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 0-13356
--------
MCNEIL REAL ESTATE FUND XXI, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 33-0030615
- --------------------------------------------------------------------------------
(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 XXI, L.P.
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..................................................... $ 3,240,113 $ 3,240,113
Buildings and improvements............................... 30,163,661 29,542,828
-------------- -------------
33,403,774 32,782,941
Less: Accumulated depreciation and amortization......... (15,786,660) (14,661,016)
-------------- -------------
17,617,114 18,121,925
Asset held for sale......................................... 2,745,988 2,731,674
Cash and cash equivalents................................... 1,719,793 1,670,843
Cash segregated for security deposits....................... 198,481 167,645
Accounts receivable......................................... 237,487 317,152
Escrow deposits............................................. 516,908 425,750
Deferred borrowing costs, net of accumulated amortiz-
ation of $203,483 and $153,724 at September 30,
1997 and December 31, 1996, respectively................. 382,918 432,677
Prepaid expenses and other assets........................... 63,636 63,559
-------------- -------------
$ 23,482,325 $ 23,931,225
============== =============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net................................. $ 21,595,273 $ 21,780,275
Mortgage note payable - affiliate........................... 733,900 733,900
Accounts payable and accrued expenses....................... 288,922 282,667
Accrued property taxes...................................... 389,907 347,845
Payable to affiliates....................................... 4,700,237 4,210,324
Advances from affiliates.................................... 779,875 735,253
Deferred gain on involuntary conversion..................... - 66,879
Security deposits and deferred rental revenue............... 210,078 195,060
-------------- -------------
28,698,192 28,352,203
-------------- -------------
Partners' deficit:
Limited partners - 50,000 Units authorized; 47,086 and
47,288 Units outstanding at September 30, 1997 and
December 31, 1996, respectively, (24,906 Current
Income Units and 22,180 Growth/Shelter Units out-
standing at September 30, 1997 and 24,949 Current
Income Units and 22,339 Growth/Shelter Units
outstanding at December 31,1996)....................... (4,846,096) (4,059,156)
General Partner.......................................... (369,771) (361,822)
-------------- -------------
(5,215,867) (4,420,978)
-------------- -------------
$ 23,482,325 $ 23,931,225
============== =============
</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 XXI, L.P.
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................ $ 1,633,807 $ 1,608,613 $ 4,855,619 $ 4,807,997
Interest...................... 23,272 26,292 61,513 80,167
Gain on involuntary
conversion.................. 39,846 - 66,655 -
------------- ------------- ------------- -------------
Total revenue............... 1,696,925 1,634,905 4,983,787 4,888,164
------------- ------------- ------------- -------------
Expenses:
Interest...................... 483,810 514,231 1,503,455 1,499,211
Interest - affiliates......... 30,579 30,182 90,537 90,027
Depreciation and
amortization................ 372,320 410,925 1,125,644 1,219,510
Property taxes................ 135,339 125,608 406,017 370,744
Personnel costs............... 214,682 187,992 596,134 563,345
Utilities..................... 123,216 110,422 334,780 320,912
Repairs and maintenance....... 191,082 187,333 581,204 538,871
Property management
fees - affiliates........... 85,888 82,623 252,172 249,970
Other property operating
expenses.................... 112,146 83,788 310,802 284,720
General and administrative.... 28,995 21,670 91,301 66,871
General and administrative -
affiliates.................. 165,682 163,274 486,630 531,628
------------- ------------- ------------- -------------
Total expenses.............. 1,943,739 1,918,048 5,778,676 5,735,809
------------- ------------- ------------- -------------
Net loss......................... $ (246,814) $ (283,143) $ (794,889) $ (847,645)
============= ============= ============= =============
Net loss allocable to limited
partners - Current
Income Unit................... $ (22,213) $ (25,483) $ (71,540) $ (76,288)
Net loss allocable to
limited partners - Growth/
Shelter Unit.................. (222,133) (254,829) (715,400) (762,881)
Net loss allocable to
General Partner............... (2,468) (2,831) (7,949) (8,476)
------------- ------------- ------------- -------------
Net loss......................... $ (246,814) $ (283,143) $ (794,889) $ (847,645)
============= ============= ============= =============
Net loss per limited partnership
unit:
Current Income Units.......... $ (.89) $ (1.02) $ (2.87) $ (3.06)
============= ============= ============= =============
Growth/Shelter Units.......... $ (10.02) $ (11.41) $ (32.25) $ (34.15)
============= ============= ============= =============
</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 XXI, L.P.
STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
For the Nine Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1995.............. $ (350,551) $ (2,943,347) $ (3,293,898)
Net loss
General Partner........................ (8,476) - (8,476)
Current Income Units................... - (76,288) (76,288)
Growth/Shelter Units................... - (762,881) (762,881)
------------- ------------- -------------
Total net loss............................ (8,476) (839,169) (847,645)
------------- ------------- -------------
Balance at September 30, 1996............. $ (359,027) $ (3,782,516) $ (4,141,543)
============= ============= =============
Balance at December 31, 1996.............. $ (361,822) $ (4,059,156) $ (4,420,978)
Net loss
General Partner........................ (7,949) - (7,949)
Current Income Units................... - (71,540) (71,540)
Growth/Shelter Units................... - (715,400) (715,400)
------------- ------------- -------------
Total net loss............................ (7,949) (786,940) (794,889)
------------- ------------- -------------
Balance at September 30, 1997............ $ (369,771) $ (4,846,096) $ (5,215,867)
============= ============= =============
</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 XXI, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) 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........................ $ 4,807,668 $ 4,770,881
Cash paid to suppliers............................ (1,938,994) (1,797,377)
Cash paid to affiliates........................... (248,889) (915,695)
Interest received................................. 61,513 80,167
Interest paid..................................... (1,440,267) (1,438,669)
Interest paid to affiliates....................... (36,665) (36,666)
Property taxes paid............................... (420,636) (363,815)
----------------- --------------
Net cash provided by operating activities............ 783,730 298,826
----------------- --------------
Cash flows from investing activities:
Net proceeds received from insurance
company......................................... 100,241 -
Additions to real estate investments.............. (635,147) (483,995)
----------------- --------------
Net cash used in investing activities................ (534,906) (483,995)
----------------- --------------
Cash flows from financing activities:
Deferred borrowing costs paid..................... - (635)
Principal payments on mortgage notes
payable......................................... (199,874) (183,361)
----------------- --------------
Net cash used in financing activities................ (199,874) (183,996)
----------------- --------------
Net increase (decrease) in cash and
cash equivalents.................................. 48,950 (369,165)
Cash and cash equivalents at beginning of
period............................................ 1,670,843 1,998,301
----------------- --------------
Cash and cash equivalents at end of period........... $ 1,719,793 $ 1,629,136
================= ==============
</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 XXI, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Loss to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------------
1997 1996
----------------- ----------------
<S> <C> <C>
Net loss............................................. $ (794,889) $ (847,645)
--------------- --------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization..................... 1,125,644 1,219,510
Amortization of deferred borrowing costs.......... 49,759 47,757
Amortization of discounts on mortgage
notes payable................................... 14,872 14,108
Accrued interest on advances from affiliates...... 44,622 -
Interest added to advances from affiliates,
net of payments................................. - 43,943
Gain on involuntary conversion.................... (66,655) -
Changes in assets and liabilities:
Cash segregated for security deposits........... (30,836) (16,065)
Accounts receivable............................. (20,800) (43,583)
Escrow deposits................................. (91,158) (6,916)
Prepaid expenses and other assets............... (77) (8,345)
Accounts payable and accrued expenses........... 6,255 (44,420)
Accrued property taxes.......................... 42,062 57,294
Payable to affiliates........................... 489,913 (134,097)
Security deposits and deferred rental
revenue....................................... 15,018 17,285
--------------- --------------
Total adjustments............................. 1,578,619 1,146,471
--------------- --------------
Net cash provided by operating activities............ $ 783,730 $ 298,826
=============== ==============
</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 XXI, L.P.
Notes to Financial Statements
(Unaudited)
September 30, 1997
NOTE 1.
- -------
McNeil Real Estate Fund XXI, L.P. (the "Partnership"), formerly known as
Southmark Realty Partners, Ltd., was organized on November 23, 1983 as a limited
partnership under the provisions of the California Revised Limited Partnership
Act to acquire and operate commercial and residential properties. The general
partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a
Delaware limited partnership, an affiliate of Robert A. McNeil ("McNeil"). The
principal place of business for the Partnership and the General Partner is 13760
Noel Road, Suite 600, LB70, Dallas, Texas, 75240.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair presentation of the Partnership's financial position 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 XXI, L.P., c/o The Herman Group, 2121 San Jacinto
St., 26th Floor, Dallas, Texas 75201.
