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, 1999
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)
(651) 227-7333
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No
Check if disclosure of delinquent filers in response to Rule 405
of Regulation S-B is not contained in this Form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Issuer's revenues for year ended December 31, 1999 were
$809,646.
As of February 29, 2000, there were 7,294.88 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 $7,294,880.
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. Prior to commending the liquidation of the Partnership,
the General Partners may reinvest the proceeds from the sale of
properties in additional properties, provided that sufficient
proceeds are distributed to the Limited Partners to pay federal
and state income taxes related to any taxable gain recognized as
a result of the sale. At any time prior to selling the
properties, the Partnership may mortgage one or more of its
properties in amounts not exceeding 50% of the fair market value
of the property.
Leases
Although there are variations in the specific terms of the
leases, the following is a summary of the general terms of the
Partnership's leases. The properties are leased to various
tenants under triple net leases, which are classified as
operating leases. Under a triple net lease, the lessee is
responsible for all real estate taxes, insurance, maintenance,
repairs and operating expenses for the property. The initial
lease terms are for 10 to 20 years. The leases provide for base
annual rental payments, payable in monthly installments, and
contain rent clauses which entitle the Partnership to receive
additional rent in future years based on stated rent increases or
if gross receipts for the property exceed certain specified
amounts, among other conditions.
Most 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 owned a 44.9042% interest in a 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 had a primary term of eighteen months
with an annual rental payment of $24,248. In December, 1997, the
lessee elected not to exercise the renewal option in the lease.
The restaurant was closed and listed for sale or lease. While
the property was vacant, the Partnership was responsible for the
real estate taxes and other costs required to maintain the
property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of the
Partnership's interest in the Waco property was approximately
$314,400. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $80,300 was recognized, which is
the difference between the book value at December 31, 1997 of
$394,700 and the estimated fair value of $314,400. The charge
was recorded against the cost of the land and building. In
December, 1998, the Partnership re-analyzed the market conditions
in the area and determined the fair value of the Partnership's
interest declined to approximately $126,000. In the fourth
quarter of 1998, a charge to operations for real estate
impairment of $180,000 was recognized, which is the difference
between the book value at December 31, 1998 of $306,000 and the
estimated fair value of $126,000. The charge was recorded
against the cost of the land and building.
In March, 1999, the Partnership entered into an agreement
to sell the Waco property to an unrelated third party. On May
10, 1999, the sale closed with the Partnership receiving net sale
proceeds of $128,879 which resulted in a net gain of $4,228. At
the time of sale, the cost and related accumulated depreciation
was $287,710 and $163,059, respectively.
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 $1,301,342, which resulted in a net gain of $655,641.
At the time of sale, the cost and related accumulated
depreciation of the property was $963,717 and $318,016,
respectively. As part of the sale proceeds, the Partnership
received a Promissory Note for $1,003,000. The Note bears
interest at a 10% rate. On April 23, 1997, the Partnership
received the principal balance and outstanding accrued interest
on the Note. Investment income earned on the Note was $24,456.
On November 18, 1997, the Partnership purchased a 30.794%
interest in a Timber Lodge Steakhouse in St. Cloud, Minnesota for
$510,635. The property is leased to Timber Lodge Steakhouse,
Inc. under a Lease Agreement with a primary term of 20 years and
annual rental payments of $51,537. The remaining interests in
the property are owned by AEI Real Estate Fund XVII Limited
Partnership and AEI Institutional Net Lease Fund '93 Limited
Partnership, affiliates of the Partnership.
During 1999, the Partnership sold its interest in the
Timber Lodge Steakhouse in three separate transactions to
unrelated third parties. The Partnership received total net sale
proceeds of $566,111 which resulted in a total net gain of
$81,898. The total cost and related accumulated depreciation of
the property was $510,635 and $26,421, respectively. The
majority of the net sale proceeds will be reinvested in
additional property in the future.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
On December 23, 1997, the Partnership purchased a 26.05%
interest in a parcel of land in Troy, Michigan for $393,620. The
land is leased to Champps Operating Corporation (Champps) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $27,553. Effective June 20, 1998, the annual rent
was increased to $41,330. Simultaneously with the purchase of
the land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to Champps
for the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7.0%. Effective June 20, 1998, the
interest rate was increased to 10.50%. On September 3, 1998,
after the development was completed, the Lease Agreement was
amended to require annual rental payments of $133,356. The
Partnership's share of the total acquisition costs, including the
cost of the land, was $1,330,265. The remaining interests in the
property are owned by AEI Real Estate Fund XVII Limited
Partnership, AEI Real Estate Fund XVIII Limited Partnership and
AEI Net Lease Income & Growth Fund XIX Limited Partnership,
affiliates of the Partnership.
In February, 1999, the Partnership entered into an
agreement to sell the Fuddruckers property to an unrelated third
party. On June 16, 1999, the sale closed with the Partnership
receiving net sale proceeds of $1,145,424 which resulted in a net
gain of $270,045. At the time of sale, the cost and related
accumulated depreciation was $1,138,296 and $262,917,
respectively.
On July 14, 1999, the Partnership purchased a Children's
World daycare center in West Chester, Ohio for $999,163. The
property is leased to ARAMARK Educational Resources, Inc. under a
Lease Agreement with a primary term of 15 years and annual rental
payments of $93,162.
Major Tenants
During 1999, 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 82%
of the Partnership's total rental revenue in 1999. 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 2000 and future years. The only exception is the tenant in
the Fuddruckers restaurant will not continue to be a major tenant
since the property was sold in June, 1999. 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 1. DESCRIPTION OF BUSINESS. (Continued)
Year 2000 Compliance
The Year 2000 issue is the result of computer systems that
use two-digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership is not aware of any issues related to Year 2000
non compliance with AEI systems or the systems of the various
tenants.
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 triple net
leases, which are classified as operating leases. The Partnership
holds an undivided fee simple interest in the properties. At any
time prior to selling the properties, the Partnership may
mortgage one or more of its properties in amounts not exceeding
50% of the fair market value of the property.
The Partnership's properties are subject to the general
competitive conditions incident to the ownership of single tenant
investment real estate. Since each property is leased under a
long-term lease, there is little competition until the
Partnership decides to sell the property. At this time, the
Partnership will be competing with other real estate owners, on
both a national and local level, in attempting to find buyers for
the properties. In the event of a tenant default, the
Partnership would be competing with other real estate owners, who
have property vacancies, to attract a new tenant to lease the
property. The Partnership's tenants operate in industries that
are very competitive and can be affected by factors such as
changes in regional or local economies, seasonality and changes
in consumer preference.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 1999.
Total Property Annual Annual
Purchase Acquisition Lease Rent Per
Property Date Costs Lessee Payment Sq. Ft.
Children's World ARAMARK
Daycare Center Educational
Franconia Hills, VA 3/24/87 $ 962,069 Resources, Inc. $147,232 $29.74
JEMCARE Learning Center
Haltom City, TX 4/3/87 $ 417,213 JEMCARE, Inc. $ 29,517 $ 7.03
Arby's Restaurant RTM
Marshall, MI 7/30/87 $ 586,425 Mid-America, Inc. $ 24,000 $ 7.75
Huntington
Denny's Restaurant Restaurants
Greenville, TX 1/10/96 $1,028,432 Group, Inc. $120,314 $24.42
Tractor Supply
Company Store
Maryville, TN Tractor Supply
(20%) 2/14/96 $ 219,405 Company, Inc. $ 23,452 $ 6.16
Champps
Americana Restaurant Champps
Troy, MI Operating
(26.05%) 9/3/98 $1,330,265 Corporation $133,356 $46.16
Children's World ARAMARK
Daycare Center Educational
West Chester, OH 7/14/99 $ 999,163 Resources, Inc. $ 93,162 $11.80
The properties listed above with a partial ownership
percentage are owned with an affiliate of the Partnership and/or
unrelated third parties. The remaining interests in the Tractor
Supply Company store are owned by AEI Real Estate Fund 85-A
Limited Partnership and an unrelated third party. The remaining
interests in the Champps Americana restaurant are owned by AEI
Real Estate Fund XVII Limited Partnership, AEI Real Estate Fund
XVIII Limited Partnership and AEI Net Lease Income & Growth Fund
XIX Limited Partnership.
