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, 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 0-17173
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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 (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 XXVII, L.P.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
--------------- --------------
ASSETS
Real estate investments:
<S> <C> <C>
Land..................................................... $ 5,387,855 $ 5,387,855
Buildings and improvements............................... 27,056,811 26,635,813
-------------- -------------
32,444,666 32,023,668
Less: Accumulated depreciation and amortization......... (8,199,161) (7,046,093)
-------------- -------------
24,245,505 24,977,575
-------------- -------------
Mortgage loan investment.................................... - 1,538,932
Less: Allowance for impairment.............................. - (177,161)
-------------- -------------
- 1,361,771
Mortgage loan investments - affiliates...................... 1,283,364 2,235,902
Cash and cash equivalents .................................. 4,789,802 5,718,657
Cash segregated for security deposits and repurchase
of limited partnership units............................. 256,803 407,565
Accounts receivable......................................... 315,264 299,835
Accrued interest receivable................................. 11,997 23,978
Deferred borrowing costs, net of accumulated
amortization of $121,912 and $48,764 at September
30, 1996 and December 31, 1995, respectively............. 73,147 146,295
Prepaid expenses and other assets........................... 272,537 318,163
-------------- -------------
$ 31,248,419 $ 35,489,741
============== =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Accounts payable and accrued expenses....................... $ 36,463 $ 68,471
Accrued property taxes...................................... 390,415 -
Payable to limited partners................................. - 332,928
Payable to affiliates....................................... 227,757 253,044
Security deposits and deferred rental revenue............... 237,923 204,368
-------------- -------------
892,558 858,811
-------------- -------------
Partners' equity (deficit):
Limited partners - 10,000,000 limited partnership units
authorized; 5,273,885 limited partnership units out-
standing at September 30, 1996 and December 31, 1995... 30,465,902 34,758,220
General Partner.......................................... (110,041) (127,290)
-------------- -------------
30,355,861 34,630,930
-------------- -------------
$ 31,248,419 $ 35,489,741
============== =============
</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>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1996 1995 1996 1995
-------------- --------------- -------------- --------------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue................ $ 2,058,000 $ 1,970,685 $ 5,988,540 $ 5,781,708
Interest income on mortgage
loan investment............. - 40,239 85,285 145,880
Interest income on mortgage
loan investments - affiliates 36,790 65,835 112,140 225,906
Other interest income......... 76,666 80,506 243,890 278,751
Property tax refund........... - - - 30,515
Gain on legal settlement...... - - - 1,302,324
------------- ------------- ------------- -------------
Total revenue............... 2,171,456 2,157,265 6,429,855 7,765,084
------------- ------------- ------------- -------------
Expenses:
Interest...................... 27,542 43,540 82,661 357,290
Depreciation and
amortization................ 386,874 382,305 1,153,068 1,126,975
Property taxes................ 214,130 202,375 633,176 607,192
Personnel costs............... 173,335 163,729 520,269 492,152
Utilities..................... 128,872 128,746 341,618 333,009
Repairs and maintenance....... 146,138 154,189 449,516 439,059
Property management
fees - affiliates........... 112,729 105,792 325,908 322,558
Other property operating
expenses.................... 153,582 165,619 459,076 499,599
General and administrative.... 53,010 19,221 77,764 41,979
General and administrative -
affiliates.................. 202,140 240,727 661,875 743,802
------------- ------------- ------------- -------------
Total expenses.............. 1,598,352 1,606,243 4,704,931 4,963,615
------------- ------------- ------------- -------------
Net income before
extraordinary item............ 573,104 551,022 1,724,924 2,801,469
Extraordinary item............... - (102,110) - (252,402)
------------- ------------- ------------- -------------
Net income....................... $ 573,104 $ 448,912 $ 1,724,924 $ 2,549,067
============= ============= ============= =============
Net income allocable
to limited partners........... $ 567,373 $ 444,423 $ 1,707,675 $ 2,523,576
Net income allocable
to General Partner............ 5,731 4,489 17,249 25,491
------------- ------------- ------------- -------------
Net income ...................... $ 573,104 $ 448,912 $ 1,724,924 $ 2,549,067
============= ============= ============= =============
Net income per weighted
average hundred limited
partnership units:
Net income before extra-
ordinary item............... $ 10.76 $ 10.28 $ 32.38 $ 52.23
Extraordinary item............ - (1.91) - (4.71)
------------- ----------- ------------- ------------
Net income.................... $ 10.76 $ 8.37 $ 32.38 $ 47.52
============= =========== ============= ============
Distributions per weighted
average hundred limited
partnership units............. $ 56.89 $ - $ 113.77 $ -
============= =========== ============= ============
</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, 1996 and 1995
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
--------------- ---------------- ---------------
<S> <C> <C> <C>
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
============= =============== ==============
