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 0-14267
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MCNEIL REAL ESTATE FUND XXIV, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 74-2339537
- --------------------------------------------------------------------------------
(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 XXIV, L.P.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land ...................................................... $ 1,624,347 $ 1,624,347
Buildings and improvements ................................ 18,235,974 17,771,163
------------ ------------
19,860,321 19,395,510
Less: Accumulated depreciation and amortization .......... (8,789,242) (7,997,592)
------------ ------------
11,071,079 11,397,918
Assets held for sale ......................................... 2,729,114 10,935,647
Cash and cash equivalents .................................... 1,225,250 2,180,029
Cash segregated for security deposits ........................ 61,853 84,737
Accounts receivable, net of allowance for doubtful
accounts of $5,597 and $24,095 at September 30,
1998 and December 31, 1997, respectively .................. 418,503 588,578
Prepaid expenses and other assets, net ....................... 143,207 114,823
------------ ------------
$ 15,649,006 $ 25,301,732
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable ....................................... $ 1,650,000 $ 5,293,017
Accounts payable and accrued expenses ........................ 246,473 181,540
Payable to tenant ............................................ -- 1,622,873
Payable to affiliates ........................................ 713,940 192,735
Security deposits and deferred rental revenue ................ 74,508 100,283
------------ ------------
2,684,921 7,390,448
------------ ------------
Partners' equity (deficit):
Limited partners - 40,000 limited partnership
units authorized and outstanding at September 30,
1998 and December 31, 1997 .............................. 12,991,673 17,935,844
General Partner ........................................... (27,588) (24,560)
------------ ------------
12,964,085 17,911,284
------------ ------------
$ 15,649,006 $ 25,301,732
============ ============
</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 XXIV, L.P.
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 ................... $ 756,191 $ 1,074,348 $ 2,565,028 $ 3,184,085
Interest ......................... 55,681 27,505 124,110 71,805
Gain on involuntary
conversion ..................... -- 55,105 -- 149,585
Other income ..................... -- 20,000 -- 20,000
----------- ----------- ----------- -----------
Total revenue .................. 811,872 1,176,958 2,689,138 3,425,475
----------- ----------- ----------- -----------
Expenses:
Interest ......................... 34,256 95,306 142,927 293,774
Depreciation and
amortization ................... 403,552 218,048 791,650 677,954
Property taxes ................... 55,679 112,726 220,036 330,172
Personnel costs .................. 69,655 80,216 212,081 234,754
Utilities ........................ 53,966 52,299 173,483 169,451
Repairs and maintenance .......... 64,045 97,658 238,419 304,524
Property management
fees - affiliates .............. 41,969 60,186 144,694 176,145
Other property operating
expenses ....................... 69,616 54,738 170,278 215,886
General and administrative ....... 78,512 15,924 281,490 61,113
General and administrative -
affiliates ..................... 116,660 129,178 372,049 381,070
Loss on disposition of real
estate ......................... -- -- 118,750 --
Write-down for impairment
of real estate ................. -- -- 126,080 --
----------- ----------- ----------- -----------
Total expenses ................. 987,910 916,279 2,991,937 2,844,843
----------- ----------- ----------- -----------
Net income (loss) ................... $ (176,038) $ 260,679 $ (302,799) $ 580,632
=========== =========== =========== ===========
Net income (loss) allocable to
limited partners ................. $ (174,278) $ 258,073 $ (299,771) $ 574,826
Net income (loss) allocable to
General Partner .................. (1,760) 2,606 (3,028) 5,806
----------- ----------- ----------- -----------
Net income (loss).................... $ (176,038) $ 260,679 $ (302,799) $ 580,632
=========== =========== =========== ===========
Net income (loss) per limited
partnership unit ................. $ (4.35) $ 6.45 $ (7.49) $ 14.37
=========== =========== =========== ===========
Distributions per limited
partnership unit ................. $ 78.61 $ 12.50 $ 116.11 $ 12.50
=========== =========== =========== ===========
</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 XXIV, L.P.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity (Deficit)
------------- ------------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1996 ............ $ (28,862) $ 18,009,967 $ 17,981,105
Net income .............................. 5,806 574,826 580,632
Distributions to limited partners........ -- (500,000) (500,000)
------------ ------------ ------------
Balance at September 30, 1997 ........... $ (23,056) $ 18,084,793 $ 18,061,737
============ ============ ============
Balance at December 31, 1997 ............ $ (24,560) $ 17,935,844 $ 17,911,284
Net loss ................................ (3,028) (299,771) (302,799)
Distributions to limited partners ....... -- (4,644,400) (4,644,400)
------------ ------------ ------------
Balance at September 30, 1998 ........... $ (27,588) $ 12,991,673 $ 12,964,085
============ ============ ============
</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 XXIV, L.P.