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated third
parties using the proportionate consolidation method. Each
tenant-in-common owns a separate, undivided interest in the
properties. Any tenant-in-common that holds more than a 50%
interest does not control decisions over the other tenant-in-
common interests. The financial statements reflect only this
Partnership's percentage share of the properties' land, building
and equipment, liabilities, revenues and expenses.
The initial Lease terms are 20 years except for the
JEMCARE property (10 years), the Tractor Supply Company store (14
years), the Arby's and Children's World daycare center (15
years). The Leases contain renewal options which may extend the
Lease term an additional 9 to 15 years.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
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, 1994, all properties were 100
percent occupied by the lessees noted.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OFMATTERS 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, 1999, there were 658 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 1999, five Limited Partners redeemed a total of 21
Partnership Units for $9,179 in accordance with the Partnership
Agreement. The Partnership acquired these Units using Net Cash
Flow from operations. In prior years, a total of twenty-one
Limited Partners redeemed 163.5 Units for $115,460. The
redemptions increase the remaining Limited Partners' ownership in
the Partnership.
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS. (Continued)
Cash distributions of $5,310 and $5,213 were made to the
General Partners and $516,495 and $516,002 were made to the
Limited Partners in 1999 and 1998, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined. These distributions should not be
compared with dividends paid on capital stock by corporations.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
For the years ended December 31, 1999 and 1998, the
Partnership recognized rental income of $787,139 and $639,164,
respectively. During the same periods, the Partnership earned
investment income of $22,507 and $43,304, respectively. In 1999,
rental income increased as a result of additional rent received
from three property acquisitions in 1998 and 1999 and deferred
income recognized as a result of the sale of the Fuddruckers
restaurant discussed below. These increases in rental income
were partially offset by a decrease in rental income due to
property sales and a decrease in investment income earned on net
sale proceeds prior to the purchase of the additional properties.
The Partnership owned a 44.9042% interest in a 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 had a primary term of eighteen months
with an annual rental payment of $24,248. In December, 1997, the
lessee elected not to exercise the renewal option in the lease.
The restaurant was closed and listed for sale or lease. While
the property was vacant, the Partnership was responsible for the
real estate taxes and other costs required to maintain the
property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of the
Partnership's interest in the Waco property was approximately
$314,400. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $80,300 was recognized, which is
the difference between the book value at December 31, 1997 of
$394,700 and the estimated fair value of $314,400. The charge
was recorded against the cost of the land and building. In
December, 1998, the Partnership re-analyzed the market conditions
in the area and determined the fair value of the Partnership's
interest declined to approximately $126,000. In the fourth
quarter of 1998, a charge to operations for real estate
impairment of $180,000 was recognized, which is the difference
between the book value at December 31, 1998 of $306,000 and the
estimated fair value of $126,000. The charge was recorded
against the cost of the land and building.
In March, 1999, the Partnership entered into an agreement
to sell the Waco property to an unrelated third party. On May
10, 1999, the sale closed with the Partnership receiving net sale
proceeds of $128,879 which resulted in a net gain of $4,228. At
the time of sale, the cost and related accumulated depreciation
was $287,710 and $163,059, respectively.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
During the years ended December 31, 1999 and 1998, the
Partnership paid Partnership administration expenses to
affiliated parties of $110,722 and $105,990, 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 $18,187 and $31,492, 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 expenses in 1999, when compared to 1998, is mainly due to
expenses incurred in 1998 related to the Waco property.
As of December 3l, 1999, 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.
The Year 2000 issue is the result of computer systems that
use two-digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership is not aware of any issues related to Year 2000
non compliance with AEI systems or the systems of the various
tenants.
Liquidity and Capital Resources
During 1999, the Partnership's cash balances increased
$848,008 mainly as a result of cash generated from the sale of
property, which was partially offset by cash used to purchase an
additional property. Net cash provided by operating activities
increased from $511,756 in 1998 to $543,245 in 1999 mainly as a
result of an increase in income and a decrease in expenses in
1999, which was partially offset by net timing differences in the
collection of payments from the lessees and the payment of
expenses.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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 1999 and 1998, the Partnership
generated cash flow from the sale of real estate of $1,840,414
and $-0-, respectively. During the same periods, the Partnership
expended $1,005,038 and $822,125, respectively, to invest in real
properties (inclusive of acquisition expenses) as the Partnership
reinvested the cash generated from the property sales.
On December 23, 1997, the Partnership purchased a 26.05%
interest in a parcel of land in Troy, Michigan for $393,620. The
land is leased to Champps Operating Corporation (Champps) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $27,553. Effective June 20, 1998, the annual rent
was increased to $41,330. Simultaneously with the purchase of
the land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to Champps
for the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7.0%. Effective June 20, 1998, the
interest rate was increased to 10.50%. On September 3, 1998,
after the development was completed, the Lease Agreement was
amended to require annual rental payments of $133,356. The
Partnership's share of the total acquisition costs, including the
cost of the land, was $1,330,265. The remaining interests in the
property are owned by AEI Real Estate Fund XVII Limited
Partnership, AEI Real Estate Fund XVIII Limited Partnership and
AEI Net Lease Income & Growth Fund XIX Limited Partnership,
affiliates of the Partnership.
In February, 1999, the Partnership entered into an
agreement to sell the Fuddruckers property to an unrelated third
party. On June 16, 1999, the sale closed with the Partnership
receiving net sale proceeds of $1,145,424 which resulted in a net
gain of $270,045. At the time of sale, the cost and related
accumulated depreciation was $1,138,296 and $262,917,
respectively.
In June, 1994, the Partnership received a lump sum payment
of $210,277 as compensation for certain modifications made to the
Fuddruckers' Lease. The lump sum payment was recognized as
income over the Lease term using the straight line method. As a
result of the sale, the Lease Agreement was terminated and the
Partnership recognized the balance of the deferred income of
$136,747 in the second quarter of 1999.
On July 14, 1999, the Partnership purchased a Children's
World daycare center in West Chester, Ohio for $999,163. The
property is leased to ARAMARK Educational Resources, Inc. under a
Lease Agreement with a primary term of 15 years and annual rental
payments of $93,162.
During 1999, the Partnership sold its interest in the
Timber Lodge Steakhouse in three separate transactions to
unrelated third parties. The Partnership received total net sale
proceeds of $566,111 which resulted in a total net gain of
$81,898. The total cost and related accumulated depreciation of
the property was $510,635 and $26,421, respectively. The
majority of the net sale proceeds will be reinvested in
additional property in the future.
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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the total number of Units
outstanding at the beginning of the year. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
During 1999, five Limited Partners redeemed a total of 21
Partnership Units for $9,179 in accordance with the Partnership
Agreement. The Partnership acquired these Units using Net Cash
Flow from operations. In prior years, a total of twenty-one
Limited Partners redeemed 163.5 Units for $115,460. 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.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
contains various "forward looking statements" within the meaning
of federal securities laws which represent management's
expectations or beliefs concerning future events, including
statements regarding anticipated application of cash, expected
returns from rental income, growth in revenue, taxation levels,
the sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements made by the Partnership, must be evaluated in
the context of a number of factors that may affect the
Partnership's financial condition and results of operations,
including the following:
<BULLET> Market and economic conditions which affect the
value of the properties the Partnership owns and the
cash from rental income such properties generate;
<BULLET> the federal income tax consequences of rental
income, deductions, gain on sales and other items and
the affects of these consequences for investors;
<BULLET> resolution by the General Partners of
conflicts with which they may be confronted;
<BULLET> the success of the General Partners of
locating properties with favorable risk return
characteristics;
<BULLET> the effect of tenant defaults; and
<BULLET> the condition of the industries in which the
tenants of properties owned by the Partnership operate.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying Index to Financial Statements.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet as of December 31, 1999 and 1998
Statements for the Years Ended December 31, 1999 and 1998:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
REPORT OF INDEPENDENT AUDITORS
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, 1999 and 1998 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,
1999 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota Boulay, Heutmaker, Zibell & Co. P.L.L.P.
