ITEM 1. BUSINESS - ------- --------
ORGANIZATION - ------------
McNeil Real Estate Fund IX, Ltd. (the "Partnership") was organized May 1, 1978, as a limited partnership under provisions of the California Uniform Limited Partnership Act. 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 Partnership is governed by an amended and restated partnership agreement dated November 12, 1991, as amended (the "Amended Partnership Agreement"). Prior to November 12, 1991, Pacific Investors Corporation (the prior "Corporate General Partner"), a wholly-owned subsidiary of Southmark Corporation ("Southmark"), and McNeil were the general partners of the Partnership, which was governed by an agreement of limited partnership dated May 1, 1978 (the "Original Partnership Agreement"). The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240.
On January 10, 1979, a Registration Statement on Form S-11 was declared effective by the Securities and Exchange Commission whereby the Partnership offered for sale $55,000,000 of limited partnership units ("Units"). The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The sale of Units closed on September 7, 1979, with 110,000 Units sold at $500 each, or gross proceeds of $55,000,000 to the Partnership. In addition, the original general partners purchased an additional 200 Units for $100,000. In 1993, 30 Units were relinquished leaving 110,170 Units outstanding at December 31, 1998.
SOUTHMARK BANKRUPTCY AND ASSET PURCHASE AGREEMENT - -------------------------------------------------
On July 14, 1989, Southmark filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Neither the Partnership, McNeil nor the Corporate General Partner were included in the filing. Southmark's reorganization plan became effective August 10, 1990. Under the plan, most of Southmark's assets, which included Southmark's interests in the Corporate General Partner, were sold or liquidated for the benefit of creditors.
In accordance with Southmark's reorganization plan, Southmark, McNeil and various of their affiliates entered into an asset purchase agreement on October 12, 1990, providing for, among other things, the transfer of control to McNeil or his affiliates of 34 limited partnerships (including the Partnership) in the Southmark portfolio.
On February 14, 1991, pursuant to the asset purchase agreement as amended on that date: (a) an affiliate of McNeil purchased the Corporate General Partner's economic interest in the Partnership; (b) McNeil became the managing general partner of the Partnership pursuant to an agreement with the Corporate General Partner that delegated management authority to McNeil; and (c) McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of McNeil, acquired the assets relating to the property management and partnership administrative business of Southmark and its affiliates and commenced management of the Partnership's properties pursuant to an assignment of the existing property management agreements from the Southmark affiliates.
On November 12, 1991, the limited partners approved a restructuring proposal that provided for (i) the replacement of the Corporate General Partner and McNeil with the General Partner; (ii) the adoption of the Amended Partnership Agreement, which substantially altered the provisions of the Original Partnership Agreement relating to, among other things, compensation, reimbursement of expenses, and voting rights; and (iii) the approval of a new property management agreement with McREMI, the Partnership's property manager.
The Amended Partnership Agreement provides for a Management Incentive Distribution ("MID") to replace all other forms of general partner compensation other than property management fees and reimbursements of certain costs. Additional Units may be issued in connection with the payment of the MID pursuant to the Amended Partnership Agreement. See Item 8 - Note 2 - "Transactions with Affiliates." For a discussion of the methodology for calculating and distributing MID, see Item 13 - Certain Relationships and Related Transactions.
Settlement of Claims:
The Partnership filed claims with the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court") against Southmark for damages relating to improper overcharges, breach of contract and breach of fiduciary duty. The Partnership settled these claims in 1991, and such settlement was approved by the Bankruptcy Court.
An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April 14, 1995, was issued by the Bankruptcy Court. In accordance with the Order, in May 1995, the Partnership received in full satisfaction of its claims, $53,573 in cash, and common and preferred stock in the reorganized Southmark. The cash and stock represent the Partnership's pro-rata share of Southmark assets available for Class 8 claimants. The Partnership sold the Southmark common and preferred stock in May 1995 for $17,244 which, when combined with the cash proceeds from Southmark, resulted in a gain on settlement of litigation of $70,817.
CURRENT OPERATIONS - ------------------
General:
The Partnership is engaged in real estate activities, including the ownership, operation and management of residential real estate and other real estate related assets. At December 31, 1998, the Partnership owned thirteen income-producing properties as described in Item 2
ITEM 2. PROPERTIES - ------- ----------
The table below sets forth the real estate investment portfolio of the Partnership at December 31, 1998. The buildings and the land on which they are located are owned by the Partnership in fee, subject in each case to a first lien deed of trust as set forth more fully in Item 8 - Note 5 - "Mortgage Notes Payable." See also Item 8 - Note 4 - "Real Estate Investments" and Schedule III - - "Real Estate Investments and Accumulated Depreciation." In the opinion of management, the properties are adequately covered by insurance.
Total: Apartments - 3,306 units
(1) Berkley Hills Apartments is owned by Berkley Hills Associates which is wholly-owned by the Partnership and the General Partner.
(2) Cherry Hills Apartments is owned by Cherry Hills Fund IX Limited Partnership which is wholly-owned by the Partnership.
(3) Forest Park Village Apartments is owned by Forest Park Fund IX Associates Limited Partnership which is wholly-owned by the Partnership and the General Partner.
(4) Lantern Tree Apartments is owned by Lantern Tree Fund IX Limited Partnership which is wholly-owned by the Partnership.
(5) Meridian West Apartments is owned by Meridian West Fund IX Limited Partnership which is wholly-owned by the Partnership.
(6) Pennbrook Apartments is owned by Pennbrook Fund IX Associates, L.P. which is wholly-owned by the Partnership and the General Partner.
(7) Rockborough Apartments is owned by Rockborough Fund IX Limited Partnership which is wholly-owned by the Partnership.
(8) Rolling Hills Apartments is owned by Rolling Hills Fund IX Associates L.P. which is wholly-owned by the Partnership and the General Partner.
(9) Ruskin Place Apartments is owned by Ruskin Place Fund IX Associates which is wholly-owned by the Partnership and the General Partner.
(10) Westgate Apartments (formerly known as Sherwood Forest Apartments) is owned by Sherwood Forest Fund IX Associates which is wholly-owned by the Partnership and the General Partner.
(11) Williamsburg Apartments is owned by Williamsburg Fund IX Limited Partnership which is wholly-owned by the Partnership.
The following table sets forth the properties' occupancy rate and rent per square foot for each of the last five years:
Occupancy rate represents all units leased divided by the total number of units of the property as of December 31 of the given year. Rent per square foot represents all revenue, except interest, derived from the property divided by the leasable square footage of the property.
Competitive Conditions - ----------------------
Real Estate Investments:
Berkley Hills Apartments - ------------------------
New construction is beginning to have an effect on Berkley Hills Apartments and the surrounding Nashville area. Rental specials were prevalent throughout 1998 and are expected to continue in 1999. Market occupancy rates have fallen from the high to the mid 90's. Berkley Hills works to maintain occupancy levels through resident retention and outside marketing programs. Continuing capital improvements are necessary for Berkley Hills to remain competitive with nearby apartment communities. Most of the new construction is directed at upscale single residents, while Berkley Hills targets middle class families and singles.
Cherry Hills Apartments - -----------------------
Cherry Hills Apartments is one of Wichita's finer apartment communities in terms of interior and exterior appearance. However, layoffs at local employers during the fourth quarter of 1998, combined with new apartment projects in the Wichita area are causing decreased occupancy, decreased rental rates, increased marketing expenditures and special promotions throughout the market. Cherry Hills year-end occupancy rate of 89% trails the market average of 91%. Rental rates, which have been higher than competitors' rates, are being adjusted until occupancy stabilizes.
