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, 1996
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, 1996 were
$734,912.
As of February 28, 1997, there were 7,350.55 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 $7,350,550.
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
October 3, 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 $77 million at December 28, 1996, 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 lessee of the Super 8 motel in Hot
Springs, Arkansas, exercised an option in the Lease Agreement to
purchase the property. On March 29, 1996, the sale closed with
the Partnership receiving net sale proceeds of $663,386 which
resulted in a net gain of $216,645. The Partnership recognized
$18,534 of this gain in 1995 due to nonrefundable deposits
received from the purchaser. At the time of sale, the cost and
related accumulated depreciation of the property was $581,541 and
$134,800, respectively.
On January 10, 1996, the Partnership purchased a Denny's
restaurant in Greenville, Texas for $1,028,432. 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 in Maryville, Tennessee for
$219,405. 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.
On January 24, 1997, the Partnership sold the Children's
World Daycare Center in Moreno Valley, California, to an
unrelated third party. The Partnership recognized net sale
proceeds of approximately $1,300,000, which resulted in a net
gain of approximately $654,000. As part of the sale proceeds,
the Partnership received a Promissory Note for $1,003,000. The
Note is due, together with accrued interest at a 10% rate, on
March 25, 1997.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Major Tenants
During 1996, three of the Partnership's lessees each
contributed more than ten percent of the Partnership's total
rental revenue. The major tenants in aggregate contributed 78%
of the Partnership's total rental revenue in 1996. 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 1997 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, 1996.
<TABLE>
<C> <S> <S> <S> <S> <S>
Total Property
Purchase Acquisition Annual Annual Rent
Property Date Costs Lessee Lease Per Sq. Ft.
Payment
Children's World Children's World
Daycare Center Learning
Franconia Hills, VA 3/24/87 $ 962,069 Centers, Inc. $139,363 $ 28.15
JEMCARE
Haltom City, TX 4/3/87 $ 417,213 JEMCARE, Inc. $ 27,012 $ 6.43
Children's World
Daycare Center Kids
Moreno Valley, CA 5/15/87 $ 963,717 Unlimited, Inc. $139,515 $ 20.17
Arby's Restaurant RTM
Marshall, MI 7/30/87 $ 586,425 Mid-America, Inc. $ 24,000 $ 7.75
Zapata's Cantina & Cafe
Waco, TX Tex-Mex Cocina
(44.9042%) 12/16/87 $ 548,010 of Waco, L.C. $ 24,248 $ 8.89
Fuddruckers Restaurant
St. Louis, MO
(60%) 3/25/88 $ 1,138,296 Fuddruckers, Inc. $138,246 $ 26.40
Huntington
Denny's Restaurant Restaurants
Greenville, TX 1/10/96 $ 1,028,432 Group, Inc. $113,625 $ 23.06
Tractor Supply
Company Store
Maryville, TN Tractor Supply
(20%) 2/14/96 $ 219,405 Company $ 22,575 $ 5.93
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
and the Fuddruckers restaurant in St. Louis, Missouri. AEI Real
Estate Fund 85-A Limited Partnership owns the remaining interest
in the Tractor Supply Company in Maryville, Tennessee.
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 (10 years), the Tractor Supply Company (14
years), the Arby's (15 years) and the Waco property (18 months).
Several of the Leases contains 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 restaurant 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 31,
1994, the restaurant policy expired. On August 31, 1996, the
daycare center 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 or 40 years depending on the date when it was placed in
service. The remaining depreciable components of a property are
personal property and land improvements which are depreciated,
using an accelerated method, over 5 and 15 years, respectively.
Since the Partnership has tax-exempt Partners, the Partnership is
subject to the rules of Section 168(h)(6) of the Internal Revenue
Code which requires a percentage of the properties' depreciable
components to be depreciated over longer lives using the straight-
line method. In general the federal tax basis of the properties
for tax depreciation purposes is the same as the basis for book
depreciation purposes.
During the last five years or since the date of purchase,
if purchased after December 31, 1991, all properties were 100
percent occupied by the lessees noted, with the exception of the
Zapata's Cantina & Cafe, which was 100 percent occupied until
January, 1993. The property was re-leased in June, 1995.
