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, 1997
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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
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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 600, LB70, Dallas, Texas, 75240
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (972) 448-5800
-----------------------------
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
units
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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 ]
101,439 of the registrant's 102,796 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 33
TOTAL OF 35 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 600, 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,
for 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 Management Incentive Distribution ("MID"). From 1993 to 1995, 40 Units
were relinquished leaving 102,836 Units outstanding as of December 31, 1996. In
1997, 40 Units were relinquished leaving 102,796 Units outstanding at December
31, 1997.
SOUTHMARK BANKRUPTCY AND CHANGE IN GENERAL PARTNER
- --------------------------------------------------
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, were 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.
<PAGE>
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.
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. See
Item 8 - Note 2 "Transactions with Affiliates". In 1992, the General Partner
received 696 Units for such a payment. 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 1995 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 commercial real estate and other
real estate related assets. At December 31, 1997, the Partnership owned four
income-producing properties as described in Item 2 - Properties.
<PAGE>
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.
Business Plan:
Pursuant to the Partnership's previously announced liquidation plans, the
Partnership has recently retained PaineWebber, Incorporated as its exclusive
financial advisor to explore alternatives to maximize the value of the
Partnership. The alternatives being considered by the Partnership include,
without limitation, a transaction in which limited partnership interests in the
Partnership are converted into cash. The General Partner of the Partnership or
entities or persons affiliated with the General Partner will not be involved as
a purchaser in any of the transactions contemplated above. Any transaction will
be subject to certain conditions including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory firm as to the fairness of the consideration received by the
Partnership pursuant to such transaction. Finally, there can be no assurance
that any transaction will be consummated, or as to the terms thereof.
The Partnership has placed Cedar Run Apartments on the market for sale effective
August 1, 1997.
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.
<PAGE>
Forward-Looking Information:
Within this document, certain statements are made as to the expected occupancy
trends, financial condition, results of operations, and cash flows of the
Partnership for periods after December 31, 1997. All of these statements are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements are not
historical and involve risks and uncertainties. The Partnership's actual
occupancy trends, financial condition, results of operations, and cash flows for
future periods may differ materially due to several factors. These factors
include, but are not limited to, the Partnership's ability to control costs,
make necessary capital improvements, negotiate sales or refinancings of its
properties, and respond to changing economic and competitive factors.
Environmental Matters:
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.
Other information:
In August 1995, High River Limited Partnership, a Delaware limited partnership
controlled by Carl C. Icahn ("High River") made an unsolicited tender offer to
purchase from holders of Units up to approximately 6.9% of the outstanding Units
of the Partnership for a purchase price of $95.00 per Unit. In September 1996,
High River made another unsolicited tender offer to purchase any and all of the
outstanding Units of the Partnership for a purchase price of $100.24 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 tender offers made with respect to the
Partnership and not tender their Units. The General Partner believes that as of
January 31, 1998, High River has purchased approximately 10.3% of the
outstanding Units pursuant to the tender offers. In addition, all litigation
filed by High River, Mr. Icahn and his affiliates in connection with the tender
offers have been dismissed without prejudice.
Management has begun to review its information technology infrastructure to
identify any systems that could be affected by the year 2000 problem. The year
2000 problem is the result of computer programs being written using two digits
rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major systems failure or
miscalculations. The information systems used by the Partnership for financial
reporting and significant accounting functions were made year 2000 compliant
during recent systems conversions. The Partnership is in the process of
evaluating the computer systems at the various properties. The Partnership also
intends to communicate with suppliers, financial institutions and others to
coordinate year 2000 issues. Management believes that the remediation of any
outstanding year 2000 conversion issues will not have a material or adverse
effect on the Partnership's operations.
<PAGE>
ITEM 2. PROPERTIES
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The following table sets forth the real estate investment portfolio of the
Partnership at December 31, 1997. 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 management, the properties are adequately covered by insurance.
<TABLE>
<CAPTION>
Net Basis 1997 Date
Property Description of Property Debt Property Tax Acquired
- -------- ----------- ----------- ---- ------------ --------
<S> <C> <C> <C> <C> <C>
Real Estate Investments:
Arrowhead (1) Apartments
Shawnee, KS 436 units $ 7,840,987 $ 6,872,784 $ 156,418 3/85
Mountain
Shadows (2) Apartments
Albuquerque, NM 504 units 12,094,007 11,445,232 195,338 8/85
Woodcreek (3) Apartments
Cary, NC 200 units 5,590,588 5,156,464 62,024 12/85
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$ 25,525,582 $ 23,474,480 $ 413,780
============= ============= ==========
Asset Held for Sale:
Cedar Run Apartments
Lexington, KY 152 units $ 3,400,316 $ - $ 30,308 12/85
============ ============= ==========
</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>
1997 1996 1995 1994 1993
------------- ------------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Arrowhead
Occupancy Rate............ 94% 95% 95% 95% 96%
Rent Per Square Foot...... $7.46 $7.12 $6.76 $6.42 $5.95
Mountain Shadows
Occupancy Rate............ 92% 87% 88% 94% 95%
Rent Per Square Foot...... $7.96 $8.28 $8.24 $7.97 $7.53
Woodcreek
Occupancy Rate............ 97% 96% 95% 99% 97%
Rent Per Square Foot...... $9.27 $8.80 $8.42 $8.08 $7.40
Asset Held for Sale:
Cedar Run
Occupancy Rate............ 94% 95% 95% 95% 91%
Rent Per Square Foot...... $7.92 $7.62 $7.22 $7.14 $6.61
</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
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Real Estate Investments:
Arrowhead
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The occupancy rate at Arrowhead is equal to the local area average of 94%.