January 25, 2000 Certified Public Accountants
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1999 1998
CURRENT ASSETS:
Cash and Cash Equivalents $ 956,627 $ 108,619
Receivables 22,460 29,698
----------- -----------
Total Current Assets 979,087 138,317
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 1,501,655 1,986,854
Buildings and Equipment 4,041,317 4,493,596
Property Acquisition Costs 5,875 0
Accumulated Depreciation (931,974) (1,246,791)
----------- -----------
Net Investments in Real Estate 4,616,873 5,233,659
----------- -----------
Total Assets $ 5,595,960 $ 5,371,976
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 24,819 $ 28,932
Distributions Payable 117,276 116,905
Deferred Income 0 15,480
----------- -----------
Total Current Liabilities 142,095 161,317
----------- -----------
DEFERRED INCOME - Net Of Current Portion 0 125,137
PARTNERS' CAPITAL (DEFICIT):
General Partners (8,923) (12,606)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
7,316 and 7,337 Units outstanding
in 1999 and 1998, respectively 5,462,788 5,098,128
----------- -----------
Total Partners' Capital 5,453,865 5,085,522
----------- -----------
Total Liabilities and Partners' Capital $ 5,595,960 $ 5,371,976
=========== ===========
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
1999 1998
INCOME:
Rent $ 787,139 $ 639,164
Investment Income 22,507 43,304
----------- -----------
Total Income 809,646 682,468
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 110,722 105,990
Partnership Administration and Property
Management - Unrelated Parties 18,187 31,492
Depreciation 137,580 125,996
Real Estate Impairment 0 180,000
----------- -----------
Total Expenses 266,489 443,478
----------- -----------
OPERATING INCOME 543,157 238,990
GAIN ON SALE OF REAL ESTATE 356,170 0
----------- -----------
NET INCOME $ 899,327 $ 238,990
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 8,993 $ 2,390
Limited Partners 890,334 236,600
----------- -----------
$ 899,327 $ 238,990
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(7,331 and 7,337 weighted average Units outstanding
in 1999 and 1998, respectively) $ 121.45 $ 32.25
=========== ===========
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
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 899,327 $ 238,990
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 137,580 125,996
Real Estate Impairment 0 180,000
Gain on Sale of Real Estate (356,170) 0
(Increase) Decrease in Receivables 7,238 (14,252)
Decrease in Payable to
AEI Fund Management, Inc. (4,113) (3,498)
Decrease in Deferred Income (140,617) (15,480)
----------- -----------
Total Adjustments (356,082) 272,766
----------- -----------
Net Cash Provided By
Operating Activities 543,245 511,756
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (1,005,038) (822,125)
Proceeds from Sale of Real Estate 1,840,414 0
----------- -----------
Net Cash Provided By (Used For)
Investing Activities 835,376 (822,125)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Distributions Payable 371 234
Distributions to Partners (521,712) (521,215)
Redemption Payments (9,272) 0
----------- -----------
Net Cash Used For
Financing Activities (530,613) (520,981)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 848,008 (831,350)
CASH AND CASH EQUIVALENTS, beginning of period 108,619 939,969
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 956,627 $ 108,619
=========== ===========
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, 1997 $ (9,783) $ 5,377,530 $ 5,367,747 7,336.55
Distributions (5,213) (516,002) (521,215)
Net Income 2,390 236,600 238,990
--------- ----------- ----------- ----------
BALANCE, December 31, 1998 (12,606) 5,098,128 5,085,522 7,336.55
Distributions (5,217) (516,495) (521,712)
Redemption Payments (93) (9,179) (9,272) (21.00)
Net Income 8,993 890,334 899,327
--------- ----------- ----------- ----------
BALANCE, December 31, 1999 $ (8,923) $ 5,462,788 $ 5,453,865 7,315.55
========= =========== =========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(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. Robert P. Johnson, the President and sole
shareholder of AFM, serves as the Individual General Partner
and an affiliate of AFM, AEI Fund Management, Inc. (AEI),
performs the administrative and operating functions for the
Partnership.
The terms of the Partnership offering 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. On December 30, 1986, the
offering terminated when the maximum subscription limit of
7,500 Limited Partnership Units ($7,500,000) was reached.
Under the terms of the Limited Partnership Agreement, the
Limited Partners and General Partners contributed funds of
$7,500,000 and $1,000, respectively. During operations, any
Net Cash Flow, as defined, which the General Partners
determine to distribute will be distributed 90% to the
Limited Partners and 10% to the General Partners; provided,
however, that such distributions to the General Partners
will be subordinated to the Limited Partners first receiving
an annual, noncumulative distribution of Net Cash Flow equal
to 10% of their Adjusted Capital Contribution, as defined,
and, provided further, that in no event will the General
Partners receive less than 1% of such Net Cash Flow per
annum. Distributions to the Limited Partners will be made
pro rata by Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of properties which the General Partners determine
to distribute will, after provisions for debts and reserves,
be paid in the following manner: (i) first, 99% to the
Limited Partners and 1% to the General Partners until the
Limited Partners receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal to 6%
of their Adjusted Capital Contribution per annum, cumulative
but not compounded, to the extent not previously distributed
from Net Cash Flow; (ii) next, 99% to the Limited Partners
and 1% to the General Partners until the Limited Partners
receive an amount equal to 14% of their Adjusted Capital
Contribution per annum, cumulative but not compounded, to
the extent not previously distributed; (iii) next, to the
General Partners until cumulative distributions to the
General Partners under Items (ii) and (iii) equal 15% of
cumulative distributions to all Partners under Items (ii)
and (iii). Any remaining balance will be distributed 85% to
the Limited Partners and 15% to the General Partners.
Distributions to the Limited Partners will be made pro rata
by Units.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) Organization - (Continued)
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of property, will be
allocated first in the same ratio in which, and to the
extent, Net Cash Flow is distributed to the Partners for
such year. Any additional profits will be allocated 90% to
the Limited Partners and 10% to the General Partners. In
the event no Net Cash Flow is distributed to the Limited
Partners, 90% of each item of income, gain or credit for
each respective year shall be allocated to the Limited
Partners, and 10% of each such item shall be allocated to
the General Partners. Net losses from operations will be
allocated 98% to the Limited Partners and 2% to the General
Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of property will be allocated in
accordance with the Partnership Agreement as follows: (i)
first, to those Partners with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Partners
and 1% to the General Partners until the aggregate balance
in the Limited Partners' capital accounts equals the sum of
the Limited Partners' Adjusted Capital Contributions plus an
amount equal to 14% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, to the General Partners
until cumulative allocations to the General Partners equal
15% of cumulative allocations. Any remaining balance will
be allocated 85% to the Limited Partners and 15% to the
General Partners. Losses will be allocated 98% to the
Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(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, 1999 AND 1998
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate.
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested
in money market accounts, certificates of deposit,
federal agency notes and commercial paper with a term of
three months or less.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under triple net
leases classified as operating leases. The Partnership
recognizes rental revenue on the accrual basis according
to the terms of the individual leases. For leases which
contain cost of living increases, the increases are
recognized in the year in which they are effective.
