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 June 30, 1996
--------------------------------------------------------
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.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------------- ---------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 239,966 $ 239,966
Buildings and improvements............................... 5,938,477 5,836,474
-------------- --------------
6,178,443 6,076,440
Less: Accumulated depreciation.......................... (2,778,879) (2,648,343)
-------------- --------------
3,399,564 3,428,097
Cash and cash equivalents................................... 133,578 233,222
Cash segregated for security deposits....................... 42,843 54,921
Accounts receivable......................................... 4,066 11,395
Escrow deposits............................................. 102,904 91,296
Prepaid expenses and other assets........................... 6,893 6,893
-------------- --------------
$ 3,689,848 $ 3,825,824
============== ==============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage note payable, net of discount...................... $ 3,773,524 $ 3,787,802
Accounts payable and accrued expenses....................... 40,274 93,165
Accrued interest............................................ 27,304 27,446
Accrued property taxes...................................... 59,752 43,142
Payable to affiliates - General Partner..................... 185,037 114,218
Security deposits and deferred rental revenue............... 43,361 50,820
-------------- --------------
4,129,252 4,116,593
-------------- --------------
Partners' equity (deficit):
Limited partners - 45,000,000 Units authorized;
11,622,696 and 16,108,041 Units outstanding at
June 30, 1996 and December 31, 1995, respectively
(6,681,985 and 9,419,080 Current Income Units out-
standing, and 4,940,711 and 6,688,961 Growth/Shelter
Units outstanding at June 30, 1996 and
December 31, 1995, respectively)...................... (5,292,223) (5,145,030)
General Partner.......................................... 4,852,819 4,854,261
-------------- --------------
(439,404) (290,769)
-------------- --------------
$ 3,689,848 $ 3,825,824
============== ==============
</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.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue................ $ 325,699 $ 429,061 $ 644,567 $ 919,889
Interest...................... 2,078 4,499 4,220 6,253
Gain on sale of real estate... - 554,047 - 554,047
------------- ------------- ------------- -------------
Total revenue............... 327,777 987,607 648,787 1,480,189
------------- ------------- ------------- -------------
Expenses:
Interest...................... 91,665 115,425 183,543 266,605
Interest - affiliates......... - 11,480 - 24,175
Depreciation.................. 66,639 81,368 130,536 175,484
Property taxes................ 31,000 35,976 59,752 77,736
Personnel expenses............ 45,339 73,896 100,780 147,233
Utilities..................... 25,990 42,694 62,849 98,564
Repair and maintenance........ 58,639 67,713 90,210 144,574
Property management
fees - affiliates........... 16,311 19,673 32,272 40,351
Other property operating
expenses.................... 17,612 27,287 35,336 77,389
General and administrative.... 10,559 54,424 21,446 64,050
General and administrative -
affiliates.................. 35,023 43,268 70,856 92,355
Reorganization expenses....... 999 170,566 5,362 170,566
------------- ------------- ------------- -------------
Total expenses.............. 399,776 743,770 792,942 1,379,082
------------- ------------- ------------- -------------
Net income (loss)................ $ (71,999) $ 243,837 $ (144,155) $ 101,107
============= ============= ============= =============
Net income (loss) allocated
to limited partners - Current
Income Units.................. $ (6,480) $ 21,945 $ (12,974) $ 9,100
Net income (loss) allocated to
limited partners - Growth/
Shelter Units................. (64,799) 219,453 (129,739) 90,996
Net income (loss) allocated to
General Partner............... (720) 2,439 (1,442) 1,011
------------- ------------- ------------- -------------
Net income (loss)................ $ (71,999) $ 243,837 $ (144,155) $ 101,107
============= ============= ============= =============
Net income (loss) per thousand
limited partnership units:
Current Income Units.......... $ (.97) $ 2.33 $ (1.94) $ .97
============= ============= ============= =============
Growth/Shelter Units.......... $ (13.12) $ 32.81 $ (26.26) $ 13.60
============= ============= ============= =============
</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.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity (Deficit)
-------------- --------------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1994.............. $ 4,839,769 $ (6,579,736) $ (1,739,967)
Net income:
General Partner........................ 1,011 - 1,011
Current Income Units................... - 9,100 9,100
Growth/Shelter Units................... - 90,996 90,996
------------- ------------- -------------
Total net income..................... 1,011 100,096 101,107
------------- ------------- -------------
Balance at June 30, 1995.................. $ 4,840,780 $ (6,479,640) $ (1,638,860)
============= ============= =============
Balance at December 31, 1995.............. $ 4,854,261 $ (5,145,030) $ (290,769)
