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, 1999
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)
(651) 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, 1999 and December 31, 1998
Statements for the Periods ended September 30, 1999 and 1998:
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, 1999 AND DECEMBER 31, 1998
(Unaudited)
ASSETS
1999 1998
CURRENT ASSETS:
Cash and Cash Equivalents $ 390,273 $ 371,557
Receivables 1,530 15,227
----------- -----------
Total Current Assets 391,803 386,784
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 1,446,391 1,446,391
Buildings and Equipment 2,663,897 2,663,897
Accumulated Depreciation (1,474,282) (1,422,454)
----------- -----------
Net Investments in Real Estate 2,636,006 2,687,834
----------- -----------
Total Assets $ 3,027,809 $ 3,074,618
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 10,230 $ 7,601
Land Remediation Estimate 211,000 211,000
Distributions Payable 69,061 68,770
----------- -----------
Total Current Liabilities 290,291 287,371
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (37,222) (36,724)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
6,638 outstanding 2,774,740 2,823,971
----------- -----------
Total Partners' Capital 2,737,518 2,787,247
----------- -----------
Total Liabilities and Partners' Capital $ 3,027,809 $ 3,074,618
=========== ===========
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
9/30/99 9/30/98 9/30/99 9/30/98
INCOME:
Rent $ 110,429 $ 111,196 $ 328,834 $ 345,836
Investment Income 4,420 5,175 12,417 14,748
--------- --------- --------- ---------
Total Income 114,849 116,371 341,251 360,584
--------- --------- --------- ---------
EXPENSES:
Partnership Administration -
Affiliates 21,656 28,724 69,990 81,703
Partnership Administration
and Property Management -
Unrelated Parties 5,205 2,568 17,625 17,572
Depreciation 17,276 15,852 51,828 51,828
--------- --------- --------- ---------
Total Expenses 44,137 47,144 139,443 151,103
--------- --------- --------- ---------
OPERATING INCOME 70,712 69,227 201,808 209,481
GAIN ON SALE OF REAL ESTATE 0 704 0 704
--------- --------- --------- ---------
NET INCOME $ 70,712 $ 69,931 $ 201,808 $ 210,185
========= ========= ========= =========
NET INCOME ALLOCATED:
General Partners $ 708 $ 700 $ 2,018 $ 2,102
Limited Partners 70,004 69,231 199,790 208,083
--------- --------- --------- ---------
$ 70,712 $ 69,931 $ 201,808 $ 210,185
========= ========= ========= =========
NET INCOME PER
LIMITED PARTNERSHIP UNIT
(6,638 and 6,711 weighted average
Units outstanding in 1999 and 1998,
respectively) $ 10.55 $ 10.32 $ 30.10 $ 31.01
========= ========= ========= =========
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)
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Incom $ 201,808 $ 210,185
Adjustments to Reconcile Net Income
To Net Cash Provided by Operating Activities:
Depreciation 51,828 51,828
Gain on Sale of Real Estate 0 (704)
Decrease in Receivables 13,697 26,417
Increase (Decrease) in Payable to
AEI Fund Management, Inc. 2,629 (857)
Increase in Unearned Rent 0 5,243
----------- -----------
Total Adjustments 68,154 81,927
----------- -----------
Net Cash Provided By
Operating Activities 269,962 292,112
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate 0 704
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Distributions Payable 291 406
Distributions to Partners (251,537) (225,453)
----------- -----------
Net Cash Used For
Financing Activities (251,246) (225,047)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 18,716 67,769
CASH AND CASH EQUIVALENTS, beginning of period 371,557 333,257
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 390,273 $ 401,026
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, 1997 $(36,304) $ 2,865,559 $ 2,829,255 6,710.96
Distributions (2,255) (223,198) (225,453)
Net Loss 2,102 208,083 210,185
-------- ----------- ----------- ----------
BALANCE, September 30, 1998 $(36,457) $ 2,850,444 $ 2,813,987 6,710.96
======== =========== =========== ==========
BALANCE, December 31, 1998 $(36,724) $ 2,823,971 $ 2,787,247 6,637.66
Distributions (2,516) (249,021) (251,537)
Net Income 2,018 199,790 201,808
-------- ----------- ----------- ----------
BALANCE, September 30, 1999 $(37,222) $ 2,774,740 $ 2,737,518 6,637.66
======== =========== =========== ==========
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, 1999
(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. (AEI), 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 with approximately 2,450
square feet on 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. The 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.