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.
Mountain Shadows
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Mountain Shadows is located in a very competitive market in Albuquerque and has
experienced a decline in occupancy rates since 1993. This decline can be
attributed to the construction of new multi-family units. The market maintains
an occupancy level at 92%. The capital improvements program that Mountain
Shadows has been involved in has kept the property aggressive in the market.
<PAGE>
Woodcreek
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The occupancy rate at Woodcreek currently mirrors the market rate of 96%. The
property is located in a rapidly developing area of Wake County in North
Carolina with an additional 4,500 units planned in 1998. The current capital
improvement program has enabled the property to stay competitive in a growing
market.
Asset Held for Sale:
Cedar Run
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Over the past three years, the Lexington market has softened modestly. The
market has fluctuated from 88% to 95%, while Cedar Run has maintained a
occupancy rate of 94% throughout 1997. The property's rent per square foot is
currently 12.5% higher than the local market rate. There has been little new
development of multi-family projects in the area.
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:
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of
the State of California for the County of Los Angeles, Case No. BC133799 (Class
and Derivative Action Complaint).
The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
<PAGE>
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. Defendants must move, answer or otherwise respond to the second
consolidated and amended complaint by June 30, 1998.
For a discussion of the Southmark bankruptcy, see Item 1 - Business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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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
Limited partnership units 5,114 as of January 31, 1998
(C) Cash distributions of $1,000,008 and $999,981 were made to the
limited partners during 1997 and 1996, respectively. During the last week
of March 1998, the Partnership distributed approximately $500,000 to the
limited partners of record as of March 1, 1998. The distributions
consisted of funds from operations and cash reserves. The Partnership
accrued distributions of $505,375 and $511,760 for the benefit of the
General Partner for the years ended December 31, 1997 and 1996,
respectively, of which all but $120,977 was paid as of December 31, 1997.
These distributions are the MID pursuant to the Amended Partnership
Agreement. Distributions of the MID are expected to be paid to the
General Partner in 1998. 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 that they will continue to be made to
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 - Financial
Statements and Supplementary Data.
<TABLE>
<CAPTION>
Statements of Years Ended December 31,
Operations 1997 1996 1995 1994 1993
- ------------------ ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Rental revenue................. $ 8,042,385 $ 7,973,979 $ 7,716,859 $ 7,415,746 $ 7,237,745
Total revenue.................. 8,193,714 8,076,096 7,991,130 7,772,979 7,280,900
Loss on disposition of real
estate...................... - - - - (2,002,611)
Income (loss) before
extraordinary items......... 107,228 (133,470) (198,113) (41,096) (3,099,381)
Extraordinary gain on early
extinguishment of debt...... - - - - 2,681,807
Net income (loss).............. 107,228 (133,470) (198,113) (41,096) (417,574)
Net loss per limited partnership unit:
Loss before extraordinary
items....................... $ (2.50) $ (5.66) $ (6.90)$ (5.19) $ (35.26)
Extraordinary gain on early
extinguishment of debt...... - - - - 25.81
Net loss....................... $ (2.50) $ (5.66) $ (6.90)$ (5.19) $ (9.45)
============= ============ ============= ============= ============
Distribution per limited
partnership unit............ $ 9.75 $ 9.70 $ - $ 4.86 $ -
============= ============ ============= ============= ============
As of December 31,
Balance Sheets 1997 1996 1995 1994 1993
- -------------- ------------- ------------- -------------- ------------- -------------
Real estate investments,
net......................... $ 25,525,582 $ 30,251,493 $ 31,548,994 $ 32,336,645 $ 33,207,297
Asset held for sale............ 3,400,316 - - - -
Total assets................... 31,395,272 33,180,985 35,129,849 37,030,171 38,348,427
Mortgage notes payable,
net......................... 23,474,480 23,857,021 24,216,133 25,443,252 25,803,685
Partners' equity............... 6,994,487 8,392,642 10,037,853 10,755,778 11,805,729
</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 foreclosed upon 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, 1997, the
Partnership owned four apartment properties. Three of the four Partnership's
properties are subject to mortgage notes.
RESULTS OF OPERATIONS
- ---------------------
1997 compared to 1996
Revenue:
Partnership revenues increased by $117,618 or 1% for the year ended 1997 as
compared to 1996. Rental revenue increased by $68,406, gain on involuntary
conversion increased by $97,210, while interest income decreased $47,998.
Rental revenue was $8,042,385 for 1997 as compared to $7,973,979 in 1996. The
increase of $68,406 is primarily due to increases in rental rates, offset by a
an increase in rental discounts given to Mountain Shadow tenants.
On October 30, 1996, four units at Woodcreek Apartments were destroyed by fire
causing $192,775 in damages. In 1997, the Partnership received $182,775 in
insurance reimbursements, of which $97,210 was recorded as a gain on involuntary
conversion.
Interest income decreased by $47,988 or 47% in 1997 as compared to 1996 due
to smaller average cash balances invested in interest-bearing accounts.
Expenses:
Partnership expenses decreased in 1997 by $123,080 or 2% as compared to the same
period last year.
General and administrative expenses decreased $157,626 or 54% for the year ended
December 31, 1997 as compared to the same period last year. In 1996, the
Partnership incurred costs to evaluate and disseminate information regarding an
unsolicited tender offer. The decrease was slightly offset by charges for
investor services, which beginning in 1997, was provided by a third party
vendor. In 1996, these costs were paid to an affiliate of the General Partner
and were included in general and administrative - affiliates.