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 .............................. $ 2,565,803 $ 3,047,071
Cash paid to suppliers .................................. (1,122,475) (1,015,557)
Cash paid to affiliates ................................. (255,038) (608,259)
Interest received ....................................... 124,110 71,805
Interest paid ........................................... (158,833) (285,997)
Property taxes paid ..................................... (131,803) (168,816)
Other income ............................................ -- 20,000
----------- -----------
Net cash provided by operating activities .................. 1,021,764 1,060,247
----------- -----------
Cash flows from investing activities:
Additions to real estate investments and
assets held for sale .................................. (2,127,656) (475,327)
Proceeds from disposition of real estate ................ 8,438,530 --
Proceeds received from insurance company ................ -- 226,747
----------- -----------
Net cash provided by (used in) investing activities......... 6,310,874 (248,580)
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage note
payable ............................................... (31,075) (97,317)
Retirement of mortgage note payable ..................... (5,261,942) --
Proceeds from mortgage note payable ..................... 1,650,000 --
Distributions to limited partners ....................... (4,644,400) (500,000)
----------- -----------
Net cash used in financing activities ...................... (8,287,417) (597,317)
----------- -----------
Net increase (decrease) in cash
and cash equivalents .................................... (954,779) 214,350
Cash and cash equivalents at beginning of
period .................................................. 2,180,029 1,615,604
----------- -----------
Cash and cash equivalents at end of period ................. $ 1,225,250 $ 1,829,954
=========== ===========
</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 XXIV, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Income (Loss) to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1998 1997
------------ -----------
<S> <C> <C>
Net income (loss) ....................................... $ (302,799) $ 580,632
----------- -----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Gain on involuntary conversion ....................... -- (149,585)
Depreciation and amortization ........................ 791,650 677,954
Loss on disposition of real estate ................... 118,750 --
Write-down for impairment of real estate ............. 126,080 --
Amortization of deferred borrowing costs ............. 5,235 7,770
Changes in assets and liabilities:
Cash segregated for security deposits .............. 22,884 (1,202)
Accounts receivable, net ........................... 39,902 (190,254)
Prepaid expenses and other assets, net ............. (80,801) (357)
Accounts payable and accrued expenses .............. 64,933 127,124
Payable to affiliates .............................. 261,705 (51,044)
Security deposits and deferred rental
revenue .......................................... (25,775) 59,209
----------- -----------
Total adjustments ................................ 1,324,563 479,615
----------- -----------
Net cash provided by operating activities ............... $ 1,021,764 $ 1,060,247
=========== ===========
</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 XXIV, L.P.
Notes to Financial Statements
September 30, 1998
(Unaudited)
NOTE 1.
- -------
McNeil Real Estate Fund XXIV, L.P. (the "Partnership"), formerly known as
Southmark Equity Partners, Ltd., was organized on October 19, 1984, as a limited
partnership under the provisions of the California Revised Limited Partnership
Act to acquire and operate commercial and residential properties. The general
partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a
Delaware limited partnership, an affiliate of Robert A. McNeil ("McNeil"). The
principal place of business for the Partnership and the General Partner is 13760
Noel Road, Suite 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 XXIV, L.P., 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 the gross rental
receipts for its residential properties and 6% of gross rental receipts for its
commercial properties to McNeil Real Estate Management, Inc. ("McREMI"), an
affiliate of the General Partner, for providing property management services for
the Partnership's residential and commercial properties and leasing services for
its residential properties. McREMI may also choose to provide leasing services
for the Partnership's commercial properties, in which case McREMI will receive
property management fees from such commercial properties equal to 3% of the
property's gross rental receipts plus leasing commissions based on the
prevailing market rate for such services where the property is located.
Under the terms of its partnership agreement, the Partnership pays a disposition
fee to the General Partner equal to 3% of the gross sales price for brokerage
services performed in connection with the sale of the Partnership's properties.
The fee is due and payable at the time the sale closes. The Partnership incurred
$204,000 of such fees during the first quarter of 1998 and $55,500 of such fees
during the second quarter of 1998 in connection with the sale of Southpointe
Plaza and Island Plaza shopping centers, respectively. These fees have not yet
been paid by the Partnership and are included in payable to affiliates on the
Balance Sheet at September 30, 1998.
