<PAGE>
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 0-14258
McNEIL REAL ESTATE FUND XV, LTD.
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(Exact name of registrant as specified in its charter)
California 94-2941516
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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___
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 ]
101,479 of the registrant's 102,836 limited partnership units are held by
non-affiliates of this registrant. 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 41
TOTAL OF 43 PAGES
<PAGE>
PART I
ITEM 1. BUSINESS
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Organization
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McNeil Real Estate Fund XV, Ltd. (the "Partnership") was organized June 26, 1984
as a limited partnership under the provisions of the California 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 Partnership is governed by an amended and restated
partnership agreement of limited partnership dated October 11, 1991, as amended
(the "Amended Partnership Agreement"). Prior to October 11, 1991, McNeil Realty
Investors Corporation (the prior "Corporate General Partner"), a wholly-owned
subsidiary of Southmark Corporation ("Southmark"), and McNeil were the general
partners of the Partnership, which was governed by an agreement of limited
partnership dated June 26, 1984 (the "Original Partnership Agreement"). The
principal place of business for the Partnership and General Partner is 13760
Noel Road, Suite 700, LB70, Dallas, Texas, 75240.
On September 14, 1984, a Registration Statement on Form S-11 was declared
effective by the Securities and Exchange Commission whereby the Partnership
offered for sale $35,000,000 of limited partnership units ("Units"), with the
General Partners' right to increase the offering up to $60,000,000. 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 January 31, 1986, with 101,519 Units sold at $500 each,
or gross proceeds of $50,759,500 to the Partnership. In addition, the original
general partners purchased a total of 10 Units for $5,000. In 1991 and in 1992,
651 and 696 Units, respectively, were issued to the General Partner for payment
of the fixed portion of the Management Incentive Distribution ("MID"). In 1993,
1994 and 1995, 10, 20 and 10 Units, respectively, were relinquished leaving
102,836 Units outstanding as of 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, McNeil nor the
Corporate 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 interest in the Corporate 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: (a) an affiliate of McNeil purchased the Corporate General Partner's
economic interest in the Partnership; (b) McNeil became the managing general
partner of the Partnership pursuant to an agreement with the Corporate General
Partner that delegated management authority to McNeil; and (c) 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.
<PAGE>
On October 11, 1991, the limited partners approved a restructuring proposal
providing for (i) the replacement of the Corporate General Partner and McNeil
with the General Partner; (ii) the adoption of the Amended Partnership
Agreement, which substantially alters provisions of the Original Partnership
Agreement relating to, among other things, compensation, reimbursements of
expenses, and voting rights; and (iii) the approval of a new property management
agreement with McREMI, the Partnership's property manager.
The Amended Partnership Agreement provides for a MID to replace all other forms
of general partner compensation other than property management fees and
reimbursements of certain costs. Additional Units may be issued in connection
with the payment of the MID pursuant to the Amended Partnership Agreement. In
1992 and 1991, the General Partner received 696 and 651 Units, respectively, for
such a payment. See Item 8 - Note 2 "Transactions with Affiliates". For a
discussion of the methodology for calculating and distributing the MID see Item
13 - Certain Relationships and Related Transactions.
Settlement of Claims:
The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark for damages relating to improper overcharges, breach of contract and
breach of fiduciary duty. The Partnership settled these claims in 1991, and such
settlement was approved by the Bankruptcy Court.
An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995 the Partnership received in full satisfaction of its claims, $26,655 in
cash, and common and preferred stock in the reorganized Southmark which
represents the Partnership's pro-rata share of Southmark assets available for
Class 8 Claimants. The Partnership sold the Southmark common and preferred stock
in May for $8,608 which, combined with the cash proceeds from Southmark,
resulted in a gain on legal settlement of $35,263.
CURRENT OPERATIONS
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General:
The Partnership is engaged in real estate activities, including the ownership,
operation and management of residential and other real estate related assets. At
December 31, 1995, the Partnership owned four income-producing properties as
described in Item 2 - Properties.
The Partnership does not directly employ any personnel. The Partnership is
managed by the General Partner and, in accordance with the Amended Partnership
Agreement, the Partnership reimburses affiliates of the General Partner for
certain costs incurred by affiliates in connection with the management of the
Partnership's business. 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.
<PAGE>
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 followed by distributions. 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, the Partnership is subject to all of the risks incident 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 to
respond promptly to changed circumstances. The Partnership competes 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) 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 discussion of competitive conditions at 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, a Delaware limited partnership
controlled by Carl C. Icahn ("High River") 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 $95.00 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 6.74% 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.
<PAGE>
ITEM 2. PROPERTIES
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The following table sets forth the real estate investment portfolio of the
Partnership at December 31, 1995. The buildings and the land on which they are
located are owned by the Partnership in fee, subject in each case (with the
exception of Cedar Run, which is unencumbered by mortgage indebtedness) to a
first lien deed of trust as set forth more fully in Item 8 - Note 5 - "Mortgage
Notes Payable". See also Item 8 - Note 4 - "Real Estate Investments" and
Schedule III - "Real Estate Investments and Accumulated Depreciation." In the
opinion of the management, the properties are adequately covered by insurance.
<TABLE>
<CAPTION>
Net Basis 1995 Date
Property Description of Property Debt Property Tax Acquired
- ------------- ----------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Arrowhead (1) Apartments
Shawnee, KS 436 units $ 8,617,008 $ 7,119,395 $ 146,627 3/85
Cedar Run Apartments
Lexington, KY 152 units 3,611,727 - 30,247 12/85
Mountain
Shadows (2) Apartments
Albuquerque, NM 504 units 13,515,173 11,856,268 182,945 8/85
Woodcreek (3) Apartments
Cary, NC 200 units 5,805,086 5,240,470 61,814 12/85
------------- ------------ ---------
$ 31,548,994 $ 24,216,133 $ 421,633
============= ============ =========
</TABLE>
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Total: Apartments - 1,292 units
(1) Arrowhead Apartments is owned by Arrowhead Fund XV Limited Partnership
which is wholly-owned by the Partnership.
(2) Mountain Shadows Apartments is owned by McNeil Mountain Shadows Fund XV
Limited Partnership which is wholly-owned by the Partnership.
(3) Woodcreek Apartments is owned by Woodcreek Fund XV, Ltd. which is wholly-
owned by the Partnership.
<PAGE>
The following table sets forth the properties' occupancy rate and rent per
square foot for each of the last five years:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
Arrowhead
Occupancy Rate............ 95% 95% 96% 92% 89%
Rent Per Square Foot...... $6.76 $6.42 $5.95 $5.49 $5.25
Cedar Run
Occupancy Rate............ 95% 95% 91% 92% 90%
Rent Per Square Foot...... $7.22 $7.14 $6.61 $6.32 $6.13
Mountain Shadows
Occupancy Rate............ 88% 94% 95% 93% 89%
Rent Per Square Foot...... $8.24 $7.97 $7.53 $6.88 $6.26
Woodcreek
Occupancy Rate............ 95% 99% 97% 92% 98%
Rent Per Square Foot...... $8.42 $8.08 $7.40 $6.87 $6.62
</TABLE>
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 at Properties
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Occupancy rates at Arrowhead mirror the local area average of 95%. Area
occupancy rates are expected to remain in the 95% range. Arrowhead is located in
an affluent county in metropolitan Kansas City. The apartment market is
extremely concentrated with over 3,000 apartment units within a one mile radius
of Arrowhead. The increase in capital improvements over the last several years
has allowed the property to reposition itself as one of the leaders in the
market.
The extensive capital improvement program at Cedar Run has resulted in
increasing the occupancy rate from 90% in 1991 to 95% in 1995. The market has
fluctuated from 90% to 96%, while Cedar Run has held its occupancy rate constant
throughout the year. The property's rent per square foot is currently 12%
higher than the local market rate. There has been little new development of
multi-family projects in the area.
Mountain Shadows is located in a very competitive market in Albuquerque. The
market maintains an occupancy level at 88% with an additional 1,892 units under
construction. The capital improvements program that Mountain Shadows has been
involved in has kept the property aggressive in the market.
The occupancy rate at Woodcreek dropped off slightly in 1995 to 95% due to the
additional units added in the market during the year. The market averages a
strong 96%. The property is located in a rapidly developing area of Wake County
in North Carolina. The current capital improvement program has enabled the
property to stay competitive in a growing market.
<PAGE>
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.
<PAGE>
3) 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, Ltd. (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 3,
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 3, 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.
4) 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)
<PAGE>
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 4, 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 4, 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.
5) 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 5,
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.
6) 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)
<PAGE>
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 6,
the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil
Investors, Inc., Robert A. McNeil and other senior officers (as defined in
this Section 6, 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. See also
Item 8 - Note 9 - "Gain on Legal Settlement."
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 Units, nor is one
expected to develop.
(B) Title of Class Number of Record Unit Holders
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Limited partnership units 5,568 as of February 16, 1996
(C) No distributions were made to the limited partners during 1995. Cash
distributions of $499,993 were made to the limited partners during 1994.
The distributions consisted of funds from the sale of Riverway Five. The
Partnership accrued distributions of $519,812 and $508,862 for the benefit
of the General Partner for the years ended December 31, 1995 and 1994,
respectively, of which all have been paid as of December 31, 1995. These
distributions are the contingent MID pursuant to the Amended Partnership
Agreement. Distributions of the contingent MID are expected to be paid to
the General Partner in 1996. See Item 8 - Note 2 - "Transactions with
Affiliates." See Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations for a discussion of distributions and
the likelihood they will continue to limited partners. In February 1996, a
distribution of $500,000 was made to the limited partners.
<PAGE>
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.
