SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A2
Annual Report Under Section 13 or 15(d)
Of The Securities Exchange Act Of 1934
For the Fiscal Year Ended: December 31, 1995
Commission file number: 0-14090
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
(Name of Small Business Issuer in its Charter)
State of Delaware 41-6273958
(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)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
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 past 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
Check if disclosure of delinquent filers in response to Rule 405
of Regulation S-B is not contained in this Form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Issuer's revenues for year ended December 31, 1995 were
$661,618.
As of February 29, 1996, there were 7,198.32 Units of limited
partnership interest in the registrant outstanding and owned by
nonaffiliates of the registrant, which Units had an aggregate
market value (based solely on the price at which they were sold
since there is no ready market for such Units) of $7,198,320.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant has not incorporated any documents by reference
into this report.
Transitional Small Business Disclosure Format:
Yes No [X]
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
AEI Real Estate Fund 86-A Limited Partnership (the
"Partnership" or the "Registrant") is a limited partnership which
was organized pursuant to the laws of the State of Delaware on
April 2, 1986. The registrant is comprised of AEI Fund
Management 86-A, Inc. (AFM) as Managing General Partner, Robert
P. Johnson as the Individual General Partner, and purchasers of
partnership units as Limited Partners. The Partnership offered
for sale up to $7,500,000 of limited partnership interests (the
"Units") (7,500 Units at $1,000 per Unit) pursuant to a
registration statement effective February 18, 1986. The
Partnership commenced operations on April 2, 1986 when minimum
subscriptions of 1,300 Limited Partnership Units ($1,300,000)
were accepted. The Partnership's offering terminated July 9,
1986 when the maximum subscription limit of 7,500 Limited
Partnership Units ($7,500,000) was reached.
The Partnership was organized to acquire, initially on a
debt-free basis, existing and newly constructed commercial
properties located in the United States, to lease such properties
to tenants under triple net leases, to hold such properties and
to eventually sell such properties. From subscription proceeds,
the Partnership purchased eight properties, including a partial
interest in one property, totaling $6,364,078. The balance of
the subscription proceeds was applied to organization and
syndication costs, working capital reserves and distributions,
which represented a return of capital. The properties are all
commercial, single tenant buildings, with the exception of the
Kearney office building, leased under triple net leases.
The Partnership will hold its properties until the General
Partners determine that the sale or other disposition of the
properties is advantageous in view of the Partnership's
investment objectives. In deciding whether to sell properties,
the General Partners will consider factors such as potential
appreciation, net cash flow and income tax considerations. In
addition, certain lessees have been granted options to purchase
properties after a specified portion of the lease term has
elapsed. It is anticipated that the Partnership will sell its
properties within twelve years after acquisition. At any time
prior to selling the properties, the Partnership may mortgage one
or more of its properties in amounts not exceeding 50% of the
fair market value of the property.
Leases
Although there are variations in the specific terms of the
leases, the following is a summary of the general terms of the
Partnership's leases. The properties are leased to various
tenants under noncancelable triple net leases, which are
classified as operating leases. Under a triple net lease, the
lessee is responsible for all real estate taxes, insurance,
maintenance, repairs and operating expenses for the property.
The initial lease terms are for 10 to 20 years. The leases
provide for base annual rental payments, payable in monthly
installments, and contain rent clauses which entitle the
Partnership to receive additional rent in future years based on
stated rent increases or if gross receipts for the property
exceed certain specified amounts, among other conditions.
The leases provide the lessees with two five-year renewal
options subject to the same terms and conditions as the initial
lease. Certain lessees have been granted options to purchase the
property. Depending on the lease, the purchase price is either
determined by a formula, or is the greater of the fair market
value of the property or the amount determined by a formula. In
all cases, if the option were to be exercised by the lessee, the
purchase price would be greater than the original cost of the
property.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Effective May 1, 1992, the Partnership replaced the
original tenant in the office building in Kearney, Nebraska, with
a new tenant who, in March, 1993, filed for reorganization. The
Partnership obtained possession of the property and listed the
property for sale or lease. The Partnership received rent of
$975 per month through March, 1994, from a tenant who was sub-
leasing part of the building from the new tenant. Since March
1994, the Partnership has received no rent from the property.
As of November, 1993, the lessee was in default under the
amended Lease Agreement. In November, 1993, after reviewing the
Sizzler's operating results, the Partnership determined that the
lessee would be unable to operate the restaurants in a manner
capable of maximizing the restaurant's sales. Consequently, at
the direction of the Partnership, a multi-unit restaurant
operator assumed operation of this restaurant while the
Partnership reviewed the available options. In June, 1994, the
Partnership closed the restaurant and listed it for sale or
lease. While the property is being re-leased, the Partnership is
responsible for the real estate taxes and other costs required to
maintain the property. The Partnership's investment in this
property represents a minor portion of the Partnership's
portfolio. The loss of rent from this property has not had a
material impact on the Partnership's Net Cash Flow.
