UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 1995
--------------------------------------------------
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 0-15459
MCNEIL REAL ESTATE FUND XXIII, L.P.
- - - - - -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 33-0139793
- - - - - -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240
- - - - - -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (214) 448-5800
--------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
<PAGE>
MCNEIL REAL ESTATE FUND XXIII, L.P.
(Debtor-in-possession)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- - - - - ------ --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
<S> <C> <C>
ASSETS Real estate investments:
Land..................................................... $ 239,966 $ 239,966
Buildings and improvements............................... 5,713,332 5,711,776
--------- ---------
5,953,298 5,951,742
Less: Accumulated depreciation.......................... (2,461,292) (2,405,420)
--------- ---------
3,492,006 3,546,322
Asset held for sale......................................... 2,334,886 2,373,130
Cash and cash equivalents ($99,115 and $79,303
restricted by the Bankruptcy Court at March 31, 1995
and December 31, 1994, respectively)..................... 136,168 107,815
Cash segregated for security deposits....................... 81,639 76,307
Accounts receivable......................................... 16,113 17,033
Escrow deposits............................................. 273,661 364,419
Prepaid expenses and other assets........................... 36,671 35,382
--------- ---------
$6,371,144 $6,520,408
========= =========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Mortgage notes payable, net of discounts.................... $3,812,207 $3,814,667
Accounts payable and accrued expenses....................... 42,920 75,624
Accrued property taxes...................................... 31,851 123,773
Payable to affiliates - General Partner..................... 5,418 4,986
Security deposits and deferred rental income................ 59,791 56,348
--------- ---------
3,952,187 4,075,398
--------- ---------
Liabilities subject to compromise........................... 4,301,654 4,184,977
--------- ---------
Partners' equity (deficit):
Limited partners - 45,000,000 Units authorized;
16,108,041 Units issued and outstanding (9,419,080
Current Income Units and 6,688,961 Growth/Shelter
Units) at March 31, 1995 and December 31, 1994........... (6,721,039) (6,579,736)
General Partner.......................................... 4,838,342 4,839,769
--------- ---------
(1,882,697) (1,739,967)
--------- ---------
$6,371,144 $6,520,408
========= =========
</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 XXIII, L.P.
(Debtor-in-Possession)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1995 1994
--------- --------
<S> <C> <C>
Revenue:
Rental revenue.............................................. $ 490,828 $ 442,947
Interest.................................................... 1,754 923
--------- --------
Total revenue............................................... 492,582 443,870
Expenses:
Interest.................................................... 151,180 155,609
Interest - affiliates....................................... 12,695 83,494
Depreciation................................................ 94,116 102,135
Property taxes.............................................. 41,760 52,275
Personnel costs............................................. 73,337 73,145
Utilities................................................... 55,870 56,869
Repairs and maintenance..................................... 76,861 55,922
Property management fees -affiliates........................ 20,678 21,820
Other property operating expenses........................... 50,102 46,925
General and administrative.................................. 9,626 13,252
General and administrative - affiliates..................... 49,087 51,090
Write-down for permanent impairment of real estate.......... - 661,921
--------- ---------
Total expenses............................................ 635,312 1,374,457
--------- ---------
Net loss....................................................... $ (142,730) $ (930,587)
========= =========
Net loss allocable to limited partners - Current Income Unit... $ (12,846) $ (83,753)
Net loss allocable to limited partners - Growth/Shelter Unit... (128,457) (837,528)
Net loss allocable to General Partner.......................... (1,427) (9,306)
---------- ---------
Net loss....................................................... $ (142,730) $ (930,587)
========= =========
Net loss per thousand limited partnership units:...............
Current Income Units........................................... $ (1.36) $ (8.89)
========= =========
Growth/Shelter Units........................................... $ (19.20) $ (124.84)
========= =========
</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 XXIII, L.P.