<TABLE>
<CAPTION>
Statements of Years Ended December 31,
Operations 1995 1994 1993 1992 1991
- ------------------ ------------- ------------- -------------- ------------- --------
<S> <C> <C> <C> <C> <C>
Rental revenue............... $ 7,716,859 $ 7,415,746 $ 7,237,745 $ 7,897,402 $ 7,685,515
Total revenue................ 7,991,130 7,772,979 7,280,900 7,982,880 7,798,105
Write-down for permanent
impairment of real estate... - - - 3,327,000 2,000,000
Loss on disposition of real
estate...................... - - 2,002,611 - -
Loss before extraordinary
items....................... (198,113) (41,096) (3,099,381) (5,450,278) (5,051,760)
Extraordinary gain on early
extinguishment of debt...... - - 2,681,807 52,623 -
Net loss..................... (198,113) (41,096) (417,574) (5,397,655) (5,051,760)
Net loss per limited
partnership unit:
Loss before extraordinary
items....................... $ (6.90) $ (5.19) $ (35.26) $ (52.45) $ (49.19)
Extraordinary gain on early
extinguishment of debt...... - - 25.81 .51 -
---------- --------- ---------- ---------- ----------
Net loss..................... $ (6.90) $ (5.19) $ (9.45) $ (51.94) $ (49.19)
========== ========= ========== ========== ==========
As of December 31,
----------------------------------------------------------------------
Balance Sheets 1995 1994 1993 1992 1991
- -------------- ----------- ---------- ----------- ----------- -----------
Real estate investments,
net........................... $31,548,994 $32,336,645 $33,207,297 $35,470,317 $46,927,977
Asset held for sale............ - - - 6,515,301 -
Total assets................... 35,129,849 37,030,171 38,348,427 43,663,439 49,330,836
Mortgage notes payable,
net........................... 24,216,133 25,443,252 25,803,685 30,191,039 30,366,355
Partners' equity............... 10,037,853 10,755,778 11,805,729 12,627,676 18,077,250
</TABLE>
See Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations. The Partnership sold Riverway Five on December 28, 1993,
while La Plaza East was lost to foreclosure on May 11, 1993.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
FINANCIAL CONDITION
- -------------------
The Partnership was formed to acquire, operate and ultimately dispose of a
portfolio of income-producing real properties. As of December 31, 1995, the
Partnership owned four apartment properties. Three of the four Partnership's
properties are subject to mortgage notes.
During 1992, La Plaza East lost a major tenant and management determined that it
would be in the Partnership's best economic interest not to make the improvement
required to lease the property. Therefore in September 1992, the Partnership
ceased making debt service payments on La Plaza East and it was subsequently
placed in receivership. On May 11, 1993, the Partnership allowed the foreclosure
of La Plaza East by the lender in full settlement of the mortgage indebtedness
on the property.
Riverway Five was sold by the Partnership on December 28, 1993 yielding cash
proceeds of $2,034,822. The property had very limited parking spaces and was
only 64% occupied. The Partnership had previously recorded write-downs of
$1,800,000 and $2,000,000 in 1992 and 1991, respectively, due to reevaluations
of the long-term prospects for the market and the lack of available parking.
Management believed that leasing the vacant space would be most difficult,
therefore the Partnership accepted a purchase offer, and the property was sold
for $2,100,000. The Partnership filed suit against the title company involved in
the Partnership's purchase of the property over representations of rights to
additional parking when the property was acquired. In September 1994, the
Partnership and Chicago Title reached a settlement of $300,000 which is recorded
as gain on settlement of litigation on the Statements of Operations net of
related legal costs.
RESULTS OF OPERATIONS
- ---------------------
1995 compared to 1994
Revenue:
Partnership revenues increased by $218,151 or 3% for the year ended 1995 as
compared to 1994. Rental revenue and interest income increased by $301,113 and
$104,776, respectively.
In 1994, the Partnership recognized income of $223,001 for the settlement of
litigation, as discussed above. In 1995, the Partnership recognized a gain
on legal settlement of $35,263 as a result of the settlement with Southmark.
Rental revenue was $7,716,859 for 1995 as compared to $7,415,746 in 1994. The
increase is primarily due to increases in rental rates, offset by slight
decreases in occupancy rates at all the properties.
Interest income earned on cash and cash equivalents increased due to an increase
in the interest rates and larger average cash balances invested in
interest-bearing accounts.
<PAGE>
Expenses:
Partnership expenses increased in 1995 by $375,168 or 5% as compared to the same
period last year. The increase is primarily due to increases in property taxes,
other property operating and general and administrative expenses.
Property tax expense for 1995 was $421,633 as compared to $393,660 in 1994. The
increase of $27,973 or 7% is a result of an increase in the assessed property
value at Mountain Shadows.
Other property operating expenses increased $53,477 or 12% for the year ended
1995 as compared to the year ended 1994. The increase can be attributed to
increases in hazard insurance at Arrowhead and Mountain Shadows, as well as
increases in office supplies and marketing at all four properties.
General and administrative expenses increased $145,222 as compared to 1994 due
to costs incurred by the Partnership in the third quarter of 1995 to evaluate
and disseminate information regarding an unsolicited tender offer as discussed
in Item 1 - Business.
1994 compared to 1993
Revenue:
Partnership revenues increased by $492,079 or 7% in 1994 as compared to 1993.
Rental revenue and interest income increased by $178,001 and $91,077,
respectively.
Rental revenue for 1994 was $7,415,746 as compared to $7,237,745 for the same
period in 1993. This increase is primarily due to increases in rental rates at
all of the properties and an increase in the occupancy rate at Cedar Run and
Woodcreek. These increases offset the loss of $340,501 in rental revenue due to
the sale of Riverway Five, as discussed above.
The Partnership also recognized income of $223,001 in 1994 for the settlement of
the lawsuit, as discussed above.
Interest income earned on cash and cash equivalents increased due to an increase
in the interest rates and larger average cash balances invested in
interest-bearing accounts.
Expenses:
Partnership expenses decreased in 1994 by $2,566,206 or 25% as compared to the
same period last year due to the loss on dispositions of real estate of
$2,002,611 relating to the foreclosure of La Plaza East in May 1993 and the sale
of Riverway Five. The effects from these transactions were declines of $48,705
for depreciation, $50,447 for property taxes, $13,405 for personnel expenses,
$87,811 for utilities, $47,245 for repair and maintenance, $18,301 for property
management fees - affiliates, and $28,788 for other property operating expenses.
<PAGE>
In addition to the foreclosure of La Plaza East and sale of Riverway Five, other
factors affected the level of expenses reported by the remaining properties.
Interest expense decreased $261,161 or 10% as compared to the same period in
1993 due to the refinancing in June of 1993 of the mortgage payable at Arrowhead
and Mountain Shadows at lower interest rates.
General and administrative expenses decreased by $105,882 or 48% as compared to
1993 due to savings the Partnership achieved through a new tax processing and
reporting system and reductions in legal and professional fees.
General and administrative - affiliates decreased by $69,347 or 23% as compared
to 1993 primarily due to an amendment of the Amended Partnership Agreement which
eliminated the Fixed MID effective July 1993.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership has experienced positive cash flow from operations of $4,887,783
for the three years ended December 31, 1995. In 1995, the Partnership received
net cash proceeds of $1,367,557 through the refinance of Woodcreek. During 1993,
the Partnership received net cash proceeds of $4,288,348 for the sale of
Riverway Five and the refinancings of Arrowhead and Mountain Shadows. Over the
last three years the Partnership has used cash to fund $3,083,787 in additions
to real estate investments, $1,125,290 in scheduled principal payments on
mortgage notes payable, $981,925 for additional deferred borrowing costs and
$1,445,502 for payment of the contingent portion of the MID. In December 1995,
proceeds from the refinance of Woodcreek and current cash reserves totaling
$2,217,856 were used to pay off the mortgage on Cedar Run.
The Partnership's generated cash flow of $1,914,501 through operating activities
in 1995 as compared to $2,107,801 in 1994. This decline of $193,300 in cash
provided by operating activities is primarily due to the proceeds received from
the litigation settlement in 1994. The increases in the cash received from
tenants and interest received were offset by the increase in the cash paid to
suppliers and the property taxes paid.
The Partnership generated cash flow of $2,107,801 through operating activities
in 1994 as compared to $865,481 in 1993. The increase in 1994 was partially
attributed to the reduction in the amount of interest paid during 1994 as
compared to 1993. The refinancing of the mortgage notes on Arrowhead and
Mountain Shadows yielded lower interest rates. Other factors include an increase
in the cash received from tenants due to the increase in rental rates, the
reduction in the taxes paid during 1994, and an increase in interest received.
The Partnership expended $1,168,355, $1,014,729 and $900,703 for capital
improvements to the properties in 1995, 1994 and 1993, respectively. The
Partnership also received proceeds of $2,034,822 for the sale of Riverway Five
in December of 1993.
During 1994, the Partnership paid distributions to the limited partners of
$499,993 for the first time since 1986. In 1995, proceeds from the refinance of
a mortgage note were used to retire another mortgage note, as discussed above.
In 1993, the Partnership refinanced two mortgage notes, as discussed above, and
received proceeds of $2,253,526.
<PAGE>
Short-term liquidity:
The Partnership held cash and cash equivalents of $2,079,352 at December 31,
1995, down $1,205,195 from the balance at December 31, 1994. This balance
provides a reasonable level of working capital for the Partnership's operations.
In 1996, operations of the Partnership's properties are expected to provide
positive cash flow from operations. Management will perform routine repairs and
maintenance on the properties to preserve and enhance their value in the market.
In the past three years the Partnership has spent over $3 million renovating the
properties so they can remain competitive in their respective markets. In 1996,
the Partnership has budgeted to spend approximately $510,000 on capital
improvements, which are expected to be funded from operations of the properties.
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. The Partnership has not
received, nor is there any assurance that the Partnership will receive, any
funds under the facility because no amounts will be 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 borrowings. This commitment by the General Partner
will terminate on October 11, 1996.
Long-term liquidity:
For the long-term, property operations will remain the primary source of funds.
While the present outlook for the Partnership's liquidity is favorable, market
conditions may change and property operations can deteriorate. In that event,
the Partnership would require other sources of working capital. No such other
sources have been identified, and the Partnership has no established lines of
credit. Other possible actions to resolve working capital deficiencies include
refinancing or renegotiating terms of existing loans, deferring major capital
expenditures on Partnership properties except where improvements are expected to
enhance the competitiveness or marketability of the properties, or arranging
working capital support from affiliates. All or a combination of these steps may
be inadequate or unfeasible in resolving such potential working capital
deficiencies. No affiliate support has been required in the past, and there is
no assurance that support would be provided in the future, since neither the
General Partner nor any affiliates have any obligation in this regard in excess
of the $5,000,000 revolving credit facility discussed above.
