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 June 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>
June 30, December 31,
1997 1996
--------------- --------------
ASSETS
- -------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 3,240,113 $ 3,240,113
Buildings and improvements............................... 29,911,356 29,542,828
-------------- -------------
33,151,469 32,782,941
Less: Accumulated depreciation and amortization......... (15,414,340) (14,661,016)
-------------- -------------
17,737,129 18,121,925
Asset held for sale......................................... 2,744,391 2,731,674
Cash and cash equivalents................................... 1,657,410 1,670,843
Cash segregated for security deposits....................... 180,578 167,645
Accounts receivable......................................... 302,236 317,152
Escrow deposits............................................. 565,933 425,750
Deferred borrowing costs, net of accumulated amortiz-
ation of $188,054 and $153,724 at June 30, 1997
and December 31, 1996, respectively...................... 398,347 432,677
Prepaid expenses and other assets........................... 60,941 63,559
-------------- -------------
$ 23,646,965 $ 23,931,225
============== =============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net................................. $ 21,658,382 $ 21,780,275
Mortgage note payable - affiliate........................... 733,900 733,900
Accounts payable and accrued expenses....................... 263,550 282,667
Accrued property taxes...................................... 416,573 347,845
Payable to affiliates....................................... 4,532,899 4,210,324
Advances from affiliates.................................... 764,769 735,253
Deferred gain on involuntary conversion..................... 40,070 66,879
Security deposits and deferred rental revenue............... 205,875 195,060
-------------- -------------
28,616,018 28,352,203
-------------- -------------
Partners' deficit:
Limited partners - 50,000 Units authorized;
47,086 and 47,288 Units outstanding at June 30,
1997 and December 31, 1996, respectively, (24,906
Current Income Units and 22,180 Growth/Shelter
Units outstanding at June 30, 1997 and 24,949
Current Income Units and 22,339 Growth/Shelter Units
outstanding at December 31,1996)....................... (4,601,750) (4,059,156)
General Partner.......................................... (367,303) (361,822)
-------------- -------------
(4,969,053) (4,420,978)
-------------- -------------
$ 23,646,965 $ 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 Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
1997 1996 1997 1996
-------------- --------------- -------------- --------------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue................ $ 1,614,511 $ 1,605,888 $ 3,221,812 $ 3,199,384
Interest...................... 19,740 31,826 38,241 53,875
Gain on involuntary
conversion.................. 26,809 - 26,809 -
------------- ------------- ------------- -------------
Total revenue............... 1,661,060 1,637,714 3,286,862 3,253,259
------------- ------------- ------------- -------------
Expenses:
Interest...................... 505,794 471,064 1,019,645 984,980
Interest - affiliates......... 30,411 29,853 59,958 59,845
Depreciation and
amortization................ 387,101 405,871 753,324 808,585
Property taxes................ 135,339 125,445 270,678 245,136
Personnel costs............... 172,259 168,161 381,452 375,353
Utilities..................... 96,252 97,408 211,564 210,490
Repairs and maintenance....... 211,357 175,433 390,122 351,538
Property management
fees - affiliates........... 82,757 85,525 166,284 167,347
Other property operating
expenses.................... 97,985 100,477 198,656 200,932
General and administrative.... 34,892 23,444 62,306 45,201
General and administrative -
affiliates.................. 163,349 187,047 320,948 368,354
------------- ------------- ------------- -------------
Total expenses.............. 1,917,496 1,869,728 3,834,937 3,817,761
------------- ------------- ------------- -------------
Net loss......................... $ (256,436) $ (232,014) $ (548,075) $ (564,502)
============= ============= ============= =============
Net loss allocable to limited
partners - Current
Income Unit................... $ (23,079) $ (20,881) $ (49,327) $ (50,805)
Net loss allocable to
limited partners - Growth/
Shelter Unit.................. (230,793) (208,813) (493,267) (508,052)
Net loss allocable to
General Partner............... (2,564) (2,320) (5,481) (5,645)
------------- ------------- ------------- -------------
Net loss......................... $ (256,436) $ (232,014) $ (548,075) $ (564,502)
============= ============= ============= =============
Net loss per limited partnership
unit:
Current Income Units.......... $ (.93) $ (.84) $ (1.98) $ (2.04)
============= ============= ============= =============
Growth/Shelter Units.......... $ (10.41) $ (9.34) $ (22.24) $ (22.74)
============= ============= ============= =============
</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 Six Months Ended June 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........................ (5,645) - (5,645)
Current Income Units................... - (50,805) (50,805)
Growth/Shelter Units................... - (508,052) (508,052)
------------- ------------- -------------
Total net loss............................ (5,645) (558,857) (564,502)
------------- ------------- -------------
Balance at June 30, 1996.................. $ (356,196) $ (3,502,204) $ (3,858,400)
============= ============= =============
Balance at December 31, 1996.............. $ (361,822) $ (4,059,156) $ (4,420,978)
Net loss
General Partner........................ (5,481) - (5,481)
Current Income Units................... - (49,327) (49,327)
Growth/Shelter Units................... - (493,267) (493,267)
------------- ------------- -------------
