SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d)
Of The Securities Exchange Act Of 1934
For the Fiscal Year Ended: December 31, 1998
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)
(651) 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, 1998 were
$446,759.
As of February 28, 1999, there were 7,017.32 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 $7,017,320.
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 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)
On April 24, 1996, the Partnership sold an office building
in Kearney, Nebraska to an unrelated third party. The
Partnership received net sale proceeds of $329,785, which
resulted in a net gain of $17,684. At the time of sale, the cost
and related accumulated depreciation of the property was $434,623
and $122,522, respectively.
On February 20, 1998, the Partnership sold the am/pm Mini
Market in Carson City, Nevada to an unrelated third party. The
Partnership received net sale proceeds of $955,401, which
resulted in a net gain of $554,742. At the time of sale, the
cost and related accumulated depreciation of the property was
$779,896 and $379,237, respectively.
The Partnership owned a 6.7522% interest in a Sizzler
restaurant in Springboro, Ohio. On July 21, 1998, the
Partnership sold the property to an unrelated third party. The
Partnership received net sale proceeds of $25,385, which resulted
in a net loss of $1,618. At the time of sale, the cost and
related accumulated depreciation of the property was $43,597 and
$16,594, respectively.
Major Tenants
During 1998, four of the Partnership's lessees each
contributed more than ten percent of the Partnership's total
rental revenue. The major tenants in aggregate contributed 88%
of the Partnership's total rental revenue in 1998. 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 1999 and future years. 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.
Employees
The Partnership has no direct employees. Management
services are performed for the Partnership by AEI Fund
Management, Inc., an affiliate of AFM.
Year 2000 Compliance
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.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
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. 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. All the properties were acquired on a debt-
free basis and are leased to various tenants under 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, 1998.
<TABLE>
<CAPTION>
Total Property Annual Annual
Purchase Acquisition Lease Rent
Property Date Costs Lessee Payment Per Sq. Ft.
<S> <C> <C> <C> <C> <C>
Auto Max Automotive Center Thomas
Bloomington, MN 6/3/87 $ 838,749 Graffunder $ 110,400 $ 14.84
DeLisi's Italian DeLisi's
Restaurant and Lounge Italian Restaurant
Brooklyn Park, MN 6/16/87 $ 968,958 and Lounge, Inc. $ 72,000 $ 9.93
Auto Max K & S
Automotive Center Mufflers, Inc. and
Coon Rapids, MN 7/24/87 $ 795,818 Motorscope, Inc. $ 83,452 $ 11.61
Taco Cabana Restaurant
Houston, TX Texas
(61.7638%) 7/31/91 $ 859,159 Taco Cabana, L.P. $ 131,809 $ 57.38
</TABLE>
AEI Net Lease Income & Growth Fund XIX Limited
Partnership, an affiliate of the Partnership, owns the remaining
interest in the Taco Cabana restaurant. Each Partnership owns a
separate, undivided interest in the property. No specific
agreement or commitment exists between the Partnerships as to the
management of their respective interests in the property, 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 15 years except for the
DeLisi's property which is 10 years. The Leases have renewal
options which may extend the lease term an additional 10 years.
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.
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, 1998, there were 935 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. 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 1998, three Limited Partners redeemed a total of 64
Partnership Units for $9,664 in accordance with the Partnership
Agreement. In prior years, a total of fifty-nine Limited
Partners redeemed 395.75 Partnership Units for $277,668. The
redemptions increase the remaining Limited Partners' ownership
interest in the Partnership.
Cash distributions of $14,421 and $3,364 were made to the
General Partners and $1,417,998 and $327,748 were made to the
Limited Partners in 1998 and 1997, 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 $1,130,000 of proceeds from
property sales in 1998. The distributions reduced the Limited
Partners' Adjusted Capital Contributions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
For the years ended December 31, 1998 and 1997, the
Partnership recognized rental income of $425,510 and $510,931,
respectively. During the same periods, the Partnership earned
investment income of $21,249 and $17,718, respectively. In 1998,
rental income decreased mainly as a result of the sale of the
am/pm property discussed below. The decrease in rental income
was partially offset by additional investment income earned on
the net proceeds from the property sale.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
During the years ended December 31, 1998 and 1997, the
Partnership paid Partnership administration expenses to
affiliated parties of $108,368 and $100,166, 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 $19,769 and $(5,249), 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, when compared to 1998, was 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, 1998, 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.