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, 1996, there were 668 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. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
During 1996, one Limited Partner redeemed a total of 10
Partnership Units for $5,703 in accordance with the Partnership
Agreement. In prior years, a total of eighteen Limited Partners
redeemed 136.5 Partnership Units for $101,139. The redemptions
increase the remaining Limited Partners' ownership in the
Partnership.
Cash distributions of $6,510 and $5,291 were made to the
General Partners and $638,814 and $514,532 were made to the
Limited Partners in 1996 and 1995, 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 $126,000 and $81,882 of
proceeds from property sales in 1996 and 1995, respectively. The
distributions reduced the Limited Partners' Adjusted Capital
Contributions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
For the years ended December 31, 1996 and 1995, the
Partnership recognized rental income of $692,432 and $605,344,
respectively. During the same periods, the Partnership earned
investment income of $42,480 and $97,006, respectively. In 1996,
rental income increased as a result of the reinvestment of net
sale proceeds in additional properties and the re-leasing of the
Waco property, as discussed below. The increase in rental income
was partially offset by a decrease in investment income earned on
the net proceeds prior to the purchase of the additional
properties.
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. 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.
To entice the assignee, WIM, Inc. (WIM), to operate the
restaurants and enter into the Lease Agreements, the Partnership
provided funds to renovate the restaurants and paid for operating
expenses. The Partnership's share of renovation and operating
expenses during this period was $230,226, which was expensed in
the fourth quarter of 1994. However, WIM was not able to operate
the properties profitably and was unable to make rental payments
as provided in the Lease Agreements. 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 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. While the property was being re-
leased, the Partnership was responsible for the real estate taxes
and other costs required to maintain the property.
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 $77 million at December 28,
1996, 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, 1996 and 1995, the
Partnership paid Partnership administration expenses to
affiliated parties of $97,897 and $116,626, 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 $16,274 and $36,853, 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 1996, when compared to 1995, is mainly the
result of expenses incurred in 1995 prior to the resolution of
the J.T. McCord's situation discussed above.
As of December 3l, 1996, the Partnership's annualized cash
distribution rate was 7.5%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement. As a result, 99% of distributions and
income were allocated to Limited Partners and 1% to the General
Partners.
Inflation has had a minimal effect on income from
operations. It is expected that increases in sales volumes of
the tenants, due to inflation and real sales growth, will result
in an increase in rental income over the term of the Leases.
Inflation also may cause the Partnership's real estate to
appreciate in value. However, inflation and changing prices may
also have an adverse impact on the operating margins of the
properties' tenants which could impair their ability to pay rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.
Liquidity and Capital Resources
During 1996, the Partnership's cash balances increased
$274,497. Net cash provided by operating activities increased
from $435,313 in 1995 to $628,957 in 1996 as a result of an
increase in revenue and a reduction in expenses in 1996, and net
timing differences in the collection of payments from the lessees
and the payment of expenses.
The major components of the Partnership's cash flow from
investing activities are investments in real estate and proceeds
from the sale of real estate. In 1996 and 1995, the Partnership
generated cash flow from the sale of real estate, as discussed
below, of $644,852 and $18,534, respectively. During the same
periods, the Partnership expended $359,459 and $888,378,
respectively, to invest in real properties (inclusive of
acquisition expenses) as the Partnership reinvested the cash
generated from the property sales.
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. 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.
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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On January 10, 1996, the Partnership purchased a Denny's
restaurant in Greenville, Texas for $1,028,432. 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 in Maryville, Tennessee for
$219,405. 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.
In July 1995, the lessee of the Super 8 motel in Hot
Springs, Arkansas, exercised an option in the Lease Agreement to
purchase the property. On March 29, 1996, the sale closed with
the Partnership receiving net sale proceeds of $663,386 which
resulted in a net gain of $216,645. The Partnership recognized
$18,534 of this gain in 1995 due to nonrefundable deposits
received from the purchaser. At the time of sale, the cost and
related accumulated depreciation of the property was $581,541 and
$134,800, respectively.
