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 September 30, 1997
------------------------------------------------------
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 0-15460
---------
MCNEIL REAL ESTATE FUND XXVI, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 33-0168395
- --------------------------------------------------------------------------------
(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>
MCNEIL REAL ESTATE FUND XXVI, L.P.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------------- --------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 6,750,456 $ 6,750,456
Buildings and improvements............................... 54,336,161 53,911,061
-------------- -------------
61,086,617 60,661,517
Less: Accumulated depreciation and amortization......... (23,638,373) (21,682,401)
-------------- -------------
37,448,244 38,979,116
Asset held for sale......................................... 3,008,374 3,008,374
Cash and cash equivalents................................... 2,833,804 2,211,029
Cash segregated for security deposits....................... 234,346 233,426
Accounts receivable, net of allowance for doubtful
accounts of $572,392 at September 30, 1997 and
December 31, 1996........................................ 1,447,411 1,276,997
Prepaid commissions......................................... 341,316 349,018
Prepaid expenses and other assets........................... 158,659 709,030
Deferred borrowing costs, net of accumulated
amortization of $284,489 and $215,640 at
September 30, 1997 and December 31, 1996, respectively... 288,676 357,522
------------- --------------
$ 45,760,830 $ 47,124,512
============= ==============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable...................................... $ 21,538,169 $ 21,815,746
Accounts payable and accrued expenses....................... 263,461 306,284
Accrued property taxes...................................... 274,872 58,660
Payable to affiliates - General Partner..................... 109,258 91,462
Security deposits and deferred rental revenue............... 290,199 236,436
-------------- -------------
22,475,959 22,508,588
-------------- -------------
Partners' equity (deficit):
Limited Partners - 90,000,000 Units authorized;
86,530,671 and 86,533,671 Units issued and out-
standing at September 30, 1997 and December 31, 1996,
respectively........................................... 23,691,574 25,016,816
General Partner.......................................... (406,703) (400,892)
-------------- -------------
23,284,871 24,615,924
-------------- -------------
$ 45,760,830 $ 47,124,512
============== =============
</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 XXVI, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1997 1996 1997 1996
-------------- --------------- -------------- --------------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue................ $ 2,189,623 $ 2,201,332 $ 6,721,468 $ 6,584,975
Interest...................... 35,975 29,933 120,250 150,172
------------- ------------- ------------- ------------
Total revenue............... 2,225,598 2,231,265 6,841,718 6,735,147
------------- ------------- ------------- ------------
Expenses:
Interest...................... 434,704 441,012 1,308,462 1,327,994
Interest - affiliates......... - - - 16,090
Depreciation and
amortization................ 638,845 665,724 1,955,972 2,036,655
Property taxes................ 217,719 186,650 640,471 595,118
Personnel expenses............ 209,368 208,043 639,756 611,881
Utilities..................... 242,615 256,755 739,254 766,602
Repairs and maintenance....... 225,863 222,765 690,615 738,678
Property management
fees - affiliates........... 137,550 121,639 392,540 373,088
Other property operating
expenses.................... 135,933 138,622 416,011 440,602
General and administrative.... 31,556 36,947 101,803 95,442
General and administrative -
affiliates.................. 175,549 179,744 537,899 554,863
------------- ------------- ------------- -------------
Total expenses.............. 2,449,702 2,457,901 7,422,783 7,557,013
------------- ------------- ------------- -------------
Net loss......................... $ (224,104) $ (226,636) $ (581,065) $ (821,866)
============= ============= ============= =============
Net loss allocable
to limited partners........... $ (221,863) $ (224,370) $ (575,254) $ (813,647)
Net loss allocable
to General Partner............ (2,241) (2,266) (5,811) (8,219)
------------- ------------- ------------- ------------
Net loss......................... $ (224,104) $ (226,636) $ (581,065) $ (821,866)
============= ============= ============ =============
Net loss per thousand
limited partnership units..... $ (2.56) $ (2.59) $ (6.65) $ (9.40)
============= ============= ============ =============
Distribution per thousand
limited partnership units..... $ 5.78 $ 4.33 $ 8.67 $ 4.33
============= ============= ============ =============
</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 XXVI, L.P.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Nine Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Total
Partners'
General Limited Equity
Partner Partners (Deficit)
--------------- --------------- --------------
<S> <C> <C> <C>
Balance at December 31, 1995.............. $ (377,413) $ 27,716,222 $ 27,338,809
Net loss.................................. (8,219) (813,647) (821,866)
Limited partner distribution.............. - (374,965) (374,965)
------------- ------------- -------------
Balance at September 30, 1996............. $ (385,632) $ 26,527,610 $ 26,141,978
============= ============= =============
Balance at December 31, 1996.............. $ (400,892) $ 25,016,816 $ 24,615,924
Net loss.................................. (5,811) (575,254) (581,065)
Limited partner distribution.............. - (749,988) (749,988)
------------- ------------- -------------