<PAGE>
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
The Partnership is paying an asset management fee which is payable to the
General Partner. Through 1999, the asset management fee is calculated as 1% of
the Partnership's tangible asset value. Tangible asset value is determined by
using the greater of (i) an amount calculated by applying a capitalization rate
of 9% to the annualized net operating income of each property or (ii) a value of
$10,000 per apartment unit for residential properties and $50 per gross square
foot for commercial properties to arrive at the property tangible asset value.
The property tangible asset value is then added to the book value of all other
assets excluding intangible items. The fee percentage decreases subsequent to
1999. Total accrued but unpaid asset management fees of $292,856 and $86,889
were outstanding at September 30, 1998 and December 31, 1997, respectively.
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner or its affiliates are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1998 1997
-------- --------
<S> <C> <C>
Property management fees ............................. $144,694 $176,145
Charged to general and administrative -
affiliates:
Partnership administration ........................ 166,082 147,876
Asset management fee .............................. 205,967 233,194
Charged to loss on disposition of real estate:
Disposition fee ................................... 204,000 --
Charged to write-down for impairment of
real estate:
Disposition fee ................................... 55,500 --
-------- --------
$776,243 $557,215
======== ========
</TABLE>
Payable to affiliates at September 30, 1998 and December 31, 1997 consisted
primarily of unpaid property management fees, disposition fee (1998 only),
Partnership general and administrative expenses and asset management fees and
are due and payable from current operations.
<PAGE>
NOTE 4.
- -------
On March 31, 1998, the Partnership sold Southpointe Plaza Shopping Center,
located in Sacramento, California, to an unaffiliated purchaser for a cash
purchase price of $6,800,000. Cash proceeds from the sale were received on April
1, 1998. Sales proceeds received, as well as the loss on sale, are detailed
below.
<TABLE>
<CAPTION>
Loss Sales
on Sale Proceeds
------------ ------------
<S> <C> <C>
Sales price.......................................... $ 6,800,000 $ 6,800,000
Selling costs ....................................... (389,990) (185,990)
Straight-line rents receivable written off........... (48,601)
Prepaid leasing commissions written off.............. (43,913)
Carrying value....................................... (6,436,246)
------------ -----------
Loss on disposition of real estate................... $ (118,750)
===========
Proceeds from sale of real estate.................... 6,614,010
Retirement of mortgage note payable.................. (5,261,942)
Retirement of accrued interest payable............... (32,338)
------------
Net cash proceeds.................................... $ 1,319,730
============
</TABLE>
As discussed in Note 3, the Partnership incurred a $204,000 disposition fee
payable to the General Partner in connection with the sale of Southpointe Plaza.
This fee increased the amount of the loss on disposition of real estate and is
included in selling costs above. However, as the fee has not yet been paid, it
did not reduce the amount of net cash proceeds received from the sale. The net
cash proceeds from the sale of Southpointe Plaza will be $1,115,730 after
payment of the disposition fee.
<PAGE>
NOTE 5.
- -------
On April 1, 1998, the Partnership sold Island Plaza Shopping Center, located in
Ft. Myers, Florida, to an unaffiliated purchaser for a cash purchase price of
$1,850,000. The Partnership recorded a $126,080 write-down for impairment of
real estate in the first quarter of 1998 to record the property at its sales
price less estimated costs to sell. Sales proceeds are detailed below.
<TABLE>
<CAPTION>
Loss Sales
on Sale Proceeds
------------ ------------
<S> <C> <C>
Sales price.......................................... $ 1,850,000 $ 1,850,000
Selling costs ....................................... (80,980) (25,480)
Straight-line rents receivable written off........... (81,572)
Prepaid leasing commissions written off.............. (3,269)
Carrying value....................................... (1,684,179)
----------- ------------
Loss on disposition of real estate................... $ --
===========
Net cash proceeds.................................... $ 1,824,520
============
</TABLE>
As discussed in Note 3, the Partnership incurred a $55,500 disposition fee
payable to the General Partner in connection with the sale of Island Plaza. This
fee increased the amount of the write-down for impairment of real estate and is
included in selling costs above. However, as the fee has not yet been paid, it
did not reduce the amount of net cash proceeds received from the sale. The net
cash proceeds from the sale of Island Plaza will be $1,769,020 after payment of
the disposition fee.
