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, 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 0-17173
MCNEIL REAL ESTATE FUND XXVII, L.P.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0214387
- ------------------------------------------------------------------------------
(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 XXVII, L.P.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------ --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
September 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
- ------
Real estate investments:
Land..................................................... $ 5,387,855 $ 5,387,855
Buildings and improvements............................... 26,572,447 26,072,480
---------- ----------
31,960,302 31,460,335
Less: Accumulated depreciation and amortization......... (6,665,321) (5,538,346)
---------- ----------
25,294,981 25,921,989
---------- ----------
Mortgage loan investments................................... 1,579,430 1,821,352
Less: Allowance for impairment.............................. (177,161) (349,325)
---------- ----------
1,402,269 1,472,027
Mortgage loan investments - affiliates...................... 2,235,902 3,207,902
Cash and cash equivalents .................................. 5,142,232 7,196,410
Cash segregated for security deposits and repurchase........
of limited partnership units............................. 237,789 404,312
Accounts receivable......................................... 422,184 525,287
Accrued interest receivable................................. 23,417 49,373
Deferred borrowing costs, net of accumulated
amortization of $24,382 and $91,612 at September 30,
1995 and December 31, 1994, respectively................. 170,677 204,366
Prepaid expenses and other assets........................... 336,526 520,187
---------- ----------
$35,265,977 $39,501,853
========== ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- -----------------------------------------
Mortgage note payable....................................... $ - $ 6,726,266
Accounts payable and accrued expenses....................... 62,145 72,431
Accrued property taxes...................................... 204,978 -
Payable to limited partners................................. - 332,931
Payable to affiliates....................................... 281,195 227,189
Security deposits and deferred rental income................ 220,442 194,886
---------- ----------
768,760 7,553,703
---------- ----------
Partners' equity (deficit):
Limited partners - 10,000,000 limited partnership units
authorized; 5,310,877 limited partnership units out-
standing at September 30, 1995 and December 31, 1994..... 34,629,173 32,105,597
General Partner.......................................... (131,956) (157,447)
---------- ----------
34,497,217 31,948,150
---------- ----------
$35,265,977 $39,501,853
========== ==========
</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 XXVII, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Rental revenue................ $1,970,685 $1,805,673 $5,781,708 $5,389,523
Interest income on mortgage
loan investments............ 40,239 35,439 145,880 99,240
Interest income on mortgage
loan investments - affiliates 65,835 69,662 225,906 198,769
Other interest income......... 80,506 68,364 278,751 150,091
Property tax refund........... - - 30,515 -
Gain on legal settlement...... - - 1,302,324 -
Gain on mortgage
modification................ - - - 70,484
--------- --------- --------- ---------
Total revenue............... 2,157,265 1,979,138 7,765,084 5,908,107
--------- --------- --------- ---------
Expenses:
Interest...................... 43,540 192,495 357,290 576,076
Depreciation and
amortization................ 382,305 358,093 1,126,975 1,063,399
Property taxes................ 202,375 182,411 607,192 579,538
Personnel costs............... 163,729 154,788 492,152 452,245
Utilities..................... 128,746 127,105 333,009 339,156
Repairs and maintenance....... 154,189 148,761 439,059 424,634
Property management
fees - affiliates........... 105,792 100,699 322,558 302,661
Other property operating
expenses.................... 165,619 150,322 499,599 493,706
General and administrative.... 19,221 11,250 41,979 76,565
General and administrative -
affiliates.................. 240,727 252,863 743,802 737,713
--------- --------- --------- ---------
Total expenses.............. 1,606,243 1,678,787 4,963,615 5,045,693
--------- --------- --------- ---------
Net income before
extraordinary item............ 551,022 300,351 2,801,469 862,414
Extraordinary item............... (102,110) - (252,402) -
--------- ---------- --------- ---------
Net income....................... $ 448,912 $ 300,351 $2,549,067 $ 862,414
========= ========== ========= =========
Net income allocable
to limited partners........... $ 444,423 $ 297,348 $2,523,576 $ 853,790
Net income allocable
to General Partner............ 4,489 3,003 25,491 8,624
--------- ---------- --------- ---------
Net income ...................... $ 448,912 $ 300,351 $2,549,067 $ 862,414
========= ========== ========= =========
