UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
-------------------------------------------
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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
MCNEIL REAL ESTATE FUND XXVII, L.P.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- ------------
ASSETS
- ------
Real estate investments:
<S> <C> <C>
Land ......................................................... $ 4,196,277 $ 4,196,277
Buildings and improvements ................................... 24,241,931 24,202,659
------------ ------------
28,438,208 28,398,936
Less: Accumulated depreciation and amortization ............. (10,487,553) (10,156,882)
------------ ------------
17,950,655 18,242,054
Assets held for sale ............................................ 4,613,386 4,613,386
Mortgage loan investments - affiliates .......................... 1,306,488 1,306,488
Cash and cash equivalents ....................................... 2,788,107 2,844,032
Cash segregated for security deposits and repurchase
of limited partnership units ................................. 135,246 467,207
Accounts receivable ............................................. 184,573 178,537
Accrued interest receivable ..................................... 11,374 12,206
Prepaid expenses and other assets ............................... 165,689 177,461
------------ ------------
$ 27,155,518 $ 27,841,371
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- -------------------------------------------
Accounts payable and accrued expenses ........................... $ 79,995 $ 70,657
Accrued property taxes .......................................... 299,257 --
Payable to limited partners ..................................... -- 332,928
Payable to affiliates ........................................... 1,378,297 1,230,795
Security deposits and deferred rental revenue ................... 282,870 248,650
------------ ------------
2,040,419 1,883,030
------------ ------------
Partners' equity (deficit):
Limited partners - 10,000,000 limited partnership
units authorized; 5,162,909 limited partnership units
outstanding at March 31, 1999 and December 31, 1998 ........ 25,157,340 26,007,139
General Partner .............................................. (42,241) (48,798)
------------ ------------
25,115,099 25,958,341
------------ ------------
$ 27,155,518 $ 27,841,371
============ ============
</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,
----------------------------
1999 1998
---------- ----------
Revenue:
<S> <C> <C>
Rental revenue ........................................ $2,279,983 $2,203,177
Interest income on mortgage loan investments -
affiliates .......................................... 32,188 190,288
Other interest income ................................. 40,799 39,088
---------- ----------
Total revenue ....................................... 2,352,970 2,432,553
---------- ----------
Expenses:
Interest .............................................. 3,194 96,035
Depreciation and amortization ......................... 330,671 332,208
Property taxes ........................................ 299,257 283,836
Personnel costs ....................................... 202,377 224,698
Utilities ............................................. 114,345 106,402
Repairs and maintenance ............................... 156,689 138,995
Property management fees - affiliates ................. 126,875 121,495
Other property operating expenses ..................... 139,857 147,812
General and administrative ............................ 93,746 128,428
General and administrative - affiliates ............... 230,303 227,373
---------- ----------
Total expenses ...................................... 1,697,314 1,807,282
---------- ----------
Net income ............................................... $ 655,656 $ 625,271
========== ==========
Net income allocable to limited partners ................. $ 649,099 $ 619,018
Net income allocable to General Partner .................. 6,557 6,253
---------- ----------
Net income ............................................... $ 655,656 $ 625,271
========== ==========
Net income per weighted average hundred limited
partnership units ..................................... $ 12.57 $ 11.90
========== ==========
Distributions per weighted average hundred limited
partnership units ..................................... $ 29.03 $ 43.21
========== ==========
</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, 1999 and 1998
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity (Deficit)
------------- ------------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1997 ............ $ (76,949) $ 29,076,126 $ 28,999,177
Net income .............................. 6,253 619,018 625,271
Distributions to limited partners........ -- (2,247,060) (2,247,060)
------------ ------------ ------------
Balance at March 31, 1998 ............... $ (70,696) $ 27,448,084 $ 27,377,388
============ ============ ============
Balance at December 31, 1998 ............ $ (48,798) $ 26,007,139 $ 25,958,341
Net income .............................. 6,557 649,099 655,656
Distributions to limited partners ....... -- (1,498,898) (1,498,898)
------------ ------------ ------------
Balance at March 31, 1999 ............... $ (42,241) $ 25,157,340 $ 25,115,099
============ ============ ============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XXVII, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1999 1998
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants ..................... $ 2,292,684 $ 2,304,967
Cash paid to suppliers ......................... (671,002) (780,244)
Cash paid to affiliates ........................ (209,676) (122,908)
Interest received .............................. 40,799 39,088
Interest received from affiliates .............. 33,020 189,588
Interest paid .................................. (3,194) (96,035)
----------- -----------
Net cash provided by operating activities ......... 1,482,631 1,534,456
----------- -----------