Redemption of limited partner units:
Current Income Units................... - (2,737) (2,737)
Growth/Shelter Units................... - (1,743) (1,743)
------------- ------------- -------------
Total redemption..................... - (4,480) (4,480)
Net loss:
General Partner........................ (1,442) - (1,442)
Current Income Units................... - (12,974) (12,974)
Growth/Shelter Units................... - (129,739) (129,739)
------------- ------------- -------------
Total net loss....................... (1,442) (142,713) (144,155)
------------- ------------- -------------
Balance at June 30, 1996.................. $ 4,852,819 $ (5,292,223) $ (439,404)
============= ============= =============
</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.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1996 1995
---------------- ---------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants............................... $ 658,764 $ 918,867
Cash paid to suppliers................................... (372,490) (522,201)
Cash paid to affiliates.................................. (32,309) (42,718)
Interest received........................................ 4,220 6,253
Interest paid............................................ (175,267) (263,695)
Property taxes paid and escrowed......................... (53,383) (77,026)
-------------- --------------
Net cash provided by operating activities................... 29,535 19,480
-------------- --------------
Cash flows from investing activities:
Additions to real estate investments..................... (102,003) (24,417)
Proceeds from sale of real estate........................ - 319,672
-------------- --------------
Net cash provided by (used in) investing activities......... (102,003) 295,255
-------------- --------------
Cash flows from financing activities:
Principal payments on mortgage notes
payable................................................ (22,696) (36,752)
Redemption of limited partner units...................... (4,480) -
-------------- --------------
Net cash used in financing activities....................... (27,176) (36,752)
-------------- --------------
Net increase (decrease) in cash and cash
equivalents.............................................. (99,644) 277,983
Cash and cash equivalents at beginning of
period................................................... 233,222 107,815
-------------- --------------
Cash and cash equivalents at end of period.................. $ 133,578 $ 385,798
============== ==============
</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.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Income (Loss) to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
Net income (loss)........................................... $ (144,155) $ 101,107
-------------- --------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation............................................. 130,536 175,484
Amortization of discount on mortgage
notes payable.......................................... 8,418 15,830
Interest added to advances from affiliates -
General Partner........................................ - 24,175
Gain on sale of real estate.............................. - (554,047)
Changes in assets and liabilities:
Cash segregated for security deposits.................. 12,078 17,981
Accounts receivable.................................... 7,329 3,921
Escrow deposits........................................ (11,608) 263,771
Prepaid expenses and other assets...................... - (159)
Accounts payable and accrued expenses.................. (52,891) 89,775
Accrued interest....................................... (142) -
Accrued property taxes................................. 16,610 (77,679)
Claims settlement payable.............................. - (113,162)
Payable to affiliates - General Partner................ 70,819 89,988
Security deposits and deferred rental
revenue.............................................. (7,459) (17,505)
-------------- --------------
Total adjustments.................................... 173,690 (81,627)
-------------- --------------
Net cash provided by operating activities................... $ 29,535 $ 19,480
============== ==============
</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.
Notes to Financial Statements
(Unaudited)
June 30, 1996
NOTE 1.
- -------
McNeil Real Estate Fund XXIII, L.P. (the "Partnership"), formerly known as
Southmark Realty Partners III, Ltd., was organized on March 4, 1985 as a limited
partnership under 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 six months ended June 30, 1996, are
not necessarily indicative of the results to be expected for the year ending
December 31, 1996.
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, 1995, 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.
- -------
Certain prior period amounts within the accompanying financial statements have
been reclassified to conform with current year presentation.
NOTE 4.
- -------
On June 30, 1994, the Partnership filed a voluntary petition for Chapter 11
reorganization. (The petition for Chapter 11 reorganization excluded the
Partnership's interest in Beckley Associates, the owner of Harbour Club II
Apartments.) The Partnership continued to conduct its affairs as a
debtor-in-possession, subject to the jurisdiction and supervision of the
Bankruptcy Court.