Balance at December 31, 1995.............. $ (127,290) $ 34,758,220 $ 34,630,930
Net income................................ 17,249 1,707,675 1,724,924
Distributions............................. - (5,999,993) (5,999,993)
------------- --------------- --------------
Balance at September 30, 1996............. $ (110,041) $ 30,465,902 $ 30,355,861
============= =============== ==============
</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)
Decrease in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------------
1996 1995
----------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants........................ $ 5,948,618 $ 5,855,825
Cash paid to suppliers............................ (1,789,365) (1,575,586)
Cash paid to affiliates........................... (1,013,070) (1,012,354)
Interest received................................. 329,175 250,381
Interest received from affiliates................. 124,121 253,947
Interest paid..................................... (9,513) (313,995)
Property taxes paid............................... (242,761) (402,214)
Property tax refund............................... - 30,515
Cash received from legal settlement............... - 1,302,324
--------------- --------------
Net cash provided by operating activities............ 3,347,205 4,388,843
--------------- --------------
Cash flows from investing activities:
Additions to real estate investments.............. (420,998) (499,967)
Proceeds from collection of mortgage loan
investment...................................... 1,361,771 241,922
Proceeds from collection of mortgage loan
investments - affiliates........................ 952,538 972,000
--------------- --------------
Net cash provided by investing activities............ 1,893,311 713,955
--------------- --------------
Cash flows from financing activities:
Net decrease in cash segregated for
repurchase of limited partnership units......... 163,550 164,229
Deferred borrowing costs paid..................... - (195,059)
Principal payments on mortgage note
payable......................................... - (6,726,266)
Mortgage prepayment penalty paid.................. - (66,949)
Repurchase of limited partnership units........... (332,928) (332,931)
Distributions paid................................ (5,999,993) -
--------------- --------------
Net cash used in financing activities................ (6,169,371) (7,156,976)
--------------- --------------
Net decrease in cash and cash equivalents............ (928,855) (2,054,178)
Cash and cash equivalents at beginning of
period............................................ 5,718,657 7,196,410
--------------- --------------
Cash and cash equivalents at end of period........... $ 4,789,802 $ 5,142,232
=============== ==============
</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>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
Net income........................................... $ 1,724,924 $ 2,549,067
--------------- --------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 1,153,068 1,126,975
Amortization of deferred borrowing costs.......... 73,148 43,295
Allowance for impairment of mortgage loan
investment...................................... - (172,164)
Extraordinary item................................ - 252,402
Changes in assets and liabilities:
Cash segregated for security deposits........... (12,788) 2,294
Accounts receivable............................. (15,429) 103,103
Accrued interest receivable..................... 11,981 25,956
Prepaid expenses and other assets............... 45,626 183,661
Accounts payable and accrued expenses........... (32,008) (10,286)
Accrued property taxes.......................... 390,415 204,978
Payable to affiliates........................... (25,287) 54,006
Security deposits and deferred rental
revenue....................................... 33,555 25,556
--------------- --------------
Total adjustments............................. 1,622,281 1,839,776
--------------- --------------
Net cash provided by operating activities............ $ 3,347,205 $ 4,388,843
=============== ==============
</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, 1996
(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, 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 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.
<PAGE>
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:
Nine Months Ended
September 30,
-------------------------
1996 1995
-------------------------
Property management fees..................... $ 325,908 $ 322,558
Charged to general and administrative -
affiliates:
Partnership administration................ 246,274 322,487
Asset management fee...................... 415,601 421,315
--------- ---------
$ 987,783 $1,066,360
========= =========
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 $952,538 and $972,000 during
the first nine months of 1996 and 1995, respectively.
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 $112,140 and $225,906 for the nine months ended
September 30, 1996 and 1995, respectively, of which $20,457 and $20,324,
respectively, was paid or payable by the General Partner.
Payable to affiliates at September 30, 1996 and December 31, 1995 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.
- -------
On March 21, 1996, the mortgage loan investment, plus accrued interest, secured
by A-Quality Mini-Storage, was repaid in full by the borrower.
<PAGE>
NOTE 5.
- -------
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 6.
- -------
On May 9, 1995, the Partnership paid down its mortgage note payable by
$4,628,250. In June 1995, the Partnership secured a $5 million line of credit
that may be used to fund any loans made to affiliates of the General Partner as
well as for working capital and general partnership purposes. 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 7.
