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 0-13356
---------
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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
MCNEIL REAL ESTATE FUND XXI, L.P.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- --------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land ....................................................... $ 1,842,544 $ 1,842,544
Buildings and improvements ................................. 22,535,805 22,468,887
------------ ------------
24,378,349 24,311,431
Less: Accumulated depreciation and amortization ........... (12,915,466) (12,611,818)
------------ ------------
11,462,883 11,699,613
Cash and cash equivalents ..................................... 1,315,755 1,253,238
Cash segregated for security deposits ......................... 171,727 181,524
Accounts receivable ........................................... 22,459 25,391
Escrow deposits ............................................... 414,801 470,958
Deferred borrowing costs, net of accumulated amortiz-
ation of $271,853 and $255,111 at March 31, 1999
and December 31, 1998, respectively ........................ 289,075 305,817
Prepaid expenses and other assets ............................. 35,922 35,922
------------ ------------
$ 13,712,622 $ 13,972,463
============ ============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------
Mortgage notes payable, net ................................... $ 12,323,090 $ 12,372,597
Accounts payable and accrued expenses ......................... 178,303 172,803
Accrued property taxes ........................................ 218,510 304,699
Payable to affiliates ......................................... 5,533,168 5,446,918
Security deposits and deferred rental revenue ................. 179,977 170,108
------------ ------------
18,433,048 18,467,125
------------ ------------
Partners' deficit:
Limited partners - 50,000 Units authorized; 46,898
and 46,948 Units outstanding at March 31, 1999 and
December 31, 1998, respectively (24,863 Current
Income Units and 22,035 Growth/Shelter Units out-
standing at March 31, 1999 and 24,863 Current
Income Units and 22,085 Growth/Shelter
Units outstanding at December 31,1998) ................... (4,355,609) (4,132,103)
General Partner ............................................ (364,817) (362,559)
------------ ------------
(4,720,426) (4,494,662)
------------ ------------
$ 13,712,622 $ 13,972,463
============ ============
</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
March 31,
-------------------------------
1999 1998
----------- -----------
Revenue:
<S> <C> <C>
Rental revenue ............................................. $ 1,280,114 $ 1,654,081
Interest ................................................... 10,658 16,801
----------- -----------
Total revenue ............................................ 1,290,772 1,670,882
----------- -----------
Expenses:
Interest ................................................... 280,751 420,825
Interest - affiliates ...................................... -- 125,780
Depreciation and amortization .............................. 303,648 387,258
Property taxes ............................................. 105,600 137,585
Personnel costs ............................................ 199,318 202,934
Utilities .................................................. 105,406 116,969
Repairs and maintenance .................................... 156,363 163,906
Property management fees - affiliates ...................... 64,134 86,281
Other property operating expenses .......................... 81,032 103,910
General and administrative ................................. 88,649 92,496
General and administrative - affiliates .................... 131,635 170,591
----------- -----------
Total expenses ........................................... 1,516,536 2,008,535
----------- -----------
Net loss ...................................................... $ (225,764) $ (337,653)
=========== ===========
Net loss allocable to limited partners -
Current Income Unit ........................................ $ (20,319) $ (30,389)
Net loss allocable to limited partners -
Growth/Shelter Unit ........................................ (203,187) (303,888)
Net loss allocable to General Partner ......................... (2,258) (3,376)
----------- -----------
Net loss ...................................................... $ (225,764) $ (337,653)
=========== ===========
Net loss per limited partnership unit:
Current Income Units .......................................... $ (.82) $ (1.22)
=========== ===========
Growth/Shelter Units .......................................... $ (9.22) $ (13.76)
=========== ===========
</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 Three Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Deficit
------------ ------------ ------------
<S> <C> <C> <C>
Balance at December 31, 1997 ............... $ (376,608) $(5,522,974) $(5,899,582)
Net loss
General Partner ......................... (3,376) -- (3,376)
Current Income Units .................... -- (30,389) (30,389)
Growth/Shelter Units .................... -- (303,888) (303,888)
----------- ----------- -----------
Total net loss ............................. (3,376) (334,277) (337,653)
----------- ----------- -----------
Balance at March 31, 1998 .................. $ (379,984) $(5,857,251) $(6,237,235)
=========== =========== ===========
Balance at December 31, 1998 ............... $ (362,559) $(4,132,103) $(4,494,662)