The Partnership's First Amended Plan of Reorganization (the "Reorganization
Plan"), which contemplated a sale of Woodbridge Apartments, was submitted to the
Bankruptcy Court on February 13, 1995. The Partnership's Disclosure Statement of
Debtor-in-Possession (the "Disclosure Statement") was approved by the Bankruptcy
Court on February 14, 1995.
<PAGE>
The Partnership's Reorganization Plan and Disclosure Statement were submitted
February 20, 1995, to a vote of the impaired creditors, as defined. The impaired
creditors included a class of creditors who had filed a judgment lien against
Woodbridge Apartments in connection with the Illinois rescission suit. The
judgment lien creditors filed objections to confirmation of the Reorganization
Plan. On April 18, 1995, the Bankruptcy Court did grant an order to sell
Woodbridge Apartments but denied confirmation of the Reorganization Plan. The
Partnership filed an appeal of the Bankruptcy Court's ruling and, in the
meantime, attempted to settle the matter with the judgment lien creditors, which
would allow for confirmation of the Reorganization Plan. On May 10, 1995, the
Reorganization Plan was amended to provide for full payment to the judgment lien
creditors. The Reorganization Plan, as amended, was subsequently confirmed by
the Bankruptcy Court on May 17, 1995.
Woodbridge Apartments was sold on May 25, 1995, and, in accordance with the
Reorganization Plan, the first and second mortgage notes payable and the related
outstanding accrued interest were paid. The Partnership also utilized $156,566
of the proceeds from the sale to pay the settlement and legal fees to the
judgment lien creditors, as discussed above.
On September 11, 1995, the Bankruptcy Court entered an Order Regarding
Objections to Claims that allowed the Partnership to pay outstanding
pre-petition claims totaling approximately $124,000 in October 1995.
The Reorganization Plan specified that advances and fees owed to affiliates of
the General Partner were limited to remaining cash, after the pre-petition
liabilities and reorganization expenses were paid. The Partnership had $37,228
of cash available to distribute to affiliate creditors. The remaining amounts
owed to affiliates of the General Partner as of May 17, 1995, were discharged
resulting in an extraordinary gain of $1,435,024 during the third quarter of
1995.
On August 15, 1995, the Partnership sent an election form to each limited
partner which allowed them to choose whether to redeem their interest in the
Partnership. The redemption price was 1/1000th of a dollar per Unit. The limited
partners were required to respond within 30 days, and at the close of the 30 day
period, 311 limited partners had elected to redeem 4,485,345 Units. In
connection with the redemption, the partnership obtained a "no-action" letter
from the Securities and Exchange Commission ("SEC") that provided that (1) the
redemption could be accomplished without compliance with Rule 13e-3 of the
Securities Exchange Act of 1934, and (2) the SEC did not intend to pursue an
enforcement action if the Reorganization Plan was consummated. Redemption of the
affected Units was completed in January 1996.
On November 18, 1995, the Partnership submitted a request for an Application to
Close Case to the Bankruptcy Court, which was entered on December 11, 1995, and
was approved on February 15, 1996.
Expenses incurred by the Partnership in connection with its Chapter 11 filing
have been expensed as "reorganization expenses" in the accompanying Statements
of Operations.
<PAGE>
NOTE 5.
- -------
The Partnership pays property management fees equal to 5% of the gross rental
receipts for its properties to McNeil Real Estate Management, Inc. ("McREMI"),
an affiliate of the General Partner, for providing property management and
leasing services. Due to the Partnership's Chapter 11 Bankruptcy filing,
property management fees for Woodbridge Apartments were reduced to 3% of the
property's gross rental receipts beginning December 1, 1994.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs. Reimbursable costs that were incurred
prior to the Partnership's bankruptcy filing, in the amount of $520,902, were
discharged under terms of the Partnership's Reorganization Plan.
The Partnership incurs asset management fees which are 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. As discussed in Note 4, asset management fees totaling $366,329 accrued
prior to the confirmation of the Reorganization Plan were discharged pursuant to
the Reorganization Plan. Total accrued but unpaid asset management fees incurred
subsequent to confirmation of the Reorganization Plan in the amount of $83,245
were outstanding at June 30, 1996.