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.
Liquidity and Capital Resources
During 1998, the Partnership's cash balances decreased
$164,112 as the Partnership distributed more cash to the Partners
than it generated for operating and investing activities. Net
cash provided by operating activities decreased from $428,194 in
1997 to $313,527 in 1998, mainly as a result of a decrease in
income and an increase in expenses in 1998.
Net cash provided by investing activities was $980,786 in
1998, which represented cash generated from the sale of real
estate.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On February 20, 1998, the Partnership sold the am/pm Mini
Market in Carson City, Nevada to an unrelated third party. The
Partnership received net sale proceeds of $955,401, which
resulted in a net gain of $554,742. At the time of sale, the
cost and related accumulated depreciation of the property was
$779,896 and $379,237, respectively.
On July 21, 1998, the Partnership sold the Sizzler
property to an unrelated third party. The Partnership received
net sale proceeds of $25,385, which resulted in a net loss of
$1,618. At the time of sale, the cost and related accumulated
depreciation of the property was $43,597 and $16,594,
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. Redemption payments
are paid to redeeming Partners in the fourth quarter of each
year. Effective July 1, 1997, the Partnership's distribution
rate was increased from 6.0% to 6.5%. In April, 1998, the
Partnership distributed $1,141,414 of the net sale proceeds to
the Limited and General Partners, which represented a return of
capital of $159.06 per Limited Partnership Unit. As a result,
distributions were higher in 1998, when compared to 1997.
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.
During 1998, three Limited Partners redeemed a total of 64
Partnership Units for $9,664 in accordance with the Partnership
Agreement. The Partnership acquired these Units using Net Cash
Flow from operations. In prior years, a total of fifty-nine
Limited Partners redeemed 395.75 Partnership Units for $277,668.
The redemptions increase the remaining Limited Partners'
ownership interest in the Partnership.
The continuing rent payments from the properties should be
adequate to fund continuing distributions and meet other
Partnership obligations on both a short-term and long-term basis.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
contains various "forward looking statements" within the meaning
of federal securities laws which represent management's
expectations or beliefs concerning future events, including
statements regarding anticipated application of cash, expected
returns from rental income, growth in revenue, taxation levels,
the sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements made by the Partnership, must be evaluated in
the context of a number of factors that may affect the
Partnership's financial condition and results of operations,
including the following:
<BULLET> Market and economic conditions which affect
the value of the properties the Partnership owns and
the cash from rental income such properties generate;
<BULLET> the federal income tax consequences of rental
income, deductions, gain on sales and other items and
the affects of these consequences for investors;
<BULLET> resolution by the General Partners of
conflicts with which they may be confronted;
<BULLET> the success of the General Partners of
locating properties with favorable risk return
characteristics;
<BULLET> the effect of tenant defaults; and
<BULLET> the condition of the industries in which the
tenants of properties owned by the Partnership
operate.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying index to financial statements.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet as of December 31, 1998 and 1997
Statements for the Years Ended December 31, 1998 and 1997:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
REPORT OF INDEPENDENT AUDITORS
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, 1998 and 1997 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, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
/s/ BOULAY, HEUTMAKER, ZIBELL & CO. P.L.L.P.
Minneapolis, Minnesota Boulay, Heutmaker, Zibell & Co. P.L.L.P.
