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, 1995
Commission file number: 0-14089
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its
Charter)
State of Delaware 93-0926134
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(612) 227-7333
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Transitional Small Business Disclosure Format:
Yes No X
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of September 30, 1995 and December 31, 1994
Statements for the Periods ended September 30, 1995 and 1994:
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>
<TABLE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(Unaudited)
ASSETS
<CAPTION>
1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,189,612 $1,608,136
Receivables 10,560 22,721
---------- ----------
Total Current Assets 1,200,172 1,630,857
---------- ----------
INVESTMENTS IN REAL ESTATE:
Land 1,489,902 1,489,902
Buildings and Equipment 3,707,369 3,707,369
Construction Advances 341,043 0
Property Acquisition Costs 19,220 0
Accumulated Depreciation (1,239,859) (1,125,200)
---------- ----------
Net Investments in Real Estate 4,317,675 4,072,071
---------- ----------
Total Assets $5,517,847 $5,702,928
========== ==========
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 26,322 $ 55,939
Distributions Payable 106,158 143,994
Current Portion of Contract Payable 15,445 8,681
Deferred Income 38,153 15,480
---------- ----------
Total Current Liabilities 186,078 224,094
---------- ----------
CONTRACT PAYABLE - Net of Current Portion 27,170 46,232
DEFERRED INCOME - Net of Current Portion 175,447 187,057
PARTNERS' CAPITAL (DEFICIT):
General Partners (12,169) (11,006)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
7,379 Units outstanding 5,141,321 5,256,551
---------- ----------
Total Partners' Capital 5,129,152 5,245,545
---------- ----------
Total Liabilities and Partners' Capital $5,517,847 $5,702,928
========== ==========
<FN>
The accompanying Notes to Financial Statements are an
integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
9/30/95 9/30/94 9/30/95 9/30/94
<S> <C> <C> <C> <C>
INCOME:
Rent $ 152,485 $ 152,255 $ 445,241 $ 534,458
Investment Income 23,318 15,462 70,394 17,459
-------- -------- -------- --------
Total Income 175,803 167,717 515,635 551,917
-------- -------- -------- --------
EXPENSES:
Partnership Administration - Affiliates 26,956 35,641 90,961 101,675
Partnership Administration and Property
Management - Unrelated Parties 2,987 295,061 25,305 312,306
Interest Expense 937 537 2,984 12,443
Depreciation 38,219 40,647 114,659 131,650
-------- -------- -------- --------
Total Expenses 69,099 371,886 233,909 558,074
-------- -------- -------- --------
NET OPERATING INCOME (LOSS) 106,704 (204,169) 281,726 (6,157)
GAIN ON SALE OF REAL ESTATE 0 662,651 0 662,651
-------- -------- -------- --------
NET INCOME $106,704 $458,482 $281,726 $656,494
======== ======== ======== ========
NET INCOME ALLOCATED:
General Partners $ 1,067 $ 4,585 $ 2,817 $ 6,565
Limited Partners 105,637 453,897 278,909 649,929
-------- -------- -------- --------
$106,704 $458,482 $281,726 $656,494
======== ======== ======== ========
NET INCOME PER
LIMITED PARTNERSHIP UNIT
(7,379 and 7,391 weighted average
Units outstanding in 1995 and 1994,
respectively) $ 14.32 $ 61.41 $ 37.80 $ 87.93
======= ======= ======= =======
<FN>
The accompanying Notes to Financial Statements are an
integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 281,726 $ 656,494
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 114,659 131,650
Gain on Sale of Real Estate 0 (662,651)
Decrease in Receivables 12,161 16,868
Increase (Decrease) in Payable to
AEI Fund Management, Inc. (29,617) 39,742
Decrease in Contract Payable (12,298) 0
Decrease in Security Deposit 0 (23,041)
Increase in Deferred Income 11,063 213,769
--------- ---------
Total Adjustments 95,968 (283,663)
--------- ---------
Net Cash Provided by
Operating Activities 377,694 372,831
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (360,263) 0
Proceeds from Sale of Real Estate 0 1,667,500
Decrease in Long-Term Receivables 0 36,659
--------- ---------
Net Cash Provided by (Used for)
Investing Activities (360,263) 1,704,159
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (37,836) 41,296
Distributions to Partners (398,119) (529,515)
--------- ---------
