UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended September 30, 1997
-----------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to_____________
Commission file number 0-17173
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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 600, LB70, Dallas, Texas, 75240
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (972) 448-5800
-----------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
<PAGE>
MCNEIL REAL ESTATE FUND XXVII, L.P.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------------- --------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 4,196,277 $ 5,387,855
Buildings and improvements............................... 22,873,501 27,175,885
-------------- -------------
27,069,778 32,563,740
Less: Accumulated depreciation and amortization......... (8,521,492) (8,674,792)
-------------- -------------
18,548,286 23,888,948
Assets held for sale 4,545,714 -
Mortgage loan investments - affiliates...................... 6,956,487 4,692,760
Cash and cash equivalents .................................. 2,046,342 3,022,851
Cash segregated for security deposits and repurchase
of limited partnership units............................. 278,980 427,123
Accounts receivable......................................... 355,592 297,942
Accrued interest receivable................................. 62,563 43,200
Deferred borrowing costs, net of accumulated
amortization of $146,294 at December 31, 1996............ - 48,765
Prepaid expenses and other assets........................... 162,188 219,681
-------------- -------------
$ 32,956,152 $ 32,641,270
============== =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Revolving credit agreement $ 3,437,647 $ 1,101,619
Accounts payable and accrued expenses....................... 61,163 77,635
Accrued property taxes...................................... 419,800 -
Payable to limited partners................................. - 332,928
Payable to affiliates....................................... 306,185 370,837
Security deposits and deferred rental revenue............... 224,234 214,829
-------------- -------------
4,449,029 2,097,848
-------------- -------------
Partners' equity (deficit):
Limited partners - 10,000,000 limited partnership units
authorized; 5,236,893 limited partnership units out-
standing at September 30, 1997 and December 31, 1996... 28,592,322 30,648,258
General Partner.......................................... (85,199) (104,836)
-------------- -------------
28,507,123 30,543,422
-------------- -------------
$ 32,956,152 $ 32,641,270
============== =============
</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,
--------------------------------- ---------------------------------
1997 1996 1997 1996
-------------- --------------- -------------- --------------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue................ $ 2,124,972 $ 2,058,000 $ 6,325,314 $ 5,988,540
Interest income on mortgage
loan investment............. - - - 85,285
Interest income on mortgage
loan investments - affiliates 195,255 36,790 573,335 112,140
Other interest income......... 44,434 76,666 117,509 243,890
------------- ------------- ------------- -------------
Total revenue............... 2,364,661 2,171,456 7,016,158 6,429,855
------------- ------------- ------------- -------------
Expenses:
Interest...................... 107,801 27,542 222,419 82,661
Depreciation and
amortization................ 402,583 386,874 1,147,555 1,153,068
Property taxes................ 249,232 214,130 747,784 633,176
Personnel costs............... 199,865 173,335 560,400 520,269
Utilities..................... 129,521 128,872 350,400 341,618
Repairs and maintenance....... 134,490 146,138 456,432 449,516
Property management
fees - affiliates........... 114,067 112,729 342,665 325,908
Other property operating
expenses.................... 166,607 153,582 486,508 459,076
General and administrative.... 53,264 53,010 92,233 77,764
General and administrative -
affiliates.................. 209,737 202,140 646,091 661,875
------------- ------------- ------------- -------------
Total expenses.............. 1,767,167 1,598,352 5,052,487 4,704,931
------------- ------------- ------------- -------------
Net income....................... $ 597,494 $ 573,104 $ 1,963,671 $ 1,724,924
============= ============= ============= =============
Net income allocable
to limited partners........... $ 591,519 $ 567,373 $ 1,944,034 $ 1,707,675
Net income allocable
to General Partner............ 5,975 5,731 19,637 17,249
------------- ------------- ------------- -------------
Net income ...................... $ 597,494 $ 573,104 $ 1,963,671 $ 1,724,924
============= ============= ============= =============
Net income per weighted
average hundred limited
partnership units............. $ 11.29 $ 10.76 $ 37.12 $ 32.38
============= ============= ============= =============
Distributions per weighted
average hundred limited
partnership units............. $ 38.19 $ 56.89 $ 76.38 $ 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, 1997 and 1996
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
--------------- ----------------- ----------------
<S> <C> <C> <C>
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
============= ================ ==============
Balance at December 31, 1996.............. $ (104,836) $ 30,648,258 $ 30,543,422
Net income................................ 19,637 1,944,034 1,963,671
Distributions............................. - (3,999,970) (3,999,970)
------------- --------------- --------------
Balance at September 30, 1997............. $ (85,199) $ 28,592,322 $ 28,507,123
============= =============== ===============
</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,
-----------------------------------------
1997 1996