On July 6, 1995, the Partnership sold the Cheddar's
restaurant in Columbus, Ohio, to the lessee. The Partnership
received net sale proceeds of $314,826, which resulted in a net
gain of $44,137. At the time of sale, the cost and related
accumulated depreciation of the property was $306,711 and
$36,022, respectively.
In March, 1995, the lessee of the Applebee's restaurant in
Fort Myers, Florida, exercised an option in the Lease Agreement
to purchase the property. On July 28, 1995, the sale closed with
the Partnership receiving net sale proceeds of $1,646,608 which
resulted in a net gain of $686,548. At the time of sale, the
cost and related accumulated depreciation of the property was
$1,179,405 and $219,345, respectively. The Managing General
Partner is in the process of preparing a proxy statement to
propose an amendment to the Limited Partnership Agreement that
would allow the Partnership to reinvest the majority of the net
proceeds in additional properties.
Major Tenants
During 1995, five of the Partnership's lessees each
contributed more than ten percent of the Partnership's total
rental revenue. The major tenants in aggregate contributed 83%
of the Partnership's total rental revenue in 1995. It is
anticipated that, based on the minimum rental payments required
under the leases, each major tenant will continue to contribute
more than ten percent of the Partnership's total rental revenue
in 1996 and future years. The only exception is the tenant in
the Applebee's property will not continue to be a major tenant
since the property was sold in 1995. Any failure of these major
tenants could materially affect the Partnership's net income and
cash distributions.
Competition
The Partnership is a minor factor in the commercial real
estate business. There are numerous entities engaged in the
commercial real estate business which have greater financial
resources than the Partnership. At the time the Partnership
elects to dispose of its properties, the Partnership will be in
competition with other persons and entities to find buyers for
its properties.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Employees
The Partnership has no direct employees. Management
services are performed for the Partnership by AEI Fund
Management, Inc., an affiliate of AFM.
ITEM 2. DESCRIPTION OF PROPERTIES.
Investment Objectives
The Partnership's investment objectives were to acquire
existing or newly-developed commercial properties throughout the
United States that offer the potential for (i) preservation and
protection of the Partnership's capital; (ii) partially tax-
deferred cash distributions from operations which may increase
through rent participation clauses or mandated rent increases;
and (iii) long-term capital gains through appreciation in value
of the Partnership's properties realized upon sale. The
Partnership does not have a policy, and there is no limitation,
as to the amount or percentage of assets that may be invested in
any one property. However, to the extent possible, the General
Partners attempt to diversify the type and location of the
Partnership's properties.
Description of Properties
The Partnership's properties are all commercial, single
tenant buildings with the exception of the Kearney office
building. All the properties were acquired on a debt-free basis
and are leased to various tenants under noncancelable triple net
leases, which are classified as operating leases. The Partnership
holds an undivided fee simple interest in the properties. At any
time prior to selling the properties, the Partnership may
mortgage one or more of its properties in amounts not exceeding
50% of the fair market value of the property.
The Partnership's properties are subject to the general
competitive conditions incident to the ownership of single tenant
investment real estate. Since each property is leased under a
long-term lease, there is little competition until the
Partnership decides to sell the property. At this time, the
Partnership will be competing with other real estate owners, on
both a national and local level, in attempting to find buyers for
the properties. In the event of a tenant default, the
Partnership would be competing with other real estate owners, who
have property vacancies, to attract a new tenant to lease the
property. The Partnership's tenants operate in industries that
are very competitive and can be affected by factors such as
changes in regional or local economies, seasonality and changes
in consumer preference.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 1995.
<TABLE>
<S> <C> <C> <C> <C> <C>
Total Property
Purchase Acquisition Annual Lease Annual Rent
Property Date Costs Lessee Payment Per Sq. Foot
Office/Warehouse
Kearney, NE 12/12/86 $ 434,623 (F1)
Auto Max Automotive Center
Bloomington, MN 6/3/87 $ 838,749 Thomas $ 110,400 $ 14.84
Graffunder
DeLisi's Italian DeLisi's Italian
Restaurant and Lounge Restaurant
Brooklyn Park, MN 6/16/87 $ 968,958 and Lounge, Inc. $ 72,000 $ 9.93
Auto Max Automotive Center Annabelle, Inc. and
Coon Rapids, MN 7/24/87 $ 795,818 Motorscope,Inc. $ 82,075 $ 11.42
am/pm Mini Market B. Wells
Carson City, NV 8/21/87 $ 779,896 O'Brien & Co. $ 99,947 $ 40.01
Sizzler Restaurant
Springboro, OH
(6.7522%) 8/24/90 $ 89,097 (F1)
Taco Cabana Restaurant
Houston, TX
(61.7638%) 7/31/91 $ 859,159 Taco Cabana, Inc. $ 120,044 $ 71.99
(F1) The property is vacant and listed for sale or lease.