Forest Park Village Apartments - ------------------------------
Forest Park Village Apartments expects to complete a five-year capital improvement program later this year. Exterior renovations are largely complete, and interior upgrades are in process. The capital program is needed to allow the property to compete with numerous other apartment communities in the Northeast Columbus submarket. Forest Park Village represents a common property in the submarket, with no distinguishing characteristics other than basements in all its units. The submarket is very competitive, and many of the competing properties have been renovated in the past few years.
Heather Square Apartments - -------------------------
Occupancy rates at Heather Square Apartments typically run 1 or 2 percentage points above the market due to the excellent curb appeal of the property. The property also is able to command rental rates slightly higher than most of its competition. Competition is mixed in the Dallas submarket where Heather Square is located. As long as the local economy remains strong, it is anticipated that the property will do well in competition with both older properties and new construction under development. Annual absorption of apartment units in the property's submarket has roughly equaled newly constructed units in the past three years.
Lantern Tree Apartments - -----------------------
New apartment construction and staffing turnover contributed to increased vacancy at Lantern Tree during 1998. However, the property has a desirable location, close to a newly developed business park. Lantern Tree compares well with its competition due to spacious and attractive floor plans. A turnaround in occupancy rates is expected at Lantern Tree as new construction is absorbed, and a stable staff contributes operating efficiencies. The property appeals to single, upper-middle class residents. The principal competitive disadvantage of the property is its location which is set back from the main thoroughfare reducing its drive-by visibility.
Meridian West Apartments - ------------------------
The economy in Meridian West Apartments' submarket remains strong, leading to improved operating results at the property. Vacancy losses decreased in both 1997 and 1998. The property increased base rental rates in 1997 and 1998, after a period of no or very small increases. The improved cash flow is being reinvested in the property to improve the competitiveness of the property. Meridian West competes primarily with better quality apartment communities, and thus the Partnership generally expects rental and occupancy rates lower than local market rates.
Pennbrook Apartments - --------------------
Pennbrook Apartments' year end occupancy rate of 98% exceeds the 95% average of the Dallas submarket where the property is located. Extensive capital improvements during 1991-1993 have positioned the property to compete effectively for the middle-class, single residents that dominate its resident profile. The Dallas market is expected to remain strong. For the past three years, new apartment construction has roughly equaled the number of apartment units absorbed by the market. New construction is generally marketed toward the higher end of the market, and should have little effect on Pennbrook.
Rockborough Apartments - ----------------------
Rockborough Apartments boasts excellent curb appeal, which has enabled the property to maintain occupancy levels above the 96% average occupancy for the property's submarket. Rockborough compares well to the established apartment communities in the area. There is new construction in the area, but rental rates are substantially higher than the rates charged at Rockborough. The Dallas area economy is expected to remain strong. Most of the new construction in the area will be for high-quality apartment communities, and should have little effect on Rockborough.
Rolling Hills Apartments - ------------------------
The area surrounding Rolling Hills Apartments continues to experience strong growth. Capital improvements at Rolling Hills the past three years have upgraded the property to compete more effectively with the high-quality apartment communities in the immediate area. Rolling Hills offers the largest floor plans in the area. The unit interiors are being updated to better compete with the newer properties in Rolling Hills' submarket. The property's average occupancy rate is in line with the Louisville market's 93% average, but average rental rates are lower than market rates. Rolling Hills is a good quality property competing against properties of even better quality.
Ruskin Place Apartments - -----------------------
Vinyl residing at Ruskin Place Apartments has improved the property's curb appeal and resulted in a year-end occupancy rate of 97% as compared to the market's 93%. Ruskin Place Apartments has steadily improved its performance over the past several years despite competitive pressures from newer apartment properties in the Lincoln market. The newer properties and new construction in progress have put upward pressure on local rental rates. Ruskin Place Apartments has been able to offer its units at lower, but still rising rental rates. This trend is expected to continue given the population increases and stable economic conditions in the local area.
Westgate Apartments - -------------------
The exterior appearance of Westgate Apartments is much improved as a result of several capital projects completed during 1997 and 1998. Additional capital improvements are needed at Westgate to maintain the property's position in the market. The exterior and interiors of the units are dated. Occupancy rates are averaging four percentage points below competing properties, and rental rates are averaging approximately 85% of the average rental rates charged by competing properties. Nine percent of Westgate's units are three and four bedroom floor plans, which are the only three and four bedroom units in the area. The local economy is doing very well, with unemployment at 2.6%. The property also has a good location in a desirable school district.
Williamsburg Apartments - -----------------------
Competition from new and refurbished apartment communities is putting pressure on Williamsburg Apartments' financial performance. Although the occupancy rate remains slightly above the city-wide average, rental rate increases will be limited for the next year or two. Improvements in cost controls and resident retention will be key to improved operating results. The property is in good condition, with only minor capital improvements needed. The property offers attractive floor plans with interiors that are being upgraded with new fixtures. Nearby Barksdale Air Force Base and a growing gambling industry provide the employment base for many of the property's tenants.
Asset Held for Sale:
Sheraton Hills Apartments - -------------------------
The year-end occupancy rate at Sheraton Hills Apartments was 96%, above the submarket's average of 94%. The Nashville apartment market is overbuilt, and developers are planning new apartment projects for 1999. Although Sheraton Hills will not compete directly with the new construction, the new construction will tend to slow the increases in rental rates that older properties may expect in coming years. Sheraton Hills will continue to focus on selected capital improvements and its excellent reputation for service that has promoted decreased tenant turnover. On August 1, 1997, the Partnership placed Sheraton Hills on the market for sale.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS - ------- -----------------
The Partnership is not party to, nor are any of the Partnership's properties the subject of, any material pending legal proceedings, other than ordinary, routine litigation incidental to the Partnership's business, except for the following:
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 May 25, 1999.
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.
For a discussion of the Southmark bankruptcy, see Item 1 - Business.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- ---------------------------------------------------
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND - ------- ------------------------------------------------------------ RELATED SECURITY HOLDER MATTERS -------------------------------
(A) There is no established public trading market for limited partnership units, nor is one expected to develop.
(B) Title of Class Number of Record Unit Holders -------------- -----------------------------
Limited partnership units 4,102 as of February 1, 1999
(C) The Partnership paid distributions of $2,300,008 and $2,749,992 to the limited partners in 1998 and 1997, respectively. During the last week of March 1999, the Partnership distributed approximately $749,000 to limited partners of record as of March 1, 1999. The Partnership accrued distributions of MID of $1,164,510 and $1,137,022 for the benefit of the General Partner for the years ended December 31, 1998 and 1997, respectively, of which $1,518,681 remains unpaid at December 31, 1998. See Item 8 - Note 2 - "Transactions with Affiliates." See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the likelihood that the Partnership will continue distributions to the limited partners.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA - ------- -----------------------
The following table sets forth a summary of certain financial data for the Partnership. This summary should be read in conjunction with the Partnership's financial statements and notes thereto appearing in Item 8 - Financial Statements and Supplementary Data.
See Item 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - ------- ----------------------------------------------------------- AND RESULTS OF OPERATIONS -------------------------
FINANCIAL CONDITION - -------------------
The Partnership was formed to acquire, operate and ultimately dispose of a portfolio of income-producing real properties. At the end of 1998, the Partnership owned thirteen apartment properties. All of the Partnership's properties are subject to mortgage notes.
