UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
--------------------------------------------
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.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2941516
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (972) 448-5800
----------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
MCNEIL REAL ESTATE FUND XV, LTD.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land ....................................................... $ 6,220,730 $ 6,220,730
Buildings and improvements ................................. 41,822,000 41,433,896
------------ ------------
48,042,730 47,654,626
Less: Accumulated depreciation ............................ (23,555,417) (22,129,044)
------------ ------------
24,487,313 25,525,582
Asset held for sale ........................................... 3,430,944 3,400,316
Cash and cash equivalents ..................................... 1,070,884 1,118,379
Cash segregated for security deposits ......................... 255,620 213,528
Accounts receivable ........................................... 18,474 94,750
Prepaid expenses and other assets ............................. 32,605 36,974
Escrow deposits ............................................... 488,765 341,153
Deferred borrowing costs (net of accumulated
amortization of $424,344 and $344,742 at
September 30, 1998 and December 31, 1997,
respectively) .............................................. 584,988 664,590
------------ ------------
$ 30,369,593 $ 31,395,272
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable, net ................................... $ 23,165,262 $ 23,474,480
Accrued property taxes ........................................ 346,419 175,741
Accrued expenses .............................................. 104,451 120,757
Accrued interest .............................................. 161,221 163,621
Payable to affiliates - General Partner ....................... 682,401 249,503
Security deposits and deferred rental revenue ................. 186,034 216,683
------------ ------------
24,645,788 24,400,785
------------ ------------
Partners' equity (deficit):
Limited partners - 120,000 limited partnership units
authorized; 102,796 limited partnership units
issued and outstanding at September 30, 1998
and December 31, 1997 .................................... 6,654,266 7,555,525
General Partner ............................................ (930,461) (561,038)
------------ ------------
5,723,805 6,994,487
------------ ------------
$ 30,369,593 $ 31,395,272
============ ============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XV, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- -------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue .................... $ 1,967,241 $ 2,036,475 $ 5,952,342 $ 5,973,958
Interest .......................... 13,168 13,158 56,872 42,734
----------- ----------- ----------- -----------
Total revenue ................... 1,980,409 2,049,633 6,009,214 6,016,692
----------- ----------- ----------- -----------
Expenses:
Interest .......................... 524,082 531,398 1,582,720 1,600,870
Depreciation ...................... 477,899 476,071 1,426,373 1,510,549
Property taxes .................... 115,473 111,285 346,419 333,855
Personnel expenses ................ 253,476 253,046 723,869 702,811
Utilities ......................... 113,105 107,207 304,614 288,206
Repair and maintenance ............ 322,859 307,694 726,788 826,995
Property management
fees - affiliates ............... 98,549 102,171 298,069 303,694
Other property operating
expenses ........................ 111,722 128,793 328,182 358,694
General and administrative ........ 59,405 34,186 284,081 106,103
General and administrative -
affiliates ...................... 44,378 37,401 141,091 113,136
----------- ----------- ----------- -----------
Total expenses .................. 2,120,948 2,089,252 6,162,206 6,144,913
----------- ----------- ----------- -----------
Net loss ............................. $ (140,539) $ (39,619) $ (152,992) $ (128,221)
=========== =========== =========== ===========
Net loss allocable to limited
partners .......................... $ (139,134) $ (141,150) $ (151,462) $ (497,514)
Net income (loss) allocable to
General Partner ................... (1,405) 101,531 (1,530) 369,293
----------- ----------- ----------- -----------
Net loss ............................. $ (140,539) $ (39,619) $ (152,992) $ (128,221)
=========== =========== =========== ===========
Net loss per limited
partnership unit .................. $ (1.35) $ (1.37) $ (1.49) $ (4.84)
=========== =========== =========== ===========
Distribution per limited
partnership unit .................. $ 2.43 $ 4.86 $ 7.29 $ 9.73
=========== =========== =========== ===========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XV, LTD.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Total
Partners'
General Limited Equity
Partner Partners (Deficit)
------------ ------------ -----------
<S> <C> <C> <C>
Balance at December 31, 1996 ............ $ (419,837) $ 8,812,479 $ 8,392,642
Net income (loss) ....................... 369,293 (497,514) (128,221)
Management Incentive Distribution........ (365,247) -- (365,247)
Distributions to limited partners ....... -- (1,000,008) (1,000,008)
----------- ----------- -----------
Balance at September 30, 1997 ........... $ (415,791) $ 7,314,957 $ 6,899,166