Net Cash Used for
Financing Activities (435,955) (488,219)
--------- ---------
NET INCREASE (DECREASE) IN CASH (418,524) 1,588,771
CASH, beginning of period 1,608,136 86,487
--------- ---------
CASH, end of period $1,189,612 $1,675,258
========= =========
<FN>
The accompanying Notes to Financial Statements are an
integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
<CAPTION>
General Limited
Partners Partners Total
<S> <C> <C> <C>
BALANCE, December 31, 1993 $ (11,268) $5,230,548 $5,219,280
Distributions (5,295) (524,220) (529,515)
Net Income 6,565 649,929 656,494
---------- ---------- ----------
BALANCE, September 30, 1994 $ (9,998) $5,356,257 $5,346,259
========== ========== ==========
BALANCE, December 31, 1994 $ (11,006) $5,256,551 $5,245,545
Distributions (3,980) (394,139) (398,119)
Net Income 2,817 278,909 281,726
---------- ---------- ----------
BALANCE, September 30, 1995 $ (12,169) $5,141,321 $5,129,152
========== ========== ==========
<FN>
The accompanying Notes to Financial Statements are an
integral part of this statement.
</TABLE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
(1)The condensed statements included herein have been
prepared by the Partnership, without audit, 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 XV 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., 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 October 3, 1986
when minimum subscriptions of 1,300 Limited Partnership
Units ($1,300,000) were accepted. The Partnership
offering terminated on December 30, 1986 when the
maximum subscription limit of 7,500 Limited Partnership
Units ($7,500,000) was reached.
Under the terms of the Limited Partnership Agreement,
the Limited Partners and General Partners contributed
funds of $7,500,000 and $1,000, respectively. During
the operation of the Partnership, any Net Cash Flow, as
defined, which the General Partners determine to
distribute will be distributed 90% to the Limited
Partners and 10% to the General Partners; provided,
however, that such distributions to the General
Partners will be subordinated to the Limited Partners
first receiving an annual, noncumulative distribution
of Net Cash Flow equal to 10% of their Adjusted Capital
Contribution, as defined, and, provided further, that
in no event will the General Partners receive less than
1% of such Net Cash Flow per annum. Distributions to
Limited Partners will be made pro rata by Units.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2)Organization - (Continued)
Any Net Proceeds of Sale, as defined, from the sale or
financing of the Partnership's properties which the
General Partners determine to distribute will, after
provisions for debts and reserves, be paid in the
following manner: (i) first, 99% to the Limited
Partners and 1% to the General Partners until the
Limited Partners receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal
to 6% of their Adjusted Capital Contribution per annum,
cumulative but not compounded, to the extent not
previously distributed from Net Cash Flow; (ii) next,
99% to the Limited Partners and 1% to the General
Partners until the Limited Partners receive an amount
equal to 14% of their Adjusted Capital Contribution per
annum, cumulative but not compounded, to the extent not
previously distributed; (iii) next, to the General
Partners until cumulative distributions to the General
Partners under Items (ii) and (iii) equal 15% of
cumulative distributions to all Partners under Items
(ii) and (iii). Any remaining balance will be
distributed 85% to the Limited Partners and 15% to the
General Partners. Distributions to the Limited
Partners will be made pro rata by Units.
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
property, will be allocated first in the same ratio in
which, and to the extent, Net Cash Flow is distributed
to the Partners for such year. Any additional profits
will be allocated 90% to the Limited Partners and 10%
to the General Partners. In the event no Net Cash Flow
is distributed to the Limited Partners, 90% of each
item of Partnership income, gain or credit for each
respective year shall be allocated to the Limited
Partners, and 10% of each such item shall be allocated
to the General Partners. Net losses from operations
will be allocated 98% to the Limited Partners and 2% to
the General Partners.
