UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 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
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>
<CAPTION>
March 31, December 31,
1996 1995
--------------- --------------
ASSETS
- ------
<S> <C> <C>
Real estate investments:
Land..................................................... $ 5,387,855 $ 5,387,855
Buildings and improvements............................... 26,737,148 26,635,813
-------------- -------------
32,125,003 32,023,668
Less: Accumulated depreciation and amortization......... (7,425,905) (7,046,093)
-------------- -------------
24,699,098 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 .................................. 6,245,614 5,718,657
Cash segregated for security deposits and repurchase........
of limited partnership units............................. 82,999 407,565
Accounts receivable......................................... 304,599 299,835
Accrued interest receivable................................. 12,397 23,978
Deferred borrowing costs, net of accumulated
amortization of $73,147 and $48,764 at March 31,
1996 and December 31, 1995, respectively................. 121,912 146,295
Prepaid expenses and other assets........................... 295,400 318,163
-------------- -------------
$ 33,045,383 $ 35,489,741
============== =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Accounts payable and accrued expenses....................... $ 58,933 $ 68,471
Accrued property taxes...................................... 174,246 -
Payable to limited partners................................. - 332,928
Payable to affiliates....................................... 378,684 253,044
Security deposits and deferred rental revenue............... 220,969 204,368
-------------- -------------
832,832 858,811
-------------- -------------
Partners' equity (deficit):
Limited partners - 10,000,000 limited partnership units
authorized; 5,273,885 limited partnership units
outstanding at March 31, 1996 andDecember 31, 1995..... 32,334,025 34,758,220
General Partner.......................................... (121,474) (127,290)
-------------- -------------
32,212,551 34,630,930
-------------- -------------
$ 33,045,383 $ 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
March 31,
----------------------------------
1996 1995
--------------- ---------------
Revenue:
<S> <C> <C>
Rental revenue................................................. $ 1,935,883 $ 1,931,262
Interest income on mortgage loan investment.................... 85,285 53,772
Interest income on mortgage loan investments - affiliates...... 38,959 93,971
Other interest income.......................................... 82,693 89,943
Property tax refund............................................ - 30,515
------------- -------------
Total revenue................................................ 2,142,820 2,199,463
------------- -------------
Expenses:
Interest....................................................... 24,382 186,878
Depreciation and amortization.................................. 379,812 371,013
Property taxes................................................. 213,576 219,920
Personnel costs................................................ 188,032 182,492
Utilities...................................................... 112,623 109,917
Repairs and maintenance........................................ 146,599 129,951
Property management fees - affiliates.......................... 106,043 108,127
Other property operating expenses.............................. 150,860 164,643
General and administrative..................................... 13,323 7,793
General and administrative - affiliates........................ 225,952 259,453
------------- -------------
Total expenses............................................... 1,561,202 1,740,187
Net income..................................................... $ 581,618 $ 459,276
============= =============
Net income allocable to limited partners....................... $ 575,802 $ 454,683
Net income allocable to General Partner........................ 5,816 4,593
------------- --------------
Net income..................................................... $ 581,618 $ 459,276
============= =============
Net income per weighted average hundred limited
partnership units............................................ $ 10.92 $ 8.56
============= =============
Distributions per weighted average hundred limited
partnership units............................................ $ 56.88 $ -
============= =============
</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 Three Months Ended March 31, 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................................ 4,593 454,683 459,276
------------- --------------- --------------
Balance at March 31, 1995................. $ (152,854) $ 32,560,280 $ 32,407,426
============= =============== ==============
Balance at December 31, 1995.............. $ (127,290) $ 34,758,220 $ 34,630,930
Distributions............................. - (2,999,997) (2,999,997)
Net income................................ 5,816 575,802 581,618
------------- --------------- --------------
Balance at March 31, 1996................. $ (121,474) $ 32,334,025 $ 32,212,551
============= =============== ==============
</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 in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------------
1996 1995
----------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from tenants........................ $ 1,923,725 $ 1,945,420
Cash paid to suppliers............................ (581,060) (552,063)
Cash paid to affiliates........................... (206,355) (329,619)
Interest received................................. 167,978 95,554
Interest received from affiliates................. 50,542 124,726
Interest paid..................................... - (176,307)
Property taxes paid............................... (39,330) (19,439)
Property tax refund............................... - 30,515
--------------- --------------
Net cash provided by operating activities............ 1,315,500 1,118,787
--------------- --------------
Cash flows from investing activities:
Additions to real estate investments.............. (101,335) (113,874)
Proceeds from collection of mortgage loan
investment...................................... 1,361,771 64,099
Proceeds from collection of mortgage loan
investments - affiliates........................ 952,538 972,000
--------------- --------------
Net cash provided by investing activities............ 2,212,974 922,225
--------------- --------------
Cash flows from financing activities:
Net decrease in cash segregated for
repurchase of limited partnership units......... 331,408 332,786
Principal payments on mortgage note
payable......................................... - (36,393)
Repurchase of limited partnership units........... (332,928) (332,931)
Distributions paid................................ (2,999,997) -
--------------- --------------
Net cash used in financing activities................ (3,001,517) (36,538)
--------------- --------------
Net increase in cash and cash equivalents............ 526,957 2,004,474
Cash and cash equivalents at beginning of
period............................................ 5,718,657 7,196,410
--------------- --------------
Cash and cash equivalents at end of period........... $ 6,245,614 $ 9,200,884
=============== ==============
</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>
Three Months Ended
March 31,
----------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Net income........................................... $ 581,618 $ 459,276
--------------- ---------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization..................... 379,812 371,013
Amortization of deferred borrowing costs.......... 24,383 10,571
Allowance for impairment of mortgage loan
investment...................................... - (45,699)
Changes in assets and liabilities:
Cash segregated for security deposits........... (6,842) (303)
Accounts receivable............................. (4,764) 1,465
Accrued interest receivable..................... 11,581 28,293
Prepaid expenses and other assets............... 22,763 23,454
Accounts payable and accrued expenses........... (9,538) 3,622
Accrued property taxes.......................... 174,246 200,481
Payable to affiliates........................... 125,640 37,961
Security deposits and deferred rental
revenue....................................... 16,601 28,653
--------------- --------------
Total adjustments............................. 733,882 659,511
--------------- --------------
Net cash provided by operating activities............ $ 1,315,500 $ 1,118,787
=============== ==============
</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
March 31, 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 three months ended March 31, 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.
