SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: September 30, 2000
Commission file number: 0-14090
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified 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)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes [X] No
Transitional Small Business Disclosure Format:
Yes No [X]
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of September 30,2000 and December 31, 1999
Statements for the Periods ended September 30, 2000 and 1999:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(Unaudited)
ASSETS
2000 1999
CURRENT ASSETS:
Cash and Cash Equivalents $ 289,561 $ 260,026
Receivables 5,650 13,806
----------- -----------
Total Current Assets 295,211 273,832
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 1,585,834 1,585,834
Buildings and Equipment 1,876,850 1,876,850
Accumulated Depreciation (882,175) (839,609)
----------- -----------
Net Investments in Real Estate 2,580,509 2,623,075
----------- -----------
Total Assets $ 2,875,720 $ 2,896,907
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 38,528 $ 21,166
Distributions Payable 65,852 64,392
Security Deposit 5,000 5,000
----------- -----------
Total Current Liabilities 109,380 90,558
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (35,489) (35,089)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
7,036 outstanding 2,801,829 2,841,438
----------- -----------
Total Partners' Capital 2,766,340 2,806,349
----------- -----------
Total Liabilities and Partners' Capital $ 2,875,720 $ 2,896,907
=========== ===========
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 PERIODS ENDED SEPTEMBER 30
(Unaudited)
Three Months Ended Nine Months Ended
9/30/00 9/30/99 9/30/00 9/30/99
INCOME:
Rent $ 90,954 $102,929 $295,737 $301,878
Investment Income 4,076 2,892 11,399 7,809
-------- -------- -------- --------
Total Income 95,030 105,821 307,136 309,687
-------- -------- -------- --------
EXPENSES:
Partnership Administration-
Affiliates 29,997 25,014 79,477 76,763
Partnership Administration
and Property Management -
Unrelated Parties 1,274 3,474 9,022 10,586
Depreciation 14,189 14,189 42,566 42,566
-------- -------- -------- --------
Total Expenses 45,460 42,677 131,065 129,915
-------- -------- -------- --------
NET INCOME $ 49,570 $ 63,144 $176,071 $179,772
======== ======== ======== ========
NET INCOME ALLOCATED:
General Partners $ 496 $ 632 $ 1,761 $ 1,798
Limited Partners 49,074 62,512 174,310 177,974
-------- -------- -------- --------
$ 49,570 $ 63,144 $176,071 $179,772
======== ======== ======== ========
NET INCOME PER
LIMITED PARTNERSHIP UNIT
(7,036 and 7,040 weighted average
Units outstanding in 2000 and 1999,
respectively) $ 6.97 $ 8.88 $ 24.77 $ 25.28
======== ======== ======== ========
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 PERIODS ENDED SEPTEMBER 30
(Unaudited)
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 176,071 $ 179,772
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 42,566 42,566
Decrease in Receivables 8,156 15,320
Increase in Payable to
AEI Fund Management, Inc. 17,362 19,477
----------- -----------
Total Adjustments 68,084 77,363
----------- -----------
Net Cash Provided By
Operating Activities 244,155 257,135
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Distributions Payable 1,460 241
Distributions to Partners (216,080) (205,345)
----------- -----------
Net Cash Used For
Financing Activities (214,620) (205,104)
----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 29,535 52,031
CASH AND CASH EQUIVALENTS, beginning of period 260,026 218,312
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 289,561 $ 270,343
=========== ===========
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 PERIODS ENDED SEPTEMBER 30
(Unaudited)
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1998 $(34,899) $2,860,288 $2,825,389 7,040.32
Distributions (2,054) (203,291) (205,345)
Net Income 1,798 177,974 179,772
--------- ---------- ---------- ----------
BALANCE, September 30, 1999 $(35,155) $2,834,971 $2,799,816 7,040.32
========= ========== ========== ==========
BALANCE, December 31, 1999 $(35,089) $2,841,438 $2,806,349 7,036.32
Distributions (2,161) (213,919) (216,080)
Net Income 1,761 174,310 176,071
--------- ---------- ---------- ----------
BALANCE, September 30, 2000 $(35,489) $2,801,829 $2,766,340 7,036.32
========= ========== ========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
(1) The condensed statements included herein have been prepared
by the Partnership, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of
operations for the interim period, on a basis consistent with
the annual audited statements. The adjustments made to these
condensed statements consist only of normal recurring
adjustments. Certain information, accounting policies, and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Partnership
believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction
with the financial statements and the summary of significant
accounting policies and notes thereto included in the
Partnership's latest annual report on Form 10-KSB.