- -------
Certain prior period amounts have been reclassified to conform to the current
period presentations.
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, 1995. The Partnership reported net income for the
first nine months of 1996 of $1,724,924 as compared to $2,549,067 for the first
nine months of 1995. Revenues were $6,429,855 for the first nine months of 1996,
down from $7,765,084 for the same period in 1995. Expenses were $4,704,931 in
1996 as compared to $4,963,615 in 1995.
<PAGE>
Net cash provided by operating activities was $3,347,205 for the nine months
ended September 30, 1996, and $4,388,843 during the same nine month period in
1995. The Partnership expended $420,998 for capital improvements, $169,378 for
the repurchase of limited partnership units (net of a decrease in cash
segregated for the repurchase of limited partnership units) and distributed
$5,999,993 to the limited partners. The Partnership received $952,538 for
repayment of affiliate loans and collected $1,361,771 of principal on its
mortgage loan investment to an unaffiliated borrower, resulting in a net
decrease in cash and cash equivalents of $928,855 for the nine months ended
September 30, 1996.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total revenue increased by $14,191 for the three months ended and decreased by
$1,335,229 for the nine months ended September 30, 1996, respectively, as
compared to the same periods in the prior year, as discussed below.
Rental revenue remained substantially the same for the first three and nine
months of 1996 as compared to the same periods of 1995. Rental revenue decreased
slightly at AAA Sentry and Margate mini-storages due to small decreases in
occupancy in 1996. Rental revenue increased at the remainder of the properties,
mainly due to increases in rental rates.
Interest income on the Partnership's mortgage loan investment to an unaffiliated
borrower (the A-Quality Mini-Storage loan) decreased by $40,239 and $60,595 for
the three and nine months ended September 30, 1996, respectively, in relation to
the comparable periods in the prior year. The decreases were due to the
repayment of the loan by the borrower in the first quarter of 1996.
Interest income on mortgage loans investments - affiliates decreased by $29,045
and $113,766 for the three and nine months ended September 30, 1996,
respectively, as compared to the same periods in the prior year. The decreases
were mainly the result of lower total loans outstanding in 1996. The Partnership
had $1.3 million of loans outstanding at September 30, 1996 as compared to $2.2
million at September 30, 1995.
Other interest income decreased by $3,840 for the three months and by $34,861
for the nine months ended September 30, 1995, due to the Partnership holding a
lower average amount of cash available for short-term investment in the first
half of 1996.
In the first quarter of 1995, the Partnership received a $30,515 refund of prior
years' property taxes for AAA Century Mini Storage as a result of an appeal
filed on behalf of the property. No such tax refund was received in 1996.
As discussed in Item 1 - Note 5, 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 1996.
In May 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 6. The loss consisted of $66,949 in prepayment penalties and a
$185,453 write off of deferred borrowing costs relating to the loan repaid.
<PAGE>
Expenses:
Total expenses decreased by $7,891 and $258,684 for the three and nine months
ended September 30, 1996, respectively, as compared to the same periods in the
prior year, mainly due to a decrease in interest expense and general and
administrative - affiliates, partially offset by an increase in general and
administrative expense, as discussed below.
Interest expense decreased by $15,998 and $274,629 for the three and nine months
ended September 30, 1996, respectively, in relation to the respective periods in
the prior year. The decrease was due to the repayment of the Partnership's
mortgage note payable in the third quarter of 1995. The interest expense
recorded in 1996 represents amortization of deferred borrowing costs incurred in
connection with obtaining a $5 million line of credit.
General and administrative expenses increased by $33,789 and $35,785 for the
three and nine months ended September 30, 1996, respectively, as compared to the
same periods in 1995. The increase was mainly due to costs incurred by the
Partnership in the third quarter of 1996 for evaluation of information regarding
an unsolicited tender offer, as discussed in Item 5 - Other Information.
General and administrative - affiliates decreased by $38,587 and $81,927 for the
three and nine months ended September 30, 1996, respectively, as compared to the
same periods in 1995. The decrease was mainly due to a decrease in overhead
expenses allocated to the Partnership by McREMI.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $3,347,205 of cash through operating activities in the
first nine months of 1996 as compared to $4,388,843 for the same period in 1995.
The decrease in 1996 was mainly due to the Partnership receiving $1,302,324 from
the settlement of a lawsuit in 1995.
The Partnership received $1,361,771 of principal on its mortgage loan investment
to an unaffiliated borrower in 1996 as compared to $241,922 in 1995. The
increase was due to the balance of the mortgage loan investment being repaid in
full by the borrower in 1996.