RESULTS OF OPERATIONS - ---------------------
1998 compared to 1997
Revenues:
Rental revenue increased $691,366 or 3.5% in 1998 as compared to rental revenue earned in 1997. Rental revenue increased at 11 of the Partnership's 13 properties. All of the Partnership's properties increased base rental rates during 1998. The increased base rental rates were complemented by increased average occupancy rates at Forest Park Village Apartments, Rockborough Apartments, Pennbrook Apartments and Ruskin Place Apartments. These four properties increased their total rental revenue by 7.0%, 6.1%, 5.1% and 4.9%, respectively. Average vacancy and other rental losses were unchanged at Berkley Hills Apartments and Meridian West Apartments. These two properties reported increased rental revenue of 3.6% and 3.8%, respectively. Increased base rental rates were partially offset by increased vacancy and other rental losses at Heather Square Apartments, Rolling Hills Apartments, Sheraton Hills Apartments, Westgate Apartments and Williamsburg Apartments. These five properties reported increased rental revenue of 3.7%, 2.9%, 3.2%, 2.0% and 2.0%, respectively. Increased base rental rates were more than offset by increased vacancy and other losses at Cherry Hills Apartments and Lantern Tree Apartments. These two properties reported 0.7% and 0.6% decreases, respectively, in net rental revenue for the year.
Interest revenue decreased 7.5% due to a decrease in the average balance of Partnership cash and cash equivalents invested in interest-bearing accounts.
The Partnership reported a one-time gain on involuntary conversion in 1997 relating to a fire at Sheraton Hills Apartments. No such gain was reported in 1998.
Expenses:
Partnership expenses increased $696,383 or 3.5% in 1998 as compared to 1997. Most expense items were comparable in 1998 to amounts reported in 1997. The Partnership reported significant increases in personnel expenses, general and administrative expenses, and general and administrative expenses paid to affiliates.
Personnel expenses increased $294,846 or 12.2% in 1998 as compared to 1997. The Partnership increased wage and salary rates and benefits in order to retain property personnel in a competitive job market. The increases were reported by all of the Partnership's properties, but were especially noticeable at Rolling Hills Apartments, Pennbrook Apartments, Westgate Apartments and Williamsburg Apartments. Increased personnel costs at these four properties exceeded 14%.
General and administrative expenses increased $612,466 to $778,596 in 1998. The increase was attributable to costs incurred to explore alternatives to maximize the value of the Partnership (see Liquidity and Capital Resources).
General and administrative expenses paid to affiliates increased $41,034 or 9.0% in 1998 as compared to 1997. Costs associated with investor relation services were charged to general and administrative during 1997. Investor relation services, beginning in 1998, are now provided by an affiliate, which accounts for the increase in general and administrative expenses paid to affiliates.
The Partnership incurred a $405,235 extraordinary loss in 1998. The Partnership refinanced the Rolling Hills mortgage note during 1998. Unamortized deferred borrowing costs associated with the prior mortgage note amounted to $405,235. The Partnership wrote off the unamortized costs when the Partnership closed escrow on the new Rolling Hills mortgage note.
1997 compared to 1996
Revenues:
Rental revenue increased $215,408 or 1.1% in 1997 compared to rental revenue achieved in 1996. Excluding rental revenue from Westridge Apartments, sold by the Partnership on July 30, 1996, rental revenue increased $613,921 or 3.1% in 1997 compared to 1996. Rental revenues increased at 11 of the Partnership's 13 remaining properties. Rental revenue was unchanged at Forest Park Village Apartments and Williamsburg Apartments as the increases in base rental rates were matched by comparable increases in vacancy losses. Of the Partnership's 11 other properties, 10 increased base rental rates an average of 3.5%. Meridian West Apartments did not increase base rental rates, but rental revenue improved as vacancy losses decreased by 19.1%. Improving occupancy rates also boosted rental revenue at Cherry Hills Apartments, Lantern Tree Apartments, and Westgate Apartments.
In 1997, the Partnership incurred a gain on involuntary conversion totaling $474,376 relating to a fire that destroyed twelve apartment units at Sheraton Hills Apartments. No such gains were recorded in 1996.
Expenses:
Partnership expenses decreased $619,925 or 3.1% in 1997 compared to 1996. However, after excluding both the loss on sale of Westridge Apartments and expenses associated with operations at Westridge Apartments before its sale, expenses remained virtually unchanged in 1997 compared to 1996. Decreases in general and administrative expenses and general and administrative expenses paid to affiliates were partially offset by increased property taxes.
Excluding Westridge Apartments for 1996, property taxes for 1997 increased $114,337 or 8.3% over property taxes for 1996. The increase was due to increases assessed valuation and tax rates in Dallas County, Texas, where three of the Partnership's properties are located.
General and administrative expenses decreased $172,168 or 51%. The decrease is attributable to costs relating to the evaluation and dissemination of information with regards to an unsolicited tender offer in 1996. No such costs were incurred in 1997. Decreased tender offer costs were partially offset by investor services expenses that were paid to a non-affiliate vendor beginning in 1997. Prior to 1997, investor services were provided by an affiliate of the General Partner, and the related expenses were reported with general and administrative expenses paid to affiliates.
General and administrative expenses paid to affiliates decreased $83,821 or 15.6%. Such expenses are generally charged based on the number of properties under management. The sale of Westridge Apartments during 1996, as well as decreased expenses incurred by the affiliates, both contributed to the decrease in expenses paid to affiliates. Also contributing to the decrease in general and administrative expenses paid to affiliates was the reclassification of investor services expenses to general and administrative expenses as discussed in the preceding paragraph.
Due to the sale of Westridge Apartments on July 30, 1996, the Partnership recognized a $220,157 loss on sale of real estate in 1996. No properties were disposed of during 1997.
LIQUIDITY AND CAPITAL RESOURCES - -------------------------------
During the three year period ended December 31, 1998, the Partnership's net income totaled $761,248. During the same three year period, the Partnership generated $14,217,621 of cash flow from operating activities. Cash provided by operating activities increased $459,526 or 9.5% in 1998 as compared to 1997. A 9.2% increase in cash paid to suppliers was more than offset by an increase in cash received from tenants and decreases in interest paid, property taxes paid and escrowed, and cash paid to affiliates.
The Partnership continued to invest in capital improvements at its properties during 1998. The Partnership invested $1,841,522 in capital improvements during 1998. These expenditures are necessary to allow the Partnership's aging properties to maintain their appeal to current and prospective tenants. The Partnership has budgeted an additional $1,601,000 for capital improvements in 1999.
The Partnership refinanced the Forest Park Village mortgage note and the Rolling Hills mortgage note during 1998. Proceeds from the refinancings were minimal, only $198,107. Most of the proceeds from the refinancings were used to pay deferred borrowing costs associated with the new borrowings. The refinancings reduced the interest rates on the two mortgage notes from 9.13% to 6.97% for Forest Park Village, and from 9.25% to 7.00% for Rolling Hills. However, the new interest rates are variable rates based on the London Interbank Offered Rate. The Partnership also modified and extended the Sheraton Hills mortgage note during 1998. The interest rate on the modified note was changed from a variable rate to a fixed rate of 6.90%. The Partnership's next maturing mortgage note is the Pennbrook mortgage note, which matures in February 2000. The General Partner has begun exploring financing alternatives for the Pennbrook mortgage note.
Short-term liquidity:
At December 31, 1998, the Partnership held cash and cash equivalents of $3,166,577, a decrease of $164,259 from the balance at the end of 1997. The General Partner anticipates that cash generated from operations during 1999 will be sufficient to fund the partnership's operating expenses, budgeted capital improvements, and monthly debt service requirements. Cash reserves are adequate for anticipated operations during 1999.
Though reduced in scope from amounts incurred in previous years, the Partnership will continue to invest substantial sums in capital improvements for the Partnership's properties. The Partnership has budgeted $1,601,000 for capital improvements for 1999. The General Partner believes these capital improvements are necessary to allow the Partnership to increase its rental revenues in the competitive markets in which the Partnership's properties operate. These expenditures also allow the Partnership to reduce future repair and maintenance expenses from amounts that would otherwise be incurred.
Long-term liquidity:
For the long term, property operations will remain the primary source of funds. In this regard, the General Partner expects that the approximately $6.3 million of capital improvements made by the Partnership during the past three years will yield improved cash flow from property operations in 1999.