Real estate is recorded at the lower of cost or estimated
net realizable value. The Partnership compares the
carrying amount of its properties to the estimated future
cash flows expected to result from the property and its
eventual disposition. If the sum of the expected future
cash flows is less than the carrying amount of the
property, the Partnership recognizes an impairment loss
by the amount by which the carrying amount of the
property exceeds the fair value of the property.
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings, and equipment.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(2) Summary of Significant Accounting Policies - (Continued)
The buildings and equipment of the Partnership are
depreciated using the straight line method for financial
reporting purposes based on estimated useful lives of 30
years and 10 years, respectively.
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated
third parties using the proportionate consolidation
method. Each tenant-in-common owns a separate, undivided
interest in the properties. Any tenant-in-common that
holds more than a 50% interest does not control decisions
over the other tenant-in-common interests. The financial
statements reflect only this Partnership's percentage
share of the properties' land, building and equipment,
liabilities, revenues and expenses.
(3) Related Party Transactions -
The Partnership owns a 20% interest in the Tractor Supply
Company store. The remaining interests in this property are
owned by AEI Real Estate Fund 85-A Limited Partnership, an
affiliate of the Partnership, and an unrelated third party.
The Partnership owns a 26.05% interest in the Champps
Americana restaurant. The remaining interests in this
property are owned by AEI Real Estate Fund XVII Limited
Partnership, AEI Real Estate Fund XVIII Limited Partnership
and AEI Net Lease Income & Growth Fund XIX Limited
Partnership, affiliates of the Partnership. The Partnership
owned a 44.9042% interest in a restaurant in Waco, Texas and
a 60% interest in the Fuddruckers restaurant. The remaining
interests in these properties were owned by AEI Real Estate
Fund XVI Limited Partnership, an affiliate of the
Partnership. As of December 31, 1998, the Partnership owned
a 30.794% interest in the Timber Lodge Steakhouse. The
remaining interests in this property are owned by AEI Real
Estate Fund XVII Limited Partnership and unrelated third
parties. AEI Institutional Net Lease Fund '93 Limited
Partnership, an affiliate of the Partnership, owned 38.412%
interest in this property until the interest was sold in a
series of transactions to unrelated third parties in 1998
and 1999. During 1999, the Partnership sold its interest in
the property to unrelated third parties.
AEI and AFM received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 3l
1999 1998
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. $ 110,722 $ 105,990
========= =========
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(3) Related Party Transactions - (Continued)
Total Incurred by the Partnership
for the Years Ended December 3l
1999 1998
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. $ 18,187 $ 31,492
========= =========
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 $35,000 and $42,126
for 1999 and 1998, respectively. $ (16,706) $ (32,464)
========= =========
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.
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through triple net leases, which are classified as operating
leases. Under a triple net lease, the lessee is responsible
for all real estate taxes, insurance, maintenance, repairs
and operating expenses of the property. The initial Lease
terms are 20 years except for the JEMCARE property (10
years), the Tractor Supply Company store (14 years), the
Arby's and the Children's World daycare center (15 years).
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.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) Investments in Real Estate - (Continued)
The Partnership's properties are all commercial, single-
tenant properties. The Arby's restaurant was built in 1972
and extensively remodeled in 1987. The JEMCARE Learning
Center was constructed in 1986. The Children's World
Daycare Center in Franconia Hills, Virginia was constructed
in 1987. The Partnership acquired all of these properties
during 1987 and 1988. The Denny's restaurant and Tractor
Supply Company store were constructed in 1995 and acquired
in 1996. The Champps Americana restaurant was constructed
and acquired in 1998. The Children's World daycare center
in West Chester, Ohio was constructed in 1997 and acquired
in 1999. There have been no costs capitalized as
improvements subsequent to the acquisitions.
The cost of the properties and related accumulated
depreciation at December 31, 1999 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Children's World,
Franconia Hills, VA $ 165,952 $ 796,117 $ 962,069 $ 373,014
JEMCARE Learning Center,
Haltom City, TX 132,925 284,288 417,213 156,045
Arby's, Marshall, MI 120,499 465,926 586,425 228,907
Denny's, Greenville, TX 332,077 696,355 1,028,432 96,247
Tractor Supply Company,
Maryville, TN 40,267 179,138 219,405 25,095
Champps Americana, Troy, MI 429,808 900,457 1,330,265 41,681
Children's World,
West Chester, OH 280,127 719,036 999,163 10,985
---------- ---------- ---------- ---------
$1,501,655 $4,041,317 $5,542,972 $ 931,974
========== ========== ========== =========
On December 23, 1997, the Partnership purchased a 26.05%
interest in a parcel of land in Troy, Michigan for $393,620.
The land is leased to Champps Operating Corporation
(Champps) under a Lease Agreement with a primary term of 20
years and annual rental payments of $27,553. Effective June
20, 1998, the annual rent was increased to $41,330.
Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement
under which the Partnership advanced funds to Champps for
the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7.0%. Effective June 20, 1998, the
interest rate was increased to 10.50%. On September 3,
1998, after the development was completed, the Lease
Agreement was amended to require annual rental payments of
$133,356. The Partnership's share of the total acquisition
costs, including the cost of the land, was $1,330,265.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) Investments in Real Estate - (Continued)
The Partnership owned a 44.9042% interest in a 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 had a primary term of
eighteen months with an annual rental payment of $24,248.
In December, 1997, the lessee elected not to exercise the
renewal option in the lease. The restaurant was closed and
listed for sale or lease. While the property was vacant,
the Partnership was responsible for the real estate taxes
and other costs required to maintain the property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of
the Partnership's interest in the Waco property was
approximately $314,400. In the fourth quarter of 1997, a
charge to operations for real estate impairment of $80,300
was recognized, which is the difference between the book
value at December 31, 1997 of $394,700 and the estimated
fair value of $314,400. The charge was recorded against the
cost of the land and building. In December, 1998, the
Partnership re-analyzed the market conditions in the area
and determined the fair value of the Partnership's interest
declined to approximately $126,000. In the fourth quarter
of 1998, a charge to operations for real estate impairment
of $180,000 was recognized, which is the difference between
the book value at December 31, 1998 of $306,000 and the
estimated fair value of $126,000. The charge was recorded
against the cost of the land and building.
In March, 1999, the Partnership entered into an agreement to
sell the Waco property to an unrelated third party. On May
10, 1999, the sale closed with the Partnership receiving net
sale proceeds of $128,879 which resulted in a net gain of
$4,228. At the time of sale, the cost and related
accumulated depreciation was $287,710 and $163,059,
respectively.
In February, 1999, the Partnership entered into an agreement
to sell the Fuddruckers property to an unrelated third
party. On June 16, 1999, the sale closed with the
Partnership receiving net sale proceeds of $1,145,424 which
resulted in a net gain of $270,045. At the time of sale,
the cost and related accumulated depreciation was $1,138,296
and $262,917, respectively.
On July 14, 1999, the Partnership purchased a Children's
World daycare center in West Chester, Ohio for $999,163.
The property is leased to ARAMARK Educational Resources,
Inc. under a Lease Agreement with a primary term of 15 years
and annual rental payments of $93,162.
During 1999, the Partnership sold its interest in the Timber
Lodge Steakhouse in three separate transactions to unrelated
third parties. The Partnership received total net sale
proceeds of $566,111 which resulted in a total net gain of
$81,898. The total cost and related accumulated
depreciation of the property was $510,635 and $26,421,
respectively. The majority of the net sale proceeds will be
reinvested in additional property in the future.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) Investments in Real Estate - (Continued)
The Partnership has incurred net costs of $5,875 relating to
the review of potential property acquisitions which have
been capitalized and will be allocated to properties
acquired subsequent to December 31, 1999.
