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: September 30, 1997
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
PART I. Financial Information
Item 1. Balance Sheet as of September 30, 1997 and December 31, 1996
Statements for the Periods ended September 30, 1997 and 1996:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(Unaudited)
ASSETS
1997 1996
CURRENT ASSETS:
Cash and Cash Equivalents $ 337,881 $ 299,844
Receivables 4,971 6,780
----------- -----------
Total Current Assets 342,852 306,624
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 1,446,391 1,667,493
Buildings and Equipment 2,714,725 3,000,246
Accumulated Depreciation (1,386,788) (1,414,181)
----------- -----------
Net Investments in Real Estate 2,774,328 3,253,558
----------- -----------
Total Assets $ 3,117,180 $ 3,560,182
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 16,756 $ 99,733
Land Remediation Estimate 211,000 211,000
Distributions Payable 68,244 91,293
Unearned Rent 13,199 0
----------- -----------
Total Current Liabilities 309,199 402,026
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (36,517) (33,015)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
6,744 Units outstanding 2,844,498 3,191,171
----------- -----------
Total Partners' Capital 2,807,981 3,158,156
----------- -----------
Total Liabilities and Partners' Capital $ 3,117,180 $ 3,560,182
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
Three Months Ended Nine Months Ended
9/30/97 9/30/96 9/30/97 9/30/96
INCOME:
Rent $ 119,539 $ 142,208 $ 377,181 $ 425,786
Investment Income 3,995 4,018 15,277 11,389
---------- ---------- ---------- ----------
Total Income 123,534 146,226 392,458 437,175
---------- --------- ---------- ----------
EXPENSES:
Partnership Administration -
Affiliates 23,742 25,503 71,884 73,059
Partnership Administration
and Property Management -
Unrelated Parties (Note 3) (95,939) 232,385 (51,360) 272,342
Depreciation 18,397 34,331 58,561 103,750
Real Estate Impairment
(Note 3) 117,823 0 117,823 0
---------- ---------- ---------- ----------
Total Expenses 64,023 292,219 196,908 449,151
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) 59,511 (145,993) 195,550 (11,976)
GAIN ON SALE OF REAL ESTATE 0 0 109,147 0
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 59,511 $ (145,993) $ 304,697 $ (11,976)
========== ========== ========== ==========
NET INCOME (LOSS) ALLOCATED:
General Partners $ 595 $ (2,920) $ 3,047 $ (240)
Limited Partners 58,916 (143,073) 301,650 (11,736)
---------- ---------- ---------- ----------
$ 59,511 $ (145,993) $ 304,697 $ (11,976)
========== ========== ========== ==========
NET INCOME (LOSS) PER
LIMITED PARTNERSHIP UNIT
(6,744 and 6,819 weighted average
Units outstanding in 1997
and 1996 respectively) $ 8.74 $ (20.98) $ 44.73 $ (1.72)
========== ========== ========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 304,697 $ (11,976)
Adjustments to Reconcile Net Income
To Net Cash Provided by Operating Activities:
Depreciation 58,561 103,750
Real Estate Impairment 117,823 0
Gain on Sale of Real Estate (109,147) 0
Decrease in Receivables 1,809 49
Increase (Decrease) in Payable to
AEI Fund Management, Inc. (82,977) 45,862
Increase in Environmental Claim 0 211,000
Increase in Unearned Rent 13,199 17,157
----------- -----------
Total Adjustments (732) 377,818
----------- -----------
Net Cash Provided By
Operating Activities 303,965 365,842
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate 411,993 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in Distributions Payable (23,049) (20,209)
Distributions to Partners (654,872) (301,592)
----------- -----------
Net Cash Used For
Financing Activities (677,921) (321,801)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 38,037 44,041
CASH AND CASH EQUIVALENTS, beginning of period 299,844 302,614
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 337,881 $ 346,655
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1995 $ (29,269) $ 3,562,088 $ 3,532,819 6,819.00
Distributions (3,016) (298,576) (301,592)
Net Loss (240) (11,736) (11,976)
---------- ----------- ----------- ---------
BALANCE, September 30, 1996 $ (32,525) $ 3,251,776 $ 3,219,251 6,819.00
========== =========== =========== =========
BALANCE, December 31, 1996 $ (33,015) $ 3,191,171 $ 3,158,156 6,743.96
Distributions (6,549) (648,323) (654,872)
Net Income 3,047 301,650 304,697
---------- ----------- ----------- ---------
BALANCE, September 30, 1997 $ (36,517) $ 2,844,498 $ 2,807,981 6,743.96
========== =========== =========== =========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
(1) The condensed statements included herein have been prepared
by the Partnership, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, 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 - (Continued)
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) Investments in Real Estate -
The Fair Muffler property, located in Park Forest, Illinois,
is a one-story brick building of approximately 2,450 square
feet on an a 19,388 square foot parcel of land. It was
acquired in August, 1986 subject to a long-term triple net
Lease for 20 years. In 1989, the lessee filed for
bankruptcy and the Partnership re-leased the property to a
Fair Muffler franchisee who had been operating the property
as a sublessee. That franchisee continued to operate the
property until December, 1996. In January, 1997, it was
leased on a month-to-month basis to a car care operator for
$2,600 per month.