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. No such other sources have been identified, and the Partnership has no established lines of credit. Other possible actions to resolve working capital deficiencies include refinancing or renegotiating terms of existing loans, 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 from affiliates would be provided in the future, since neither the General Partner nor any affiliates have any obligation in this regard.
As previously announced, the Partnership has retained PaineWebber, Incorporated ("PaineWebber") 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. The Partnership, through PaineWebber, provided financial and other information to interested parties as part of an auction process and until early March 1999 was conducting discussions with one bidder in an attempt to reach a definitive agreement with respect to a sale transaction. In early March 1999, because the Partnership had been unable to conclude negotiations for a transaction with such bidder, the Partnership terminated such discussions and commenced discussions with respect to a sale transaction with another well-financed bidder who had been involved in the original auction process. During the last full week of March, the Partnership entered into a 45 day exclusivity agreement with such party. 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.
Income Allocations and Distributions:
Terms of the Amended Partnership Agreement specify that income before depreciation is allocated to the General Partner to the extent of MID paid in cash. Depreciation is allocated in the ratio of 95:5 to the limited partners and the General Partner, respectively. Therefore, for the years ended December 31, 1998, 1997 and 1996, net income of $3,898, $706,613 and $1,161,697, respectively, was allocated to the General Partner. The limited partners received allocations of net income of $74,070 and $270,649 and an allocation of net loss of $1,455,679 for the years ended December 31, 1998, 1997 and 1996, respectively.
The Partnership distributed $2,300,008 and $2,749,992 to the limited partners in 1998 and 1997, respectively. Approximately $2,042,000 of the 1997 distribution represented proceeds from the sale of Westridge Apartments. The rest of 1997's distribution, and 1998's distribution represented distributions of cash flow from operations and from cash reserves of the Partnership. During the last week of March 1999, the Partnership distributed approximately $749,000 to the limited partners of record as of March 1, 1999. The General Partner will continue to monitor the cash reserves and working capital needs of the Partnership to determine when cash flows will support additional distributions to the limited partners.
The Partnership paid $903,815 and $1,370,360 of MID to the General Partner in 1997 and 1996, respectively. No MID payments were paid to the General Partner during 1998. The General Partner has elected to defer payment of administrative reimbursements and MID so that the Partnership can pay distributions to the limited partners.
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 are 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. Management will complete assessment of findings by May 1, 1999. 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.
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 June, 1999.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------- ----------------------------------------------------------
Not Applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------- -------------------------------------------
All other schedules are omitted because they are not applicable or the financial information required is included in the financial statements or the notes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of McNeil Real Estate Fund IX, Ltd.:
We have audited the accompanying balance sheets of McNeil Real Estate Fund IX, Ltd. (a California limited partnership) as of December 31, 1998 and 1997, and the related statements of operations, partners' deficit and cash flows for each of the three years in the period ended December 31, 1998. These financial statements and the schedule referred to below are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of McNeil Real Estate Fund IX, Ltd. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Dallas, Texas March 19, 1999
McNEIL REAL ESTATE FUND IX, LTD.
BALANCE SHEETS
See accompanying notes to financial statements.
McNEIL REAL ESTATE FUND IX, LTD.
STATEMENTS OF OPERATIONS
See accompanying notes to financial statements.
McNEIL REAL ESTATE FUND IX, LTD.
STATEMENTS OF PARTNERS' DEFICIT
For the Years Ended December 31, 1998, 1997 and 1996
See accompanying notes to financial statements.
McNEIL REAL ESTATE FUND IX, LTD.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
See discussion of noncash investing and financing activities in Note 2 - "Transactions with Affiliates" and Note 7 - "Refinancing of Mortgage Notes Payable." See accompanying notes to financial statements.
McNEIL REAL ESTATE FUND IX, LTD.
STATEMENTS OF CASH FLOWS
Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities
See accompanying notes to financial statements.
McNEIL REAL ESTATE FUND IX, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------------------------
Organization - ------------
McNeil Real Estate Fund IX, Ltd. (the "Partnership") was organized on May 1, 1978 as a limited partnership under the provisions of the California Uniform Limited Partnership Act. The general partner of the Partnership is McNeil Partners L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil. The Partnership is governed by an amended and restated partnership agreement dated November 12, 1991, as amended (the "Amended Partnership Agreement"). The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240.
The Partnership is engaged in real estate activities, including the ownership, operation and management of residential real estate and other real estate related assets. At December 31, 1998, the Partnership owned 13 income-producing properties as described in Note 4 - "Real Estate Investments."
As previously announced, the Partnership has retained PaineWebber, Incorporated ("PaineWebber") 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. The Partnership, through PaineWebber, provided financial and other information to interested parties as part of an auction process and until early March 1999 was conducting discussions with one bidder in an attempt to reach a definitive agreement with respect to a sale transaction. In early March 1999, because the Partnership had been unable to conclude negotiations for a transaction with such bidder, the Partnership terminated such discussions and commenced discussions with respect to a sale transaction with another well-financed bidder who had been involved in the original auction process. During the last full week of March, the Partnership entered into a 45 day exclusivity agreement with such party. 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.
Basis of Presentation - ---------------------
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Partnership's financial statements include the accounts of the tier partnerships listed on the next page for the years ended December 31, 1998, 1997 and 1996. These single asset tier partnerships were formed to accommodate the refinancings of the related properties. The ownership interest of the Partnership and the General Partner in each tier partnership is detailed below. The Partnership retains effective control of each tier partnership. The General Partner's minority interest is not presented because it is either negative or immaterial.
(a) The general partner of these partnerships is a corporation whose stock is 100% owned by the Partnership.
Adoption of Recent Accounting Pronouncements - --------------------------------------------
The Partnership has adopted Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131 requires an enterprise to report financial information about its reportable operating segments, which are defined as components of a business for which separate financial information is evaluated regularly by the chief decision maker in allocating resources and assessing performance. The Partnership does not prepare such information for internal use, since it analyzes the performance of and allocates resources for each property individually. The Partnership's management has determined that it operates one line of business and it would be impracticable to report segment information. Therefore, the adoption of SFAS 131 has no impact on the Partnership's financial statements.
Real Estate Investments - -----------------------
Real estate investments are generally stated at the lower of depreciated cost or fair value. Real estate investments are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". When the carrying value of a property exceeds the sum of all estimated future cash flows, an impairment loss is recognized. At such time, a write-down is recorded to reduce the basis of the property to its estimated fair value.
Improvements and betterments are capitalized and expensed through depreciation charges. Repairs and maintenance are charged to operations as incurred.
Asset Held for Sale - -------------------
The asset held for sale is stated at the lower of depreciated cost or fair value less costs to sell. Depreciation ceased at the time the asset was placed on the market for sale.
Depreciation - ------------
Buildings and improvements are depreciated using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 32 years.
Cash and Cash Equivalents - -------------------------
Cash and cash equivalents include cash on hand and cash on deposit with financial institutions with original maturities of three months or less. Carrying amounts for cash and cash equivalents approximate fair value.
Escrow Deposits - ---------------
The Partnership is required to maintain escrow accounts in accordance with the terms of various mortgage agreements. These escrow accounts are controlled by the mortgagee and are used for payment of property taxes, hazard insurance, capital improvements and/or property replacements. Carrying amounts for escrow deposits approximate fair value.
Deferred Borrowing Costs - ------------------------
Loan fees and other related costs incurred to obtain long-term financing on real property are capitalized and amortized using a method that approximates the effective interest method over the terms of the related mortgage notes payable. Amortization of deferred borrowing costs is included in interest expense on the Statements of Operations.