General and administrative - affiliates expense decreased by $47,310 or 23% for
1997 as compared to the same period last year due to the reduction of overhead
expenses allocable to the Partnership. Allocated expenses decreased in part due
to investor services being performed by an unrelated third party in 1997, as
discussed above.
<PAGE>
1996 compared to 1995
Revenue:
Partnership revenues increased by $84,966 or 1% for the year ended 1996 as
compared to 1995. Rental revenue increased by $257,120 or 3%, while interest
income decreased $136,891.
Rental revenue was $7,973,979 for 1996 as compared to $7,716,859 in 1995. The
increase of $257,120 or 3% is primarily due to increases in rental rates, offset
by a slight increase in rental discounts given to Mountain Shadow tenants.
Interest income decreased by $136,891 or 57% in 1996 as compared to 1995 due
to smaller average cash balances invested in interest-bearing accounts.
The Partnership also recognized a gain on legal settlement from Southmark of
$35,263 in 1995. No such gain has been recognized in 1996.
Expenses:
Partnership expenses increased in 1996 by $20,323 as compared to the same period
last year. Increases in personnel, repairs and maintenance, and general and
administrative expenses were offset by decreases in mortgage interest and
general and administrative - affiliate expenses.
Mortgage interest expense decreased for the year ended 1996, compared to 1995,
by $299,187 or 12%. The decrease is due to the payoff of the Cedar Run mortgage
note payable in December 1995.
Personnel expenses for 1996 were $883,514 as compared to $835,031 in 1995.
The increase of $48,483 or 6% is due to increased office and maintenance
salaries at all of the properties.
Repairs and maintenance expense for the period ended 1996 increased by $216,826
or 28%, compared to 1995. The increase is partially due to the replacement of
carpeting, which met the Partnership's criteria for capitalization in 1995 based
on the magnitude of replacements, but were expensed in 1996. In addition,
furniture rental increased at Mountain Shadows due to an increase in corporate
unit leases where furniture rental is included in the lease. The Partnership
also experienced increases in contract painting and cleaning services as a
result of increased turnover of residents at the properties.
General and administrative expenses increased in 1996 by $35,200 or 14%, as
compared to 1995, due to costs incurred by the Partnership to evaluate and
disseminate information regarding an unsolicited 1996 tender offer as discussed
in Item 1 - Business.
General and administrative - affiliates expense decreased by $45,581 or 18% for
the period ended 1996 as compared to 1995. The decrease is due to the reduction
of overhead expenses allocable to the Partnership.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership has experienced positive cash flow from operations of $5,987,476
for the three years ended December 31, 1997. In 1995, the Partnership received
net cash proceeds of $1,367,557 through the refinancing of Woodcreek. In 1997,
the Partnership also received $182,775 in insurance proceeds from a fire at
Woodcreek. Over the last three years the Partnership has used cash to fund
$2,692,620 in additions to real estate investments, $1,265,536 in scheduled
principal payments on mortgage notes payable, $143,638 for additional deferred
borrowing costs, $1,384,337 for payment of the MID and $1,999,989 for
distributions to the limited partners. In December 1995, proceeds from the
refinancing of Woodcreek and current cash reserves totaling $2,217,856 were used
to pay off the principal balance of the mortgage note on Cedar Run.
The Partnership generated cash flow of $2,090,556 through operating activities
in 1997 as compared to $1,982,419 in 1996. This increase of $108,137 is due to a
reduction in the cash paid to affiliates as well as the amounts paid for
interest and property taxes.
The Partnership generated cash flow of $1,982,419 through operating activities
in 1996 as compared to $1,914,501 in 1995. This increase of $67,918 resulting
from an increase in cash received from tenants and the reduction in interest
paid and cash paid to affiliates was offset by the increase in cash paid to
suppliers and the decrease in interest received.
The Partnership expended $696,769, $827,496 and $1,168,355 for capital
improvements to the properties in 1997, 1996 and 1995, respectively.
During 1997 and 1996, the Partnership paid distributions to the limited partners
of $1,999,989.
Short-term liquidity:
The Partnership held cash and cash equivalents of $1,118,379 at December 31,
1997, down $244,433 from the balance at December 31, 1996. This balance provides
a reasonable level of working capital for the Partnership's operations.
In 1998, 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 $2,692,620 renovating the
properties so they can remain competitive in their respective markets. In 1998,
the Partnership has budgeted to spend approximately $616,000 on capital
improvements, which are expected to be funded from operations of the properties.
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
<PAGE>
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.
Pursuant to the Partnership's previously announced liquidation plans, the
Partnership has recently retained PaineWebber, Incorporated as its exclusive
financial advisor to explore alternatives to maximize the value of the
Partnership. The alternatives being considered by the Partnership include,
without limitation, a transaction in which limited partnership interests in the
Partnership are converted into cash. The General Partner of the Partnership or
entities or persons affiliated with the General Partner will not be involved as
a purchaser in any of the transactions contemplated above. Any transaction will
be subject to certain conditions including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory firm as to the fairness of the consideration received by the
Partnership pursuant to such transaction. Finally, there can be no assurance
that any transaction will be consummated, or as to the terms thereof.
The Partnership has placed Cedar Run Apartments on the market for sale effective
August 1, 1997.
Income allocations and distributions:
Terms of the Amended Partnership Agreement specify that income before
depreciation is allocated to the General Partner to the extent of MID paid in
cash. Depreciation is allocated in the ratio of 99:1 to the limited partners and
the General Partner, respectively. Therefore, for each of the three years ended
December 31, 1997, net income of $364,174, $448,715 and $511,270, respectively,
was allocated to the General Partner. The limited partners received allocations
of net loss of $256,946, $582,185 and $709,383 for each of the three years ended
December 31, 1997, respectively.