Balance at September 30, 1997............. $ (406,703) $ 23,691,574 $ 23,284,871
============= ============= =============
</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 XXVI, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------------
1997 1996
----------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants........................ $ 6,588,450 $ 6,261,641
Cash paid to suppliers............................ (2,124,428) (2,807,695)
Cash paid to affiliates........................... (912,643) (3,848,416)
Interest received................................. 120,250 150,172
Interest paid..................................... (1,241,933) (1,168,527)
Interest paid to affiliates....................... - (53,903)
Property taxes paid and escrowed.................. (354,256) (332,027)
--------------- --------------
Net cash provided by (used in) operating
activities........................................ 2,075,440 (1,798,755)
--------------- --------------
Net cash used in investing activities:
Additions to real estate investments.............. (425,100) (957,121)
--------------- --------------
Cash flows from financing activities:
Principal payments on mortgage notes payable...... (277,577) (240,134)
Retirement of mortgage note - affiliate........... - (952,538)
Repayments of advances from affiliates -
General Partner................................. - (130,517)
Deferred borrowing costs paid..................... - (15,683)
Limited partner distributions..................... (749,988) (374,965)
--------------- --------------
Net cash used in financing activities................ (1,027,565) (1,713,837)
--------------- --------------
Net increase (decrease) in cash and
cash equivalents.................................. 622,775 (4,469,713)
Cash and cash equivalents at beginning of
period............................................ 2,211,029 6,761,516
--------------- --------------
Cash and cash equivalents at end of period........... $ 2,833,804 $ 2,291,803
=============== ==============
</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 XXVI, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Loss to Net Cash Provided by (Used in)
Operating Activities
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------------
1997 1996
----------------- ----------------
<S> <C> <C>
Net loss............................................. $ (581,065) $ (821,866)
--------------- --------------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization..................... 1,955,972 2,036,655
Amortization of deferred borrowing costs.......... 68,846 66,832
Allowance for doubtful accounts................... - (13,391)
Changes in assets and liabilities:
Cash segregated for security deposits........... (920) (22,749)
Accounts receivable............................. (170,414) (290,097)
Prepaid commissions............................. 7,702 21,544
Prepaid expenses and other assets............... 550,371 80,475
Accounts payable and accrued expenses........... (42,823) (154,886)
Accrued property taxes.......................... 216,212 199,451
Payable to affiliates - General Partner......... 17,796 (2,920,465)
Security deposits and deferred rental
revenue....................................... 53,763 19,742
--------------- --------------
Total adjustments............................. 2,656,505 (976,889)
--------------- --------------
Net cash provided by (used in) operating
activities........................................ $ 2,075,440 $ (1,798,755)
=============== ==============
</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 XXVI, L.P.
Notes to Financial Statements
September 30, 1997
(Unaudited)
NOTE 1.
- -------
McNeil Real Estate Partners XXVI, L.P., (the "Partnership"), formerly known as
Southmark Equity 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 and commercial 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, 1997
are not necessarily indicative of the results to be expected for the year ending
December 31, 1997.
NOTE 2.
- -------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Report on Form 10-K for the year ended
December 31, 1996, and the notes thereto, as filed with the Securities and
Exchange Commission, which is available upon request by writing to McNeil Real
Estate Fund XXVI, L.P., c/o The Herman Group, 2121 San Jacinto St., 26th Floor,
Dallas, Texas 75201.
NOTE 3.
- -------
The Partnership pays property management fees equal to 5% of gross rental
receipts for its residential property 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 property. 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.
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
<PAGE>
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 for residential property and $50 per gross square
foot for commercial property to arrive at the property tangible asset value. The
property tangible asset value is then added to the book value of all other
assets excluding intangible items. The fee percentage decreases subsequent to
1999.
The General Partner has, in its discretion, advanced funds to enable the
Partnership to meet its working capital requirements. These advances, which were
unsecured and due on demand, accrued interest at a rate equal to the prime
lending rate plus 1%. In May 1996, the Partnership repaid all outstanding
affiliate advances and the related accrued interest.
In March 1993, the Partnership obtained a loan from McNeil Real Estate Fund
XXVII, L.P., an affiliate of the General Partner, which allows the Partnership
to borrow funds totaling $1,536,000. Of this amount available, $952,538 was
borrowed at December 31, 1995. The note was secured by Continental Plaza and
required monthly interest-only payments equal to the prime lending rate of Bank
of America plus 2 1/2% with the principal balance due March 1, 1996. On January
8, 1996 the Partnership repaid the mortgage loan.