Discounts on Mortgage Notes Payable - -----------------------------------
Discounts on mortgage notes payable are amortized over the remaining terms of the related mortgage notes using the effective interest method. Amortization of discounts on mortgage notes payable is included in interest expense on the Statements of Operations.
Rental Revenue - --------------
The Partnership leases its properties under short-term operating leases. Lease terms generally are less than one year in duration. Rental revenue is recognized as earned.
Income Taxes - ------------
No provision for Federal income taxes is necessary in the financial statements of the Partnership because, as a partnership, it is not subject to Federal income tax and the tax effect of its activities accrues to the partners. See Note 3 - "Taxable Income (Loss)."
Allocation of Net Income and Net Loss - -------------------------------------
The Amended Partnership Agreement provides for net income or net loss of the Partnership for both financial statement and income tax reporting purposes to be allocated as indicated below. For allocation purposes, net income and net loss of the Partnership are determined prior to deductions for depreciation.
(a) First, 5% of all deductions for depreciation shall be allocated to the General Partner, and 95% of all deductions for depreciation shall be allocated to the limited partners;
(b) then, an amount of net income equal to the cumulative amount of Management Incentive Distribution ("MID") paid to the General Partner for which no income has previously been allocated (see Note 2 - "Transactions with Affiliates") shall be allocated to the General Partner; however, if all or a portion of the MID consists of limited partnership units ("Units"), the amount of net income so allocated to the General Partner shall be equal to the amount of cash the General Partner would have otherwise received;
(c) then, any remaining net income shall be allocated to the General Partner and to the limited partners so that the total amount of net income allocated to the General Partner pursuant to paragraph (b) above and this paragraph (c), and to the limited partners pursuant to this paragraph (c), shall be in the ratio of 5% to the General Partner and 95% to the limited partners.
(d) Net loss shall be allocated 95% percent to the limited partners and 5% to the General Partner.
Federal income tax law provides that the allocation of loss to a partner will not be recognized unless the allocation is in accordance with a partner's interest in the partnership or the allocation has substantial economic effect. Internal Revenue Code Section 704(b) and accompanying Treasury Regulations establish criteria for allocations of Partnership deductions attributable to debt. The Partnership's tax allocations for 1998, 1997 and 1996 have been made in accordance with these provisions.
Distributions - -------------
Pursuant to the Amended Partnership Agreement and at the sole discretion of the General Partner, distributions during each taxable year shall be made as follows:
(a) first, to the General Partner, an amount equal to the MID; and
(b) any remaining distributable cash, as defined, shall be distributed 100% to the limited partners.
The Partnership paid distributions of $2,300,008 and $2,749,992 to the limited partners in 1998 and 1997, respectively. No distributions were paid to the limited partners in 1996. The Partnership paid or accrued distributions of $1,164,510, $1,137,022 and $1,133,561 for the benefit of the General Partner for the years ended December 31, 1998, 1997 and 1996, respectively. These distributions are the MID pursuant to the Amended Partnership Agreement. The General Partner has waived the collection terms of reimbursable expenses and MID, and has elected for the Partnership to pay limited partner distributions before the payment of such amounts. During the last week of March 1999, the Partnership distributed approximately $749,000 to limited partners of record as of March 1, 1999.
Net Income (Loss) Per Limited Partnership Unit - ----------------------------------------------
Net income (loss) per limited partnership unit is computed by dividing net income (loss) allocated to the limited partners by the weighted average number of Units outstanding. Per Unit information has been computed based on 110,170 Units outstanding in 1998, 1997 and 1996.
NOTE 2 - TRANSACTIONS WITH AFFILIATES - -------------------------------------
The Partnership pays property management fees equal to 5% of the gross rental receipts of the Partnership's properties to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management and leasing services for the Partnership's properties.
The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs.
Under terms of the Amended Partnership Agreement, the Partnership is paying a MID to the General Partner. The maximum MID is calculated as 1% of the tangible asset value of the Partnership. 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 $10,000 per apartment unit 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 maximum MID percentage decreases to .75% in 2000, .50% in 2001 and .25% thereafter.
The MID will be paid to the extent of the lesser of the Partnership's excess cash flow as defined, or net operating income, as defined (the "Entitlement Amount"), and may be paid (i) in cash, unless there is insufficient cash to pay the distribution in which event any unpaid portion not taken in Units will be deferred and is payable, without interest, from the first available cash and/or (ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of Units issued in payment of the MID is based on the greater of $50 per Unit or the net tangible asset value, as defined, per Unit. During 1998, 1997 and 1996, no Units were issued as payment for the MID.
During 1991, the Partnership amended its capitalization policy and began capitalizing certain costs of improvements and betterments that under policies of prior management had been expensed when incurred. The purpose of the amendment was to more properly recognize items which were capital in nature. The effect of the amendment standing alone was evaluated at the time the change was made and determined not to be material to the financial statements of the Partnership in 1991, nor was it expected to be material in any future year. However, the amendment can have a material effect on the calculation of the Entitlement Amount which determines the amount of MID earned. Capital improvements are excluded from cash flow, as defined. The majority of base period cash flow was measured under the previous capitalization policy, while incentive period cash flow is determined using the amended policy. Under the amended policy, more items are capitalized, and cash flow increases. The amendment of the capitalization policy did not materially affect the MID for 1998, 1997 or 1996 because the Entitlement Amount was sufficient to pay the MID notwithstanding the amendment to the capitalization policy.
Any amount of the MID which is paid to the General Partner in Units will be treated as if cash is distributed to the General Partner and is then contributed to the Partnership by the General Partner. The MID represents a return of equity to the General Partner for increasing cash flow, as defined, and accordingly is treated as a distribution.
Compensation and reimbursements paid or accrued for the benefit of the General Partner or its affiliates are as follows:
Payable to affiliates - General Partner at December 31, 1998, 1997 and 1996 consists of MID, reimbursable costs and property management fees which are due and payable from current operations. The General Partner has waived the collection terms of MID and reimbursable expenses, and has elected for the Partnership to pay limited partner distributions before the payment of such amounts.
NOTE 3 - TAXABLE INCOME (LOSS) - ------------------------------
McNeil Real Estate Fund IX, Ltd. is a partnership and is not subject to Federal and state income taxes. Accordingly, no recognition has been given to income taxes in the accompanying financial statements of the Partnership since the income or loss of the Partnership is to be included in the tax returns of the individual partners. The tax returns of the Partnership are subject to examination by Federal and state taxing authorities. If such examinations result in adjustments to distributive shares of taxable income or loss, the tax liability of the partners could be adjusted accordingly.
The Partnership's net assets and liabilities for tax purposes exceeded the net assets and liabilities for financial reporting purposes by of $12,087,333 in 1998, $10,256,886 in 1997 and $9,965,434 in 1996.
NOTE 4 - REAL ESTATE INVESTMENTS - --------------------------------
The basis and accumulated depreciation of the Partnership's real estate investments at December 31, 1998 and 1997 are set forth in the following tables:
On August 1, 1997, the General Partner placed Sheraton Hills Apartments, located in Nashville, Tennessee, on the market for sale. Accordingly, Sheraton Hills Apartments is classified as an asset held for sale on the accompanying Balance Sheets. The net book value of Sheraton Hills Apartments was $3,140,461 and 3,009,553 at December 31, 1998 and 1997, respectively.
The results of operations for Sheraton Hills Apartments are $557,955, $797,974 and $146,983 for 1998, 1997 and 1996, respectively. Results of operations are operating revenues including gain on involuntary conversion, less operating expenses including depreciation and interest expense.
NOTE 5 - MORTGAGE NOTES PAYABLE - --------------------------------
The table below sets forth the mortgage notes payable of the Partnership at December 31, 1998 and 1997. All mortgage notes are secured by real estate investments.
(a) The debt is non-recourse to the Partnership.
