UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 1996
-----------------------------------------------------
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.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 33-0050225
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (214) 448-5800
------------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
<PAGE>
MCNEIL REAL ESTATE FUND XX, L.P.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------------- --------------
ASSETS
- ------
<S> <C> <C>
Real estate investments:
Land..................................................... $ 699,697 $ 699,697
Buildings and improvements............................... 6,123,527 6,119,787
-------------- -------------
6,823,224 6,819,484
Less: Accumulated depreciation.......................... (1,177,733) (1,093,107)
-------------- -------------
5,645,491 5,726,377
Mortgage loan investments, net of allowance of
$792,013 at March 31, 1996 and
December 31, 1995........................................ 3,504,474 3,537,436
Mortgage loan investment - affiliate........................ 733,900 733,900
Cash and cash equivalents .................................. 3,456,079 3,927,223
Cash segregated for security deposits....................... 65,309 59,869
Interest and other accounts receivable...................... 70,940 77,480
Escrow deposits............................................. 174,440 144,844
Deferred borrowing costs, net of accumulated
amortization of $34,767 and $31,264 at March 31,
1996 and December 31, 1995, respectively................. 126,727 130,230
Prepaid expenses and other assets........................... 26,677 8,590
-------------- -------------
$ 13,804,037 $ 14,345,949
============== =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Mortgage note payable, net.................................. $ 2,750,096 $ 2,760,961
Accounts payable and other accrued expenses................. 50,438 120,293
Accrued property taxes...................................... 159,134 123,530
Payable to affiliates - General Partner..................... 68,565 32,849
Deferred revenue............................................ 168,819 170,475
Security deposits and deferred rental revenue............... 61,629 58,213
-------------- -------------
3,258,681 3,266,321
-------------- -------------
Partners' equity (deficit):
Limited partners - 60,000 limited partnership
units authorized; 49,512 limited partnership units
issued and outstanding at March 31, 1996 and
December 31, 1995...................................... 10,864,729 11,399,658
General Partner.......................................... (319,373) (320,030)
-------------- -------------
10,545,356 11,079,628
-------------- -------------
$ 13,804,037 $ 14,345,949
============== =============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1996 1995
-------------- ---------------
Revenue:
<S> <C> <C>
Rental revenue............................................... $ 362,907 $ 328,983
Interest income on mortgage loan investments................. 71,014 68,220
Interest income on mortgage
loan investment - affiliate................................ 15,304 15,137
Other interest income........................................ 46,830 50,453
Total revenue.............................................. 496,055 462,793
Expenses:
Interest..................................................... 62,881 63,421
Depreciation................................................. 84,626 81,207
Property taxes............................................... 48,076 46,788
Personnel costs.............................................. 36,984 49,543
Utilities.................................................... 19,710 20,333
Repairs and maintenance...................................... 31,135 29,783
Property management fees -affiliates......................... 16,885 15,500
Other property operating expenses............................ 18,734 19,671
General and administrative................................... 28,099 16,610
General and administrative -affiliates....................... 83,222 95,479
Total expenses............................................. 430,352 438,335
Net income..................................................... $ 65,703 $ 24,458
============= =============
Net income allocable to limited partners....................... $ 65,046 $ 24,213
Net income allocable to General Partner........................ 657 245
------------- -------------
Net income..................................................... $ 65,703 $ 24,458
============= =============
Net income per limited partnership unit........................ $ 1.31 $ .49
============= =============
Distributions per limited partnership unit..................... $ 12.12 $ 5.05
============= =============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Three Months Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
--------------- -------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1994.............. $ (320,671) $ 11,586,184 $ 11,265,513
Net income................................ 245 24,213 24,458
Distributions............................. - (250,001) (250,001)
------------- ------------- -------------
Balance at March 31, 1995................. $ (320,426) $ 11,360,396 $ 11,039,970
============= ============= =============
Balance at December 31, 1995.............. $ (320,030) $ 11,399,658 $ 11,079,628
Net income................................ 657 65,046 65,703
Distributions............................. - (599,975) (599,975)
------------- ------------- -------------
Balance at March 31, 1996................. $ (319,373) $ 10,864,729 $ 10,545,356
============= ============= =============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Decrease in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------------
1996 1995
------------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants........................ $ 371,445 $ 340,881
Cash paid to suppliers............................ (224,008) (118,172)