In 1996, in anticipation of selling the property, the
Partnership conducted an environmental soil contamination
investigation of the property. The investigation revealed
contamination of approximately 2,750 cubic yards exceeding
Tier 1 soil migration to Class II groundwater, which will
need to be remediated. The contamination has been
identified as petroleum constituents and is believed to have
been caused by underground storage tanks in place when the
property was operated as a gasoline station, prior to the
Partnership's ownership.
An estimate for site remediation work, which includes
contaminated soil removal, tank removal, soil sampling,
backfilling and reporting, of $211,000 was received from an
environmental engineering firm. The Partnership has engaged
legal counsel to investigate what sources, if any, are
available for indemnification of these reclamation costs.
In the third quarter of 1996, the Partnership accrued a
current liability of $211,000 to remediate the site. It has
not been determined when the reclamation work will begin or
how long it will take to complete. It is reasonably
possible that the actual costs could materially differ from
the estimate.
The Partnership obtained an independent appraisal of the
property which showed a value of $125,000. A charge to
operations for real estate impairment of $116,252 was
recognized in the fourth quarter of 1996, which is the
difference between book value at December 31, 1995 of
$241,252 and the appraised market value of $125,000. The
charge was recorded against the carrying amount of the land.
Since 1995, the Partnership has not paid real estate taxes
on the Park Forest property while it was unsuccessfully
appealing the real estate tax valuation of the property.
During this period of time the Partnership accrued $128,958
of real estate taxes, of which $86,399 was accrued as of
December 31, 1996. In 1997, Cook County sold the property
for unpaid taxes to an unrelated third party. The
Partnership can prevent the sale of the property by paying
the balance of taxes due. However, since the taxes due
exceed the fair market value of the property, the
Partnership does not intend to pay these taxes.
Consequently, the Partnership reversed the accrual for these
taxes resulting in a $86,399 credit to 1997 expenses for the
taxes accrued in a prior year. As a result, the balance of
the Partnership Administration and Property Management -
Unrelated Parties expenses is a credit balance of $51,360
for the nine months ended September 30, 1997. Since the
Partnership intends to allow the tax sale to be completed, a
charge to operations for an additional real estate
impairment of $117,823 was recognized in the third quarter
of 1997, to write down the carrying value of the property to
zero.
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
On February 17, 1997, the Partnership sold the Auto Max
property to an unrelated third party. The Partnership
received net sale proceeds of $411,993, which resulted in a
net gain of $109,147. At the time of sale, the cost and
related accumulated depreciation of the property was
$388,800 and $85,954, respectively. In April, 1997, the
Partnership distributed $404,040 of the net sale proceeds to
the Limited and General Partners which represented a return
of capital of $59.31 per Limited Partnership Unit,
respectively.
(4) 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
Results of Operations
For the nine months ended September 30, 1997 and 1996, the
Partnership recognized rental income of $377,181 and $425,786,
respectively. During the same periods, the Partnership earned
investment income of $15,277 and $11,389, respectively. In 1997,
rental income decreased mainly as a result of the sale of the
Auto Max property discussed below. The decrease in rental income
was partially offset by additional investment income earned on
the net proceeds from the property sale.
During the nine months ended September 30, 1997 and 1996,
the Partnership paid Partnership administration expenses to
affiliated parties of $71,884 and $73,059, respectively. These
administration expenses include costs associated with the
management of the properties, processing distributions, reporting
requirements and correspondence to the Limited Partners. During
the same periods, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $(51,360) and $272,342, 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 decrease
in these expenses in 1997 relates to the Park Forest real estate
tax and reclamation costs discussed below.
The Fair Muffler property, located in Park Forest,
Illinois, is a one-story brick building of approximately 2,450
square feet on an a 19,388 square foot parcel of land. It was
acquired in August, 1986 subject to a long-term triple net Lease
for 20 years. In 1989, the lessee filed for bankruptcy and the
Partnership re-leased the property to a Fair Muffler franchisee
who had been operating the property as a sublessee. That
franchisee continued to operate the property until December,
1996. In January, 1997, it was leased on a month-to-month basis
to a car care operator for $2,600 per month.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
In 1996, in anticipation of selling the property, the
Partnership conducted an environmental soil contamination
investigation of the property. The investigation revealed
contamination of approximately 2,750 cubic yards exceeding Tier 1
soil migration to Class II groundwater, which will need to be
remediated. The contamination has been identified as petroleum
constituents and is believed to have been caused by underground
storage tanks in place when the property was operated as a
gasoline station, prior to the Partnership's ownership.
An estimate for site remediation work, which includes
contaminated soil removal, tank removal, soil sampling,
backfilling and reporting, of $211,000 was received from an
environmental engineering firm. The Partnership has engaged
legal counsel to investigate what sources, if any, are available
for indemnification of these reclamation costs. In the third
quarter of 1996, the Partnership accrued a current liability of
$211,000 to remediate the site. It has not been determined when
the reclamation work will begin or how long it will take to
complete. It is reasonably possible that the actual costs could
materially differ from the estimate.
