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, 1995
Commission file number: 0-14089
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
(Name of Small Business Issuer 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)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No
Check if disclosure of delinquent filers in response to Rule 405
of Regulation S-B is not contained in this Form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Issuer's revenues for year ended December 31, 1995 were
$702,350.
As of February 29, 1996, there were 7,360.55 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 $7,360,550.
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 XV Limited Partnership (the
"Partnership" or the "Registrant") is a limited partnership which
was organized pursuant to the laws of the State of Delaware on
October3, 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 July 31, 1986. The Partnership
commenced operations on October 3, 1986 when minimum
subscriptions of 1,300 Limited Partnership Units ($1,300,000)
were accepted. The Partnership's offering terminated December
30, 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 partial
interests in three properties, totaling $6,409,650. 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 leased under triple net
leases.
The Partnership will hold its properties until the General
Partners determine that the sale or other disposition of the
properties is advantageous in view of the Partnership's
investment objectives. In deciding whether to sell properties,
the General Partners will consider factors such as potential
appreciation, net cash flow and income tax considerations. In
addition, certain lessees have been granted options to purchase
properties after a specified portion of the lease term has
elapsed. It is anticipated that the Partnership will sell its
properties within twelve years after acquisition. At any time
prior to selling the properties, the Partnership may mortgage one
or more of its properties in amounts not exceeding 50% of the
fair market value of the property.
Leases
Although there are variations in the specific terms of the
leases, the following is a summary of the general terms of the
Partnership's leases. The properties are leased to various
tenants under noncancelable triple net leases, which are
classified as operating leases. Under a triple net lease, the
lessee is responsible for all real estate taxes, insurance,
maintenance, repairs and operating expenses for the property.
The initial lease terms are for 10 to 20 years. The leases
provide for base annual rental payments, payable in monthly
installments, and contain rent clauses which entitle the
Partnership to receive additional rent in future years based on
stated rent increases or if gross receipts for the property
exceed certain specified amounts, among other conditions.
Several of the leases provide the lessee with two to three
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)
The Partnership owns a 44.9042% interest in a J.T.
McCord's restaurant in Waco, Texas, which was previously closed.
In June 1995, the Partnership re-leased the restaurant 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.
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. In consideration for
the lease assumption and amendment, the Partnership received a
lump sum payment from the original lessee of $210,277.
Fuddruckers, Inc. is owned by DAKA International, which has a net
worth in excess of $64 million, making it a much higher credit
lessee than the original lessee.
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. 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 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. As of December 31, 1995, the
Partnership had received a $20,000 non-refundable earnest money
deposit and recognized a gain of $18,534. The Partnership
anticipates the sale will close on March 29, 1996.
On January 10, 1996, the Partnership purchased a Denny's
restaurant in Greenville, Texas. The purchase price was
approximately $1,000,000. The property is leased to Huntington
Restaurants Group, Inc. under a Lease Agreement with a primary
term of 20 years and annual rental payments of $113,625. Through
December 31, 1995, the Partnership had advanced $867,945 for the
construction of the property and was charging interest on the
Note at the rate of 8%.
On February 14, 1996, the Partnership purchased a 20%
interest in a Tractor Supply Company Store in Maryville,
Tennessee. The purchase price was approximately $215,000. The
property is leased to Tractor Supply Company under a Lease
Agreement with a primary term of 14 years and annual rental
payments of $22,575. The remaining interest in the property was
purchased by AEI Real Estate Fund 85-A Limited Partnership, an
affiliate of the Partnership.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Major Tenants
During 1995, 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 85%
of the Partnership's total rental revenue in 1995. It is
anticipated that, based on the minimum rental payments required
under the leases, each major tenant will continue to contribute
more than ten percent of the Partnership's total rental revenue
in 1996 and future years. Any failure of these major tenants or
business concepts 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.
ITEM 2. DESCRIPTION OF PROPERTIES.
Investment Objectives
The Partnership's investment objectives are 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 noncancelable
triple net leases, which are classified as operating leases. The
Partnership holds an undivided fee simple interest in the
properties. At any time prior to selling the properties, the
Partnership may mortgage one or more of its properties in amounts
not exceeding 50% of the fair market value of the property.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
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.
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 1995.