NOTE 6.
- -------
Effective January 1, 1996, the Partnership adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." This statement requires the cessation of depreciation on assets
held for sale. Since Island Plaza, Southpointe Plaza and Springwood Plaza were
placed on the market for sale, no depreciation was taken effective April 1,
1996, October 1, 1996 and August 1, 1997, respectively.
<PAGE>
NOTE 7.
- -------
On June 1, 1998, the Partnership received $1,650,000 in proceeds from a mortgage
note payable secured by Riverbay Plaza Shopping Center. The proceeds were used
to pay for improvements made in 1997 to renovate and expand an anchor tenant's
space. The mortgage note, payable to an unaffiliated lender, bears interest at a
variable rate equal to 1.75% plus the London Interbank Offered Rate per annum
and matures on April 15, 2001. Interest-only payments are due monthly until July
1, 1999, at which time monthly principal and interest payments of $13,301 are
due. The remaining principal balance is due at maturity.
NOTE 8.
- -------
In February 1997, a fire occurred at Riverbay Plaza Shopping Center. One
tenant's space (less than 3% of the total leasable square footage of the center)
was completely destroyed. In addition, there was damage to the roof and several
tenant spaces incurred water and smoke damage. During 1997, reimbursements
totaling $226,747 were received from the insurance carrier and repairs were
completed. The Partnership recognized a $149,585 gain on involuntary conversion
which represents the amount of insurance reimbursements received in excess of
the basis of the property damaged.
NOTE 9.
- -------
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. 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
- -------------------
On March 31, 1998, the Partnership sold Southpointe Plaza for a gross sales
price of $6.8 million. The Partnership recognized a $118,750 loss on the sale.
On April 1, 1998, the Partnership sold Island Plaza for a gross sales price of
$1.85 million. A $126,080 write-down for impairment of real estate was recorded
in the first quarter of 1998 and no gain or loss was recorded on the sale.
The Partnership reported a net loss for the first nine months of 1998 of
$302,799 as compared to net income of $580,632 for the first nine months o,f
1997. Revenues decreased to $2,689,138 in 1998 from $3,425,475 for the same
period in 1997. Expenses were $2,991,937 in 1998 as compared to $2,844,843 in
1997.
In June 1998, the Partnership received $1,650,000 in proceeds from a mortgage
note payable secured by Riverbay Plaza Shopping Center. The proceeds were used
to pay for improvements made in 1997 to renovate and expand an anchor tenant's
space.
<PAGE>
Net cash provided by operating activities was $1,021,764 for the first nine
months of 1998. The Partnership received $1,650,000 in proceeds from a mortgage
note payable secured by Riverbay Plaza, as previously discussed. The Partnership
made $31,075 in regularly scheduled principal payments on its mortgage note
payable. The Partnership received $8,438,530 in proceeds from the sales of
Southpointe Plaza and Island Plaza shopping centers, $5,261,942 of which was
used to pay off the mortgage note payable secured by Southpointe Plaza. After
distributions of $4,644,400 to the limited partners during the first nine months
of 1998, cash and cash equivalents decreased by $954,779, leaving a balance of
$1,225,250 at September 30, 1998.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total revenue decreased by $365,086 and $736,337 for the three and nine months
ended September 30, 1998, respectively, as compared to the same periods in 1997.
The decrease was due to decreases in rental revenue, gain on involuntary
conversion and other income, partially offset by an increase in interest income,
as discussed below.
Rental revenue for the three and nine months ended September 30, 1998 decreased
by $318,157 and $619,057, respectively, in relation to the comparable periods in
1997. Approximately $766,000 of the decrease was due to the sales of Southpointe
Plaza and Island Plaza on March 31, 1998 and April 1, 1998, respectively. In
addition, rental revenue decreased by approximately $32,000 at Towne Center due
to a major tenant vacating a large space in the second quarter of 1997. These
decreases were partially offset by increases in rental revenue of approximately
$89,000, $32,000 and $28,000 at Riverbay Plaza, Sleepy Hollow and Pine Hills,
respectively, due to increases in average occupancy rates and rental rates in
the first nine months of 1998. Rental revenue remained relatively unchanged at
Springwood Plaza.
Interest income increased by $28,176 and $52,305 for the quarter and nine months
ended September 30, 1998, respectively, as compared to the same periods in the
prior year. The increase was due to a higher average amount of cash and cash
equivalents available for short-term investment in 1998, mainly due to net cash
proceeds from the sales of Southpointe Plaza and Island Plaza shopping centers
received in the second quarter of 1998.
