
Net income .............................. 45,120 93,972 139,092
Management Incentive Distribution ....... (149,578) -- (149,578)
Distributions to limited partners ....... -- (500,169) (500,169)
----------- ----------- -----------
Balance at March 31, 1999 ............... $(1,316,461) $ 691,540 $ (624,921)
=========== =========== ===========
</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>
Three Months Ended
March 31,
--------------------------------
1999 1998
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants .............................. $ 2,234,138 $ 2,145,009
Cash paid to suppliers .................................. (778,211) (829,799)
Cash paid to affiliates ................................. (129,100) (105,110)
Interest received ....................................... 21,944 19,659
Interest paid ........................................... (497,095) (507,309)
Property taxes paid and escrowed ........................ (144,957) (146,432)
----------- -----------
Net cash provided by operating activities .................. 706,720 576,018
----------- -----------
Cash flows from investing activities:
Insurance proceeds from involuntary conversions ......... 31,600 293,680
Additions to real estate investments .................... (34,003) (321,168)
----------- -----------
Net cash used in investing activities ...................... (2,403) (27,488)
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage notes payable ............ (125,976) (115,997)
Management incentive distribution paid .................. (45,120) --
Distributions to limited partners ....................... (500,169) (499,996)
----------- -----------
Net cash used in financing activities ...................... (671,265) (615,993)
----------- -----------
Net increase (decrease) in cash and cash equivalents........ 33,052 (67,463)
Cash and cash equivalents at beginning of
period .................................................. 1,911,552 1,292,615
----------- -----------
Cash and cash equivalents at end of period ................. $ 1,944,604 $ 1,225,152
=========== ===========
</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>
Three Months Ended
March 31,
---------------------------
1999 1998
--------- ---------
<S> <C> <C>
Net income ..................................................... $ 139,092 $ 264,666
--------- ---------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ................................................ 462,890 456,591
Amortization of deferred borrowing costs .................... 26,316 23,915
Amortization of discounts on mortgage
notes payable ............................................. 13,135 12,563
Gain on involuntary conversions ............................. -- (189,275)
Changes in assets and liabilities:
Cash segregated for security deposits ..................... 8,142 (30,054)
Accounts receivable ....................................... (9,273) 3,171
Prepaid expenses and other assets ......................... 13,664 2,900
Escrow deposits ........................................... (125,010) (54,692)
Accounts payable .......................................... (26,488) (761)
Accrued interest .......................................... 2,130 (800)
Accrued property taxes .................................... 172,857 37,274
Other accrued expenses .................................... (24,381) (16,860)
Payable to affiliates - General Partner ................... 34,320 52,863
Security deposits and deferred rental revenue ............. 19,326 14,517
--------- ---------
Total adjustments ....................................... 567,628 311,352
--------- ---------
Net cash provided by operating activities ...................... $ 706,720 $ 576,018
========= =========
</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)
March 31, 1999
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 three months ended March 31, 1999 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1999.
NOTE 2.
- -------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1998, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil 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. 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. The maximum
MID percentage decreases to .75% in 2000, .50% in 2001 and .25% thereafter.
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, 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:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Property management fees - affiliates ..................... $109,020 $104,978
Charged to general and administrative - affiliates:
Partnership administration .............................. 54,400 52,995
-------- --------
$163,420 $157,973
======== ========
Charged to General Partner's deficit:
Management Incentive Distribution ....................... $149,578 $141,210
======== ========
</TABLE>
<PAGE>
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 gain on involuntary conversion. The
gain on involuntary conversion was recognized in the first quarter of 1998 when
the Partnership received the insurance proceeds.
On November 14, 1997, a fire caused $544,716 of damage to eight units of Thunder
Hollow Apartments. The Partnership received $503,062 and $31,600 of insurance
reimbursements to cover the repair and restoration costs at Thunder Hollow
Apartments during 1998 and in the first quarter of 1999, respectively. The
excess of the insurance reimbursements received over the basis of the property
damaged was recorded as a $375,797 gain on involuntary conversion. The gain was
recognized during 1998 as insurance proceeds were received from the
Partnership's insurance carrier. $171,277 of the total $375,797 gain was
recognized in the first quarter of 1998.
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 March 31, 1999, the
Partnership owned four apartment properties and one retail shopping center.
All of the Partnership's properties are subject to mortgage notes.