Distributions:
Terms of the Amended Partnership Agreement specify that income before
depreciation is allocated to the General Partner to the extent of contingent MID
paid in cash. Depreciation is allocated in the ratio of 95:5 to the limited
partners and the General Partner, respectively. Therefore for the three year
period ended December 31, 1995, $511,270, $492,604, and $554,160,
respectively, was allocated to the General Partner. The limited partners
received allocations of net loss of $(709,383), $(533,700) and
$(971,734) for the three year period ended December 31, 1995, respectively.
During 1994, the limited partners received a cash distribution of $499,993. This
distribution consisted of funds from the sale of Riverway Five. A distribution
of $519,812 for the contingent portion of the MID was accrued by the Partnership
for the General Partner in 1995. In light of the Cedar Run payoff, management
did not make any distributions to the limited partners in 1995. In February
1996, a distribution of $500,000 was made to the limited partners. The General
Partner will continue to monitor the cash reserves and working capital needs of
the Partnership to determine when cash flow will support additional
distributions to the limited partners.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
Page
Number
------
INDEX TO FINANCIAL STATEMENTS
- -----------------------------
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.............................18
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...................................................33
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 XV, Ltd.:
We have audited the accompanying balance sheets of McNeil Real Estate Fund XV,
Ltd. (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 XV,
Ltd. 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 XV, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1995 1994
--------------- --------------
ASSETS
- ------
<S> <C> <C>
Real estate investments:
Land..................................................... $ 7,087,195 $ 7,087,195
Building and improvements................................ 44,889,821 43,721,466
-------------- -------------
51,977,016 50,808,661
Less: Accumulated depreciation.......................... (20,428,022) (18,472,016)
-------------- -------------
31,548,994 32,336,645
Cash and cash equivalents................................... 2,079,352 3,284,547
Cash segregated for security deposits....................... 249,574 244,994
Accounts receivable......................................... 6,691 11,488
Prepaid expenses and other assets........................... 43,905 85,623
Escrow deposits............................................. 364,431 278,490
Deferred borrowing costs, net of accumulated
amortization of $172,430 and $124,350 at
December 31, 1995 and 1994, respectively ................ 836,902 788,384
-------------- -------------
$ 35,129,849 $ 37,030,171
============== =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable, net................................. $ 24,216,133 $ 25,443,252
Accounts payable............................................ 42,258 26,499
Accrued expenses............................................ 197,112 79,404
Accrued interest............................................ 169,346 188,816
Accrued property taxes...................................... 164,534 212,148
Payable to affiliates - General Partner..................... 48,469 56,915
Security deposits and deferred rental income................ 254,144 267,359
-------------- -------------
25,091,996 26,274,393
-------------- -------------
Partners' equity (deficit):
Limited partners - 120,000 limited partnership units
authorized; 102,836 and 102,846 limited partnership
units issued and outstanding at December 31, 1995
and 1994, respectively..................................... 10,394,645 11,104,028
General Partner............................................ (356,792) (348,250)
-------------- -------------
10,037,853 10,755,778
-------------- -------------
$ 35,129,849 $ 37,030,171
============== =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Rental revenue.......................... $ 7,716,859 $ 7,415,746 $ 7,237,745
Interest................................ 239,008 134,232 43,155
Gain on settlement of legal expenses.... 35,263 - -
Gain on settlement of litigation........ - 223,001 -
---------- ---------- ----------
Total revenue......................... 7,991,130 7,772,979 7,280,900
---------- ---------- ----------
Expenses:
Interest................................ 2,433,439 2,397,880 2,659,041
Depreciation and amortization........... 1,956,006 1,885,381 1,826,962
Property taxes.......................... 421,633 393,660 436,860
Personnel expenses...................... 835,031 810,327 771,130
Repairs and maintenance................. 785,740 801,181 862,291
Property management fees -
affiliates............................ 385,074 376,559 367,413
Utilities............................... 378,487 366,026 473,874
Other property operating expenses....... 487,602 434,125 455,934
General and administrative.............. 258,081 112,859 218,741
General and administrative -
affiliates............................ 248,150 236,077 305,424
Loss on dispositions of real estate..... - - 2,002,611
---------- ---------- ----------
Total expenses........................ 8,189,243 7,814,075 10,380,281
---------- ---------- ----------
Loss before extraordinary item............. (198,113) (41,096) (3,099,381)
Extraordinary gain on early extin-
guishment of debt....................... - - 2,681,807
---------- ---------- ----------
Net loss................................... $ (198,113) $ (41,096) $ (417,574)
========== ========== ==========
Net loss allocable to limited partners..... $ (709,383) $ (533,700) $ (971,734)
Net income allocable to
General Partner......................... 511,270 492,604 554,160
---------- ---------- ----------
Net loss................................... $ (198,113) $ (41,096) $ (417,574)
========== ========== ==========
Net loss per limited partnership unit:
Loss before extraordinary item.......... $ (6.90) $ (5.19) $ (35.26)
Extraordinary gain on early
extinguishment of debt................ - - 25.81
---------- ---------- ----------
Net loss................................... $ (6.90) $ (5.19) $ (9.45)
========== ========== ==========
Distribution per limited partnership unit.. $ - $ 4.86 $ -
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
---------------- --------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1992.............. $ (481,779) $ 13,109,455 $ 12,627,676
Net income (loss)......................... 554,160 (971,734) (417,574)
Contingent Management Incentive
Distribution........................... (404,373) - (404,373)
-------------- -------------- --------------
Balance at December 31, 1993.............. (331,992) 12,137,721 11,805,729
Net income (loss)......................... 492,604 (533,700) (41,096)
Limited partners distribution............. - (499,993) (499,993)
Contingent Management Incentive
Distribution........................... (508,862) - (508,862)
-------------- -------------- --------------
Balance at December 31, 1994.............. (348,250) 11,104,028 10,755,778
Net income (loss)......................... 511,270 (709,383) (198,113)
Contingent Management Incentive
Distribution........................... (519,812) - (519,812)
-------------- -------------- --------------
Balance at December 31, 1995.............. $ (356,792) $ 10,394,645 $ 10,037,853
============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from tenants.............. $ 7,687,865 $ 7,446,868 $ 7,204,490
Cash received from legal settlement..... 35,263 - -
Cash paid to suppliers.................. (2,639,152) (2,486,722) (2,780,099)
Cash paid to affiliates................. (630,652) (611,940) (715,617)
Interest received....................... 239,008 134,232 43,155
Interest paid........................... (2,308,035) (2,285,387) (2,571,339)
Property taxes paid..................... (469,796) (312,251) (563,749)
Proceeds from litigation settlement..... - 223,001 -
Insurance proceeds...................... - - 248,640
---------- ----------- ----------
Net cash provided by operating activities.. 1,914,501 2,107,801 865,481
---------- ----------- ----------
Cash flows from investing activities:
Additions to real estate
investments........................... (1,168,355) (1,014,729) (900,703)
Net proceeds from disposition of
real estate........................... - - 2,034,822
---------- ----------- ----------
Net cash provided by (used in)
investing activities.................... (1,168,355) (1,014,729) 1,134,119
---------- ----------- ----------
Cash flows from financing activities:
Net proceeds from refinancing of
mortgage notes payable................ 1,367,557 - 2,253,526
Principal payments on mortgage
notes payable......................... (2,644,430) (407,750) (290,966)
Deferred borrowing costs paid........... (143,638) - (838,287)
Limited partners distribution........... - (499,993) -
Contingent Management
Incentive Distribution................ (530,830) (511,458) (403,214)
---------- ----------- ----------
Net cash provided by (used in)
financing activities.................. (1,951,341) (1,419,201) 721,059
---------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents...................... (1,205,195) (326,129) 2,720,659
Cash and cash equivalents at
beginning of year..................... 3,284,547 3,610,676 890,017
---------- ----------- ----------
Cash and cash equivalents at end
of year............................... $ 2,079,352 $ 3,284,547 $ 3,610,676
========== =========== ==========
</TABLE>
See discussions of noncash investing and financing activities in Note 7.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
STATEMENTS OF CASH FLOWS
Reconciliation of Net Loss to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net loss................................... $ (198,113) $ (41,096) $ (417,574)
---------- ---------- ----------
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization........... 1,956,006 1,885,381 1,826,962
Amortization of discounts on
mortgage notes payable................ 49,754 47,317 22,583
Amortization of deferred borrowing
costs................................. 95,120 68,136 98,023
Extraordinary gain on early
extinguishment of debt................ - - (2,681,807)
Loss on disposition of real estate...... - - 2,002,611
Changes in assets and liabilities:
Cash segregated for security
deposits............................ (4,580) 12,952 (37,854)
Accounts receivable................... 4,797 8,137 (1,724)
Accounts receivable - insurance
claim............................... - - 248,640
Prepaid expenses and other assets..... 41,718 (29,561) 4,572
Escrow deposits....................... (85,941) 61,811 (326,968)
Accounts payable...................... 15,759 (9,505) 21,077
Accrued expenses...................... 117,708 12,911 33,688
Accrued interest...................... (19,470) (2,960) (32,904)
Accrued property taxes................ (47,614) 70,734 129,404
Payable to affiliates - General
Partner............................. 2,572 696 (42,780)
Security deposits and deferred
rental income....................... (13,215) 22,848 19,532
---------- ---------- ----------
Total adjustments................. 2,112,614 2,148,897 1,283,055
---------- ---------- ----------
Net cash provided by operating activities.. $ 1,914,501 $ 2,107,801 $ 865,481
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------
Organization
- ------------
McNeil Real Estate Fund XV, Ltd. (the "Partnership") was organized June 26, 1984
as a limited partnership under the provisions of the California 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. The Partnership is governed by an amended and restated partnership
agreement of limited partnership dated October 11, 1991, as amended (the
"Amended Partnership Agreement"). 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 real estate activities, including the ownership,
operation and management of residential and other real estate related assets. At
December 31, 1995, the Partnership owned four income-producing properties as
described in Note 4 - Real Estate 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 include the accounts of the following
listed tier partnerships. These single asset tier partnerships were formed to
accommodate the refinancing of the respective property. The Partnership's and
the General Partner's ownership interest in each tier partnership is detailed
as follows:
<TABLE>
<CAPTION>
% of Ownership Interest
Tier Partnership Partnership General Partner
---------------- ----------- ---------------
<S> <C> <C>
Arrowhead Fund XV LP (a)(b) 100 -
McNeil Mountain Shadows Fund XV LP (a)(b) 100 -
Woodcreek Fund XV, Ltd. (a)(c) 100 -
</TABLE>
(a) The general partner of these partnerships is a corporation whose stock is
100% owned by the Partnership.