=========== =========== ===========
Balance at December 31, 1997 ............ $ (561,038) $ 7,555,525 $ 6,994,487
Net loss ................................ (1,530) (151,462) (152,992)
Management Incentive Distribution ....... (367,893) -- (367,893)
Distributions to limited partners ....... -- (749,797) (749,797)
----------- ----------- -----------
Balance at September 30, 1998 ........... $ (930,461) $ 6,654,266 $ 5,723,805
=========== =========== ===========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XV, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1998 1997
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants .................... $ 5,947,871 $ 5,905,883
Cash paid to suppliers ........................ (2,377,511) (2,357,937)
Cash paid to affiliates ....................... (374,155) (429,581)
Interest received ............................. 56,872 42,734
Interest paid ................................. (1,463,099) (1,490,656)
Property taxes paid ........................... (317,307) (287,223)
----------- -----------
Net cash provided by operating activities ........ 1,472,671 1,383,220
----------- -----------
Cash flows from investing activities:
Additions to real estate investments .......... (388,104) (365,838)
Additions to asset held for sale .............. (30,628) --
----------- -----------
Net cash used in investing activities ............ (418,732) (365,838)
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage notes
payable ..................................... (351,637) (324,079)
Management Incentive Distribution ............. -- (384,398)
Distributions to limited partners ............. (749,797) (1,000,008)
----------- -----------
Net cash used in financing activities ............ (1,101,434) (1,708,485)
----------- -----------
Net decrease in cash and cash equivalents ........ (47,495) (691,103)
Cash and cash equivalents at beginning of
period ........................................ 1,118,379 1,362,812
----------- -----------
Cash and cash equivalents at end of period........ $ 1,070,884 $ 671,709
=========== ===========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XV, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Loss to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net loss ............................................ $ (152,992) $ (128,221)
----------- -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation ..................................... 1,426,373 1,510,549
Amortization of discounts on mortgage
notes payable .................................. 42,419 40,537
Amortization of deferred borrowing costs ......... 79,602 71,888
Changes in assets and liabilities:
Cash segregated for security deposits .......... (42,092) 58,999
Accounts receivable ............................ 76,276 (129,614)
Prepaid expenses and other assets .............. 4,369 3,880
Escrow deposits ................................ (147,612) (343,393)
Accrued property taxes ......................... 170,678 333,855
Accrued expenses ............................... (16,306) (25,528)
Accrued interest ............................... (2,400) (2,211)
Payable to affiliates - General Partner ........ 65,005 (12,751)
Security deposits and deferred rental
revenue ...................................... (30,649) 5,230
----------- -----------
Total adjustments ............................ 1,625,663 1,511,441
----------- -----------
Net cash provided by operating activities ........... $ 1,472,671 $ 1,383,220
=========== ===========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
Notes to Financial Statements
(Unaudited)
September 30, 1998
NOTE 1.
- -------
McNeil Real Estate Fund XV, Ltd. (the "Partnership") was organized June 26, 1984
as a limited partnership organized 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 limited partnership agreement, dated October 11, 1991 (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.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair presentation of the Partnership's financial position and
results of operations. All adjustments were of a normal recurring nature.
However, the results of operations for the nine months ended September 30, 1998
are not necessarily indicative of the results to be expected for the year ending
December 31, 1998.
NOTE 2.
- -------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1997, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund XV, Ltd., c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240.
NOTE 3.
- -------
The Partnership pays property management fees equal to 5% of gross rental
receipts of the Partnership's properties to McNeil Real Estate Management, Inc.
("McREMI"), an affiliate of the General Partner, for providing property
management services and leasing services.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
Under terms of the Amended Partnership Agreement, the Partnership is paying a
Management Incentive Distribution ("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 to arrive at the property
tangible asset value. The property tangible asset value is then added to the
book value of all other assets excluding intangible items.
<PAGE>
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, 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 limited partnership units ("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.