January 27, 1999 Certified Public Accountants
<PAGE>
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1998 1997
CURRENT ASSETS:
Cash and Cash Equivalents $ 218,312 $ 382,424
Receivables 15,320 9,996
----------- -----------
Total Current Assets 233,632 392,420
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 1,585,834 1,721,594
Buildings and Equipment 1,876,850 2,520,986
Accumulated Depreciation (782,855) (1,103,640)
----------- -----------
2,679,829 3,138,940
Real Estate Held for Sale 0 27,003
----------- -----------
Net Investments in Real Estate 2,679,829 3,165,943
----------- -----------
Total Assets $ 2,913,461 $ 3,558,363
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 20,826 $ 20,597
Distributions Payable 62,246 78,588
Security Deposit 5,000 5,000
----------- -----------
Total Current Liabilities 88,072 104,185
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (34,899) (28,611)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
7,040 and 7,104 outstanding in 1998
and 1997, respectively 2,860,288 3,482,789
----------- -----------
Total Partners' Capital 2,825,389 3,454,178
----------- -----------
Total Liabilities and Partners' Capital $ 2,913,461 $ 3,558,363
=========== ===========
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 31
1998 1997
INCOME:
Rent $ 425,510 $ 510,931
Investment Income 21,249 17,718
----------- -----------
Total Income 446,759 528,649
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 108,368 100,166
Partnership Administration and Property
Management - Unrelated Parties 19,769 (5,249)
Depreciation 58,452 93,214
----------- -----------
Total Expenses 186,589 188,131
----------- -----------
OPERATING INCOME 260,170 340,518
GAIN ON SALE OF REAL ESTATE 553,124 0
----------- -----------
NET INCOME $ 813,294 $ 340,518
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 8,133 $ 3,406
Limited Partners 805,161 337,112
----------- -----------
$ 813,294 $ 340,518
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(7,088 and 7,116 weighted average Units outstanding
in 1998 and 1997, respectively) $ 113.59 $ 47.37
=========== ===========
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
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 813,294 $ 340,518
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 58,452 93,214
Gain on Sale of Real Estate (553,124) 0
Increase in Receivables (5,324) (9,996)
Increase in Payable to
AEI Fund Management, Inc. 229 4,458
----------- -----------
Total Adjustments (499,767) 87,676
----------- -----------
Net Cash Provided By
Operating Activities 313,527 428,194
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate 980,786 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (16,342) 6,616
Distributions to Partners (1,432,322) (331,059)
Redemption Payments (9,761) (5,266)
----------- -----------
Net Cash Used For
Financing Activities (1,458,425) (329,709)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (164,112) 98,485
CASH AND CASH EQUIVALENTS, beginning of period 382,424 283,939
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 218,312 $ 382,424
=========== ===========
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 CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1996 $ (28,653) $ 3,478,638 $ 3,449,985 7,120.32
Distributions (3,311) (327,748) (331,059)
Redemption Payments (53) (5,213) (5,266) (16.00)
Net Income 3,406 337,112 340,518
--------- ----------- ----------- ----------
BALANCE, December 31, 1997 (28,611) 3,482,789 3,454,178 7,104.32
Distributions (14,324) (1,417,998) (1,432,322)
Redemption Payments (97) (9,664) (9,761) (64.00)
Net Income 8,133 805,161 813,294
--------- ----------- ----------- ----------
BALANCE, December 31, 1998 $ (34,899) $ 2,860,288 $ 2,825,389 7,040.32
========= =========== =========== ==========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
(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, 1998 AND 1997
(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, 1998 AND 1997
(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 Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested
in money market accounts, certificates of deposit,
federal agency notes and commercial paper with a term of
three months or less.
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 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 Partnership compares the
carrying amount of its properties to the estimated future
cash flows expected to result from the property and its
eventual disposition. If the sum of the expected future
cash flows is less than the carrying amount of the
property, the Partnership recognizes an impairment loss
by the amount by which the carrying amount of the
property exceeds the fair value of the property.
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.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(2) Summary of Significant Accounting Policies - (Continued)
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 -
The Partnership owns 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. The
Partnership owned a 6.7522% interest in the Sizzler
restaurant. The remaining interest in this property was
owned by AEI Real Estate Fund XVIII 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.
AEI and AFM received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 3l
1998 1997
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. $ 108,368 $ 100,166
========= =========
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. In addition, $19,004 of
real estate taxes were reimbursed in 1997. $ 19,769 $ (5,249)
========= =========
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.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through 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 15 years except for 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. 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. The Taco Cabana restaurant was
constructed and acquired in 1991. All the remaining
properties were constructed and acquired in 1987. There
have been no costs capitalized as improvements subsequent to
the acquisitions.