(Debtor-in-Possession)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Three Months Ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity(Deficit)
-------- ---------- --------------
<S> <C> <C> <C>
Balance at December 31, 1993.............. $(225,716) $(5,128,564) $(5,354,280)
Net loss
General Partner........................ (9,306) - (9,306)
Current Income Units................... - (83,753) (83,753)
Growth/Shelter Units................... - (837,528) (837,528)
--------- ---------- ----------
Total net loss............................ (9,306) (921,281) (930,587)
--------- ---------- ----------
Balance at March 31, 1994................. $ (235,022) $(6,049,845) $(6,284,867)
========= ========== ==========
Balance at December 31, 1994.............. $4,839,769 $(6,579,736) $(1,739,967)
Net loss
General Partner........................ (1,427) - (1,427)
Current Income Units................... - (12,846) (12,846)
Growth/Shelter Units................... - (128,457) (128,457)
--------- ---------- ----------
Total net loss............................ (1,427) (141,303) (142,730)
--------- ---------- ----------
Balance at March 31, 1995................. $4,838,342 $(6,721,039) $(1,882,697)
========= ========== ==========
</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 XXIII, L.P.
(Debtor-in-Possession)
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1995 1994
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from tenants........................ $ 486,844 $ 436,204
Cash paid to suppliers............................ (238,626) (230,664)
Cash paid to affiliates........................... (21,345) (35,612)
Interest received................................. 1,754 923
Interest paid..................................... (146,402) (146,042)
Property taxes escrowed........................... (30,150) (46,737)
-------- ---------
Net cash provided by (used in)
operating activities.............................. 52,075 (21,928)
-------- --------
Cash flows from investing activities:
Additions to real estate investments.............. (1,556) (6,034)
-------- --------
Cash flows from financing activities:
Principal payments on mortgage notes
payable......................................... (22,166) (20,624)
Advances from affiliates - General Partner........ - 33,804
-------- --------
Net cash provided by (used in)
financing activities.............................. (22,166) 13,180
-------- --------
Net increase (decrease) in cash and cash equivalents. 28,353 (14,782)
Cash and cash equivalents at beginning of
period............................................ 107,815 89,311
-------- --------
Cash and cash equivalents at end of period........... $ 136,168 $ 74,529
======== ========
</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 XXIII, L.P.
(Debtor-in-Possession)
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Loss to Net Cash Provided by (Used in)
Operating Activities
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1995 1994
-------- --------
<S> <C> <C>
Net loss............................................. $(142,730) $(930,587)
-------- --------
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation...................................... 94,116 102,135
Amortization of discounts on mortgage
notes payable................................... 8,695 8,325
Interest added to advances from affiliates -
General Partner................................. 12,695 83,494
Write-down for permanent impairment
of real estate.................................. - 661,921
Changes in assets and liabilities:
Cash segregated for security deposits........... (5,332) (348)
Accounts receivable............................. 920 (763)
Escrow deposits................................. 90,758 119,127
Prepaid expenses and other assets............... (1,289) (6,422)
Accounts payable and accrued expenses........... 22,301 (41,773)
Accrued property taxes.......................... (82,013) (60,962)
Claims settlement payable....................... 1,354 1,842
Payable to affiliates - General Partner......... 48,420 37,298
Security deposits and deferred rental
income........................................ 4,180 4,785
------- -------
Total adjustments............................. 194,805 908,659
------- -------
Net cash provided by (used in)
operating activities.............................. $ 52,075 $(21,928)
======= =======
</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 XXIII, L.P.
(Debtor-in-Possession)
Notes to Financial Statements
(Unaudited)
March 31, 1995
NOTE 1.
- - - - - ------
McNeil Real Estate Partners XXIII, L.P., (the "Partnership"), formerly known as
Southmark Realty Partners III, Ltd. was organized on March 4, 1985 as a limited
partnership under the provisions of the California Revised Limited Partnership
Act to acquire and operate 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
700, 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 three months ended March 31, 1995 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1995.
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, 1994, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate XXIII, L.P., c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240.
NOTE 3.
- - - - - ------
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. The Partnership has suffered
recurring losses from operations and has relied on advances from affiliates to
meet its debt obligations and to fund capital improvements. There is no
guarantee that such advances will continue to be available. As discussed in Note
6, the Partnership has filed a Voluntary Petition for reorganization under
Chapter 11 of the United States Bankruptcy Court. The Partnership's First
Amended Plan of Reorganization (the "Reorganization Plan") was filed with the
Bankruptcy Court on February 13, 1995, and the Partnership's Disclosure
Statement of Debtor-in-Possession (the "Disclosure Statement") was approved by
the Bankruptcy Court on February 14, 1995. The Partnership is operating in this
Chapter 11 proceeding as a debtor-in-possession. Accordingly, the General
Partner has continued to manage the business and affairs of the Partnership
subject to the jurisdiction and supervision of the United States Bankruptcy
Court - Northern District of Texas (the "Bankruptcy Court").
