SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: March 31, 1995
Commission file number: 0-14264
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its
Charter)
State of Minnesota 41-1525197
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(612) 227-7333
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Transitional Small Business Disclosure Format:
Yes No X
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
INDEX
Page
PART I. Financial Information
Item 1. Balance Sheet as of March 31, 1995 and December 31, 1994 3
Statements for the Periods ended March 31, 1995 and 1994:
Income 4
Cash Flows 5
Changes in Partners' Capital 6
Notes to Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis 9
PART II. Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
<TABLE>
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
BALANCE SHEET
MARCH 31, 1995 AND DECEMBER 31, 1994
(Unaudited)
ASSETS
<CAPTION>
1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash $ 254,164 $ 268,922
Receivables 1,426 0
----------- -----------
Total Current Assets 255,590 268,922
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 1,783,745 1,783,745
Buildings and Equipment 3,000,246 3,000,246
Accumulated Depreciation (1,173,877) (1,138,636)
----------- -----------
Net Investments in Real Estate 3,610,114 3,645,355
----------- -----------
Total Assets $3,865,704 $3,914,277
=========== ===========
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 24,108 $ 9,953
Distributions Payable 87,579 120,864
Unearned Rent 9,616 0
----------- -----------
Total Current Liabilities 121,303 130,817
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (27,153) (26,763)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
6,844 Units outstanding 3,771,554 3,810,223
----------- -----------
Total Partners' Capital 3,744,401 3,783,460
----------- -----------
Total Liabilities and Partners' Capital $3,865,704 $3,914,277
=========== ===========
<FN>
The accompanying Notes to Financial Statements are an
integral part of this statement.
</TABLE>
<TABLE>
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
INCOME:
Rent $ 139,875 $ 136,037
Investment Income 3,603 2,227
----------- -----------
Total Income 143,478 138,264
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 28,961 21,679
Partnership Administration and Property
Management - Unrelated Parties 21,823 20,411
Depreciation 35,241 35,241
----------- -----------
Total Expenses 86,025 77,331
----------- -----------
NET INCOME $ 57,453 $ 60,933
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 575 $ 609
Limited Partners 56,878 60,324
----------- -----------
$57,453 $60,933
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(6,844 and 6,867 weighted average Units
outstanding in 1995 and 1994, respectively) $ 8.31 $ 8.78
=========== ===========
<FN>
The accompanying Notes to Financial Statements are an
integral part of this statement.
</TABLE>
<TABLE>
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 57,453 $ 60,933
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 35,241 35,241
(Increase) Decrease in Receivables (1,426) 21,191
Increase (Decrease)in Payable to
AEI Fund Management, Inc. 14,155 (9,521)
Increase in Unearned Rent 9,616 9,576
---------- ----------
Total Adjustments 57,586 56,487
---------- ----------
Net Cash Provided by
Operating Activities 115,039 117,420
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (33,285) 20,662
Distributions to Partners (96,512) (119,641)
---------- ----------
Net Cash Used for
Financing Activities (129,797) (98,979)
---------- ----------
NET INCREASE (DECREASE) IN CASH (14,758) 18,441
CASH, beginning of period 268,922 206,767
---------- ----------
CASH, end of period $ 254,164 $ 225,208
=========== ==========
<FN>
The accompanying Notes to Financial Statements are an
integral part of this statement.
</TABLE>
<TABLE>
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
<CAPTION>
General Limited
Partners Partners Total
<S> <C> <C> <C>
BALANCE, December 31, 1993 $ (25,229) $ 3,962,017 $ 3,936,788
Distributions (1,196) (118,445) (119,641)
Net Income 609 60,324 60,933
----------- ----------- -----------
BALANCE, March 31, 1994 $ (25,816) $ 3,903,896 $ 3,878,080
=========== =========== ===========
BALANCE, December 31, 1994 $ (26,763) $ 3,810,223 $ 3,783,460
Distributions (965) (95,547) (96,512)
Net Income 575 56,878 57,453
----------- ----------- -----------
BALANCE, March 31, 1995 $ (27,153) $ 3,771,554 $ 3,744,401
=========== =========== ===========
<FN>
The accompanying Notes to Financial Statements are an
integral part of this statement.
