UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K405
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
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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 0-14007
McNEIL REAL ESTATE FUND XX, L.P.
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(Exact name of registrant as specified in its charter)
California 33-0050225
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (214) 448-5800
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act: Limited partnership
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
49,507 of the registrant's 49,512 outstanding limited partnership units are held
by non-affiliates. The aggregate market value of units held by non-affiliates is
not determinable since there is no public trading market for limited partnership
units and transfers of units are subject to certain restrictions.
Documents Incorporated by Reference: See Item 14, Page 39
TOTAL OF 41 PAGES
<PAGE>
PART I
ITEM 1. BUSINESS
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ORGANIZATION
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McNeil Real Estate Fund XX, L.P. (the "Partnership"), formerly known as
Southmark Income Investors, Ltd., was organized on July 19, 1984 as a limited
partnership under the provisions of the California Revised Limited Partnership
Act to invest in, hold, manage and dispose of mortgage loans, real estate and
real estate-related investments. 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 General Partner was elected at
a meeting of limited partners on March 30, 1992, at which time an amended and
restated partnership agreement (the "Amended Partnership Agreement") was
adopted. Prior to March 30, 1992, the general partner of the Partnership was
Southmark Investment Group, Inc. (the "Original General Partner"), a Nevada
corporation and a wholly-owned subsidiary of Southmark Corporation
("Southmark"). The principal place of business for the Partnership and the
General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240.
On September 28, 1984, the Partnership registered with the Securities and
Exchange Commission under the Securities Act of 1933 (File No. 2-92376) and
commenced a public offering for the sale of $30,000,000 of limited partnership
units ("Units"). The Units represent equity interests in the Partnership and
entitle the holders thereof to participate in certain allocations and
distributions of the Partnership. The sale of Units closed on September 27,
1985, with 49,528 Units sold at $500 each, or gross proceeds (net of discounts
of $57,546) of $24,706,454 to the Partnership. In 1994 and 1993, 12 and 4 Units
were relinquished, respectively, leaving 49,512 Units outstanding at December
31, 1995.
SOUTHMARK BANKRUPTCY AND CHANGE IN GENERAL PARTNER
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On July 14, 1989, Southmark filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. Neither the Partnership, the General
Partner nor the Original General Partner were included in the filing.
Southmark's reorganization plan became effective August 10, 1990. Under the
plan, most of Southmark's assets, which included Southmark's interests in the
Original General Partner, are being sold or liquidated for the benefit of
creditors.
In accordance with Southmark's reorganization plan, Southmark, McNeil and
various of their affiliates entered into an asset purchase agreement on October
12, 1990, providing for, among other things, the transfer of control to McNeil
or his affiliates of 34 limited partnerships (including the Partnership) in the
Southmark portfolio.
On February 14, 1991, pursuant to the asset purchase agreement as amended on
that date, McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of
McNeil, acquired the assets relating to the property management and partnership
administrative business of Southmark and its affiliates and commenced management
of the Partnership's properties pursuant to an assignment of the existing
property management agreements from the Southmark affiliates.
On March 30, 1992, the limited partners approved a restructuring proposal that
provided for (i) the replacement of the Original General Partner with a new
general partner, McNeil Partners, L.P.; (ii) the adoption of the Amended
Partnership Agreement which substantially alters the provisions of the original
partnership agreement relating to, among other things, compensation,
reimbursement of expenses and voting rights; (iii) the approval of an amended
property management agreement with McREMI, the Partnership's property manager;
and (iv) the approval to change the Partnership's name to McNeil Real Estate
Fund XX, L.P. Under the Amended Partnership Agreement, the Partnership began
accruing an asset management fee, retroactive to February 14, 1991, which is
payable to the General Partner. For a discussion of the methodology for
calculating the asset management fee, see Item 13 Certain Relationships and
Related Transactions. The proposals approved at the March 30, 1992 meeting were
implemented as of that date.
Concurrent with the approval of the restructuring, the General Partner acquired
from Southmark and its affiliates, for aggregate consideration of $5,441, the
general partner interest of the Original General Partner. None of the Units are
owned by the General Partner or its affiliates.
CURRENT OPERATIONS
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General:
The Partnership is engaged in the servicing of mortgage loans, including equity
and revenue participation loans, and the ownership, operation and management of
income-producing properties acquired through foreclosure. In July 1990, the
Partnership foreclosed on Park Spring Apartments (renamed Sterling Springs
Apartments) in settlement of the related mortgage loan. In September 1991, the
Partnership foreclosed on Holiday Inn - Jacksonville (renamed Cherokee Inn) in
partial settlement of the related mortgage loan and later sold the property in
January 1993. In May 1993, the Partnership foreclosed on 1130 Sacramento
Condominiums in settlement of the related mortgage loan. At December 31, 1995,
the Partnership operated two income-producing properties as described in Item 2
Properties, and serviced three mortgage loan investments.
The Partnership does not directly employ any personnel. The General Partner
conducts the business of the Partnership directly and through its affiliates.
The Partnership reimburses affiliates of the General Partner for such services
rendered in accordance with the Amended Partnership Agreement. See Item 8 - Note
2 - "Transactions With Affiliates."
The business of the Partnership to date has involved only one industry segment.
See Item 8 - Financial Statements and Supplementary Data. The Partnership has no
foreign operations. The business of the Partnership is not seasonal.
Business Plan:
The Partnership's anticipated plan of operations for 1996 is to preserve or
increase the net operating income of its properties whenever possible, while at
the same time making whatever capital expenditures are reasonable under the
circumstances in order to preserve and enhance the value of the Partnership's
properties. The General Partner is evaluating market and other economic
conditions to determine the optimum time to commence an orderly liquidation of
the Partnership's properties in accordance with the terms of the Amended
Partnership Agreement. In conjunction therewith, the General Partner will
continue to explore potential avenues to enhance the value of the Units in the
Partnership, which may include, among other things, asset sales or refinancings
of the Partnership's properties which may result in distributions to the limited
partners. See Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Competitive Conditions:
Since the principal business of the Partnership is to own and operate real
estate acquired through foreclosure and to service mortgage loans secured by
real estate investments, the Partnership is subject to certain of the risks
incidental to ownership of real estate and interests therein, many of which
relate to the illiquidity of this type of investment. These risks include
changes in general or local economic conditions, changes in supply or demand for
competing properties in an area, changes in interest rates and availability of
permanent mortgage funds which may render the sale or refinancing of a property
difficult or unattractive, changes in real estate and zoning laws, increases in
real property tax rates and Federal or local economic or rent controls. The
illiquidity of real estate investments generally impairs the ability of the
Partnership and its borrowers to respond promptly to changed circumstances. The
Partnership and its borrowers compete with numerous established companies,
private investors (including foreign investors), real estate investment trusts,
limited partnerships and other entities (many of which have greater resources
than the Partnership and its borrowers) in connection with the sale, financing
and leasing of properties. The impact of these risks on the Partnership,
including losses from operations and foreclosures of the Partnership's
properties, is described in Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations. See Item 2 - Properties for a
discussion of the competitive conditions at each of the Partnership's
properties.
Other Information:
The environmental laws of the Federal government and of certain state and local
governments impose liability on current property owners for the clean-up of
hazardous and toxic substances discharged on the property. This liability may be
imposed without regard to the timing, cause or person responsible for the
release of such substances onto the property. The Partnership could be subject
to such liability in the event that it owns properties having such environmental
problems. The Partnership has no knowledge of any pending claims or proceedings
regarding such environmental problems.
In August 1995, High River Limited Partnership ("High River"), a Delaware
limited partnership controlled by Carl C. Icahn, made an unsolicited tender
offer (the "HR Offer") to purchase from holders of Units up to approximately 45%
of the outstanding Units of the Partnership for a purchase price of $100 per
Unit. In addition, High River made unsolicited tender offers for certain other
partnerships controlled by the General Partner. The Partnership recommended that
the limited partners reject the HR Offer made with respect to the Partnership
and not tender their Units pursuant to the HR Offer. The HR Offer terminated,
after numerous extensions, on October 6, 1995. The General Partner believes that
as of February 29, 1996, High River has purchased approximately 9.13% of the
outstanding Units pursuant to the HR Offer. In addition, all litigation filed by
High River, Mr. Icahn and his affiliates in connection with the HR Offer has
been dismissed without prejudice.
ITEM 2. PROPERTIES
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The following table sets forth the real estate investment portfolio of the
Partnership at December 31, 1995. All of the buildings and the land on which
they are located are owned by the Partnership in fee. 1130 Sacramento
Condominiums is unencumbered by mortgage indebtedness. Sterling Springs
Apartments is subject to a first lien deed of trust as set forth more fully in
Item 8 - Note 7 - "Mortgage Note Payable." See also Item 8 - Note 4 "Real Estate
Investments" and Schedule III - Real Estate Investments and Accumulated
Depreciation. In the opinion of management, the properties are adequately
covered by insurance.
<TABLE>
Net Basis 1995 Date
Property Description of Property Debt Property Taxes Acquired
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<S> <C> <C> <C> <C> <C>
1130 Sacramento Condominiums
San Francisco, CA 4 units $2,527,687 $ - $ 56,530 5/93
Sterling Springs Apartments
Austin, TX (1) 172 units 3,198,690 2,760,961 123,531 7/90
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$5,726,377 $2,760,961 $ 180,061
========= ========= ========
</TABLE>
Total: Condominiums - 4 units
Apartments - 172 units
(1) Sterling Springs Apartments is owned by Sterling Springs Fund XX Limited
Partnership, which is wholly-owned by the Partnership.
The following table sets forth the properties' occupancy rate and rent per
square foot for the last five years:
<TABLE>
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1130 Sacramento (1)
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Occupancy Rate............ 100% 75% N/A N/A N/A
Rent Per Square Foot...... $25.96 $13.91 N/A N/A N/A
Sterling Springs
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Occupancy Rate............ 99% 95% 98% 97% 97%
Rent Per Square Foot...... $ 9.10 $ 8.37 $7.62 $6.76 $6.26
</TABLE>
(1) Construction on 1130 Sacramento Condominiums was completed in January 1994.
Occupancy rate represents all units leased divided by the total number of units
of the property as of December 31 of the given year. Rent per square foot
represents all revenue, except interest, derived from the property's operations
divided by the leasable square footage of the property.
Competitive conditions:
1130 Sacramento
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1130 Sacramento is an eight-story residential condominium containing four units.
The property is located in the prestigious Nob Hill area of San Francisco,
California. As construction of the property was completed in January 1994, no
capital expenditures are anticipated in 1996. Due to the high rental rates, this
property appeals to a very small market. However, the Partnership will attempt
to keep all units leased during 1996.
Sterling Springs
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Sterling Springs is a garden-style apartment community located in the southwest
area of Austin, Texas. A large number of competing apartment units were built in
1994 and 1995 and additional development is projected for 1996. Occupancy is
expected to decrease slightly in 1996; however, management plans rental rate
increases in 1996 which should allow the property to maintain or slightly
increase rental revenue.
ITEM 3. LEGAL PROCEEDINGS
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The Partnership is not party to, nor are any of the Partnership's properties the
subject of, any material pending legal proceedings, other than ordinary, routine
litigation incidental to the Partnership's business, except for the following:
1) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors,
Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil
Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and
Carole J. McNeil (L95012) - High River ("HR") filed this action in the
United States District Court for the Southern District of New York against
McNeil Partners, L.P., McNeil Investors, Inc. and Mr. and Mrs. McNeil (as
defined in this Section 1, collectively, the "Defendants") requesting,
among other things, names and addresses of the limited partners in the
partnerships referenced above (as defined in this Section 1, the
"Partnerships"). The District Court issued a preliminary injunction against
the Partnerships requiring them to commence mailing materials relating to
the HR tender offer on August 14, 1995.