A gain on involuntary conversion of $149,585 was recognized in the first nine
months of 1997 relating to fire damage that occurred at Riverbay Plaza Shopping
Center. The gain, which represented the insurance proceeds received in excess of
the basis of the property damaged, was recognized as reimbursement proceeds were
received from the insurance carrier. No such gain was recognized in the first
nine months of 1998.
In the third quarter of 1997, the Partnership received $20,000 for a deposit
forfeited by a prospective buyer of Island Plaza. No such income was received in
the first nine months of 1998.
Expenses:
Total expenses increased by $71,631 for the three months and by $147,094 for the
nine months ended September 30, 1998 as compared to the same periods in 1997.
The increase was mainly due to a loss on disposition of real estate and a
write-down for impairment of real estate recognized in the first quarter of
1998, as discussed below.
<PAGE>
Interest expense for the three and nine months ended September 30, 1998
decreased by $61,050 and $150,847, respectively, in relation to the comparable
periods in 1997. Interest expense decreased by approximately $196,000 due to the
retirement of the Southpointe Plaza mortgage note payable in conjunction with
the sale of the property. This decrease was partially offset by an increase in
interest expense related to the Riverbay Plaza loan, which was acquired in June
1998.
Depreciation and amortization expense increased by $185,504 and $113,696 for the
three and nine months ended September 30, 1998, respectively, in relation to the
same periods in 1997. The increase was mainly due to approximately $1.6 million
in tenant improvements completed at Riverbay Plaza at the end of 1997.
The sales of Southpointe Plaza and Island Plaza resulted in decreased property
taxes, repairs and maintenance expenses and property management fees -
affiliates. For the three and nine months ended September 30, 1998, property
taxes decreased by $57,047 and $110,136, respectively, repairs and maintenance
decreased by $33,613 and $66,105, respectively, and property management fees -
affiliates decreased by $18,217 and $31,451, respectively, as compared to the
same periods in the prior year.
Other property operating expenses increased by $14,878 for the three months and
decreased by $45,608 for the nine months ended September 30, 1998. The overall
decrease was due to the sales of Southpointe Plaza and Island Plaza shopping
centers. This decrease was partially offset by an increase in bad debts at
Springwood Plaza in the third quarter of 1998.
General and administrative expenses increased by $62,588 and $220,377 for the
three and nine months ended September 30, 1998, respectively, as compared to the
same periods in 1997. The increase was mainly due to costs incurred in 1998 to
explore alternatives to maximize the value of the Partnership (see Liquidity and
Capital Resources).
The Partnership recognized a $118,750 loss on the sale of Southpointe Plaza
Shopping Center in the first nine months of 1998. No such loss was recognized in
the first nine months of 1997.
Island Plaza Shopping Center was sold to an unaffiliated buyer on April 1, 1998.
The Partnership recorded a $126,080 write-down for impairment of real estate in
the first quarter of 1998 to record the property at its sales price less
estimated costs to sell. No such write-down was recorded in the first nine
months of 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership's primary source of cash flows is from operating activities,
which generated $1,021,764 of cash in the first nine months of 1998, comparable
to the $1,060,247 generated for the same period in 1997.
The Partnership expended $2,127,656 and $475,327 for capital improvements to its
properties in the first nine months of 1998 and 1997, respectively. In the
fourth quarter of 1997, improvements totaling approximately $1.6 million were
performed at Riverbay Plaza to renovate and expand an anchor tenant's space.
These costs were paid by the tenant and reimbursed by the Partnership in the
second quarter of 1998.
<PAGE>
On April 1, 1998, the Partnership received a total of $8,438,530 in proceeds
from the sales of Southpointe Plaza and Island Plaza shopping centers.
$5,261,942 of the proceeds was used to repay the Southpointe Plaza mortgage note
payable.
In the first nine months of 1997, the Partnership received $226,747 in proceeds
from the insurance company for fire damage that occurred at Riverbay Plaza
Shopping Center. No such insurance proceeds were received in the first nine
months of 1998.
The Partnership made $31,075 and $97,317 in regularly scheduled principal
payments on the Southpointe Plaza mortgage note payable in the first nine months
of 1998 and 1997, respectively. The decrease in 1998 was due to the sale of the
property and the repayment of the loan on April 1, 1998.