Additionally, the Partnership is involved in certain litigation, the ultimate
outcome of which could result in a significant loss to the Partnership. These
conditions raise substantial doubt about the Partnership's ability to continue
as a going concern. The accompanying financial statements have been prepared on
the basis of accounting principles applicable to a going concern that presume
the realization of assets and settlement of liabilities in the ordinary course
of business, rather than through a process of forced liquidations. Accordingly,
the statements do not include any adjustments relating to the realizable values
of all assets or the settlement amounts of all liabilities.
Under the bankruptcy proceedings, certain liabilities have priority and the
payment of certain other liabilities existing at June 30, 1994, have been
deferred. Such liabilities have been set forth separately in the financial
statements.
<PAGE>
The Partnership, subject to approval of the Plan of Reorganization, has a
contract for the sale of Woodbridge Apartments. Accordingly the net book value
of the property has been reclassified as an asset held for sale.
Assets held for sale are stated at the lower of cost or net realizable value.
NOTE 4.
- - - - - ------
Certain reclassifications have been made to prior period amounts to conform with
the current period presentation.
NOTE 5.
- - - - - ------
The Partnership pays property management fees equal to 5% of the gross rental
receipts for its residential properties to McNeil Real Estate Management, Inc.
("McREMI"), an affiliate of the General Partner, for providing property
management and leasing services. Due to the bankrupty proceedings, the property
management fees paid by Woodbridge Apartments were reduced to 3% beginning
December 1, 1994.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
The Partnership is incurring 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 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 $355,749 were
outstanding at March 31, 1995.
The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships if certain conditions
are met. Borrowings under the facility may be used to fund deferred maintenance,
refinancing obligations and working capital needs. There is no assurance that
the Partnership will receive any additional funds under the facility because no
amounts have been reserved for any particular partnership. As of March 31, 1995,
$2,102,530 remained available for borrowing under the facility; however,
additional funds could become available as other partnerships repay existing
borrowings.
The General Partner has, in its discretion, advanced funds to the Partnership to
meet its working capital requirements. These advances, which are unsecured and
due on demand, accrue interest at a rate equal to the prime lending rate plus
1%.
McNeil Real Estate Fund XXV, L.P., an affiliate which owns a phase of Harbour
Club Apartments, has advanced funds to the Partnership for working capital
requirements. The advance, which is unsecured and due on demand, accrues
interest at a rate equal to the prime lending rate plus 1%.
The total advances from affiliates at March 31, 1995 and December 31, 1994
consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------- -------
<S> <C> <C>
Advances from General Partner- revolving
credit facility..................................... $ 65,670 $ 65,670
Advances from General Partner - other................... 281,823 281,823
Advance from McNeil Real Estate Fund XXV, L.P........... 113,000 113,000
Accrued interest payable................................ 83,278 70,583
------- -------
$543,771 $531,076
======= =======
</TABLE>
<PAGE>
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner and its affiliates are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1995 1994
------ ------
<S> <C> <C>
Property management fees............................... $20,678 $21,820
Charged to interest - affiliates:
Interest on advances from affiliates - General
Partner........................................... 12,695 83,494
Charged to general and administrative -
affiliates:
Partnership administration.......................... 28,352 35,616
Asset management fee................................ 20,735 15,474
------ ------
$82,460 $156,404
====== =======
</TABLE>
The payable to affiliates - General Partner at March 31, 1995 and December 31,
1994 consisted primarily of unpaid asset management fees, property management
fees and partnership general and administrative expenses.
As discussed in Note 6, Advances from affiliates - General Partners and a
portion of Payable to affiliates - General Partner have been classified as
unsecured claims and are deferred under the Chapter 11 proceedings, therefore,
the amounts due have been reclassified as "Liabilities subject to compromise" on
the financial statements for the Partnership.
NOTE 6.