On August 18, 1995, the Defendants filed an Answer and Counterclaim. The
Counterclaim principally asserts (1) the HR tender offers have been
undertaken in violation of the Federal securities laws, on the basis of
material, non-public, and confidential information, and (2) that the HR
offer documents omit and/or misrepresent certain material information about
the HR tender offers. The Counterclaim seeks a preliminary and permanent
injunction against the continuation of the HR tender offers and,
alternatively, ordering corrective disclosure with respect to allegedly
false and misleading statements contained in the tender offer documents.
This action was dismissed without prejudice in November 1995.
2) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors,
Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil
Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and
Carole J. McNeil - United States District Court for the Southern District
of New York, (Case No. 95 Civ. 9488) (Second Action).
On November 7, 1995, High River filed a second complaint with the District
Court which alleges, inter alia, that McNeil Partners, L.P.'s (the "General
Partner") Schedule 14D-9 filed in connection with the High River tender
offers was materially false and misleading, in violation of Sections 14(d)
and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(d)
and (e), and the SEC Regulations promulgated thereunder; and that High
River further alleges that the General Partner has wrongfully refused to
admit High River as a limited partner to the ten partnerships referenced
above. Additionally, High River purports to assert claims derivatively on
behalf of McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XXIV, L.P.
and McNeil Real Estate Fund XXV, L.P., for breach of contract and breach of
fiduciary duty, asserting that the General Partner has charged these
partnerships excessive fees. High River's complaint seeks, inter alia,
preliminary injunctive relief requiring the General Partner to admit High
River as a limited partner in each of the ten partnerships referenced above
and to transfer the tendered units of interest in the partnerships to High
River; an unspecified award of damages payable to High River and an
additional unspecified award of damages payable to certain of the
partnerships; an order that defendants must discharge their fiduciary
duties and must account for all fees they have received from certain of the
partnerships; and attorneys' fees.
On January 31, 1996, this action was dismissed without prejudice.
3) HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young, BDO Seidman et
al. (Case #92-06560-A). This suit was filed on behalf of the Partnership
and other affiliated partnerships (the "Affiliated Partnerships") on May
26, 1992, in the 14th Judicial District Court of Dallas County. The
petition sought recovery against the Partnership's former auditors, Ernst &
Young, for negligence and fraud in failing to detect and/or report
overcharges of fees/expenses by Southmark, the former general partner. The
former auditors initially asserted counterclaims against the Affiliated
Partnerships based on alleged fraudulent misrepresentations made to the
auditors by the former management of the Affiliated Partnerships
(Southmark) in the form of client representation letters executed and
delivered to the auditors by Southmark management. The counterclaims sought
recovery of attorneys' fees and costs incurred in defending this action.
The counterclaims were later dismissed on appeal, as discussed below.
The trial court granted summary judgment against the Partnership based on
the statute of limitations; however, on appeal, the Dallas Court of Appeals
reversed the trial court and remanded for trial the Affiliated
Partnerships' fraud claims against Ernst & Young. The Texas Supreme Court
denied Ernst & Young's application for writ of error on January 11, 1996.
The Partnership is continuing to pursue vigorously its claims against Ernst
& Young; however, the final outcome of this litigation cannot be determined
at this time.
4) Martha Hess, et al. v. Southmark Equity Partners II, Ltd., Southmark Income
Investors, Ltd. (presently known as McNeil Real Estate Fund XX, L.P.),
Southmark Equity Partners, Ltd., Southmark Realty Partners III, Ltd., and
Southmark Realty Partners II, Ltd., et al. ("Hess"); Kotowski v. Southmark
Equity Partners, Ltd. and Donald Arceri v. Southmark Income Investors, Ltd.
These cases were previously pending in the Illinois Appellate Court for the
First District ("Appellate Court"), as consolidated Case No. 90-107.
Consolidated with these cases are an additional 14 matters against
unrelated partnership entities. The Hess case was filed on May 20, 1988, by
Martha Hess, individually and on behalf of a putative class of those
similarly situated. The original, first, second and third amended
complaints in Hess sought rescission, pursuant to the Illinois Securities
Act, of over $2.7 million of principal invested in five Southmark (now
McNeil) partnerships, and other relief including damages for breach of
fiduciary duty and violation of the Illinois Consumer Fraud and Deceptive
Business Practices Act. The original, first, second and third amended
complaints in Hess were dismissed against the defendant-group because the
Appellate Court held that they were not the proper subject of a class
action complaint. Hess was, thereafter, amended a fourth time to state
causes of action against unrelated partnership entities. Hess went to
judgment against that unrelated entity and the judgment, along with the
prior dismissal of the class action, was appealed. The Hess appeal was
decided by the Appellate Court during 1992. The Appellate Court affirmed
the dismissal of the breach of fiduciary duty and consumer fraud claims.
The Appellate Court did, however, reverse in part, holding that certain
putative class members could file class action complaints against the
defendant-group. Although leave to appeal to the Illinois Supreme Court was
sought, the Illinois Supreme Court refused to hear the appeal. The effect
of the denial is that the Appellate Court's opinion remains standing. On
June 15, 1994, the Appellate Court issued its mandate sending the case back
to trial court.
In late January 1995, the plaintiffs filed a Motion to File an Amended
Consolidated Class Action Complaint, which amends the complaint to name
McNeil Partners, L.P. as the successor general partner to Southmark
Investment Group. In February 1995, the plaintiffs filed a Motion for Class
Certification. The amended cases against the defendant-group, and others,
are proceeding under the caption George and Joy Kugler v. I.R.E. Real
Estate Income Fund, Jerry and Barbara Neumann v. Southmark Equity Partners
II, Richard and Theresa Bartoszewski v. Southmark Realty Partners III, and
Edward and Rose Weskerna v. Southmark Realty Partners II.
In September 1995, the court granted the Plaintiffs' Motion to File an
Amended Complaint, to Consolidate and for Class Certification. The
defendants have answered the complaint and have plead that the Plaintiffs
did not give timely notice of their right to rescind within six months of
knowing that right. The ultimate outcome of this litigation cannot be
determined at this time.
5) Robert Lewis v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A.
McNeil et al. - In the District Court of Dallas County, Texas, A-14th
Judicial District, Cause No. 95-08535 (Class Action) - Plaintiff, Robert
Lewis, is a limited partner with McNeil Pacific Investors Fund 1972, Ltd.,
McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV, Ltd.
Plaintiff brings this action on his own behalf and as a class action on
behalf of the class of all limited partners of McNeil Pacific Investors
Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund
IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd.,
McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P. and
McNeil Real Estate Fund XXV, L.P. (as defined in this Section 3, the
"Partnerships") as of August 4, 1995.
Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc.,
Robert A. McNeil and other senior officers (as defined in this Section 5,
collectively, the "Defendants") breached their fiduciary duties by, among
other things, (1) failing to attempt to sell the properties owned by the
Partnerships (as defined in this Section 5, the "Properties") and extending
the lives of the Partnerships indefinitely, contrary to the Partnerships'
business plans, (2) paying distributions to themselves and generating fees
for their affiliates, (3) refusing to make significant distributions to the
class members, despite the fact that the Partnerships have positive cash
flows and substantial cash balances, and (4) failing to take steps to
create an auction market for equity interests of the Partnerships, despite
the fact that a third party bidder filed tender offers for approximately
forty-five percent (45%) of the outstanding units of each of the
Partnerships. Plaintiff also claims that Defendants have breached the
partnership agreements of the Partnerships by failing to take steps to
liquidate the Properties and by their alteration of the Partnerships'
primary purposes, their acts in contravention of these agreements, and
their use of the assets of the Partnerships for their own benefit instead
of for the benefit of the Partnerships.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
6) James F. Schofield, Gerald C. Gillett and Donna S. Gillett v. McNeil
Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management,
Inc., Robert A. McNeil, Carole J. McNeil, McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil
Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, 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) and United States District Court,
Southern District of New York, Case No. 95CIV.6711 (Class and Derivative
Action Complaint).
These are corporate/securities class and derivative actions brought in
state and Federal court by limited partners of each of the nine (9) limited
partnerships that are named as nominal defendants as listed above (as
defined in this Section 6, the "Partnerships"). Plaintiffs allege that
McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc.
and four (4) of their senior officers and/or directors (as defined in this
Section 6, collectively, the "Defendants") have breached their fiduciary
duties. Specifically, Plaintiffs allege that Defendants have caused the
Partnerships to enter into several wasteful transactions that have no
business purpose or benefit to the Partnerships and which have rendered
such units highly illiquid and artificially depressed the prices that are
available for units on the limited resale market. Plaintiffs also allege
that Defendants have engaged in a course of conduct to prevent the
acquisition of units by Carl Icahn by disseminating false, misleading and
inadequate information. Plaintiffs further allege that Defendants have
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 and, thereby, have
breached the partnership agreements.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend these actions.
7) Alfred Napoletano v. McNeil Partners, L.P., McNeil Investors, Inc., Robert
A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd.,
McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil
Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real
Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate
Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund
XXV, L.P. - Superior Court of the State of California, County of Los
Angeles, Case No. BC133849 (Class Action Complaint).
Plaintiff brings this class action on behalf of a class of all persons and
entities who are current owners of units and/or are limited partners in one
or more of the partnerships referenced above (as defined in this Section 7,
the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil
Investors, Inc., Robert A. McNeil and other senior officers (as defined in
this Section 7, collectively, the "Defendants") have breached their
fiduciary duties to the class members by, among other things, (1) taking
steps to prevent the consummation of the High River tender offers, (2)
failing to take steps to maximize unitholders' or limited partners' values,
including failure to liquidate the properties owned by the Partnerships,
(3) managing the Partnerships so as to extend indefinitely the present fee
arrangements, and (4) paying itself and entities owned and controlled by
the general partner excessive fees and reimbursements of general and
administrative expenses.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
8) Warren Heller v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A.
McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil
Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real
Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate
Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund
XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV,
L.P. - Superior Court of the State of California, County of Los Angeles,
Case No. BC133957 (Class Action Complaint).
Plaintiff brings this class action on behalf of a class of all persons and
entities who are current owners of units and/or are limited partners in one
or more of the partnerships referenced above (as defined in this Section 8,
the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil
Investors, Inc., Robert A. McNeil and other senior officers (as defined in
this Section 8, collectively, the "Defendants") have breached their
fiduciary duties to the class members by, among other things, (1) taking
steps to prevent the consummation of the High River tender offers, (2)
failing to take steps to maximize unitholders' or limited partners' values,
including failure to liquidate the properties owned by the Partnerships,
(3) managing the Partnerships so as to extend indefinitely the present fee
arrangements, and (4) paying itself and entities owned and controlled by
the general partner excessive fees and reimbursements of general and
administrative expenses.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
For a discussion of the Southmark bankruptcy, see Item 1 - Business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND
- ------ ------------------------------------------------------------
RELATED SECURITY HOLDER MATTERS
-------------------------------
(A) There is no established public trading market for limited partnership
units, nor is one expected to develop.
(B) Title of Class Number of Record Unit Holders
-------------- -----------------------------
Limited partnership units 5,158 as of February 16, 1996
(C) Distributions paid to limited partners totaled $250,001 in 1995 and
$249,933 in 1994 from cash from operations. No distributions were
paid to the General Partner in 1995 or 1994. See Item 7 Management's
Discussion and Analysis of Financial Condition and Results of
Operations, and Item 8 Note 1 - "Organization and Summary of
Significant Accounting Policies - Distributions."