The Partnership paid $6,726,266 in principal payments on its mortgage note
payable in the nine months ended September 30, 1995. No principal payments were
made in 1996 since the loan was repaid in full in 1995.
The Partnership distributed $5,999,993 to the limited partners in the first nine
months of 1996. No distributions were paid to the limited partners in 1995.
Short-term liquidity:
At September 30, 1996, the Partnership held cash and cash equivalents of
$4,789,802. 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 1996. The Partnership has budgeted $586,000 for necessary capital
improvements for all properties in 1996 which is expected to be funded from
available cash reserves or from operations of the properties.
<PAGE>
The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships, if certain
conditions are met. Borrowings under the facility may be used to fund deferred
maintenance, refinancing obligations and working capital needs. There is no
assurance that the Partnership will receive any funds under the facility because
no amounts are reserved for any particular partnership. As of September 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 will terminate on March 30, 1997.
The Partnership acquired a $5 million line of credit in 1995 that may be used
for property operations.
Long-term liquidity:
While the present outlook for the Partnership's liquidity is favorable, market
conditions may charge and property operations can deteriorate. In that event,
the Partnership would require other sources of working capital. The Partnership
acquired a $5 million line of credit in 1995 that may be used for property
operations. Other possible actions to resolve cash deficiencies include
deferring major capital expenditures on Partnership properties except where
improvements are expected to enhance the competitiveness or marketability of the
properties, or arranging working capital support from affiliates. No affiliate
support has been required in the past, and there is no assurance that support
would be provided in the future, since neither the General Partner nor any
affiliates have any obligation in this regard.
The Partnership has determined to begin an orderly liquidation of all the
Partnership's assets. Although there can be no assurance as to the timing of any
liquidation, it is anticipated that such liquidation would result in
distributions to the limited partners of the cash proceeds from the sale of the
Partnership's properties, subject to cash reserve requirements, as they are sold
with the last property disposition before December 1999 followed by a
dissolution of the Partnership.
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 Corporation ("Southmark"), the former general partner. The former
auditors initially 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 counterclaims were later dismissed
on appeal, as discussed below.
<PAGE>
The trial court granted summary judgment against the Partnership based on the
statute of limitations; however, on appeal, the Dallas Court of Appeals reversed
the trial court and remanded for trial the Affiliated Partnerships' fraud claims
against Ernst & Young. The Texas Supreme Court denied Ernst & Young's
application for writ of error on January 11, 1996. The Partnership is continuing
to pursue vigorously its claims against Ernst & Young. Trial is anticipated to
be set for early December 1996; however, the final outcome of this litigation
cannot be determined at this time.
ITEM 5. OTHER INFORMATION
- ------- -----------------
On September 20, 1996, High River announced that it had commenced a tender offer
for any and all units of the Partnership at $5.62 per unit (the original offer
price of $6.19 was reduced by the August 1996 distributions to unitholders of
$0.57 per unit). The tender was originally due to expire October 18, 1996,
however, this offer has been extended until November 22, 1996.
On October 17, 1996, McNeil Real Estate Fund XXVII, L.P. announced that it had
received an unsolicited offer from an unaffiliated third party to acquire all
outstanding Units of Fund XXVII at $6.50 per Unit. After meeting with the
offeror in Dallas and considering the $6.50 offer, the partnership rejected it
as being inadequate.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Document Description
------- --------------------
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 (Loss) per Hundred Limited
Partnership Units. Net income (loss) per one
hundred limited partnership 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
hundreds). Per unit information has been
computed based on 52,739 and 53,109 weighted
average limited partnership units (in
hundreds) outstanding in 1996 and 1995.
27. Financial Data Schedule for the quarter
ended September 30, 1996.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended September 30, 1996.
<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:
McNEIL REAL ESTATE FUND XXVII, L.P.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
November 14, 1996 By: /s/ Donald K. Reed
- ----------------- ----------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
November 14, 1996 By: /s/ Ron K. Taylor
- ----------------- ----------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer of
McNeil Investors, Inc.
November 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,789,802
<SECURITIES> 0
<RECEIVABLES> 315,264
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 32,444,666
<DEPRECIATION> (8,199,161)
<TOTAL-ASSETS> 31,248,419
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 30,355,861
<TOTAL-LIABILITY-AND-EQUITY> 31,248,419
<SALES> 5,988,540
<TOTAL-REVENUES> 6,429,855
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,622,270
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,661
<INCOME-PRETAX> 1,724,924
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,724,924
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,724,924
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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