</TABLE>
The properties listed above with a partial ownership
percentage are owned with affiliates of the Partnership. AEI
Real Estate Fund XVIII Limited Partnership owns the remaining
interest in the Sizzler restaurant in Springboro, Ohio. AEI Net
Lease Income & Growth Fund XIX Limited Partnership owns the
remaining interest in the Taco Cabana restaurant in Houston,
Texas.
Each Partnership owns a separate, undivided interest in
the properties. No specific agreement or commitment exists
between the Partnerships as to the management of their respective
interests in the properties, and the Partnership that holds more
than a 50% interest does not control decisions over the other
Partnership's interest.
The initial Lease terms are for 20 years except for the
Taco Cabana and Auto Max properties which are 15 years and the
DeLisi's property which is 10 years. The Leases have renewal
options which may extend the lease term an additional 10 years.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
Pursuant to the Lease Agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they occupy. The General Partners believe the properties are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.
For tax purposes, the Partnership's properties are
depreciated under the Modified Accelerated Cost Recovery System
(MACRS). The largest depreciable component of a property is the
building which is depreciated, using the straight-line method,
over 31.5 years. The remaining depreciable components of a
property are personal property and land improvements which are
depreciated, using an accelerated method, over 5 and 15 years,
respectively. Since the Partnership has tax-exempt Partners, the
Partnership is subject to the rules of Section 168(h)(6) of the
Internal Revenue Code which requires a percentage of the
properties' depreciable components to be depreciated over longer
lives using the straight-line method. In general the federal tax
basis of the properties for tax depreciation purposes is the same
as the basis for book depreciation purposes.
During the last five years, all properties were 100
percent occupied by the lessees noted, with the exception of the
Sizzler property, which was 100 percent occupied until June,
1994, and the office/warehouse property which was 100 percent
occupied until May, 1992, and then 30 percent occupied until
March, 1994. The Sizzler property and the office/warehouse
property have been 100 percent vacant since June, 1994, and
March, 1994, respectively.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS.
As of December 31, 1995, there were 950 holders of record
of the registrant's Limited Partnership Units. There is no other
class of security outstanding or authorized. The registrant's
Units are not a traded security in any market. However, the
Partnership may purchase 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
outstanding at the beginning of the year and in no event,
obligated to purchase Units if such purchase would impair the
capital or operation of the Partnership.
During 1995, seventeen Limited Partners redeemed a total
of 55 Partnership Units for $34,815 in accordance with the
Partnership Agreement. In prior years, a total of twenty-nine
Limited Partners redeemed 223.75 Partnership Units for $177,047.
The redemptions increase the remaining Limited Partners'
ownership interest in the Partnership.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Cash distributions of $5,431 and $5,745 were made to the
General Partners and $502,883 and $562,502 were made to the
Limited Partners in 1995 and 1994, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined, except as discussed below. These
distributions should not be compared with dividends paid on
capital stock by corporations.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $221,627 of proceeds from the
Applebee's and Cheddar's sales in 1995. The distributions
reduced the Limited Partners' Adjusted Capital Contributions.
Results of Operations
The Partnership's rental income is derived from long-term,
triple net lease agreements on the Partnership's properties. For
the years ended December 31, 1995 and 1994, the Partnership
recognized rental income of $616,054 and $688,888, respectively.
During the same periods, the Partnership earned investment income
of $45,564 and $1,991, respectively. In 1995, rental income
decreased as a result of two property sales discussed below. The
decrease in rental income was partially offset by additional
investment income earned on the net proceeds from the property
sales.
Effective May 1, 1992, the Partnership replaced the
original tenant in the office building in Kearney, Nebraska, with
a new tenant who, in March, 1993, filed for reorganization. The
Partnership obtained possession of the property and listed the
property for sale or lease. The Partnership received rent of
$975 per month through March, 1994, from a tenant who was sub-
leasing part of the building from the new tenant. Since March
1994, the Partnership has received no rent from the property.
The total amount of rent not collected in 1995 and 1994 was
$62,008 and $59,081, respectively. These amounts were not
accrued for financial reporting purposes.
During the years ended December 31, 1995 and 1994, the
Partnership paid Partnership administration expenses to
affiliated parties of $126,948 and $125,257, 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 $50,831 and $68,476, 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 1995, when compared to 1994, is the result
of increased reimbursements from the tenant of the DeLisi's
restaurant property which reduced the Partnership's real estate
tax expense.
As of December 31, 1995, the Partnership's annualized cash
distribution rate was 6.5%, 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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.