ITEM 6. SELECTED FINANCIAL DATA
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The following table sets forth a summary of certain financial data for the
Partnership. This summary should be read in conjunction with the Partnership's
financial statements and notes thereto appearing in Item 8 - Financial
Statements and Supplementary Data.
<TABLE>
Years Ended December 31,
Statements of ----------------------------------------------------------------------
Operations 1995 1994 1993 1992 1991
- ------------------ --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Rental and room revenues..... $1,405,346 $1,172,233 $ 962,172 $1,801,891 $1,085,118
Interest income.............. 568,970 591,791 817,243 684,934 839,271
Gain on sale of real estate . - - 458,221 - -
Provision for loss on
mortgage loan investment... - - - (792,013) -
Loss on foreclosure of
mortgage loan collateral... - - - - (1,766,481)
Income (loss) before extra-
ordinary item.............. 64,116 88,909 954,172 (904,350)
(1,335,524)
Extraordinary item, net...... - - 251,203 - -
Net income (loss)............ 64,116 88,909 1,205,375 (904,350) (1,335,524)
Net income (loss) per limited
partnership unit:
Income (loss) before extra-
ordinary item.............. $ 1.28 $ 1.78 $ 19.07 $ (17.54) $ (24.27)
Extraordinary item, net.... - - 5.02 - -
--------- --------- --------- --------- --------
Net income (loss) $ 1.28 $ 1.78 $ 24.09 $ (17.54) $ (24.27)
========= ========= ========= =========
Distributions per limited
partnership unit........... $ 5.05 $ 5.05 $ 57.01 $ - $ -
========= ========= ========= ========= ========
</TABLE>
<TABLE>
As of December 31,
-----------------------------------------------------------------------
Balance Sheets 1995 1994 1993 1992 1991
- ------------------ ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Real estate investments, net... $ 5,726,377 $ 5,938,194 $ 5,979,165 $ 3,146,905 $ 3,558,859
Assets held for sale, net...... - - - 1,768,153 -
Mortgage loan investments, net. 4,271,336 4,418,306 4,371,457 7,571,671 5,871,593
Total assets................... 14,345,949 14,484,111 14,665,413 14,046,630 14,575,070
Mortgage note payable, net..... 2,760,961 2,802,303 2,840,237 - -
Partners' equity............... 11,079,628 11,265,513 11,426,537 13,044,660 13,949,010
</TABLE>
See Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations. In September 1991, the Partnership foreclosed on Holiday
Inn - Jacksonville (renamed Cherokee Inn) in Jacksonville, Texas, in partial
settlement of the mortgage loan secured by the property and later sold the
property in January 1993. In May 1993, the Partnership foreclosed on 1130
Sacramento Condominiums in settlement of the mortgage loan secured by the
property.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------ -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
FINANCIAL CONDITION
- -------------------
The Partnership was formed to engage in the business of making and servicing
mortgage loans and acquiring, operating and ultimately disposing of
income-producing real properties. In July 1990, the Partnership foreclosed on
Park Springs Apartments (renamed Sterling Springs Apartments) in Austin, Texas,
in settlement of the mortgage loan secured by the property. In September 1991,
the Partnership foreclosed on Holiday Inn - Jacksonville (renamed Cherokee Inn)
in Jacksonville, Texas, in partial settlement of the mortgage loan secured by
the property and later sold the property in January 1993 (see Item 8 - Note 4 -
"Real Estate Investments"). In May 1993, the Partnership foreclosed on 1130
Sacramento Condominiums in settlement of the mortgage loan secured by the
property.
At December 31, 1995, the Partnership serviced three mortgage loan investments
totaling $4,271,336 and operated two income-producing properties. Both
properties were acquired through foreclosure. In June 1993, the Partnership
acquired a mortgage note payable secured by Sterling Springs Apartments.
RESULTS OF OPERATIONS
- ---------------------
1995 compared to 1994
Revenue:
Total revenue increased by $210,292 in 1995 as compared 1994. The increase was
due to an increase in rental revenue and other interest income, partially offset
by a decrease in interest income on mortgage loan investments, as discussed
below.
Rental revenue for 1995 increased by $233,113 in relation to 1994. The increase
was partially due to an increase in rental rates at Sterling Springs Apartments
in February 1995. Also contributing to the increase in rental revenue was the
increase in occupancy at 1130 Sacramento Condominiums. Although construction of
the building was completed in January 1994, two of the four units were not
leased until the third quarter of 1994.
Interest income on mortgage loan investments decreased by $91,321 in 1995 as
compared to 1994 due to the modification of the Idlewood Nursing Home mortgage
loan investment in February 1995 (See Item 8 - Note 5 "Mortgage Loan
Investments"). In accordance with Statement of Financial Accounting Standards
No. 114 "Accounting by Creditors for Impairment of a Loan" ("SFAS 114"), which
the Partnership adopted in 1994, the Partnership has ceased accruing interest on
the loan and all payments received are recorded as a reduction of principal.
Other interest income earned on short-term investments of cash and cash
equivalents increased by $68,500 in 1995, as compared to 1994. The increase was
mainly due to an increase in interest rates earned on invested cash.
Expenses:
Total expenses for 1995 increased by $235,085 as compared to 1994. The increase
was mainly due to an increase in general and administrative expenses, as
discussed below.
Property taxes in 1995 increased by $20,541 in relation to 1994, mainly due to
an increase in the assessed taxable value of both of the Partnership's
properties by taxing authorities.
Repairs and maintenance expense decreased by $17,939 in 1995 as compared to
1994. The decrease was mainly due to a greater amount of costs incurred at 1130
Sacramento in 1994 for repairs resulting from damage caused by a broken water
pipe.
Property management fees - affiliates increased by $9,188 in 1995, in relation
to 1994, due to an increase in gross rental receipts, on which the fees are
based, at 1130 Sacramento Condominiums and Sterling Springs Apartments.
Utilities expense increased in 1995 by $11,480 in relation to 1994. The increase
was mainly due to an increase in water usage at Sterling Springs Apartments in
1995 as a result of several minor water leaks.
General and administrative expenses increased by $177,742 in 1995 as compared to
1994. The increase was mainly due to the Partnership incurring approximately
$190,000 of costs relating to evaluation and dissemination of information
regarding an unsolicited tender offer as discussed in Item 1 - Business and Item
3 - Legal Proceedings.
1994 compared to 1993
Revenue:
Total revenue decreased by $630,429 in 1994 as compared to 1993. The decrease
was mainly due to a gain of $458,221 on the sale of Cherokee Inn and a $106,817
gain on the purchase of a participation interest recorded in 1993. No such gains
were recorded in 1994.
Rental and room revenues increased by $210,061 in 1994 as compared to 1993. The
increase was partially due to the completion of 1130 Sacramento Condominiums in
early 1994, contributing rental revenue of approximately $111,000 in 1994. The
increase was also due to an increase in rental rates at Sterling Springs
Apartments in 1994.
Interest income on mortgage loan investments decreased by $146,577 in 1994 as
compared to 1993. The interest rate on the Idlewood Nursing Home mortgage was
reduced from 12% to 8.5% in March 1994. The Partnership ceased accruing interest
on the mortgage in July 1994 due to the borrower's continued inability to make
the required monthly payments (see Item 8 - Note 5 - "Mortgage Loan
Investments"). The Partnership recorded approximately $96,000 of interest income
related to this note in 1994 as compared to approximately $242,000 in 1993.
Interest income on mortgage loan investment - affiliate decreased by $126,968 in
1994 as compared to 1993. The decrease was due to the fact that the borrower
paid off $2,865,602 of the loan and the Partnership reduced the remaining
principal balance of the loan by $206,101 in June 1993.
Other interest income earned on short-term investments of cash and cash
equivalents increased by $48,093 in 1994 as compared to 1993. The increase was
due to an increase in interest rates and to greater average cash balances
invested in these accounts during 1994. The Partnership held $1.4 million of
cash and cash equivalents at the beginning of 1993, which increased to $3.8
million by the end of the year. The Partnership held $3.7 million of cash and
cash equivalents at December 31, 1994.
As further discussed in Item 8 - Note 4 - "Real Estate Investments," in 1993,
the Partnership recognized a $458,221 gain on the sale of Cherokee Inn, a
$106,817 gain on the purchase Southmark's participation interest in Sterling
Springs Apartments and a $50,000 gain on the settlement of a lawsuit. No such
gains were recognized in 1994.
Expenses:
Total expenses for 1994 increased by $234,834 as compared to 1993. The increase
was mainly due to an increase in depreciation expense and interest expense as
discussed below.
In 1993, the Partnership obtained financing for Sterling Springs Apartments. As
a result, the Partnership recorded $255,375 of interest expense in 1994. Since
the financing was not received until June 1993, only $133,234 of interest
expense was recorded in 1993.
Depreciation expense increased by $154,975 in 1994 as compared to 1993. The
increase was primarily due to the fact that 1994 includes approximately $123,000
of depreciation expense for 1130 Sacramento Condominiums. Since the condominiums
were not completed until 1994, no depreciation was recorded in 1993. In
addition, there was an increase in depreciation expense due to the addition of
depreciable capital improvements at Sterling Springs Apartments in 1994.
Property taxes increased by $46,736 in 1994 as compared to 1993. The
Partnership's real estate tax liability increased as the result of the addition
of 1130 Sacramento Condominiums to the partnership's portfolio in May 1993.
Personnel costs decreased by $29,458 in 1994 as compared to 1993. The decrease
was mainly due to a decrease in personnel after Cherokee Inn was sold in early
1993.
Repairs and maintenance expense increased by $37,802 in 1994 as compared to
1993, mainly due to expenses incurred at 1130 Sacramento in 1994. As the
property was not completed until 1994, no such expenses were incurred at the
property in 1993.
Property management fees - affiliates increased by $9,627 in 1994 as compared to
1993. The increase was due to an increase in gross rental receipts, on which the
fees are based, at 1130 Sacramento Condominiums and Sterling Springs Apartments.
Other property operating expenses decreased by $44,214 in 1994 as compared to
1993. The decrease was primarily due to the fact that the first quarter of 1993
included expenses relating to the sale of Cherokee Inn. No such expenses
occurred at the property in 1994.
General and administrative expenses for 1994 decreased by $64,515 as compared to
1993. The decrease was due to a decrease in legal fees relating to the sale of
Cherokee Inn and the foreclosure of 1130 Sacramento Condominiums.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $437,492 through operating activities in 1995 as
compared to $447,851 in 1994 and $423,072 in 1993.
The Partnership expended $118,615, $265,844 and $812,726 for capital
improvements to its properties in 1995, 1994 and 1993, respectively. 1994 and
1993 include improvements to 1130 Sacramento Condominiums for which construction
was completed early in 1994.
In 1995, the Partnership collected $146,970 of principal on mortgage loan
investments as compared to $35,718 and $56,352 collected in 1994 and 1993,
respectively. As previously discussed, in accordance with SFAS 114, all payments
received from the borrower on the Idlewood Nursing Home mortgage loan investment
were recorded as a reduction of principal in 1995. The Partnership also
collected a $25,941 fee in 1995 for extending the maturity of the Lakeland
Nursing Home mortgage loan investment.
In 1993, the borrower on an affiliated mortgage loan investment partially
liquidated the loan as further discussed in Item 8 - Note 6 - "Mortgage Loan
Investment-Affiliate." The Partnership sold Cherokee Inn for $855,000 cash in
January 1993. In 1993, the Partnership purchased Southmark's participation
interest in Sterling Springs Apartments for $50,000 and paid off an $800,000
second lien mortgage on 1130 Sacramento Condominiums.