- - - - - ------
One of the Partnership's properties, Woodbridge Apartments, is encumbered by two
mortgage notes payable. The first lien mortgage note payable is co-insured by
the Federal Housing Administration and is, therefore, regulated by the
Department of Housing and Urban Development ("HUD"). The second lien mortgage
note payable, in the amount of $982,260, is payable in monthly installments of
interest only and payments are limited to "surplus cash", as defined by HUD, and
as calculated at June 30 and December 31 of each year. No "surplus cash" has
been available to make the interest payments on the second lien and therefore,
the Partnership ceased making such payments in April 1994. The Partnership was
unsuccessful in attempting to negotiate a restructuring of the mortgage and the
second lienholder was expected to initiate foreclosure proceedings. In an effort
to prevent the loss of the property, the Partnership filed a Voluntary Petition
for reorganization under Chapter 11 of the United States Bankruptcy Court,
Northern District of Texas on June 30, 1994.
As a result of its Chapter 11 proceeding, the realization of assets and
liquidation of liabilities attributable to the Partnership are subject to
significant uncertainties. The Partnership's financial statements include
adjustments and reclassifications to reflect the liabilities that have been
deferred under the Chapter 11 proceeding as "Liabilities subject to compromise."
The Partnership's First Amended Plan of Reorganization (the "Reorganization
Plan") was filed with the Bankruptcy Court on February 13, 1995, and the
Partnership's Disclosure Statement of Debtor-in-Possession (the "Disclosure
Statement") was approved by the Bankruptcy Court on February 14, 1995.
The Reorganization Plan contemplates the sale of Woodbridge Apartments, and the
Partnership presently has a contract to sell the property. On April 12, 1995,
the Bankruptcy Court issued an order to sell Woodbridge Apartments and closing
of the sale is expected to occur May 23, 1995. In accordance with the Disclosure
Statement, if the property is not sold by June 1, 1995, the mortgage holders
will be allowed to foreclose on the property.
On or before 120 days after the date the Reorganization Plan is confirmed, the
Partnership will send an election form for each limited partner to choose
whether to redeem their interest in the Partnership. The election to redeem the
limited partner interests must be returned to the Partnership within thirty
days. The redemption price would be 1/1000th of a cent per Unit. Notwithstanding
any other provision of the Reorganization Plan, if the Partnership is not able
to secure a "no-action" letter from the Securities and Exchange Commission
("SEC") in a form satisfactory to the Partnership in its sole and absolute
discretion, then this election shall be void and the limited partners will
retain their interests. The "no-action" letter shall, at a minimum, provide (1)
that the purchase of partnership interests can be accomplished without
compliance with Rule 13e-3 of the Securities Exchange Act of 1934 and (2) that
the SEC has not been advised by the Division of the SEC issuing the letter to
pursue an enforcement action if the Reorganization Plan is consummated. In the
event that a "no-action" letter satisfactory to the Partnership is not issued by
the SEC, the limited partners shall retain their interests. If one hundred
percent (100%) of the limited partners elect to redeem their interest or the
General Partner of the Partnership determines that the level of redemption could
potentially result in the treatment of the Partnership as a corporation for tax
purposes, then this provision shall be void and the limited partners will retain
their interests.
The Partnership's Reorganization Plan and Disclosure Statement were submitted
February 20, 1995 to a vote of the impaired creditors, as defined. The judgment
lien creditors filed objections to confirmation of the Partnership's First
Amended Plan of Reorganization. On April 12, 1995, the Bankruptcy Court did
grant the order to sell Woodbridge Apartments but denied confirmation of the
Reorganization Plan. The Partnership has filed an appeal of the Court's ruling
and, in the meantime, is attempting to settle the matter with the judgment lien
creditors which would allow for confirmation of the Reorganization Plan.
Management cannot presently predict the outcome of these negotiations.
The Partnership's financial statements include the accounts of Beckley
Associates Limited Partnership. Beckley Associates, which owns Harbour Club II
Apartments, is wholly-owned by the Partnership and the General Partner. Beckley
Associates was not included in the bankruptcy filing. Summarized below is a
statement of assets, liabilities and partners' equity of the portion of the
Partnership included in the Chapter 11 reorganization as of March 31, 1995, and
the results of operations for the three months ended March 31, 1995, prepared on
a going concern basis. The assets, liabilities and transactions of Beckley
Associates have been excluded.