Net income per hundred limited
partnership units:
Net income before extra-
ordinary item............... $ 10.28 $ 5.56 $ 52.23 $ 15.96
Extraordinary item............ (1.91) - (4.71) -
--------- ---------- --------- ---------
Net income.................... $ 8.37 $ 5.56 $ 47.52 $ 15.96
========= ========== ========= =========
</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 XXVII, L.P.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Nine Months Ended September 30, 1995 and 1994
<TABLE>
Total
General Limited Partners'
Partner Partners Equity
-------- ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1993.............. $(171,003) $31,096,521 $30,925,518
Net income................................ 8,624 853,790 862,414
-------- ---------- ----------
Balance at September 30, 1994............. $(162,379) $31,950,311 $31,787,932
======== ========== ==========
Balance at December 31, 1994.............. $(157,447) $32,105,597 $31,948,150
Net income................................ 25,491 2,523,576 2,549,067
-------- ---------- ----------
Balance at September 30, 1995............. $(131,956) $34,629,173 $34,497,217
======== ========== ==========
</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 XXVII, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
Nine Months Ended
September 30,
---------------------------------
1995 1994
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from tenants........................ $5,855,825 $ 5,481,653
Cash paid to suppliers............................ (1,575,586) (1,824,730)
Cash paid to affiliates........................... (1,012,354) (1,138,334)
Interest received................................. 250,381 256,353
Interest received from affiliates................. 253,947 210,078
Interest paid..................................... (313,995) (544,364)
Deferred borrowing costs paid..................... (195,059) -
Property taxes paid............................... (402,214) (350,907)
Property tax refund............................... 30,515 -
Cash received from legal settlement............... 1,302,324 -
Mortgage prepayment penalty paid.................. (66,949) -
--------- ---------
Net cash provided by operating activities............ 4,126,835 2,089,749
--------- ---------
Cash flows from investing activities:
Additions to real estate investments.............. (499,967) (319,273)
Proceeds from collection of mortgage loan
investments..................................... 241,922 212,037
Mortgage loan investments - affiliates............ - (208,000)
Proceeds from collection of mortgage loan
investments - affiliates........................ 972,000 1,603,135
--------- ---------
Net cash provided by investing activities............ 713,955 1,287,899
--------- ---------
Cash flows from financing activities:
Net decrease in cash segregated for repurchase
of limited partnership units.................... 164,229 81,770
Principal payments on mortgage note
payable......................................... (6,726,266) (93,736)
Repurchase of limited partnership units........... (332,931) (332,933)
--------- ----------
Net cash used in financing activities................ (6,894,968) (344,899)
---------- ---------
Net increase (decrease) in
cash and cash equivalents........................ (2,054,178) 3,032,749
Cash and cash equivalents at beginning of
period............................................ 7,196,410 4,580,636
--------- ---------
Cash and cash equivalents at end of period........... $ 5,142,232 $ 7,613,385
========== ==========
</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 XXVII, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
<TABLE>
Nine Months Ended
September 30,
---------------------------------
1995 1994
--------- ---------
<S> <C> <C>
Net income........................................... $2,549,067 $ 862,414
--------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization..................... 1,126,975 1,063,399
Amortization of deferred borrowing costs.......... 43,295 31,712
Gain on mortgage modification..................... - (70,484)
Allowance for impairment of mortgage loan
investment...................................... (172,164) -
Changes in assets and liabilities:
Cash segregated for security deposits........... 2,294 (3,649)
Accounts receivable............................. 103,103 133,689
Accrued interest receivable..................... 25,956 18,332
Deferred borrowing costs........................ (9,606) -
Prepaid expenses and other assets............... 183,661 (125,272)
Accounts payable and accrued expenses........... (10,286) 21,971
Accrued property taxes.......................... 204,978 228,631
Payable to affiliates........................... 54,006 (97,960)
Security deposits and deferred rental
income........................................ 25,556 26,966
--------- ---------
Total adjustments............................. 1,577,768 1,227,335
--------- ---------
Net cash provided by operating activities............ $4,126,835 $2,089,749
========= =========
</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 XXVII, L.P.