(b) Mortgage discounts are based on an effective interest rate of 8.62%.
(c) Financing for the mortgage notes referenced above was obtained under the terms of a Real Estate Mortgage Investment Conduit financing. The referenced mortgage notes are cross-collateralized. Principal prepayments made before July 2000 are subject to a Yield Maintenance Premium, as defined. Additionally, the Partnership must pay a release payment equal to 25% of the prepaid balance that will be applied to the remaining referenced mortgage notes.
(d) On March 20, 1998, the Partnership refinanced the Forest Park Village mortgage note. The new mortgage note bears interest at a variable rate equal to 1.75% plus the London Interbank Offered Rate ("LIBOR"). The interest rate is adjusted every three months. Terms of the note require monthly interest-only debt service payments, plus annual principal payments equal to 5% of the outstanding principal balance. At December 31, 1998, the interest rate of the mortgage note was 6.97%. See Note 7 - "Refinancing of Mortgage Notes Payable."
(e) The Pennbrook mortgage note matures on February 1, 2000. The General Partner is exploring financing alternatives to resolve the impending maturity of the mortgage note.
(f) Effective August 31, 1998, the Partnership refinanced the Rolling Hills mortgage note. The new mortgage note bears interest at a variable rate equal to 1.75% plus the LIBOR. The interest rate is adjusted every three months. Terms of the note require monthly interest-only debt service payments, plus annual principal payments equal to 5% of the outstanding principal balance. At December 31, 1998, the interest rate of the mortgage note was 7.00%. See Note 7 - "Refinancing of Mortgage Notes Payable."
(g) Effective September 1, 1998, the Partnership and the Sheraton Hills mortgage note holder modified and extended the Sheraton Hills mortgage note. See Note 7 - "Refinancing of Mortgage Notes Payable."
(h) Balloon payments on the Partnership's mortgage notes are due as follows:
Based on borrowing rates currently available to the Partnership for mortgage loans with similar terms and average maturities, the fair value of the mortgage notes payable was approximately $49,923,000 and $52,907,000 at December 31, 1998 and 1997, respectively.
NOTE 6 - SALE OF REAL ESTATE - ----------------------------
On July 30, 1996, the Partnership sold Westridge Apartments to an unaffiliated purchaser for a purchase price of $2,110,500. The Partnership agreed to finance a portion of the sales price by accepting a short-term, $1,550,000 purchase money mortgage note. The mortgage note accrued interest at 10.0% per annum and required monthly interest-only payments. On February 5, 1997, the purchaser repaid the $1,550,000 mortgage note to the Partnership. Cash proceeds from the sale, as well as the loss on sale of Westridge Apartments, are presented below.
NOTE 7 - REFINANCING OF MORTGAGE NOTES PAYABLE - ----------------------------------------------
On March 20, 1998, the Partnership refinanced the Forest Park Village mortgage note. The new mortgage note, in the amount of $5,925,000, bears interest at a variable rate equal to 1.75% plus the LIBOR per annum. The new mortgage note requires monthly interest-only debt service payments and annual principal payments equal to 5% of the outstanding principal balance of the note. Terms of the new mortgage note require the Partnership to deposit funds into a restricted cash account on a quarterly basis. The restricted funds will be used to pay the annual principal payment and are included in "cash restricted for mortgage payments" on the Balance Sheets. The new mortgage note matures on March 20, 2001. Proceeds from the refinancing of the Forest Park Village mortgage note are as follows:
New mortgage note.................................. $ 5,925,000 Existing debt retired.............................. (5,830,964) ----------
Cash proceeds from refinancing..................... $ 94,036 ==========
The Partnership incurred $82,148 of deferred borrowing costs in connection with the refinancing of the Forest Park Village mortgage note.
On August 31, 1998, the Partnership refinanced the Rolling Hills mortgage note. The new mortgage note, in the amount of $6,650,000, bears interest at a variable rate equal to 1.75% plus the LIBOR per annum. The new mortgage note requires monthly interest-only debt service payments and annual principal payments equal to 5% of the outstanding principal balance of the note. Terms of the new mortgage note require the Partnership to deposit funds into a restricted cash account on a quarterly basis. The restricted funds will be used to pay the annual principal payment and are included in "cash restricted for mortgage payments" on the Balance Sheets. The new mortgage note matures on September 1, 2001. Proceeds from the refinancing of the Rolling Hills mortgage note are as follows:
New mortgage note.................................. $ 6,650,000 Existing debt retired.............................. (6,545,929) ----------
Cash proceeds from refinancing..................... $ 104,071 ==========
The Partnership incurred $77,366 of deferred borrowing costs in connection with the refinancing of the Rolling Hills mortgage note.
In connection with the refinancing of the Rolling Hills mortgage note, the Partnership wrote off the balance of unamortized deferred borrowing costs associated with the prior mortgage note. The write-off, in the amount of $405,235, is reported as the extraordinary item on the Partnership's Statement of Operations for the year ended December 31, 1998.
On September 1, 1998, the Partnership and the holder of the Sheraton Hills mortgage note agreed to modify the terms of the Sheraton Hills mortgage note. The interest rate was changed from a variable rate to a 6.9% fixed rate. The monthly debt service payments were changed from a variable amount to $17,844. The maturity date of the mortgage note was extended to November 1, 2001. The Partnership incurred $29,535 of deferred borrowing costs in connection with the modification.
NOTE 8 - GAIN ON INVOLUNTARY CONVERSIONS - ----------------------------------------
On April 24, 1996, a fire damaged 12 units at Sheraton Hills Apartments. The cost to repair the fire damage was $562,560, of which, the Partnership received $546,069 in insurance reimbursements. The Partnership recognized a $474,376 gain on involuntary conversion equal to the insurance proceeds received less the adjusted basis of the property damaged by the fire. The gain on involuntary conversion was recognized in 1997 when the insurance proceeds were received. Reconstruction of the damaged units was completed during the third quarter of 1996.
NOTE 9 - LEGAL PROCEEDINGS - --------------------------
The Partnership is not party to, nor are any of the Partnership's properties the subject of, any material pending legal proceedings, other than ordinary, routine litigation incidental to the Partnership's business, except for the following:
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 May 25, 1999.
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.
NOTE 10 - COMMITMENTS AND CONTINGENCIES - ---------------------------------------
Environmental laws create potential liabilities that may affect property owners. The environmental laws of Federal and certain state governments, for example, impose liability on current and certain past owners of property from which there is a release or threat of release of hazardous substances. This liability includes costs of investigation and remediation of the hazardous substances and natural resource damages. Liability for costs of investigation and remediation is strict and may be imposed irrespective of whether the property owner was at fault, although there are a number of defenses. Both governments and third parties may seek recoveries under these laws.
Third parties also may seek recovery under the common law for damages to their property or person, against owners of property from which there has been a release of hazardous and other substances.
The presence of contamination or the failure to remediate contaminations may adversely affect the owner's ability to sell or lease real estate or to borrow using the real estate as collateral.
Various buildings at properties do or may contain building materials that are the subject of various regulatory programs intended to protect human health. Such building materials include, for example, asbestos, lead-based paint, and lead plumbing components. The Company has implemented programs to deal with the presence of those materials, which include, as appropriate, reduction of potential exposure situations. The Company does not believe that the costs of such programs are likely to have a material adverse effect. Failure to implement such programs can result in regulatory violations or liability claims resulting from alleged exposure to such materials.
In connection with the proposed sale transaction as more fully described in Note 1 - "Organization and Summary of Significant Accounting Policies", Phase I environmental site assessments have been completed for each property owned by the Partnership. Such environmental assessments performed on the properties have not revealed any environmental liability that the Partnership believes would have a material adverse effect on the Partnership's business, assets, or results of operations. The Partnership has not been notified by any governmental authority of any non-compliance, liability or other claim in connection with any of its properties. There can be no assurances, however, that environmental liabilities have not developed since such environmental assessments were prepared, or that future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations) will not result in imposition of environmental liability.