Total Property
Purchase Acquisition Annual Lease
Property Date Costs Lessee Payment
Children's World Children's World
Daycare Center Learning
Franconia Hills, VA 3/24/87 $ 962,069 Centers, Inc. $ 135,964
JEMCARE
Haltom City, TX 4/3/87 $ 417,213 JEMCARE, Inc. $ 48,592
Children's World
Daycare Center Kids
Moreno Valley, CA 5/15/87 $ 963,717 Unlimited, Inc. $ 136,112
Arby's Restaurant RTM
Marshall, MI 7/30/87 $ 586,425 Mid-America, Inc. $ 24,000
Zapata's Cantina & Cafe
Waco, TX Tex-Mex Cocina
(44.9042%) 12/16/87 $ 548,010 of Waco, L.C. $ 24,248
Fuddruckers Restaurant
St. Louis, MO
(60%) 3/25/88 $1,138,296 Fuddruckers, Inc. $ 138,246
Super 8 Motel
Hot Springs, AR Motel
(50%) 4/11/88 $ 581,541 Developers, Inc. $ 91,887
The properties listed above with a partial ownership
percentage are owned with an affiliate of the Partnership. AEI
Real Estate Fund XVI Limited Partnership owns the remaining
interest in the Zapata's Cantina & Cafe restaurant in Waco,
Texas, the Fuddruckers restaurant in St. Louis, Missouri and the
Super 8 Motel in Hot Springs, Arizona.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
Each Partnership owns a separate, undivided interest in
the properties. No specific agreement or commitment exists
between the Partnerships as to the management of their respective
interests in the properties, and the Partnership that holds more
than a 50% interest does not control decisions over the other
Partnership's interest.
The initial Lease terms are 20 years except for the
JEMCARE property and the Super 8 Motel (10 years), the Arby's (15
years) and the Waco property (18 months). Several of the Leases
contain renewal options which may extend the Lease term an
additional 9 to 15 years.
The Partnership acquired lease guarantee insurance from
United Guaranty Commercial Insurance Company of Iowa for two of
its Leases, the J.T. McCord's in Waco, Texas and the daycare
center in Haltom City, Texas. The policies insure approximately
80% of the annual rental payments for a period of ten years for
the Haltom City property and a twelve month period (over seven
years) for the Waco property. The rent guarantee begins thirty
days after the occurrence of all the following: (1) the lessee
is at least thirty days in default in the payment of rent; (2)
the lessee has been removed from the property; (3) the property
has been listed for rent with a real estate broker and "For Rent"
signs have been posted on the property; and (4) certain other
minor conditions. Once these conditions have been satisfied, the
Partnership will receive lease insurance payments until either
the property is re-leased or the policy expires. On December 15,
1994, the J.T. McCord's policy expired.
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.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS.
As of December 31, 1995, there were 665 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 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 operation of the Partnership.
During 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 121.5 Partnership Units for $91,798. The
redemptions increase the remaining Limited Partners' ownership in
the Partnership.
Cash distributions of $5,291 and $6,992 were made to the
General Partners and $514,532 and $683,596 were made to the
Limited Partners in 1995 and 1994, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined, except as discussed below. These
distributions should not be compared with dividends paid on
capital stock by corporations.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $81,882 and $205,463 of
proceeds from the Applebee's sale in 1995 and 1994, respectively.
The distributions reduced the Limited Partners' Adjusted Capital
Contributions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
The Partnership's rental income is derived from long-term,
triple net lease agreements on the Partnership's properties. For
the years ended December 31, 1995 and 1994, the Partnership
recognized rental income of $605,344 and $698,253, respectively.
During the same periods, the Partnership earned investment income
of $97,006 and $39,816, respectively. In 1995, rental income
decreased mainly as the result of the property sale discussed
below. The decrease in rental income was partially offset by
rent increases on four properties and additional investment
income earned on the net proceeds from the property sale.
ITEM 6. 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 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 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
July20, 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. To reduce expenses and minimize the
losses produced by the property, the Waco restaurant was closed
and listed for sale or lease. While the property was being re-
leased, the Partnership was responsible for the real estate taxes
and other costs required to maintain the property.
As part of the Plan, the Partnerships, which own these
properties, were responsible for an annual payment to the
Creditors Trust of approximately $110,000 for the next five
years. The Partnership's share of the annual payment was
$16,465. In 1994, the Partnership expensed $71,520 to record
this liability and administrative costs related to the
bankruptcy.