The Partnership placed Redwood Plaza, the Partnership's sole remaining
commercial property, on the market for sale on October 1, 1996.
RESULTS OF OPERATIONS
- ---------------------
The Partnership's net income amounted to $139,092 for the first quarter of 1999.
For the first quarter of 1998, the Partnership reported net income of $264,666.
Net income for the first quarter of 1998 included $189,275 of gain on
involuntary conversions related to fires at Embarcadero Club Apartments and
Thunder Hollow Apartments. The Partnership incurred no such gains during the
first quarter of 1999.
<PAGE>
Revenues:
The Partnership's rental revenue increased $55,116 or 2.6% for the first quarter
of 1999 as compared to the first quarter of 1998. Tanglewood Village Apartments
reported a 9.7% increase in rental revenue due to an increase in base rental
rates and an increase in the property's occupancy rate. Rental revenue increased
2.7% and 1.8% at Embarcadero Club Apartments and Thunder Hollow Apartments,
respectively. Both properties increased base rental rates, but the increases
were partially offset by decreased occupancy. Rental revenue decreased 5.4% at
Windrock Apartments because of increases in vacancy, concessions and other
rental losses. Rental revenue decreased 1.4% at Redwood Plaza. Base rental rates
increased at Redwood Plaza, but the increase was entirely offset by increased
vacancy losses. The Partnership expects occupancy to increase later in 1999 as
newly reconfigured space at Redwood Plaza is leased to new tenants.
The Partnership recognized $189,275 of involuntary conversion gains during the
first quarter of 1998 relating to fires at Embarcadero Club Apartments and
Thunder Hollow Apartments. An additional $204,520 of gain was recognized in
subsequent quarters of 1998. The gains equal insurance proceeds received in
excess of the basis of the property damaged by the fires. No such gains were
recognized during the first quarter of 1999.
Expenses:
Partnership expenses decreased $6,300 or 0.3% for the first quarter of 1999 as
compared to the first quarter of 1998. Expenses in all categories were
comparable to the year-earlier figures.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $706,720 of cash from operating activities for the
first quarter of 1999, a 23% increase over cash generated from operating
activities for the first quarter of 1998. Most of the increased funds from
operating activities was the result of an increase in cash received from tenants
combined with a decrease in cash paid to suppliers.
The Partnership expended $34,003 and $321,168 in capital improvements during
first quarters of 1999 and 1998, respectively. Most of the capital improvements
from 1998 related to restoration work at Embarcadero Club Apartments and Thunder
Hollow Apartments resulting from fire damage at the two properties. Insurance
proceeds of $31,600 and $293,680 were received during the first quarter of 1999
and 1998, respectively, to compensate the Partnership for the fire restoration
costs. The Partnership has budgeted a total of $740,000 of capital improvements
for 1999. Budgeted capital improvements will be funded from property operations.
The Partnership paid $45,120 of MID to the General Partner during the first
quarter of 1999. No payments of MID were made during 1998. The Partnership
distributed $500,169 and $499,996 to the limited partners during the first
quarter of 1999 and 1998, respectively. 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 certain of its repairs
and maintenance expenses. For 1999, the Partnership has budgeted $740,000 of
capital improvements to its real estate investments. Budgeted capital
improvements for 1999 will be funded from property operations.
At March 31, 1999, the Partnership held cash and cash equivalents of $1,944,604.
The General Partner considers this level of cash reserves to be adequate to meet
the Partnership's operating needs. The General Partner believes that anticipated
operating results for 1999 will be sufficient to fund the Partnership's budgeted
capital improvements for 1999, repay the current portion of the Partnership's
mortgage notes, and provide funds for any required environmental remediation
(see Item 5 - Other Information).
The Partnership placed Redwood Plaza on the market for sale on October 1, 1996.
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, 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. During
the last full week of March, the Partnership entered into a 45 day exclusivity
agreement with a well-financed bidder with whom it had commenced discussions
with respect to a sale transaction. The Partnership and such party have made
significant progress in negotiating the terms of a proposed transaction and are
continuing to have intensive discussions with respect to a transaction. In light
on these continuing negotiations, the exclusivity agreement has been extended
for an additional 21 days until June 4, 1999. 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 regarding whether any such agreement will be reached nor the terms
thereof.
None of the Partnership's remaining mortgage notes mature before 2002.