Net loss
General Partner ......................... (2,258) -- (2,258)
Current Income Units .................... -- (20,319) (20,319)
Growth/Shelter Units .................... -- (203,187) (203,187)
----------- ----------- -----------
Total net loss ............................. (2,258) (223,506) (225,764)
----------- ----------- -----------
Balance at March 31, 1999 .................. $ (364,817) $(4,355,609) $(4,720,426)
=========== =========== ===========
</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>
Three Months Ended
March 31,
--------------------------------
1999 1998
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants ........................ $ 1,296,740 $ 1,631,609
Cash paid to suppliers ............................ (640,521) (787,618)
Cash paid to affiliates ........................... (109,519) (83,284)
Interest received ................................. 10,658 16,801
Interest paid ..................................... (258,818) (365,004)
Interest paid to affiliates ....................... -- (108,131)
Property taxes paid and escrowed .................. (114,104) (153,371)
----------- -----------
Net cash provided by operating activities ............ 184,436 151,002
----------- -----------
Cash flows from investing activities:
Additions to real estate investments .............. (66,918) (41,363)
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage notes
payable ......................................... (55,001) (66,979)
Principal payments on mortgage notes
payable - affiliate ............................. -- (4,090)
----------- -----------
Net cash used in financing activities ................ (55,001) (71,069)
----------- -----------
Net increase in cash and cash equivalents ............ 62,517 38,570
Cash and cash equivalents at beginning of
period ............................................ 1,253,238 1,817,585
----------- -----------
Cash and cash equivalents at end of period ........... $ 1,315,755 $ 1,856,155
=========== ===========
</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>
Three Months Ended
March 31,
1999 1998
---------- ----------
<S> <C> <C>
Net loss ................................................ $(225,764) $(337,653)
--------- ---------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization ........................ 303,648 387,258
Amortization of deferred borrowing costs ............. 16,742 15,629
Amortization of discounts on mortgage
notes payable ...................................... 5,494 5,222
Accrued interest on advances from affiliates ......... -- 14,777
Changes in assets and liabilities:
Cash segregated for security deposits .............. 9,797 (15,653)
Accounts receivable ................................ 2,932 (453)
Escrow deposits .................................... 56,157 91,890
Prepaid expenses and other assets .................. -- (5,641)
Accounts payable and accrued expenses .............. 5,500 (44,095)
Accrued property taxes ............................. (86,189) (129,496)
Payable to affiliates .............................. 86,250 173,588
Security deposits and deferred rental
revenue .......................................... 9,869 (4,371)
--------- ---------
Total adjustments ................................ 410,200 488,655
--------- ---------
Net cash provided by operating activities ............... $ 184,436 $ 151,002
========= =========
</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)
March 31, 1999
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 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 XXI, L.P., 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 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 $1,483,244 and $1,443,393 were outstanding at
March 31, 1999 and December 31, 1998, respectively.
<PAGE>
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 to .75% in 2000,
.50% in 2001 and .25% thereafter. Total accrued but unpaid asset management fees
of $3,682,123 and $3,636,836 were outstanding at March 31, 1999 and December 31,
1998, respectively.
The Partnership pays a disposition fee to 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 March 31,
1999 and December 31, 1998. In connection with the sale of Fort Meigs Plaza, the
General Partner waived its right to receive a disposition fee, which would have
totaled $114,000.
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 were payable to, the
General Partner. These advances totaling $630,574, and accrued interest of
$182,091, were repaid in full in April 1998.
Compensation and reimbursements 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 ................................ $ 64,134 $ 86,281
Charged to interest - affiliates:
Interest on advances from affiliates ................. -- 14,777
Interest on mortgage notes payable - affiliate ....... -- 111,003
Charged to general and administrative -affiliates: ......
Partnership administration ........................... 63,253 69,374
Asset management fee ................................. 68,382 101,217
-------- --------
$195,769 $382,652
======== ========
</TABLE>
Payable to affiliates at March 31, 1999 and December 31, 1998 consisted
primarily of unpaid asset management fees, property management fees, disposition
fees and partnership general and administrative expenses and is due and payable
from current operations.
<PAGE>
The mortgage notes payable - affiliate secured by Fort Meigs Plaza were repaid
in full when the property was sold in April 1998. See Note 4.