In 1995, the Partnership negotiated a settlement, with the
trustee, 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 of $50,891 was
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.
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 the current annual
rent of $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 $64 million, making it a much
higher credit lessee than the original lessee.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
During the years ended December 31, 1995 and 1994, the
Partnership paid Partnership administration expenses to
affiliated parties of $116,626 and $133,552, 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 $36,853 and $358,397, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, taxes, insurance and other property costs. The decrease
in these expenses in 1995, when compared to 1994, is the result
of expenses incurred in 1994 related to the J.T. McCord's
situation discussed above.
As of December 3l, 1995, the Partnership's annualized cash
distribution rate was 7.0%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement. As a result, 99% of distributions and
income were allocated to Limited Partners and 1% to the General
Partners.
Inflation has had a minimal effect on income from
operations. It is expected that increases in sales volumes of
the tenants, due to inflation and real sales growth, will result
in an increase in rental income over the term of the Leases.
Inflation also may cause the Partnership's real estate to
appreciate in value. However, inflation and changing prices may
also have an adverse impact on the operating margins of the
properties' tenants which could impair their ability to pay rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.
Liquidity and Capital Resources
During 1995, the Partnership's cash balances decreased
$998,513 mainly as the result of cash advanced for the
construction of a property discussed below. Net cash provided by
operating activities decreased from $475,262 in 1994 to $435,313
in 1995. In 1995, net cash income before depreciation, when
compared to 1994, increased by approximately $313,000. In 1994,
net cash income before depreciation was depressed mainly due to
property management expenses incurred related to the J.T.
McCord's situation discussed above. The increase in net cash
income before depreciation was offset by net timing differences
in the collection of payments from the lessees and the payment of
expenses by the Partnership, which resulted in an overall
decrease in net cash provided by operating activities in 1995.
In 1994, net cash provided by investing activities was
$1,704,159, mostly as the result of the sale of the Applebee's
restaurant. In 1995, net cash used for investing activities was
$869,844, as the proceeds from the property sale were invested in
the construction of a new property for the Partnership.
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 $662,651. 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 below. 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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. As of December 31, 1995, the
Partnership had received a $20,000 non-refundable earnest money
deposit and recognized a gain of $18,534. The Partnership
anticipates the sale will close on March 29, 1996.
During 1995 and 1994, the Partnership distributed $82,709
and $207,539 of the net sale proceeds to the Limited and General
Partners as part of their regular quarterly distributions, which
represented a return of capital of $11.10 and $27.84 per Limited
Partnership Unit, respectively. The majority of the remaining
net proceeds were reinvested in additional properties.
On January 10, 1996, the Partnership purchased a Denny's
restaurant in Greenville, Texas. The purchase price was
approximately $1,000,000. The property is leased to Huntington
Restaurants Group, Inc. under a Lease Agreement with a primary
term of 20 years and annual rental payments of $113,625. Through
December 31, 1995, the Partnership had advanced $867,945 for the
construction of the property and was charging interest on the
Note at the rate of 8%.
On February 14, 1996, the Partnership purchased a 20%
interest in a Tractor Supply Company Store in Maryville,
Tennessee. The purchase price was approximately $215,000. The
property is leased to Tractor Supply Company under a Lease
Agreement with a primary term of 14 years and annual rental
payments of $22,575. The remaining interest in the property was
purchased by AEI Real Estate Fund 85-A Limited Partnership, an
affiliate of the Partnership.
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. In 1994, the Partnership paid distributions at an 8.5%
rate which resulted in distributions to the Partners of
approximately $690,000. Effective April 1, 1995, the
distribution rate was reduced to 6.5% and then increased to 7.0%
effective December 1, 1995, which resulted in distributions to
the Partners of approximately $520,000.
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.
During 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 121.5 Partnership Units for $91,798. The
redemptions increase the remaining Limited Partners' ownership in
the Partnership.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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
related to the J.T. McCord's property. The Partnership provided
a mortgage and a Lease Assignment Agreement on its Applebee's
restaurant in Hilton Head, South Carolina as collateral for the
loan. On July 29, 1994, the Partnership sold the property and a
portion of the net proceeds was used to pay off the outstanding
principal balance of the bank Note and satisfy the mortgage. In
1994, interest expense on the Note was $3,561.