(b) Included in financial statements for years ended December 31, 1995, 1994 and
1993.
(c) Included in financial statements for year ended December 31, 1995.
<PAGE>
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 betterment's 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 and Amortization
- -----------------------------
Buildings and improvements are depreciated using the straight-line method over
the estimated useful lives of the assets, ranging from 3 to 25 years. Tenant
improvements were amortized over the terms of the related tenant lease using the
straight-line method.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include cash on hand and cash on deposit with
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 various mortgage indebtedness agreements. 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 a method that approximates the
effective interest method over the terms of the related mortgage notes payable.
Amortization of deferred borrowing costs is included in interest expense on the
Statements of Operations.
<PAGE>
Discounts on Mortgage Notes Payable
- -----------------------------------
Discounts on mortgage notes payable are being amortized over the remaining terms
of the related mortgage notes using the effective interest method. Amortization
of discounts on mortgage notes payable is included in interest expense on the
Statements of Operations.
Rental Revenue
- --------------
The Partnership leases its residential properties under short-term operating
leases. Lease terms generally are less than one year in duration. Rental revenue
is recognized as earned.
The Partnership leased its commercial properties under noncancelable operating
leases. Certain leases provided concessions and/or periods of escalating or free
rent. Rental revenue was recognized on a straight-line basis over the term of
the related leases.
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
- -------------------------------------
The Amended Partnership Agreement provides for net income of the Partnership for
both financial statements and income tax reporting purposes to be allocated as
indicated below. For allocation purposes, net income and net loss of the
Partnership are determined prior to deductions for depreciation:
a) first, deductions for depreciation shall be allocated 1% to the General
Partner and 99% to the limited partners;
b) then, net income in an amount equal to the greater of 1) 1% of net income
or 2) the cumulative amount distributed for the contingent portion of the
Management Incentive Distribution ("MID") for which no income allocation
has previously been made shall be allocated to the General Partner;
provided that if all or a portion of such distribution consists of limited
partnership units ("Units"), the amount of net income allocated shall be
equal to the amount of cash the General Partner would have otherwise
received; and
c) any remaining net income shall be allocated 100% to the limited partners.
The Amended Partnership Agreement provides that net losses shall be allocated 1%
to the General Partner and 99% to the limited partners.
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.
<PAGE>
Distributions
- -------------
Pursuant to the Amended Partnership Agreement and at the discretion of the
General Partner, distributions of cash from property operations shall be made as
follows:
(a) first, to the General Partner, an amount equal to the contingent portion of
the MID; and
(b) any remaining distributable cash, as defined, shall be distributed 100% to
the limited partners.
At the discretion of the General Partner, distribution of cash from sales or
refinancing shall be distributed as follows:
(a) first, to the General Partner, an amount equal to any contingent portion of
the MID not satisfied through distributions of cash from property
operations; and
(b) any remaining cash shall be distributed to the limited partners in the
following proportions: 95/270 to Group A subscribers, 90/270 to Group B
subscribers and 85/270 to Group C subscribers of the pro rata portion of
the original invested capital attributable to each group of subscribers.
No distributions were made to the limited partners during 1995 or 1993. Cash
distributions of $499,993 were made to the limited partners during 1994. The
Partnership accrued distributions of $519,812, $508,862 and $404,373 for the
benefit of the General Partner for the years ended December 31, 1995, 1994 and
1993, respectively. The distributions are the contingent portion of the MID
pursuant to the Amended Partnership Agreement. In February 1996, a distribution
of $500,000 was made to the limited partners. The General Partner will continue
to monitor the cash reserves and working capital needs of the Partnership to
determine when cash flow will support additional distributions to the limited
partners.
Net Income (Loss) Per Limited Partnership Unit
- ----------------------------------------------
Net income (loss) per Unit is computed by dividing net income (loss) allocated
to the limited partners by the weighted average number of Units outstanding
calculated on the last day of each calendar month. Per Unit information has been
computed based on 102,836, 102,846 and 102,866 weighted average Units
outstanding in 1995, 1994 and 1993, respectively.
Reclassification
- ----------------
Certain reclassifications have been made to prior period amounts to conform with
the current year presentation.
<PAGE>
NOTE 2 - TRANSACTIONS WITH AFFILIATES
- -------------------------------------
The Partnership pays property management fees equal to 5% of the gross rental
receipts of the Partnership's properties to McNeil Real Estate Management, Inc.
("McREMI"), an affiliate of the General Partner, for providing property
management services for the Partnership's residential and commercial properties
and leasing services for its residential properties. McREMI could have also
chosen to provide leasing services for the Partnership's commercial properties,
in which case McREMI would have received property management fees from such
commercial properties equal to 3% of the property's gross rental receipts plus
leasing commissions based on the prevailing market rate for such services where
the property was located.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
The Partnership reimbursed an affiliate of the General Partner for costs
incurred in connection with refinancing and modification of mortgage notes
payable. These costs are capitalized as deferred borrowing costs and amortized
over the remaining term of the related mortgage.
Under the terms of the Amended Partnership Agreement, the Partnership is paying
the MID to the General Partner. The maximum MID is calculated as 1% of the
tangible asset value of the Partnership. The maximum MID percentage decreases
subsequent to 1999. Tangible asset value is determined by using the greater of
(i) an amount calculated by applying a capitalization rate of 9% to the
annualized net operating income of each property or (ii) a value of $10,000 per
apartment unit for residential property and $50 per gross square foot for
commercial property to arrive at the property tangible asset value. The property
tangible asset value is then added to the book value of all other assets
excluding intangible assets. Prior to July 1, 1993, the MID consisted of two
components: (i) the fixed portion was payable without respect to the net income
of the Partnership and was equal to 25% of the maximum MID (the "Fixed MID") and
(ii) a contingent portion which was payable only to the extent of the lesser of
the Partnership's excess cash flow, as defined, or net operating income (the
"Entitlement Amount") and is equal to up to 75% of the maximum MID (the
"Contingent MID").
Effective July 1, 1993, the General Partner amended the Amended Partnership
Agreement as a settlement to a class action complaint. This amendment eliminated
the Fixed MID portion and made the entire MID payable to the extent of the
Entitlement Amount. In all other respects, the calculation and payment of the
MID remained the same.
Fixed MID was payable in Units unless the Entitlement Amount exceeded the amount
necessary to pay the Contingent MID, in which case, at the General Partner's
option, the Fixed MID was paid in cash to the extent of such excess.
Contingent MID will be paid to the extent of the Entitlement Amount, and may be
paid (i) in cash, unless there is insufficient cash to pay the distribution in
which event any unpaid portion not taken in Units will be deferred and is
payable, without interest, from the first available cash and/or (ii) in Units. A
maximum of 50% of the MID may be paid in Units. The number of Units issued in
payment of the MID is based on the greater of $50 per Unit or the net tangible
asset value, as defined, per Unit.
<PAGE>
During 1991, the Partnership amended its capitalization policy and began
capitalizing certain costs of improvements and betterments which under policies
of prior management had been expensed when incurred. The purpose of the
amendment was to more properly recognize items which were capital in nature. The
effect of the amendment standing alone was evaluated at the time the change was
made and determined not to be material to the financial statements of the
Partnership in 1991, nor was it expected to be material in any future year.
However, the amendment can have a material effect on the calculation of the
Entitlement Amount which determines the amount of Contingent MID earned and the
amount of Fixed MID payable in cash. Capital improvements are excluded from cash
flow, as defined. The majority of base period cash flow was measured under the
previous capitalization policy, while incentive period cash flow is determined
using the amended policy. Under the amended policy, more items are capitalized,
and cash flow increases. The amendment of the capitalization policy did not
materially affect the MID for 1995, 1994 or 1993 because the Entitlement Amount
was sufficient to pay Contingent MID notwithstanding the amendment to the
capitalization policy.
Any amount of the MID that is paid to the General Partner in Units will be
treated as if cash is distributed to the General Partner and is then contributed
to the Partnership by the General Partner. The Fixed MID was treated as a fee
payable to the General Partner by the Partnership for services rendered. The
Contingent MID represents a return of equity to the General Partner for
increasing cash flow, as defined, and accordingly is treated as a distribution.
Compensation and reimbursements paid or accrued for the benefit of the General
Partner or its affiliates are as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Deferred borrowing costs................... $ - $ - $ 42,839
Property management fees - affiliates...... 385,074 376,559 367,413
Charged to general and
administrative - affiliates:
Partnership administration.............. 248,150 236,077 246,365
Fixed MID............................... - - 59,059
-------- -------- --------
$ 633,224 $ 612,636 $ 715,676
======== ======== ========
Charged to General Partner's deficit:
Contingent MID.......................... $ 519,812 $ 508,862 $ 404,373
======== ======== ========
</TABLE>
Payable to affiliates - General Partner at December 31, 1995 and 1994 consists
primarily of reimbursable costs and property management fees which are due and
payable from current operations.