For tax purposes, profits arising from the sale,
financing, or other disposition of the Partnership's
property will be allocated in accordance with the
Partnership Agreement as follows: (i) first, to those
Partners with deficit balances in their capital
accounts in an amount equal to the sum of such deficit
balances; (ii) second, 99% to the Limited Partners and
1% to the General Partners until the aggregate balance
in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital
Contributions plus an amount equal to 14% of their
Adjusted Capital Contributions per annum, cumulative
but not compounded, to the extent not previously
allocated; (iii) third, to the General Partners until
cumulative allocations to the General Partners equal
15% of cumulative allocations. Any remaining balance
will be allocated 85% to the Limited Partners and 15%
to the General Partners. Losses will be allocated 98%
to the Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund
a deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the
General Partners will contribute to the Partnership an
amount equal to the lesser of the deficit balances in
their capital accounts or 1% of total Limited Partners'
and General Partners' capital contributions.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3)Investments in Real Estate -
In May, 1990, Flagship, Inc. (Flagship), the lessee of
the J.T. McCord's property, filed for reorganization,
after occupying the property for approximately five
years. Flagship continued to operate the property
while attempting to develop a plan of reorganization
which would be acceptable to the bankruptcy court and
its creditors. In 1992, it became apparent that
Flagship did not have the financial resources to
operate the property in compliance with the lease. In
March, 1993, the Partnership, along with affiliated
Partnerships which also own J.T. McCord's properties,
filed its own plan of reorganization (the "Plan") with
the Court. That Plan provided for an assignee of the
Partnerships (a replacement tenant) to purchase the
assets of Flagship and operate the restaurants with
financial assistance from the Partnerships. This Plan
was expected to allow the Partnerships to avoid closing
these properties, allow operations to continue
uninterrupted, and avoid further costly litigation with
Flagship and its creditors. The Plan was confirmed by
the Court and the creditors April 16, 1993 and became
effective July 20, 1993. At that time, various claims
between Flagship and the Partnership were dismissed.
On April 21, 1993, the Partnership's assignee, WIM,
Inc. (WIM), took over management of the restaurants.
To entice WIM to operate the restaurants and enter into
the Lease Agreements, the Partnership provided funds to
renovate the restaurants and paid for operating
expenses. However, WIM was not able to operate the
properties profitably and was unable to make rental
payments as provided in the Lease Agreements. The
Partnership's share of renovation and operating
expenses during this period was $230,226 which was
expensed in the third and fourth quarter of 1994. To
reduce expenses and minimize the losses produced by the
property, the Waco restaurant was closed and listed for
sale or lease.
As part of the transaction to redeem these properties
from the bankruptcy court action, the Partnerships,
which own these properties, are responsible for an
annual payment to the Creditors Trust of approximately
$110,000 for five years. The Partnership's share of
the annual payment is $16,465. The present value of
this obligation was recorded as a Contract Payable on
the accompanying Balance Sheet using a discount rate of
9%. In the third quarter of 1994, the Partnership
expensed $71,520 to record this liability and
administrative costs related to the bankruptcy.
The Partnership is negotiating with the trustee to
settle the outstanding amount due to the Creditors
Trust. The settlement will provide for a lump sum
payment of the minimum amount due over the remaining
term of the plan for release of the Partnership and WIM
from any other financial obligations and reporting
requirements to the trustee. The settlement is
expected to be completed in the fourth quarter of 1995.
In June 1995, the Partnership re-leased the Waco
property to Tex-Mex Cocina of Waco, L.C. The Lease
Agreement has a primary term of eighteen months with an
annual rental payment of $24,248. The Partnership
could also receive additional rent if gross receipts
from the property exceed certain specified amounts.