The continuing rent payments from the properties, together
with cash generated from the property sales, should be adequate
to fund continuing distributions and meet other Partnership
obligations on both a short-term and long-term basis.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying Index to Financial Statements.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report
Balance Sheet as of December 31, 1995 and 1994
Statements for the Years Ended December 31, 1995 and 1994:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
INDEPENDENT AUDITOR'S REPORT
To the Partners:
AEI Real Estate Fund XV Limited Partnership
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI REAL
ESTATE FUND XV LIMITED PARTNERSHIP (a Delaware limited
partnership) as of December 31, 1995 and 1994 and the related
statements of income, cash flows and changes in partners' capital
for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of AEI Real Estate Fund XV Limited Partnership as of December31,
1995 and 1994, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota /s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
February 6, 1996 Certified Public Accountants
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1995 1994
CURRENT ASSETS:
Cash $ 609,623 $ 1,608,136
Receivables 36,412 22,721
----------- -----------
Total Current Assets 646,035 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 867,945 0
Property Acquisition Costs 20,433 0
Accumulated Depreciation (1,278,079) (1,125,200)
----------- -----------
Net Investments in Real Estate 4,807,570 4,072,071
----------- -----------
Total Assets $ 5,453,605 $ 5,702,928
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 29,450 $ 55,939
Distributions Payable 109,176 143,994
Current Portion of Contract Payable 0 8,681
Deferred Income 15,480 15,480
----------- -----------
Total Current Liabilities 154,106 224,094
----------- -----------
CONTRACT PAYABLE - Net of Current Portion 0 46,232
DEFERRED INCOME - Net Of Current Portion 171,577 187,057
PARTNERS' CAPITAL (DEFICIT):
General Partners (12,182) (11,006)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
7,364 and 7,379 outstanding in 1995
and 1994, respectively 5,140,104 5,256,551
----------- -----------
Total Partners' Capital 5,127,922 5,245,545
----------- -----------
Total Liabilities and Partners' Capital $ 5,453,605 $ 5,702,928
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 3l
1995 1994
INCOME:
Rent $ 605,344 $ 698,253
Investment Income 97,006 39,816
---------- ----------
Total Income 702,350 738,069
---------- ----------
EXPENSES:
Partnership Administration - Affiliates 116,626 133,552
Partnership Administration and Property
Management - Unrelated Parties 36,853 358,397
Interest 2,985 13,483
Depreciation 152,879 169,870
---------- ----------
Total Expenses 309,343 675,302
---------- ----------
OPERATING INCOME 393,007 62,767
GAIN ON SALE OF REAL ESTATE 18,534 662,651
---------- ----------
NET INCOME $ 411,541 $ 725,418
========== ==========
NET INCOME ALLOCATED:
General Partners $ 4,115 $ 7,254
Limited Partners 407,426 718,164
---------- ----------
$ 411,541 $ 725,418
========== ==========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(7,375 and 7,388 weighted average Units
Outstanding in 1995 and 1994, respectively) $ 55.24 $ 97.21
========== ==========
The accompanying notes to financial statements are an integral
part of this statement.
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 411,541 $ 725,418
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 152,879 169,870
Gain on Sale of Real Estate (18,534) (662,651)
Increase in Receivables (13,691) (2,292)
Increase (Decrease) in Payable to
AEI Fund Management, Inc. (26,489) 10,508
Increase (Decrease) in Contract Payable (54,913) 54,913
Decrease in Security Deposit 0 (23,041)
Increase (Decrease) in Deferred Income (15,480) 202,537
----------- -----------
Total Adjustments 23,772 (250,156)
----------- -----------
Net Cash Provided By
Operating Activities 435,313 475,262
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (888,378) 0
Proceeds from Sale of Real Estate 18,534 1,667,500
Decrease in Long Term Receivable 0 36,659
----------- -----------
Net Cash Provided By (Used For)
Investing Activities (869,844) 1,704,159
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (34,818) 41,381
Distributions to Partners (519,729) (690,501)
Redemption Payments (9,435) (8,652)
----------- -----------
Net Cash Used For
Financing Activities (563,982) (657,772)
----------- -----------
NET INCREASE (DECREASE) IN CASH (998,513) 1,521,649
CASH, beginning of period 1,608,136 86,487
----------- -----------
CASH, end of period $ 609,623 $1,608,136
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid During The Year $ 4,025 $ 12,443
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1993 $ (11,268) $ 5,230,548 $ 5,219,280 7,391.05
Distributions (6,905) (683,596) (690,501)
Redemption Payments (87) (8,565) (8,652) (12.50)
Net Income 7,254 718,164 725,418
---------- ----------- ----------- ----------
BALANCE, December 31, 1994 (11,006) 5,256,551 5,245,545 7,378.55
Distributions (5,197) (514,532) (519,729)
Redemption Payments (94) (9,341) (9,435) (15.00)
Net Income 4,115 407,426 411,541
---------- ----------- ----------- ----------
BALANCE, December 31, 1995 $ (12,182) $ 5,140,104 $ 5,127,922 7,363.55
========== =========== =========== ==========
The accompanying notes to financial statements are an integral
part of this statement.