NOTE 4.
- -------
On April 20, 1998, the Partnership sold Fort Meigs Plaza Shopping Center,
located in Perrysburg, Ohio, to an unaffiliated purchaser for a cash purchase
price of $3,800,000. Cash proceeds from the sale, after payment of prorated
rents and property taxes, were used to repay the mortgage notes payable to
McNeil Real Estate Fund XX, L.P. ("Fund XX"), an affiliate.
Under the terms of its partnership agreement, the Partnership normally pays a
disposition fee to 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 sale of Fort Meigs Plaza, the General Partner waived its
right to receive such fee, which would have totaled $114,000.
NOTE 5.
- -------
The mortgage notes payable secured by Wise County Plaza matured on August 1,
1997 and the Partnership was unable to negotiate a modification and extension of
the loans. On May 29, 1998, Wise County Plaza was foreclosed on by the lender in
full settlement of the mortgage indebtedness secured by the property.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
Fort Meigs Plaza Shopping Center was sold on April 20, 1998. Wise County Plaza
Shopping Center was foreclosed on by the lender on May 29, 1998. There has been
no significant change in the operations of the remainder of the Partnership's
properties since December 31, 1998. The Partnership reported a net loss for the
first three months of 1999 of $225,764 as compared to a net loss of $337,653 for
the first three months of 1998. Revenues decreased to $1,290,772 in the first
quarter of 1999 from $1,670,882 in the first quarter of 1998, while expenses
decreased to $1,516,536 in the first quarter of 1999 from $2,008,535 in the
first quarter of 1998.
Net cash provided by operating activities was $184,436 for the first three
months of 1999. The Partnership expended $66,918 for capital improvements and
$55,001 for regularly scheduled principal payments on its mortgage notes
payable. Cash and cash equivalents increased by $62,517 in the first three
months of 1999, leaving a balance of $1,315,755 at March 31, 1999.
The Partnership has had little ready cash reserves since its inception. It has
been largely dependent on deferring affiliate payables in order to support its
operations. At March 31, 1999 the Partnership owed payables to affiliates for
property management fees, Partnership general and administrative expenses, asset
management fees and disposition fees totaling $5,533,168.
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total revenue decreased by $380,110 for the three months ended March 31, 1999 as
compared to the same period in 1998, as discussed below.
Rental revenue in the first quarter of 1999 decreased by $373,967 in relation to
the prior year. Excluding rental revenue from Fort Meigs Plaza and Wise County
Plaza, which were disposed of in 1998, rental revenue increased by $33,562.
Rental revenue increased at all of the Partnership's remaining properties in the
first quarter of 1999, mainly due to an increase in rental rates at all of the
properties. The largest increases, of approximately $12,000 and $10,000,
occurred at Woodcreek and Breckenridge apartments, respectively.
Interest income decreased by $6,143 for the three months ended March 31, 1999 in
relation to the comparable period in 1998, mainly due to a decline in the amount
of cash available for short-term investment in the first quarter of 1999. The
Partnership held cash and cash equivalents of approximately $1.32 million at
March 31, 1999 as compared to approximately $1.86 million at March 31, 1998.
Expenses:
Total expenses decreased by $491,999 in the first three months of 1999 as
compared to the same period in 1998. Excluding the sale of Fort Meigs Plaza and
the foreclosure of Wise County Plaza in 1998, total expenses decreased by
$37,714. This decrease in expenses was mainly due to decreases in interest -
affiliates and general and administrative - affiliates, as discussed below.
Interest expense for the first quarter of 1999 decreased by $140,074 in relation
to the first quarter of 1998. The decrease was mainly due to the foreclosure of
Wise County Plaza in May 1998.
Interest - affiliates decreased by $125,780 in the first three months of 1999 as
compared to the same period in the prior year. The decrease was mainly the
result of the April 1998 payoff of the affiliate loans secured by Fort Meigs
Plaza. Additionally, in April 1998 the Partnership repaid $630,574 of
interest-bearing advances from affiliates ($14,778 of interest was recorded on
these advances in the first quarter of 1998).