During 1997, the limited partners received a cash distribution of $1,000,008.
During the last week of March 1998, the Partnership distributed approximately
$500,000 to the limited partners of record as of March 1, 1998. The
distributions consisted of funds from operations and cash reserves. A
distribution of $505,375 for the MID was accrued by the Partnership for the
General Partner in 1997. 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
- ------- -------------------------------------------
<TABLE>
<CAPTION>
Page
Number
------
INDEX TO FINANCIAL STATEMENTS
- -----------------------------
Financial Statements:
<S> <C>
Report of Independent Public Accountants....................................... 14
Balance Sheets at December 31, 1997 and 1996................................... 15
Statements of Operations for each of the three years in the period
ended December 31, 1997..................................................... 16
Statements of Partners' Equity (Deficit) for each of the three years
in the period ended December 31, 1997....................................... 17
Statements of Cash Flows for each of the three years in the
period ended December 31, 1997.............................................. 18
Notes to Financial Statements.................................................. 20
Financial Statement Schedule -
Schedule III - Real Estate Investments and Accumulated
Depreciation............................................................. 28
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
McNeil Real Estate Fund XV, Ltd.:
We have audited the accompanying balance sheets of McNeil Real Estate Fund XV,
Ltd. (a California limited partnership) as of December 31, 1997 and 1996, and
the related statements of operations, partners' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997, 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 20, 1998
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1997 1996
--------------- --------------
ASSETS
- ------
<S> <C> <C>
Real estate investments:
Land..................................................... $ 6,220,730 $ 7,087,195
Buildings and improvements............................... 41,433,896 45,563,139
-------------- -------------
47,654,626 52,650,334
Less: Accumulated depreciation.......................... (22,129,044) (22,398,841)
-------------- -------------
25,525,582 30,251,493
Asset held for sale......................................... 3,400,316 -
Cash and cash equivalents................................... 1,118,379 1,362,812
Cash segregated for security deposits....................... 213,528 263,255
Accounts receivable......................................... 94,750 188,831
Prepaid expenses and other assets........................... 36,974 43,266
Escrow deposits............................................. 341,153 310,888
Deferred borrowing costs, net of accumulated
amortization of $344,742 and $248,892 at
December 31, 1997 and 1996, respectively ................ 664,590 760,440
-------------- -------------
$ 31,395,272 $ 33,180,985
============== =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable, net................................. $ 23,474,480 $ 23,857,021
Accrued expenses............................................ 120,757 149,324
Accrued interest............................................ 163,621 166,600
Accrued property taxes...................................... 175,741 170,447
Deferred gain - involuntary conversion...................... - 97,210
Payable to affiliates - General Partner..................... 249,503 99,892
Security deposits and deferred rental income................ 216,683 247,849
-------------- -------------
24,400,785 24,788,343
-------------- -------------
Partners' equity (deficit):
Limited partners - 120,000 limited partnership units
authorized; 102,796 and 102,836 limited
partnership units issued and outstanding at
December 31, 1997 and 1996, respectively.............. 7,555,525 8,812,479
General Partner.......................................... (561,038) (419,837)
-------------- -------------
6,994,487 8,392,642
-------------- -------------
$ 31,395,272 $ 33,180,985
============== =============
</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,
----------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Revenue:
Rental revenue.......................... $ 8,042,385 $ 7,973,979 $ 7,716,859
Interest................................ 54,119 102,117 239,008
Gain on settlement of legal expenses.... - - 35,263
Gain on involuntary conversion.......... 97,210 - -
------------- ------------- --------------
Total revenue......................... 8,193,714 8,076,096 7,991,130
------------- ------------- --------------
Expenses:
Interest................................ 2,129,976 2,134,252 2,433,439
Depreciation............................ 2,022,364 2,039,432 1,956,006
Property taxes.......................... 444,088 433,520 421,633
Personnel expenses...................... 904,117 883,514 835,031
Repairs and maintenance................. 1,027,540 1,002,566 785,740
Property management fees -
affiliates............................ 405,298 399,829 385,074
Utilities............................... 370,134 362,268 378,487
Other property operating expenses....... 492,055 458,335 487,602
General and administrative.............. 135,655 293,281 258,081
General and administrative -
affiliates............................ 155,259 202,569 248,150
------------- ------------- --------------
Total expenses........................ 8,086,486 8,209,566 8,189,243
------------- ------------- --------------
Net income (loss).......................... $ 107,228 $ (133,470) $ (198,113)
============= ============= ==============
Net loss allocable to limited partners..... $ (256,946) $ (582,185) $ (709,383)
Net income allocable to
General Partner......................... 364,174 448,715 511,270
------------- ------------- --------------
Net income (loss).......................... $ 107,228 $ (133,470) $ (198,113)
============= ============= ==============
Net loss per limited partnership unit...... $ (2.50) $ (5.66) $ (6.90)
============= ============= ==============
Distribution per limited partnership unit.. $ 9.73 $ 9.70 $ -
============= ============= ==============
</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, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
---------------- ----------------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1994.............. $ (348,250) $ 11,104,028 $ 10,755,778
Net income (loss)......................... 511,270 (709,383) (198,113)
Management Incentive Distribution......... (519,812) - (519,812)
-------------- -------------- --------------
Balance at December 31, 1995.............. (356,792) 10,394,645 10,037,853
Net income (loss)......................... 448,715 (582,185) (133,470)
Distributions to limited partners......... - (999,981) (999,981)
Management Incentive Distribution......... (511,760) - (511,760)
-------------- -------------- --------------