<PAGE>
NOTE 3 - TAXABLE LOSS
- ---------------------
McNeil Real Estate Fund XV, Ltd. 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 $472,231 in 1995,
$284,142 in 1994 and $223,814 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>
<CAPTION>
Buildings and Accumulated Net Book
1995 Land Improvements Depreciation Value
---- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Arrowhead
Shawnee, KS $ 1,537,294 $ 13,723,961 $ (6,644,247) $ 8,617,008
Cedar Run
Lexington, KY 866,465 4,660,303 (1,915,041) 3,611,727
Mountain Shadows
Albuquerque, NM 3,236,768 19,017,982 (8,739,577) 13,515,173
Woodcreek
Cary, NC 1,446,668 7,487,575 (3,129,157) 5,805,086
---------- ----------- ------------ -----------
$ 7,087,195 $ 44,889,821 $ (20,428,022) $ 31,548,994
========== =========== ============ ===========
Buildings and Accumulated Net Book
1994 Land Improvements Depreciation Value
---- ----------- ------------- -------------- ------------
Arrowhead $ 1,537,294 $ 13,461,561 $ (6,043,380) $ 8,955,475
Cedar Run 866,465 4,398,333 (1,693,290) 3,571,508
Mountain Shadows 3,236,768 18,632,378 (7,936,767) 13,932,379
Woodcreek 1,446,668 7,229,194 (2,798,579) 5,877,283
---------- ----------- ------------ -----------
$ 7,087,195 $ 43,721,466 $ (18,472,016) $ 32,336,645
========== =========== ============ ===========
</TABLE>
During the second quarter of 1992, the Partnership placed La Plaza East on the
market. This decision was made after a major tenant gave notice of intent to
terminate their lease in October 1992 and management determined that the cost of
improvements required to lease this space could not be recovered by the
Partnership. Management recorded a write-down of $1,527,000 to reflect a
permanent impairment in the carrying value of the real estate during the second
quarter of 1992. As of September 30, 1992, the Partnership ceased making debt
service payments on the mortgage note and in November 1992, the property was
placed in receivership. The property was lost through foreclosure on May 12,
1993. See Note 7.
<PAGE>
During the fourth quarter of 1992, the Partnership recorded a $1,800,000
write-down for permanent impairment of the Partnership's investment in Riverway
Five. The Partnership wrote down the carrying value of the property to its
estimated recoverable amount due to a reevaluation of the long-term prospects
for this market and the lack of parking available at the property. On or about
August 19, 1993, the Partnership filed an action against the title company
regarding the lack of parking. Although Riverway Five was sold December 28,
1993, the Partnership continued to pursue the action filed against the title
company. On September 14, 1994, the Partnership received a settlement of
$300,000 which is included in the Statement of Operations net of related legal
costs.
Except for Cedar Run, the Partnership's real estate properties are encumbered by
mortgage indebtedness as discussed in Note 5.
NOTE 5 - MORTGAGE NOTES PAYABLE
- -------------------------------
The following table sets forth the mortgage notes payable of the Partnership at
December 31, 1995 and 1994. All mortgage notes are secured by real estate
investments.
<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rates % Maturity Date (d) 1995 1994
- -------- --------------- ------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Arrowhead First 8.150 $ 60,450 07/03 $ 7,294,796 $ 7,420,072
Discount (b) (175,401) (194,068)
-------------- --------------
7,119,395 7,226,004
------------- --------------
Cedar Run (e) First 11.035 22,919 01/01 - 2,246,411
------------- --------------
Mountain Shadows First 8.150 100,670 07/03 12,148,372 12,357,000
Discount (b) (292,104) (323,191)
-------------- --------------
11,856,268 12,033,809
-------------- --------------
Woodcreek First (c) 8.540 40,517 08/02 5,240,470 -
First 10.000 28,546 08/95 - 2,700,090
Second 11.000 11,918 12/95 - 1,236,938
------------- --------------
5,240,470 3,937,028
------------- --------------
$ 24,216,133 $ 25,443,252
============= ==============
</TABLE>
(a) The debt is non-recourse to the Partnership.
(b) Discounts are based on an effective interest rate of 8.62% for Arrowhead
and Mountain Shadows.
(c) On August 11, 1995, the Partnership refinanced the mortgage note payable on
Woodcreek (See Note 6).
<PAGE>
(d) Balloon payments on the mortgage notes payable are due as follows:
<TABLE>
<CAPTION>
Property Balloon Payment Date
---------------- --------------- -----
<S> <C> <C>
Woodcreek $4,894,767 08/02
Arrowhead 5,947,622 07/03
Mountain Shadows 9,904,857 07/03
</TABLE>
(e) On December 28, 1995, the Partnership paid off the mortgage note
payable on Cedar Run in the amount of $2,217,856. The related deferred
borrowing costs in the amount of $47,040 were written off.
Scheduled principal maturities of the mortgage notes payable under existing
agreements, before consideration of discounts of $467,505, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996.................................... $ 402,373
1997.................................... 436,589
1998.................................... 473,715
1999.................................... 513,999
2000.................................... 557,709
Thereafter.............................. 22,299,253
-----------
Total................................. $ 24,683,638
===========
</TABLE>
Based on borrowing rates currently available to the Partnership for mortgage
loans with similar terms and average maturities, the fair value of notes payable
was approximately $24,306,000 as of December 31, 1995.
NOTE 6 - REFINANCING OF MORTGAGE NOTES PAYABLE
- ----------------------------------------------
On August 11, 1995, the Partnership refinanced the mortgage notes payable on
Woodcreek. The new loan bears an interest rate of 8.54% and will mature August
11, 2002. Following is a summary of the transaction:
<TABLE>
<CAPTION>
<S> <C>
New loan proceeds...................... $ 5,250,000
Existing debt retired................... (3,882,443)
------------
Cash proceeds from refinancing.. $ 1,367,557
============
</TABLE>
<PAGE>
The Partnership deposited $131,656 into property tax and deferred maintenance
escrows and incurred loan costs of $143,638 relating to the refinancing.
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 the General Partner.
Arrowhead and Mountain Shadows were included in the REMIC. The properties in the
REMIC are not collateralized across the partnerships, but are
cross-collateralized within the same partnership. The new mortgage loans bear an
interest rate of 8.15%, which has been discounted to an effective rate of 8.62%,
and mature in July 2003. Following is a summary of the cash proceeds relating
the refinancings:
<TABLE>
<CAPTION>
Mountain
Arrowhead Shadows Total
------------ ------------- -------------
<S> <C> <C> <C>
New loan proceeds.................. $ 7,581,000 $ 12,625,000 $ 20,206,000
Existing debt retired.............. (6,973,979) (10,219,402) (17,193,381)
Mortgage discount.................. (220,294) (366,865) (587,159)
Prepayment penalty................. (69,740) (102,194) (171,934)
---------- ----------- -----------
Cash proceeds from refinancing..... $ 316,987 $ 1,936,539 $ 2,253,526
========== =========== ===========
</TABLE>
Of the proceeds, the Partnership deposited $389,881 into property tax,
insurance, and replacements escrows and incurred loan costs of $838,287 relating
to the refinancings. The Partnership also recognized an extraordinary loss on
early extinguishment of debt on Arrowhead in the amount of $94,386 and Mountain
Shadows in the amount of $155,239, which is attributable to the unamortized loan
costs and prepayment penalties related to the retired mortgages.
NOTE 7 - DISPOSITION OF PROPERTY
- --------------------------------
On December 28, 1993, the Partnership sold its investment in Riverway Five to an
unaffiliated buyer for a cash sales price of $2,100,000. Cash proceeds from this
transaction, as well as the gain on sale of Riverway Five is detailed below.
<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
------------ -------------
<S> <C> <C>
Sales price.......................................... $ 2,100,000 $ 2,100,000
Real estate taxes paid............................... - (50,447)
Selling costs........................................ (14,731) (14,731)
Basis of real estate sold............................ (1,370,233) -
----------
Gain on sale......................................... $ 715,036
========== ----------
Net cash proceeds.................................... $ 2,034,822
==========
</TABLE>
<PAGE>
On May 11, 1993, La Plaza East was foreclosed on by the lender in full
settlement of the mortgage indebtedness. In connection with this transaction,
the Partnership recognized a loss on disposition of real estate and an
extraordinary gain on early extinguishment of debt. The amounts are determined
as follows:
<TABLE>
<CAPTION>
<S> <C>
Estimated fair value of real estate......... $ 3,756,000
Carrying value.............................. (6,473,647)
----------
Loss on disposition of real estate.......... $(2,717,647)
==========
Amount of mortgage and accrued
interest settled.......................... $ 6,687,432
Estimated fair value of real estate......... (3,756,000)
----------
Gain on early extinguishment of debt........ $ 2,931,432
==========
</TABLE>
The Partnership ceased recording income and expense on La Plaza East when it was
placed into receivership in November 1992. Had the Partnership continued to
report the operations of La Plaza East during 1993 through the date of
foreclosure they would be as follows:
<TABLE>
<CAPTION>
<S> <C>
Rental and other income..................... $ 277,272
Interest expense............................ (397,629)
Depreciation and amortization............... (112,934)
Property taxes.............................. (49,763)
Property management fees.................... (13,271)
Utilities................................... (38,218)
Other property operating.................... (45,660)
--------
Net loss.................................... $(380,203)
========
</TABLE>
<PAGE>
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
<PAGE>
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) 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, Ltd. (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 3,
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 3, 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.
4) 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)
<PAGE>
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 4, 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 4, 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.
5) 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 5,
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.
6) 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)
<PAGE>
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 6,
the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil
Investors, Inc., Robert A. McNeil and other senior officers (as defined in
this Section 6, 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.
(7) 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, BDO Seidman, for
negligence and fraud in failing to detect and/or report overcharges of
fees/expenses by Southmark, the former general partner. The former auditors
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 original petition also alleged
causes of action against certain former officers and directors of the
Partnership's original general partner for breach of fiduciary duty, fraud
and conspiracy relating to the improper assessment and payment of certain
administrative fees/expenses. On January 11, 1994 the allegations against
the former officers and directors were dismissed.
The trial court granted summary judgment in favor of Ernst & Young and
BDO Seidman on the fraud and negligence claims based on the statute of
limitations. The Affiliated Partnerships appealed the summary judgment to
the Dallas Court of Appeals. In August 1995, the Appeals Court upheld all
of the summary judgments in favor of BDO Seidman. In exchange for the
plaintiff's agreement not to file any motions for rehearing or further
appeals, BDO Seidman agreed that it will not pursue the counterclaims
against the Partnership.
NOTE 9 - GAIN ON LEGAL SETTLEMENT
- ---------------------------------
The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark Corporation ("Southmark"), an affiliate of a previous general partner
for damages relating to improper overcharges, breach of contract and breach of
fiduciary duty. The Partnership settled these claims in 1991, and such
settlement was approved by the Bankruptcy Court.