McNEIL REAL ESTATE FUND IX, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1998
See accompanying notes to Schedule III.
McNEIL REAL ESTATE FUND IX, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1998
See accompanying notes to Schedule III
McNEIL REAL ESTATE FUND IX, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1998
See accompanying notes to Schedule III.
McNEIL REAL ESTATE FUND IX, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION December 31, 1998
(a) For Federal income tax purposes, the properties are depreciated over lives ranging from 5-27.5 years using ACRS or MACRS methods. The aggregate cost of real estate investments for Federal income tax purposes was $94,313,115 and accumulated depreciation was $57,699,982 at December 31, 1998.
(b) The initial cost and encumbrances reflect the present value of future loan payments discounted, if appropriate, at a rate estimated to be the prevailing interest rate at the date of acquisition or refinancing.
(c) The asset held for sale is carried at the lower of depreciated cost or fair value less costs to sell. Historical cost, net of accumulated depreciation and cumulative write-downs, becomes the new cost basis when the asset is classified as "Asset Held for Sale." Depreciation ceases at the time the asset is placed on the market for sale.
McNEIL REAL ESTATE FUND IX, LTD.
Notes to Schedule III
Real Estate Investments and Accumulated Depreciation
A summary of activity for the Partnership's real estate investments and accumulated depreciation is as follows:
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------- --------------------------------------------------------------- FINANCIAL DISCLOSURE --------------------
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- --------------------------------------------------
Neither the Partnership nor the General Partner has any directors or executive officers. The names and ages of, as well as the positions held by, the officers and directors of McNeil Investors, Inc., the general partner of the General Partner, are as follows:
Other Principal Occupations and Other Name and Position Age Directorships During the Past 5 Years - ----------------- --- -------------------------------------
Robert A. McNeil, 78 Mr. McNeil is also Chairman of the Chairman of the Board and Director of McNeil Real Estate Board and Director Management, Inc. ("McREMI") which is an affiliate of the General Partner. He has held the foregoing positions since the formation of such entity in 1990. Mr. McNeil received his B.A. degree from Stanford University in 1942 and his L.L.B. degree from Stanford Law School in 1948. He is a member of the State Bar of California and has been involved in real estate financing since the late 1940's and in real estate acquisitions, syndications and dispositions since 1960. From 1986 until active operations of McREMI and McNeil Partners, L.P. began in February 1991, Mr. McNeil was a private investor. Mr. McNeil is a member of the International Board of Directors of the Salk Institute, which promotes research in improvements in health care.
Carole J. McNeil 55 Mrs. McNeil is Co-Chairman, with husband Co-Chairman of the Robert A. McNeil, of McNeil Investors, Board Inc. Mrs. McNeil has twenty years of real estate experience, most recently as a private investor from 1986 to 1993. In 1982, she founded Ivory & Associates, a commercial real estate brokerage firm in San Francisco, CA. Prior to that, she was a commercial real estate associate with the Madison Company and, earlier, a commercial sales associate and analyst with Marcus and Millichap in San Francisco. In 1978, Mrs. McNeil established Escrow Training Centers, California's first accredited commercial training program for title company escrow officers and real estate agents needing college credits to qualify for brokerage licenses. She began in real estate as Manager and Marketing Director of Title Insurance and Trust in Marin County, CA. Mrs. McNeil serves on the International Board of Directors of the Salk Institute.
Other Principal Occupations and Other Name and Position Age Directorships During the Past 5 Years - ----------------- --- -------------------------------------
Ron K. Taylor 41 Mr. Taylor is the President and Chief President and Chief Executive Officer of McNeil Real Estate Executive Officer Management which is an affiliate of the General Partner. Mr. Taylor has been in this capacity since the resignation of Donald K. Reed on March 4, 1997. Prior to assuming his current responsibilities, Mr. Taylor served as a Senior Vice President of McREMI. Mr. Taylor has been in this capacity since McREMI commenced operations in 1991. Prior to joining McREMI, Mr. Taylor served as an Executive Vice President for a national syndication/property management firm. In this capacity, Mr. Taylor had the responsibility for the management and leasing of a 21,000,000 square foot portfolio of commercial properties. Mr. Taylor has been actively involved in the real estate industry since 1983.
Each director shall serve until his successor shall have been duly elected and qualified.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION - -------- ----------------------
No direct compensation was paid or payable by the Partnership to directors or officers (since it does not have any directors or officers) for the year ended December 31, 1998, nor was any direct compensation paid or payable by the Partnership to directors or officers of the general partner of the General Partner for the year ended December 31, 1998. The Partnership has no plans to pay any such remuneration to any directors or officers of the general partner of the General Partner in the future.
See Item 13 - Certain Relationships and Related Transactions for amounts of compensation and reimbursements paid by the Partnership to the General Partner and its affiliates.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------- --------------------------------------------------------------
(A) Security ownership of certain beneficial owners.
No individual or group, as defined by Section 13(d)(3) of the Securities Exchange Act of 1934, known to the Partnership is the beneficial owner of more than 5% of the Partnership's securities, except as noted in below:
1. A group of limited partnerships affiliated with Liquidity Financial Corporation, all of whose outstanding stock is owned by Richard G. Wollack and Brent R. Donaldson, 2200 Powell Street, Suite 700, Emeryville, California, 94608, collectively own 6,389 Units (5.8%) as of February 1, 1999.
2. High River Limited Partnership, 100 S. Bedford Road, Mount Kisco, New York, 10549, owns 15,616 Units (14.2%) as of February 1, 1999.
(B) Security ownership of management.
The General Partner and the officers and directors of its general partner, collectively, own 5,715 Units (5.2%) as of February 1, 1999.
(C) Change in control.
None.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ----------------------------------------------
Under the terms of the Amended Partnership Agreement, the Partnership is paying the MID to the General Partner. The maximum MID is calculated as 1% of the tangible asset value of the Partnership. 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 $10,000 per apartment unit 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 maximum MID percentage decreases to .75% in 2000, .50% in 2001 and .25% thereafter.
The MID will be paid to the lesser of the Partnership's excess cash flow, as defined, or net operating income (the "Entitlement Amount"), and may be paid in (i) cash, unless there is insufficient cash to pay the distribution, in which event any unpaid portion not taken in Units will be deferred and is payable, without interest, from the first available cash and/or (ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of Units issued in payment of the MID is based on the greater of $50 per Unit or the net tangible asset value, as defined, per Unit. For the year ended December 31, 1998, the Partnership paid or accrued MID for the General Partner in the amount of $1,164,510.
The Partnership pays property management fees equal to 5% of gross rental receipts of the Partnership's properties to McREMI for providing property management and leasing services for the Partnership's properties. The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. For the year ended December 31, 1998, the Partnership incurred $1,517,803 of property management fees and reimbursements.
See Item 1 - Business, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 8 - Note 2 - "Transactions with Affiliates."
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - -------- ---------------------------------------------------------------
See accompanying Index to Financial Statements at Item 8 - Financial Statements and Supplementary Data.
(A) The following exhibits are incorporated by reference and are an integral part of this Form 10-K.
Exhibits
Exhibit Number Description --------- -----------
3. Limited Partnership Agreement (Incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended September 30, 1987).
3.1 Amended and Restated Limited Partnership Agreement dated November 12, 1991 (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter year ended September 30, 1991).