The minimum future rental on the Leases for years subsequent
to December 31, 1999 are as follows:
2000 $ 574,418
2001 546,832
2002 549,702
2003 552,628
2004 555,610
Thereafter 4,915,803
-----------
$ 7,694,993
===========
In 1999 and 1998, the Partnership recognized contingent
rents of $22,978 and $30,861, 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
annual base rent from $163,550 to $138,246. 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 was recognized as
income over the Lease term, which was scheduled to expire
January 31, 2008, using the straight line method. As of
March 31, 1999 and December 31, 1998, the Partnership had
recognized $73,530 and $69,660, respectively, of this
payment as income. On June 16, 1999, the Partnership sold
the Fuddruckers restaurant and the Lease Agreement was
terminated. As a result, the Partnership recognized the
balance of the deferred income of $136,747 in the second
quarter of 1999.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(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:
1999 1998
Tenants Industry
Fuddruckers Inc. Restaurant $ 203,980 $ 153,727
ARAMARK Educational
Resources, Inc. Child Care 190,169 144,562
Champps Operating
Corporation Restaurant 133,356 65,027
Huntington Restaurants
Group, Inc. Restaurant 120,125 117,856
--------- ---------
Aggregate rent revenue of major tenants $ 647,630 $ 481,172
========= =========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 82% 75%
========= =========
(7) Partners' Capital -
Cash distributions of $5,310 and $5,213 were made to the
General Partners and $516,495 and $516,002 were made to the
Limited Partners for the years ended December 31, 1999 and
1998, respectively. The Limited Partners' distributions
represent $70.45 and $70.33 per Limited Partnership Unit
outstanding using 7,331 and 7,337 weighted average Units in
1999 and 1998, respectively. The distributions represent
$70.45 and $32.25 per Unit of Net Income and $0 and $38.08
per Unit of return of contributed capital in 1999 and 1998,
respectively.
Distributions of Net Cash Flow to the General Partners
during 1999 and 1998 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.
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.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(7) Partners' Capital - (Continued)
During 1999, five Limited Partners redeemed a total of 21
Partnership Units for $9,179 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In 1998, the
Partnership did not redeem any Units from the Limited
Partners. 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
$941.37 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:
1999 1998
Net Income for Financial
Reporting Purposes $ 899,327 $ 238,990
Depreciation for Tax Purposes
(Over) Under Depreciation for Financial
Reporting Purposes 3,980 (1,337)
Income Accrued for Tax Purposes
Under Income for Financial
Reporting Purposes (140,617) (15,480)
Real Estate Impairment Loss
Not Recognized for
Tax Purposes 0 180,000
Gain on Sale of Real Estate for Tax Purposes
Under Gain for Financial Reporting Purposes (347,171) 0
---------- ----------
Taxable Income to Partners $ 415,519 $ 402,173
========== ==========
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(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:
1999 1998
Partners' Capital for
Financial Reporting Purposes $5,453,865 $5,085,522
Adjusted Tax Basis of Investments
in Real Estate Over Net Investments
in Real Estate for Financial
Reporting Purposes 69,318 412,509
Income Accrued for Tax Purposes
Over Income for Financial
Reporting Purposes 0 140,617
Syndication Costs
Treated as Reduction of Capital
for Financial Reporting Purposes 1,054,819 1,054,819
---------- ----------
Partners' Capital for
Tax Reporting Purposes $6,578,002 $6,693,467
========== ==========
(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:
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 452 $ 452 $ 250 $ 250
Money Market Funds 956,175 956,175 108,369 108,369
--------- --------- --------- ---------
Total Cash and
Cash Equivalents $ 956,627 $ 956,627 $ 108,619 $ 108,619
========= ========= ========= =========
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 55, is Chief Executive Officer,
President and Director and has held these positions since the
formation of AFM in December, 1985, and has been elected to
continue in these positions until December, 2000. From 1970 to
the present, he has been employed exclusively in the investment
industry, specializing in tax-advantaged limited partnership
investments. In that capacity, he has been involved in the
development, analysis, marketing and management of public and
private investment programs investing in net lease properties as
well as public and private investment programs investing in
energy development. Since 1971, Mr. Johnson has been the
president, a director and a registered principal of AEI
Securities, Inc. (formerly AEI Incorporated), which is registered
with the Securities and Exchange Commission as a securities
broker-dealer, is a member of the National Association of
Securities Dealers, Inc. (NASD) and is a member of the Security
Investors Protection Corporation (SIPC). Mr. Johnson has been
president, a director and the principal shareholder of AEI Fund
Management, Inc., a real estate management company founded by
him, since 1978. Mr. Johnson is currently a general partner or
principal of the general partner in fifteen other limited
partnerships.
Mark E. Larson, age 47, is Executive Vice President,
Treasurer and Chief Financial Officer and has been elected to
continue in these positions until December, 2000. Mr. Larson has
been Treasurer and Executive Vice President since December, 1987
and Chief Financial Officer since January, 1990. In January,
1993, Mr. Larson was elected to serve as Secretary of AFM and
will continue to serve until December, 2000. Mr. Larson has been
employed by AEI Fund Management, Inc. and affiliated entities
since 1985. From 1979 to 1985, Mr. Larson was with Apache
Corporation as manager of Program Accounting responsible for the
accounting and reports for approximately 45 public partnerships.
Mr. Larson is responsible for supervising the accounting
functions of AFM and the registrant.
ITEM 10. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative and management services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information pertaining to
the ownership of the Units by each person known by the
Partnership to beneficially own 5% or more of the Units, by each
General Partner, and by each officer or director of the Managing
General Partner as of February 29, 2000:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
AEI Fund Management 86-A, Inc. 3 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Robert P. Johnson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Mark E. Larson 17.67 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
* Less than 1%
The persons set forth in the preceding table hold sole voting
power and power of disposition with respect to all of the Units
set forth opposite their names. The General Partners know of no
holders of more than 5% of the outstanding Units.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The registrant, AFM and its affiliates have common
management and utilize the same facilities. As a result, certain
administrative expenses are allocated among these related
entities. All of such activities and any other transactions
involving the affiliates of the General Partner of the registrant
are governed by, and are conducted in conformity with, the
limitations set forth in the Limited Partnership Agreement of the
registrant. Reference is made to Note 3 on 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).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A.
(Continued)
A. Exhibits -
Description
10.2 Development Financing
Agreement dated December 23, 1997 between
the Partnership, AEI Net Lease Income &
Growth Fund XIX Limited Partnership, AEI
Real Estate Fund XVIII Limited
Partnership, AEI Real Estate Fund XVII
Limited Partnership and Champps
Entertainment, Inc. relating to the
property at 301 West Big Beaver Road,
Troy, Michigan (incorporated by reference
to Exhibit 10.8 of Form 10-KSB filed with
the Commission on March 23, 1998).
10.3 Net Lease Agreement dated
December 23, 1997 between the
Partnership, AEI Net Lease Income &
Growth Fund XIX Limited Partnership, AEI
Real Estate Fund XVIII Limited
Partnership, AEI Real Estate Fund XVII
Limited Partnership and Champps
Entertainment, Inc. relating to the
property at 301 West Big Beaver Road,
Troy, Michigan (incorporated by reference
to Exhibit 10.9 of Form 10-KSB filed with
the Commission on March 23, 1998).
10.4 First Amendment to Net
Lease Agreement dated September 3, 1998
between the Partnership, AEI Net Lease
Income & Growth Fund XIX Limited
Partnership, AEI Real Estate Fund XVIII
Limited Partnership, AEI Real Estate Fund
XVII Limited Partnership and Champps
Entertainment, Inc. relating to the
property at 301 West Big Beaver Road,
Troy, Michigan (incorporated by reference
to Exhibit 10.2 of Form 8-K filed with
the Commission on September 15, 1998).