In September, 1996, the Partnership distributed $127,273
of the net proceeds as an additional distribution to the Limited
and General Partners, which represented a return of capital of
$17.11 per Limited Partnership Unit, respectively. The majority
of the remaining proceeds will be reinvested in an additional
property.
On January 24, 1997, the Partnership sold the Children's
World Daycare Center in Moreno Valley, California, to an
unrelated third party. The Partnership recognized net sale
proceeds of approximately $1,300,000, which resulted in a net
gain of approximately $654,000. As part of the sale proceeds,
the Partnership received a Promissory Note for $1,003,000. The
Note is due, together with accrued interest at a 10% rate, on
March 25, 1997.
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 1996, distributions were higher than in 1995 as a
result of the distribution of net sale proceeds in September,
1996.
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the total number of Units
outstanding at the beginning of the year. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
During 1996, one Limited Partner redeemed a total of 10
Partnership Units for $5,703 in accordance with the Partnership
Agreement. The Partnership acquired these Units using Net Cash
Flow from operations. In prior years, a total of eighteen
Limited partners redeemed 136.5 Partnership Units for $101,139.
The redemptions increase the remaining Limited Partners'
ownership in the Partnership.
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, 1996 and 1995
Statements for the Years Ended December 31, 1996 and 1995:
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, 1996 and 1995 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 December 31,
1996 and 1995, 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.
January 31, 1997 Certified Public Accountants
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1996 1995
CURRENT ASSETS:
Cash and Cash Equivalents $ 884,120 $ 609,623
Receivables 9,945 36,412
----------- -----------
Total Current Assets 894,065 646,035
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 1,757,210 1,489,902
Buildings and Equipment 4,106,357 3,707,369
Construction Advances 0 867,945
Property Acquisition Costs 0 20,433
Accumulated Depreciation (1,312,489) (1,278,079)
----------- -----------
Net Investments in Real Estate 4,551,078 4,807,570
----------- -----------
Total Assets $ 5,445,143 $ 5,453,605
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 26,679 $ 29,450
Distributions Payable 120,350 109,176
Deferred Income 15,480 15,480
----------- -----------
Total Current Liabilities 162,509 154,106
----------- -----------
DEFERRED INCOME - Net Of Current Portion 156,097 171,577
PARTNERS' CAPITAL (DEFICIT):
General Partners (12,195) (12,182)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
7,354 and 7,364 outstanding in 1996
and 1995, respectively 5,138,732 5,140,104
----------- -----------
Total Partners' Capital 5,126,537 5,127,922
----------- -----------
Total Liabilities and Partners' Capital $ 5,445,143 $ 5,453,605
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 3l
1996 1995
INCOME:
Rent $ 692,432 $ 605,344
Investment Income 42,480 97,006
----------- -----------
Total Income 734,912 702,350
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 97,897 116,626
Partnership Administration and Property
Management - Unrelated Parties 16,274 36,853
Interest 0 2,985
Depreciation 169,210 152,879
----------- -----------
Total Expenses 283,381 309,343
----------- -----------
OPERATING INCOME 451,531 393,007
GAIN ON SALE OF REAL ESTATE 198,111 18,534
----------- -----------
NET INCOME $ 649,642 $ 411,541
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 6,497 $ 4,115
Limited Partners 643,145 407,426
----------- -----------
$ 649,642 $ 411,541
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(7,361 and 7,375 weighted average Units outstanding
in 1996 and 1995, respectively) $ 87.37 $ 55.24
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 649,642 $ 411,541
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 169,210 152,879
Gain on Sale of Real Estate (198,111) (18,534)
(Increase) Decrease in Receivables 26,467 (13,691)
Decrease in Payable to
AEI Fund Management, Inc. (2,771) (26,489)
Decrease in Contract Payable 0 (54,913)
Decrease in Deferred Income (15,480) (15,480)
----------- -----------
Total Adjustments (20,685) 23,772
----------- -----------
Net Cash Provided By
Operating Activities 628,957 435,313
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (359,459) (888,378)
Proceeds from Sale of Real Estate 644,852 18,534
----------- -----------
Net Cash Provided By (Used For)
Investing Activities 285,393 (869,844)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable 11,174 (34,818)
Distributions to Partners (645,267) (519,729)
Redemption Payments (5,760) (9,435)
----------- -----------
Net Cash Used For
Financing Activities (639,853) (563,982)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 274,497 (998,513)
CASH AND CASH EQUIVALENTS, beginning of period 609,623 1,608,136
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 884,120 $ 609,623
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid During The Year $ 0 $ 4,025