In 1993, $2,854,568 was received when the Partnership obtained financing for
Sterling Springs Apartments. The Partnership paid $161,494 to obtain this
financing.
The Partnership made principal payments on its mortgage note payable secured by
Sterling Springs Apartments of $48,584, $44,793 and $17,617 in 1995, 1994 and
1993, respectively. Since the loan was not obtained until June 1993, a lesser
amount of principal payments were made in that year.
The Partnership distributed $250,001 and $249,933 to the limited partners in
1995 and 1994, respectively, from cash from operations and $2,823,498 in 1993
from the partial liquidation of the affiliated mortgage loan investment
previously discussed.
Short-term liquidity:
At December 31, 1995, the Partnership held cash and cash equivalents of
$3,927,223. This balance provides a reasonable level of working capital for the
Partnership's immediate needs in operating its properties.
In 1996, operations of Sterling Springs Apartments and 1130 Sacramento
Condominiums are expected to provide sufficient positive cash flow for normal
operations. Management will perform routine repairs and maintenance on the
properties to preserve and enhance their value and competitiveness in the
market. The Partnership has budgeted to spend approximately $38,000 on capital
improvements to its properties in 1996, which are expected to be funded from
operations of the properties.
For 1996, management expects that cash from operations of its properties and
principal and interest collections on the mortgage loan investments, along with
the present balance of cash and cash equivalents held, will allow the
Partnership to meet its obligations as they come due.
In March 1996, the Partnership distributed $600,000 to the limited partners.
Long-term liquidity:
Only one property, Sterling Springs Apartments, is encumbered with mortgage
debt. The mortgage on this property is not due until 2003.
In the event that the Partnership acquires ownership of other properties through
foreclosure, the cash and cash equivalent balances presently held will provide a
source for the maintenance and improvement of the properties. Because the timing
and number of properties which may be foreclosed is uncertain, there is no
assurance that the balances presently held will be sufficient for needed capital
improvements. At present, there are no commitments nor any known needs for
improvements to the properties securing the Partnership's loans. The Partnership
has no existing lines of credit from outside sources.
The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships, if certain
conditions are met. Borrowings under the facility may be used to fund deferred
maintenance, refinancing obligations and working capital needs. There is no
assurance that the Partnership will receive any funds under the facility because
no amounts are reserved for any particular partnership. As of December 31, 1995,
$2,662,819 remained available for borrowing under the facility; however,
additional funds could become available as other partnerships repay existing
borrowings. This commitment will terminate on March 30, 1997.
Another possible source of funds is the sale of the Partnership's mortgage loan
investments or properties securing the Partnership's mortgage loans. Such sales
are possibilities only, and since the Partnership does not control the
properties securing its loans, sales of those properties may occur only if
initiated by the borrower or in the event of foreclosure by the Partnership.
There is no assurance that any sales can be contracted or closed to coincide
with the Partnership's future cash needs. For the long term, the Partnership
will remain dependent on operations of the properties it owns or of the
properties securing its loans as the primary source of debt repayment, until the
properties can be sold.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
<TABLE>
Page
Number
------
INDEX TO FINANCIAL STATEMENTS
- -----------------------------
<S> <C>
Financial Statements:
Report of Independent Public Accountants....................................... 15
Balance Sheets at December 31, 1995 and 1994................................... 16
Statements of Operations for each of the three years in the period
ended December 31, 1995..................................................... 17
Statements of Partners' Equity (Deficit) for each of the three years in the
period ended December 31, 1995.............................................. 19
Statements of Cash Flows for each of the three years in the period
ended December 31, 1995..................................................... 19
Notes to Financial Statements.................................................. 21
Financial Statement Schedule -
Schedule III - Real Estate Investments and Accumulated
Depreciation............................................................. 32
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of McNeil Real Estate Fund XX, L.P.:
We have audited the accompanying balance sheets of McNeil Real Estate Fund XX,
L.P. (a California limited partnership) as of December 31, 1995 and 1994, and
the related statements of operations, partners' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements and the schedule referred to below are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of McNeil Real Estate Fund XX,
L.P. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Dallas, Texas
March 6, 1996
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
BALANCE SHEETS
<TABLE>
December 31,
------------------------------
1995 1994
----------- ---------
ASSETS
- ------
<S> <C> <C>
Real estate investments:
Land..................................................... $ 699,697 $ 699,697
Buildings and improvements............................... 6,119,787 6,001,172
---------- ---------
6,819,484 6,700,869
Less: Accumulated depreciation.......................... (1,093,107) (762,675)
---------- ---------
5,726,377 5,938,194
Mortgage loan investments, net of allowance of
$792,013 at December 31, 1995 and 1994................... 3,537,436 3,684,406
Mortgage loan investment - affiliate........................ 733,900 733,900
Cash and cash equivalents 3,927,223 3,734,020
Cash segregated for security deposits....................... 59,869 56,480
Interest and other accounts receivable...................... 77,480 50,244
Escrow deposits............................................. 144,844 128,642
Deferred borrowing costs, net of accumulated
amortization of $31,264 and $18,137 at
December 31, 1995 and 1994, respectively................. 130,230 143,357
Prepaid expenses and other assets........................... 8,590 14,868
---------- ---------
$14,345,949 $14,484,111
========== ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- -----------------------------------------
Mortgage note payable, net.................................. $ 2,760,961 $ 2,802,303
Accounts payable and other accrued expenses................. 120,293 79,726
Accrued property taxes...................................... 123,530 112,216
Payable to affiliates - General Partner..................... 32,849 19,449
Deferred revenue............................................ 170,475 150,053
Security deposits and deferred rental income................ 58,213 54,851
----------- ----------
3,266,321 3,218,598
----------- ----------
Partners' equity (deficit):
Limited partners - 60,000 limited partnership units
authorized; 49,512 limited partnership units issued
and outstanding at December 31, 1995 and 1994.......... 11,399,658 11,586,184
General Partner.......................................... (320,030) (320,671)
---------- ----------
11,079,628 11,265,513
---------- ----------
$14,345,949 $14,484,111
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
For the Years Ended December 31,
-----------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Rental and room revenues................ $1,405,346 $1,172,233 $ 962,172
Interest income on mortgage loan
investments........................... 286,327 377,648 524,225
Interest income on mortgage loan
investment - affiliate................ 61,388 61,388 188,356
Other interest income................... 221,255 152,755 104,662
Gain on disposition of real estate...... - - 458,221
Gain on purchase of participation
interest.............................. - - 106,817
Other income............................ - - 50,000
--------- --------- ---------
Total revenue......................... 1,974,316 1,764,024 2,394,453
--------- --------- ---------
Expenses:
Interest................................ 252,774 255,375 133,234
Depreciation............................ 330,432 306,815 151,840
Property taxes.......................... 180,061 159,520 112,784
Personnel costs......................... 150,765 150,255 179,713
Repairs and maintenance................. 115,750 133,689 95,887
Property management fees - affiliates... 66,477 57,289 47,662
Utilities............................... 93,220 81,740 84,175
Other property operating expenses....... 87,896 93,820 138,034
General and administrative.............. 247,374 69,632 134,147
General and administrative - affiliates. 385,451 366,980 362,805
--------- --------- ---------
Total expenses........................ 1,910,200 1,675,115 1,440,281
--------- --------- ---------
Income before extraordinary item........... 64,116 88,909 954,172
Extraordinary item, net.................... - - 251,203
---------- --------- ---------
Net income................................. $ 64,116 $ 88,909 $1,205,375
========== ========= =========
Net income allocable to limited
partners................................ $ 63,475 $ 88,020 $1,193,321
Net income allocable to General
Partner................................. 641 889 12,054
---------- --------- ---------
Net income................................. $ 64,116 $ 88,909 $1,205,375
========== ========= =========
Net income per limited partnership unit:
Income before extraordinary item........ $ 1.28 $ 1.78 $ 19.07
Extraordinary item, net................. - - 5.02
---------- --------- ---------
Net income.............................. $ 1.28 $ 1.78 $ 24.09
========== ========= =========
Distributions per limited
partnership unit........................ $ 5.05 $ 5.05 $ 57.01
========== ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
Total
General Limited Partners'
Partner Partners Equity
-------- ----------- ----------
<S> <C> <C> <C>
Balance at December 31, 1992.............. $(333,614) $ 13,378,274 $13,044,660
Net income................................ 12,054 1,193,321 1,205,375
Distributions............................. - (2,823,498) (2,823,498)
-------- ----------- ----------
Balance at December 31, 1993.............. (321,560) 11,748,097 11,426,537
Net income................................ 889 88,020 88,909
Distributions............................. - (249,933) (249,933)
--------- ----------- ----------
Balance at December 31, 1994.............. (320,671) 11,586,184 11,265,513
Net income................................ 641 63,475 64,116
Distributions............................. - (250,001) (250,001)
---------- ----------- ----------
Balance at December 31, 1995.............. $ (320,030) $ 11,399,658 $11,079,628
========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
For the Years Ended December 31,
-----------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from tenants and
guests................................ $1,391,600 $1,176,330 $1,040,911
Cash paid to suppliers.................. (648,603) (501,931) (639,272)
Cash paid to affiliates................. (438,528) (432,820) (409,126)
Interest received....................... 502,270 543,085 586,203
Interest received from affiliates....... 48,886 48,886 204,112
Interest paid........................... (232,736) (236,526) (104,258)
Property taxes paid..................... (56,530) (47,305) (126,678)
Property taxes escrowed................. (128,867) (101,868) (128,820)
--------- ---------- ---------
Net cash provided by operating activities.. 437,492 447,851 423,072
--------- ---------- ---------
Cash flows from investing activities:
Additions to real estate
investments........................... (118,615) (265,844) (812,726)
Collection of principal on
mortgage loan investments............. 146,970 35,718 56,352
Collection of principal on
mortgage loan investment - affiliate.. - - 2,890,348
Loan extension fee received............. 25,941 - -
Purchase of participation interest...... - - (50,000)
Pay off of second lien on purchased
property.............................. - - (800,000)
Proceeds from sale of real estate....... - - 855,000
--------- --------- ---------
Net cash provided by (used in)
investing activities.................... 54,296 (230,126) 2,138,974
--------- --------- ---------
Cash flows from financing activities:
Deferred borrowing costs paid........... - - (161,494)
Proceeds from mortgage note payable..... - - 2,854,568
Principal payments on mortgage note
payable............................... (48,584) (44,793) (17,617)
Distributions paid...................... (250,001) (249,933) (2,823,498)
--------- --------- ---------
Net cash used in financing activities...... (298,585) (294,726) (148,041)
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents........................ 193,203 (77,001) 2,414,005
Cash and cash equivalents at
beginning of year....................... 3,734,020 3,811,021 1,397,016
--------- --------- ---------
Cash and cash equivalents at end
of year................................. $3,927,223 $3,734,020 $3,811,021
========= ========= =========
</TABLE>
See discussion of noncash investing activities and financing activities in Note
4 - "Real Estate Investments."