Liquidity and Capital Resources
During 1995, the Partnership's cash balances increased
$1,812,717 due to the sale of two of the Partnership's
properties. Net cash provided by operating activities decreased
from $501,743 in 1994 to $483,881 in 1995. The decrease was due
to a reduction in rental income, as a result of the property
sales, which was partially offset by additional investment income
earned on the net sale proceeds and a reduction in Partnership
expenses.
Net cash provided by investing activities increased
$1,961,434, which represents the net cash proceeds from the sale
of two of the Partnership's properties. On July 6, 1995, the
Partnership sold the Cheddar's restaurant in Columbus, Ohio, to
the lessee. The Partnership received net sale proceeds of
$314,826, which resulted in a net gain of $44,137. At the time
of sale, the cost and related accumulated depreciation of the
property was $306,711 and $36,022, respectively.
In March, 1995, the lessee of the Applebee's restaurant in
Fort Myers, Florida, exercised an option in the Lease Agreement
to purchase the property. On July 28, 1995, the sale closed with
the Partnership receiving net sale proceeds of $1,646,608 which
resulted in a net gain of $686,548. At the time of sale, the
cost and related accumulated depreciation of the property was
$1,179,405 and $219,345, respectively. The Managing General
Partner is in the process of preparing a proxy statement to
propose an amendment to the Limited Partnership Agreement that
would allow the Partnership to reinvest the majority of the net
proceeds in additional properties.
During 1995, the Partnership distributed $223,865 of the
net sale proceeds to the Limited and General Partners as part of
their regular quarterly distributions, which represented a return
of capital of $30.55 per Limited Partnership Unit.
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. Redemption payments
are paid to redeeming Partners in the fourth quarter of each
year. The redemption payments generally are funded with cash
that would normally be paid as part of the regular quarterly
distributions. As a result, distributions have fluctuated from
year to year due to cash used to fund redemption payments. This
is one of the reasons why distributions to Partners were higher
in 1994 when compared to 1995.
The Partnership may purchase 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
outstanding at the beginning of the year. 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
During 1995, seventeen Limited Partners redeemed a total
of 55 Partnership Units for $34,815 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, a total of
twenty-nine Limited Partners redeemed 223.75 Partnership Units
for $177,047. The redemptions increase the remaining Limited
Partners' ownership interest in the Partnership.
In January, 1994, the Partnership established a $100,000
unsecured line of credit at Fidelity Bank of Edina, Minnesota.
On January 5, 1995 the line of credit was increased to $150,000.
The line of credit bears interest at the prime rate plus one
percent on the outstanding balance, which was due on demand, but
in any event no later than January 5, 1996. The line of credit
was established to provide short-term financing to cover any
temporary cash deficits. In September, 1995, the line of credit
was cancelled. As of December 31, 1994, the amount due on the
line of credit was $35,000. In 1995 and 1994, total interest
expense was $4,061 and $2,553, respectively.
The continuing rent payments from the properties, together
with cash generated from the property sales, should be adequate
to fund continuing distributions and meet other Partnership
obligations on both a short-term and long-term basis.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying index to financial statements.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report
Balance Sheet as of December 31, 1995 and 1994
Statements for the Years Ended December 31, 1995 and 1994:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
INDEPENDENT AUDITOR'S REPORT
To the Partners:
AEI Real Estate Fund 86-A Limited Partnership
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI REAL
ESTATE FUND 86-A LIMITED PARTNERSHIP (a Delaware limited
partnership) as of December 31, 1995 and 1994 and the related
statements of income, cash flows and changes in partners' capital
for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements 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 AEI Real Estate Fund 86-A Limited Partnership as of December
31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota /s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
February 6, 1996 Certified Public Accountants
<PAGE>
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1995 1994
CURRENT ASSETS:
Cash and Cash Equivalents $ 1,822,519 $ 9,802
Receivables 3,240 11,604
----------- -----------
Total Current Assets 1,825,759 21,406
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 1,810,273 2,458,967
Buildings and Equipment 2,956,027 3,793,449
Accumulated Depreciation (1,031,715) (1,139,101)
----------- -----------
Net Investments in Real Estate 3,734,585 5,113,315
----------- -----------
Total Assets $ 5,560,344 $ 5,134,721
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 16,401 $ 20,662
Distributions Payable 74,425 128,894
Security Deposit 5,000 5,000
Line of Credit 0 35,000
----------- -----------
Total Current Liabilities 95,826 189,556
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (8,507) (13,701)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
7,221 and 7,276 outstanding in 1995
and 1994, respectively 5,473,025 4,958,866
----------- -----------
Total Partners' Capital 5,464,518 4,945,165
----------- -----------
Total Liabilities and Partners' Capital $ 5,560,344 $ 5,134,721
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 3l