<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 three months ended March 31, 1999 and 1998, net
income of $45,120 and $2,647, respectively, was allocated to the General
Partner. Net income of $93,972 and $262,019 was allocated to the limited
partners for the three months ended March 31, 1999 and 1998, respectively.
The Partnership distributed $500,169 and $499,996 to the limited partners in the
first three months of 1999 and 1998, respectively. 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 paid $45,120 of MID to the General
Partner during the first quarter of 1999. No MID payments were made to the
General Partner during 1998.
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 March 31, 1999. 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.
YEAR 2000 DISCLOSURE
- --------------------
State of readiness
- ------------------
The year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major systems failure or
miscalculations.
Management has assessed its information technology ("IT") infrastructure to
identify any systems that could be affected by the year 2000 problem. The IT
used by the Partnership for financial reporting and significant accounting
functions was made year 2000 compliant during recent systems conversions. The
software utilized for these functions is licensed by third party vendors who
have warranted that their systems are year 2000 compliant.
<PAGE>
Management is in the process of evaluating the mechanical and embedded
technological systems at the various properties. Management has inventoried all
such systems and queried suppliers, vendors and manufacturers to determine year
2000 compliance. Based on this review, management believes these systems are
substantially compliant. In circumstances of non-compliance management will work
with the vendor to remedy the problem or seek alternative suppliers who will be
in compliance. 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. However, no estimates can be made as to the potential
adverse impact resulting from the failure of third party service providers and
vendors to be year 2000 compliant.
Cost
- ----
The cost of IT and embedded technology systems testing and upgrades is not
expected to be material to the Partnership. Because all the IT systems have been
upgraded over the last three years, all such systems were compliant, or made
compliant at no additional cost by third party vendors. Management anticipates
the costs of assessing, testing, and if necessary replacing embedded technology
components will be less than $50,000. Such costs will be funded from operations
of the Partnership.
Risks
- -----
Ultimately, the potential impact of the year 2000 issue will depend not only on
the corrective measures the Partnership undertakes, but also on the way in which
the year 2000 issue is addressed by government agencies and entities that
provide services or supplies to the Partnership. Management has not determined
the most likely worst case scenario to the Partnership. As management studies
the findings of its property systems assessment and testing, management will
develop a better understanding of what would be the worst case scenario.
Management believes that progress on all areas is proceeding and that the
Partnership will experience no adverse effect as a result of the year 2000
issue. However, there is no assurance that this will be the case.
Contingency plans
- -----------------
Management is developing contingency plans to address potential year 2000
non-compliance of IT and embedded technology systems. Management believes that
failure of any IT system could have an adverse impact on operations. However,
management believes that alternative systems are available that could be
utilized to minimize such impact. Management believes that any failure in the
embedded technology systems could have an adverse impact on that property's
performance. Management will assess these risks and develop plans to mitigate
possible failures by July 1999.
<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 XXIII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund
XXV, L.P., McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund
XXVII, L.P., Hearth Hollow Associates, McNeil Midwest Properties I, L.P. and
Regency North Associates, L.P., - Superior Court of the State of California for
the County of Los Angeles, Case No. BC133799 (Class and Derivative Action
Complaint).
The action involves purported class and derivative actions brought by limited
partners of each of the limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. The case was stayed pending settlement discussions. A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties. Preliminary
Court approval was received on October 6, 1998. A hearing for Final Approval of
Settlement, initially scheduled for December 17, 1998, has been continued to
July 2, 1999.
<PAGE>
Because McNeil Real Estate Fund XXIII, L.P., Hearth Hollow Associates, McNeil
Midwest Properties I, L.P. and Regency North Associates, L.P. would be part of
the transaction contemplated in the settlement and Plaintiffs claim that an
effort should be made to sell the McNeil Partnerships, Plaintiffs have included
allegations with respect to McNeil Real Estate Fund XXIII, L.P., Hearth Hollow
Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P.
in the third consolidated and amended complaint.
Plaintiff's counsel intends to seek an order awarding attorney's fees and
reimbursements of their out-of-pocket expenses. The amount of such award is
undeterminable until final approval is received from the court. Fees and
expenses shall be allocated amongst the Partnerships on a pro rata basis, based
upon tangible asset value of each such partnership, less total liabilities,
calculated in accordance with the Amended Partnership Agreements for the quarter
most recently ended.