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.
Compensation, reimbursements and distributions paid to or accrued for the
benefit of the General Partner and its affiliates are as follows:
Nine Months Ended
September 30,
------------------------
1998 1997
-------- --------
Property management fees - affiliates ....... $298,069 $303,694
Charged to general and administrative -
affiliates:
Partnership administration ............... 141,091 113,136
-------- --------
$439,160 $416,830
======== ========
Charged to General Partner's deficit:
MID ...................................... $367,893 $365,247
======== ========
NOTE 4.
- -------
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
<PAGE>
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. The case was stayed pending settlement discussions. A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties. Preliminary
Court approval was received on October 6, 1998. A hearing on final Court
approval is scheduled for December 17, 1998.
Plaintiff's counsel intend to seek an order awarding attorney's fees and
reimbursements of their out-of-pocket expenses. The amount of such award is
undeterminable until final approval is received from the court. Fees and
expenses shall be allocated amongst the Partnerships on a pro rata basis, based
upon tangible asset value of each such partnership, less total liabilities,
calculated in accordance with the Amended Partnership Agreements for the quarter
most recently ended.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
The Partnership is engaged in real estate activities, including the ownership,
operation and management of residential and other real estate related assets. At
September 30, 1998, the Partnership owned four apartment properties. Three of
the four Partnership's properties are subject to mortgage notes.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Partnership revenues decreased by $69,224 and $7,478 for the three months and
nine months ended September 30, 1998, respectively, as compared to the same
period last year. Rental revenue decreased by $21,616 and interest income
increased by $14,138 or 33% for the nine months ended September 30, 1998 as
compared to the same period last year.
<PAGE>
Rental revenues decreased $69,234 and $21,616 for the three months and nine
months ended September 30, 1998, respectively, as compared to last year. The
decrease in rental revenues is due to a decrease in the occupancy rates at
Mountain Shadows offset by increases in rental rates at Arrowhead and Cedar Run.
Mountain Shadows, located in Albuquerque, New Mexico, has experience a decline
in market occupancy rates as a result of over building in the apartment market.
Management believes this condition is short-term and anticipates improvement
performance for 1999.
Expenses:
Partnership expenses increased by $31,696 and $17,923 for the three and nine
months ended September 30, 1998, respectively, as compared to the same periods
in 1997. An increase in general and administrative expenses offset by a decrease
in repairs and maintenance and depreciation expense.
Depreciation decreased by $84,176 for the nine months ended September 30, 1998
as compared to the nine months ended September 30, 1997. This decrease is due to
Cedar Run, which is currently classified as an asset held for sale, for which no
depreciation has been recognized since August 1, 1997.
Repairs and maintenance expense increased for the three months and decreased for
the nine months ended September 30, 1998 by $15,165 and $100,207, respectively,
compared to the same periods in 1997. The increase for the three months ended
September 30, 1998 as compared to the same period last year is due to increases
in cleaning and decorating. The decrease is due to the reduction in appliance
and carpet replacement expenses at the properties, which did not meet the
criteria for capitalization. This decrease is also due to a reduction in carpet
cleaning, carpet repair and equipment and furniture rental.
General and administrative expenses increased $25,219 and $177,978 for the three
and nine months ended September 30, 1998, respectively, as compared to the same
periods last year. The increase was mainly due to costs incurred to explore
alternatives to maximize the value of the Partnership (see Liquidity and Capital
Resources). The increase was partially offset by decreases attributable to
investor services. During 1997, charges for investor services were provided by a
third party vendor. Beginning with 1998, these services are provided by
affiliates of the General Partner.
General and administrative-affiliate expenses increased by $6,977 and $27,955
for the three and nine months ended September 30, 1998, respectively, as
compared to the same periods of 1997. The increase is due to the change in
investor services charges as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership's primary source of cash flows is from operating activities
which generated $1,472,671 of cash in the first nine months of 1998 as compared
to $1,383,220 for the same period in 1997. The increase in cash provided by
operating activities of $89,451 was mainly the result of an increase in cash
received from tenants and decrease in the cash paid to affiliates offset by an
increase in property taxes.
The Partnership expended $418,732 and $365,838 for capital improvements to its
properties in the first nine months of 1998 and 1997, respectively.