Cash flows from investing activities:
Additions to real estate investments and
assets held for sale ......................... (39,272) (426,971)
Mortgage loan investments - affiliates ......... -- (75,000)
----------- -----------
Net cash used in investing activities ............. (39,272) (501,971)
----------- -----------
Cash flows from financing activities:
Net decrease in cash segregated for
repurchase of limited partnership units ...... 332,542 331,782
Repurchase of limited partnership units ........ (332,928) (332,928)
Distributions to limited partners .............. (1,498,898) (2,247,060)
----------- -----------
Net cash used in financing activities ............. (1,499,284) (2,248,206)
----------- -----------
Net decrease in cash and cash equivalents ......... (55,925) (1,215,721)
Cash and cash equivalents at beginning of
period ......................................... 2,844,032 2,440,084
----------- -----------
Cash and cash equivalents at end of period ........ $ 2,788,107 $ 1,224,363
=========== ===========
</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,
-------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net income ............................................ $ 655,656 $ 625,271
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ...................... 330,671 332,208
Changes in assets and liabilities:
Cash segregated for security deposits ............ (581) (335)
Accounts receivable .............................. (6,036) 111,631
Accrued interest receivable ...................... 832 (700)
Prepaid expenses and other assets ................ 11,772 17,644
Accounts payable and accrued expenses ............ 9,338 (63,818)
Accrued property taxes ........................... 299,257 283,836
Payable to affiliates ............................ 147,502 225,960
Security deposits and deferred rental
revenue ........................................ 34,220 2,759
----------- -----------
Total adjustments .............................. 826,975 909,185
----------- -----------
Net cash provided by operating activities ............. $ 1,482,631 $ 1,534,456
=========== ===========
</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, 1999
(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 three months ended March 31, 1999 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1999.
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, 1998, 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 600, LB70, 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 to .75% in 2000,
.50% in 2001 and .25% thereafter. Total accrued but unpaid asset management fees
of $860,074 and $768,885 were outstanding at March 31, 1999 and December 31,
1998, respectively.
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner or its affiliates are as follows:
Three Months Ended
March 31,
------------------------
1999 1998
---------- ----------
Property management fees...................... $ 126,875 $ 121,495
Charged to general and administrative -
affiliates:
Partnership administration................. 82,291 69,177
Asset management fee....................... 148,012 158,196
---------- ---------
$ 357,178 $ 348,868
========== =========
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 $75,000 during the first three months of
1998. No loans were made or repaid during the first three months of 1999.
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 $32,188 and $190,288 for the three months ended
March 31, 1999 and 1998, respectively, of which $4,832 and $25,948,
respectively, was paid or payable by the General Partner.
Payable to affiliates at March 31, 1999 and December 31, 1998 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 October 25, 1996, the Partnership agreed to loan an aggregate of $1.68
million to McNeil Pension Investment Fund, Ltd. ("McPIF"), an affiliate of the
General Partner, at an interest rate of prime plus 1% per annum (the maximum
rate allowed to be incurred by McPIF in connection with borrowings from
affiliates pursuant to McPIF's partnership agreement). The prime lending rate
was 7.75% at March 31, 1999 and December 31, 1998 and was 8.5% at March 31,
1998. In 1996, $820,426 was borrowed by McPIF pursuant to this commitment. An
additional $75,000 was borrowed in January 1998. McPIF borrowed an additional
$411,062 in May 1998 and repaid a $411,062 mortgage loan investment secured by
Brice Road Office Building. This loan is secured by a first lien on Verre Center
Office Building located in Chamblee, Georgia. Interest on the loan is payable
monthly. Principal is payable in November 1999.
NOTE 5.
- -------
In June 1998, the Partnership paid off the $3,437,648 balance of its revolving
credit agreement. Any borrowings under the revolving credit agreement bore
interest at prime plus one-half of one percent or a LIBOR-based rate, if so
elected by the Partnership. The Partnership was required to pay a commitment fee
equal to one-quarter of one percent per annum on any unused portion of the line
of credit. The revolving credit agreement was cancelled by the Partnership in
March 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, 1998. The Partnership reported net income for the
first three months of 1999 of $655,656 as compared to $625,271 for the first
three months of 1998. Revenues were $2,352,970 for the first three months of
1999 and $2,432,553 for the same period in 1998. Expenses were $1,697,314 in the
first quarter of 1999 as compared to $1,807,282 in the first quarter of 1998.
Net cash provided by operating activities was $1,482,631 for the three months
ended March 31, 1999. The Partnership expended $39,272 for capital improvements,
paid $332,928 for the repurchase of limited partnership units (excluding a
decrease in cash segregated for the repurchase of limited partnership units of
$332,542) and distributed $1,498,898 to the limited partners. Cash and cash
equivalents totaled $2,788,107 at March 31, 1999, a net decrease of $55,925 from
the balance at December 31, 1998.