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF CASH FLOWS
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
<TABLE>
For the Years Ended December 31,
---------------------------------------------
1995 1994 1993
------- ------- ---------
<S> <C> <C> <C>
Net income................................. $ 64,116 $ 88,909 $1,205,375
------- ------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation............................ 330,432 306,815 151,840
Amortization of deferred borrowing
costs................................. 13,127 12,295 5,842
Amortization of discount on
mortgage note payable................. 7,242 6,859 3,286
Accrued interest deducted from
(added to) mortgage loan
investments........................... - (82,567) 47,413
Amortization of deferred revenue........ (5,519) - -
Gain on purchase of participation
interest.............................. - - (106,817)
Gain on disposition of real estate...... - - (458,221)
Extraordinary item, net................. - - (251,203)
Changes in assets and liabilities:
Cash segregated for security
deposits........................... (3,389) (19,116) (9,331)
Interest and other accounts
receivable.......................... (27,236) 85,145 (49,596)
Escrow deposits....................... (16,202) 33,443 (162,085)
Prepaid expenses and other
assets.............................. 6,278 (1,588) 35,779
Accounts payable and other
accrued expenses.................... 40,567 3,286 26,431
Accrued proxy costs................... - - (16,648)
Accrued property taxes................ 11,314 2,563 (12,228)
Payable to affiliates - General
Partner............................. 13,400 (8,551) 2,103
Security deposits and deferred
rental income....................... 3,362 20,358 5,791
Liability for participation
interest in foreclosed property..... - - 5,341
-------- -------- ---------
Total adjustments..................... 373,376 358,942 (782,303)
--------- -------- ---------
Net cash provided by operating activities.. $ 437,492 $ 447,851 $ 423,072
========= ======== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----- -----------------------------------------------------------
Organization
- ------------
McNeil Real Estate Fund XX, L.P. (the "Partnership"), formerly known as
Southmark Income Investors, Ltd., was organized on July 19, 1984 as a limited
partnership under the provisions of the California Revised Limited Partnership
Act to invest in, hold, manage and dispose of mortgage loans, real estate and
real estate-related investments. 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 General Partner was elected at
a meeting of limited partners on March 30, 1992, at which time an amended and
restated partnership agreement (the "Amended Partnership Agreement") was
adopted. Prior to March 30, 1992, the general partner of the Partnership was
Southmark Investment Group, Inc., (the "Original General Partner"), a Nevada
corporation and a wholly-owned subsidiary of Southmark Corporation
("Southmark"). The principal place of business for the Partnership and the
General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240.
The Partnership is engaged in the servicing of mortgage loans, including equity
and revenue participation loans, and the ownership, operation and management of
income-producing properties acquired through foreclosure. In July 1990, the
Partnership foreclosed on Park Spring Apartments (renamed Sterling Springs
Apartments) in settlement of the related mortgage loan. In September 1991, the
Partnership foreclosed on Holiday Inn - Jacksonville (renamed Cherokee Inn) in
partial settlement of the related mortgage loan and later sold the property in
January 1993. In May 1993, the Partnership foreclosed on 1130 Sacramento
Condominiums in settlement of the related mortgage loan. At December 31, 1995,
the Partnership operated two income-producing properties as described in Note 4
- - "Real Estate Investments," and serviced three mortgage loan investments as
described in Note 5 - "Mortgage Loan Investments."
Basis of Presentation
- ---------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Partnership's financial statements consolidate the accounts of Sterling
Springs Fund XX Limited Partnership. This single asset tier partnership was
formed to accommodate the refinancing of Sterling Springs Apartments. The
Partnership is the limited partner and wholly-owns the corporation that is the
general partner of the tier partnership. The Partnership retains effective
control of the tier partnership.
Real Estate Investments
- -----------------------
Real estate investments are generally stated at the lower of cost or net
realizable value. Real estate investments are monitored on an ongoing basis to
determine if the property has sustained a permanent impairment in value. At such
time, a write-down is recorded to reduce the basis of the property to its net
realizable value. A permanent impairment is determined to have occurred when a
decline in property value is considered to be other than temporary based upon
management's expectations with respect to projected cash flows and prevailing
economic conditions.
Improvements and betterments are capitalized and expensed through depreciation
charges. Repairs and maintenance are charged to operations as incurred.
In March 1995, the Financial Accounting Standards Board issued 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 that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. This statement is effective for financial statements for fiscal
years beginning after December 15, 1995. The Partnership has not adopted the
principles of this statement within the accompanying financial statements;
however, it is not anticipated that adoption will have a material effect on the
carrying value of the Partnership's long-lived assets.
Depreciation
- ------------
Buildings and improvements are depreciated using the straight-line method over
the estimated useful lives of the assets, ranging from 5 to 25 years.
Mortgage Loan Investments
- -------------------------
Mortgage loan investments are recorded at their original basis, net of any
allowance for impairment. Interest income is recognized as it is earned.
Interest accrual is ceased at such time as management determines collection is
doubtful.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include cash on hand and cash on deposit in financial
institutions with original maturities of three months or less. Carrying amounts
for cash and cash equivalents approximate fair value.
Escrow Deposits
- ---------------
The Partnership is required to maintain escrow accounts in accordance with the
terms of its mortgage indebtedness agreement. These escrow accounts are
controlled by the mortgagee and are used for payment of property taxes, hazard
insurance, capital improvements and/or property replacements. Carrying amounts
for escrow deposits approximate fair value.
Deferred Borrowing Costs
- ------------------------
Loan fees and other related costs incurred to obtain long-term financing on real
property are capitalized and amortized using the effective interest method over
the term of the related mortgage note payable. Amortization of deferred
borrowing costs is included in interest expense on the Statements of Operations.
Discount on Mortgage Note Payable
- ---------------------------------
The discount on the mortgage note payable is being amortized over the remaining
term of the related mortgage note using the effective interest method.
Amortization of the discount on the mortgage note payable is included in
interest expense on the Statements of Operations.
Rental and Room Revenues
- ------------------------
The Partnership leases its properties under short-term operating leases. Lease
terms generally are less than one year in duration. Rental revenue is recognized
as earned, as was room revenue.
Income Taxes
- ------------
No provision for Federal income taxes is necessary in the financial statements
of the Partnership because, as a partnership, it is not subject to Federal
income tax and the tax effect of its activities accrues to the partners.
Allocation of Net Income and Net Loss
- -------------------------------------
Under the terms of the Amended Partnership Agreement, net income and net losses
(except from a terminating disposition) are allocated 99% to the limited
partners and 1% to the General Partner.
Federal income tax law provides that the allocation of loss to a partner will
not be recognized unless the allocation is in accordance with a partner's
interest in the partnership or the allocation has substantial economic effect.
Internal Revenue Code Section 704(b) and accompanying Treasury Regulations
establish criteria for allocation of Partnership deductions attributable to
debt. The Partnership's tax allocations for 1995, 1994 and 1993 have been made
in accordance with these provisions.
Distributions
- -------------
Under the terms of the Amended Partnership Agreement, operating cash flow and
cash from sales or refinancings are distributed 100% to the limited partners as
further defined in the Amended Partnership Agreement. Terminating dispositions
are to be made in accordance with the partners' positive capital account
balances. Distributions may be restricted or suspended in circumstances where
the General Partner determines that such action is in the best interest of the
Partnership.
The Partnership distributed $250,001 and $249,933 of cash from operations in
1995 and 1994, respectively, and $2,823,498 of cash from the partial payoff of a
mortgage loan investment from an affiliate to the limited partners during 1993.
No distributions were paid to the General Partner in 1995, 1994 or 1993.
In March 1996, the Partnership distributed $600,000 to the limited partners.
Net Income Per Limited Partnership Unit
- ---------------------------------------
Net income per limited partnership unit ("Unit") is computed by dividing net
income allocated to the limited partners by the weighted average number of Units
outstanding. Per Unit information has been computed based on 49,512, 49,512 and
49,524 average Units outstanding during 1995, 1994 and 1993, respectively.
Reclassifications
- -----------------
Certain reclassifications have been made to prior year amounts to conform with
the current year presentations.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
- ----- ----------------------------
The Partnership pays property management fees equal to 5% of the gross rental
receipts for its properties to McNeil Real Estate Management, Inc. ("McREMI"),
an affiliate of the General Partner, for providing property management services
and leasing services.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
Under the terms of the Amended Partnership Agreement, the Partnership is paying
an asset management fee 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 percent to the annualized net
operating income of each property, (ii) a value of $10,000 per apartment unit or
(iii) on 1130 Sacramento, the net book value of the property is used 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. Compensation and reimbursements paid to
or accrued for the benefit of the General Partner or its affiliates are as
follows:
<TABLE>
For the Years Ended December 31,
---------------------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Property management fees................... $ 66,477 $ 57,289 $ 47,662
Charged to general and
administrative - affiliates:
Partnership administration.............. 211,700 199,786 202,868
Asset management fee.................... 173,751 167,194 159,937
------- ------- -------
$451,928 $424,269 $410,467
======= ======= =======
</TABLE>
Payable to affiliates - General Partner at December 31, 1995 and 1994 consisted
primarily of unpaid property management fees, Partnership general and
administrative expenses and asset management fees and are due and payable from
current operations.
NOTE 3 - TAXABLE INCOME
- ------ --------------
McNeil Real Estate Fund XX, L.P. is a partnership and is not subject to Federal
and state income taxes. Accordingly, no recognition has been given to income
taxes in the accompanying financial statements of the Partnership since the
income or loss of the Partnership is to be included in the tax returns of the
individual partners. The tax returns of the Partnership are subject to
examination by Federal and state taxing authorities. If such examinations result
in adjustments to distributive shares of taxable income or loss, the tax
liability of the partners could be adjusted accordingly.
The Partnership's net assets and liabilities for tax purposes exceeded the net
assets and liabilities for financial reporting purposes by $6,954,599 in 1995,
$6,434,406 in 1994 and $6,188,844 in 1993.
NOTE 4 - REAL ESTATE INVESTMENTS
- ------ -----------------------
The basis and accumulated depreciation of the Partnership's real estate
investments at December 31, 1995 and 1994 are set forth in the following tables:
<TABLE>
Buildings and Accumulated Net Book
1995 Land Improvements Depreciation Value
---- -------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
1130 Sacramento
San Francisco, CA (a) $ 307,697 $ 2,468,101 $ (248,111) $ 2,527,687
Sterling Springs
Austin, TX (b) 392,000 3,651,686 (844,996) 3,198,690
-------- ---------- --------- ----------
$ 699,697 $ 6,119,787 $(1,093,107) $ 5,726,377
======== ========== ========== ==========
Buildings and Accumulated Net Book
1994 Land Improvements Depreciation Value
---- --------- ------------ ------------ ----------
1130 Sacramento (a) $ 307,697 $ 2,468,101 $ (122,619) $ 2,653,179
Sterling Springs (b) 392,000 3,533,071 (640,056) 3,285,015
-------- ---------- ----------- ----------
$ 699,697 $ 6,001,172 $ (762,675) $ 5,938,194
======== ========== =========== ==========
</TABLE>
(a) The mortgage loan investment secured by 1130 Sacramento matured
December 31, 1991. In September 1991, the borrower discontinued making
monthly interest payments. Negotiations with the borrower for a loan
modification were unsuccessful, and the Partnership initiated
foreclosure proceedings. However, the borrower's May 1992 bankruptcy
filing served to automatically stay such proceedings. Relief from Stay
was granted on February 4, 1993, and the Partnership acquired the
property at a foreclosure sale on May 4, 1993.
Prior to acquiring the property at the foreclosure sale, the
Partnership purchased a second lien on the property for $800,000 cash.
The property was recorded at the book value of the mortgage loan
investment plus the $800,000 paid for the second lien, which
approximated the fair market value of the property at the date of
foreclosure. No depreciation expense was recorded in 1993 on 1130
Sacramento as the property was under construction.
(b) On July 3, 1990, the Partnership foreclosed on Park Springs Apartments
(renamed Sterling Springs Apartments) in Austin, Texas, in settlement
of the mortgage loan secured by the property. Since Southmark had owned
a 3.92% participation interest in the loan, after foreclosure Southmark
owned a 3.92% economic interest in the property.