Depreciation and amortization, property taxes, property management fees -
affiliates and other property operating expenses decreased by $83,610, $31,985,
$22,147 and $22,878, respectively, in the first three months of 1999 as compared
to the same period in 1998. These decreases were mainly attributable to Fort
Meigs Plaza and Wise County Plaza, which were disposed of in 1998, but
subsequent to March 31, 1998.
For the three months ended March 31, 1999, general and administrative -
affiliates decreased by $38,956 as compared to the same period in 1998. The
decrease was mainly due to a decrease in asset management fees due to a decline
in the tangible asset value of the Partnership, on which the fees are based, as
a result of the disposition of Fort Meigs Plaza and Wise County Plaza in 1998.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 31, 1999, the Partnership held cash and cash equivalents of $1,315,755.
Cash of $184,436 was provided by operating activities during the first three
months of 1999 as compared to $151,002 provided during the same period in 1998.
Excluding cash provided by operations of Fort Meigs Plaza which was sold in
April 1998 and Wise County Plaza which was foreclosed on in May 1998, cash
provided by operating activities increased by $88,865 in the first quarter of
1999. The increase was mainly due to an increase in cash received from tenants
and a decrease in cash paid to suppliers, partially offset by an increase in
cash paid to affiliates in 1999. The increase in cash received from tenants was
due to an increase in rental revenue and security deposits collected from
tenants in 1999. The timing of the payment of invoices at the end of the period
was the primary factor in the decrease in cash paid to suppliers. In the first
quarter of 1999, the Partnership paid an affiliate approximately $46,000 of
previously accrued asset management fees and reimbursable expenses. No asset
management fees or reimbursable expenses were paid during the first quarter of
1998.
Cash used for additions to real estate investments totaled $66,918 for the first
three months of 1999 as compared to $41,363 for the same period in 1998. A
greater amount was expended in 1999 for windows at Governour's Square Apartments
and for appliances at Breckenridge Apartments and Evergreen Square Apartments.
The foreclosure of Wise County Plaza in May 1998 resulted in a decrease in cash
used for principal payments on mortgage notes payable to $55,001 in the first
quarter of 1999 from $66,979 in the first quarter of 1998.
No principal payments on mortgage notes payable - affiliate were made in 1999 as
Fort Meigs Plaza was sold and the affiliate loans were repaid in April 1998.
Short-term liquidity
In 1999, 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 Partnership has no established lines of credit from outside sources.
Although affiliates of the Partnership have previously funded cash deficits,
affiliates are not obligated to advance funds to the Partnership and 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.
For the Partnership as a whole, management projects positive cash flow from
operations in 1999. The Partnership has budgeted approximately $1,017,000 for
necessary capital improvements for all properties in 1999, which are expected to
be funded from available cash reserves or from operations of the properties.
<PAGE>
Additional efforts to maintain and improve Partnership liquidity have included
continued attention to property management activities. The objective has been to
obtain maximum occupancy rates while holding expenses to levels necessary to
maximize cash flows. The Partnership has made capital expenditures on its
properties where improvements were expected to increase the competitiveness and
marketability of the properties.
Long-term liquidity
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.
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's working capital needs have been
supported by deferring certain affiliate payables. The Partnership owed payables
to affiliates for property management fees, Partnership general and
administrative expenses, asset management fees and disposition fees totaling
$5,533,168 at March 31, 1999.
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<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
24,863 Current Income Units outstanding in
1999 and 1998, and 22,035 and 22,085
Growth/Shelter Units outstanding in 1999 and
1998, respectively.
27. Financial Data Schedule for the quarter
ended March 31, 1999.
(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 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
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/ 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,315,755
<SECURITIES> 0
<RECEIVABLES> 22,459
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 24,378,349
<DEPRECIATION> (12,915,466)
<TOTAL-ASSETS> 13,712,622
<CURRENT-LIABILITIES> 0
<BONDS> 12,323,090
0
0
<COMMON> 0
<OTHER-SE> (4,720,426)
<TOTAL-LIABILITY-AND-EQUITY> 13,712,622
<SALES> 1,280,114
<TOTAL-REVENUES> 1,290,772
<CGS> 711,853
<TOTAL-COSTS> 1,015,501
<OTHER-EXPENSES> 220,284
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 280,751
<INCOME-PRETAX> (225,764)
<INCOME-TAX> 0
<INCOME-CONTINUING> (225,764)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (225,764)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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