The cost of the properties and related accumulated
depreciation at December 31, 1998 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Auto Max, Bloomington, MN $ 361,269 $ 477,480 $ 838,749 $ 204,879
DeLisi's, Brooklyn Park, MN 317,355 651,603 968,958 319,504
Auto Max, Coon Rapids, MN 382,263 413,555 795,818 175,847
Taco Cabana, Houston, TX 524,947 334,212 859,159 82,625
----------- ----------- ----------- -----------
$ 1,585,834 $ 1,876,850 $ 3,462,684 $ 782,855
=========== =========== =========== ===========
On February 20, 1998, the Partnership sold the am/pm Mini
Market in Carson City, Nevada to an unrelated third party.
The Partnership received net sale proceeds of $955,401,
which resulted in a net gain of $554,742. At the time of
sale, the cost and related accumulated depreciation of the
property was $779,896 and $379,237, respectively.
In April, 1998, the Partnership distributed $1,141,414 of
net sale proceeds to the Limited and General Partners, which
represented a return of capital of $159.06 per Limited
Partnership Unit.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate - (Continued)
The Partnership owned a 6.7522% interest in a Sizzler
restaurant in Springboro, Ohio. On July 21, 1998, the
Partnership sold the property to an unrelated third party.
The Partnership received net sale proceeds of $25,385, which
resulted in a net loss of $1,618. At the time of sale, the
cost and related accumulated depreciation of the property
was $43,597 and $16,594, respectively. The property was
classified on the Balance Sheet as Real Estate Held for Sale
at December 31, 1997.
The minimum future rentals on the Leases for years
subsequent to December 31, 1998 are as follows:
1999 $ 398,134
2000 398,852
2001 399,585
2002 302,750
2003 290,209
Thereafter 657,307
-----------
$ 2,446,837
===========
In 1998 and 1997, the Partnership recognized contingent
rents of $16,013 and $20,022, 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.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(6) 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:
1998 1997
Tenants Industry
Texas Taco Cabana, L.P. Restaurant $ 129,897 $ 126,031
Thomas Graffunder Automotive Service 110,400 110,400
DeLisi's Italian Restaurant
and Lounge, Inc. Restaurant 78,051 72,000
K & S Mufflers, Inc. Automotive Service 56,168 60,156
B. Wells O'Brien & Co. Convenience Store N/A 107,813
---------- ----------
Aggregate rent revenue of major tenants $ 374,516 $ 476,400
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 88% 93%
========== ==========
(7) Partners' Capital -
Cash distributions of $14,421 and $3,364 were made to the
General Partners and $1,417,998 and $327,748 were made to
the Limited Partners for the years ended December 31, 1998
and 1997, respectively. The Limited Partners' distributions
represent $200.06 and $46.06 per Limited Partnership Unit
outstanding using 7,088 and 7,116 weighted average Units in
1998 and 1997, respectively. The distributions represent
$112.22 and $46.06 per Unit of Net Income and $87.84 and $-0-
per Unit of return of contributed capital in 1998 and 1997,
respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $1,130,000 of proceeds
from property sales in 1998. The distributions reduced the
Limited Partners' Adjusted Capital Contributions.
Distributions of Net Cash Flow to the General Partners
during 1998 and 1997 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, 1998 AND 1997
(7) 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 1998, three Limited Partners redeemed a total of 64
Partnership Units for $9,664 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In 1997, three Limited
Partners redeemed a total of 16 Partnership Units for
$5,213. 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
$587.53 per original $1,000 invested.