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner and its affiliates are as follows:
Six Months Ended June 30,
--------------------------
1996 1995
---------- ----------
Property management fees........................ $ 32,272 $ 40,351
Charged to interest - affiliates:
Interest on advances from affiliates -
General Partner............................ - 24,175
Charged to general and administrative -
affiliates:
Partnership administration................... 39,927 56,192
Asset management fee......................... 30,929 36,163
--------- ----------
$ 103,128 $ 156,881
========= ==========
Payable to affiliates - General Partner at June 30, 1996, and December 31, 1995,
consists primarily of unpaid asset management fees, property management fees and
reimbursable costs that are due and payable from current operations.
<PAGE>
NOTE 6.
- -------
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.
Operations at Harbour Club II Apartments, the Partnership's sole remaining
property, are expected to be sufficient to provide cash for operating expenses
and debt service for 1996. However, the property is in need of major capital
improvements in order to maintain occupancy and rental rates at a level
sufficient to fund operating expenses and debt service in future years. The
Partnership's cash reserves are inadequate to fund the needed capital
improvements, and it is unlikely that cash flow from operating activities will
be sufficient to provide for the needed capital improvements. No outside sources
of financing have been identified. Although affiliates of the Partnership have
previously provided working capital for the Partnership, there can be no
assurance that the Partnership will receive additional funds from the General
Partner or other affiliates. Management is currently seeking additional
financing to fund the needed capital improvements; however, such financing is
not assured. If the property is unable to obtain additional funds and cannot
maintain operations at a level to pay operating expenses and debt service, the
property may ultimately be foreclosed on by the lender.
Harbour Club II Apartments 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
affiliate of Southmark Corporation, the parent corporation of the Partnership's
former general partner. 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 its
mortgage loan to the United States Department of Housing and Urban Development
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. As of June 30, 1996, no steps have been taken towards
the foreclosure of Phase I.
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.
<PAGE>
NOTE 7.
- -------
On May 23, 1995, Woodbridge Apartments was sold to an unrelated third party for
a cash price of $3,2000,000. Cash proceeds and the gain on the disposition is
detailed below:
Gain on Sale Cash Proceeds
------------ -------------
Sales Price........................... $ 3,200,000 $ 3,200,000
Selling costs......................... (121,904) (121,904)
Retirement of mortgage discounts...... (214,659)
Carrying value........................ (2,309,390)
-----------
Gain on disposition of real estate.... $ 554,047
===========
Retirement of mortgage notes.......... (2,641,421)
Payment of accrued interest........... (117,003)
------------
Net cash proceeds..................... $ 319,672
============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The accompanying financial statements have been prepared assuming 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.
The Partnership's operating activities provided $29,535 for the first half of
1996 as compared to $19,480 provided in the first half of 1995. With the
disposition of Woodbridge Apartments on May 25, 1995, cash received from
tenants, cash paid to suppliers, interest paid and property taxes paid and
escrowed decreased. Cash paid to suppliers decreased further during 1996 due to
the decreased reorganization expenses relating to the Partnership's bankruptcy
proceeding.
Cash used for additions to real estate improvements totaled $102,003 for the six
months ended June 30, 1996 as compared to $24,417 for the same period of the
prior year. The Partnership's capital budget will continue only at a bare
minimum until additional financing can be arranged. The Partnership received
$319,672 of proceeds from the sale of Woodbridge Apartments. The use of these
proceeds was restricted by the Bankruptcy Court for payment of bankruptcy
claims.
<PAGE>
Scheduled principal payments through monthly debt service payments totaled
$22,696 for the six months ended June 30, 1996, down from $36,752 for the same
period of 1995. The decrease is due to the sale of Woodbridge Apartments in May
1995. In accordance with terms of the Partnership's Reorganization Plan, the
Partnership redeemed 4,485,345 limited partnership units from the limited
partners for a total of $4,480 during the first half of 1996.
Short-term liquidity:
At June 30, 1996, the Partnership held $133,578 of cash and cash equivalents,
down $99,644 from the balance at December 31, 1995. For the balance of 1996, the
General Partner anticipates rental operations at Harbour Club II Apartments will
provide sufficient rental revenue to pay for the operating expenses of the
property and debt service payments on the property's mortgage note. However,
rental operations at Harbour Club II Apartments are not expected to be
sufficient to fund necessary capital improvements to the property nor to pay the
Partnership's other expenses. To the extent available, the Partnership will use
its cash reserves to fund limited capital improvements and the Partnership's
other expenses.