1995 1994
INCOME:
Rent $ 616,054 $ 688,888
Investment Income 45,564 1,991
----------- -----------
Total Income 661,618 690,879
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 126,948 125,257
Partnership Administration and Property
Management - Unrelated Parties 50,831 68,476
Interest 4,061 2,553
Depreciation 147,981 163,389
----------- -----------
Total Expenses 329,821 359,675
----------- -----------
OPERATING INCOME 331,797 331,204
GAIN ON SALE OF REAL ESTATE 730,685 0
----------- -----------
NET INCOME $ 1,062,482 $ 331,204
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 10,625 $ 3,312
Limited Partners 1,051,857 327,892
----------- -----------
$ 1,062,482 $ 331,204
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(7,262 and 7,283 weighted average Units outstanding
in 1995 and 1994, respectively) $ 144.84 $ 45.02
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,062,482 $ 331,204
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 147,981 163,389
Gain on Sale of Real Estate (730,685) 0
Decrease in Receivables 8,364 6,911
Increase (Decrease) in Payable to
AEI Fund Management, Inc. (4,261) 239
----------- -----------
Total Adjustments (578,601) 170,539
----------- -----------
Net Cash Provided By
Operating Activities 483,881 501,743
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate 1,961,434 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (54,469) 27,429
Distributions to Partners (507,963) (568,184)
Redemption Payments (35,166) (6,345)
Increase (Decrease) in Line of Credit (35,000) 35,000
----------- -----------
Net Cash Used For
Financing Activities (632,598) (512,100)
----------- -----------
NET INCREASE (DECREASE) IN CASH 1,812,717 (10,357)
CASH AND CASH EQUIVALENTS, beginning of period 9,802 20,159
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,822,519 $ 9,802
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid During the Year $ 4,061 $ 2,553
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1993 $ (11,268) $ 5,199,758 $ 5,188,490 7,285.25
Distributions (5,682) (562,502) (568,184)
Redemption Payments (63) (6,282) (6,345) (9.00)
Net Income 3,312 327,892 331,204
--------- ----------- ----------- ----------
BALANCE, December 31, 1994 (13,701) 4,958,866 4,945,165 7,276.25
Distributions (5,080) (502,883) (507,963)
Redemption Payments (351) (34,815) (35,166) (54.93)
Net Income 10,625 1,051,857 1,062,482
--------- ----------- ----------- ----------
BALANCE, December 31, 1995 $ (8,507) $ 5,473,025 $ 5,464,518 7,221.32
========= =========== =========== ==========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) Organization -
AEI Real Estate Fund 86-A Limited Partnership (Partnership)
was formed to acquire and lease commercial properties to
operating tenants. The Partnership's operations are managed
by AEI Fund Management 86-A, Inc. (AFM), the Managing
General Partner of the Partnership. Robert P. Johnson, the
President and sole shareholder of AFM, serves as the
Individual General Partner of the Partnership. An affiliate
of AFM, 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 April 2, 1986 when minimum
subscriptions of 1,300 Limited Partnership Units
($1,300,000) were accepted. The Partnership's offering
terminated on July 9, 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.
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 l% 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.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) Organization - (Continued)
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.
(2) Summary of Significant Accounting Policies -
Financial Statement Presentation
The accounts of the Partnership are maintained on the
accrual basis of accounting for both federal income tax
purposes and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate
Cash and Cash Equivalents
Cash and cash equivalents include all cash and highly
liquid investment securities with maturities at
acquisition of three months or less. Such investment
securities are carried at cost plus accrued interest which
approximates fair market value.
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
Partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under long-term
triple net leases classified as operating leases. The
Partnership recognizes rental revenue on the accrual
basis according to the terms of the individual leases.
For leases which contain cost of living increases, the
increases are recognized in the year in which they are
effective.
Real estate is recorded at the lower of cost or estimated
net realizable value. The Financial Accounting Standards
Board has issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" which is effective for the
Partnership's fiscal year ended December 31, 1996. The
Partnership regularly reviews the carrying value of its
properties and will reduce properties to their net
realizable value as needed. Adoption of Statement 121 is
not expected to have a material effect on the
Partnership's financial statements.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings and equipment.
The buildings and equipment of the Partnership are
depreciated using the straight-line method for financial
reporting purposes based on estimated useful lives of 30
years and 10 years respectively.
(3) Related Party Transactions -
On June 7, 1990, the Partnership acquired a 20% interest in
the Cheddar's restaurant. On August 24, 1990, the
Partnership acquired a 6.7522% interest in the Sizzler
restaurant. The remaining interest in these properties are
owned by AEI Real Estate Fund XVIII Limited Partnership, an
affiliate of the Partnership. On July 31, 1991, the
Partnership acquired a 61.7638% interest in the Taco Cabana
restaurant. The remaining interest in this property is
owned by AEI Net Lease Income & Growth Fund XIX Limited
Partnership, an affiliate of the Partnership.