(2) Organization -
AEI Real Estate Fund 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. Robert P. Johnson, the President and sole
shareholder of AFM, serves as the Individual General Partner
and 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 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 operations, any
Net Cash Flow, as defined, which the General Partners
determine to distribute will be distributed 90% to the
Limited Partners and 10% to the General Partners; provided,
however, that such distributions to the General Partners
will be subordinated to the Limited Partners first receiving
an annual, noncumulative distribution of Net Cash Flow equal
to 10% of their Adjusted Capital Contribution, as defined,
and, provided further, that in no event will the General
Partners receive less than 1% of such Net Cash Flow per
annum. Distributions to Limited Partners will be made pro
rata by Units.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Continued)
(2) Organization - (Continued)
Any Net Proceeds of Sale, as defined, from the sale or
financing of properties which the General Partners determine
to distribute will, after provisions for debts and reserves,
be paid in the following manner: (i) first, 99% to the
Limited Partners and 1% to the General Partners until the
Limited Partners receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal to 6%
of their Adjusted Capital Contribution per annum, cumulative
but not compounded, to the extent not previously distributed
from Net Cash Flow; (ii) next, 99% to the Limited Partners
and 1% to the General Partners until the Limited Partners
receive an amount equal to 14% of their Adjusted Capital
Contribution per annum, cumulative but not compounded, to
the extent not previously distributed; (iii) next, to the
General Partners until cumulative distributions to the
General Partners under Items (ii) and (iii) equal 15% of
cumulative distributions to all Partners under Items (ii)
and (iii). Any remaining balance will be distributed 85% to
the Limited Partners and 15% to the General Partners.
Distributions to the Limited Partners will be made pro rata
by Units.
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of 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 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 property will be allocated in
accordance with the Partnership Agreement as follows: (i)
first, to those Partners with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Partners
and 1% to the General Partners until the aggregate balance
in the Limited Partners' capital accounts equals the sum of
the Limited Partners' Adjusted Capital Contributions plus an
amount equal to 14% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, to the General Partners
until cumulative allocations to the General Partners equal
15% of cumulative allocations. Any remaining balance will
be allocated 85% to the Limited Partners and 15% to the
General Partners. Losses will be allocated 98% to the
Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
AEI REAL ESTATE FUND 86-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Continued)
(3) Payable to AEI Fund Management -
AEI Fund Management, Inc. performs the administrative and
operating functions for the Partnership. The payable to AEI
Fund Management represents the balance due for those
services. This balance is non-interest bearing and
unsecured and is to be paid in the normal course of
business.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the nine months ended September 30, 2000 and 1999, the
Partnership recognized rental income of $295,737 and $301,878,
respectively. During the same periods, the Partnership earned
investment income of $11,399 and $7,809, respectively.
During the nine months ended September 30, 2000 and 1999,
the Partnership paid Partnership administration expenses to
affiliated parties of $79,477 and $76,763, 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 $9,022 and $10,586, 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.
As of September 30, 2000, the Partnership's annualized
cash distribution rate was 6.9%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement. As a result, 99% of distributions and
income were allocated to Limited Partners and 1% to the General
Partners.
Inflation has had a minimal effect on income from
operations. It is expected that increases in sales volumes of
the tenants, due to inflation and real sales growth, will result
in an increase in rental income over the term of the leases.
Inflation also may cause the Partnership's real estate to
appreciate in value. However, inflation and changing prices may
also have an adverse impact on the operating margins of the
properties' tenants which could impair their ability to pay rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Liquidity and Capital Resources
During the nine months ended September 30, 2000, the
Partnership's cash balances increased $29,535 as the Partnership
distributed less cash to the Partners than it generated from
operating activities. Net cash provided by operating activities
decreased from $257,135 in 1999 to $244,155 in 2000, mainly as a
result of net timing differences in the collection of payments
from the lessees and the payment of expenses.
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 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.
On October 1, 2000, five Limited Partners redeemed a total
of 28.2 Partnership Units for $2,994 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, a total of
sixty-four Limited Partners redeemed 463.75 Partnership Units for
$287,836. 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 2.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:
Market and economic conditions which affect the value
of the properties the Partnership owns and the cash
from rental income such properties generate;
the federal income tax consequences of rental income,
deductions, gain on sales and other items and the
affects of these consequences for investors;
resolution by the General Partners of conflicts with
which they may be confronted;
the success of the General Partners of locating
properties with favorable risk return characteristics;
the effect of tenant defaults; and
the condition of the industries in which the tenants of
properties owned by the Partnership operate.
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the Partnership is a party or of which the Partnership's
property is subject.
ITEM 2.CHANGES IN SECURITIES
None.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.OTHER INFORMATION
None.
PART II - OTHER INFORMATION
(Continued)
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
Description
27 Financial Data Schedule for period
ended September 30, 2000.
b. Reports filed on Form 8-K - None.
SIGNATURES
In accordance with the requirements of the Exchange Act,
the Registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: November 7, 2000 AEI Real Estate Fund 86-A
Limited Partnership
By: AEI Fund Management 86-A, Inc.
Its: Managing General Partner
By: /s/ Robert P. Johnson
Robert P. Johnson
President
(Principal Executive Officer)
By: /s/ Mark E. Larson
Mark E. Larson
Chief Financial Officer
(Principal Accounting Officer)