----------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants........................ $ 6,202,153 $ 5,948,618
Cash paid to suppliers............................ (1,833,850) (1,789,365)
Cash paid to affiliates........................... (1,053,408) (1,013,070)
Interest received................................. 117,509 329,175
Interest received from affiliates................. 553,971 124,121
Interest paid..................................... (183,658) (9,513)
Property taxes paid............................... (327,984) (242,761)
--------------- ---------------
Net cash provided by operating activities............ 3,474,733 3,347,205
--------------- --------------
Cash flows from investing activities:
Additions to real estate investments.............. (352,607) (420,998)
Proceeds from collection of mortgage loan
investment...................................... - 1,361,771
Mortgage loan investments - affiliates............ (2,336,028) -
Proceeds from collection of mortgage loan
investments - affiliates........................ 72,301 952,538
--------------- --------------
Net cash provided by (used in) investing
activities........................................ (2,616,334) 1,893,311
---------------- --------------
Cash flows from financing activities:
Net decrease in cash segregated for
repurchase of limited partnership units......... 161,962 163,550
Proceeds from revolving credit agreement.......... 2,336,028 -
Repurchase of limited partnership units........... (332,928) (332,928)
Distributions paid................................ (3,999,970) (5,999,993)
--------------- --------------
Net cash used in financing activities................ (1,834,908) (6,169,371)
--------------- --------------
Net decrease in cash and cash equivalents............ (976,509) (928,855)
Cash and cash equivalents at beginning of
period............................................ 3,022,851 5,718,657
--------------- --------------
Cash and cash equivalents at end of period........... $ 2,046,342 $ 4,789,802
=============== ==============
</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,
----------------------------------------
1997 1996
---------------- ---------------
<S> <C> <C>
Net income........................................... $ 1,963,671 $ 1,724,924
--------------- --------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 1,147,555 1,153,068
Amortization of deferred borrowing costs.......... 48,765 73,148
Changes in assets and liabilities:
Cash segregated for security deposits........... (13,819) (12,788)
Accounts receivable............................. (57,650) (15,429)
Accrued interest receivable..................... (19,363) 11,981
Prepaid expenses and other assets............... 57,493 45,626
Accounts payable and accrued expenses........... (16,472) (32,008)
Accrued property taxes.......................... 419,800 390,415
Payable to affiliates........................... (64,652) (25,287)
Security deposits and deferred rental
revenue....................................... 9,405 33,555
--------------- --------------
Total adjustments............................. 1,511,062 1,622,281
--------------- --------------
Net cash provided by operating activities............ $ 3,474,733 $ 3,347,205
=============== ==============
</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, 1997
(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 600, Dallas,
Texas 75240.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair presentation of the Partnership's financial position and
results of operations. All adjustments were of a normal recurring nature.
However, the results of operations for the nine months ended September 30, 1997
are not necessarily indicative of the results to be expected for the year ending
December 31, 1997.
NOTE 2.
- -------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1996, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund XXVII, L.P., c/o The Herman Group, 2121 San Jacinto
St., 26th Floor, Dallas, Texas 75201.
NOTE 3.
- -------
The Partnership pays property management fees equal to 5% of 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,
--------------------------
1997 1996
----------- -----------
Property management fees...................... $ 342,665 $ 325,908
Charged to general and administrative -
affiliates:
Partnership administration................. 197,733 246,274
Asset management fee....................... 448,358 415,601
---------- ----------
$ 988,756 $ 987,783
========== ==========
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 made loans to affiliates of $2,336,028 and received repayments from
affiliates of $72,301 during the first nine months of 1997. The Partnership
received repayments from affiliates of $952,538 during the first nine months of
1996.
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 $573,335 and $112,140 for the nine months ended
September 30, 1997 and 1996, respectively, of which $112,935 and $53,457,
respectively, was paid or payable by the General Partner.
Payable to affiliates at September 30, 1997 and December 31, 1996 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.
<PAGE>
NOTE 4.
- -------
On February 28, 1997, the Partnership agreed to loan an aggregate of
approximately $2.336 million to McNeil Real Estate Fund X, Ltd. ("Fund X"), at
an interest rate of prime plus 1% per annum (the maximum rate allowed to be
incurred by Fund X in connection with borrowings from affiliates pursuant to
Fund X's partnership agreement). In 1997, $2,336,029 was borrowed by Fund X
pursuant to this commitment, which was drawn by the Partnership from its
revolving line of credit. This loan is secured by a first lien on La Plaza
Business Center located in Las Vegas, Nevada. Interest on the loan is payable
monthly, with principal payable in February 2000.