The Lease contains renewal options which may extend the
lease term an additional 10 years. The property is now
operated as a Zapata's Cantina & Cafe.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3)Investments in Real Estate - (Continued)
In June, 1994, the lessee of the Applebee's restaurant
in Hilton Head, South Carolina, exercised an option in
the Lease Agreement to purchase the property. On July
29, 1994, the sale closed with the Partnership
receiving net sale proceeds of $1,667,500 which
resulted in a net gain of $662,561. At the time of
sale, the cost and related accumulated depreciation of
the property was $1,212,379 and $207,530, respectively.
A portion of the net sale proceeds was used to pay off
the bank note and satisfy the mortgage on the property
as discussed in Note 7. In October, 1994, the Managing
General Partner filed a proxy statement to propose an
amendment to the Limited Partnership Agreement that
would allow the Partnership to reinvest the net
proceeds in additional properties. The Amendment
passed with a majority of Units voting in favor of the
Amendment.
In 1994 and the first quarter of 1995, the Partnership
distributed $207,539 and $71,813 of the net proceeds to
the Partners as part of their regular quarterly
distributions, which represented a return of capital of
$27.84 and $9.64 per Limited Partnership Unit,
respectively. The majority of the remaining net
proceeds will be reinvested in additional properties.
In May, 1995, the Partnership entered into a commitment
to purchase a Denny's restaurant in Greenville, Texas.
The purchase price will be approximately $1,000,000.
The property will be leased to Huntington Restaurants
Groups, Inc. under a Lease Agreement with a primary
term of 20 years and annual rental payments of
approximately $112,500. Through September 30, 1995,
the Partnership had advanced $341,043 for the
construction of the property and was charging interest
on the Note at the rate of 8%. The Partnership has
incurred net costs of $19,220 related to the
acquisition of the property. The costs have been
capitalized and will be allocated to land, building and
equipment when the acquisition is completed.
In July 1995, the Partnership entered into an agreement
to sell the Super 8 Motel in Hot Springs, Arkansas, to
the lessee. The sale price for the Partnership's
interest in the property will be approximately
$680,000, which will result in a net gain of
approximately $220,000.
(4) Contract Payable -
Scheduled maturities of the contract payable, discussed
in Note 3, are as follows:
1996 $ 15,445
1997 14,170
1998 13,000
--------------
$ 42,615
========
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(5)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.
(6)Deferred Income -
In June, 1994, Fuddruckers, Inc., the restaurant
concept's franchisor, acquired the operations of the
Fuddruckers restaurant in St. Louis, Missouri, and
assumed the lease obligations from the original lessee.
As part of the agreement, the Partnership amended the
Lease to reduce the base rent from $163,550 to
$138,246. The Partnership could receive additional
rent in the future if 10% of gross receipts from the
property exceed the base rent. In consideration for
the lease assumption and amendment, the Partnership
received a lump sum payment from the original lessee of
$210,277. The lump sum payment will be recognized as
income over the remainder of the Lease term, which
expires January 31, 2008, using the straight line
method. As of September 30, 1995 and December 31,
1994, the Partnership had recognized $19,350 and
$7,740, respectively, of this payment as income. At
September 30, 1995, the remaining deferred income of
$22,673 was prepaid rent related to certain other
Partnership properties.
(7)Long-Term Debt -
On January 31, 1994, the Partnership entered into a
five-year bank term Note for $134,713 with interest at
the prime rate plus one half percent. Proceeds from
the Note were advanced to WIM for renovation and other
restaurant costs related to the J.T. McCord's property.
The Partnership provided a mortgage and a Lease
Assignment Agreement on the Applebee's restaurant
located on Hilton Head Island, South Carolina as
collateral for the loan. In the first six months of
1994, interest expense on the Note was $3,024.
On July 29, 1994, a portion of the net proceeds from
the sale of the Applebee's property was used to pay off
the outstanding principal balance of the bank note and
satisfy the mortgage.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS
The Partnership's rental income is derived from long-
term Lease Agreements on the Partnership's properties.