<TABLE>
<CAPTION>
March 31,
1995
---------
<S> <C>
ASSETS
------
Asset held for sale............................ $2,334,886
Cash and cash equivalents...................... 99,115
Cash segregated for security deposits.......... 23,345
Accounts receivable............................ 1,250
Escrow deposits................................ 204,734
Prepaid expenses and other assets.............. 27,198
---------
2,690,528
=========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
-----------------------------------------
Mortgage notes payable, net of discounts....... $2,423,642
Accounts payable and accrued expenses.......... 311,613
Accrued property taxes......................... 27,517
Claims settlement payable...................... 114,516
Payable to affiliates - General Partner........ 858,518
Advances from affiliates - General Partner..... 543,771
Security deposits and deferred rental income... 22,077
---------
$4,310,654
---------
Partners' deficit.............................. (1,611,126)
---------
$2,690,528
=========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1995
----------------
<S> <C>
Rental revenue................................. $ 173,138
Interest....................................... 481
--------
Total revenues............................... 173,619
Interest....................................... 59,474
Interest - affiliates.......................... 12,695
Depreciation................................... 38,244
Property taxes................................. 9,909
Personnel costs................................ 20,782
Utilities...................................... 20,010
Repairs and maintenance........................ 28,774
Property management fees - affiliates.......... 5,169
Other property operating....................... 29,234
General and administrative..................... 9,626
General and administrative - affiliates........ 49,087
--------
Total expenses............................... 283,004
--------
Net loss $(109,385)
========
</TABLE>
The ultimate outcome of the Chapter 11 proceedings cannot be determined at this
time. Concurrent with the filing of the Voluntary Petition for reorganization,
the General Partner contributed to the Partnership the purchased advances of
$4,375,661 plus accrued interest of $704,482 owing to the General Partner from
the Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- - - - - ------ ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- - - - - -------------------
Net loss for the first three months of 1995 was $142,730 as compared to $930,587
for the first three months of 1994.
The Partnership ceased making the interest only payments on the second lien on
the Woodbridge Apartments in April 1994 which constituted a default under the
mortgage agreement. The Partnership was unsuccessful in attempting to negotiate
a restructuring of the mortgage, and the second lienholder was expected to
initiate foreclosure proceedings. Accordingly, the Partnership recorded a
write-down for permanent impairment of real estate of $661,921 on Woodbridge
Apartments during the first quarter of 1994, to write down the property to its
estimated net realizable value. In an effort to prevent the loss of the
property, the Partnership filed a Voluntary Petition for reorganization under
Chapter 11 in the United States Bankruptcy Court, Northern District of Texas on
June 30, 1994. In January 1995, the Partnership received an offer to buy the
property from an unaffiliated third party for a purchase price that was higher
than its book value, after the write-down. The sale is expected to close on May
23, 1995, and the Partnership expects to record a gain on the sale.
Occupancy at Woodbridge Apartments has rebounded to an average occupancy of 83%
for the first three months of 1995, as compared to an average occupancy of 69%
for the same period of 1994. While operating under Chapter 11 protection, the
property has been able to keep current all post-petition liabilities pursuant to
the cash collateral order.
Harbour Club II is part of a four-phase apartment complex located in Belleville,
Michigan. Phases I and III of the complex are owned by partnerships in which
McNeil Partners, L.P. is the general partner; while Phase IV is owned by
University Real Estate Fund 12, Ltd., ("UREF 12") whose general partner is an
<PAGE>
affiliate of Southmark Corporation. McREMI had been managing all four phases of
the complex until December 1992, when the property management agreement between
McREMI and UREF 12 was canceled. Additionally, in January 1993, Phase I
defaulted on the mortgage loan to HUD and unless a refinancing agreement can be
reached with the lender, the property is subject to foreclosure. If Phase I is
lost to foreclosure, it would be extremely difficult to operate Phases II and
III because the pool and clubhouse are located in Phase I.
Harbour Club II had an improved average occupancy of 91% for the first three
months of 1995 as compared to an average occupancy of 87% for the same period of
1994. Harbour Club II was able to provide enough cash flow from operations to
meet ordinary operating expenses as well as the debt service for its related
mortgage during the first three months of 1995; however, the property is in need
of major capital repairs and improvements in order to compete in its local
market. The Partnership is seeking alternatives to fund the necessary
improvements, but at this time no sources have been found.