10.5 Purchase Agreement dated February 4,
1999 between the Partnership, AEI Real
Estate Fund XVI Limited Partnership and
Elizabeth Cockrum relating to the
property at 2175 Barrett Station Road,
St. Louis, Missouri (incorporated by
reference to Exhibit 10.1 of Form 8-K
filed with the Commission on June 21,
1999).
10.6 Purchase Agreement dated March 24,
1999 between the Partnership, AEI Real
Estate Fund XVI Limited Partnership and
Tom Salome relating to the property at
1812 North Valley Mills Drive, Waco,
Texas (incorporated by reference to
Exhibit 10.1 of Form 10-QSB filed with
the Commission on July 30, 1999).
10.7 Amendment to Purchase Agreement
dated May 19, 1999 between the
Partnership, AEI Real Estate Fund XVI
Limited Partnership and Elizabeth Cockrum
relating to the property at 2175 Barrett
Station Road, St. Louis, Missouri
(incorporated by reference to Exhibit
10.2 of Form 8-K filed with the
Commission on June 21, 1999).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A.
(Continued)
A. Exhibits -
Description
10.8 Purchase and Sale Agreement and
Escrow Instructions dated May 20, 1999
between AEI Fund Management, Inc. and
ARAMARK Educational Resources, Inc.
relating to the property at 7236 Tylers
Corner, West Chester, Ohio (incorporated
by reference to Exhibit 10.1 of Form 8-K
filed with the Commission on July 26,
1999).
10.9 Second Assignment of Purchase and
Sale Agreement and Escrow Instructions
dated June 18, 1999 between the
Partnership, AEI Fund Management, Inc.
and ARAMARK Educational Resources, Inc.
relating to the property at 7236 Tylers
Corner, West Chester, Ohio (incorporated
by reference to Exhibit 10.2 of Form 8-K
filed with the Commission on July 26,
1999).
10.10 Net Lease Agreement dated July
14, 1999 between the Partnership and
ARAMARK Educational Resources, Inc.
relating to the property at 7236 Tylers
Corner, West Chester, Ohio (incorporated
by reference to Exhibit 10.3 of Form 8-K
filed with the Commission on July 26,
1999).
10.11 Purchase Agreement dated August
4, 1999 between the Partnership and AEI
Institutional Net Lease Fund '93 Limited
Partnership and VTA Building Company
relating to the property at 3950 Second
Street South, St. Cloud, Minnesota
(incorporated by reference to Exhibit
10.7 of Form 10-QSB filed with the
Commission on November 8, 1999).
10.12 Purchase Agreement dated
October 6, 1999 between the Partnership
and Kenneth F. Cairns relating to the
property 3950 Second Street South, St.
Cloud, Minnesota (incorporated by
reference to Exhibit 10.8 of Form 10-QSB
filed with the Commission on November 8,
1999).
10.13 Purchase Agreement dated
October 7, 1999 between the Partnership
and Kathleen DeVoe Hans relating to the
property at 3950 Second Street South, St.
Cloud, Minnesota (incorporated by
reference to Exhibit 10.9 of Form 10-QSB
filed with the Commission on November 8,
1999).
10.14 Purchase Agreement dated
November 18, 1999 between the Partnership
and AEI Real Estate Fund XVII Limited
Partnership and Kilduff 1996 Revocable
Trust, dated June 20, 1996 relating to
the property at 3950 Second Street South,
St. Cloud, Minnesota.
27 Financial Data Schedule
for year ended December 31, 1999.
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 10, 2000 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 10, 2000
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 10, 2000
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
PURCHASE AGREEMENT
Timber Lodge Steakhouse - St. Cloud, MN
This AGREEMENT, entered into effective as of the 18th of
November, 1999.
l. PARTIES. Seller is AEI Real Estate Fund XV Limited Partnership
which presently owns an undivided 7.7342% and AEI Real Estate
Fund XVII Limited Partnership which presently owns an undivided
30.7940% and interest in the fee title to that certain real
property legally described in the attached Exhibit "A" (the
"Entire Property") Buyer is Marshall M. Kilduff, Trustee, and
Pat S. Kilduff, Trustee, of the Kilduff 1996 Revocable Trust,
dated June 20, 1996, ("Buyer"). Seller wishes to sell and Buyer
wishes to buy a portion as Tenant in Common of Seller's interest
in the Entire Property.
2. PROPERTY. The Property to be sold to Buyer in this transaction
consists of an undivided 9.5671 percentage interest (hereinafter,
simply the "Property") as Tenant in Common in the Entire
Property. (Fund XV selling 7.7342% and Fund XVII selling
1.8329%.)
3. PURCHASE PRICE The purchase price for this percentage
interest in the Entire Property is $182,400, all cash. (Fund XV
receiving $147,455.14 and Fund XVII receiving $34,944.86)
4. TERMS. The purchase price for the Property will be paid by
Buyer as follows:
(a) When this agreement is executed, Buyer will pay $5,000
to Seller (which shall be deposited into escrow according to
the terms hereof) (the "First Payment"). The First Payment
will be credited against the purchase price when and if
escrow closes and the sale is completed.
(b) Buyer will deposit the balance of the purchase price,
$177,400 (the "Second Payment") into escrow in sufficient
time to allow escrow to close on the closing date.
5. CLOSING DATE. Escrow shall close on or before November 30,
1999.
6. DUE DILIGENCE. Buyer will have until the expiration of the
tenth business day (The "Review Period") after delivery of each
of following items, to be supplied by Sellers, to conduct all of
its inspections and due diligence and satisfy itself regarding
each item, the Property, and this transaction. Buyer agrees to
indemnify and hold Sellers harmless for any loss or damage to the
Entire Property or persons caused by Buyer or its agents arising
out of such physical inspections of the Entire Property.
(a) The original and one copy of a title insurance
commitment for an Owner's Title insurance policy (see
paragraph 8 below).
(b) A copy of a Certificate of Occupancy or other such
document certifying completion and granting permission to
permanently occupy the improvements on the Entire Property
as are in Seller's possession.
(c) A copy of an "as built" survey of the Entire Property
done concurrent with Seller's acquisition of the Property.
(d) Lease (as further set forth in paragraph 11(a) below) of
the Entire Property showing occupancy date, lease expiration
date, rent, and Guarantys, if any, accompanied by such
tenant financial statements as may have been provided most
recently to Seller by the Tenant and/or Guarantors.
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
It is a contingency upon Seller's obligations hereunder that two
(2) copies of Co-Tenancy Agreement in the form attached hereto
duly executed by Buyer and AEI Real Estate Fund XVII Limited
Partnership and dated on escrow closing date be delivered to the
Seller on the closing date.
Buyer may cancel this agreement for ANY REASON in its sole
discretion by delivering a cancellation notice, return receipt
requested, to Seller and escrow holder before the expiration of
the Review Period. Such notice shall be deemed effective only
upon receipt by Seller. If this Agreement is not cancelled as
set forth above, the First Payment shall be non-refundable unless
Seller shall default hereunder.
If Buyer cancels this Agreement as permitted under this
Section, except for any escrow cancellation fees and any
liabilities under the first paragraph of section 6 of this
agreement (which will survive), Buyer (after execution of such
documents reasonably requested by Seller to evidence the
termination hereof) shall be returned its First Payment, and
Buyer will have absolutely no rights, claims or interest of any
type in connection with the Property or this transaction,
regardless of any alleged conduct by Sellers or anyone else.
Unless this Agreement is canceled by Buyer pursuant to the
terms hereof, if Buyer fails to make the Second Payment, Seller
shall be entitled to retain the First Payment and Buyer
irrevocably will be deemed to be in default under this Agreement.
Seller may, at its option, retain the First Payment and declare
this Agreement null and void, in which event Buyer will be deemed
to have canceled this Agreement and relinquish all rights in and
to the Property or Sellers may exercise its rights under Section
14 hereof. If this Agreement is not canceled and the Second
Payment is made when required, all of Buyer's conditions and
contingencies will be deemed satisfied.