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<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, 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
Distributions (6,453) (638,814) (645,267)
Redemption Payments (57) (5,703) (5,760) (10.00)
Net Income 6,497 643,145 649,642
---------- ----------- ----------- -----------
BALANCE, December 31, 1996 $ (12,195) $ 5,138,732 $ 5,126,537 7,353.55
========== =========== =========== ===========
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, 1996 and 1995
(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 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 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, 1996 and 1995
(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, 1996 and 1995
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents include cash in checking, cash invested in
money market accounts, certificates of deposit, federal
agency notes and commercial paper with a term of three
months or less.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under triple net
leases classified as operating leases. The Partnership
recognizes rental revenue on the accrual basis according
to the terms of the individual leases. For leases which
contain cost of living increases, the increases are
recognized in the year in which they are effective.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
(2) Summary of Significant Accounting Policies - (Continued)
Real estate is recorded at the lower of cost or estimated
net realizable value. The Financial Accounting Standards
Board 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. This
standard requires the Partnership to compare the carrying
amount of its properties to the estimated future cash
flows expected to result from the property and its
eventual disposition. If the sum of the expected future
cash flows is less than the carrying amount of the
property, the Statement requires the Partnership to
recognize an impairment loss by the amount by which the
carrying amount of the property exceeds the fair value of
the property. Adoption of this Statement did not have a
material effect on the Partnership's financial
statements.
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings, and equipment.
The buildings and equipment of the Partnership are
depreciated using the straight line method for financial
reporting purposes based on estimated useful lives of 30
years and 10 years, respectively.
(3) Related Party Transactions -
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 AEI Real Estate
Fund XVI Limited Partnership, an affiliate of the
Partnership. In 1996, the Partnership acquired a 20%
interest in the Tractor Supply Company. The remaining
interest in this property is owned by AEI Real Estate Fund
85-A Limited Partnership, an affiliate of the Partnership.
Each Partnership owns a separate, undivided interest in the
properties. No specific agreement or commitment exists
between the Partnerships as to the management of their
respective 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.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
(3) Related Party Transactions - (Continued)
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
1996 1995
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. $ 97,897 $ 116,626
======== ========
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. $ 16,274 $ 36,853
======== ========
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 $29,768 and $14,210
for 1996 and 1995, respectively. $ (16,996) $ 20,433
======== ========
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, 1996 and 1995
(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 (10 years), the Tractor Supply
Company (14 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. The
two Children's World Daycare Centers and the Fuddruckers
restaurant were newly-constructed in 1987. The Partnership
acquired all of these properties during 1987 and 1988. The
Denny's restaurant and Tractor Supply Company were newly-
constructed in 1995 and acquired in 1996. There have been
no costs capitalized as improvements subsequent to the
acquisitions.
The cost of the properties and related accumulated
depreciation at December 31, 1996 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Children's World,
Franconia Hills, VA $ 165,952 $ 796,117 $ 962,069 $ 298,039
JEMCARE Learning Center
Haltom City, TX 132,925 284,288 417,213 132,210
Children's World,
Moreno Valley, CA 187,858 775,859 963,717 315,286
Arby's, Marshall, MI 120,499 465,926 586,425 185,090
Zapata's, Waco, TX 183,929 364,081 548,010 138,256
Fuddruckers, St. Louis, MO 593,703 544,593 1,138,296 214,640
Denny's,
Greenville, TX 332,077 696,355 1,028,432 23,302
Tractor Supply Company
Maryville, TN 40,267 179,138 219,405 5,666
----------- ----------- ----------- -----------
$ 1,757,210 $ 4,106,357 $ 5,863,567 $ 1,312,489
=========== =========== =========== ===========
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
(4) Investments in Real Estate - (Continued)
In May, 1990, Flagship, Inc. (Flagship), the lessee of the
J.T. McCord's properties, filed for reorganization, after
occupying the properties for approximately five years. 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.