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(1) 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. (AEI), performs the
administrative and operating functions for the Partnership.
The terms of the Partnership offering called 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's offering
terminated on December30, 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 the 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 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.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(1) Organization - (Continued)
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
property, will be allocated first in the same ratio in
which, and to the extent, Net Cash Flow is distributed to
the Partners for such year. Any additional profits will be
allocated 90% to the Limited Partners and 10% to the General
Partners. In the event no Net Cash Flow is distributed to
the Limited Partners, 90% of each item of Partnership
income, gain or credit for each respective year shall be
allocated to the Limited Partners, and 10% of each such item
shall be allocated to the General Partners. Net losses from
operations will be allocated 98% to the Limited Partners and
2% to the General Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of the Partnership's property will be
allocated in accordance with the Partnership Agreement as
follows: (i) first, to those Partners with deficit balances
in their capital accounts in an amount equal to the sum of
such deficit balances; (ii) second, 99% to the Limited
Partners and 1% to the General Partners until the aggregate
balance in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital Contributions
plus an amount equal to 14% of their Adjusted Capital
Contributions per annum, cumulative but not compounded, to
the extent not previously allocated; (iii) third, to the
General Partners until cumulative allocations to the General
Partners equal 15% of cumulative allocations. Any remaining
balance will be allocated 85% to the Limited Partners and
15% to the General Partners. Losses will be allocated 98%
to the Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(2) Summary of Significant Accounting Policies -
Financial Statement Presentation
The accounts of the Partnership are maintained on the
accrual basis of accounting for both federal income tax
purposes and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(2) Summary of Significant Accounting Policies - (Continued)
Given that the Partnership has had limited success in its
efforts to lease or dispose of certain properties, it is
reasonably possible that the Partnership's estimate that
it will recover the carrying amount of these properties
from future operations or sales will change in the near
term.
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under triple net
leases classified as operating leases. The Partnership
recognizes rental revenue on the accrual basis according
to the terms of the individual leases. For leases which
contain cost of living increases, the increases are
recognized in the year in which they are effective.
Real estate is recorded at the lower of cost or estimated
net realizable value. The Financial Accounting Standards
Board has issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" which is effective for the
Partnership's fiscal year ended December 31, 1996. The
Partnership regularly reviews the carrying value of its
properties and will reduce properties to their net
realizable value as needed. Adoption of Statement 121 is
not expected to have a material effect on the
Partnership's operations.
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings, and equipment.
The buildings and equipment of the Partnership are
depreciated using the straight line method for financial
reporting purposes based on estimated useful lives of 30
years and 10 years, respectively.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(3) Related Party Transactions -
In 1987, the Partnership acquired a 44.9042% interest in the
restaurant in Waco, Texas. In 1988, the Partnership
acquired a 50% interest in the Super 8 Motel and a 60%
interest in the Fuddruckers restaurant. The remaining
interests in these properties are owned by an affiliate of
the Partnership, AEI Real Estate Fund XVI Limited
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 interests in the properties, and the Partnership
that holds more than a 50% interest does not control
decisions over the other Partnership's interest. The
financial statements reflect only this Partnership's
percentage share of the properties' land, building and
equipment, liabilities, revenues and expenses.
AFM and AEI received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 3l
1995 1994
a. AEI and AFM are reimbursed for all costs incurred in
connection with managing the Partnership's operations,
maintaining the Partnership's books and communicating
the results of operations to the Limited Partners. $ 116,626 $ 133,552
======== ========
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 1994, this amount included $301,746 of
property operating and renovation costs related to the
J.T. McCord's property as discussed in Note 4. $ 36,853 $ 358,397
======== ========
c. AEI is reimbursed for all property acquisition costs incurred
by it in acquiring properties on behalf of the Partnership.