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. Total accrued but unpaid asset management fees of $143,884 were
outstanding at March 31, 1996.
<PAGE>
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner or its affiliates are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
Property management fees............................. $ 106,043 $ 108,127
Charged to general and administrative -
affiliates:
Partnership administration........................ 88,747 107,999
Asset management fee.............................. 137,205 151,454
--------------- --------------
$ 331,995 $ 367,580
=============== ==============
</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 $952,538 and $972,000 during
the first three 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 $38,959 and $93,971 for the three months ended
March 31, 1996 and 1995, respectively, of which $6,794 and $6,719, respectively,
was paid or payable by the General Partner.
Payable to affiliates at March 31, 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 paid off in full by the borrower.
<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, 1995. The Partnership reported net income for the
first three months of 1996 of $581,618 as compared to $459,276 for the first
three months of 1995. Revenues were $2,142,820 for the first three months of
1996, down from $2,199,463 for the same period in 1995. Expenses were $1,561,202
in 1996 as compared to $1,740,187 in 1995.
Net cash provided by operating activities was $1,315,500 for the three months
ended March 31, 1996, comparable to the $1,118,787 provided during the same
three month period in 1995. The Partnership expended $101,335 for capital
improvements, $1,520 for the repurchase of limited partnership units (net of a
decrease in cash segregated for the repurchase of limited partnership units) and
distributed $2,999,997 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
increase in cash and cash equivalents of $526,957 for the quarter ended March
31, 1996.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total revenue decreased by $56,643 the first three months of 1996 as compared to
the same period in the prior year, as discussed below.
Rental revenue remained substantially the same for the first quarter of 1996 as
compared to the first quarter of 1995. Rental revenue decreased slightly at One
Corporate Center III office building due to a decrease in occupancy from 96% in
the first quarter of 1995 down to 91% in the same period in 1996. Rental revenue
also decreased at AAA Sentry and Margate mini-storages due to slight 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) increased by $31,513 for the three
months ended March 31, 1996 in relation to the comparable period in the prior
year.
Interest income on mortgage loans investments - affiliates decreased by $55,012
for the quarter ended March 31, 1996 as compared to the same period in the prior
year. The decrease was mainly the result of lower total loans outstanding in the
first quarter of 1996. The Partnership had $1.3 million of loans outstanding at
March 31, 1996 as compared to $2.2 million at March 31, 1995.
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.
<PAGE>
Expenses:
Total expenses decreased by $178,985 for the first three months of 1996 as
compared to the same period in the prior year, mainly due to a decrease in
interest expense, as discussed below.
Interest expense decreased by $162,496 for the three months ended March 31, 1996
in relation to the respective period 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.
Repairs and maintenance increased by $16,648 for the three months ended March
31, 1996 as compared to the same period in 1995. The increase was mainly due to
a greater amount of snow removal costs being incurred at One Corporate Center I
and One Corporate Center III office buildings due to heavy snowfall in the area
in 1996.
General and administrative expenses increased by $5,530 for the three months
ended March 31, 1996 as compared to the same period in 1995. The increase is
mainly due to an increase in audit expense.
General and administrative - affiliates decreased by $33,501 for the three
months ended March 31, 1996 as compared to the same period in 1995. The decrease
is due to a lower amount of overhead expenses being allocated to the Partnership
by McREMI.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $1,315,500 of cash through operating activities in the
first three months of 1996 as compared to $1,118,787 for the same period in
1995.
The Partnership received $1,361,771 of principal on its mortgage loan investment
to an unaffiliated borrower in 1996 as compared to $64,099 in 1995. The increase
was due to the balance of the mortgage loan investment being repaid in full by
the borrower in the first quarter of 1996.
The Partnership paid $36,393 in principal payments on its mortgage note payable
in the three months ended March 31, 1995. No principal payments were made in
1996 since the loan was repaid in full in the third quarter of 1995.
The Partnership distributed $2,999,997 to the limited partners in the first
quarter of 1996. No distributions were paid to the limited partners in 1995.
Short-term liquidity:
At March 31, 1996, the Partnership held cash and cash equivalents of $6,245,614.
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 Partnership distributed $2,999,997 to the limited partners in the first
quarter of 1996. At the present time, the Partnership anticipates making
additional distributions to the limited partners in 1996. Management is
currently reviewing cash requirements to determine the amount and timing of such
distributions.
PART II. OTHER INFORMATION
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 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 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 March 31, 1996.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended March 31, 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
May 14, 1996 By: /s/ Donald K. Reed
- -------------------- -----------------------------------------
Date Donald K. Reed
President and Chief Executive Officer
May 14, 1996 By: /s/ Ron K. Taylor
- -------------------- -----------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer of
McNeil Investors, Inc.
May 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,245,614
<SECURITIES> 0
<RECEIVABLES> 304,599
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 32,125,003
<DEPRECIATION> (7,425,905)
<TOTAL-ASSETS> 33,045,383
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 33,045,383
<SALES> 1,935,883
<TOTAL-REVENUES> 2,142,820
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,536,820
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,382
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 581,618
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 581,618
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