To entice the assignee, WIM, Inc. (WIM) to operate the
restaurants and enter into the Lease Agreements, the
Partnership provided funds to renovate the restaurants and
paid for operating expenses. The Partnership's share of
renovation and operating expenses during this period was
$230,226 which was expensed in the fourth quarter of 1994.
However, WIM was not able to operate the properties
profitably and was unable to make rental payments as
provided in the Lease Agreements. To reduce expenses and
minimize the losses produced by these properties, the Waco
restaurant was closed and listed for sale or lease.
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. While the property was being re-leased, the
Partnership was responsible for the real estate taxes and
other costs required to maintain the property.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
(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. 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.
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 for $1,028,432. 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 in Maryville, Tennessee
for $219,405. 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.
In July 1995, the lessee of the Super 8 motel in Hot
Springs, Arkansas, exercised an option in the Lease
Agreement to purchase the property. On March 29, 1996, the
sale closed with the Partnership receiving net sale proceeds
of $663,386 which resulted in a net gain of $216,645. The
Partnership recognized $18,534 of this gain in 1995 due to
nonrefundable deposits received from the purchaser. At the
time of sale, the cost and related accumulated depreciation
of the property was $581,541 and $134,800, respectively.
In September, 1996, the Partnership distributed $127,273 of
the net proceeds as an additional distribution to the
Limited and General Partners, which represented a return of
capital of $17.11 per Limited Partnership Unit,
respectively. The majority of the remaining proceeds will
be reinvested in an additional property.
On January 24, 1997, the Partnership sold the Children's
World Daycare Center in Moreno Valley, California, to an
unrelated third party. The Partnership recognized net sale
proceeds of approximately $1,300,000, which resulted in a
net gain of approximately $654,000. As part of the sale
proceeds, the Partnership received a Promissory Note for
$1,003,000. The Note is due, together with accrued interest
at a 10% rate, on March 25, 1997.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
(4) Investments in Real Estate - (Continued)
The minimum future rental on the non-cancelable Leases for
years subsequent to December 31, 1996 are as follows:
1997 $ 622,633
1998 626,055
1999 629,626
2000 633,273
2001 605,687
Thereafter 4,795,232
-----------
$ 7,912,506
===========
The Partnership recognized contingent rents in 1996 and 1995
of $18,925 and $10,909, 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, 1996 and 1995, the
Partnership has recognized $38,700 and $23,220,
respectively, of this payment as income.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
(6) Major Tenants -
The following schedule presents rent revenue from individual
tenants, or affiliated groups of tenants, who each
contributed more than ten percent of the Partnership's total
rent revenue for the years ended December 31:
1996 1995
Tenants Industry
Children's World
Learning Centers, Inc. Child Care $ 277,177 $ 270,417
Fuddruckers Inc. Restaurant 153,727 153,727
Huntington Restaurants
Group, Inc. Restaurant 110,876 N/A
Motel Developers, Inc. Motel N/A 90,709
---------- ----------
Aggregate rent revenue of major tenants $ 541,780 $ 514,853
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 78% 85%
========== ==========
(7) Partners' Capital -
Cash distributions of $6,510 and $5,291 were made to the
General Partners and $638,814 and $514,532 were made to the
Limited Partners for the years ended December 31, 1996 and
1995, respectively. The Limited Partners' distributions
represent $86.78 and $69.77 per Limited Partnership Unit
outstanding using 7,361 and 7,375 weighted average Units in
1996 and 1995, respectively. The distributions represent
$86.59 and $53.97 per Unit of Net Income and $.19 and $15.80
per Unit of return of contributed capital in 1996 and 1995,
respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $126,000 and $81,882 of
proceeds from property sales in 1996 and 1995, respectively.
The distributions reduced the Limited Partners' Adjusted
Capital Contributions.