Balance at December 31, 1996.............. (419,837) 8,812,479 8,392,642
Net income (loss)......................... 364,174 (256,946) 107,228
Distributions to limited partners......... - (1,000,008) (1,000,008)
Management Incentive Distribution......... (505,375) - (505,375)
-------------- -------------- --------------
Balance at December 31, 1997.............. $ (561,038) $ 7,555,525 $ 6,994,487
============== ============== ==============
</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,
----------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from tenants.............. $ 7,965,817 $ 7,957,172 $ 7,687,865
Cash received from legal settlement..... - - 35,263
Cash paid to suppliers.................. (2,983,507) (2,999,800) (2,639,152)
Cash paid to affiliates................. (531,923) (593,626) (630,652)
Interest received....................... 54,119 102,117 239,008
Interest paid........................... (1,983,057) (2,017,275) (2,308,035)
Property taxes paid..................... (430,893) (466,169) (469,796)
------------- ------------- --------------
Net cash provided by operating activities.. 2,090,556 1,982,419 1,914,501
------------- ------------- --------------
Cash flows from investing activities:
Additions to real estate investments
and assets held for sale.............. (696,769) (827,496) (1,168,355)
Insurance proceeds from fire............ 182,775 - -
------------- ------------- --------------
Net cash used in investing activities...... (513,994) (827,496) (1,168,355)
------------- ------------- --------------
Cash flows from financing activities:
Net proceeds from refinancing of
mortgage notes payable................ - - 1,367,557
Principal payments on mortgage
notes payable......................... (436,589) (402,373) (2,644,430)
Deferred borrowing costs paid........... - - (143,638)
Distributions to the limited partners... (1,000,008) (999,981) -
Management Incentive Distribution
paid.................................. (384,398) (469,109) (530,830)
------------- ------------- --------------
Net cash used in financing activities...... (1,820,995) (1,871,463) (1,951,341)
------------- ------------- --------------
Net decrease in cash and cash
equivalents............................. (244,433) (716,540) (1,205,195)
Cash and cash equivalents at
beginning of year..................... 1,362,812 2,079,352 3,284,547
------------- ------------- --------------
Cash and cash equivalents at end
of year............................... $ 1,118,379 $ 1,362,812 $ 2,079,352
============= ============= ==============
</TABLE>
See discussions of noncash investing and financing activities in Note 6.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
STATEMENTS OF CASH FLOWS
Reconciliation of Net Income (Loss) to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------
1997 1996 1995
--------------- ---------------- -----------------
<S> <C> <C> <C>
Net income (loss).......................... $ 107,228 $ (133,470) $ (198,113)
------------- -------------- ---------------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Gain on involuntary conversion.......... (97,210) - -
Depreciation and amortization........... 2,022,364 2,039,432 1,956,006
Amortization of discounts on
mortgage notes payable................ 54,048 43,261 49,754
Amortization of deferred borrowing
costs................................. 95,850 76,462 95,120
Changes in assets and liabilities:
Cash segregated for security
deposits............................ 49,727 (13,681) (4,580)
Accounts receivable................... (88,694) 635 4,797
Prepaid expenses and other assets..... 6,292 639 41,718
Escrow deposits....................... (30,265) 53,543 (85,941)
Accounts payable...................... - (42,258) 15,759
Accrued expenses...................... (28,567) (47,788) 117,708
Accrued interest...................... (2,979) (2,746) (19,470)
Accrued property taxes................ 5,294 5,913 (47,614)
Payable to affiliates - General
Partner............................. 28,634 8,772 2,572
Security deposits and deferred
rental income....................... (31,166) (6,295) (13,215)
------------- ------------- --------------
Total adjustments................. 1,983,328 2,115,889 2,112,614
------------- ------------- --------------
Net cash provided by operating activities.. $ 2,090,556 $ 1,982,419 $ 1,914,501
============= ============= ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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 600, LB70, Dallas,
Texas, 75240.
The Partnership is engaged in real estate activities, including the ownership,
operation and management of residential and commercial real estate and other
real estate related assets. At December 31, 1997, the Partnership owned four
income-producing properties as described in Note 4 - Real Estate Investments.
Pursuant to the Partnership's previously announced liquidation plans, the
Partnership has recently retained PaineWebber, Incorporated as its exclusive
financial advisor to explore alternatives to maximize the value of the
Partnership. The alternatives being considered by the Partnership include,
without limitation, a transaction in which limited partnership interests in the
Partnership are converted into cash. The General Partner of the Partnership or
entities or persons affiliated with the General Partner will not be involved as
a purchaser in any of the transactions contemplated above. Any transaction will
be subject to certain conditions including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory firm as to the fairness of the consideration received by the
Partnership pursuant to such transaction. Finally, there can be no assurance
that any transaction will be consummated, or as to the terms thereof.
The Partnership has placed Cedar Run Apartments on the market for sale effective
August 1, 1997.
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.
<PAGE>
The Partnership's financial statements include the accounts of the following
listed tier partnerships for the years ended December 31, 1997, 1996 and 1995.
These single asset tier partnerships were formed to accommodate the refinancing
of the respective properties. The Partnership has a 100% ownership interest in
each of the following tier partnerships:
Tier Partnership
----------------
Arrowhead Fund XV Limited Partnership*
McNeil Mountain Shadows Fund XV
Limited Partnership*
Woodcreek Fund XV, Ltd.*
* The general partner of these partnerships is a corporation whose stock is 100%
owned by the Partnership.
Real Estate Investments
- -----------------------
Real estate investments are generally stated at the lower of depreciated cost or
fair value. Real estate investments are reviewed for impairment whenever events
or changes in circumstances indicate that their carrying amounts may not be
recoverable. When the carrying value of a property exceeds the sum of all
estimated future cash flows, an impairment loss is recognized. At such time, a
write-down is recorded to reduce the basis of the property to its estimated fair
value.