On June 11, 1993, the Partnership purchased Southmark's 3.92% interest
in the property. The Partnership paid Southmark $50,000 in cash and
assigned to Southmark the Partnership's share of Southmark bankruptcy
plan assets due to be received by the Partnership as a result of claims
filed against Southmark. The Partnership recorded a $106,817 gain in
1993 as a result of this transaction.
On September 3, 1991, the Partnership foreclosed on Holiday Inn - Jacksonville
(renamed Cherokee Inn) in Jacksonville, Texas, in partial settlement of the
mortgage loan secured by the property. In 1993, the Partnership received $50,000
from the original borrowers in full settlement of the deficiency resulting from
the difference between the loan balance and the value of the property acquired.
On January 4, 1993, the Partnership sold Cherokee Inn for $855,000 in cash. The
Partnership recognized a gain of $458,221 as a result of this transaction.
NOTE 5 - MORTGAGE LOAN INVESTMENTS
- ------ -------------------------
The following sets forth the Partnership's mortgage loan investments to
unaffiliated borrowers at December 31, 1995 and 1994. The mortgage loan
investments are secured by the related real estate.
<TABLE>
Mortgage Annual Monthly December 31,
Lien Interest Payments/ ----------------------------
Property Position Rates % Maturity 1995 1994
- -------- -------- ------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Idlewood Nursing
Home (a) First 8.50 (a) 2/98 $2,013,820 $2,140,092
Allowance for impairment (792,013) (792,013)
--------- ---------
1,221,807 1,348,079
--------- ---------
Lakeland Nursing
Home (b) First 12.00 $24,995 2/98 2,315,629 2,336,327
--------- ---------
Total $3,537,436 $3,684,406
========= =========
</TABLE>
(a) The Partnership owns an 83% participation interest in the Idlewood
Nursing Home mortgage loan investment. In January 1991, the borrowing
partnership became unable to make all payments required under the
original mortgage loan agreement. Since that time, the mortgage loan
agreement has been modified four times such that the maturity date was
extended and the interest rate was decreased. On February 27, 1995, the
loan was modified such that payments on the loan are due equal to the net
cash flow from operations of the property, with a minimum amount due of
$9,130 per month.
As a result of the borrowing partnership's inability to make the required
payments, the Partnership recorded a $792,013 provision for loss in 1992
to reduce the carrying value of the mortgage loan investment to the
estimated recoverable amount of the collateral. The Partnership ceased
accruing interest on the loan in 1994. The general partner of the
borrowing partnership has personally guaranteed 10% of the total loan
amount. In accordance with Statement of Financial Accounting Standards
No. 114 "Accounting by Creditors for Impairment of a Loan" ("SFAS 114"),
which the Partnership adopted in 1994, the loan is not recorded as an
in-substance foreclosure at December 31, 1995 and 1994. The impact of
adopting SFAS 114 was not material to the Partnership's financial
statements.
In accordance with SFAS 114, a measure of the impairment of the Idlewood
loan has been made based on the present value of expected future cash
flows required under the February 1995 modification. This measure
indicates an impairment less than the total allowance previously
recorded. Due to the uncertainties surrounding this mortgage loan
investment and its ultimate realizability given its history of numerous
modifications, none of the previously recorded allowance will be reversed
until the underlying property has demonstrated its ability to meet the
required principal and interest payments. All payments received on the
loan in 1995 were recorded as a reduction of principal in accordance with
SFAS 114.
(b) The Partnership owns a 90% participation interest in the Lakeland Nursing
Home mortgage loan. Monthly payments include principal and interest. The
general partner of the borrowing partnership personally guaranteed 25% of
the total loan amount.
Based on market lending rates for mortgage loan investments with similar terms,
risks and average maturities, the fair value of mortgage loan investments was
approximately $4,413,000 at December 31, 1995.
<PAGE>
A summary of activity for mortgage loan investments for each of the three years
in the period ended December 31, 1995 is as follows:
<TABLE>
For the Years Ended December 31,
----------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year............... $3,684,406 $3,637,557 $3,741,322
Accrued interest added to
(deducted from) principal............... - 82,567 (47,413)
Collection of principal.................... (146,970) (35,718) (56,352)
--------- --------- ---------
Balance at end of year..................... $3,537,436 $3,684,406 $3,637,557
========= ========= =========
</TABLE>
NOTE 6 - MORTGAGE LOAN INVESTMENT - AFFILIATE
- ------ ------------------------------------
The following sets forth the Partnership's mortgage loan investment to an
affiliated borrower at December 31, 1995 and 1994:
<TABLE>
Mortgage Annual Monthly December 31,
Lien Interest Payments/ ---------------------
Property Position (a) Rates % Maturity 1995 1994
- -------- ------------ --------- -------------- ------- --------
<S> <C> <C> <C> <C> <C>
Fort Meigs Shopping
Center Second 8.25 (b) 4,074 (b) 4/97 $733,900 $ 733,900
======= ========
</TABLE>
(a) The mortgage loan is non-recourse to the borrower.
(b) Although interest on the loan accrues at 8.25%, interest only payments
at 6.66% are payable monthly.
Integon Life Insurance Corporation ("Integon") was the holder of a note
receivable dated September 23, 1986 secured by Holiday Inn - Kingsland. On
September 25, 1986, the Partnership entered into a loan participation agreement
(the "Participation Agreement") with Integon, pursuant to which the Partnership
purchased a 66.1107% interest in the Holiday Inn - Kingsland note receivable. As
a result of subsequent transactions between the two parties, this participation
interest was reduced to 46.64%.
The borrower defaulted on the loan in November 1988. On August 1, 1989, the
Partnership notified Integon of its intent to exercise the put option under the
terms of the Participation Agreement. Under the put provisions, the Partnership
had the right to require Integon to repurchase the Partnership's interest in the
loan of $3,501,220, upon default by the borrower. Integon successfully completed
its foreclosure proceedings in December 1991.
Integon refused to perform under the repurchase provision citing claims it might
have against the Partnership resulting from actions of the Original General
Partner. In 1990, the Partnership filed suit against Integon to collect under
the repurchase provisions. On August 24, 1992, the Partnership settled its
lawsuit against Integon, whereby the Partnership transferred to Integon its
interest in the property securing the loan in question. In exchange, Integon
transferred to the Partnership its interest in a mortgage loan secured by
Governour's Square Apartments, a property owned by an affiliate of the General
Partner and located in Wilmington, North Carolina, and $320,000 in cash. The
Partnership recognized a gain of $51,082 in 1992, which represented the gain
attributable to the proportion of the assets that were received in cash. The
remaining gain on the settlement of $613,988 was deferred and is being amortized
over the term of the mortgage loan investment as payments are received.
In June 1993, the affiliate paid off $2,865,602 of this loan. In order to induce
the affiliate to partially liquidate this loan, the Partnership agreed to reduce
the principal balance of the loan by $206,101, thereby reducing the total amount
of the gain on the settlement. For the remaining $733,900 balance of the loan, a
new loan agreement was executed and the affiliate substituted a second lien on
another of its properties, Fort Meigs Shopping Center, as the collateral on the
loan.
As a result of the partial liquidation, the Partnership recognized $457,304 of
the previously discussed deferred gain. This gain was partially offset by the
$206,101 reduction in principal balance discussed above, resulting in a $251,203
net extraordinary gain in 1993.
The proceeds from the partial pay off of the loan were used to pay distributions
to the limited partners of $2,823,498 in 1993.
Based on market lending rates for mortgage loan investments with similar terms,
risks and average maturities, the fair value of the mortgage loan
investment-affiliate was approximately $723,000 at December 31, 1995.
A summary of activity for the mortgage loan investment to an affiliated borrower
for each of the three years in the period ended December 31, 1995 is as follows:
<TABLE>
For the Years Ended December 31,
-----------------------------------------------------
1995 1994 1993
------- ------- -----------
<S> <C> <C> <C>
Balance at beginning of year............... $733,900 $733,900 $ 3,830,349
Reduction in principal..................... - - (206,101)
Collection of principal.................... - - (2,890,348)
------- ------- ----------
Balance at end of year..................... $733,900 $733,900 $ 733,900
======= ======= ==========
</TABLE>
NOTE 7 - MORTGAGE NOTE PAYABLE
- ----- ---------------------
The following sets forth the mortgage note payable of the Partnership at
December 31, 1995 and 1994. The mortgage note payable is secured by the related
real estate investment.
<TABLE>
Mortgage Annual Monthly December 31,
Lien Interest Payments/ -------------------------
Property Position (a) Rate % Maturity 1995 1994
- -------- ------------ ------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sterling Springs
Apartments First 8.15 $23,443 7/03 $2,829,007 $2,877,591
Discount (b) (68,046) (75,288)
--------- ---------
$2,760,961 $2,802,303
========= =========
</TABLE>
(a) The debt is non-recourse to the Partnership.
(b) The mortgage loan was discounted to an effective rate of 8.62%.
On June 24, 1993, the General Partner refinanced a portfolio of properties via a
Real Estate Mortgage Investment Conduit ("REMIC"). This REMIC consists of a pool
of properties from various partnerships affiliated with McNeil. One of the
Partnership's properties, Sterling Springs Apartments, is included in this
REMIC. The properties in the REMIC are not collateralized across the
partnerships. The Partnership incurred loan costs of $161,494 in connection with
the financing of the property. An additional $218,147 of tax, insurance and
property replacement escrows were established at the closing of the loan.
Scheduled principal maturities of the mortgage note payable under existing
terms, excluding a discount of $68,046, are as follows:
1996 $ 52,694
1997 57,153
1998 61,989
1999 67,234
2000 72,923
Thereafter 2,517,014
---------
Total $2,829,007
=========
Based on borrowing rates currently available to the Partnership for a mortgage
loan with similar terms and average maturities, the fair value of the mortgage
note payable was approximately $2,772,000 at December 31, 1995.
NOTE 8 - LEGAL PROCEEDINGS
- ------ -----------------
The Partnership is not party to, nor are any of the Partnership's properties the
subject of any material pending legal proceedings, other than ordinary, routine
litigation incidental to the Partnership's business, except for the following:
1) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors,
Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil
Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and
Carole J. McNeil (L95012) - High River ("HR") filed this action in the
United States District Court for the Southern District of New York against
McNeil Partners, L.P., McNeil Investors, Inc. and Mr. and Mrs. McNeil (as
defined in this Section 1, collectively, the "Defendants") requesting,
among other things, names and addresses of the limited partners in the
partnerships referenced above (as defined in this Section 1, the
"Partnerships"). The District Court issued a preliminary injunction against
the Partnerships requiring them to commence mailing materials relating to
the HR tender offer on August 14, 1995.
On August 18, 1995, the Defendants filed an Answer and Counterclaim. The
Counterclaim principally asserts (1) the HR tender offers have been
undertaken in violation of the Federal securities laws, on the basis of
material, non-public, and confidential information, and (2) that the HR
offer documents omit and/or misrepresent certain material information about
the HR tender offers. The Counterclaim seeks a preliminary and permanent
injunction against the continuation of the HR tender offers and,
alternatively, ordering corrective disclosure with respect to allegedly
false and misleading statements contained in the tender offer documents.
This action was dismissed without prejudice in November 1995.
2) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors,
Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil
Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and
Carole J. McNeil - United States District Court for the Southern District
of New York, (Case No. 95 Civ. 9488) (Second Action).