Distributions of Net Cash Flow to the General Partners
during 1996 and 1995 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, 1996 and 1995
(7) Partners' Capital - (Continued)
The Partnership may acquire Units from Limited Partners who
have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated
to purchase in any year more than 5% of the number of Units
outstanding at the beginning of the year. In no event shall
the Partnership be obligated to purchase Units if, in the
sole discretion of the Managing General Partner, such
purchase would impair the capital or operation of the
Partnership.
During 1996, one Limited Partner redeemed a total of 10
Partnership Units for $5,703 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In 1995, three Limited
Partners redeemed a total of 15 Partnership Units for
$9,341. 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
$963.71 per original $1,000 invested.
(8) Income Taxes -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the years ended December 31:
1996 1995
Net Income For Financial
Reporting Purposes $ 649,642 $ 411,541
Depreciation for Tax Purposes
Under Depreciation For Financial
Reporting Purposes 43,688 38,449
Income Accrued for Tax Purposes
Under Income For Financial
Reporting Purposes (15,480) (15,480)
Property Expenses For Tax Purposes
Over Expenses For Financial
Reporting Purposes 0 (54,913)
Gain on Sale of Real Estate for Tax Purposes
Under Gain for Financial Reporting Purposes (15,419) 0
---------- ----------
Taxable Income to Partners $ 662,431 $ 379,597
========== ==========
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, AND 1995
(8) Income Taxes - (Continued)
The following is a reconciliation of Partners' capital for
financial reporting purposes to Partners' capital reported
for federal income tax purposes for the years ended December
31:
1996 1995
Partners' Capital For
Financial Reporting Purposes $ 5,126,537 $ 5,127,922
Adjusted Tax Basis of Investments
in Real Estate Over Net Investments
in Real Estate for Financial
Reporting Purposes 139,266 110,997
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 171,577 187,057
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 $ 6,492,199 $ 6,480,795
=========== ===========
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, AND 1995
(9) 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:
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 257 257 $ 1,680 $ 1,680
Money Market Funds 888,863 888,863 607,943 607,943
Construction Advances 0 0 867,945 867,945
--------- --------- --------- ---------
Total Cash and
Cash Equivalents $ 884,120 $ 884,120 $ 609,623 $ 609,623
========= ========= ========= =========
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 52, 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, 1998. 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 44, is Executive Vice President,
Treasurer and Chief Financial Officer and has been elected to
continue in these positions until March, 1998. 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, 1998. 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 Pages 21 and 22 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
10.1 Net Lease Agreement dated
January 10, 1996, between the Partnership
and Huntington Restaurants Group, Inc.
relating to the property at 3103 W. I-30,
Greenville, Texas (incorporated by
reference to Exhibit 10.1 of Form 8-K
filed with the Commission on January 17,
1996).
10.2 Purchase Agreement dated
July 25, 1995 between the Partnership,
AEI Real Estate Fund XVI Limited
Partnership and Motel Developers, Inc.
relating to the property at 4726 Central
Avenue, Hot Springs, Arkansas
(incorporated by reference to Exhibit
10.1 of Form 8-K filed with the
Commission on April 2, 1996).
27 Financial Data Schedule
for year ended December 31, 1996.
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 6, 1997 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 6, 1997
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E.Larson Executive Vice President, Treasurer March 6, 1997
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
</TABLE>
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<CIK> 0000793631
<NAME> AEI REAL ESTATE FUND XV LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 884,120
<SECURITIES> 0
<RECEIVABLES> 9,945
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 894,065
<PP&E> 5,863,567
<DEPRECIATION> (1,312,489)
<TOTAL-ASSETS> 5,445,143
<CURRENT-LIABILITIES> 162,509
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,126,537
<TOTAL-LIABILITY-AND-EQUITY> 5,445,143
<SALES> 0
<TOTAL-REVENUES> 734,912
<CGS> 0
<TOTAL-COSTS> 283,381
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 649,642
<INCOME-TAX> 0
<INCOME-CONTINUING> 649,642
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<EXTRAORDINARY> 0
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<NET-INCOME> 649,642
<EPS-PRIMARY> 87.37
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