RESULTS OF OPERATIONS
- - - - - ---------------------
Revenue:
Total Partnership revenues were $492,582 for the three months ended March 31,
1995, as compared to $443,870 for the same period of 1994. Rental revenue for
Harbour Club II and Woodbridge Apartments increased due to lower vacancies.
Expenses:
Total expenses were $635,312 for the three months ended March 31, 1995, as
compared to $1,374,457 for the same period of 1994. The 1994 expenses include a
$661,921 write-down for permanent impairment of real estate related to
Woodbridge Apartments.
Interest - affiliates decreased $70,799 for the three months ended March 31,
1995, as compared to the same period of 1994. The decrease was due to the
decrease in the balance of advances purchased by the General Partner which were
contributed to the Partnership in June 1994.
Property taxes decreased $10,515 for the three months ended March 31, 1995,
primarily due to reduced tax expense at Harbour Club II Apartments.
Repairs and maintenance expense increased $20,939 for the three months ended
March 31, 1995. Carpet and appliance replacements at Harbour Club II Apartments
increased during the first quarter of 1995 as compared to 1994 due to increased
occupancy as well as a renovation of vacant units to improve marketability.
LIQUIDITY AND CAPITAL RESOURCES
- - - - - -------------------------------
The Partnership was provided with $52,075 of cash flow from operations as
compared to cash used in operations of $21,928 for the same period of 1994. The
change in cash flow from operations is primarily due to the increased rental
revenue at both of the Partnership's properties.
The minimal cash balances of the Partnership have continued to limit capital
improvements. Additions to real estate totaled $1,556 for the first three months
of 1995 as compared to $6,034 for the same period of 1994.
During the first three months of 1994, the Partnership received $33,804 of
advances from affiliates of the General Partner to fund operating cash
shortfalls. The Partnership has received no such advances during the first three
months of 1995.
At March 31, 1995, the Partnership held cash and cash equivalents of $136,168,
of which $99,115 was in segregated accounts which have been restricted by the
Bankruptcy Court, and accordingly was not available for general use by the
Partnership.
<PAGE>
Short-term liquidity
- - - - - --------------------
As previously discussed in Item 1 - Note 6, the Partnership is operating under
Chapter 11 proceedings as a debtor-in-possession. The Reorganization Plan
contemplates the sale of Woodbridge Apartments, and the Partnership presently
has a contract to sell the property and closing is expected May 23, 1995. In
accordance with the Disclosure Statement, if the property is not sold by June 1,
1995, the mortgage holders will be allowed to foreclose on the property.
The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships if certain conditions
are met. Borrowings under the facility may be used to fund deferred maintenance,
refinancing obligations and working capital needs. There is no assurance that
the Partnership will receive any additional funds under the facility because no
amounts have been reserved for any particular partnership. As of March 31, 1995,
$2,102,530 remained available for borrowing under the facility; however,
additional funds could become available as other partnerships repay existing
borrowings. Additionally, the General Partner has, at its discretion, advanced
funds to the Partnership in addition to the revolving credit facility. The
General Partner is not obligated to advance funds to the Partnership and there
is no assurance that the Partnership will receive additional funds.
The balance of cash and cash equivalents can be considered no more than a
minimum level of cash reserves for the properties operation. For the rest of
1995, operations of the properties are expected to provide sufficient positive
cash flow for normal operating expenses and some debt service payments. However,
any needed capital improvements will require the use of existing cash reserves
or other sources of cash. No such sources have been identified. The Partnership
has no established lines of credit from outside sources. Although affiliates of
the Partnership have previously funded such cash deficits, there can be no
assurance that the Partnership will receive additional funds Other possible
actions to resolve cash deficiencies include refinancings, deferring capital
expenditures on the Partnership properties except where improvements are
expected to enhance the competitiveness and marketability of the properties, or
property sales. A sale or refinancing of the properties is only a possibility
and currently Woodbridge Apartments is under contract for sale.
Long-term liquidity
- - - - - -------------------
The Partnership does not have any mortgage maturities until the second note on
Woodbridge Apartments matures in March, 1996. However, the Woodbridge notes
payable are classified as current due to the bankruptcy proceedings. As
previously discussed, the Partnership currently has a contract for sale on
Woodbridge Apartments, and the proceeds from the sale will be used to pay off
the first and second mortgage note.