</TABLE>
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
(Unaudited)
(1)The condensed statements included herein have been
prepared by the Partnership, without audit, and reflect
all adjustments which are, in the opinion of management,
necessary to a fair statement of the results of
operations for the interim period, on a basis consistent
with the annual audited statements. The adjustments
made to these condensed statements consist only of
normal recurring adjustments. Certain information,
accounting policies, and footnote disclosures normally
included in financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and
regulations, although the Partnership believes that the
disclosures are adequate to make the information
presented not misleading. It is suggested that these
condensed financial statements be read in conjunction
with the financial statements and the summary of
significant accounting policies and notes thereto
included in the Partnership's latest annual report on
Form 10-KSB.
(2)Organization -
AEI Real Estate Fund 85-B Limited Partnership
(Partnership) was formed to acquire and lease
commercial properties to operating tenants. The
Partnership's operations are managed by Net Lease
Management 85-B, Inc. (NLM), the Managing General
Partner of the Partnership. Robert P. Johnson, the
President and sole shareholder of NLM, serves as the
Individual General Partner of the Partnership. An
affiliate of NLM, AEI Fund Management, Inc., performs
the administrative and operating functions for the
Partnership.
The terms of the Partnership offering call for a
subscription price of $1,000 per Limited Partnership
Unit, payable on acceptance of the offer. The
Partnership commenced operations on September 17, 1985
when minimum subscriptions of 1,300 Limited Partnership
Units ($1,300,000) were accepted. The Partnership's
offering terminated on February 4, 1986 when the
maximum subscription limit of 7,500 Limited Partnership
Units ($7,500,000) was reached.
Under the terms of the Limited Partnership Agreement,
the Limited Partners and General Partners contributed
funds of $7,500,000 and $1,000, respectively. During
the operation of the Partnership, any Net Cash Flow, as
defined, which the General Partners determine to
distribute will be distributed 90% to the Limited
Partners and 10% to the General Partners; provided,
however, that such distributions to the General
Partners will be subordinated to the Limited Partners
first receiving an annual, noncumulative distribution
of Net Cash Flow equal to 10% of their Adjusted Capital
Contribution, as defined, and, provided further, that
in no event will the General Partners receive less than
1% of such Net Cash Flow per annum. Distributions to
Limited Partners will be made pro rata by Units.
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2)Organization - (Continuted)
Any Net Proceeds of Sale, as defined, from the sale or
financing of the Partnership's properties which the
General Partners determine to distribute will, after
provisions for debts and reserves, be paid in the
following manner: (i) first, 99% to the Limited
Partners and 1% to the General Partners until the
Limited Partners receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal
to 6% of their Adjusted Capital Contribution per annum,
cumulative but not compounded, to the extent not
previously distributed from Net Cash Flow; (ii) next,
99% to the Limited Partners and 1% to the General
Partners until the Limited Partners receive an amount
equal to 14% of their Adjusted Capital Contribution per
annum, cumulative but not compounded, to the extent not
previously distributed; (iii) next, to the General
Partners until cumulative distributions to the General
Partners under Items (ii) and (iii) equal 15% of
cumulative distributions to all Partners under Items
(ii) and (iii). Any remaining balance will be
distributed 85% to the Limited Partners and 15% to the
General Partners. Distributions to the Limited
Partners will be made pro rata by Units.
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
property, will be allocated first in the same ratio in
which, and to the extent, Net Cash Flow is distributed
to the Partners for such year. Any additional profits
will be allocated 90% to the Limited Partners and 10%
to the General Partners. In the event no Net Cash Flow
is distributed to the Limited Partners, 90% of each
item of Partnership income, gain or credit for each
respective year shall be allocated to the Limited
Partners, and 10% of each such item shall be allocated
to the General Partners. Net losses from operations
will be allocated 98% to the Limited Partners and 2% to
the General Partners.