On November 7, 1995, High River filed a second complaint with the District
Court which alleges, inter alia, that McNeil Partners, L.P.'s (the "General
Partner") Schedule 14D-9 filed in connection with the High River tender
offers was materially false and misleading, in violation of Sections 14(d)
and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(d)
and (e), and the SEC Regulations promulgated thereunder; and that High
River further alleges that the General Partner has wrongfully refused to
admit High River as a limited partner to the ten partnerships referenced
above. Additionally, High River purports to assert claims derivatively on
behalf of McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XXIV, L.P.
and McNeil Real Estate Fund XXV, L.P., for breach of contract and breach of
fiduciary duty, asserting that the General Partner has charged these
partnerships excessive fees. High River's complaint seeks, inter alia,
preliminary injunctive relief requiring the General Partner to admit High
River as a limited partner in each of the ten partnerships referenced above
and to transfer the tendered units of interest in the partnerships to High
River; an unspecified award of damages payable to High River and an
additional unspecified award of damages payable to certain of the
partnerships; an order that defendants must discharge their fiduciary
duties and must account for all fees they have received from certain of the
partnerships; and attorneys' fees.
On January 31, 1996, this action was dismissed without prejudice.
3) HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young, BDO Seidman et
al. (Case #92-06560-A). This suit was filed on behalf of the Partnership
and other affiliated partnerships (the "Affiliated Partnerships") on May
26, 1992, in the 14th Judicial District Court of Dallas County. The
petition sought recovery against the Partnership's former auditors, Ernst &
Young, for negligence and fraud in failing to detect and/or report
overcharges of fees/expenses by Southmark, the former general partner. The
former auditors initially asserted counterclaims against the Affiliated
Partnerships based on alleged fraudulent misrepresentations made to the
auditors by the former management of the Affiliated Partnerships
(Southmark) in the form of client representation letters executed and
delivered to the auditors by Southmark management. The counterclaims sought
recovery of attorneys' fees and costs incurred in defending this action.
The counterclaims were later dismissed on appeal, as discussed below.
The trial court granted summary judgment against the Partnership based on
the statute of limitations; however, on appeal, the Dallas Court of Appeals
reversed the trial court and remanded for trial the Partnerships' fraud
claims against Ernst & Young. The Texas Supreme Court denied Ernst &
Young's application for writ of error on January 11, 1996. The Partnership
is continuing to pursue vigorously its claims against Ernst & Young;
however, the final outcome of this litigation cannot be determined at this
time.
4) Martha Hess, et al. v. Southmark Equity Partners II, Ltd., Southmark Income
Investors, Ltd. (presently known as McNeil Real Estate Fund XX, L.P.),
Southmark Equity Partners, Ltd., Southmark Realty Partners III, Ltd., and
Southmark Realty Partners II, Ltd., et al. ("Hess"); Kotowski v. Southmark
Equity Partners, Ltd. and Donald Arceri v. Southmark Income Investors, Ltd.
These cases were previously pending in the Illinois Appellate Court for the
First District ("Appellate Court"), as consolidated Case No. 90-107.
Consolidated with these cases are an additional 14 matters against
unrelated partnership entities. The Hess case was filed on May 20, 1988, by
Martha Hess, individually and on behalf of a putative class of those
similarly situated. The original, first, second and third amended
complaints in Hess sought rescission, pursuant to the Illinois Securities
Act, of over $2.7 million of principal invested in five Southmark (now
McNeil) partnerships, and other relief including damages for breach of
fiduciary duty and violation of the Illinois Consumer Fraud and Deceptive
Business Practices Act. The original, first, second and third amended
complaints in Hess were dismissed against the defendant-group because the
Appellate Court held that they were not the proper subject of a class
action complaint. Hess was, thereafter, amended a fourth time to state
causes of action against unrelated partnership entities. Hess went to
judgment against that unrelated entity and the judgment, along with the
prior dismissal of the class action, was appealed. The Hess appeal was
decided by the Appellate Court during 1992. The Appellate Court affirmed
the dismissal of the breach of fiduciary duty and consumer fraud claims.
The Appellate Court did, however, reverse in part, holding that certain
putative class members could file class action complaints against the
defendant-group. Although leave to appeal to the Illinois Supreme Court was
sought, the Illinois Supreme Court refused to hear the appeal. The effect
of the denial is that the Appellate Court's opinion remains standing. On
June 15, 1994, the Appellate Court issued its mandate sending the case back
to trial court.
In late January 1995, the plaintiffs filed a Motion to File an Amended
Consolidated Class Action Complaint, which amends the complaint to name
McNeil Partners, L.P. as the successor general partner to Southmark
Investment Group. In February 1995, the plaintiffs filed a Motion for Class
Certification. The amended cases against the defendant-group, and others,
are proceeding under the caption George and Joy Kugler v. I.R.E. Real
Estate Income Fund, Jerry and Barbara Neumann v. Southmark Equity Partners
II, Richard and Theresa Bartoszewski v. Southmark Realty Partners III, and
Edward and Rose Weskerna v. Southmark Realty Partners II.
In September 1995, the court granted the plaintiffs' Motion to File an
Amended Complaint, to Consolidate and for Class Certification. The
defendants have answered the complaint and have plead that the plaintiffs
did not give timely notice of their right to rescind within six months of
knowing that right. The ultimate outcome of this litigation cannot be
determined at this time.
5) Robert Lewis v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A.
McNeil et al. - In the District Court of Dallas County, Texas, A-14th
Judicial District, Cause No. 95-08535 (Class Action) - Plaintiff, Robert
Lewis, is a limited partner with McNeil Pacific Investors Fund 1972, Ltd.,
McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV, Ltd.
Plaintiff brings this action on his own behalf and as a class action on
behalf of the class of all limited partners of McNeil Pacific Investors
Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund
IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd.,
McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P. and
McNeil Real Estate Fund XXV, L.P. (as defined in this Section 3, the
"Partnerships") as of August 4, 1995.
Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc.,
Robert A. McNeil and other senior officers (as defined in this Section 5,
collectively, the "Defendants") breached their fiduciary duties by, among
other things, (1) failing to attempt to sell the properties owned by the
Partnerships (as defined in this Section 5, the "Properties") and extending
the lives of the Partnerships indefinitely, contrary to the Partnerships'
business plans, (2) paying distributions to themselves and generating fees
for their affiliates, (3) refusing to make significant distributions to the
class members, despite the fact that the Partnerships have positive cash
flows and substantial cash balances, and (4) failing to take steps to
create an auction market for equity interests of the Partnerships, despite
the fact that a third party bidder filed tender offers for approximately
forty-five percent (45%) of the outstanding units of each of the
Partnerships. Plaintiff also claims that Defendants have breached the
partnership agreements of the Partnerships by failing to take steps to
liquidate the Properties and by their alteration of the Partnerships'
primary purposes, their acts in contravention of these agreements, and
their use of the assets of the Partnerships for their own benefit instead
of for the benefit of the Partnerships.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
6) James F. Schofield, Gerald C. Gillett and Donna S. Gillett v. McNeil
Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management,
Inc., Robert A. McNeil, Carole J. McNeil, McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil
Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, 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) and United States District Court,
Southern District of New York, Case No. 95CIV.6711 (Class and Derivative
Action Complaint).
These are corporate/securities class and derivative actions brought in
state and Federal court by limited partners of each of the nine (9) limited
partnerships that are named as nominal defendants as listed above (as
defined in this Section 6, the "Partnerships"). Plaintiffs allege that
McNeil Investors, Inc., its affiliate McNeil Real Estate Management, Inc.
and four (4) of their senior officers and/or directors (as defined in this
Section 6, collectively, the "Defendants") have breached their fiduciary
duties. Specifically, Plaintiffs allege that Defendants have caused the
Partnerships to enter into several wasteful transactions that have no
business purpose or benefit to the Partnerships and which have rendered
such units highly illiquid and artificially depressed the prices that are
available for units on the limited resale market. Plaintiffs also allege
that Defendants have engaged in a course of conduct to prevent the
acquisition of units by Carl Icahn by disseminating false, misleading and
inadequate information. Plaintiffs further allege that Defendants have
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 and, thereby, have
breached the partnership agreements.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend these actions.
7) Alfred Napoletano v. McNeil Partners, L.P., McNeil Investors, Inc., Robert
A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd.,
McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil
Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real
Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate
Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund
XXV, L.P. - Superior Court of the State of California, County of Los
Angeles, Case No. BC133849 (Class Action Complaint).
Plaintiff brings this class action on behalf of a class of all persons and
entities who are current owners of units and/or are limited partners in one
or more of the partnerships referenced above (as defined in this Section 7,
the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil
Investors, Inc., Robert A. McNeil and other senior officers (as defined in
this Section 5, collectively, the "Defendants") have breached their
fiduciary duties to the class members by, among other things, (1) taking
steps to prevent the consummation of the High River tender offers, (2)
failing to take steps to maximize unitholders' or limited partners' values,
including failure to liquidate the properties owned by the Partnerships,
(3) managing the Partnerships so as to extend indefinitely the present fee
arrangements, and (4) paying itself and entities owned and controlled by
the general partner excessive fees and reimbursements of general and
administrative expenses.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
8) Warren Heller v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A.
McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil
Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real
Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate
Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund
XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV,
L.P. - Superior Court of the State of California, County of Los Angeles,
Case No. BC133957 (Class Action Complaint).
Plaintiff brings this class action on behalf of a class of all persons and
entities who are current owners of units and/or are limited partners in one
or more of the partnerships referenced above (as defined in this Section 8,
the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil
Investors, Inc., Robert A. McNeil and other senior officers (as defined in
this Section 8, collectively, the "Defendants") have breached their
fiduciary duties to the class members by, among other things, (1) taking
steps to prevent the consummation of the High River tender offers, (2)
failing to take steps to maximize unitholders' or limited partners' values,
including failure to liquidate the properties owned by the Partnerships,
(3) managing the Partnerships so as to extend indefinitely the present fee
arrangements, and (4) paying itself and entities owned and controlled by
the general partner excessive fees and reimbursements of general and
administrative expenses.
The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.
<PAGE>
McNEIL REAL ESTATE FUND XX, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 1995
<TABLE>
Initial Cost (b) Cumulative Costs
--------------------------- Write-down Capitalized
Related (b) Buildings and and Permanent Subsequent
Description Encumbrances Land Improvements Impairment To Acquisition
- ----------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
1130 Sacramento
Condominiums
San Francisco, CA $ - $ 307,697 $ 1,866,696 $ - $ 601,405
Sterling Springs
Apartments
Austin, TX 2,760,961 392,000 2,908,000 - 743,686
--------- --------- ---------- --------- ---------
$2,760,961 $ 699,697 $ 4,774,696 $ - $1,345,091
========= ========= ========== ========= =========
</TABLE>
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XX, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 1995
<TABLE>
Gross Amount at
Which Carried at Close of Period
----------------------------------------------- Accumulated
Buildings and Depreciation
Description Land Improvements Total (a) and Amortization
- ----------- --------- --------- --------- ----------
<S> <C> <C> <C> <C>
1130 Sacramento
Condominiums
San Francisco, CA $ 307,697 $2,468,101 $2,775,798 $ (248,111)
Sterling Springs
Apartments
Austin, TX 392,000 3,651,686 4,043,686 (844,996)
--------- --------- --------- ----------
$ 699,697 $6,119,787 $6,819,484 $(1,093,107)
========= ========= ========= ==========
</TABLE>
(a) For Federal Income tax purposes, the properties are depreciated over lives
ranging from 15-25 years using ACRS or MACRS methods. The aggregate cost of
real estate investments for Federal income tax purposes was $6,820,738 and
accumulated depreciation was $877,736 at December 31, 1995.