Although the sale of Woodbridge Apartments provided some additional cash
reserves for the Partnership, the Partnership still faces liquidity problems
because of urgently needed capital improvements at Harbour Club II Apartments,
for which no financing has been secured. Operating activities at Harbour Club II
Apartments for 1996 are expected to provide sufficient positive cash flow for
normal operating expenses and debt service payments. However, the needed capital
improvements will require the use of other sources of cash. No such sources have
been identified. The Partnership has no established lines of credit from outside
sources. Other possible actions to provide financing for the capital
improvements may include refinancing or modifying the property's mortgage debt.
Should such refinancing or modification of Harbour Club II's mortgage debt prove
unfeasible, the Partnership could be forced to either sell the property or to
relinquish control of the property to the mortgage note holder.
The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships if certain conditions
are met. Borrowings under the facility may be used to fund deferred maintenance,
refinancing obligations and working capital needs. The Partnership had received
advances under the revolving credit facility to fund additions to the
Partnership's real estate investments and costs incurred in connection with the
refinancing of the Partnership's mortgage note payable. Such advances were
discharged as a result of the Chapter 11 proceedings. There is no assurance that
the Partnership will receive any additional funds under the facility because no
amounts will be reserved for any particular partnership. As of June 30, 1996,
$4,082,159 remained available for borrowing under the facility; however,
additional funds could become available as other partnerships repay existing
borrowings. This commitment expires on March 30, 1997.
Additionally, the General Partner has, at its discretion, advanced funds to the
Partnership in addition to the revolving credit facility. The Partnership
received other advances that were used to fund working capital requirements.
Such advances were discharged as a result of the Chapter 11 proceedings. The
General Partner is not obligated to advance funds to the Partnership and there
is no assurance that the Partnership will receive additional funds.
<PAGE>
Long-term liquidity:
The Partnership has been in a distressed cash situation for several years.
Although Harbour Club II is able to operate in such a manner as 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 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.
Harbour Club II Apartments is part of a four-phase apartment complex located in
Belleville, Michigan. Phases I and III of the complex are owned by partnerships
affiliated with the General Partner; while Phase IV is owned by University Real
Estate Fund 12, Ltd., ("UREF 12") whose general partner is an affiliate of
Southmark Corporation, the parent corporation of the Partnership's former
general partner. McREMI managed 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 its United States
Department of Housing and Urban Development mortgage note. 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 used by all three
phases are located on Phase I. As of June 30, 1996, no steps have been taken to
foreclose on Phase I.
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, the Partnership suspended distributions to
Current Income Unit holders in 1988. There have been no distributions to
Growth/Shelter Unit holders. Distributions to Unit holders will remain suspended
for the foreseeable future. The General Partner will continue to monitor the
cash reserves and working capital needs of the Partnership to determine when
cash flows will support distributions to the Unit holders.
FINANCIAL CONDITION
- -------------------
The occupancy rate at Harbour Club II Apartments decreased to 90% at June 30,
1996. Occupancy at December 31, 1995, was 92%. Harbour Club II Apartments was
able to provide enough cash flow from operations to meet ordinary operating
expenses as well as the debt service for its related mortgage note during the
first half of 1996; however, as discussed above, the property is in need of
major capital improvements in order to compete in its local market. The
Partnership is seeking alternatives to fund the necessary capital improvements,
but at this time no sources have been found.
Until the Partnership is able to generate cash from operations or sales, the
Partnership will be dependent on its present cash reserves, operation of its
property, or financial support from affiliates. Distributions will remain
suspended until cash reserves are judged adequate.
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total Partnership revenues were $327,777 and $648,787 for the three months and
six months ended June 30, 1996, respectively, as compared to $987,607 and
$1,480,189 for the same periods of 1995. Revenues for the three months and six
months ended June 30, 1995 include a $554,047 gain from the sale of Woodbridge
Apartments on May 25, 1995.