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner and its affiliates are as follows:
Nine Months Ended
September 30,
-----------------------
1997 1996
---------- ----------
Property management fees - affiliates................ $ 392,540 $ 373,088
Charged to interest - affiliates:
Interest on advances from affiliates - General
Partner......................................... - 4,692
Interest on mortgage note payable - affiliate..... - 11,398
Charged to general and administrative affiliates:
Partnership administration........................ 107,506 154,642
Asset management fee.............................. 430,393 400,221
--------- --------
$ 930,439 $ 944,041
========= ========
The total payable to affiliates - General Partner at September 30, 1997 and
December 31, 1996 consisted primarily of unpaid asset management fees, property
management fees and partnership general and administrative expenses and are due
and payable from current operations.
NOTE 4.
- -------
In 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 Edison Ford Square is currently classified as an asset held for sale, no
depreciation was taken effective April 1, 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
There has been no significant change in the operations of the Partnership's
properties since December 31, 1996. The Partnership reported a net loss of
$581,065 for the first nine months of 1997 as compared to $821,866 for the first
nine months of 1996. Revenues increased slightly to $6,841,718 in 1997 from
$6,735,147 in 1996, while expenses dropped to $7,422,783 in 1997 from $7,557,013
in 1996.
Net cash provided by operating activities was $2,075,440 for the first nine
months of 1997. The Partnership expended $425,100 for capital improvements and
$277,577 for principal payments on its mortgage notes payable. After
distributions of $749,988 to the limited partners, cash and cash equivalents
totaled $2,833,804 at September 30, 1997, an increase of $622,775 from the
balance at December 31, 1996.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total Partnership revenue for the three months ended September 30, 1997
decreased by $5,667 and increased $106,571 for the nine months ended September
30, 1997, respectively, as compared to the same periods of 1996, mainly due to
an increase of rental revenue, slightly offset by a decrease in interest income,
as discussed below.
Rental revenue for the three months ended September 30, 1997 decreased by
$11,709 and increased for the nine months ended September 30, 1997 by $136,493,
respectively, as compared to the same periods in 1996. Rental revenue of all
properties increased in 1997 as compared to 1996, except at Edison Ford Square
where rental revenue decreased by $101,292 due to decreases in occupancy rate
and reimbursements from tenants for common area maintenance. In addition, the
property received $11,000 of rental revenue from a move-out tenant in 1996. No
such revenue was received in 1997. Rental revenue at Westwood Center and
Northway Mall increased approximately $106,000 and $64,000, respectively, due to
an increase in rental income and straight-line rent adjustments at both
properties. Additionally, there was an increase in occupancy and rental rates at
Northway Mall.
Interest income decreased by $29,922 for the nine months ended September 30,
1997 as compared to the same period in 1996 due to a lower amount of cash
available for short-term investment in 1997.
Expenses:
Total expenses decreased by $8,199 and $134,230 for the three and nine months
ended September 30, 1997 as compared to the same periods of 1996.
No interest expense - affiliates was recorded in 1997 as compared to $16,090 for
the nine months ended September 30, 1996, due to the repayment of the loan from
McNeil Real Estate Fund XXVII, L.P. in January 1996, as well as the repayment of
all advances from affiliates in May 1996.
<PAGE>
Property taxes increased $31,069 and $45,353 for the three and nine months ended
September 30, 1997, respectively, as compared to the same periods in 1996. This
is due to the property tax refund in 1996 of $23,922 for Westwood and an
increase of $52,497 on the assessed value at Northway Mall. This increase was
somewhat offset by a decline in the assessed value at Edison Ford Square.
Repairs and maintenance expenses increased for the three months ended September
30, 1997 by $3,098 and decreased for the nine months ended September 30, 1997 by
$48,063, as compared to the same periods in 1996. This increase of $3,098 for
the three months ended September 30, 1997 is due to an increase in parking lot
and sidewalk repairs at Northway Mall. The decrease was due to decreased
expenses for snow removal and roof repairs at Northway Mall, as well as heating
and air conditioning repairs and maintenance at Westwood Center.