NOTE 3.
- -------
Certain reclassifications have been made to prior period amounts to conform with
the current period presentation.
NOTE 4.
- -------
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. The Partnership has had to defer
payment of payables to affiliates in order to meet its working capital needs.
Additionally, in 1997, the mortgage notes payable secured by Wise County Plaza
and Fort Meigs Plaza mature. The mortgage note payable - affiliate secured by
Fort Meigs Plaza also matures in 1997. In addition to regularly scheduled debt
service payments, balloon payments totaling approximately $9.7 million are due
in 1997. Management expects to refinance these mortgage notes as they mature.
However, if management is unable to refinance the mortgage notes as they mature,
the Partnership will require other sources of cash. No such sources have been
identified. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
<PAGE>
NOTE 5.
- -------
The Partnership pays property management fees equal to 5% of gross rental
receipts for its residential properties and 6% of gross rental receipts for its
commercial 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. Total accrued but unpaid Partnership
general and administration fees of $1,099,254 and $909,705 were outstanding at
September 30, 1997 and December 31, 1996, respectively.
The Partnership is paying an asset management fee which is payable to the
General Partner. Through 1999, the Asset Management Fee is calculated as 1% of
the Partnership's tangible asset value. 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 fee percentage decreases subsequent to
1999. Total accrued but unpaid asset management fees of $3,225,011 and
$2,927,930 were outstanding at September 30, 1997 and December 31, 1996,
respectively.
The Partnership pays a disposition fee to an affiliate of the General Partner
equal to 3% of the gross sales price for brokerage services performed in
connection with the sale of the Partnership's properties. The fee is due and
payable at the time the sale closes. In connection with the sales of Suburban
Plaza and Wyoming Mall, total accrued but unpaid disposition fees of $346,050
were outstanding at September 30, 1997 and December 31, 1996.
Prior to the restructuring of the Partnership, affiliates of the Original
General Partner advanced funds to enable the Partnership to meet its working
capital requirements. These advances were purchased by, and are now payable to,
the General Partner.
The total advances from affiliates at September 30, 1997 and December 31, 1996
consisted of the following:
September 30, December 31,
1997 1996
------------- ------------
Advances purchased by General Partner.............. $ 630,574 $ 630,574
Accrued interest payable........................... 149,301 104,679
-------- ----------
$ 779,875 $ 735,253
======== ==========
<PAGE>
Compensation and reimbursements 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............................ $ 252,172 $ 249,970
Charged to interest - affiliates:
Interest on advances from affiliates.............. 44,622 43,943
Interest on mortgage note payable - affiliate..... 45,915 46,084
Charged to general and administrative -affiliates:
Partnership administration........................ 189,549 230,765
Asset management fee.............................. 297,081 300,863
-------- --------
$ 829,339 $ 871,625
======== ========
Payable to affiliates at September 30, 1997 and December 31, 1996 consisted
primarily of unpaid asset management fees, property management fees, disposition
fees and partnership general and administrative expenses and are due and payable
from current operations.
NOTE 6.
- -------
In October 1997, the lender on the Partnership's mortgage note payable to a
non-affiliate secured by Fort Meigs Plaza extended the maturity of the note to
December 15, 1997 from October 15, 1997. The mortgage note payable to an
affiliate matured on September 1, 1997 and the affiliate has verbally agreed to
extend the maturity to December 15, 1997. The Partnership is currently
attempting to refinance the mortgages.
The mortgage notes payable secured by Wise County Plaza matured on August 1,
1997. The Partnership is currently attempting to negotiate an extension with the
lender.
NOTE 7.
- -------
On July 12 and September 5, 1996, Governour's Square Apartments suffered damages
from two separate hurricanes. Repairs of damages totaling $191,178 were
completed. Reimbursements for the repairs totaling $40,937 were received from
the insurance carrier in 1996, and $100,241 were received during 1997. The
Partnership recognized a gain on involuntary conversion of $27,252 in the fourth
quarter of 1996 and $66,655 in the first nine months of 1997. The total gain on
involuntary conversion of $93,907 represents the insurance claims in excess of
the basis of the property damaged by the hurricanes.
<PAGE>
NOTE 8.
- -------
In 1996, the Partnership adopted 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."