The amounts are net of financing and commitment fees and
expense reimbursements received by the Partnership from
the lessees in the amount of $14,210 for 1995. $ 20,433 $ 0
======== ========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a, b and c. This
balance is non-interest bearing and unsecured and is to be
paid in the normal course of business.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through non-cancelable triple net leases, which are
classified as operating leases. Under a triple net lease,
the lessee is responsible for all real estate taxes,
insurance, maintenance, repairs and operating expenses of
the property. The initial Lease terms are 20 years except
for the JEMCARE property and the Super 8 Motel (10 years),
the Arby's (15 years) and the Waco property discussed below.
Several of the Leases have renewal options which may extend
the lease term an additional 9 to 15 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 Arby's restaurant was built in 1972
and extensively remodeled in 1987. The restaurant in Waco,
Texas was constructed in 1980 and enlarged in 1982 and 1983.
The JEMCARE Learning Center was constructed in 1986. All of
the remaining buildings were newly-constructed in 1987. The
Partnership acquired all of the properties during 1987 and
1988. There have been no costs capitalized as improvements
subsequent to the acquisitions.
The cost of the properties and related accumulated
depreciation at December 31, 1995 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Children's World,
Franconia Hills, VA $ 165,952 $ 796,117 $ 962,069 $ 267,601
JEMCARE Learning Center
Haltom City, TX 132,925 284,288 417,213 118,650
Children's World,
Moreno Valley, CA 187,858 775,859 963,717 282,529
Arby's, Marshall, MI 120,499 465,926 586,425 165,521
Zapata's, Waco, TX 183,929 364,081 548,010 122,965
Fuddruckers, St. Louis, MO 593,703 544,593 1,138,296 190,226
Super 8 Motel,
Hot Springs, AR 105,036 476,505 581,541 130,587
---------- ---------- ---------- ----------
$1,489,902 $3,707,369 $5,197,271 $1,278,079
========== ========== ========== ==========
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(4) Investments in Real Estate - (Continued)
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 July20, 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 included in Partnership Administration and Property
Management - Unrelated Parties. To reduce expenses and
minimize the losses produced by the property, the Waco
restaurant was closed and listed for sale or lease. While
the property was being re-leased, the Partnership was
responsible for the real estate taxes and other costs
required to maintain the property.
As part of the Plan, the Partnerships, which own these
properties, were responsible for an annual payment to the
Creditors Trust of approximately $110,000 for the next five
years. The Partnership's share of the annual payment was
$16,465. In 1994, the Partnership expensed $71,520 to
record this liability and administrative costs related to
the bankruptcy.
In 1995, the Partnership negotiated a settlement, with the
trustee, 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 of
$50,891 was 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
DECEMBER 31, 1995 and 1994
(4) 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
$662,651. 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 6. 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 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. As of
December 31, 1995, the Partnership had received a $20,000
non-refundable earnest money deposit and recognized a gain
of $18,534. The Partnership anticipates the sale will close
on March 29, 1996.
During 1995 and 1994, the Partnership distributed $82,709
and $207,539 of the net sale proceeds to the Limited and
General Partners as part of their regular quarterly
distributions, which represented a return of capital of
$11.10 and $27.84 per Limited Partnership Unit,
respectively. The majority of the remaining net proceeds
were reinvested in additional properties.
On January 10, 1996, the Partnership purchased a Denny's
restaurant in Greenville, Texas. The purchase price was
approximately $1,000,000. The property is leased to
Huntington Restaurants Group, Inc. under a Lease Agreement
with a primary term of 20 years and annual rental payments
of $113,625. Through December 31, 1995, the Partnership had
advanced $867,945 for the construction of the property and
was charging interest on the Note at the rate of 8%.
On February 14, 1996, the Partnership purchased a 20%
interest in a Tractor Supply Company store in Maryville,
Tennessee. The purchase price was approximately $215,000.