<PAGE>
An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995 the Partnership received in full satisfaction of its claims, $26,655 in
cash, and common and preferred stock in the reorganized Southmark which
represents the Partnership's pro-rata share of Southmark assets available for
Class 8 Claimants. The Partnership sold the Southmark common and preferred stock
in May for $8,608 which, combined with the cash proceeds from Southmark,
resulted in a gain on legal settlement of $35,263.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1995
<TABLE>
<CAPTION>
Cumulative Costs
Initial Cost (b) Write-down Capitalized
Related (b) Buildings and and Permanent Subsequent
Description Encumbrances Land Improvements Impairment To Acquisition
- -------------- ------------ ----------- -------------- ------------- --------------
APARTMENTS:
<S> <C> <C> <C> <C> <C>
Arrowhead
Shawnee, KS $ 7,119,395 $ 1,537,294 $ 12,035,648 $ - $ 1,688,313
Cedar Run
Lexington, KY - 866,465 3,947,228 (150,600) 863,675
Mountain Shadows
Albuquerque, NM 11,856,268 3,236,768 17,555,977 - 1,462,005
Woodcreek
Cary, NC 5,240,470 1,446,668 6,590,377 - 897,198
----------- ---------- ----------- --------- ----------
$ 24,216,133 $ 7,087,195 $ 40,129,230 $ (150,600) $ 4,911,191
=========== ========== =========== ========= ==========
</TABLE>
(b) The encumbrances reflect the present value of future loan payments
discounted, if appropriate, at a rate estimated to be the prevailing
interest rate at the date of acquisition or refinancing.
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1995
<TABLE>
<CAPTION>
Gross Amount at
Which Carried at Close of Period Accumulated
Buildings and Depreciation
Description Land Improvements Total (a) and Amortization
- ---------------- ----------- -------------- ------------ ----------------
APARTMENTS:
<S> <C> <C> <C> <C>
Arrowhead
Shawnee, KS $ 1,537,294 $ 13,723,961 $ 15,261,255 $ (6,644,247)
Cedar Run
Lexington, KY 866,465 4,660,303 5,526,768 (1,915,041)
Mountain Shadows
Albuquerque, NM 3,236,768 19,017,982 22,254,750 (8,739,577)
Woodcreek
Cary, NC 1,446,668 7,487,575 8,934,243 (3,129,157)
---------- ----------- ----------- -----------
$ 7,087,195 $ 44,889,821 $ 51,977,016 $(20,428,022)
========== =========== =========== ===========
</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 approximately
$52,710,907 and accumulated depreciation was $29,241,575 December 31, 1995.
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1995
<TABLE>
<CAPTION>
Date of Date Depreciable
Description Construction Acquired lives (years)
- ------------------ ------------ -------- -------------
APARTMENTS:
<S> <C> <C> <C>
Arrowhead
Shawnee, KS 1971 03/85 3-25
Cedar Run
Lexington, KY 1978 12/85 3-25
Mountain Shadows
Albuquerque, NM 1986 08/85 3-25
Woodcreek
Cary, NC 1981 12/85 3-25
</TABLE>
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
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>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------
1995 1994 1993
------------ ------------ ------------
Real estate investments:
- ------------------------
<S> <C> <C> <C>
Balance at beginning of year............... $ 50,808,661 $ 49,793,932 $ 52,126,161
Improvements............................... 1,168,355 1,014,729 900,703
Disposition of real estate................. - - (3,232,932)
----------- ----------- -----------
Balance at end of year..................... $ 51,977,016 $ 50,808,661 $ 49,793,932
=========== =========== ===========
Accumulated depreciation:
- -------------------------
Balance at beginning of year............... $ 18,472,016 $ 16,586,635 $ 16,655,844
Depreciation............................... 1,956,006 1,885,381 1,826,962
Disposition of real estate................. - - (1,896,171)
----------- ----------- -----------
Balance at end of year..................... $ 20,428,022 $ 18,472,016 $ 16,586,635
=========== =========== ===========
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.
PART III
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>
<CAPTION>
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
Chairman of the Board and Director of McNeil Real
Board and Director Estate Management, Inc. ("McREMI")
which is an affiliate of the General
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
Co-Chairman of the husband Robert A. McNeil, of McNeil
Board Investors, Inc. Mrs. McNeil has
twenty years of real estate experience,
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 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------
<S> <C> <C>
Donald K. Reed, 50 Mr.Reed is President, Chief Executive
Director, President, Officer and Director of McREMI which is
and Chief Executive an affiliate of the General Partner.
Officer Prior to joining McREMI in March 1993,
Mr. Reed was President, Chief Operating
Officer and Director 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
Vice President McREMI and has been in this 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.
<PAGE>
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.
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 6,934
Units (approximately 6.74% 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 1,357 Units, which represent less than 2% of
the outstanding Units.
(C) Change in control.
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
Under the terms of the Amended Partnership Agreement, the Partnership is paying
the MID to the General Partner. The maximum MID is calculated as 1% of the
tangible asset value of the Partnership. The maximum MID percentage decreases
subsequent to 1999. Tangible asset value is determined by using the greater of
(i) an amount calculated by applying a capitalization rate of 9% to the
annualized net operating income of each property or (ii) a value of $10,000 per
apartment unit for residential property and $50 per gross square foot for
commercial property to arrive at the property tangible asset value. The property
tangible asset value is then added to the book value of all other assets
excluding intangible assets. Prior to July 1, 1993, the MID consisted of two
components: (i) the fixed portion which was payable without respect to the net
income of the Partnership and was equal to 25% of the maximum MID (the "Fixed
MID") and (ii) a contingent portion which was payable only to the extent of the
lesser of the Partnership's excess cash flow, as defined, or net operating
income (the "Entitlement Amount") and is equal to up to 75% of the maximum MID
(the "Contingent MID").
<PAGE>
Effective July 1, 1993, the General Partner amended the Amended Partnership
Agreement as a settlement to a class action complaint. This amendment eliminates
the Fixed MID portion and makes the entire MID payable to the extent of the
Entitlement Amount. In all other respects the calculation and payment of the MID
will remain the same.
Contingent MID will be paid to the extent of the Entitlement Amount, and may be
paid (i) in cash, unless there is insufficient cash to pay the distribution in
which event any unpaid portion not taken in Units will be deferred and is
payable, without interest, from the first available cash and/or (ii) in Units. A
maximum of 50% of the MID may be paid in Units. The number of Units issued in
payment of the MID is based on the greater of $50 per Unit or the net tangible
asset value, as defined, per Unit. For the year ended December 31, 1995, the
Partnership paid or accrued for the General Partner Contingent MID in the amount
of $519,812.
Any amount of the MID that is paid to the General Partner in Units will be
treated as if cash is distributed to the General Partner and is then contributed
to the Partnership by the General Partner. The Fixed MID was treated as a fee
payable to the General Partner by the Partnership for services rendered. The
Contingent MID represents a return of equity to the General Partner for
increasing cash flow, as defined, and accordingly is treated as a distribution.
The Partnership pays property management fees equal to 5% of the gross rental
receipts of the Partnership's properties to McREMI, an affiliate of the General
Partner, for providing property management and leasing services for the
Partnership's residential properties. 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 $633,224 in
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 STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
- -------- -----------------------------------------------------------------
See accompanying Index to Financial Statements at Item 8.
(A) Exhibits
The following exhibits are incorporated by reference and are an integral
part of this Form 10-K.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3. Partnership Agreement dated June 26,
1984 and amended as of September 7,
1984. (1)
3.1 Amended and Restated Partnership
Agreement of McNeil Real Estate Fund
XV, Ltd., dated October 11, 1991.(1)
3.2 Amendment No. 1 to the Amended and
Restated Partnership Agreement,
dated March 28, 1994. (2)
3.3 Amendment No. 2 to the Amended and
Restated Partnership Agreement,
dated March 28, 1994. (2)
10.1 Property Management Agreement, dated
October 11, 1991, between McNeil
Real Estate Fund XV, Ltd. and McNeil
Real Estate Management, Inc. (1)
10.2 Revolving Credit Agreement, dated
August 6, 1991, between McNeil
Partners, L.P. and various selected
partnerships, including the
Registrant. (1)
10.3 Termination Agreement, dated
October 11, 1991, between McNeil
Real Estate Fund XV, Ltd. and McNeil
Partners, L.P. (1)
10.4 Amendment of Property Management
Agreement, dated March 5, 1993,
between McNeil Real Estate Fund
XV, Ltd. and McNeil Real Estate
Management, Inc. (Incorporated by
reference to the Annual Report on
Form 10-K for the year ended
December 31, 1992)
10.5 Loan Agreement, dated June 24,
1993, between Lexington Mortgage
Company and McNeil Real Estate Fund
XV, Ltd. et al. (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)
10.6 Master Property Management
Agreement, dated as of June 24,
1993 between McNeil Real Estate
Management, Inc. and McNeil Real
Estate Fund XV, Ltd. (2)
10.7 Mortgage Note, dated August 11,
1995, between Woodcreek Fund XV,
Ltd. and Fleet Real Estate Capital,
Inc.
11. Statement regarding computation of
Net Income (Loss) per limited
partnership unit (see Note 1 to
Financial Statements).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
22. Following is a list of subsidiaries of the Partnership:
<S> <C> <C> <C>
Names Under
Jurisdiction Which It Is
Name of Subsidiary Incorporation Doing Business
------------------ ------------- --------------
Arrowhead Fund XV Delaware None
Limited Partnership
McNeil Mountain Shadows Delaware None
Fund XV Limited
Partnership
Woodcreek Fund XV, Ltd. Texas None
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(1) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XV, Ltd. (File No. 0-14258),
on Form 10-K for the period ended
December 31, 1991, as filed with
the Securities and Exchange
Commission on March 29, 1992.
(2) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XV, Ltd. (File No. 0-14258),
on Form 10-K for the period ended
December 31, 1993, as filed with
the Securities and Exchange
Commission on March 30, 1994.
The Partnership has omitted instruments with respect to long-term debt
where the total amount of the securities authorized thereunder does not
exceed 10% of the total assets of the Partnership and its subsidiaries
on a consolidated basis. The Partnership agrees to furnish a copy of
each instrument to the Commission upon request.