This statement requires the cessation of depreciation on assets held for sale.
Since Fort Meigs Plaza was placed on the market for sale, no depreciation was
taken effective October 1, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
There has been no significant change in the operations of the Partnership's
properties since December 31, 1996. The Partnership reported a net loss for the
first nine months of 1997 of $794,889 as compared to $847,645 for the first nine
months of 1996. Revenues increased to $4,983,787 in 1997 from $4,888,164 in
1996. Expenses were $5,778,676 in 1997 as compared to $5,735,809 in 1996.
Net cash provided by operating activities was $783,730 for the first nine months
of 1997. The Partnership expended $635,147 for capital improvements and $199,874
for principal payments on its mortgage notes payable. The Partnership received
$100,241 in proceeds from the insurance carrier for hurricane damage suffered at
Governour's Square Apartments in 1996. Cash and cash equivalents increased by
$48,950 for the first nine months of 1997, leaving a balance of $1,719,793 at
September 30, 1997.
The Partnership has had little ready cash reserves since its inception. It has
been largely dependent on affiliates to support its operations. Although no
additional advances from affiliates were required during the first nine months
of 1997, at September 30, 1997 the Partnership owed affiliate advances of
$779,875 and payables to affiliates for property management fees, Partnership
general and administrative expenses, asset management fees and disposition fees
totaling $4,700,237.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total revenue increased by $62,020 and $95,623 for the three and nine months
ended September 30, 1997, respectively, as compared to the same periods in 1996.
The increase was due to an increase in rental revenue, partially offset by a
decrease in interest income, as discussed below. In addition, the Partnership
recognized a $66,655 gain on involuntary conversion during 1997 relating to
hurricane damage at Governour's Square Apartments, as discussed in Item 1,
Note 7.
<PAGE>
Rental revenue increased by $25,194 and $47,622 for the three and nine months
ended September 30, 1997, respectively, as compared to the same periods in 1996.
Rental revenue increased at Governour's Square, Bedford Green, Breckenridge and
Woodcreek apartments due to increases in rental rates in 1997. An increase in
average occupancy at Fort Meigs Plaza and a decrease in discounts and
concessions given to tenants at Wise County Plaza resulted in increased rental
revenue at those properties. These increases were partially offset by a decrease
in rental revenue at Evergreen Square Apartments due to a decline in the average
occupancy rate in 1997. In addition, in 1996 the Partnership received
approximately $29,000 of rental revenue relating to properties which had
previously been sold. No such income was received during the first nine months
of 1997.
Interest income decreased by $3,020 and $18,654 for the three and nine months
ended September 30, 1997, respectively, as compared to the same periods in 1996.
The Partnership had a greater amount of cash available for short-term investment
in the first seven months of 1996. In August 1996, the Partnership paid $700,000
in previously accrued overhead reimbursements to McREMI, which decreased the
amount of cash available for short-term investment in 1997 and the last part of
1996.
Expenses:
Total expenses increased by $25,691 and $42,867 for the three and nine months
ended September 30, 1997, respectively, as compared to the same periods in 1996.
General and administrative expenses for the three and nine months ended
September 30, 1997 increased by $7,325 and $24,430, respectively, as compared to
the same periods in 1996. Approximately $15,000 of costs incurred for investor
services were paid to an unrelated third party in 1997. In the first nine months
of 1996, such costs were paid to an affiliate of the General Partner and were
included in general and administrative - affiliates on the Statements of
Operations.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 30, 1997, the Partnership held cash and cash equivalents of
$1,719,793.
Cash of $783,730 was provided by operating activities during the first nine
months of 1997 as compared to $298,826 provided during the same period in 1996.
The increase in cash provided by operations in the first nine months of 1997 was
mainly the result of a decrease in cash paid to affiliates in 1997. In August
1996, the Partnership paid $700,000 of previously accrued overhead
reimbursements to McREMI.
In 1997, the Partnership received $100,241 in proceeds from the insurance
carrier for hurricane damage at Governour's Square Apartments in 1996. No such
proceeds were received in the first nine months of 1996.
Cash used for additions to real estate investments totaled $635,147 for the
first nine months of 1997 as compared to $483,995 for the same period in 1996. A
greater amount was spent in 1997 for landscaping and exterior painting at
Governour's Square Apartments due to hurricane damage sustained in 1996.