7. ESCROW. Escrow shall be opened by Seller and funds deposited
in escrow upon acceptance of this Agreement by both parties. The
escrow holder will be a nationally-recognized escrow company
selected by Seller. A copy of this Agreement will be delivered to
the escrow holder and will serve as escrow instructions together
with the escrow holder's standard instructions and any additional
instructions required by the escrow holder to clarify its rights
and duties (and the parties agree to sign these additional
instructions). If there is any conflict between these other
instructions and this Agreement, this Agreement will control.
8. TITLE. Closing will be conditioned on the agreement of a
title company selected by Seller to issue an Owner's policy of
title insurance, dated as of the close of escrow, in an amount
equal to the purchase price, insuring that Buyer will own
insurable title to the Property subject only to: the title
company's standard exceptions; current real property taxes and
assessments; survey exceptions; the rights of parties in
possession pursuant to the lease defined in paragraph 11 below;
and other items of record disclosed to Buyer during the Review
Period.
Buyer shall be allowed five (5) days after receipt of said
commitment for examination and the making of any objections to
marketability thereto, said objections to be made in writing or
deemed waived. If any objections are so made, the Seller shall
be allowed eighty (80) days to make such title marketable or in
the alternative to obtain a commitment for insurable title
insuring over Buyer's objections. If Sellers shall decide to
make no efforts to make title marketable, or is unable to make
title marketable or obtain insurable title, (after execution by
Buyer of such documents reasonably requested by Seller to
evidence the termination hereof) Buyer's First Payment shall be
returned and this Agreement shall be null and void and of no
further force and effect. Seller has no obligation to spend any
funds or make any effort to satisfy Buyer's objections, if any.
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
Pending satisfaction of Buyer's objections, the payments
hereunder required shall be postponed, but upon satisfaction of
Buyer's objections and within ten (10) days after written notice
of satisfaction of Buyer's objections to the Buyer, the parties
shall perform this Agreement according to its terms.
9. CLOSING COSTS. Seller will pay one-half of escrow fees, the
cost of the title commitment and any brokerage commissions
payable. The Buyer will pay the cost of issuing a Standard
Owners Title Insurance Policy in the full amount of the purchase
price, if Buyer shall decide to purchase the same. Buyer will
pay all recording fees, one-half of the escrow fees, and the cost
of an update to the Survey in Seller possession (if an update is
required by Buyer.) Each party will pay its own attorney's fees
and costs to document and close this transaction.
10. REAL ESTATE TAXES, SPECIAL ASSESSMENTS AND PRORATIONS.
(a) Because the Entire Property (of which the Property is a
part) is subject to a triple net lease (as further set forth
in paragraph 11(a)(i), the parties acknowledge that there
shall be no need for a real estate tax proration. However,
Seller represents that to the best of its knowledge, all
real estate taxes and installments of special assessments
due and payable in all years prior to the year of Closing
have been paid in full. Unpaid real estate taxes and unpaid
levied and pending special assessments existing on the date
of Closing shall be the responsibility of Buyer and Seller
in proportion to their respective Tenant in Common
interests, pro-rated, however, to the date of closing for
the period prior to closing, which shall be the
responsibility of Seller if Tenant shall not pay the same.
Seller and Buyer shall likewise pay all taxes due and
payable in the year after Closing and any unpaid
installments of special assessments payable therewith and
thereafter, if such unpaid levied and pending special
assessments and real estate taxes are not paid by any tenant
of the Entire Property.
(b) All income and all operating expenses from the Entire
Property shall be prorated between the parties and adjusted
by them as of the date of Closing. Seller shall be entitled
to all income earned and shall be responsible for all
expenses incurred prior to the date of Closing, and Buyer
shall be entitled to its proportionate share of all income
earned and shall be responsible for its proportionate share
of all operating expenses of the Entire Property incurred on
and after the date of closing.
11. SELLER'S REPRESENTATION AND AGREEMENTS.
(a) Seller represents and warrants as of this date that:
(i) Except for the Lease Agreement in existence between AEI
Real Estate Fund XV Limited Partnership, AEI Real Estate
Fund XVII Limited Partnership, and Institutional Net Lease
Fund '93 Limited Partnership (as "Landlord") and Timber
Lodge Steakhouse, Inc. ("Tenant"), dated November 18, 1997,
Seller is not aware of any leases of the Property. The
above referenced lease agreement has an option to purchase
in favor of the Tenant as set forth in paragraph 33 of said
lease agreement.
(ii) It is not aware of any pending litigation or
condemnation proceedings against the Property or Seller's
interest in the Property.
(iii) Except as previously disclosed to Buyer and as
permitted in paragraph (b) below, Seller is not aware of any
contracts Seller has executed that would be binding on Buyer
after the closing date.
(b) Provided that Buyer performs its obligations when
required, Seller agrees that it will not enter into any new
contracts that would materially affect the Property and be
binding
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
on Buyer after the Closing Date without Buyer's prior
consent, which will not be unreasonably withheld. However,
Buyer acknowledges that Seller retains the right both prior
to and after the Closing Date to freely transfer all or a
portion of Seller's remaining undivided interest in the
Entire Property, provided such sale shall not encumber the
Property being purchased by Buyer in violation of the terms
hereof or the contemplated Co-Tenancy Agreement.
12. DISCLOSURES.
(a) Seller has not received any notice of any material,
physical, or mechanical defects of the Entire Property,
including without limitation, the plumbing, heating, air
conditioning, ventilating, electrical system. To the best of
Seller's knowledge without inquiry, all such items are in
good operating condition and repair and in compliance with
all applicable governmental, zoning, and land use laws,
ordinances, regulations and requirements. If Seller shall
receive any notice to the contrary prior to Closing, Seller
will inform Buyer prior to Closing.
(b) Seller has not received any notice that the use and
operation of the Entire Property is not in full compliance
with applicable building codes, safety, fire, zoning, and
land use laws, and other applicable local, state and federal
laws, ordinances, regulations and requirements. If Seller
shall receive any notice to the contrary prior to Closing,
Seller will inform Buyer prior to Closing.
(c) Seller knows of no facts nor has Seller failed to
disclose to Buyer any fact known to Seller which would
prevent the Tenant from using and operating the Entire
Property after the Closing in the manner in which the Entire
Property has been used and operated prior to the date of
this Agreement. If Seller shall receive any notice to the
contrary prior to Closing, Seller will inform Buyer prior to
Closing.
(d) Seller has not received any notice that the Entire
Property is in violation of any federal, state or local law,
ordinance, or regulations relating to industrial hygiene or
the environmental conditions on, under, or about the Entire
Property, including, but not limited to, soil, and
groundwater conditions. To the best of Seller's knowledge,
there is no proceeding or inquiry by any governmental
authority with respect to the presence of Hazardous
Materials on the Entire Property or the migration of
Hazardous Materials from or to other property. Buyer agrees
that Seller will have no liability of any type to Buyer or
Buyer's successors, assigns, or affiliates in connection
with any Hazardous Materials on or in connection with the
Entire Property after the Closing Date. Seller shall
indemnify Buyer for any liability arising due to Hazardous
Materials on or in connection with the Entire Property prior
to the Closing Date. If Seller shall receive any notice to
the contrary prior to Closing, Seller will inform Buyer
prior to Closing.
(e) Buyer agrees that it shall be purchasing the Property
in its then present condition, as is, where is, and Seller
has no obligations to construct or repair any improvements
thereon or to perform any other act regarding the Property,
except as expressly provided herein.