Pursuant to the Lease Agreement, the monthly rent was
increased 2.5% on March 1, 1995 for the Virginia Children's
World property, 2.5% on April 30, 1995 for the California
Children's World property and 4% on May 1, 1995 for the
Super 8 property. Rental income decreased in the first nine
months of 1995, when compared to the same period in 1994, by
$89,217. The decrease is due to the sale of Applebee's
property discussed below. The decrease in rental income was
partially offset by additional investment income earned on
the net proceeds from the sale of the Applebee's.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
In May, 1990, Flagship, Inc. (Flagship), the lessee
of the J.T. McCord's property, filed for reorganization,
after occupying the properties for approximately five years.
Flagship continued to operate the property while attempting
to develop a plan of reorganization which would be
acceptable to the bankruptcy court and its creditors. In
1992, it became apparent that Flagship did not have the
financial resources to operate the property in compliance
with the lease. In March, 1993, the Partnership, along with
affiliated Partnerships which own other J.T. McCord's
properties, filed its own plan of reorganization (the
"Plan") with the Court. That Plan provided for an assignee
of the Partnerships (a replacement tenant) to purchase the
assets of Flagship and operate the restaurants with
financial assistance from the Partnerships. This Plan was
expected to allow the Partnerships to avoid closing these
properties, allow operations to continue uninterrupted, and
avoid further costly litigation with Flagship and its
creditors. The Plan was confirmed by the Court and the
creditors April 16, 1993 and became effective July 20, 1993.
At that time, various claims between Flagship and the
Partnership were dismissed. On April 21, 1993, the
Partnership's assignee, WIM, Inc. (WIM), took over
management of the restaurants.
To entice WIM to operate the restaurants and enter
into the Lease Agreements, the Partnership provided funds to
renovate the restaurants and paid for operating expenses.
However, WIM was not able to operate the properties
profitably and was unable to make rental payments as
provided in the Lease Agreements. The Partnership's share
of renovation and operating expenses during this period was
$230,226 which was expensed in the third and fourth quarter
of 1994.. To reduce expenses and minimize the losses
produced by the property, the Waco restaurant was closed and
listed for sale or lease.
As part of the transaction to redeem these properties
from the bankruptcy court action, the Partnerships, which
own these properties, are responsible for an annual payment
to the Creditors Trust of approximately $110,000 for five
years. The Partnership's share of the annual payment is
$16,465. In the third quarter of 1994, the Partnership
expensed $71,520 to record this liability and administrative
costs related to the bankruptcy.
The Partnership is negotiating with the trustee to
settle the outstanding amount due to the Creditors Trust.
The settlement will provide for a lump sum payment of the
minimum amount due over the remaining term of the plan for
release of the Partnership and WIM from any other financial
obligations and reporting requirements to the trustee. The
settlement is expected to be completed in the fourth quarter
of 1995.
On January 31, 1994, the Partnership entered into a
five-year bank term note for $134,713 with interest equal to
the prime rate plus one half percent. Proceeds from the
Note were advanced to WIM for renovation and other
restaurant operating costs. The Partnership provided a
mortgage and a Lease Assignment Agreement on its Applebee's
restaurant in Hilton Head, Carolina as collateral for the
loan. In the first six months of 1994, interest expense on
the Note was $3,024.
In June 1995, the Partnership re-leased the Waco
property to Tex-Mex Cocina of Waco, L.C. The Lease
Agreement has a primary term of eighteen months with an
annual rental payment of $24,248. The Partnership could
also receive additional rent if gross receipts from the
property exceed certain specified amounts. The Lease
contains renewal options which may extend the lease term an
additional 10 years. The property is now operated as a
Zapata's Cantina & Cafe.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
In June, 1994, the lessee of the Applebee's
restaurant in Hilton Head, South Carolina, exercised an
option in the Lease Agreement to purchase the property. On
July 29, 1994, the sale closed with the Partnership
receiving net sale proceeds of $1,667,500 which resulted in
a net gain of $662,561. At the time of sale, the cost and
related accumulated depreciation of the property was
$1,212,379 and $207,530, respectively. A portion of the net
sale proceeds was used to pay off the bank note and satisfy
the mortgage on the property discussed above. In October,
1994, the Managing General Partner filed a proxy statement
to propose an amendment to the Limited Partnership Agreement
that would allow the Partnership to reinvest the net
proceeds in additional properties. The Amendment passed
with a majority of Units voting in favor of the Amendment.