<PAGE>
Short-term liquidity
For the remainder of 1997, present cash balances and operations of the
properties are expected to provide sufficient cash for normal operating
expenses, debt service payments and budgeted capital improvements. The mortgage
notes payable secured by Wise County Plaza matured on August 1, 1997 and the
Partnership is currently attempting to negotiate an extension with the lender.
The mortgage note payable - affiliate secured by Fort Meigs Plaza matured on
September 1, 1997. The maturity of the Fort Meigs Plaza mortgage note payable to
a non-affiliate was extended to December 1997 from October 1997. Fort Meigs
Plaza is currently on the market for sale. The Partnership will attempt to
extend the maturity of the mortgages until the property can be sold.
In addition to regularly scheduled debt service payments, balloon payments
totaling approximately $9.7 million are due in 1997. Management expects to
refinance these mortgage notes as they mature or sell the property securing the
loan. However, if management is unable to refinance the mortgage notes as they
mature, the Partnership will require other sources of cash. No such sources have
been identified. The Partnership has no established lines of credit from outside
sources. Although affiliates of the Partnership have previously funded cash
deficits, there can be no assurance the Partnership will receive additional
funds. Other possible actions to resolve cash deficiencies include refinancing,
deferring major capital or repair expenditures on Partnership properties except
where improvements are expected to enhance the competitiveness and marketability
of the properties, deferring payables to or arranging financing from affiliates
or the ultimate sale of Partnership properties.
Long-term liquidity
The Partnership has determined to begin orderly liquidation of all its assets.
Although there can be no assurance as to the timing of the liquidation due to
real estate market conditions, the general difficulty of disposing of real
estate, and other general economic factors, it is anticipated that such
liquidation would result in the dissolution of the Partnership followed by a
liquidating distribution to the limited partners by December 2001. In this
regard, the Partnership has placed Fort Meigs Plaza on the market for sale.
Operations of the Partnership's properties are expected to provide sufficient
cash flow for operating expenses, debt service payments and capital improvements
in the foreseeable future. The Partnership has significant mortgage maturities
during 1997, and management expects to refinance these mortgage notes as they
mature or sell the property securing the loan. If management is unable to
refinance the mortgage notes as they mature, the Partnership will require other
sources of cash. No such sources have been identified.
These conditions raise substantial doubt about the Partnership's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Distributions
To maintain adequate cash balances of the Partnership, distributions to Current
Income Unit holders were suspended in 1989. There have been no distributions to
Growth/Shelter Units holders. Distributions to Unit holders will remain
suspended for the foreseeable future. The General Partner will continue to
monitor the cash reserves and working capital needs of the Partnership to
determine when cash flows will support distributions to the Unit holders.
<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. 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 March 26, 1992.
(Incorporated by reference to the Current
Report of the Registrant on Form 8-K dated
March 26, 1992, as filed on April 9, 1992).
11. Statement regarding computation of Net
Income (Loss) per Limited Partnership Unit:
Net income (loss) per limited partnership
unit is computed by dividing net income
(loss) allocated to the limited partners by
the weighted average number of limited
partnership units outstanding. Per unit
information has been computed based on
24,906 and 24,949 Current Income Units
outstanding in 1997 and 1996, respectively,
and 22,180 and 22,339 Growth/Shelter Units
outstanding in 1997 and 1996, respectively.
27. Financial Data Schedule for the quarter
ended September 30, 1997.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended September 30, 1997.
<PAGE>
MCNEIL REAL ESTATE FUND XXI, L.P.
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 XXI, L.P.
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/ Carol A. Fahs
- ----------------- -------------------------------------------
Date Carol A. Fahs
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> 1,719,793
<SECURITIES> 0
<RECEIVABLES> 237,487
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 33,403,774
<DEPRECIATION> (15,786,660)
<TOTAL-ASSETS> 23,482,325
<CURRENT-LIABILITIES> 0
<BONDS> 22,329,173
0
0
<COMMON> 0
<OTHER-SE> (5,215,867)
<TOTAL-LIABILITY-AND-EQUITY> 23,482,325
<SALES> 4,855,619
<TOTAL-REVENUES> 4,983,787
<CGS> 2,481,109
<TOTAL-COSTS> 3,606,753
<OTHER-EXPENSES> 577,931
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,593,992
<INCOME-PRETAX> (794,889)
<INCOME-TAX> 0
<INCOME-CONTINUING> (794,889)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (794,889)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