27. Financial Data Schedule for the year
ended December 31, 1995.
</TABLE>
(B) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended December 31, 1995.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
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>
<CAPTION>
McNEIL REAL ESTATE FUND XV, LTD.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
<S> <C>
March 29, 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.
March 29, 1996 By: /s/ Donald K. Reed
- ---------------------------- ------------------------------------------------
Date Donald K. Reed
President and Director of McNeil Investors, Inc.
March 29, 1996 By: /s/ Ron K. Taylor
- ---------------------------- ------------------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer
of McNeil Investors, Inc.
March 29, 1996 By: /s/ Brandon K. Flaming
- ---------------------------- ------------------------------------------------
Date Brandon K. Flaming
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> 2,079,352
<SECURITIES> 0
<RECEIVABLES> 6,691
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 51,977,016
<DEPRECIATION> (20,428,022)
<TOTAL-ASSETS> 35,129,849
<CURRENT-LIABILITIES> 0
<BONDS> 24,216,133
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,129,849
<SALES> 7,716,859
<TOTAL-REVENUES> 7,991,130
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,755,804
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,433,439
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (198,113)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (198,113)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Loan No. 55-9509025
MORTGAGE NOTE
$5,250,000.00 August 11, 1995
FOR VALUE RECEIVED, WOODCREEK FUND XV, LTD., a Texas
limited partnership doing business in North Carolina as Woodcreek
Fund XV, Ltd., Limited Partnership, having its principal office
at 13760 Noel Road, Suite 700, Dallas, Texas 75240 ("Maker")
promises to pay to the order of FLEET REAL ESTATE CAPITAL, INC.,
a Rhode Island corporation, or its assigns ("Payee") having its
principal office at 4275 Executive Square, Suite 200, La Jolla,
California 92037, the Principal Amount (as defined below),
together with interest from the date hereof at the Interest Rate
(as defined below). Interest accruing hereunder shall be
calculated on the basis of a 360-day year of twelve 30-day
months.
WHEN USED HEREIN, the following capitalized terms shall
have the following meanings:
"Commencement Date" shall be October 1, 1995.
"Closing Date" shall be August 11, 1995.
"Default Rate" shall be the Interest Rate plus five
percent (5%) per annum.
"Interest Rate" shall be eight and fifty-four one
hundredths percent (8.54%) per annum.
"Lockout Period" shall be the period from August 11,
1995 through September 1, 1999.
"Maturity Date" shall be August 11, 2002.
"Monthly Amount" shall be the sum of Forty Thousand
Five Hundred Sixteen and 88/100 Dollars ($40,516.88).
"Payment Date" shall be the first business day of each
month commencing on the first business day of the second full
month after the Closing Date and continuing to and including the
Maturity Date.
"Principal Amount" shall be Five Million Two Hundred
Fifty Thousand and No/100 United States Dollars.
<PAGE>
The Principal Amount and interest thereon shall be due
and payable in lawful money of the United States as follows:
(a) On the date hereof, all accrued and unpaid
interest on the unpaid balance through the end of the
month in which the Closing Date occurs shall be due and
payable. Thereafter, commencing on the Commencement
Date, eighty-three (83) equal monthly installments of
principal and interest at the Monthly Amount each shall
be due and payable. Each installment of principal and
interest shall be applied first to interest and the
remainder thereof to reduction of principal. Each
monthly installment shall be due on each Payment Date.
In addition, all amounts advanced by Payee pursuant to
applicable provisions of the Security Documents (as
hereinafter defined), together with any interest at the
Default Rate or other charges as therein provided,
shall be immediately due and payable hereunder. In the
event any such advance is not so repaid by Maker, Payee
may, at its option, first apply any payments received
hereunder to repay said advances together with any
interest thereon or other charges as provided in the
Security Documents, and the balance, if any, shall be
applied in payment of any installment then due. The
entire remaining unpaid balance of principal of this
Note, all interest accrued thereon and all other sums
payable hereunder or under the Security Documents shall
be due and payable in full on the Maturity Date.
(b) Amounts due on this Note shall be payable,
without any counterclaim, setoff or deduction
whatsoever, at the office of Payee or its agent or
designee at the address set forth in Exhibit 1 or at
such other place as Payee or its agent or designee may
from time to time designate in writing.
(c) This Note is secured by a Deed of Trust,
Mortgage, Security Agreement and Assignment of Rents
and Leases of even date herewith (the "Mortgage") from
Maker to Payee and by an Assignment of Rents and Leases
of even date herewith (the "Assignment") from Maker to
Payee. The Mortgage, the Assignment and any other
instrument given at any time to secure this Note are
hereinafter collectively called the "Security
Documents."
<PAGE>
(d) This Note may not be prepaid prior to the end
of the Lockout Period, except as set forth herein. Any
prepayment of this Note, in whole or in part, prior to
the end of the Lockout Period, except as permitted
herein, shall constitute an "Event of Default" under
the Mortgage. Maker has the right to prepay the
principal of this Note in full or in part on any
Payment Date after the end of the Lockout Period, upon
sixty days' prior written notice and payment, together
with the portion of the principal to be prepaid, of a
prepayment premium in an amount calculated as specified
in Appendix 1. The calculation of the prepayment
premium shall be made by Payee and shall, absent
manifest error, be conclusive. In the event this Note
is prepaid from the proceeds of insurance or
condemnation awards in accordance with Sections 10, 11
and 12 of the Mortgage either prior to or after the end
of the Lockout Period, a prepayment premium shall be
payable calculated as specified in Appendix 1.
Notwithstanding the foregoing, this Note may be prepaid
without a prepayment premium during the one hundred
eighty (180) day period prior to the Maturity Date.
Upon acceleration of this Note in accordance with its
terms and the terms of the Security Documents, Maker
agrees to pay the prepayment premium described above in
the amount that would be due if a voluntary payment
were made on the date of such acceleration. A tender
of payment of the amount necessary to pay and satisfy
the entire unpaid principal balance of this Note or any
portion thereof at any time after an Event of Default
under the Mortgage or an acceleration by Payee of the
indebtedness evidenced hereby, whether such payment is
tendered voluntarily, during or after foreclosure of
the Mortgage, or pursuant to realization upon other
security, shall constitute a purposeful evasion of the
prepayment terms of this Note, shall be deemed to be a
voluntary prepayment hereof, and Maker shall be
required to pay the prepayment premium as described
above. Partial prepayments of principal shall not
change the Payment Dates or amounts of subsequent
monthly installments, unless Payee shall otherwise
agree in writing. Notwithstanding the foregoing,
nothing in this paragraph (d) shall vary or negate the
provisions of Section 18(c) of the Mortgage.
(e) If Maker defaults in the payment of any
installment of principal and interest on the date on
which it shall fall due or in the performance of any of
the agreements, conditions, covenants, provisions or
stipulations contained in this Note or in the Security
Documents, and if such default shall continue beyond
<PAGE>
any grace period provided for in the Mortgage so as to
constitute an Event of Default thereunder, then Payee,
at its option and without further notice to Maker, may
declare immediately due and payable the entire unpaid
principal balance of this Note, together with interest
thereon at an annual rate after the date of such
default equal to the Default Rate, together with all
sums due by Maker under the Security Documents,
anything herein or in the Security Documents to the
contrary notwithstanding. The foregoing provision
shall not be construed as a waiver by Payee of its
right to pursue any other remedies available to it
under the Mortgage, this Note or any other Security
Document, nor shall it be construed to limit in any way
the application of the Default Rate. Any payment
hereunder may be enforced and recovered in whole or in
part at such time by one or more of the remedies
provided to Payee in this Note or in the Security
Documents. In the event that: (i) this Note or any
Security Document is placed in the hands of an attorney
for collection or enforcement or is collected or
enforced through any legal proceeding; (ii) an attorney
is retained to represent Payee in any bankruptcy,
reorganization, receivership, or other proceedings
affecting creditors' rights and involving a claim under
this Note or any Security Document; (iii) an attorney
is retained to protect or enforce the lien of the
Mortgage or any Security Document; or (iv) an attorney
is retained to represent Payee in any other proceedings
whatsoever in connection with this Note, the Mortgage,
any of the Security Documents or any portion of the
Mortgaged Property (as defined in the Mortgage), then
Maker shall pay to Payee all reasonable attorney's
fees, costs and expenses incurred in connection
therewith, including costs of appeal, together with
interest on any judgment obtained by Payee at the
Default Rate.
(f) If Maker defaults in the payment of any
monthly installment on the Payment Date, and such
default is not cured within fifteen (15) days
thereafter, then Maker shall pay to Payee a late
payment charge in an amount equal to four percent (4%)
of the amount of the installment not paid as
aforesaid.. Said late charge payments, if payable,
shall be secured by the Mortgage and the other Security
Documents, shall be payable without notice or demand by
Payee except as required by North Carolina law, and are
independent of and have no effect upon the rights of
Payee under paragraph (e) above.
<PAGE>
(g) Maker and all endorsers, sureties and
guarantors hereby jointly and severally waive all
applicable exemption rights, valuation and
appraisement, presentment for payment, demand, notice
of demand, notice of nonpayment or dishonor, protest
and notice of protest of this Note, and all other
notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of
this Note. Maker and all endorsers, sureties and
guarantors consent to any and all extensions of time,
renewals, waivers or modifications that may be granted
by Payee with respect to the payment or other
provisions of this Note and to the release of the
collateral or any part thereof, with or without
substitution, and agree that additional makers,
endorsers, guarantors or sureties may become parties
hereto without notice to them or affecting their
liability hereunder.
(h) Payee shall not be deemed, by any act of
omission or commission, to have waived any of its
rights or remedies hereunder unless such waiver is in
writing and signed by Payee, and then only to the
extent specifically set forth in writing. A waiver of
one event shall not be construed as continuing or as a
bar to or waiver of any right or remedy to a subsequent
event.
(i) This Note shall be governed by and construed
in accordance with the laws of the State in which the
Mortgaged Property is located (the "State").