Cash paid to affiliates........................... (64,391) (107,373)
Interest received................................. 116,244 138,982
Interest received from affiliates................. 12,221 12,221
Interest paid..................................... (57,555) (58,551)
Property taxes paid............................... (12,472) (5,767)
Property taxes escrowed........................... (29,100) (36,678)
------------------ --------------
Net cash provided by operating activities............ 112,384 165,543
----------------- --------------
Cash flows from investing activities:
Additions to real estate investments.............. (3,740) (10,942)
Collection of principal on mortgage loan
investments..................................... 32,962 39,280
----------------- --------------
Net cash provided by investing activities............ 29,222 28,338
----------------- --------------
Cash flows from financing activities:
Principal payments on mortgage note payable....... (12,775) (11,779)
Distributions paid................................ (599,975) (250,001)
----------------- --------------
Net cash used in financing activities................ (612,750) (261,780)
----------------- --------------
Net decrease in cash and cash equivalents............ (471,144) (67,899)
Cash and cash equivalents at beginning of
period............................................ 3,927,223 3,734,020
----------------- --------------
Cash and cash equivalents at end of period........... $ 3,456,079 $ 3,666,121
================= ==============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Net income........................................... $ 65,703 $ 24,458
--------------- ---------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation...................................... 84,626 81,207
Amortization of deferred borrowing costs.......... 3,503 3,185
Amortization of discount on mortgage note
payable......................................... 1,910 1,765
Changes in assets and liabilities:
Cash segregated for security deposits........... (5,440) (6,284)
Interest and other accounts receivable.......... 6,540 (9,746)
Escrow deposits................................. (29,596) (34,729)
Prepaid expenses and other assets............... (18,087) 6,623
Accounts payable and other accrued
expenses...................................... (69,855) 9,611
Accrued property taxes.......................... 35,604 41,021
Payable to affiliates - General Partner......... 35,716 3,606
Deferred revenue................................ (1,656) 25,941
Security deposits and deferred rental
revenue....................................... 3,416 18,885
--------------- --------------
Total adjustments............................. 46,681 141,085
--------------- --------------
Net cash provided by operating activities............ $ 112,384 $ 165,543
=============== ==============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XX, L.P.
Notes to Financial Statements
March 31, 1996
(Unaudited)
NOTE 1.
- -------
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 Uniform Limited
Partnership Act. The general partner of the Partnership is McNeil Partners, L.P.
(the "General Partner"), a Delaware limited partnership, an affiliate of Robert
A. McNeil ("McNeil"). The principal place of business for the Partnership and
the General Partner is 13760 Noel Road, Suite 700, Dallas, Texas 75240.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair presentation of the Partnership's financial position and
results of operations. All adjustments were of a normal recurring nature.
However, the results of operations for the three months ended March 31, 1996 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1996.
NOTE 2.
- -------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1995, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund XX, L.P., c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, Dallas, Texas 75240.
NOTE 3.
- -------
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.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
The Partnership is paying an asset management fee which is payable to the
General Partner. Through 1999, the asset management fee is calculated as 1% of
the Partnership's tangible asset value. Tangible asset value is determined by
using the greater of (i) an amount calculated by applying a capitalization rate
of 9% to the annualized net operating income of each property, (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.
<PAGE>
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner and its affiliates are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
Property management fees............................. $ 16,885 $ 15,500
Charged to general and administrative -
affiliates:
Partnership administration........................ 40,881 53,417
Asset management fee.............................. 42,341 42,062
--------------- --------------
$ 100,107 $ 110,979
=============== ==============
</TABLE>
Payable to affiliates - General Partner at March 31, 1996 and December 31, 1995
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 4.
- -------
Martha Hess, et al. v. Southmark Equity Partners II, Ltd., Southmark Income
Investors, Ltd., Southmark Equity Partners, Ltd. (presently known as McNeil Real
Estate Fund XXIV, L.P.), 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. 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 entity and
the judgment, along with the prior dismissals of the class action, was appealed.
The claims against the Partnership were dismissed by the Appellate Court.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
There has been no significant change in the operations of Sterling Springs
Apartments or 1130 Sacramento Condominiums since December 31, 1995.
The Partnership reported net income of $65,703 for the first three months of
1996 as compared to net income of $24,458 for the same period in 1995. Revenues
in 1996 increased to $496,055 from $462,793 in 1995, while expenses were
$430,352 in 1996 as compared to $438,335 in 1995.