Total net loss............................ (5,481) (542,594) (548,075)
------------- ------------- -------------
Balance at June 30, 1997.................. $ (367,303) $ (4,601,750) $ (4,969,053)
============= ============= =============
</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>
Six Months Ended
June 30,
-------------------------------------------
1997 1996
------------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants........................ $ 3,223,375 $ 3,231,345
Cash paid to suppliers............................ (1,302,991) (1,170,281)
Cash paid to affiliates........................... (164,657) (166,595)
Interest received................................. 38,241 53,875
Interest paid..................................... (976,353) (944,609)
Interest paid to affiliates....................... (24,443) (24,443)
Property taxes paid............................... (293,553) (238,126)
----------------- --------------
Net cash provided by operating activities............ 499,619 741,166
----------------- --------------
Cash flows from investing activities:
Additions to real estate investments.............. (381,245) (306,352)
----------------- --------------
Cash flows from financing activities:
Deferred borrowing costs paid..................... - (312)
Principal payments on mortgage notes
payable......................................... (131,807) (120,920)
----------------- --------------
Net cash used in financing activities................ (131,807) (121,232)
----------------- --------------
Net increase (decrease) in cash and
cash equivalents.................................. (13,433) 313,582
Cash and cash equivalents at beginning of
period............................................ 1,670,843 1,998,301
----------------- --------------
Cash and cash equivalents at end of period........... $ 1,657,410 $ 2,311,883
================= ==============
</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>
Six Months Ended
June 30,
-----------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Net loss............................................. $ (548,075) $ (564,502)
--------------- ---------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization..................... 753,324 808,585
Amortization of deferred borrowing costs.......... 34,330 31,838
Amortization of discounts on mortgage
notes payable................................... 9,914 9,406
Accrued interest on advances from affiliates...... 29,516 29,235
Gain on involuntary conversion.................... (26,809) -
Changes in assets and liabilities:
Cash segregated for security deposits........... (12,933) (3,341)
Accounts receivable............................. 14,916 23,832
Escrow deposits................................. (140,183) 60,538
Prepaid expenses and other assets............... 2,618 (3,478)
Accounts payable and accrued expenses........... (19,117) (9,914)
Accrued property taxes.......................... 68,728 (25,612)
Payable to affiliates........................... 322,575 369,106
Security deposits and deferred rental
revenue....................................... 10,815 15,473
--------------- --------------
Total adjustments............................. 1,047,694 1,305,668
--------------- --------------
Net cash provided by operating activities............ $ 499,619 $ 741,166
=============== ==============
</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)
June 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 six months ended June 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.
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 $3,122,480 and
$2,927,930 were outstanding at June 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 June 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 June 30, 1997 and December 31, 1996
consisted of the following:
June 30, December 31,
1997 1996
--------- ------------
Advances purchased by General Partner.......... $ 630,574 $ 630,574
Accrued interest payable....................... 134,195 104,679
-------- ---------
$ 764,769 $ 735,253
======== =========
<PAGE>
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner and its affiliates are as follows:
Six Months Ended
June 30,
-----------------------
1997 1996
--------- ----------
Property management fees....................... $ 166,284 $ 167,347
Charged to interest - affiliates:
Interest on advances from affiliates........ 29,516 29,235
Interest on mortgage note payable -
affiliate................................ 30,442 30,610
Charged to general and administrative -
affiliates:
Partnership administration.................. 126,398 165,253
Asset management fee........................ 194,550 203,101
-------- ---------
$ 547,190 $ 595,546
======== =========
Payable to affiliates at June 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 March 1997, the lender on the Partnership's $733,900 mortgage note payable -
affiliate secured by Fort Meigs Plaza extended the maturity of the note to
September 1, 1997 from April 1, 1997.
NOTE 7.
- -------
On July 12 and September 5, 1996, Governour's Square Apartments suffered damages
from two separate hurricanes. Repairs of damages totaling $191,402 were
completed. Reimbursements for the repairs totaling $40,937 were received from
the insurance carrier in 1996, and $40,272 were received during the first half
of 1997. The remaining costs of $110,193 less a $50,000 deductible, were
received in July 1997 and are included in accounts receivable on the June 30,
1997 Balance Sheet. The Partnership recognized a gain on involuntary conversion
of $27,252 and recorded a deferred gain of $66,879 in 1996. The total gain on
involuntary conversion of $94,131 represents the insurance claims in excess of
the basis of the property damaged by the hurricanes. A $26,809 gain on
involuntary conversion was recognized during the first half of 1997, and the
remaining deferred gain was recognized in July 1997 when the remaining insurance
claim reimbursements were received.