Each Partnership owns a separate, undivided interest in the
properties. No specific agreement or commitment exists
between the Partnerships as to the management of their
respective interest in the properties, and the Partnership
that holds more than a 50% interest does not control
decisions over the other Partnership's interest. The
financial statements reflect only this Partnership's
percentage share of the properties' land, building and
equipment, liabilities, revenues and expenses.
AFM and AEI received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 3l
1995 1994
a. AEI and AFM are reimbursed for all costs
incurred in connection with managing the
Partnership's operations, maintaining the
Partnership's books and communicating
the results of operations to the Limited
Partners. $ 126,948 $ 125,257
======== ========
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(3) Related Party Transactions - (Continued)
b. AEI and AFM are reimbursed for all direct
expenses they have paid on the Partnership's
behalf to third parties. These expenses included
printing costs, legal and filing fees, direct
administrative costs, outside audit and
accounting costs, taxes, insurance and other
property costs. $ 50,831 $ 68,476
======== ========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a and b. This
balance is non-interest bearing and unsecured and is to be
paid in the normal course of business.
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through non-cancelable triple net leases, which are
classified as operating leases. Under a triple net lease,
the lessee is responsible for all real estate taxes,
insurance, maintenance, repairs and operating expenses of
the property. The initial Lease terms are for 20 years
except for the Taco Cabana and Auto Max properties which are
15 years and the DeLisi's property which is 10 years. The
Leases have renewal options which may extend the lease term
an additional 10 years. The Leases contain rent clauses
which entitle the Partnership to receive additional rent in
future years based on stated rent increases or if gross
receipts for the property exceed certain specified amounts,
among other conditions. The leases provide the lessees with
two five-year renewal options subject to the same terms and
conditions as the initial lease. Certain lessees have been
granted options to purchase the property. Depending on the
lease, the purchase price is either determined by a formula,
or is the greater of the fair market value of the property
or the amount determined by a formula. In all cases, if the
option were to be exercised by the lessee, the purchase
price would be greater than the original cost of the
property.
The Partnership's properties are all commercial, single-
tenant properties with the exception of the Kearney Office
Building. The Kearney office building and warehouse were
constructed in 1978 and 1981, respectively. The building
was remodeled in 1986. The Sizzler restaurant was
constructed and acquired in 1990. The Taco Cabana
restaurant was constructed and acquired in 1991. All the
remaining buildings were constructed in 1987. The Kearney
office building was acquired in 1986. All the remaining
properties were acquired during 1987. There have been no
costs capitalized as improvements subsequent to the
acquisitions.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(4) Investments in Real Estate - (Continued)
The cost of the properties and related accumulated
depreciation at December 31, 1995 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Office Building, Kearney, NE $ 64,498 $ 370,125 $ 434,623 $ 118,736
Auto Max, Bloomington, MN 361,269 477,480 838,749 155,738
DeLisi's, Brooklyn Park, MN 317,355 651,603 968,958 249,218
Auto Max, Coon Rapids, MN 382,263 413,555 795,818 132,923
am/pm Mini Market,
Carson City, NV 135,760 644,136 779,896 311,922
Sizzler, Springboro, OH 24,181 64,916 89,097 13,974
Taco Cabana, Houston, TX 524,947 334,212 859,159 49,204
----------- ----------- ----------- ----------
$ 1,810,273 $ 2,956,027 $ 4,766,300 $ 1,031,715
=========== =========== =========== ==========
Effective May 1, 1992, the Partnership replaced the original
tenant in the office building in Kearney, Nebraska, with a
new tenant who, in March, 1993, filed for reorganization.
The Partnership obtained possession of the property and
listed the property for sale or lease. The Partnership
received rent of $975 per month through March, 1994, from a
tenant, who was sub-leasing part of the building from the
new tenant. Since March, 1994, the Partnership has received
no rent from the property. The total amount of rent not
collected in 1995 and 1994 was $62,008 and $59,081
respectively. These amounts were not accrued for financial
reporting purposes.
On July 6, 1995, the Partnership sold the Cheddar's
restaurant in Columbus, Ohio, to the lessee. The
Partnership received net sale proceeds of $314,826, which
resulted in a net gain of $44,137. At the time of sale, the
cost and related accumulated depreciation of the property
was $306,711 and $36,022, respectively.