In August 1997, the $800,000 loan to Fund X matured. The Partnership agreed to
extend the maturity of the loan to August 2000. La Plaza Business Center was
substituted as collateral on the loan, which was originally secured by Lakeview
Plaza Shopping Center.
NOTE 5.
- -------
On March 21, 1996, the mortgage loan investment, plus accrued interest, secured
by A-Quality Mini-Storage, was repaid in full by the borrower.
NOTE 6.
- -------
In 1996, the Partnership adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement requires the cessation of depreciation on assets held for sale.
Since AAA Century Airport Self-Storage and Burbank Mini-Storage were placed on
the market for sale, no depreciation was taken effective August 1, 1997.
NOTE 7.
- -------
The lender extended the maturity of the Partnership's $5 million revolving
credit agreement, which originally matured in June 1997, to June 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
There has been no significant change in the operations of the Partnership's
properties since December 31, 1996. The Partnership reported net income for the
first nine months of 1997 of $1,963,671 as compared to $1,724,924 for the first
nine months of 1996. Revenues were $7,016,158 for the first nine months of 1997,
up from $6,429,855 for the same period in 1996. Expenses were $5,052,487 in 1997
as compared to $4,704,931 in 1996.
<PAGE>
Net cash provided by operating activities was $3,474,733 for the nine months
ended September 30, 1997. The Partnership received $2,336,028 from its line of
credit agreement, which it loaned to an affiliate of the General Partner. In
addition, the Partnership received $72,301 in repayments of mortgage loan
investments - affiliates. The Partnership expended $352,607 for capital
improvements, $170,966 for the repurchase of limited partnership units (net of a
decrease in cash segregated for the repurchase of limited partnership units) and
distributed $3,999,970 to the limited partners, resulting in a net decrease in
cash and cash equivalents of $976,509 for the nine months ended September 30,
1997.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total revenue increased by $193,205 and $586,303 for the three and nine months
ended September 30, 1997, respectively, as compared to the same periods in the
prior year, as discussed below.
Rental revenue increased by $66,972 and $336,774 for the three and nine months
ended September 30, 1997, respectively, as compared to the same periods in 1996.
Rental revenue increased approximately $116,000 and $105,000 at One Corporate
Center I and III office buildings, respectively, due to increased rental rates,
decreased discounts and concessions given to tenants and increased occupancy
from 97% and 95%, respectively, at September 30, 1996 to 100% and 98%,
respectively, at September 30, 1997. An increase in occupancy at Burbank
Mini-Storage from 87% at September 30, 1996 to 92% at September 30, 1997
resulted in increased rental revenue of approximately $26,000. Increases in
rental revenue of approximately $27,000 and $21,000 at Fountainbleau and Kendall
Sunset mini-storages, respectively, were due to increased rental rates. Rental
revenue also increased by approximately $26,000 and $16,000 at Margate and
Forest Hill mini-storage warehouses, respectively, due to increased rental
revenues and average occupancy rates in 1997.
Interest income on the Partnership's mortgage loan investment to an unaffiliated
borrower (the A-Quality Mini-Storage loan) totaled $85,285 for the first three
months of 1996. No such interest income was recorded in 1997 as the loan was
repaid in 1996.
Interest income on mortgage loans investments - affiliates increased by $158,465
and $461,195 for the three and nine months ended September 30, 1997,
respectively, as compared to the same periods in the prior year. The increase
was the result of a greater amount of loans outstanding in 1997. The Partnership
had $7.0 million of loans outstanding at September 30, 1997 as compared to $1.3
million at September 30, 1996.
Other interest income decreased by $32,232 and $126,381 for the three and nine
months ended September 30, 1997, respectively, due to the Partnership having a
lower amount of cash available for short-term investment in the first half of
1997. The Partnership held $2.0 million of cash and cash equivalents at
September 30, 1997 as compared to $4.8 million at September 30, 1996.
Expenses:
Total expenses increased by $168,815 and $347,556 for the three and nine months
ended September 30, 1997, respectively, as compared to the same periods in the
prior year. The increase was mainly due to an increase in interest expense,
property taxes and general and administrative expenses, as discussed below.
<PAGE>
Interest expense increased by $80,259 and $139,758 for the three and nine months
ended September 30, 1997, respectively, in relation to the respective periods in
the prior year. The interest expense recorded in the first nine months of 1996
represents amortization of deferred borrowing costs incurred in connection with
obtaining a $5 million line of credit. The Partnership did not borrow any funds
under the line of credit agreement until November 1996. The interest expense
recorded in 1997 includes amortization of deferred borrowing costs as well as
interest expense incurred on borrowings under the line of credit agreement. The
Partnership had borrowed $3.4 million under the agreement at September 30, 1997.