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total revenue decreased by $79,583 for the three months ended March 31, 1999 as
compared to the same period in the prior year. The decrease was mainly due to a
decrease in interest income on mortgage loan investments affiliates, as
discussed below.
Interest income on mortgage loan investments - affiliates decreased by $158,100
for the first three months of 1999 as compared to the same period in 1998. The
decrease was mainly due to the collection of approximately $5.7 million of
affiliate loans in the second quarter of 1998.
Expenses:
Total expenses decreased by $109,968 for the three months ended March 31, 1999
as compared to the same period in the prior year, as discussed below.
Interest expense for the three months ended March 31, 1999 decreased by $92,841
in relation to the respective period in the prior year, due to the payoff of the
Partnership's line of credit in June 1998 and cancellation of the line of credit
agreement in March 1999.
Repairs and maintenance for the three month period ended March 31, 1999
increased by $17,694 as compared to the same period in 1998. The increase was
mainly due to an increase in snow removal costs at One Corporate Center I and
III due to greater snowfall in the first quarter of 1999 in Minnesota, where the
office buildings are located.
General and administrative expenses decreased by $34,682 for first three months
of 1999 in relation to the same period in 1998. The decrease was mainly due to a
greater amount of costs incurred in 1998 to explore alternatives to maximize the
value of the Partnership (see Liquidity and Capital Resources).
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $1,482,631 of cash through operating activities in the
first three months of 1999 as compared to $1,534,456 for the same period in
1998. Interest received from affiliates decreased in 1999 due to the repayment
of affiliate advances in June 1998, as previously discussed. This decrease in
cash provided by operating activities was partially offset by a decrease in cash
paid to suppliers, mainly due to a decrease in general and administrative costs,
as discussed above, and a decrease in interest paid due to the repayment of the
Partnership's line of credit in June 1998.
The Partnership expended $39,272 and $426,971 for capital improvements to its
properties in the first three months of 1999 and 1998, respectively. In the
first quarter of 1998, the roof at AAA Sentry Mini-Storage was replaced and the
exterior of Forest Hill, Margate and Kendall Sunset mini-storages were
repainted. In addition, a greater amount of tenant improvements was performed at
the two office buildings in the first quarter of 1998.
The Partnership loaned $75,000 to an affiliate of the General Partner in the
first three months of 1998. No affiliate loans were made or repaid in the first
quarter of 1999.
<PAGE>
The Partnership distributed $1,498,898 and $2,247,060 to the limited partners in
the first three months of 1999 and 1998, respectively.
Short-term liquidity:
At March 31, 1999, the Partnership held cash and cash equivalents of $2,788,107.
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 1999. The Partnership has budgeted approximately $1.05 million for
necessary capital improvements for all properties in 1999 which is expected to
be funded from available cash reserves or from operations of the properties.
Additional efforts to maintain and improve Partnership liquidity have included
continued attention to property management activities. The objective has been to
obtain maximum occupancy rates while holding expenses to levels necessary to
maximize cash flows. The Partnership has made capital expenditures on its
properties where improvements were expected to increase the competitiveness and
marketability of the properties.
Long-term liquidity:
While the outlook for maintenance of adequate levels of liquidity is favorable,
should operations deteriorate and present cash resources be insufficient for
current needs, the Partnership would require other sources of working capital.
Other possible actions to resolve cash deficiencies include refinancings,
deferral of capital expenditures on Partnership properties except where
improvements are expected to increase the competitiveness and marketability of
the properties, arranging financing from affiliates or the ultimate sale of the
properties.
As previously announced, the Partnership has retained PaineWebber, Incorporated
as its exclusive financial advisor to explore alternatives to maximize the value
of the Partnership, including, without limitation, a transaction in which
limited partnership interests in the Partnership are converted into cash. During
the last full week of March, the Partnership entered into a 45 day exclusivity
agreement with a well-financed bidder with whom it had commenced discussions
with respect to a sale transaction. The Partnership and such party have made
significant progress in negotiating the terms of a proposed transaction and are
continuing to have intensive discussions with respect to a transaction. In light
on these continuing negotiations, the exclusivity agreement has been extended
for an additional 21 days until June 4, 1999. It is possible that the General
Partner and its affiliates will receive non-cash consideration for their
ownership interests in connection with any such transaction. There can be no
assurance regarding whether any such agreement will be reached nor the terms
thereof.
The Partnership placed AAA Century Airport Self-Storage and Burbank Mini-Storage
on the market for sale effective August 1, 1997.