Notes to Financial Statements
September 30, 1995
(Unaudited)
NOTE 1.
- ------
McNeil Real Estate Fund XXVII, L.P. (the "Partnership"), formerly known as
Southmark Prime Plus, L.P., was organized by affiliates of Southmark Corporation
("Southmark") on January 16, 1987, as a limited partnership under the provisions
of the Delaware Revised Uniform Limited Partnership Act to make short-term loans
to affiliates of the general partner. 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, 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, 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 Fund XXVII, L.P., c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, Dallas, Texas 75240.
NOTE 3.
- ------
The Partnership pays property management fees equal to 5% of the gross rental
receipts for its mini-storage warehouses 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 mini-storage warehouses and commercial properties and leasing
services for its mini-storage warehouses. 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.
The Partnership is paying an asset management fee, which is payable to the
General Partner. Through 1999, the asset management fee is calculated as 1% of
the Partnership's tangible asset value. Tangible asset value is determined by
using the greater of (i) an amount calculated by applying a capitalization rate
of 9% to the annualized net operating income of each property or (ii) a value of
$30 per gross square foot for mini-storage warehouses and $50 per gross square
foot for commercial properties to arrive at the property tangible asset value.
The property tangible asset value is then added to the book value of all other
assets excluding intangible items. The fee percentage decreases subsequent to
1999.
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner or its affiliates are as follows:
<TABLE>
Nine Months Ended
September 30,
-------------------------------
1995 1994
------- -------
<S> <C> <C>
Property management fees............................. $ 322,558 $ 302,661
Charged to general and administrative -
affiliates:
Partnership administration........................ 322,487 302,133
Asset management fee.............................. 421,315 435,580
--------- ---------
$1,066,360 $1,040,374
========= =========
</TABLE>
Under the terms of its amended partnership agreement, the Partnership is
expressly permitted to make loans to affiliates of the General Partner, so long
as such loans meet certain conditions, including that such loans bear interest
at a rate of prime plus 2.5%, or prime plus 3.5% if the loan is junior to other
indebtedness. These loans are secured by income-producing real estate and may be
either junior or senior to other indebtedness secured by such property. The
Partnership received repayments from affiliates of $972,000 during the first
nine months of 1995. The Partnership loaned $208,000 and received repayments
from affiliates of $1,603,135 during the first nine months of 1994.
In order to induce the Partnership to lend funds to affiliates of the General
Partner, the General Partner agreed to pay (i) the difference between the
interest rate required by the Partnership's amended partnership agreement to be
charged to affiliates and the interest rate actually paid by certain of those
affiliates, and (ii) all points (1.5% or 2% if the loan is junior to other
indebtedness), closing costs and expenses. The Partnership recorded interest
income on affiliate loans of $ 225,906 and $198,769 for the nine months ended
September 30, 1995 and 1994, respectively, of which $ 20,324 and $8,749,
respectively, was paid or payable by the General Partner. In addition, the
General Partner paid in advance the interest which would be owed for one year
pursuant to this arrangement which totaled $1,320 for the nine months ended
September 30, 1994. The Partnership repaid $82,578 of such prepaid interest to
the General Partner in connection with loans repaid during the first nine months
of 1994. No such payments were received or repayments were made during the first
nine months of 1995.
Payable to affiliates at September 30, 1995 and December 31, 1994 consisted
primarily of a performance incentive fee of $141,647 accrued in prior years,
Partnership general and administrative expenses, asset management fees and
prepaid interest. Except for the performance incentive fee and prepaid interest,
all accrued fees are due and payable from current operations.
NOTE 4.
- ------
The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark for damages relating to improper overcharges, breach of contract and
breach of fiduciary duty. The Partnership settled these claims in 1991, and such
settlement was approved by the Bankruptcy Court.
An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995 the Partnership received in full satisfaction of its claims, $984,649
in cash, and common and preferred stock in the reorganized Southmark
subsequently sold for $317,675, which amounts represent the Partnership's
pro-rata share of Southmark assets available for Class 8 Claimants.
NOTE 5.
- ------
On May 9, 1995, the Partnership paid down its mortgage note payable by
$4,628,250. In July 1995, the Partnership secured a $5 million line of credit
that will be used to fund any loans made to affiliates of the General Partner.