In March, 1995, the lessee of the Applebee's restaurant in
Fort Myers, Florida, exercised an option in the Lease
Agreement to purchase the property. On July 28, 1995, the
sale closed with the Partnership receiving net sale proceeds
of $1,646,608 which resulted in a net gain of $686,548. At
the time of sale, the cost and related accumulated
depreciation of the property was $1,179,405 and $219,345,
respectively. The Managing General Partner is in the
process of preparing a proxy statement to propose an
amendment to the Limited Partnership Agreement that would
allow the Partnership to reinvest the majority of the net
proceeds in additional properties.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(4) Investments in Real Estate - (Continued)
During 1995, the Partnership distributed $223,865 of the net
sale proceeds to the Limited and General Partners as part of
their regular quarterly distributions, which represented a
return of capital of $30.55 per Limited Partnership Unit.
The minimum future rentals on the non-cancelable Leases for
years subsequent to December 31, 1995 are as follows:
1996 $ 484,466
1997 461,749
1998 450,391
1999 450,391
2000 450,391
Thereafter 2,200,559
-----------
$ 4,497,947
===========
In 1995 and 1994, the Partnership recognized contingent
rents of $27,471 and $18,581, respectively.
(5) Security Deposit -
In April, 1992, the Partnership received a deposit from the
tenant of the DeLisi's Italian Restaurant as security for
future rent payments. The funds are invested in a short
term money market account and will be refunded at the end of
the Lease, without interest, to the tenant provided there is
no default in the Lease Agreement.
(6) Line of Credit -
In January, 1994, the Partnership established a $100,000
unsecured line of credit at Fidelity Bank of Edina,
Minnesota. On January 5, 1995 the line of credit was
increased to $150,000. The line of credit bears interest at
the prime rate plus one percent on the outstanding balance,
which was due on demand, but in any event no later than
January 5, 1996. The line of credit was established to
provide short-term financing to cover any temporary cash
deficits. In September, 1995, the line of credit was
cancelled. As of December 31, 1994, the amount due on the
line of credit was $35,000. In 1995 and 1994, total
interest expense was $4,061 and $2,553, respectively.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(7) Major Tenants -
The following schedule presents rent revenue from individual
tenants, or affiliated groups of tenants, who each
contributed more than ten percent of the Partnership's total
rent revenue for the years ended December 31:
Tenants who individually generate
10% or more of total rent revenue:
1995 1994
Tenants Industry
Apple South, Inc. Restaurant $ 102,495 $ 156,863
Taco Cabana, Inc. Restaurant 117,676 113,728
B. Wells O'Brien & Co. Convenience Store 110,687 110,750
Thomas Graffunder Automotive Service 110,400 110,400
DeLisi's Italian Restaurant
and Lounge, Inc. Restaurant 72,000 72,000
---------- ----------
Aggregate rent revenue of major tenants $ 513,258 $ 563,741
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 83% 82%
========== ==========
(8) Partners' Capital -
Cash distributions of $5,431 and $5,745 were made to the
General Partners and $502,883 and $562,502 were made to the
Limited Partners for the years ended December 31, 1995 and
1994, respectively. The Limited Partners' distributions
represent $69.25 and $77.23 per Limited Partnership Unit
outstanding using 7,262 and 7,283 weighted average Units in
1995 and 1994, respectively. The distributions represent
$69.25 and $44.16 per Unit of Net Income and $-0- and $33.07
per Unit of return of contributed capital in 1995 and 1994,
respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $221,627 of proceeds from
the Applebee's and Cheddar's sales in 1995. The
distributions reduced the Limited Partners' Adjusted Capital
Contributions.
Distributions of Net Cash Flow to the General Partners
during 1995 and 1994 were subordinated to the Limited
Partners as required in the Partnership Agreement. As a
result, 99% of distributions and income were allocated to
the Limited Partners and 1% to the General Partners.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(8) Partners' Capital - (Continued)
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 outstanding at the beginning of the year.
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.
During 1995, seventeen Limited Partners redeemed a total of
55 Partnership Units for $34,815 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In 1994, three Limited
Partners redeemed a total of 9 Partnership Units for $6,280.
The redemptions increase the remaining Limited Partners'
ownership interest in the Partnership.
After the effect of redemptions and the return of capital
from the sale of property, the Adjusted Capital
Contribution, as defined in the Partnership Agreement, is
$986.54 per original $1,000 invested.