(j) The parties hereto intend and believe that
each provision in this Note comports with all
applicable law. However, if any provision in this Note
is found by a court of law to be in violation of any
applicable law, and if such court should declare such
provision of this Note to be unlawful, void or
unenforceable as written, then it is the intent of all
parties hereto that such provision shall be given full
force and effect to the fullest possible extent that is
legal, valid and enforceable, that the remainder of
this Note shall be construed as if such unlawful, void
or unenforceable provision were not contained therein,
and that the rights, obligations and interest of Maker
and the holder hereof under the remainder of this Note
shall continue in full force and effect; provided,
however, that if any provision of this Note which is
found to be in violation of any applicable law concerns
the imposition of interest hereunder, the rights,
obligations and interests of Maker and Payee with
respect to the imposition of interest hereunder shall
be governed and controlled by the provisions of the
following paragraph.
<PAGE>
(k) It being the intention of Payee and Maker to
comply with the laws of the State with regard to the
rate of interest charged hereunder, it is agreed that,
notwithstanding any provision to the contrary in this
Note, the Mortgage, or any of the other Security
Documents, no such provision, including without
limitation any provision of this Note providing for the
payment of interest or other charges, shall require the
payment or permit the collection of any amount ("Excess
Interest") in excess of the maximum amount of interest
permitted by law to be charged for the use or
detention, or the forbearance in the collection, of all
or any portion of the indebtedness evidenced by this
Note. If any Excess Interest is provided for, or is
adjudicated to be provided for, in this Note, the
Mortgage, or any of the other Security Documents, then
in such event:
(i) the provisions of this paragraph shall
govern;
(ii) Maker shall not be obligated to pay any
Excess Interest;
(iii) any Excess Interest that Payee may
have received hereunder shall, at the option of
Payee, be (x) applied as a credit against the
unpaid principal balance then due under this Note,
accrued and unpaid interest thereon not to exceed
the maximum amount permitted by law, or both, (y)
refunded to the payor thereof or (z) any
combination of the foregoing;
(iv) the applicable interest rate or rates
provided for herein shall be automatically subject
to reduction to the maximum lawful rate allowed to
be contracted for in writing under the applicable
usury laws of the aforesaid State, and this Note,
the Mortgage and the other Security Documents
shall be deemed to have been, and shall be,
reformed and modified to reflect such reduction in
such interest rate or rates; and
(v) Maker shall not have any action or
remedy against Payee for any damages whatsoever or
any defense to enforcement of this Note, Mortgage
or any other Security Document arising out of the
payment or collection of any Excess Interest.
<PAGE>
(l) Upon any endorsement, assignment, or other
transfer of this Note by Payee or by operation of law,
the term "Payee," as used herein, shall mean such
endorsee, assignee, or other transferee or successor to
Payee then becoming the holder of this Note. This Note
shall inure to the benefit of Payee and its successors
and assigns and shall be binding upon the undersigned
and its successors and assigns. The term "Maker" as
used herein shall include the respective successors and
assigns, legal and personal representatives, executors,
administrators, devisees, legatees and heirs of Maker.
(m) Any notice, demand or other communication
which any party may desire or may be required to give
to any other party shall be in writing and shall be
given as provided in the Mortgage.
(n) To the extent that Maker makes a payment or
Payee receives any payment or proceeds for Maker's
benefit, which are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required
to be repaid to a trustee, debtor in possession,
receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to
such extent, the obligations of Maker hereunder
intended to be satisfied shall be revived and continue
as if such payment or proceeds had not been received by
Payee.
(o) Maker shall execute and acknowledge (or cause
to be executed and acknowledged) and deliver to Payee
all documents, and take all actions, reasonably
required by Payee from time to time to confirm the
rights created or now or hereafter intended to be
created under this Note and the Security Documents, to
protect and further the validity, priority and
enforceability of this Note and the Security Documents,
to subject to the Security Documents any property of
Maker intended by the terms of any one or more of the
Security Documents to be encumbered by the Security
Documents, or otherwise carry out the purposes of the
Security Documents and the transactions contemplated
thereunder; provided, however, that no such further
actions, assurances and confirmations shall increase
Maker's obligations under this Note.
(p) No modification, amendment, extension,
discharge, termination or waiver (a "Modification") of
any provision of this Note, or any one or more of the
other Security Documents, nor consent to any departure
by Maker therefrom, shall in any event be effective
<PAGE>
unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the
specific instance, and for the purpose, for which
given. Except as otherwise expressly provided herein,
no notice to, or demand on, Maker shall entitle Maker
to any other or future notice or demand in the same,
similar or other circumstances. Payee does not hereby
agree to, nor does Payee hereby commit itself to, enter
into any Modification.
(q) Maker hereby expressly and unconditionally
waives, in connection with any suit, action or
proceeding brought by Payee on this Note, any and every
right it may have to (a) interpose any counterclaim
therein (other than a counterclaim which can only be
asserted in the suit, action or proceeding brought by
Payee on this Note and cannot be maintained in a
separate action) and (b) have the same consolidated
with any other or separate suit, action or proceeding.
(r) Notwithstanding any provision to the contrary
in the Mortgage or this Note, Payee shall not have any
recourse to any asset of Maker or its partners other
than the Mortgaged Property in order to satisfy the
indebtedness for payment of the principal and interest
evidenced by this Note, and Payee's sole recourse for
satisfaction of the payment of principal and interest
evidenced by this Note shall be to exercise its rights
against the Mortgaged Property encumbered by the
Mortgage and the other collateral securing this Note.
The foregoing sentence shall not be deemed or construed
to be a release of the indebtedness evidenced by this
Note or in any way impair, limit or otherwise affect
the lien of the Mortgage or any such other instrument
securing repayment of this Note or prevent Payee from
naming Maker, its partners, or their successors or
assigns as a defendant to any action to enforce any
remedy for default so long as there is no personal or
deficiency money judgment sought or entered against
Maker, its partners, or their successors or assigns for
payment of principal and interest evidenced by this
Note. Notwithstanding the foregoing provisions of this
paragraph, it is expressly understood and agreed that
the aforesaid limitation of liability shall no way
affect or apply to Maker's or its partners' continued
personal liability for the payment to Payee of:
<PAGE>
(i) any loss or damage occurring by reason of all
or any part of the Mortgaged Property being
encumbered by a voluntary lien (other than the
Mortgage) granted by Maker;
(ii) any Rents (as defined in the Mortgage),
issues, profits and/or income collected by Maker
in excess of normal and verifiable operating
expenses from the Mortgaged Property after default
by Maker hereunder, under the Mortgage or under
any other instrument securing or referring to this
Note;
(iii) unrefunded security deposits made by
tenants of the Mortgaged Property;
(iv) payment of Taxes, as defined in Section 5 of
the Mortgage, and insurance premiums, payment of
which is required to be made by Maker under the
Mortgage;
(v) Rents, security deposits with respect to
leases of the Mortgaged Property, insurance
proceeds, condemnation awards and any other
payments or consideration which Maker receives and
to which Payee is entitled pursuant to the terms
of the Mortgage or of any other Security Document;
(vi) damage to the Mortgaged Property from waste
committed or permitted by Maker;
(vii) loss or damage occurring by reason of the
failure of Maker to comply with any of the
provisions of Section 35 of the Mortgage;
(viii) any loss or claim incurred by or asserted
against Payee as a result of fraud or
misrepresentation by Maker or any of the partners
thereof with respect to any certification,
representation or warranty made by Maker or such
other persons to Payee herein or in any of the
Security Documents;
(ix) all indebtedness and obligations arising
under or pursuant to that certain Environmental
Indemnity dated of even date herewith executed by
Maker, the general partner of Maker and McNeil
Real Estate Fund XV, Ltd. for the benefit of
Payee; and
<PAGE>
(x) reasonable attorney's fees incurred by Payee
in connection with suit filed on account of any of
the foregoing clauses (i) through (ix).
IN WITNESS WHEREOF, Maker has caused this Note to be
executed under seal and delivered as of the day and year first
above written.
WOODCREEK FUND XV, LTD., a Texas
limited partnership doing business
in North Carolina as Woodcreek Fund
XV, Ltd., Limited Partnership
By: Woodcreek Fund XV Corp., a
Delaware corporation, General
Partner
By: /s/ Ron K. Taylor
---------------------------
Ron K. Taylor, Vice
President
[SEAL]
ATTEST:
By: /s/ Harriet Yates
----------------------------
Harriet Yates, Secretary
[SEAL]
<PAGE>
APPENDIX 1
Calculation of Prepayment Premium
The prepayment premium shall be equal to the greater
of (A) one percent (1%) of the portion of the principal amount
of this Note being repaid or (B) the product of (i) a fraction
whose numerator is an amount equal to the portion of the
principal balance of this Note being prepaid and whose
denominator is the entire outstanding principal balance of
this Note on the date of such prepayment (after subtracting
the amount of any scheduled principal payment due on such
Payment Date), multiplied by (ii) an amount equal to the
remainder obtained by subtracting (x) an amount equal to the
entire outstanding principal balance of this Note as of the
date of such prepayment (after subtracting the amount of any
scheduled principal payment due on such Payment Date) from (y)
the present value as of the date of such prepayment of the
remaining scheduled payments of principal and interest on this
Note (including any final installment of principal payable on
the Maturity Date) determined by discounting such payments at
the Discount Rate (as hereinafter defined).
For purposes of this Note:
(x) "Discount Rate" shall mean the rate which, when
compounded monthly, is equivalent to the Treasury
Rate (defined below); and
(y) "Treasury Rate" shall mean the yield calculated by
the linear interpolation of the yield, as reported
in Federal Reserve Statistical Release H.15-Selected
Interest Rates under the heading "U.S. government
securities/Treasury constant maturities" for the
week ending prior to the date of the relevant
prepayment of this Note, of U.S. Treasury constant
maturities with a maturity date (one longer and one
shorter) most nearly approximating the Maturity Date
of this Note. In the event Release H.15 is no
longer published, the Payee shall select a
comparable publication to determine the Treasury
Rate.
<PAGE>
EXHIBIT 1
Amounts due on this note shall be payable to Fleet
Real Estate Capital, Inc. at the following address:
Fleet Real Estate Capital, Inc.
4275 Executive Square
Suite 200
La Jolla, CA 92037
Loan No.: 55-9509025