In connection with obtaining the line of credit, the Partnership paid off the
remaining $2,019,844 balance of its mortgage note payable. In connection with
the repayments, the Partnership paid prepayment penalties of $66,949 and wrote
off $185,453 of deferred borrowing costs, resulting in an extraordinary loss of
$252,402 in 1995.
NOTE 6.
- ------
In April 1994, the Partnership and the borrower on the Partnership's mortgage
loan investment secured by A-Quality Mini-Storage reached a settlement
concerning the loan. Under the settlement, the borrower paid the Partnership
$150,000 in cash and the loan was renewed for $1,453,194 (representing
$2,100,000 principal balance less all post-bankruptcy petition payments made by
the borrower) effective January 1, 1994. A gain of $70,484 was recorded in
connection with this transaction. An additional second lien loan was executed in
the amount of $134,397 at an interest rate of 6%, which was paid in full in the
third quarter of 1995. Principal and interest at a rate of prime plus 2% are
payable monthly on the first lien loan which matures in January 1997.
NOTE 7.
- ------
A mortgage loan investment to an affiliate of the General Partner in the amount
of $483,364 matured in May 1995. A new loan under substantially the same terms,
effective as of the prior loan's maturity date, was made in the third quarter of
1995.
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, 1994. The Partnership reported net income for the
first nine months of 1995 of $2,549,067 as compared to $862,414 for the first
nine months of 1994. Revenues were $7,765,084 for the first nine months of 1995,
up from $5,908,107 for the same period in 1994. Expenses were $4,963,615 in 1995
as compared to $5,045,693 in 1994. The Partnership also recognized a $252,402
extraordinary loss in 1995, as discussed below.
Net cash provided by operating activities was $4,126,835 for the nine months
ended September 30, 1995, an increase from the $2,089,749 provided during the
same nine month period in 1994. The Partnership expended $499,967 for capital
improvements, $6,726,266 for principal payments on the mortgage note payable and
$168,702 for the repurchase of limited partnership units (net of a decrease in
cash segregated for the repurchase of limited partnership units). The
Partnership received $972,000 for repayment of affiliate loans and $241,922 in
collections of principal on mortgage loan investments to an unaffiliated
borrower, resulting in a net decrease in cash of $2,054,178 at September 30,
1995.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total revenue increased by $178,127 and $1,856,977 the first three and nine
months of 1995, respectively, as compared to the same periods in the prior year.
The increase was primarily due to a gain on legal settlement and an increase in
rental revenue, as discussed below.
Rental revenue for the three and nine months ended September 30, 1995 increased
by $165,012 and $392,185, respectively, as compared to the same periods in 1994.
The increase was mainly due to increases in occupancy at One Corporate Center
III Office Building and AAA Century Mini-Storage. One Corporate Center III was
98% occupied at September 30, 1995 as compared to 92% at September 30, 1994,
resulting in an increase in rental revenue of approximately $170,000. Rental
revenue increased by approximately $43,000 at AAA Century as occupancy increased
to 97% at the end of the third quarter of 1995 from 89% for the same period in
1994. In addition, increases in rental rates resulted in rental revenue
increases of approximately $55,000, $58,000, $31,000, $24,000 and $28,000 at One
Corporate Center I Office Building, AAA Sentry, Forest Hill, Fountainbleau and
Military Trail mini-storages, respectively.
Interest income on the Partnership's mortgage loan investments to an
unaffiliated borrower (the A-Quality Mini-Storage loan) increased by $4,800 and
$46,640 for the three and nine months ended September 30, 1995, respectively, in
relation to the comparable periods in the prior year. The increase was mainly
due to an increase in the interest rate earned on the first lien loan during the
first half of 1995, which is based on the prime lending rate of Bank of America.
Interest income on mortgage loans investments - affiliates decreased by $3,827
for the quarter ended September 30, 1995 and increased by $27,137 for nine
months ended September 30, 1995, as compared to the same periods in the prior
year. The increase was mainly the result of higher interest rates earned on
outstanding loans, which are based on the prime lending rate of Bank of America.
This increase was partially offset by lower total loans outstanding in the
second quarter of 1995. The Partnership had $2.2 million of loans outstanding at
September 30, 1995 as compared to $2.7 million at September 30, 1994.