The Partnership has been in a distressed cash situation for several years. After
the sale of Woodbridge Apartments, the Partnership will have one remaining
property, Harbour Club II Apartments. Although Harbour Club II is able to
operate in such a manner to provide for operating expenses and debt service
payments, the property has not proven the capability to produce the cash flow
necessary for capital improvements nor to support Partnership general and
administrative operations. The inability to make necessary capital improvements
has led to deteriorating conditions at the property. In the opinion of
management, if capital improvements are not made to make the property more
marketable, the net realizable value of the property may be further impaired.
These conditions raise substantial doubt about the Partnership's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Distributions
- - - - - -------------
To maintain adequate cash balances of the Partnership, distributions to Current
Income Unit holders were suspended in 1988. There have been no distribution to
Growth/Shelter Units holders. Distributions to Unit holders will remain
suspended for the foreseeable future.
PART II. OTHER INFORMATION
ITEM 3. DEFAULT ON PAYMENT OF MORTGAGE NOTE
- - - - - ------ -----------------------------------
In April 1994, the Partnership discontinued monthly payments on the second lien
mortgage note payable for Woodbridge Apartments. The Partnership has received
notice from the lender that the mortgage note payable is in default and the
maturity date of the note has been accelerated. The second lienholder was
expected to initiate foreclosure proceedings, and in order to prevent the loss
of the property, the Partnership filed a Voluntary Petition for reorganization
under Chapter 11 of the United States Bankruptcy Court, Northern District of
Texas on June 30, 1994. As a Debtor-in-Possession, the Partnership, in October
1994, began making payments to the second lienholder in the amount of excess
cash flow, as defined, and as of May 11, 1995, total principal and interest of
$1,099,263 was due and unpaid.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - - - - ------ --------------------------------
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
4. Amended and Restated Limited Partnership Agreement dated March 30, 1992.
(Incorporated by reference to the Current Report of the Registrant on Form 8-K
dated March 30, 1992, as filed on April 10, 1992).
11. Statement regarding computation of Net Loss per Thousand Limited Partnership
Units: Net loss per thousand limited partner units is computed by dividing
net loss allocated to the limited partners by the weighted average number of
limited partnership units outstanding expressed in thousands. Per unit
information has been computed based on 9,419 Current Income Units (in
thousands) outstanding in 1994 and 1993 and 6,709 and 6,689 Growth/Shelter
Units (in thousands) outstanding in 1994 and 1993, respectively.
</TABLE>
b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended March 31, 1995
<PAGE>
MCNEIL REAL ESTATE FUND XXIII, L.P.
(Debtor-in-Possession)
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:
<TABLE>
<CAPTION>
<S> <C>
McNEIL REAL ESTATE FUND XXIII, L.P.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
May 12, 1995 By: /s/ Donald K. Reed
- - - - - ----------------------------- -------------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
May 12, 1995 By: /s/ Robert C. Irvine
- - - - - ----------------------------- -------------------------------------------
Date Robert C. Irvine
Chief Financial Officer of McNeil Investors, Inc.
Principal Financial Officer
May 12, 1995 By: /s/ Carol A. Fahs
- - - - - ----------------------------- -------------------------------------------
Date Carol A. Fahs
Chief Accounting Officer of McNeil Real Estate
Management, Inc.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995
<PERIOD-END> DEC-31-1994 MAR-31-1995
<CASH> 107,815 136,168
<SECURITIES> 0 0
<RECEIVABLES> 17,033 16,113
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 5,951,742 5,953,298
<DEPRECIATION> (2,405,420) (2,461,292)
<TOTAL-ASSETS> 6,520,408 6,371,144
<CURRENT-LIABILITIES> 0 0
<BONDS> 3,814,667 3,812,207
<COMMON> 0 0
0 0
0 0
<OTHER-SE> (1,739,967) (1,882,697)
<TOTAL-LIABILITY-AND-EQUITY> 6,520,408 6,371,144
<SALES> 1,894,443 490,828
<TOTAL-REVENUES> 1,900,473 492,582
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,527,724 471,437
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 838,579 163,875
<INCOME-PRETAX> (1,465,830) (142,730)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,465,830) (142,730)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,465,830) (142,730)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