Other property operating expenses decreased by $2,689 and $24,591 for the three
and nine months ended September 30, 1997, respectively, as compared to the same
periods in 1996. The decrease was due to decreases in marketing and leasing and
legal expense at Northway Mall
General and administrative expenses decreased for the three months ended
September 30, 1997 by $5,391 and increased for the nine months ended September
30, 1997 by $6,361 as compared to the same periods in 1996. The decrease of
$5,391 for the three months ended September 30, 1997 is due to a reduction in
postage expense. The increase of $6,361 is due to costs incurred for investor
services paid to an unrelated third party in 1997. In the first half of 1996,
such costs were paid to an affiliate of the General Partner and were included in
general and administrative - affiliates on the Statements of Operations. The
increase was also attributable to costs incurred by the Partnership to evaluate
and disseminate information regarding an unsolicited 1996 tender offer.
The increase was partially offset by a decrease of professional fees.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $2,075,440 of cash through operating activities for
the nine months ended September 30, 1997 as compared to $1,798,755 used for the
same period in 1996. The change in cash flow from operations is primarily due to
decreases in cash paid to suppliers and cash paid to affiliates. In May 1997,
the Partnership received $479,000 for capital reimbursements from escrow held by
the mortgagee of Northway Mall after completion of the required roof repairs and
asbestos removal, as well as a refund of $50,000 of prepaid deferred borrowing
costs. No such reimbursements or refund were received in 1996. With the loan
proceeds of the Northway Mall's financing, the Partnership paid approximately
$3.8 million to affiliates including deferred asset management fees and overhead
reimbursements to McREMI during the first half of 1996.
Additions to real estate investments totaled $425,100 for the nine months ended
September 30, 1997 as compared to $957,121 for the same period of 1996.
Total principal payments on mortgage notes payable were $277,577 for the nine
months ended September 30, 1997 as compared to $240,134 for the same period of
1996. With the loan proceeds of Northway Mall, the Partnership repaid a loan of
$952,538 from McNeil Real Estate Fund XXVII, L.P. and advances from affiliates
of $130,517 in the first half of 1996. Additional deferred borrowing costs of
$15,683 were paid in 1996 relating to the Northway Mall's refinancing. The
Partnership distributed $749,988 to the limited partners during 1997, while
$374,965 was paid during 1996.
<PAGE>
Short-term liquidity:
At September 30, 1997, the Partnership held cash and cash equivalents of
$2,833,804. The present cash balance plus cash to be provided by operating
activities is considered adequate to meet the Partnership's needs for debt
service, normal amounts of repairs and maintenance and capital improvements to
preserve and enhance the value of the properties. The Partnership has budgeted
$2,041,000 for necessary capital improvements for all properties in 1997.
The General Partner has, at its discretion, advanced funds to the Partnership to
fund working capital requirements. All outstanding advances from affiliates and
the related accrued interest were repaid in 1996. The General Partner is not
obligated to advance funds to the Partnership and there is no assurance that the
Partnership will receive additional funds.
Long-term liquidity:
While the present outlook for Partnership's liquidity is favorable, market
conditions may change and property operations could 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. There is no assurance that affiliate
support could be arranged, since neither the General Partner nor any affiliates
have any obligation in this regard.
The Partnership has significant mortgage maturities during 1998, and management
expects to refinance these mortgage notes as they mature. However, if management
is unable to refinance the mortgage notes as they mature, the Partnership will
require other sources of cash. No such sources have been identified.
The Partnership has determined to begin orderly liquidation of all its assets.
Although there can be no assurance as to the timing of the liquidation due to
real estate market conditions, the general difficulty of disposing of real
estate, and other general economic factors, it is anticipated that such
liquidation would result in the dissolution of the Partnership followed by a
liquidating distribution to Unit holders by December 1998. In this regard, the
Partnership has placed Edison Ford Square on the market for sale.
Distributions:
During 1997, the Partnership distributed $749,988 to the limited partners. 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 limited partners.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of
the State of California for the County of Los Angeles, Case No. BC133799 (Class
and Derivative Action Complaint).
The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. Defendants intend to file a demurrer to the second consolidated and
amended complaint on or before December 1, 1997.
<PAGE>
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 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 XXVI, L.P. dated June 1995.
11. Statement regarding computation of Net Loss
per Thousand Limited Partnership Units: Net
loss per thousand limited partnership 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
86,531 and 86,534 limited partnership units
(in thousands) outstanding in 1997 and 1996,
respectively.
27. Financial Data Schedule for the quarter
ended September 30, 1997.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended September 30, 1997.
<PAGE>
MCNEIL REAL ESTATE FUND XXVI, 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 XXVI, L.P.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
November 14, 1997 By: /s/ Ron K. Taylor
- ----------------- -------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
November 14, 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,833,804
<SECURITIES> 0
<RECEIVABLES> 2,019,803
<ALLOWANCES> (572,392)
<INVENTORY> 0
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0
0
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</TABLE>