In 1994 and the first quarter of 1995, the
Partnership distributed $207,539 and $71,813 of the net
proceeds to the Partners as part of their regular quarterly
distributions, which represented a return of capital of
$27.84 and $9.64 per Limited Partnership Unit, respectively.
The majority of the remaining net proceeds will be
reinvested in additional properties.
In May, 1995, the Partnership entered into a
commitment to purchase a Denny's restaurant in Greenville,
Texas. The purchase price will be approximately $1,000,000.
The property will be leased to Huntington Restaurants
Groups, Inc. under a Lease Agreement with a primary term of
20 years and annual rental payments of approximately
$112,500. Through September 30, 1995, the Partnership had
advanced $341,043 for the construction of the property and
was charging interest on the Note at the rate of 8%. The
Partnership has incurred net costs of $19,220 related to the
acquisition of the property. The costs have been
capitalized and will be allocated to land, building and
equipment when the acquisition is completed.
In July 1995, the Partnership entered into an
agreement to sell the Super 8 Motel in Hot Springs,
Arkansas, to the lessee. The sale price for the
Partnership's interest in the property will be approximately
$680,000, which will result in a net gain of approximately
$220,000.
In June, 1994, Fuddruckers, Inc., the restaurant
concept's franchisor, acquired the operations of the
Fuddruckers restaurant in St. Louis, Missouri, and assumed
the lease obligations from the original lessee. As part of
the agreement, the Partnership amended the Lease to reduce
the base rent from $163,550 to $138,246. The Partnership
could receive additional rent in the future if 10% of gross
receipts from the property exceed the base rent. In
consideration for the lease assumption and amendment, the
Partnership received a lump sum payment from the original
lessee of $210,277. The lump sum payment will be recognized
as income over the remainder of the Lease term, which
expires January 31, 2008, using the straight line method.
Fuddruckers, Inc. is owned by DAKA International, which has
a net worth in excess of $31 million, making it a much
higher credit lessee than the original lessee.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
During the first nine months of 1995 and 1994, the
Partnership incurred Partnership administration and property
management expenses from unrelated parties of $25,305 and
$312,306, 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. These expenses
were higher in 1994, when compared to the same periods in
1995, due to the J.T. McCord's situation discussed above.
The Partnership administration expenses incurred from
affiliates include costs associated with the management of
the properties, processing distributions, reporting
requirements and correspondence to the Limited Partners.
As of September 30, 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.
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 and in no event, obligated to purchase Units if such
purchase would impair the capital or operations of the
Partnership.
On October 1, 1995, three Limited Partners redeemed a
total of 15 Partnership Units for $9,341 in accordance with
the Partnership Agreement. The Partnership acquired these
Units using Net Cash Flow from operations. In prior years,
a total of fifteen Limited partners redeemed 121.45
Partnership Units for $91,798. The redemptions increase the
remaining Limited Partners' ownership in the Partnership.
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 terms 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.
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.
PART II - OTHER INFORMATION
(Continued)
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.OTHER INFORMATION
None.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
Description
27 Financial Data Schedule for period ended
September 30, 1995.
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 10, 1995 AEI Real Estate Fund XV
Limited Partnership
By: AEI Fund Management 86-A,Inc.
Its: Managing General Partner
By:/s/ Robert P. Johnson
Robert P. Johnson
President
By:/s/ Mark E. Larson
Mark E. Larson
Chief Financial Officer
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<NAME> AEI REAL ESTATE FUND XV LTD PARTNERSHIP
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
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<SECURITIES> 0
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