In June 1998, the Partnership received $1,650,000 in proceeds from a mortgage
note payable secured by Riverbay Plaza Shopping Center. The proceeds were used
to pay for improvements made in 1997 to renovate and expand an anchor tenant's
space.
The Partnership distributed $4,644,400 and $500,000 to the limited partners in
the first nine months of 1998 and 1997, respectively.
Short-term liquidity:
At September 30, 1998, the Partnership held cash and cash equivalents of
$1,225,250. This balance provides a reasonable level of working capital for the
Partnership's immediate needs in operating its properties.
For the Partnership as a whole, management projects positive cash flow from
operations in 1998. The Partnership has budgeted approximately $619,000 for
necessary capital improvements for all properties in 1998 (excluding the
approximately $1.6 million of tenant improvements that were completed in 1997
but not reimbursed to the tenant until 1998). These capital improvements are
expected to be funded from available cash reserves or from operations of the
properties. The present cash balance is believed to provide an adequate reserve
for property operations.
In 1997, improvements totaling approximately $1.6 million were performed at
Riverbay Plaza to renovate and expand an anchor tenant's space. These costs were
paid by the tenant and reimbursed by the Partnership in 1998. The Partnership
obtained a mortgage loan secured by Riverbay Plaza to pay these costs and
received such funds in June 1998.
On March 31, 1998, the Partnership sold Southpointe Plaza Shopping Center,
located in Sacramento, California, to an unaffiliated purchaser for a cash
purchase price of $6,800,000. On April 1, 1998, cash proceeds totaling
$6,614,010 were received and $5,294,280 was used to pay the principal and
accrued interest balance of the mortgage note payable secured by the property.
An additional $204,000 disposition fee is payable to the General Partner.
On April 1, 1998, the Partnership sold Island Plaza Shopping Center, located in
Ft. Myers, Florida, to an unaffiliated purchaser for a cash purchase price of
$1,850,000. Cash proceeds totaling $1,824,520 were received after payment of
various closing costs. An additional $55,500 disposition fee is payable to the
General Partner.
<PAGE>
Additional efforts to maintain and improve partnership liquidity have included
continued attention to property management activities. The objective has been to
obtain maximum occupancy rates while holding expenses to levels necessary to
maximize cash flows. The Partnership has made capital expenditures on its
properties where improvements were expected to increase the competitiveness and
marketability of the properties.
Long-term liquidity:
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. 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.
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.
<PAGE>
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.
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.
<PAGE>
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 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Description
------- -----------
4. Amended and Restated Limited Partnership
Agreement dated March 30, 1992.
(Incorporated by reference to the Current
Report of the registrant on Form 8-K dated
March 30, 1992, as filed on April 10, 1992).
4.1 Amendment No. 1 to the Amended and Restated
Limited Partnership Agreement of McNeil Real
Estate Fund XXIV, L.P. dated June 1995
(incorporated by reference to the Quarterly
Report of the registrant on Form 10-Q for
the period ended June 30,1995, as filed on
August 14, 1995).
11. Statement regarding computation of Net
Income per Limited Partnership Unit: Net
income per limited partnership unit is
computed by dividing net income allocated to
the limited partners by the number of
limited partnership units outstanding. Per
unit information has been computed based on
40,000 limited partnership units outstanding
in 1998 and 1997.
27. Financial Data Schedule for the quarter
ended September 30, 1998.
(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 XXIV, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
McNEIL REAL ESTATE FUND XXIV, L.P.
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/ Carol A. Fahs
- ----------------- -------------------------------------------
Date Carol A. Fahs
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> 1,225,250
<SECURITIES> 0
<RECEIVABLES> 424,100
<ALLOWANCES> (5,597)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,860,321
<DEPRECIATION> (8,789,242)
<TOTAL-ASSETS> 15,649,006
<CURRENT-LIABILITIES> 0
<BONDS> 1,650,000
0
0
<COMMON> 0
<OTHER-SE> 12,964,085
<TOTAL-LIABILITY-AND-EQUITY> 15,649,006
<SALES> 2,565,028
<TOTAL-REVENUES> 2,689,138
<CGS> 1,158,991
<TOTAL-COSTS> 1,950,641
<OTHER-EXPENSES> 653,539
<LOSS-PROVISION> 126,080
<INTEREST-EXPENSE> 142,927
<INCOME-PRETAX> (302,799)
<INCOME-TAX> 0
<INCOME-CONTINUING> (302,799)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (302,799)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