The property is leased to Tractor Supply Company under a
Lease Agreement with a primary term of 14 years and annual
rental payments of $22,575. The remaining interest in the
property was purchased by AEI Real Estate Fund 85-A Limited
Partnership, an affiliate of the Partnership. The
Partnership has incurred net costs of $20,433 related to the
acquisition of the properties. The costs have been
capitalized and will be allocated to land, building and
equipment.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(4) Investments in Real Estate - (Continued)
The minimum future rental on the non-cancelable Leases for
years subsequent to December31, 1995 are as follows:
1996 $ 609,787
1997 575,736
1998 512,471
1999 479,320
2000 480,205
Thereafter 2,957,395
---------
$5,614,914
=========
The Partnership recognized contingent rents in 1995 and 1994
of $10,909 and $23,020, respectively.
(5) 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 the current annual rent of $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 December 31, 1995 and 1994, the
Partnership recognized $23,220 and $7,740, respectively, of
this payment as income.
(6) 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. 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. In 1994,
interest expense on the Note was $3,561.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(7) Major Tenants -
The following schedule presents rent revenue from individual
tenants, or affiliated groups of tenants, who each
contributed more than ten percent of the Partnership's total
rent revenue for the years ended December 31:
Tenants who individually generate
10% or more of total rent revenue:
1995 1994
Tenants Industry
Children's World
Learning Centers, Inc. Child Care $ 270,417 $ 263,888
Fuddruckers Inc. Restaurant 153,727 158,280
Apple South, Inc. Restaurant 0 99,166
Motel Developers, Inc. Motel 90,709 87,220
---------- ----------
Aggregate rent revenue of major tenants $ 514,853 $ 608,554
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 85% 87%
========== ==========
(8) Partners' Capital -
Cash distributions of $5,291 and $6,992 were made to the
General Partners and $514,532 and $683,596 were made to the
Limited Partners for the years ended December 31, 1995 and
1994, respectively. The Limited Partners' distributions
represent $69.77 and $92.53 per Limited Partnership Unit
outstanding using 7,375 and 7,388 weighted average Units in
1995 and 1994, respectively. The distributions represent
$53.97 and $92.53 per Unit of Net Income and $15.80 and $-0-
per Unit of return of contributed capital in 1995 and 1994,
respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $81,882 and $205,463 of
proceeds from the Applebee's sale in 1995 and 1994,
respectively. The distributions reduced the Limited
Partners' Adjusted Capital Contributions.
Distributions of Net Cash Flow to the General Partners
during 1995 and 1994 were subordinated to the Limited
Partners as required in the Partnership Agreement. As a
result, 99% of distributions and income were allocated to
the Limited Partners and 1% to the General Partners.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(8) Partners' Capital - (Continued)
The Partnership may acquire Units from Limited Partners who
have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated
to purchase in any year more than 5% of the number of Units
outstanding at the beginning the year and in no event,
obligated to purchase Units if such purchase would impair
the capital or operation of the Partnership.
During 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 1994, three Limited
Partners redeemed a total of 12.5 Partnership Units for
$8,565 The redemptions increase the remaining Limited
Partners' ownership 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
$979.51 per original $1,000 invested.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(9) Income Taxes -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the years ended December 31:
1995 1994
Net Income For Financial
Reporting Purposes $ 411,541 $ 725,418
Depreciation for Tax Purposes
Under Depreciation For Financial
Reporting Purposes 38,449 47,737
Income Accrued for Tax Purposes Over
(Under) Income For Financial
Reporting Purposes (15,480) 147,743
Property Expenses For Tax Purposes (Over)
Under Expenses For Financial Reporting
Purposes (54,913) 108,612
Gain on Sale of Real Estate for Tax Purposes
Over Gain for Financial Reporting Purposes 0 812
---------- ----------
Taxable Income to Partners $ 379,597 $1,030,322
========== ==========
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, AND 1994
(9) Income Taxes - (Continued)
The following is a reconciliation of Partners' capital for
financial reporting purposes to Partners' capital reported
for federal income tax purposes for the years ended
December31:
1995 1994
Partners' Capital For
Financial Reporting Purposes $ 5,127,922 $ 5,245,545
Depreciation For Tax Purposes
Under Depreciation For Financial
Reporting Purposes 53,589 15,140
Capitalized Start-Up Costs
Under Section 195 152,848 152,848
Amortization of Start-Up and
Organization Costs (165,254) (165,254)
Income Accrued For Tax Purposes Over
Income For Financial
Reporting Purposes 187,057 202,537
Property Expenses For Tax Purposes
Under Expenses For Financial Reporting
Purposes 56,596 111,510
Gain on Sale of Real Estate for Tax Purposes
Over Gain for Financial Reporting Purposes 812 812
Organization and Syndication Costs
Treated as Reduction of Capital
For Financial Reporting Purposes 1,067,225 1,067,225
----------- -----------
Partners' Capital For
Tax Reporting Purposes $ 6,480,795 $ 6,630,363
=========== ===========
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, AND 1994
(10) Fair Value of Financial Instruments -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, are as follows at
December 31, 1995:
1995
Carrying Fair
Amount Value
Cash $ 609,623 $ 609,623
Construction Advances 867,945 867,945
The carrying values of cash and construction advances
approximate fair values.
ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT.
The registrant is a limited partnership and has no
officers, directors, or direct employees. The General Partners
of the registrant are Robert P. Johnson and AFM. The General
Partners manage and control the Partnership's affairs and have
general responsibility and the ultimate authority in all matters
affecting the Partnership's business. The director and officers
of AFM are as follows:
Robert P. Johnson, age 51, is Chief Executive Officer,
President and Director and has held these positions since the
formation of AFM in December, 1985, and has been elected to
continue in these positions until March, 1997. From 1970 to the
present, he has been employed exclusively in the investment
industry, specializing in tax-advantaged limited partnership
investments. In that capacity, he has been involved in the
development, analysis, marketing and management of public and
private investment programs investing in net lease properties as
well as public and private investment programs investing in
energy development. Since 1971, Mr. Johnson has been the
president, a director and a registered principal of AEI
Incorporated, which is registered with the Securities and
Exchange Commission as a securities broker-dealer, is a member of
the National Association of Securities Dealers, Inc. (NASD) and
is a member of the Security Investors Protection Corporation
(SIPC). Mr. Johnson has been president, a director and the
principal shareholder of AEI Fund Management, Inc., a real estate
management company founded by him, since 1978. Mr. Johnson is
currently a general partner or principal of the general partner
in fifteen other limited partnerships.
Mark E. Larson, age 43, is Executive Vice President,
Treasurer and Chief Financial Officer and has been elected to
continue in these positions until March, 1997. Mr. Larson has
been Treasurer and Executive Vice President since December, 1987
and Chief Financial Officer since January, 1990. In January,
1993, Mr. Larson was elected to serve as Secretary of AFM and
will continue to serve until March, 1997. Mr. Larson has been
employed by AEI Fund Management, Inc. and affiliated entities
since 1985. From 1979 to 1985, Mr. Larson was with Apache
Corporation as manager of Program Accounting responsible for the
accounting and reports for approximately 45 public partnerships.
Mr. Larson is responsible for supervising the accounting
functions of AFM and the registrant.
ITEM 10. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative and management services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
AFM, the Managing General Partner of the Partnership, and
Robert P. Johnson, its Individual General Partner, contributed
$1,000 in total for their interest in the registrant. See Item 1
for a discussion of their share of the registrant's profits and
losses. During 1989, AFM purchased three Limited Partnership
Units (less than 1% of the Units outstanding) from a Limited
Partner.
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 21 and is
incorporated herein by reference, for details of related party
transactions.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A.
A. Exhibits -
Description
27 Financial Data Schedule
for year ended December 31, 1995.
B. Reports on Form 8-K and Form 8-K/A - 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 XV
Limited Partnership
By: AEI Fund Management 86-A, Inc.
Its Managing General Partner
March 21, 1996 By: /s/ Robert P. Johnson
Robert P. Johnson, President and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Name Title Date
/s/ Robert P. Johnson President (Principal Executive Officer) March 21, 1996
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 21, 1996
Mark E. Larson and Chief Financial Officer
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<NAME> AEI REAL ESTATE FUND XV LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 609,623
<SECURITIES> 0
<RECEIVABLES> 36,412
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0
0
<COMMON> 0
<OTHER-SE> 5,127,922
<TOTAL-LIABILITY-AND-EQUITY> 5,453,605
<SALES> 0
<TOTAL-REVENUES> 702,350
<CGS> 0
<TOTAL-COSTS> 306,358
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<INCOME-PRETAX> 411,541
<INCOME-TAX> 0
<INCOME-CONTINUING> 411,541
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