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XXV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 1995
<TABLE>
Date of Date Depreciable
Description Construction Acquired lives (years)
- ----------- ------------ -------- ------------
<S> <C> <C> <C>
1130 Sacramento
Condominiums
San Francisco, CA 1992 5/93 5-25
Sterling Springs
Apartments
Austin, TX 1985 7/90 5-25
</TABLE>
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
Notes to Schedule III
Real Estate Investments and Accumulated Depreciation
A summary of activity for the Partnership's real estate investments and
accumulated depreciation is as follows:
<TABLE>
For the Years Ended December 31,
-----------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Real estate investments:
- -----------------------
Balance at beginning of year............... $6,700,869 $6,435,025 $3,450,925
Improvements............................... 118,615 265,844 809,707
Reclassification from assets held
for sale................................ - - 2,174,393
---------- --------- ---------
Balance at end of year..................... $6,819,484 $6,700,869 $6,435,025
========= ========= =========
Accumulated depreciation:
- ------------------------
Balance at beginning of year............... $ 762,675 $ 455,860 $ 304,020
Depreciation............................... 330,432 306,815 151,840
--------- --------- ---------
Balance at end of year..................... $1,093,107 $ 762,675 $ 455,860
========= ========= =========
Assets held for sale:
- --------------------
Balance at beginning of year............... $ - $ - $1,768,153
Improvements............................... - - 3,019
Purchase of second lien.................... - - 800,000
Reclassification to real estate
investments............................. - - (2,174,393)
Sale ...................................... - - (396,779)
---------- --------- ---------
Balance at end of year..................... $ - $ - $ -
========== ========= =========
</TABLE>
<PAGE>
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURES.
---------------------
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
Neither the Partnership nor the General Partner has any directors or executive
officers. The names and ages of, as well as the positions held by, the officers
and directors of McNeil Investors, Inc., the general partner of the General
Partner, are as follows:
<TABLE>
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------
<S> <C> <C>
Robert A. McNeil, 75 Mr. McNeil is also Chairman of the Board and Director of McNeil Real
Chairman of the Estate Management, Inc. ("McREMI") which is an affiliate of the General
Board and Director Partner. He has held the foregoing positions since the formation of such
entity in 1990. Mr. McNeil received his B.A. degree from Stanford
University in 1942 and his L.L.B. degree from Stanford Law School in
1948. He is a member of the State Bar of California and has been involved
in real estate financing since the late 1940's and in real estate
acquisitions, syndications and dispositions since 1960. From 1986 until
active operations of McREMI and McNeil Partners, L.P. began in February
1991, Mr. McNeil was a private investor. Mr. McNeil is a member of the
International Board of Directors of the Salk Institute, which promotes
research in improvements in health care.
Carole J. McNeil 52 Mrs. McNeil is Co-Chairman, with husband Robert A. McNeil, of McNeil
Co-Chairman of the Investors, Inc. Mrs. McNeil has twenty years of real
estate experience, Board most recently as a private investor from 1986 to
1993. In 1982, she founded Ivory & Associates, a commercial real estate
brokerage firm in San Francisco, CA. Prior to that, she was a commercial
real estate associate with the Madison Company and, earlier, a commercial
sales associate and analyst with Marcus and Millichap in San Francisco. In
1978, Mrs. McNeil established the Escrow Training Centers, California's
first accredited commercial training program for title company escrow
officers and real estate agents needing college credits to qualify for
brokerage licenses. She began in real estate as Manager and Marketing
Director of Title Insurance and Trust in Marin County, CA. Mrs. McNeil
serves on the International Board of Directors of the Salk Institute.
Other Principal Occupations and Other
Name and Position Age Directorships during the Past 5 Years
- ----------------- --- -------------------------------------
Donald K. Reed, 50 Mr. Reed is President, Chief Executive Officer and Director of McREMI
Director, President, which is an affiliate of the General Partner. Prior to joining McREMI in
and Chief Executive March 1993, Mr. Reed was President, Chief Operating Officer and Director
Officer of Duddlesten Management Corporation and Duddlesten Realty Advisors, Inc.,
with responsibility for a management portfolio of office, retail,
multi-family and mixed-use land projects representing $2 billion in asset
value. He was also Chief Operating Officer, Director and member of the
Executive Committee of all Duddlesten affiliates. Mr. Reed started with the
Duddlesten companies in 1976 and served as Senior Vice President and Chief
Financial Officer and as Executive Vice President and Chief Operating
Officer of Duddlesten Management Corporation before his promotion to
President in 1982. He was President and Chief Operating Officer of
Duddlesten Realty Advisors, Inc., which has been engaged in real estate
acquisitions, marketing and dispositions, since its formation in 1989.
Ron K. Taylor 38 Mr. Taylor is a Senior Vice President of McREMI and has been in this
Vice President capacity since McREMI commenced active operations in 1991. He also serves
as Acting Chief Financial Officer of McREMI since the resignation of
Robert C. Irvine on January 31, 1996. Mr. Taylor is primarily responsible
for Asset Management functions at McREMI, including property
dispositions, commercial leasing, real estate finance and portfolio
management. Prior to joining McREMI, Mr. Taylor served as an Executive
Vice President for a national syndication/property management company.
Mr. Taylor has been involved in the real estate industry since 1983.
</TABLE>
Each director shall serve until his successor shall have been duly elected and
qualified.
ITEM 11. EXECUTIVE COMPENSATION
- ------- ----------------------
No direct compensation was paid or payable by the Partnership to directors or
officers (since it does not have any directors or officers) for the year ended
December 31, 1995, nor was any direct compensation paid or payable by the
Partnership to directors or officers of the general partner of the General
Partner for the year ended December 31, 1995. The Partnership has no plans to
pay any such remuneration to any directors or officers of the general partner of
the General Partner in the future.
See Item 13 - Certain Relationships and Related Transactions for amounts of
compensation and reimbursements paid by the Partnership to the General Partner
and its affiliates.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- --------------------------------------------------------------
(A) Security ownership of certain beneficial owners.
No individual or group, as defined by Section 13(d)(3) of the Securities
Exchange Act of 1934, was known by the Partnership to own more than 5%
of the Units, other than High River Limited Partnership which owns
4,519.36 Units at February 29, 1996 (approximately 9.13% of the
outstanding Units). The business address for High River Limited
Partnership is 100 South Bedford Road, Mount Kisco, New York 10549.
(B) Security ownership of management.
The General Partner and the officers and directors of its general
partner collectively own 4.5 Units, which is less than 1% of Units
outstanding.
(C) Change in control.
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The amendments to the Partnership compensation structure included in the Amended
Partnership Agreement provide for an asset management fee to replace all other
forms of general partner compensation other than property management fees and
reimbursements of certain costs. 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 percent to the annualized net operating income of each
property, (ii) a value of $10,000 per apartment unit or (iii) on 1130
Sacramento, the net book value of the property is used 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. For the year ended December 31, 1995, the
Partnership paid or accrued $173,751 of such asset management fees.
The Partnership pays property management fees equal to 5% of the gross rental
receipts of its properties to McREMI, an affiliate of the General Partner, for
providing property management services. Additionally, the Partnership reimburses
McREMI for its costs, including overhead, of administering the Partnership's
affairs. For the year ended December 31, 1995, the Partnership paid or accrued
$278,177 of such property management fees and reimbursements. See Item 1 -
Business, Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations and Item 8 - Note 2 - "Transactions With Affiliates."
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- ------- ----------------------------------------------------------------
See accompanying Index to Financial Statements at Item 8.
(A) Exhibits
--------
Exhibit
Number Description
------ -----------
4. Amended and Restated Limited
Partnership Agreement dated March
30, 1992 (incorporated by reference
to the Current Report of the
registrant on Form 8-K dated March
30, 1992, as filed on April 10,
1992).
10.3 Portfolio Services Agreement dated
February 14, 1991, between Southmark
Income Investors, Ltd. and McNeil
Real Estate Management, Inc. (1)
10.5 Promissory Note dated October 30,
1985, between Lakeland Associates,
Ltd. and Paris Savings and Loan
Association relating to Lakeland
Nursing Home. (1)
10.6 Loan Participation Agreement dated
September 4, 1986, between Southmark
Income Investors, Ltd. and Paris
Savings and Loan Association
relating to Lakeland Nursing Home.
(1)
10.7 Promissory Note dated February 28,
1986, between Idlewood Associates,
Ltd. and Southern Heritage Life
Insurance Company relating to
Idlewood Nursing Home. (1)
10.8 Loan Participation Agreement dated
September 4, 1986, between Southmark
Income Investors, Ltd. and Paris
Savings and Loan Association
relating to Idlewood Nursing Home.
(1)
10.10 Loan Agreement dated June 23, 1993,
between Lexington Mortgage Company
and McNeil Real Estate Fund XX,
L.P., et al. (3)
10.11 Property Management Agreement dated
June 24, 1993, between McNeil Real
Estate Management, Inc. and Sterling
Springs Fund XX Limited Partnership
(filed without schedules). (4)
10.12 Revolving Credit Agreement dated
August 6, 1992, between McNeil
Partners, L.P. and various selected
partnerships, including the
registrant. (4)
10.14 Property Management Agreement dated
March 30, 1992, between McNeil Real
Estate Fund XX, L.P. and McNeil Real
Estate Management, Inc. (2)
<PAGE>
Exhibit
Number Description
------ -----------
10.15 Amendment of Property Management
Agreement dated March 5, 1993, by
McNeil Real Estate Fund XX, L.P. and
McNeil Real Estate Management, Inc.
(2).
11. Statement regarding computation of
Net Income per Limited Partnership
Unit (see Note 1 to Financial
Statements).
22. Following is a list of subsidiaries
of the Partnership:
<TABLE>
Names Under
Jurisdiction Which It Is
Name of Subsidiary Incorporation Doing Business
------------------ ------------- --------------
<S> <C> <C>
Sterling Springs Fund XX
Limited Partnership Delaware None
</TABLE>
(1) Incorporated by reference to the
Quarterly Report of the registrant
on Form 10-Q for the period ended
March 31, 1991, as filed on May 14,
1991.
(2) Incorporated by reference to the
Annual Report of the registrant on
Form 10-K for the period ended
December 31, 1992, as filed on March
30, 1993.
(3) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XI, Ltd. (File No. 0-9783) on
Form 10-K for the period ended
December 31, 1993, as filed on March
30, 1994.
(4) Incorporated by reference to the
Annual Report of the registrant on
Form 10-K for the period ended
December 31, 1993, as filed on March
30, 1994.
(B) There were no reports on Form 8-K filed by the Partnership during the
quarter ended December 31, 1995.
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
A Limited Partnership
SIGNATURE PAGE
Pursuant to the requirements of Section 13 or 15(d) 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.
<TABLE>
McNEIL REAL ESTATE FUND XX, L.P.
<S> <C>
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
April 1, 1996 By: /s/ Robert A. McNeil
- ------------------------------- ---------------------------------------
Date Robert A. McNeil
Chairman of the Board and Director
Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
April 1, 1996 By: /s/ Donald K. Reed
- -------------------------------- ---------------------------------------
Date Donald K. Reed
President and Director of McNeil Investors, Inc.
April 1, 1996 By: /s/ Ron K. Taylor
- -------------------------------- ---------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer
of McNeil Investors, Inc.
April 1, 1996 By: /s/ Carol A. Fahs
- -------------------------------- ---------------------------------------
Date Carol A. Fahs
Chief Accounting Officer of McNeil Real Estate
Management, Inc.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,927,223
<SECURITIES> 0
<RECEIVABLES> 4,406,929
<ALLOWANCES> 792,013
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,819,484
<DEPRECIATION> (1,093,107)
<TOTAL-ASSETS> 14,345,949
<CURRENT-LIABILITIES> 0
<BONDS> 2,760,961
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,345,949
<SALES> 1,405,346
<TOTAL-REVENUES> 1,974,316
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,657,426
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 252,774
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 64,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,116
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