Property taxes for the three and nine months ended September 30, 1997 increased
by $35,102 and $114,608, respectively, as compared to the same periods in 1996.
The increase was due to an increase in the assessed taxable value of One
Corporate Center I and III office buildings by taxing authorities.
General and administrative expenses increased by $254 and $14,469 for the three
and nine months ended September 30, 1997, respectively, as compared to the same
periods in 1996. Approximately $14,000 of costs incurred for investor services
were paid to an unrelated third party in 1997. In the first nine months of 1996,
such costs were paid to an affiliate of the General Partner and were included in
general and administrative - affiliates on the Statements of Operations.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $3,474,733 of cash through operating activities in the
first nine months of 1997 as compared to $3,347,205 for the same period in 1996.
Cash received from tenants and interest received from affiliates increased in
1997 due to an increase in rental revenue and interest income on mortgage loan
investments - affiliates, as discussed above. These increases were partially
offset by a decrease in interest received from non-affiliates due to the
repayment of the A-Quality Mini-Storage loan and an increase in interest paid on
borrowings from the Partnership's line of credit.
The Partnership expended $352,607 and $420,998 for capital improvements to its
properties for the first nine months of 1997 and 1996, respectively. A greater
amount of tenant improvements were performed at One Corporate Center III Office
Building in 1996.
The Partnership received $1,361,771 of principal on its mortgage loan investment
to an unaffiliated borrower in the first quarter of 1996. The balance of the
mortgage loan investment was repaid in full by the borrower in 1996.
In the first nine months of 1997, the Partnership received $2,336,028 from its
line of credit agreement, which it loaned to an affiliate of the General
Partner. The Partnership received $72,301 and $952,538 in repayments on loans to
affiliates in the first nine months of 1997 and 1996, respectively.
The Partnership distributed $3,999,970 and $5,999,993 to the limited partners in
the first nine months of 1997 and 1996, respectively.
Short-term liquidity:
At September 30, 1997, the Partnership held cash and cash equivalents of
$2,046,342. This balance provides a reasonable level of working capital for the
Partnership's immediate needs in operating its properties.
<PAGE>
For the Partnership as a whole, management projects positive cash flow from
operations in 1997. The Partnership has budgeted approximately $800,000 for
necessary capital improvements for all properties in 1997 which is expected to
be funded from available cash reserves or from operations of the properties.
The $5 million revolving credit agreement originally expired in June 1997. The
lender extended the maturity of the loan to June 1999.
Long-term liquidity:
While the present outlook for the Partnership's liquidity is favorable, market
conditions may change 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 orderly liquidation of all its assets.
Although there can be no assurance as to the timing of the liquidation due to
real estate market conditions, the general difficulty of disposing of real
estate, and other general economic factors, it is anticipated that such
liquidation would result in the dissolution of the Partnership followed by a
liquidating distribution the limited partners by December 1999. In this regard,
the Partnership placed AAA Century Airport Self-Storage and Burbank Mini-Storage
on the market for sale effective August 1, 1997.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of
the State of California for the County of Los Angeles, Case No. BC133799 (Class
and Derivative Action Complaint).
The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
<PAGE>
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. Defendants intend to file a demurrer to the second consolidated and
amended complaint on or before December 1, 1997.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number 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 52,369 and 52,739 weighted
average limited partnership units (in
hundreds) outstanding in 1997 and 1996.
27. Financial Data Schedule for the quarter
ended September 30, 1997.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended September 30, 1997.
<PAGE>
MCNEIL REAL ESTATE FUND 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 13, 1997 By: /s/ Ron K. Taylor
- ----------------- -------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
November 13, 1997 By: /s/ Carol A. Fahs
- ----------------- ------------------------------------------
Date Carol A. Fahs
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,046,342
<SECURITIES> 0
<RECEIVABLES> 355,592
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 27,069,778
<DEPRECIATION> (8,521,492)
<TOTAL-ASSETS> 32,956,152
<CURRENT-LIABILITIES> 0
<BONDS> 3,437,647
0
0
<COMMON> 0
<OTHER-SE> 28,507,123
<TOTAL-LIABILITY-AND-EQUITY> 32,956,152
<SALES> 6,325,314
<TOTAL-REVENUES> 7,016,158
<CGS> 2,944,189
<TOTAL-COSTS> 4,091,744
<OTHER-EXPENSES> 738,324
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 222,419
<INCOME-PRETAX> 1,963,671
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,963,671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,963,671
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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