Rental revenue decreased $103,362 and $275,322 for the three months and six
months ended June 30, 1996, respectively, as compared to the same periods of
1995. Most of the decrease is attributable to the May 25, 1995, sale of
Woodbridge Apartments. Rental revenue at Harbour Club II Apartments increased
$1,516 or .2% for the first half of 1996 as compared to the same period of prior
year. The occupancy rate at Harbour Club II Apartments decreased to 90% at the
end of June 1996 from 96% at the end of June 1995. Increases in base rental
rates were offset by increased vacancy loss.
Expenses:
Total Partnership expenses decreased $343,994 and $586,140 for the three months
and six months ended June 30, 1996, respectively, as compared to the same
periods of 1995. All line items decreased primarily due to the May 25, 1995,
sale of Woodbridge Apartments.
Pursuant to the Partnership's Reorganization Plan, all interest-bearing
liabilities due to affiliates were discharged during 1995. Thus, no interest -
affiliates was incurred during the first half 1996 as compared to $24,175 of
such interest in the first half of 1995.
General and administrative decreased $43,865 and $42,604 for the three months
and six months ended June 30, 1996, respectively, as compared to the same
periods of 1995. The decrease was due to the $41,000 legal fees paid in 1995
relating to the settlement of the judgment lien rendered in connection with the
Illinois rescission suit.
General and administrative - affiliates decreased $8,245 and 21,499 for the
three months and six months ended June 30, 1996, respectively, as compared to
the same periods of 1995. Such expenses are allocated based on, among other
criteria, the number of properties owned by the Partnership. Due to the
disposition of Woodbridge Apartments in 1995, expenses allocated to the
Partnership by McREMI have decreased.
The Partnership incurred $170,566 of reorganization expenses relating to the
Partnership's bankruptcy proceeding during the first half of 1995. Only $5,362
of such expenses were incurred during 1996.
Excluding the effects of the disposition of Woodbridge Apartments, expenses
incurred by the Partnership for operating at Harbour Club II Apartments
increased $12,694 during the six months ended June 30, 1996, as compared to the
same period of 1995. The increases in operating expenses at Harbour Club II
Apartments were concentrated in depreciation. Depreciation increased by $18,792
during the first half of 1996 as a result of $102,003 of capital improvements
placed in service during the first six months of 1996.
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
- ------- ---------------------
In accordance with the Partnership's Reorganization Plan, on August 15, 1995,
the Partnership sent an election form to each limited partner which allowed them
to choose whether to redeem their interest in the Partnership. The redemption
price was 1/1000th of a dollar per Unit. The limited partners were required to
respond within 30 days, and at the close of the 30 day period, 311 limited
partners had elected to redeem 4,485,345 Units. In connection with the
redemption, the partnership obtained a "no-action" letter from the Securities
and Exchange Commission ("SEC") that provided that (1) the redemption could be
accomplished without compliance with Rule 13e-3 of the Securities Exchange Act
of 1934, and (2) the SEC did not intend to pursue an enforcement action if the
Reorganization Plan was consummated. Redemption of the affected Units was
completed on January 1, 1996.
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. (Incorpo-
rated 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
Income (Loss) per Thousand Limited Part-
nership Units: Net income (loss) per
thousand limited partner units is computed
by dividing net income (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 6,682 and 9,399 Current Income Units (in
thousands) outstanding in 1996 and 1995,
respectively, and 4,941 and 6,689 Growth/
Shelter Units (in thousands) outstanding
in 1996 and 1995, respectively.
27. Financial Data Schedule for the quarter
ended June 30, 1996.
b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended June 30, 1996.
<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:
McNEIL REAL ESTATE FUND XXIII, L.P.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
August 14, 1996 By: /s/ Donald K. Reed
- ------------------- ------------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
August 14, 1996 By: /s/ Ron K. Taylor
- ------------------- -----------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer of
McNeil Investors, Inc.
August 14, 1996 By: /s/ Carol A. Fahs
- ------------------- -----------------------------------------
Date Carol A. Fahs
Chief Accounting Officer of McNeil
Real Estate Management, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 133,578
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,178,443
<DEPRECIATION> (2,778,879)
<TOTAL-ASSETS> 3,689,848
<CURRENT-LIABILITIES> 0
<BONDS> 3,773,524
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,689,848
<SALES> 644,567
<TOTAL-REVENUES> 648,787
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 609,399
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 183,543
<INCOME-PRETAX> (144,155)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (144,155)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