The Partnership's method of accounting for real estate investments is in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" ("SFAS 121"), which the Partnership adopted effective January 1, 1996. The
adoption of SFAS 121 did not have a material impact on the accompanying
financial statements.
Improvements and betterments are capitalized and expensed through depreciation
charges. Repairs and maintenance are charged to operations as incurred.
Asset Held for Sale
- -------------------
The asset held for sale is stated at the lower of depreciated cost or fair value
less costs to sell. Depreciation on the asset ceased at the time it was placed
on the market for sale.
Depreciation
- ------------
Buildings and improvements are depreciated using the straight-line method over
the estimated useful lives of the assets, ranging from 3 to 25 years.
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.
<PAGE>
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.
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.
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 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
<PAGE>
(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 1997, 1996 and 1995 have been made
in accordance with these provisions.
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 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 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.
Cash distributions of $1,000,008 and $999,981 were made to the limited partners
during 1997 and 1996, respectively. No distributions were made to the limited
partners during 1995. The Partnership paid or accrued distributions of $505,375,
$511,760 and $519,812 for the benefit of the General Partner for the years ended
December 31, 1997, 1996 and 1995, respectively. These distributions are the MID
pursuant to the Amended Partnership Agreement. The General Partner has waived
the collection terms of reimbursable expenses and MID, and has elected for the
Partnership to pay limited partner distributions before the payment of such
amounts. During the last week of March 1998, the Partnership plans to distribute
approximately $500,000 to the limited partners of record as of March 1, 1998.
Net Loss Per Limited Partnership Unit
- -------------------------------------
Net loss per Unit is computed by dividing net 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
102,796 weighted average Units outstanding in 1997 and 102,836 weighted average
Units outstanding in 1996 and 1995.
<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.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
Under the terms of the Amended Partnership Agreement, the Partnership is paying
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 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.
The MID will be paid to the extent of the lesser of the Partnership's excess
cash flow, as defined, or net operating income, as defined (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.
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 MID earned. 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
1997, 1996 or 1995 because the Entitlement Amount was sufficient to pay 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 MID represents a return of equity
to the General Partner for increasing cash flow, as defined, and accordingly is
treated as a distribution.
<PAGE>
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,
----------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Property management fees - affiliates...... $ 405,298 $ 399,829 $ 385,074
Charged to general and
administrative - affiliates:
Partnership administration.............. 155,259 202,569 248,150
------------- ------------- --------------
$ 560,557 $ 602,398 $ 633,224
============= ============= ==============
Charged to General Partner's deficit:
MID..................................... $ 505,375 $ 511,760 $ 519,812
============= ============= ==============
</TABLE>
Payable to affiliates - General Partner at December 31, 1997 and 1996 consists
primarily of MID, reimbursable costs and property management fees which are due
and payable from current operations. The General Partner has waived the
collection terms of reimbursable expenses and MID, and has elected for the
Partnership to pay limited partner distributions before the payment of such
amounts.
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 $856,079 in 1997,
$713,934 in 1996, $472,231 in 1995.
<PAGE>
NOTE 4 - REAL ESTATE INVESTMENTS
- --------------------------------
The basis and accumulated depreciation of the Partnership's real estate
investments at December 31, 1997 and 1996 are set forth in the following tables:
<TABLE>
<CAPTION>
Buildings and Accumulated Net Book
1997 Land Improvements Depreciation Value
---- -------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Arrowhead
Shawnee, KS $ 1,537,294 $ 14,180,810 $ (7,877,117) $ 7,840,987
Mountain Shadows
Albuquerque, NM 3,236,768 19,260,309 (10,403,070) 12,094,007
Woodcreek
Cary, NC 1,446,668 7,992,777 (3,848,857) 5,590,588
------------- ------------- ------------- --------------
$ 6,220,730 $ 41,433,896 $ (22,129,044) $ 25,525,582
============= ============= ============= ==============
Buildings and Accumulated Net Book
1996 Land Improvements Depreciation Value
---- -------------- ------------ ------------ ----------------
Arrowhead $ 1,537,294 $ 13,912,565 $ (7,251,742) $ 8,198,117
Cedar Run (a) 866,465 4,770,183 (2,154,534) 3,482,114
Mountain Shadows 3,236,768 19,140,288 (9,567,883) 12,809,173
Woodcreek 1,446,668 7,740,103 (3,424,682) 5,762,089
------------- ------------- ------------- --------------
$ 7,087,195 $ 45,563,139 $ (22,398,841) $ 30,251,493
============= ============= ============= ==============
</TABLE>
(a) Effective August 1, 1997, management placed Cedar Run, located in
Lexington, Kentucky, on the market for sale. Therefore, at December 31,
1997, Cedar Run is classified as an asset held for sale at a net book value
of $3,400,316.
The results of operations for the asset held for sale at December 31, 1997 are
$322,673, $129,824 and $(172,340) for 1997, 1996 and 1995, respectively. Results
of operations are operating revenues less operating expenses, including interest
expense and depreciation expense.
Except for Cedar Run, the Partnership's real estate properties are encumbered by
mortgage indebtedness as discussed in Note 5.