<PAGE>
Forward-Looking Information:
Within this document, certain statements are made as to the expected occupancy
trends, financial condition, results of operations, and cash flows of the
Partnership for periods after March 31, 1999. All of these statements are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements are not
historical and involve risks and uncertainties. The Partnership's actual
occupancy trends, financial condition, results of operations, and cash flows for
future periods may differ materially due to several factors. These factors
include, but are not limited to, the Partnership's ability to control costs,
make necessary capital improvements, negotiate sales or refinancings of its
properties, and respond to changing economic and competitive factors.
YEAR 2000 DISCLOSURE
- --------------------
State of readiness
- ------------------
The year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major systems failure or
miscalculations.
Management has assessed its information technology ("IT") infrastructure to
identify any systems that could be affected by the year 2000 problem. The IT
used by the Partnership for financial reporting and significant accounting
functions was made year 2000 compliant during recent systems conversions. The
software utilized for these functions is licensed by third party vendors who
have warranted that their systems are year 2000 compliant.
Management is in the process of evaluating the mechanical and embedded
technological systems at the various properties. Management has inventoried all
such systems and queried suppliers, vendors and manufacturers to determine year
2000 compliance. Based on this review, management believes these systems are
substantially compliant. In circumstances of non-compliance management will work
with the vendor to remedy the problem or seek alternative suppliers who will be
in compliance. Management believes that the remediation of any outstanding year
2000 conversion issues will not have a material or adverse effect on the
Partnership's operations. However, no estimates can be made as to the potential
adverse impact resulting from the failure of third party service providers and
vendors to be year 2000 compliant.
Cost
- ----
The cost of IT and embedded technology systems testing and upgrades is not
expected to be material to the Partnership. Because all the IT systems have been
upgraded over the last three years, all such systems were compliant, or made
compliant at no additional cost by third party vendors. Management anticipates
the costs of assessing, testing, and if necessary replacing embedded technology
components will be less than $50,000. Such costs will be funded from operations
of the Partnership.
<PAGE>
Risks
- -----
Ultimately, the potential impact of the year 2000 issue will depend not only on
the corrective measures the Partnership undertakes, but also on the way in which
the year 2000 issue is addressed by government agencies and entities that
provide services or supplies to the Partnership. Management has not determined
the most likely worst case scenario to the Partnership. As management studies
the findings of its property systems assessment and testing, management will
develop a better understanding of what would be the worst case scenario.
Management believes that progress on all areas is proceeding and that the
Partnership will experience no adverse effect as a result of the year 2000
issue. However, there is no assurance that this will be the case.
Contingency plans
- -----------------
Management is developing contingency plans to address potential year 2000
non-compliance of IT and embedded technology systems. Management believes that
failure of any IT system could have an adverse impact on operations. However,
management believes that alternative systems are available that could be
utilized to minimize such impact. Management believes that any failure in the
embedded technology systems could have an adverse impact on that property's
performance. Management will assess these risks and develop plans to mitigate
possible failures by July 1999.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIII, 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., Hearth Hollow Associates, McNeil Midwest Properties I, L.P. and
Regency North Associates, L.P., - 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 limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. The case was stayed pending settlement discussions. A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties. Preliminary
Court approval was received on October 6, 1998. A hearing for Final Approval of
Settlement, initially scheduled for December 17, 1998, has been continued to
July 2, 1999.
<PAGE>
Because McNeil Real Estate Fund XXIII, L.P., Hearth Hollow Associates, McNeil
Midwest Properties I, L.P. and Regency North Associates, L.P. would be part of
the transaction contemplated in the settlement and Plaintiffs claim that an
effort should be made to sell the McNeil Partnerships, Plaintiffs have included
allegations with respect to McNeil Real Estate Fund XXIII, L.P., Hearth Hollow
Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P.
in the third consolidated and amended complaint.
Plaintiff's counsel intends to seek an order awarding attorney's fees and
reimbursements of their out-of-pocket expenses. The amount of such award is
undeterminable until final approval is received from the court. Fees and
expenses shall be allocated amongst the Partnerships on a pro rata basis, based
upon tangible asset value of each such partnership, less total liabilities,
calculated in accordance with the Amended Partnership Agreements for the quarter
most recently ended.
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).
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 51,629 and 51,999 weighted
average limited partnership units (in
hundreds) outstanding in 1999 and 1998.
27. Financial Data Schedule for the quarter
ended March 31, 1999.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended March 31, 1999.
<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 18, 1999 By: /s/ Ron K. Taylor
- -------------- ---------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
May 18, 1999 By: /s/ Carol A. Fahs
- -------------- ---------------------------------------------
Date Carol A. Fahs
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,788,107
<SECURITIES> 0
<RECEIVABLES> 184,573
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