<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 six months of 1997 of $548,075 as compared to $564,502 for the first six
months of 1996. Revenues increased to $3,286,862 in 1997 from $3,253,259 in
1996. Expenses were $3,834,937 in 1997 as compared to $3,817,761 in 1996.
Net cash provided by operating activities was $499,619 for the first six months
of 1997. The Partnership expended $381,245 for capital improvements and $131,807
for principal payments on its mortgage notes payable. Cash and cash equivalents
decreased by $13,433 for the first six months of 1997, leaving a balance of
$1,657,410 at June 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 six months of
1997, at June 30, 1997 the Partnership owed affiliate advances of $764,769 and
payables to affiliates for property management fees, Partnership general and
administrative expenses, asset management fees and disposition fees totaling
$4,532,899.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total revenue increased by $23,346 and $33,603 for the first three and six
months of 1997, respectively, as compared to the same periods of 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 $26,809 gain on involuntary conversion during the first half of
1997 relating to hurricane damages at Governour's Square Apartments, as
discussed in Item 1, Note 7.
<PAGE>
Rental revenue increased by $8,623 and $22,428 for the three and six months
ended June 30, 1997, respectively, as compared to the same periods in 1996.
Rental revenue for all properties increased slightly during the first half of
1997, except at Evergreen Square Apartments where rental revenue decreased due
to a decline in occupancy to 82% at the end of June 1997 from 90% at the end of
June 1996. In addition, in 1996 the Partnership received approximately $18,000
of rental revenue relating to a property which had previously been sold. No such
income was received during the first half of 1997.
Interest income decreased by $12,086 and $15,634 for the three and six months
ended June 30, 1997, respectively, as compared to the same periods in 1996 due
to a lower amount of cash available for short-term investment in 1997. The
Partnership held $1.7 million of cash and cash equivalents at June 30, 1997 as
compared to $2.3 million at June 30, 1996.
Expenses:
Total expenses increased by $47,768 and $17,176 for the first three and six
months of 1997, respectively, as compared to the same periods in 1996. The
increase was mainly due to increases in property taxes, repairs and maintenance
and general and administrative expenses, partially offset by a decrease in
general and administrative - affiliates, as discussed below.
Property taxes increased by $9,894 and $25,542 for the three and six months
ended June 30, 1997, respectively, as compared to the same periods in 1996. The
increase was partially due to increased property taxes at Woodcreek and
Evergreen Square Apartments. In addition, in 1996 the Partnership received an
approximately $5,700 refund of prior years' property taxes relating to Bedford
Green Apartments. No such refund was received in the first half of 1997.
Repairs and maintenance expense increased by $35,924 and $38,584 for the three
and six months ended June 30, 1997, respectively, as compared to the same
periods in 1996. The increase was due to increases in replacement of floor
coverings at Woodcreek Apartments and replacement of appliances at Governour's
Square Apartments. The replacements, which met the Partnership's criteria for
capitalization in 1996, were expensed in 1997.
General and administrative expenses for the first three and six months of 1997
increased by $11,448 and $17,105, respectively, as compared to the same periods
in 1996. Costs incurred for investor services were paid to an unrelated third
party in 1997. In the first six 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.
General and administrative - affiliates decreased by $23,698 and $47,406 for the
three and six months ended June 30, 1997, respectively, as compared to the same
periods in 1996. The decrease was mainly due to a decrease in overhead expenses
allocated to the Partnership by McREMI, which was partially due to investor
services being performed by an unrelated third party in 1997, as discussed
above.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At June 30, 1997, the Partnership held cash and cash equivalents of $1,657,410.
Cash of $499,619 was provided by operating activities during the first six
months of 1997 as compared to $741,166 provided during the same period in 1996.
The decrease in cash provided by operations in the first half of 1997 was mainly
the result of an increase in cash paid to suppliers, interest paid and property
taxes paid due to the timing of the payment of invoices.
Cash used for additions to real estate investments totaled $381,245 for the
first six months of 1997 as compared to $306,352 for the same period in 1996. A
greater amount was spent in the first half of 1997 for landscaping and exterior
painting at Governour's Square Apartments.
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
April 1, 1997 and the maturity was extended to September 1, 1997. The Fort Meigs
mortgage note payable to a non-affiliate matures in October 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 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. The
Partnership has received an offer from a non-affiliate to purchase the property
for $4.4 million.
<PAGE>
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.
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.
<PAGE>
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.
<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 June 30, 1997.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended June 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
August 13, 1997 By: /s/ Ron K. Taylor
- --------------- ------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
August 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,657,410
<SECURITIES> 0
<RECEIVABLES> 302,236
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 33,151,469
<DEPRECIATION> (15,414,340)
<TOTAL-ASSETS> 23,646,965
<CURRENT-LIABILITIES> 0
<BONDS> 22,392,282
0
0
<COMMON> 0
<OTHER-SE> (4,969,053)
<TOTAL-LIABILITY-AND-EQUITY> 23,646,965
<SALES> 3,221,812
<TOTAL-REVENUES> 3,286,862
<CGS> 1,618,756
<TOTAL-COSTS> 2,372,080
<OTHER-EXPENSES> 383,254
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,079,603
<INCOME-PRETAX> (548,075)
<INCOME-TAX> 0
<INCOME-CONTINUING> (548,075)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (548,075)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