For tax purposes, profits arising from the sale,
financing, or other disposition of the Partnership's
property will be allocated in accordance with the
Partnership Agreement as follows: (i) first, to those
Partners with deficit balances in their capital
accounts in an amount equal to the sum of such deficit
balances; (ii) second, 99% to the Limited Partners and
1% to the General Partners until the aggregate balance
in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital
Contributions plus an amount equal to 14% of their
Adjusted Capital Contributions per annum, cumulative
but not compounded, to the extent not previously
allocated; (iii) third, to the General Partners until
cumulative allocations to the General Partners equal
15% of cumulative allocations. Any remaining balance
will be allocated 85% to the Limited Partners and 15%
to the General Partners. Losses will be allocated 98%
to the Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund
a deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the
General Partners will contribute to the Partnership an
amount equal to the lesser of the deficit balances in
their capital accounts or 1% of total Limited Partners'
and General Partners' capital contributions.
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3)Payable to AEI Fund Management -
AEI Fund Management, Inc. performs the administrative
and operating functions for the Partnership. The
payable to AEI Fund Management represents the balance
due for those services. This balance is non-interest
bearing and unsecured and is to be paid in the normal
course of business.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS
The Partnership's rental income is derived from long-
term Lease Agreements on the Partnership's properties. In
March, 1995, the Partnership recognized approximately $1,426
of additional rent from the lessee of the Automax in
Minneapolis, Minnesota, as a result of an increase in sales
for the lease year ended December 31, 1994.
During the first three months of 1995 and 1994, the
Partnership incurred Partnership administration and property
management expenses from unrelated parties of $21,823 and
$20,411, respectively. These expenses represent direct
payments to third parties for legal and filing fees, direct
administrative costs, outside audit and accounting costs,
taxes, insurance and other property costs. The Partnership
administration expenses incurred from affiliates include
costs associated with the management of the properties,
processing distributions, reporting requirements and
correspondence to the Limited Partners.
As of March 31, 1995, the Partnership's annualized cash
distribution rate was 6.0%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners were subordinated to the Limited Partners as
required in the Partnership Agreement. As a result, 99% of
distributions and income were allocated to Limited Partners
and 1% to the General Partners.
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such
Units may be acquired at a discount. The Partnership is not
obligated to purchase in any year more than 5% of the total
number of Units originally sold and in no event obligated to
purchase Units if such purchase would impair the capital or
operation of the Partnership.
During 1994, four Limited Partners redeemed a total of
22.5 Partnership Units for $14,798 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, a
total of sixty Limited Partners redeemed 633 Partnership
Units for $518,898. The redemptions increase the remaining
Limited Partners' ownership interest in the Partnership.
Inflation has had a minimal effect on income from
operations. It is expected that increases in sales volumes
of the tenants, due to inflation and real sales growth, will
result in an increase in rental income over the terms of the
leases. Inflation also may cause the Partnership's real
estate to appreciate in value. However, inflation and
changing prices may also have an adverse impact on the
operating margins of the properties' tenants which could
impair their ability to pay rent and subsequently reduce the
Partnership's Net Cash Flow available for distributions.
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
There are no material pending legal proceedings to
which the Partnership is a party or of which the
Partnership's property is subject.
ITEM 2.CHANGES IN SECURITIES
None.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.OTHER INFORMATION
None.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits - None.
b. Reports filed on Form 8-K - None.
SIGNATURES
In accordance with the requirements of the Exchange
Act, the Registrant has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 9, 1995 AEI Real Estate Fund 85-B
Limited Partnership
By: Net Lease Management 85-B, Inc.
Its: Managing General Partner
By: /s/ Robert P. Johnson
Robert P. Johnson
President
By: /s/ Mark E. Larson
Mark E. Larson
Chief Financial Officer