Other interest income for the three and nine months ended September 30, 1995
increased by $12,142 and $128,660, respectively, as compared to the same periods
in the prior year. The increase was primarily the result of higher average cash
balances available for short-term investment in 1995. In addition, there was a
slight increase in interest rates earned on invested cash in 1995.
In the first quarter of 1995, the Partnership received a $30,515 property tax
refund for AAA Century Self- Storage as a result of an appeal filed on behalf of
the property. No such tax refund was received in 1994.
As discussed in Item 1 - Note 4, in 1995 the Partnership received cash and
common and preferred stock in the reorganized Southmark in settlement of its
bankruptcy claims against Southmark. The Partnership recognized a $1,302,324
gain as a result of this settlement. No such gain was recognized in 1994.
In 1994, the Partnership recognized a gain on mortgage modification of $70,484
relating to the settlement for the A-Quality mini-storage loan. No such gain was
recognized in 1995.
In 1995, the Partnership recognized a $252,402 extraordinary loss incurred in
connection with the pay down of its mortgage note payable as discussed in Item 1
- - Note 5. The loss consisted of $66,949 in prepayment penalties and a $185,453
write off of deferred borrowing costs.
Expenses:
Total expenses decreased by $72,544 and $82,078 for the first three and nine
months of 1995, respectively, as compared to the same periods in the prior year,
mainly due to a decrease in interest expense, as discussed below.
Interest expense decreased by $148,955 and $218,786 for the three and nine
months ended September 30, 1995, respectively, in relation to the respective
periods in the prior year. The decrease was due to the paydown of the
Partnership's mortgage note payable in the second quarter of 1995 as further
discussed in Item 1 - Note 5.
General and administrative expenses increased by $7,971 and decreased by $34,586
for the three and nine months ended September 30, 1995, respectively, as
compared to the same periods in 1994. The overall decrease was due to a decrease
in legal expenses in the first half of 1995. A greater amount of legal expenses
were incurred in 1994 relating to a lawsuit against the borrower on the
A-Quality Mini-Storage loan and a suit against the officers and directors of the
original general partner and the Partnership's former auditors.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $4,126,835 of cash through operating activities in the
first nine months of 1995 as compared to $2,089,749 for the same period in 1994.
The increase in 1995 was mainly due to $1,302,324 of cash received in 1995 from
the settlement of the Partnership's bankruptcy claims against Southmark. In
addition, there was an increase in cash received from tenants (see discussion of
the increase in rental revenue above), and a decrease in interest paid as a
result of the repayment of the partnership's mortgage loan payable.
The Partnership expended $499,967 and $319,273 for capital improvements to its
properties in 1995 and 1994, respectively. The increase in 1995 was due to
expenditures made at One Corporate Center I Office Building to replace an aging
air conditioning system, roof replacement and remodel of the hallways.
In the first nine months of 1995 and 1994, the Partnership received $241,922 and
$212,037, respectively, in payments on its mortgage loan investment to an
unaffiliated borrower. The loan was modified effective January 1994; however, no
principal payments were received on the loan until April 1994. Prior to the
modification, interest only from the excess cash flow of the property was paid
on the loan.
The Partnership collected principal on loans to affiliates (net of loans made)
of $972,000 and $1,395,135 in the first nine months of 1995 and 1994,
respectively.
The Partnership paid $6,726,266 and $93,736 in principal payments on its
mortgage note payable in the nine months ended September 30, 1995 and 1994,
respectively. As further discussed in Item 1 - Note 5, the Partnership repaid
the loan in 1995.
Short-term liquidity:
- --------------------
At September 30, 1995, the Partnership held cash and cash equivalents of
$5,142,232. This balance provides a reasonable level of working capital for the
Partnership's immediate needs in operating its properties.
For the Partnership as a whole, management projects positive cash flow from
operations in 1995. The Partnership has budgeted $641,000 for necessary capital
improvements for all properties in 1995 which is expected to be funded from
available cash reserves or from operations of the properties.
At the present time, the Partnership anticipates resuming distributions to the
limited partners in the foreseeable future and is reviewing cash requirements to
determine the amount and timing of such distributions.