(9) Income Taxes -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the years ended December 31:
1995 1994
Net Income For Financial
Reporting Purposes $ 1,062,482 $ 331,204
Depreciation for Tax Purposes
Under Depreciation For Financial
Reporting Purposes 46,656 49,908
Property Expenses For Tax Purposes
Under Expenses For Financial Reporting
Purposes 22,238 37,134
Gain on Sale of Real Estate For Tax Purposes
Under Gain For Financial Reporting Purposes (16,994) 0
----------- -----------
Taxable Income to Partners $ 1,114,382 $ 418,246
=========== ===========
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(9) Income Taxes - (Continued)
The following is a reconciliation of Partners' capital for
financial reporting purposes to Partners' capital reported
for federal income tax purposes for the years ended December
31:
1995 1994
Partners' Capital For
Financial Reporting Purposes $ 5,464,518 $ 4,945,165
Depreciation For Tax Purposes Over
Depreciation For Financial
Reporting Purposes (31,080) (77,736)
Capitalized Start-Up Costs
Under Section 195 273,183 273,183
Amortization of Start-Up and
Organization Costs (280,829) (280,829)
Property Expenses For Tax Purposes
Under Expense For Financial Reporting
Purposes 114,304 92,066
Gain on Sale of Real Estate For Tax
Purposes Over Gain For Financial
Reporting Purposes 59,407 76,401
Organization and Syndication Costs
Treated as Reduction of Capital
For Financial Reporting Purposes 1,093,184 1,093,184
----------- -----------
Partners' Capital For
Tax Reporting Purposes $ 6,692,687 $ 6,121,434
=========== ===========
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(10) Fair Value of Financial Instruments -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, are as follows at
December 31, 1995:
1995
Carrying Fair
Amount Value
Cash $ 1,822,519 $ 1,822,519
The carrying value of cash approximates fair value.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The registrant is a limited partnership and has no
officers, directors, or direct employees. The General Partners
of the registrant are Robert P. Johnson and AFM. The General
Partners manage and control the Partnership's affairs and have
general responsibility and the ultimate authority in all matters
affecting the Partnership's business. The director and officers
of AFM are as follows:
Robert P. Johnson, age 51, is Chief Executive Officer,
President and Director and has held these positions since the
formation of AFM in December, 1985, and has been elected to
continue in these positions until March, 1997. From 1970 to the
present, he has been employed exclusively in the investment
industry, specializing in tax-advantaged limited partnership
investments. In that capacity, he has been involved in the
development, analysis, marketing and management of public and
private investment programs investing in net lease properties as
well as public and private investment programs investing in
energy development. Since 1971, Mr. Johnson has been the
president, a director and a registered principal of AEI
Incorporated, which is registered with the Securities and
Exchange Commission as a securities broker-dealer, is a member of
the National Association of Securities Dealers, Inc. (NASD) and
is a member of the Security Investors Protection Corporation
(SIPC). Mr. Johnson has been president, a director and the
principal shareholder of AEI Fund Management, Inc., a real estate
management company founded by him, since 1978. Mr. Johnson is
currently a general partner or principal of the general partner
in fifteen other limited partnerships.
Mark E. Larson, age 43, is Executive Vice President,
Treasurer and Chief Financial Officer and has been elected to
continue in these positions until March, 1997. Mr. Larson has
been Treasurer and Executive Vice President since December, 1987
and Chief Financial Officer since January, 1990. In January
1993, Mr. Larson was elected to serve as Secretary of AFM and
will continue to serve until March, 1997. Mr. Larson has been
employed by AEI Fund Management, Inc. and affiliated entities
since 1985. From 1979 to 1985, Mr. Larson was with Apache
Corporation as manager of Program Accounting responsible for the
accounting and reports for approximately 45 public partnerships.
Mr. Larson is responsible for supervising the accounting
functions of AFM and the registrant.
ITEM 10. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative and management services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
AFM, the Managing General Partner of the registrant, and
Robert P. Johnson, its Individual General Partner, contributed
$1,000 in total for their interest in the registrant. See Item 1
for a discussion of their share of the registrant's profits and
losses. During 1989, AFM purchased 23 Limited Partnership Units
(less than 1% of the Units outstanding) from certain Limited
Partners.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The registrant, AFM and its affiliates have common
management and utilize the same facilities. As a result, certain
administrative expenses are allocated among these related
entities. All of such activities and any other transactions
involving the affiliates of the General Partner of the registrant
are governed by, and are conducted in conformity with, the
limitations set forth in the Limited Partnership Agreement of the
registrant. Reference is made to Note 3 on page 19 , and is
incorporated herein by reference, for details of related party
transactions.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A.
A. Exhibits -
Description
27 Financial Data Schedule
for year ended December 31, 1995.
B. Reports on Form 8-K and Form 8-K/A - During the quarter ended
December 31, 1995, the
Partnership filed a Form
8-K dated November 15,1995,
reporting the disposition
of the Applebee's
Restaurant in Fort Myers.
SIGNATURES
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.
AEI REAL ESTATE FUND 86-A
Limited Partnership
By: AEI Fund Management 86-A, Inc.
Its Managing General Partner
July 24, 1996 By: /s/ Robert P. Johnson
Robert P. Johnson, President 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.
Name Title Date
/s/ Robert P. Johnson President(Principal Executive Officer) August 29, 1996
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer August 29, 1996
Mark E. Larson and Chief Financial Officer (Principal
Accounting Officer)