(8) 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:
1998 1997
Net Income For Financial
Reporting Purposes $ 813,294 $ 340,518
Depreciation for Tax Purposes
(Over) Under Depreciation For Financial
Reporting Purposes (1,054) 21,106
Property Expenses For Tax Purposes (Over)
Under Expenses For Financial Reporting
Purposes 5,538 (19,722)
Gain on Sale of Real Estate For Tax Purposes
Under Gain For Financial Reporting
Purposes (112,437) 0
----------- -----------
Taxable Income to Partners $ 705,341 $ 341,902
=========== ===========
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(8) 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:
1998 1997
Partners' Capital For
Financial Reporting Purposes $ 2,825,389 $ 3,454,178
Adjusted Tax Basis of Investments
in Real Estate Over Net Investments
in Real Estate for Financial
Reporting Purposes 67,282 180,773
Property Expenses For Tax Purposes
Under Expenses For Financial Reporting
Purposes 58,251 52,713
Syndication Costs
Treated as Reduction of Capital
For Financial Reporting Purposes 1,085,538 1,085,538
----------- -----------
Partners' Capital For
Tax Reporting Purposes $ 4,036,460 $ 4,773,202
=========== ===========
(9) Fair Value of Financial Instruments -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, for the years ended
December 31:
1998 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 266 $ 266 $ 132 $ 132
Money Market Funds 218,046 218,046 382,292 382,292
--------- --------- --------- ---------
Total Cash and
Cash Equivalents $ 218,312 $ 218,312 $ 382,424 $ 382,424
========= ========= ========= =========
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 54, 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 December, 1999. 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
Securities, Inc. (formerly 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 seventeen other limited
partnerships.
Mark E. Larson, age 46, is Executive Vice President,
Treasurer and Chief Financial Officer and has been elected to
continue in these positions until December, 1999. 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 December, 1999. 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.
The following table sets forth information pertaining to
the ownership of the Units by each person known by the
Partnership to beneficially own 5% or more of the Units, by each
General Partner, and by each officer or director of the Managing
General Partner as of February 28, 1999:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
AEI Fund Management 86-A, Inc. 23 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Robert P. Johnson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Mark E. Larson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
* Less than 1%
The persons set forth in the preceding table hold sole voting
power and power of disposition with respect to all of the Units
set forth opposite their names. The General Partners know of no
holders of more than 5% of the outstanding Units.
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
10.1 Purchase Agreement dated
March 20, 1996 between the Partnership,
Mark H. Meyer and David L. Meyer relating
to the property at 2501 30th Avenue,
Kearney, Nebraska (incorporated by
reference to Exhibit 10.1 of Form 8-K
filed with the Commission on May 6,
1996).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A.
(Continued)
A. Exhibits -
Description
10.2 Assignment of Purchaser's
interest in Purchase Agreement dated
April 23, 1996 between Mark H. Meyer,
David L. Meyer and Sports West, L.L.C.
relating to the property at 2501 30th
Avenue, Kearney, Nebraska (incorporated
by reference to Exhibit 10.2 of Form 8-K
filed with the Commission on May 6,
1996).
10.3 Purchase Agreement dated
December 17, 1997 between the Partnership
and Atlantic Richfield Company relating
to the property at 4190 South Carson
Street, Carson City, Nevada (incorporated
by reference to Exhibit 10.1 of Form 8-K
filed with the Commission on March 4,
1998).
27 Financial Data Schedule
for year ended December 31, 1998.
B. Reports on Form 8-K and Form 8-K/A - None.
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
March 12, 1999 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) March 12, 1999
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 12, 1999
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000785788
<NAME> AEI REAL ESTATE FUND 86-A LTD PARTNERHSIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 218,312
<SECURITIES> 0
<RECEIVABLES> 15,320
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 233,632
<PP&E> 3,462,684
<DEPRECIATION> (782,855)
<TOTAL-ASSETS> 2,913,461
<CURRENT-LIABILITIES> 88,072
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,825,389
<TOTAL-LIABILITY-AND-EQUITY> 2,913,461
<SALES> 0
<TOTAL-REVENUES> 446,759
<CGS> 0
<TOTAL-COSTS> 186,589
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 813,294
<INCOME-TAX> 0
<INCOME-CONTINUING> 813,294
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 813,294
<EPS-PRIMARY> 113.59
<EPS-DILUTED> 113.59
</TABLE>