Net cash provided by operating activities was $112,384 for the three months
ended March 31, 1996, a change from the $165,543 provided during the same three
month period in 1995.
The Partnership expended $3,740 for capital improvements, made $12,775 in
principal payments on its mortgage note payable, and collected $32,962 of
principal on mortgage loan investments. After distributions of $599,975 to the
limited partners, cash and cash equivalents totaled $3,456,079 at March 31,
1996, a net decrease of $471,144 from the balance at December 31, 1995.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total revenue increased by $33,262 for the three month period ended March 30,
1996 as compared to the same period in 1995. The increase was mainly due to an
increase in rental revenue, as discussed below.
Rental revenue for the three months ended March 31, 1996 increased by $33,924 as
compared to the same period in 1995. The increase was due to an increase in
rental rates at Sterling Springs Apartments in July 1995 and again in March
1996.
Expenses:
Total expenses for the three months ended March 31, 1996 decreased by $7,983 as
compared to the same period in 1995. The decrease was due to a decrease in
personnel costs and general and administrative - affiliates, offset by an
increase in general and administrative expenses, as discussed below.
Personnel costs decreased by $12,559 for the three months ended March 31, 1996
as compared to the same period in 1995. The decrease was mainly due to a
worker's compensation insurance refund received on Sterling Springs Apartments;
the result of an audit performed on prior years' workers' compensation
insurance.
General and administrative expense increased by $11,489 for the three months
ended March 31, 1996 as compared to the same period in 1995. The increase was
mainly due to the Partnership incurring approximately $12,000 of costs in 1996
to defend class action litigation.
<PAGE>
General and administrative - affiliates decreased by $12,257 for the three
months ended March 31, 1996 as compared to the same period in 1995. The decrease
was mainly due to a decrease in overhead expenses allocated to the Partnership
by McREMI.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $112,384 through operating activities for the first
three months of 1996 as compared to $165,543 for the first three months of 1995.
The decrease in 1996 was mainly due to an increase in cash paid to suppliers,
the result of outstanding accounts payables in 1995 paid in the first quarter of
1996.
Short-term liquidity:
At March 31, 1996, the Partnership held cash and cash equivalents of $3,456,079.
This balance provides a reasonable level of working capital for the Partnerships
immediate needs in operating its properties.
In 1996, operations of Sterling Springs Apartments and 1130 Sacramento 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.
The Partnership distributed $599,975 to the limited partners in the first
quarter of 1996. At the present time, the Partnership anticipates making
additional distributions to the limited partners in 1996. Management is
currently reviewing cash requirements to determine the amount and timing of such
distributions.
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.
<PAGE>
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 March 31, 1996,
$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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
Martha Hess, et al. v. Southmark Equity Partners II, Ltd., Southmark Income
Investors, Ltd., Southmark Equity Partners, Ltd. (presently known as McNeil Real
Estate Fund XXIV, L.P.), 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. 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 entity and
the judgment, along with the prior dismissals of the class action, was appealed.
The claims against the Partnership were dismissed by the Appellate Court.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Document 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).
11. Statement regarding computation of Net
Income per Limited Partnership Unit: Net
income (loss) per limited partnership unit
is computed by dividing net income (loss)
allocated to the limited partners by the
weighted average number of limited
partnership units outstanding. Per unit
information has been computed based on
49,512 limited partnership units outstanding
in 1996 and 1995.
27. Financial Data Schedule for the quarter ended
March 31, 1996.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended March 31, 1996.
<PAGE>
MCNEIL REAL ESTATE FUND XX, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
McNEIL REAL ESTATE FUND XX, L.P.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
May 14, 1996 By: /s/ Donald K. Reed
- ------------------- -------------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
May 14, 1996 By: /s/ Ron K. Taylor
- ------------------- -------------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer of
McNeil Investors, Inc.
May 14, 1996 By: /s/ Carol A. Fahs
- ------------------- -------------------------------------------
Date Carol A. Fahs
Chief Accounting Officer of McNeil
Real Estate Management, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,456,079
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,823,224
<DEPRECIATION> (1,177,733)
<TOTAL-ASSETS> 13,804,037
<CURRENT-LIABILITIES> 0
<BONDS> 2,750,096
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,804,037
<SALES> 362,907
<TOTAL-REVENUES> 496,055
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 367,471
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,881
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 65,703
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,703
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