ITEM 5. OTHER INFORMATION
- ------- -----------------
Environmental Matters:
Environmental laws create potential liabilities that may affect property owners.
The environmental laws of the federal and certain state governments, for
example, impose liability on current and certain past owners of property from
which there is a release or threat of release of hazardous substances. This
liability includes costs of investigation and remediation of the hazardous
substances and natural resource damages. Liability for costs of investigation
and remediation is strict, and may be imposed irrespective of whether the
property owner was at fault, although there are a number of defenses. Third
parties, as well as governments, may recover under these laws. Third parties,
such as adjacent property owners, also may seek to recover under the common law,
for damages to their property or health. The presence of contamination also may
affect the ability of the property owner to sell, lease, or borrow money against
the property. To date, environmental concerns, including those related to the
presence of hazardous substances, have not generally had a material effect on
the Partnership's capital expenditures, earnings or competitive position.
In connection with the proposed sale transaction as more fully described above,
in fiscal 1998, an independent environmental consultant engaged by the
Partnership completed a Phase I Environmental Site Assessment of each property
owned by the Partnership. Such environmental assessments performed on the
properties have not revealed any environmental liability that the Partnership
believes would have a material adverse effect on the Partnership's business,
assets or results of operations, except for the Redwood Plaza property in Utah
(the "Property"). The Phase I report recommended additional investigation at the
Property because of the presence of a dry cleaning plant that had been there for
approximately twenty years, and because the plant reportedly had used and stored
the chemical tetrachloroethene (PCE). Pursuant to the Partnership's request, the
consultant then conducted a Phase II Environmental Site Assessment of the
Property, and found that some of the soil and groundwater contained PCE and its
degradation products. Pursuant to the Partnership's request, the consultant then
conducted a Phase III investigation, and found the presence of contamination in
soil and groundwater samples taken at the property line. Because the Partnership
has not undertaken any groundwater or soil sampling off-site, the extent of the
contamination from the Property has not been established. To deal with this
situation, the Partnership has applied to the Utah Department of Environmental
Quality to enter the Property into the State's Voluntary Cleanup Program, to
obtain a release from the State for cleanup liabilities.
<PAGE>
The Partnership is also investigating whether prior owners or tenants of the
Property may be responsible for the remediation of the contaminants and is also
reviewing whether the cost of remediation may be covered by insurance.
Following the 1998 Phase III Environmental Site Assessment, the Partnership
asked its consultant to prepare a preliminary estimate of likely remediation
costs for the Property based on all of the information known at that time. These
estimated costs ranged from $600,000 to $1,170,000 over a period of five years.
These estimates are based on preliminary information and may change as
additional data is gathered. There also exists the potential for third party
actions, the likelihood and extent of which cannot be predicted at this time.
Accordingly, the Partnership recorded a liability for remediation costs at the
Property of $600,000 in fiscal year 1998. This estimate may be affected by,
among other things, new data and by any modifications to any remediation plan
that may be proposed by the Utah regulatory authorities. The effect of the
resolution of these matters on the results of operations of the Partnership
cannot be predicted because of the uncertainty concerning both the amount and
timing of future expenditures and future results of operations.
It is possible that these assessments with respect to the Property do not reveal
all potential environmental liabilities or that there are material environmental
liabilities of which the Partnership is unaware. Moreover, no assurances can be
given that (i) future laws, ordinances or regulations will not impose any
material environmental liability or (ii) the current environmental condition of
the Property has not been or will not be affected by tenants and occupants of
the Property, by the condition of properties in the vicinity of the Property, or
by third parties unrelated to the Partnership.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Description
-------- -----------
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 1999 and 1998.
27. Financial Data Schedule for the quarter ended
March 31, 1999.
(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 March 31, 1999.
<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
May 18, 1999 By: /s/ Ron K. Taylor
- -------------- ---------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
May 18, 1999 By: /s/ Brandon K. Flaming
- -------------- ---------------------------------------------
Date Brandon K. Flaming
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,944,604
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 41,920,872
<DEPRECIATION> (22,965,793)
<TOTAL-ASSETS> 25,259,971
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<BONDS> 23,353,457
0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 25,259,971
<SALES> 2,215,072
<TOTAL-REVENUES> 2,237,016
<CGS> 0
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<OTHER-EXPENSES> 1,559,248
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