The Partnership obtained an independent appraisal of the
property which showed a value of $125,000. A charge to
operations for real estate impairment of $116,252 was recognized
in the fourth quarter of 1996, which is the difference between
book value at December 31, 1995 of $241,252 and the appraised
market value of $125,000. The charge was recorded against the
carrying amount of the land.
Since 1995, the Partnership has not paid real estate taxes
on the Park Forest property while it was unsuccessfully appealing
the real estate tax valuation of the property. During this
period of time the Partnership accrued $128,958 of real estate
taxes, of which $86,399 was accrued as of December 31, 1996. In
1997, Cook County sold the property for unpaid taxes to an
unrelated third party. The Partnership can prevent the sale of
the property by paying the balance of taxes due. However, since
the taxes due exceed the fair market value of the property, the
Partnership does not intend to pay these taxes. Consequently,
the Partnership reversed the accrual for these taxes resulting in
a $86,399 credit to 1997 expenses for the taxes accrued in a
prior year. As a result, the balance of the Partnership
Administration and Property Management - Unrelated Parties
expenses is a credit balance of $51,360 for the nine months ended
September 30, 1997. Since the Partnership intends to allow the
tax sale to be completed, a charge to operations for an
additional real estate impairment of $117,823 was recognized in
the third quarter of 1997, to write down the carrying value of
the property to zero.
As of September 30, 1997, the Partnership's annualized
cash distribution rate was 5.00%, 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.
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 term 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Liquidity and Capital Resources
During the nine months ended September 30, 1997, the
Partnership's cash balances increased $38,037. Net cash provided
by operating activities decreased from $365,842 in 1996 to
$303,965 in 1997.
On February 17, 1997, the Partnership sold the Auto Max
property to an unrelated third party. The Partnership received
net sale proceeds of $411,993, which resulted in a net gain of
$109,147. At the time of sale, the cost and related accumulated
depreciation of the property was $388,800 and $85,954,
respectively. In April, 1997, the Partnership distributed
$404,040 of the net sale proceeds to the Limited and General
Partners which represented a return of capital of $59.31 per
Limited Partnership Unit, respectively.
The Partnership's primary use of cash flow is distribution
and redemption payments to Partners. The Partnership declares
its regular quarterly distributions before the end of each
quarter and pays the distribution in the first week after the end
of each quarter. The Partnership attempts to maintain a stable
distribution rate from quarter to quarter. However, in certain
quarters, the Partnership will increase the quarterly
distribution to pay out contingent rent received as a result of
an increase in sales at a property. The distribution of the
contingent rent can cause the total distributions and the
distribution payable to fluctuate from year to year. Redemption
payments are paid to redeeming Partners in the fourth quarter of
each year.
In the first nine months of 1996, the Partnership made
distributions at a 6.27% rate which resulted in distributions to
the Partners of $301,592. In April, 1997, the Partnership
distributed net sale proceeds of $404,040 to the Partners as a
special distribution, which reduced the Limited Partners'
Adjusted Capital Contribution. Effective April 1, 1997, the
Partnership made distributions at a 5.0% rate on the reduced
capital balance, which resulted in distributions to the Partners
of $250,832 for the first nine months of 1997.
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 number of Units
originally sold. In no event shall the Partnership be obligated
to purchase Units if, in the sole discretion of the Managing
General Partner, such purchase would impair the capital or
operation of the Partnership.
On October 1, 1997, five Limited Partners redeemed a total
of 33 Partnership Units for $15,905 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, a total of
seventy-two Limited Partners redeemed 755.84 Partnership Units
for $590,626. The redemptions increase the remaining Limited
Partners' ownership interest in the Partnership.
The continuing rent payments from the properties, together
with the Partnership's cash reserve, should be adequate to fund
continuing distributions and meet other Partnership obligations,
including those obligations associated with remediation of
contaminated soil at the Fair Muffler property located in Park
Forest, Illinois, on both a short-term and long-term basis.
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 -
Description
27 Financial Data Schedule for period
ended September 30, 1997.
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: November 11, 1997 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
(Principal Executive Officer)
By: /s/ Mark E Larson
Mark E. Larson
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000771677
<NAME> AEI REAL ESTATE FUND 85B LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 337,881
<SECURITIES> 0
<RECEIVABLES> 4,971
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 342,852
<PP&E> 4,161,116
<DEPRECIATION> (1,386,788)
<TOTAL-ASSETS> 3,117,180
<CURRENT-LIABILITIES> 309,199
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,807,981
<TOTAL-LIABILITY-AND-EQUITY> 3,117,180
<SALES> 0
<TOTAL-REVENUES> 392,458
<CGS> 0
<TOTAL-COSTS> 196,908
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 304,697
<INCOME-TAX> 0
<INCOME-CONTINUING> 304,697
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 304,697
<EPS-PRIMARY> 44.73
<EPS-DILUTED> 44.73
</TABLE>