In July 1995, the Partnership secured a $5 million line of credit. This line of
credit will be used to fund any loans to affiliates of the General Partner.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------ -----------------
HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young, BDO Seidman et al
(Case #92-06560-A). This suit was filed on behalf of the Partnership and other
affiliated partnerships (the "Affiliated Partnerships") on May 26, 1992, in the
14th Judicial District Court of Dallas County. The petition sought recovery
against the Partnership's former auditors, Ernst & Young, for negligence and
fraud in failing to detect and/or report overcharges of fees/expenses by
Southmark, the former general partner. The former auditors asserted
counterclaims against the Affiliated Partnerships based on alleged fraudulent
misrepresentations made to the auditors by the former management of the
Affiliated Partnerships (Southmark) in the form of client representation letters
executed and delivered to the auditors by Southmark management. The
counterclaims sought recovery of attorneys' fees and costs incurred in defending
this action. The original petition also alleged causes of action against certain
former officers and directors of the Partnership's original general partner for
breach of fiduciary duty, fraud and conspiracy relating to the improper
assessment and payment of certain administrative fees/expenses. On January 11,
1994 the allegations against the former officers and directors were dismissed.
The trial court granted summary judgment in favor of Ernst & Young and BDO
Seidman on the fraud and negligence claims based on the statute of limitations.
The Affiliated Partnerships appealed the summary judgment to the Dallas Court of
Appeals. In August 1995, the appeals court upheld all of the summary judgments
in favor of the defendants, except it overturned the summary judgment as to the
fraud claim against Ernst & Young. Therefore, the plaintiffs will proceed to
trial unless a reasonable settlement can be effected between the parties. The
ultimate outcome of this litigation cannot be determined at this time.
ITEM 5. OTHER EVENTS
- ------ ------------
On May 9, 1995, the Partnership paid down its mortgage note payable by
$4,628,250. In July 1995, the Partnership secured a $5 million line of credit
that will be used to fund any loans made to affiliates of the General Partner.
In connection with obtaining the line of credit, the Partnership paid off the
remaining $2,019,844 balance of its mortgage note payable. In connection with
the repayments, the Partnership paid prepayment penalties of $66,949 and wrote
off $185,453 of deferred borrowing costs, resulting in an extraordinary loss of
$252,402 in 1995.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
(a) Exhibits.
<TABLE>
Exhibit
Number Document Description
<S> <C> <C>
4.2 Amended and Restated Partnership Agreement of McNeil XXVII, L.P. 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).
10. Mutual Release and Settlement Agreement between Southmark Storage Associates
Limited Partnership and McNeil Real Estate Fund XXVII, L.P. (incorporated by
reference to the Quarterly Report of the registrant on Form 10-Q for the
period ended March 31, 1995, as filed on May 15, 1995).
11. Statement regarding computation of Net Income per Hundred Limited
Partnership Units. Net income per one hundred limited partnership units is
computed by dividing net income allocated to the limited partners by the
weighted average number of limited partnership units outstanding (expressed in
hundreds). Per unit information has been computed based on 53,109 and 53,483
weighted average limited partnership units (in hundreds) outstanding in
1995 and 1994.
</TABLE>
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended September 30, 1995.
<PAGE>
MCNEIL REAL ESTATE FUND XXVII, 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:
<TABLE>
<S> <C>
McNEIL REAL ESTATE FUND XXVII, L.P.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
November 13, 1995 By: /s/ Donald K. Reed
- -------------------------------- -------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
November 13, 1995 By: /s/ Robert C. Irvine
- -------------------------------- -------------------------------------
Date Robert C. Irvine
Chief Financial Officer of McNeil Investors, Inc.
Principal Financial Officer
November 13, 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>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,142,232
<SECURITIES> 0
<RECEIVABLES> 422,184
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 31,960,302
<DEPRECIATION> (6,665,321)
<TOTAL-ASSETS> 32,265,977
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,265,977
<SALES> 5,781,708
<TOTAL-REVENUES> 7,765,084
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,606,325
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357,290
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,801,469
<DISCONTINUED> 0
<EXTRAORDINARY> (252,402)
<CHANGES> 0
<NET-INCOME> 2,549,067
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