<PAGE>
NOTE 5 - MORTGAGE NOTES PAYABLE
- -------------------------------
The following table sets forth the mortgage notes payable of the Partnership at
December 31, 1997 and 1996. 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) 1997 1996
- -------- --------------- ------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Arrowhead (c) First 8.150 $ 60,450 07/03 $ 7,011,548 $ 7,158,921
Discount (b) (138,764) (159,043)
------------- --------------
6,872,784 6,999,878
------------- --------------
Mountain
Shadows (c) First 8.150 100,670 07/03 11,676,664 11,922,091
Discount (b) (231,432) (265,201)
------------- --------------
11,445,232 11,656,890
Woodcreek First 8.540 40,517 08/02 5,156,464 5,200,253
------------- --------------
$ 23,474,480 $ 23,857,021
============= ==============
</TABLE>
(a) The debt is non-recourse to the Partnership.
(b) Discounts are based on an effective interest rate of 8.62%.
(c) Financing was obtained under the terms of a Real Estate Mortgage Investment
Conduit financing. The mortgage notes payable are cross-collateralized and
may not be prepaid in whole or part before July 1998. Any prepayments made
during the sixth or seventh loan years are subject to a Yield Maintenance
premium, as defined. Additionally, the Partnership must pay a release
payment equal to 25% of the prepaid balance which will be applied to the
remaining mortgage notes in the collateral pool.
(d) Balloon payments on the mortgage notes payable are due as follows:
Property Balloon Payment Date
-------- --------------- ----
Woodcreek $ 4,894,767 08/02
Arrowhead 5,947,622 07/03
Mountain Shadows 9,904,857 07/03
<PAGE>
Scheduled principal maturities of the mortgage notes payable under existing
agreements, before consideration of discounts of $370,196, are as follows:
Real Estate
Investments
------------
1998........................ $ 473,715
1999........................ 513,999
2000........................ 557,709
2001........................ 605,137
2002........................ 5,528,391
Thereafter.................. 16,165,725
-----------
Total....................... $ 23,844,676
===========
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 $24,293,000 at December 31, 1997 and $23,497,000 at December
31, 1996.
NOTE 6 - REFINANCING OF MORTGAGE NOTE PAYABLE
- ---------------------------------------------
On August 11, 1995, the Partnership refinanced the mortgage note 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:
New loan proceeds................... $ 5,250,000
Existing debt retired............... (3,882,443)
------------
Cash proceeds from refinancing...... $ 1,367,557
============
The Partnership deposited $131,656 into property tax and deferred maintenance
escrows and incurred loan costs of $143,638 relating to the refinancing.
NOTE 7 - 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:
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of
the State of California for the County of Los Angeles, Case No. BC133799 (Class
and Derivative Action Complaint).
<PAGE>
The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. Defendants must move, answer or otherwise respond to the second
consolidated and amended complaint by June 30, 1998.
NOTE 8 - GAIN ON INVOLUNTARY CONVERSION
- ---------------------------------------
On October 30, 1996, four units at Woodcreek Apartments were destroyed by fire
causing $192,775 in damages. In 1997, the Partnership received $182,775 in
insurance reimbursements, of which $97,210 was recorded as a gain on involuntary
conversion.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Costs
Initial Cost Cumulative Capitalized
Related (b) Buildings and Write-down for Subsequent
Description Encumbrances Land Improvements Impairment To Acquisition
- ----------- -------------- -------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
APARTMENTS:
Arrowhead
Shawnee, KS $ 6,872,784 $ 1,537,294 $ 12,035,648 $ - $ 2,145,162
Mountain Shadows
Albuquerque, NM 11,445,232 3,236,768 17,555,977 - 1,704,332
Woodcreek
Cary, NC 5,156,464 1,446,668 6,590,377 - 1,402,400
-------------- -------------- ------------- ----------- ------------
$ 23,474,480 $ 6,220,730 $ 36,182,002 $ - $ 5,251,894
============== ============= ============= =========== ============
Asset Held for Sale:
Cedar Run
Lexington, KY (c) $ -
=============
</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.
(c) Asset held for sale is stated at the lower of depreciated cost or fair
value less costs to sell. Historical cost, net of accumulated depreciation
and write-downs, becomes the new cost basis when the asset is classified as
"Held for sale." Depreciation ceases at the time it is placed on the
market for sale.
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Gross Amount at
Which Carried at Close of Period
Buildings and Accumulated
Description Land Improvements Total (a) Depreciation
- ----------- ---- ------------- --------- ------------
<S> <C> <C> <C> <C>
APARTMENTS:
Arrowhead
Shawnee, KS $ 1,537,294 $ 14,180,810 $ 15,718,104 $ (7,877,117)
Mountain Shadows
Albuquerque, NM 3,236,768 19,260,309 22,497,077 (10,403,070)
Woodcreek
Cary, NC 1,446,668 7,992,777 9,439,445 (3,848,857)
-------------- ------------- ---------------- --------------
$ 6,220,730 $ 41,433,896 $ 47,654,626 $ (22,129,044)
============== ============= =============== =============
Asset Held for Sale:
Cedar Run
Lexington, KY (c) $ 3,400,316
===============
</TABLE>
(a) For Federal income tax purposes, the properties are depreciated over lives
ranging from 5-27.5 years using ACRS or MACRS methods. The aggregate cost
of real estate investments for Federal income tax purposes was $53,464,882
and accumulated depreciation was $22,635,828 December 31, 1997.
(c) Asset held for sale is stated at the lower of depreciated cost or fair
value less costs to sell. Historical cost, net of accumulated depreciation
and write-downs, becomes the new cost basis when the asset is classified as
"Held for sale." Depreciation ceases at the time it is placed on the
market for sale.