Since 1995, the Partnership has not paid real estate taxes
on the Park Forest property while the tax valuation of the
property was unsuccessfully appealed. In 1997, the
outstanding tax liability of approximately $128,958 was
purchased by an unrelated third party. Since the tax
liability exceeded the fair market value of the property,
the Partnership did not redeem the tax sale. Accordingly,
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. The purchaser of
the tax liability has not petitioned for issuance of the tax
deed.
On August 5, 1998, the Partnership sold the Fair Muffler
property to the current tenant for $5,000. The sale
resulted in a net gain of $704. The Partnership is
reviewing its legal obligation for the contamination
reclamation liability and may have adjustments to the
accrued liability in future periods.
On January 21, 1998, the Cheddar's restaurant was destroyed
by fire. The lessee rebuilt the restaurant and reopened on
November 16, 1998. The lessee had adequate insurance
coverage to cover the cost of rebuilding and the rental
payments in the interim.
AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(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, 1999 and 1998, the
Partnership recognized rental income of $328,834 and $345,836,
respectively. During the same periods, the Partnership earned
investment income of $12,417 and $14,748, respectively. In 1999,
rental income decreased mainly as a result of the sale of the
Fair Muffler property.
During the nine months ended September 30, 1999 and 1998,
the Partnership paid Partnership administration expenses to
affiliated parties of $69,990 and $81,703, 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 $17,625 and $17,572, 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 Fair Muffler property, located in Park Forest,
Illinois, is a one-story brick building of approximately 2,450
square feet on 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Since 1995, the Partnership has not paid real estate taxes
on the Park Forest property while the tax valuation of the
property was unsuccessfully appealed. In 1997, the outstanding
tax liability of approximately $128,958 was purchased by an
unrelated third party. Since the tax liability exceeded the fair
market value of the property, the Partnership did not redeem the
tax sale. Accordingly, 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. The purchaser
of the tax liability has not petitioned for issuance of the tax
deed.
On August 5, 1998, the Partnership sold the Fair Muffler
property to the current tenant for $5,000. The sale resulted in
a net gain of $704. The Partnership is reviewing its legal
obligation for the contamination reclamation liability and may
have adjustments to the accrued liability in future periods.
On January 21, 1998, the Cheddar's restaurant was
destroyed by fire. The Lessee rebuilt the restaurant and
reopened on November 16, 1998. The lessee had adequate insurance
coverage to cover the cost of rebuilding and the rental payments
in the interim.
As of September 30, 1999, the Partnership's annualized
cash distribution rate was 5.0%, 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.
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.
The Year 2000 issue is the result of computer systems that
use two digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and has
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership intends to monitor and communicate with
tenants regarding Year 2000 compliance, although there can be no
assurance that the systems of the various tenants will be Year
2000 compliant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Liquidity and Capital Resources
During the nine months ended September 30, 1999, the
Partnership's cash balances increased $18,716 as the Partnership
distributed less cash to the Partners than it generated from
operating activities. Net cash provided by operating activities
decreased from $292,112 in 1998 to $269,962 in 1999 as a result
of a decrease in total income in 1999 and net timing differences
in the collection of payments from the lessees and the payment of
expenses, which were partially offset by a decrease in expenses
in 1999.
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 March, 1999, the Partnership distributed $8,656 of sale
proceeds to the Limited and General Partners as part of their
regular quarterly distribution, which represented a return of
capital of $1.29 per Limited Partnership Unit.
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, 1999, eight Limited Partners redeemed a
total of 38 Partnership Units for $16,420 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, a total of
eighty-four Limited Partners redeemed 862.14 Partnership Units
for $640,259. 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.
PART II - OTHER INFORMATION
(Continued)
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, 1999.
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 8, 1999 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 85-B LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 390,273
<SECURITIES> 0
<RECEIVABLES> 1,530
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 391,803
<PP&E> 4,110,288
<DEPRECIATION> (1,474,282)
<TOTAL-ASSETS> 3,027,809
<CURRENT-LIABILITIES> 290,291
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,737,518
<TOTAL-LIABILITY-AND-EQUITY> 3,027,809
<SALES> 0
<TOTAL-REVENUES> 341,251
<CGS> 0
<TOTAL-COSTS> 139,443
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 201,808
<INCOME-TAX> 0
<INCOME-CONTINUING> 201,808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 201,808
<EPS-BASIC> 30.10
<EPS-DILUTED> 30.10
</TABLE>