3.2 Amendment No. 1 to the Amended and Restated Partnership Agreement of McNeil Real Estate Fund IX, Ltd., dated to be effective as of July 31, 1993. (5)
3.3 Amendment No. 2 to the Amended and Restated Partnership Agreement of McNeil Real Estate Fund IX, Ltd., dated March 28, 1994. (5)
10.2 Mortgage Note, dated August 11, 1988, between Sherwood Forest Fund IX Associates and American Mortgages, Inc. (1)
10.3 Assignment and Assumption Agreement, dated as of November 12, 1991, between Pacific Investors Corporation and McNeil Partners, L.P. regarding Sherwood Forest Fund IX Associates. (2)
10.4 Assignment and Assumption Agreement, dated as of November 12, 1991, between Pacific Investors Corporation and McNeil Partners, L.P. regarding Berkley Hills Associates. (2)
Exhibit Number Description --------- -----------
10.5 Assignment and Assumption Agreement, dated as of November 12, 1991, between Pacific Investors Corporation and McNeil Partners, L.P. regarding Ruskin Place Fund IX Associates. (2)
10.6 Assignment and Assumption Agreement, dated as of November 12, 1991, between Rolling Hills Apartment Corp. and McNeil Partners, L.P. regarding Rolling Hills Fund IX Associates, L.P. (2)
10.7 Assignment and Assumption Agreement, dated as of November 12, 1991, between Pacific Investors Corporation, Robert A. McNeil and McNeil Partners, L.P. regarding McNeil Real Estate Fund IX, Ltd. (2)
10.8 Termination Agreement, dated as of November 12, 1991, between Ruskin Place Fund IX Associates and McNeil Real Estate Management, Inc. (2)
10.9 Termination Agreement, dated as of November 12, 1991, between Rolling Hills Fund IX Associates, L.P. and McNeil Real Estate Management, Inc. (2).
10.10 Termination Agreement, dated as of November 12, 1991, between Sherwood Forest Fund IX Associates and McNeil Real Estate Management, Inc. (2)
10.11 Termination Agreement, dated as of November 12, 1991, between Berkley Hills Associates and McNeil Real Estate Management, Inc. (2)
10.12 Property Management Agreement, dated as of November 12, 1991, between McNeil Real Estate Fund IX, Ltd. and McNeil Real Estate Management, Inc. (2)
10.13 Property Management Agreement, dated as of November 12, 1991, between Ruskin Place Fund IX Associates and McNeil Real Estate Management, Inc. (2)
10.14 Property Management Agreement, dated as of November 12, 1991, between Rolling Hills Fund IX Associates, L.P. and McNeil Real Estate Management, Inc. (2)
10.15 Property Management Agreement, dated as of November 12, 1991, between Sherwood Forest Fund IX Associates, L.P. and McNeil Real Estate Management, Inc. (2)
10.16 Property Management Agreement, dated as of November 12, 1991, between Berkley Hills Associates and McNeil Real Estate Management, Inc. (2)
10.17 Asset Management Agreement, dated as of November 12, 1991, between McNeil Real Estate Fund IX, Ltd. and McNeil Partners, L.P. (2)
10.18 Amendment of Property Management Agreement dated March 5, 1993 between the Partnership and McNeil Real Estate Management, Inc. (3)
10.19 Property management agreement, dated as of January 28, 1993, between Pennbrook Fund IX, L.P. and McNeil Real Estate Management, Inc. (3)
10.20 Amendment of Property Management Agreement dated March 5, 1993 between Pennbrook Fund IX Associates, L.P. and McNeil Real Estate Management, Inc. (3)
10.21 Loan Agreement dated June 24, 1993 between Lexington Mortgage Company and McNeil Real Estate Fund IX, Ltd., et. al. (4)
10.22 Master Property Management Agreement, dated as of June 24, 1993, between McNeil Real Estate Management, Inc. and McNeil Real Estate Fund IX, Ltd. (5)
10.23 Mortgage Note, dated September 28, 1989, between Ruskin Place Fund IX Associates and American Mortgages, Inc. (6)
10.24 Modification of Mortgage Note, dated July 28, 1994, between Ruskin Place Fund IX Associates and American Mortgages, Inc. (6)
10.25 Deed of Trust Note, dated November 3, 1988, between Berkley Hills Associates and American Mortgages, Inc. (6)
Exhibit Number Description ------- -----------
10.26 Modification of Deed of Trust Note, dated July 28, 1994, between Berkley Hills Associates and American Mortgages, Inc. (6)
10.28 Promissory Note, dated February 5, 1979, between Summers-The Heather Apartments Company and The Mutual Benefit Life Insurance Company. (6)
10.29 Promissory Note, dated September 2, 1988, between McNeil Real Estate Fund IX, Ltd. and FNB Mortgage Corp. (6)
10.30 Multifamily Note, dated January 29, 1993, between Pennbrook Fund IX Associates, L.P. and Washington Mortgage Financial Group, Ltd. (6)
10.31 Modification of Mortgage Note, dated June 30, 1993, between Sherwood Forest Fund IX Associates and American Mortgages, Inc. (6)
10.32 Promissory Note, dated March 20, 1998, between Forest Park Fund IX Associates Limited Partnership and NationsBank of Texas, N.A.
10.33 Promissory Note, dated August 31, 1998, between Rolling Hills Fund IX Associates, L.P. and NationsBank, N.A.
11. Statement regarding computation of net income (loss) per limited partnership unit (see Item 8 - Note 1 to Financial Statements).
22. Following is a list of subsidiaries of the Partnership:
The Partnership has omitted instruments with respect to long-term debt where the total amount of the securities authorized thereunder does not exceed 10% of the total assets of the Partnership. The Partnership agrees to furnish a copy of each such instrument to the Commission upon request.
(1) Incorporated by reference to the Annual Report of McNeil Real Estate Fund IX, Ltd. (File No. 0-9026) on Form 10-K for the period ended December 31, 1990, as filed with the Securities and Exchange Commission on March 29, 1991.
(2) Incorporated by reference to the Annual Report of McNeil Real Estate Fund IX, Ltd. (File No. 0-9026), on Form 10-K for the period ended December 31, 1991, as filed with the Securities and Exchange Commission on March 30, 1992.
(3) Incorporated by reference to the Annual Report of McNeil Real Estate Fund IX, Ltd. (File No. 0-9026), on Form 10-K for the period ended December 31, 1992, as filed with the Securities and Exchange Commission on March 30, 1993.
(4) Incorporated by reference to the Annual Report of McNeil Real Estate Fund XI, Ltd. (File No. 0-9783), on Form 10-K for the period ended December 31, 1993, as filed with the Securities and Exchange Commission on March 30, 1994.
(5) Incorporated by reference to the Annual Report of McNeil Real Estate Fund IX, Ltd. (File No. 0-9026), on Form 10-K for the period ended December 31, 1993, as filed with the Securities and Exchange Commission on March 30, 1994.
(6) Incorporated by reference to the Annual Report of McNeil Real Estate Fund IX, Ltd. (File No. 0-9026), on Form 10-K for the period ended December 31, 1994, as filed with the Securities and Exchange Commission on March 30, 1995.
27. Financial Data Schedule for the year ended December 31, 1998.
(B) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended December 31, 1998.
McNEIL REAL ESTATE FUND IX, LTD. A Limited Partnership
SIGNATURE PAGE
Pursuant to the requirements of Section 13 or 15(d) 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 IX, LTD.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
March 31, 1999 By: /s/ Robert A. McNeil - -------------- --------------------------------------- Date Robert A. McNeil Chairman of the Board and Director (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
March 31, 1999 By: /s/ Ron K. Taylor - -------------- --------------------------------------- Date Ron K. Taylor President and Director of McNeil Investors, Inc. (Principal Financial Officer)
March 31, 1999 By: /s/ Brandon K. Flaming - -------------- --------------------------------------- Date Brandon K. Flaming Vice President of McNeil Investors, Inc. (Principal Accounting Officer)