See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Date of Date Depreciable
Description Construction Acquired lives (years)
- ----------- ------------ -------- -------------
<S> <C> <C> <C>
APARTMENTS:
Arrowhead
Shawnee, KS 1971 03/85 3-25
Mountain Shadows
Albuquerque, NM 1986 08/85 3-25
Woodcreek
Cary, NC 1981 12/85 3-25
Asset Held for Sale:
Cedar Run
Lexington, KY 1978 12/85
</TABLE>
(c) Asset held for sale is stated at the lower of depreciated cost or fair
value less costs to sell. Historical cost, net of accumulated depreciation
and write-downs, becomes the new cost basis when the asset is classified as
"Held for sale." Depreciation ceases at the time it is placed on the
market for sale.
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,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Real estate investments:
Balance at beginning of year............... $ 52,650,334 $ 51,977,016 $ 50,808,661
Improvements............................... 696,769 827,496 1,168,355
Reclassification to asset held for sale.... (5,692,477) - -
Replacement of assets...................... - (154,178) -
------------- -------------- --------------
Balance at end of year..................... $ 47,654,626 $ 52,650,334 $ 51,977,016
============= ============== ==============
Accumulated depreciation:
Balance at beginning of year............... $ 22,398,841 $ 20,428,022 $ 18,472,016
Depreciation............................... 2,022,364 2,039,432 1,956,006
Reclassification to asset held for sale.... (2,292,161) - -
Replacement of assets...................... - (68,613) -
------------- ------------- --------------
Balance at end of year..................... $ 22,129,044 $ 22,398,841 $ 20,428,022
============= ============= ==============
Asset held for sale:
Balance at beginning of year............... $ - $ - $ -
Reclassification to asset held for
sale.................................... 3,400,316 - -
------------- ------------- --------------
Balance at end of year..................... $ 3,400,316 $ - $ -
============= ============= =============
</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, 77 Mr. McNeil is also Chairman of the
Chairman of the Board and Director of McNeil Real Estate
Board and Director 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 54 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>
Ron K. Taylor 40 Mr. Taylor is the President and Chief
President and Chief Executive Officer of McNeil Real Estate
Executive Officer Management which is an affiliate of the
General Partner. Mr. Taylor has been in
this capacity since the resignation of
Donald K. Reed on March 4, 1997. Prior
to assuming his current
responsibilities, Mr. Taylor served as a
Senior Vice President of McREMI. Mr.
Taylor has been in this capacity since
McREMI commenced operations in 1991.
Prior to joining McREMI, Mr. Taylor
served as an Executive Vice President
for a national syndication/property
management firm. In this capacity, Mr.
Taylor had the responsibility for the
management and leasing of a 21,000,000
square foot portfolio of commercial
properties. Mr. Taylor has been actively
involved in the real estate industry
since 1983.
</TABLE>
Each director shall serve until his successor shall have been duly elected and
qualified.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
No direct compensation was paid or payable by the Partnership to directors or
officers (since it does not have any directors or officers) for the year ended
December 31, 1997, 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, 1997. 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
10,577 Units at January 31, 1998 (approximately 10.3% of the outstanding
Units). The business address for High River Limited Partnership is 100
South Bedford Road, Mount Kisco, New York 10549.
<PAGE>
(B) Security ownership of management.
The General Partner and the officers and directors of its general
partner, collectively, own 1,357 Units at January 31, 1998, 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.
The MID will be paid to the extent of the lesser of the Partnership's excess
cash flow, as defined, or net operating income, as defined (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, 1997, the Partnership paid or accrued for the General Partner MID in the
amount of $505,375.
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 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, 1997, the Partnership paid or accrued $560,557 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>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
- -------- ------------------------------------------------------------------
See accompanying Index to Financial Statements at Item 8 - Financial Statements
and Supplementary Data.
(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> <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 Termination Agreement, dated
October 11, 1991, between McNeil
Real Estate Fund XV, Ltd. and McNeil
Partners, L.P. (1)
10.3 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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C> <C>
10.4 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)
10.5 Master Property Management Agree-
ment, dated as of June 24, 1993
between McNeil Real Estate
Management, Inc. and McNeil Real
Estate Fund XV, Ltd. (2)
10.6 Mortgage Note, dated August 11,
1995, between Woodcreek Fund XV,
Ltd. and Fleet Real Estate Capital,
Inc. (Incorporated by reference to
the Annual Report on Form 10-K for
the year ended December 31, 1995)
11. Statement regarding computation of
net loss per limited partnership
unit (see Item 8 - Note 1 -
"Organization and Summary of
Significant Accounting Policies").
22. Following is a list of subsidiaries
of the Partnership:
</TABLE>
<TABLE>
<CAPTION>
Names Under
Jurisdiction Which It Is
Name of Subsidiary Incorporation Doing Business
------------------ ------------- --------------
<S> <C> <C>
Arrowhead Fund XV Delaware None
Limited Partnership
McNeil Mountain Shadows Delaware None
Fund XV Limited
Partnership
Woodcreek Fund XV, Ltd. Texas None
</TABLE>
<PAGE>
(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, 1997.
(B) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended December 31, 1997.
<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.
McNEIL REAL ESTATE FUND XV, LTD.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
March 31, 1998 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 31, 1998 By: /s/ Ron K. Taylor
- -------------- ----------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
March 31, 1998 By: /s/ Brandon K. Flaming
- -------------- ----------------------------------------
Date Brandon K. Flaming
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,118,379
<SECURITIES> 0
<RECEIVABLES> 94,750
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 47,654,626
<DEPRECIATION> (22,129,044)
<TOTAL-ASSETS> 31,395,272
<CURRENT-LIABILITIES> 0
<BONDS> 23,474,480
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 31,395,272
<SALES> 8,042,385
<TOTAL-REVENUES> 8,193,714
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,956,510
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,129,976
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 107,228
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,228
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