<PAGE>
During the first nine months of 1998, the Partnership paid $351,637 in principal
payments on the mortgage notes and made distributions of $749,797 to the limited
partners.
Short-term liquidity:
At September 30, 1998, the Partnership held cash and cash equivalents of
$1,070,884, a decrease of $47,495 from the balance at December 31, 1997. This
balance provides a comfortable level of working capital for the Partnership's
operations.
During 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 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
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.
As previously announced, the Partnership has retained PaineWebber, Incorporated
("PaineWebber") as its exclusive financial advisor to explore alternatives to
maximize the value of the Partnership including, without limitation, a
transaction in which limited partnership interests in the Partnership are
converted into cash. The Partnership, through PaineWebber, has provided
financial and other information to interested parties and is currently
conducting discussions with one such party in an attempt to reach a definitive
agreement with respect to a sale transaction. It is possible that the General
Partner and its affiliates will receive non-cash consideration for their
ownership interests in connection with any such transaction. There can be no
assurance that any such agreement will be reached nor the terms thereof.
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 the nine months ended
September 30, 1998 and 1997, net loss of $(1,530) and net income of $369,293,
respectively, was allocated to the General Partner. The limited partners
received net loss allocations of $(151,462) and $(497,514) for the nine months
ended September 30, 1998 and 1997, respectively.
<PAGE>
During 1998, the limited partners received a cash distribution of $749,797. The
distribution consisted of funds from operations. A distribution of $367,893 for
the MID was accrued by the Partnership for the nine months ended September 30,
1998 for the General Partner.
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 September 30, 1998. 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.
Other Information:
Management has reviewed 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.
Management is in the process of evaluating the mechanical and embedded
technological systems at the various properties. Management intends to inventory
all such systems and query suppliers, vendors and manufacturers to determine
year 2000 compliance. In circumstances of non-compliance management will work
with the vendor to remedy the problem or seek alternative suppliers who will be
in compliance. Management believes that the remediation of any outstanding year
2000 conversion issues will not have a material or adverse effect on the
Partnership's operations. However, no estimates can be made as to the potential
adverse impact resulting from the failure of third party service providers and
vendors to be year 2000 compliant. Management is in the process of identifying
those risks as well as developing a contingency plan to mitigate potential
adverse effects from non-compliance.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund 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.
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. The case was stayed pending settlement discussions. A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties. Preliminary
Court approval was received on October 6, 1998. A hearing on final Court
approval is scheduled for December 17, 1998.
Plaintiff's counsel intend to seek an order awarding attorney's fees and
reimbursements of their out-of-pocket expenses. The amount of such award is
undeterminable until final approval is received from the court. Fees and
expenses shall be allocated amongst the Partnerships on a pro rata basis, based
upon tangible asset value of each such partnership, less total liabilities,
calculated in accordance with the Amended Partnership Agreements for the quarter
most recently ended.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Description
------- -----------
3.1 Amended and Restated Partnership Agreement
dated October 11, 1991. (1)
11. Statement regarding computation of net loss
per limited partnership unit: Net loss per
limited partnership unit is computed by
dividing net loss allocated to the limited
partners by the number of limited
partnership units outstanding. Per unit
information has been computed based on
102,796 limited partnership units
outstanding in 1998 and 1997, respectively.
27. Financial Data Schedule for the quarter
ended September 30, 1998.
(1) Incorporated by reference to the Annual Report of Registrant,
on Form 10-K for the period ended December 31, 1991, as filed
on March 30, 1992.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended September 30, 1998.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
McNEIL REAL ESTATE FUND XV, Ltd.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
November 16, 1998 By: /s/ Ron K. Taylor
- ----------------- -------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
November 16, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,070,884
<SECURITIES> 0
<RECEIVABLES> 18,474
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 48,042,730
<DEPRECIATION> (23,555,417)
<TOTAL-ASSETS> 30,369,593
<CURRENT-LIABILITIES> 0
<BONDS> 23,165,262
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 30,369,593
<SALES> 5,952,342
<TOTAL-REVENUES> 6,009,214
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,579,486
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,582,720
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (152,992)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (152,992)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