(f) Buyer acknowledges that, having been given the
opportunity to inspect the Entire Property and such
financial information on the Lessee and Guarantors of the
Lease as Buyer or its advisors shall request, if in Seller's
possession, Buyer is relying solely on its own investigation
of the Property and not on any information provided by
Seller or to be provided except as set forth herein. Buyer
further acknowledges that the information provided and to be
provided by Seller with respect to the Property, the Entire
Property and to the Lessee and Guarantors of Lease was
obtained from a variety of sources and Seller neither (a)
has made independent investigation or verification of such
information,
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
or (b) makes any representations as to the accuracy or
completeness of such information except as herein set forth.
The sale of the Property as provided for herein is made on
an "AS IS" basis, and Buyer expressly acknowledges that, in
consideration of the agreements of Seller herein, except as
otherwise specified herein in paragraph 11(a) and (b) above
and this paragraph 12, Seller makes no Warranty or
representation, Express or Implied, or arising by operation
of law, including, but not limited to, any warranty of
condition, habitability, tenantability, suitability for
commercial purposes, merchantability, or fitness for a
particular purpose, in respect of the Property.
The provisions (d) - (f) above shall survive Closing.
13. CLOSING.
(a) Before the closing date, Seller will deposit into
escrow an executed special warranty deed warranting title
against lawful claims by, through, or under a conveyance
from Seller, but not further or otherwise, conveying
insurable title of the Property to Buyer, subject to the
exceptions contained in paragraph 8 above.
(b) On or before the closing date, Buyer will deposit into
escrow: the balance of the purchase price when required
under Section 4; any additional funds required of Buyer,
(pursuant to this agreement or any other agreement executed
by Buyer) to close escrow. Both parties will sign and
deliver to the escrow holder any other documents reasonably
required by the escrow holder to close escrow.
(c) On the closing date, if escrow is in a position to
close, the escrow holder will: record the deed in the
official records of the county where the Property is
located; cause the title company to commit to issue the
title policy; immediately deliver to Seller the portion of
the purchase price deposited into escrow by cashier's check
or wire transfer (less debits and prorations, if any);
deliver to Seller and Buyer a signed counterpart of the
escrow holder's certified closing statement and take all
other actions necessary to close escrow.
14. DEFAULTS. If Buyer defaults, Buyer will forfeit all rights
and claims and Seller will be relieved of all obligations and
will be entitled to retain all monies heretofore paid by the
Buyer. In addition, Seller shall retain all remedies available
to Seller at law or in equity.
If Seller shall default, Buyer irrevocably waives any rights
to file a lis pendens, a specific performance action or any other
claim, action or proceeding of any type in connection with the
Property or this or any other transaction involving the Property,
and will not do anything to affect title to the Property or
hinder, delay or prevent any other sale, lease or other
transaction involving the Property (any and all of which will be
null and void), unless: it has paid the First Payment, deposited
the balance of the Second Payment for the purchase price into
escrow, performed all of its other obligations and satisfied all
conditions under this Agreement, and unconditionally notified
Seller that it stands ready to tender full performance, purchase
the Property and close escrow as per this Agreement, regardless
of any alleged default or misconduct by Seller. Provided,
however, that in no event shall Seller be liable for any
punitive, consequential or speculative damages arising out of any
default by Seller hereunder.
15. BUYER'S REPRESENTATIONS AND WARRANTIES.
a. Buyer represents and warrants to Seller as follows:
(i) In addition to the acts and deeds recited herein and
contemplated to be performed, executed, and delivered by
Buyer, Buyer shall perform, execute and deliver or cause to
be performed, executed, and delivered at the Closing or
after the Closing, any and all further
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
acts, deeds and assurances as Seller or the Title Company
may require and be reasonable in order to consummate the
transactions contemplated herein.
(ii) Buyer has all requisite power and authority to
consummate the transaction contemplated by this Agreement
and has by proper proceedings duly authorized the execution
and delivery of this Agreement and the consummation of the
transaction contemplated hereby.
(iii) To Buyer's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the
transaction contemplated hereby will violate or be in
conflict with (a) any applicable provisions of law, (b) any
order of any court or other agency of government having
jurisdiction hereof, or (c) any agreement or instrument to
which Buyer is a party or by which Buyer is bound.
16. DAMAGES, DESTRUCTION AND EMINENT DOMAIN.
(a) If, prior to closing, the Property or any part thereof
be destroyed or further damaged by fire, the elements, or
any cause, due to events occurring subsequent to the date of
this Agreement to the extent that the cost of repair exceeds
$10,000.00, this Agreement shall become null and void, at
Buyer's option exercised, if at all, by written notice to
Seller within ten (10) days after Buyer has received written
notice from Seller of said destruction or damage. Seller,
however, shall have the right to adjust or settle any
insured loss until (i) all contingencies set forth in
Paragraph 6 hereof have been satisfied, or waived; and (ii)
any ten-day period provided for above in this Subparagraph
16a for Buyer to elect to terminate this Agreement has
expired or Buyer has, by written notice to Seller, waived
Buyer's right to terminate this Agreement. If Buyer elects
to proceed and to consummate the purchase despite said
damage or destruction, there shall be no reduction in or
abatement of the purchase price, and Seller shall assign to
Buyer the Seller's right, title, and interest in and to all
insurance proceeds (pro-rata in relation to the Entire
Property) resulting from said damage or destruction to the
extent that the same are payable with respect to damage to
the Property, subject to rights of any Tenant of the Entire
Property.
If the cost of repair is less than $10,000.00, Buyer shall
be obligated to otherwise perform hereinunder with no
adjustment to the Purchase Price, reduction or abatement,
and Seller shall assign Seller's right, title and interest
in and to all insurance proceeds pro-rata in relation to the
Entire Property, subject to rights of any Tenant of the
Entire Property.
(b) If, prior to closing, the Property, or any part
thereof, is taken by eminent domain, this Agreement shall
become null and void, at Buyer's option. If Buyer elects to
proceed and to consummate the purchase despite said taking,
there shall be no reduction in, or abatement of, the
purchase price, and Seller shall assign to Buyer the
Seller's right, title, and interest in and to any award
made, or to be made, in the condemnation proceeding pro-rata
in relation to the Entire Property, subject to rights of any
Tenant of the Entire Property.
In the event that this Agreement is terminated by Buyer as
provided above in Subparagraph 16a or 16b, the First Payment
shall be immediately returned to Buyer (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof).
17. BUYER'S 1031 TAX FREE EXCHANGE.
While Seller acknowledges that Buyer is purchasing the
Property as "replacement property" to accomplish a tax free
exchange, Buyer acknowledges that Seller has made no
representations, warranties, or agreements to Buyer or Buyer's
agents that the transaction contemplated by the Agreement will
qualify for such tax treatment, nor has there been any
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
reliance thereon by Buyer respecting the legal or tax
implications of the transactions contemplated hereby. Buyer
further represents that it has sought and obtained such third
party advice and counsel as it deems necessary in regards to the
tax implications of this transaction.
Buyer wishes to novate/assign the ownership rights and
interest of this Purchase Agreement to San Francisco Bay Exchange
Service which will act as Accommodator to perfect the 1031
exchange by preparing an agreement of exchange of Real Property
whereby San Francisco Bay Exchange Service will be an independent
third party purchasing the ownership interest in subject property
from Seller and selling the ownership interest in subject
property to Buyer under the same terms and conditions as
documented in this Purchase Agreement. Buyer asks the Seller,
and Seller agrees to cooperate in the perfection of such an
exchange if at no additional cost or expense to Seller or delay
in time. Buyer hereby indemnifies and holds Seller harmless from
any claims and/or actions resulting from said exchange. Pursuant
to the direction of San Francisco Bay Exchange Service, Seller
will deed the Property to Buyer.
18. CANCELLATION
If any party elects to cancel this Contract because of any
breach by another party or because escrow fails to close by
the agreed date, the party electing to cancel shall deliver
to escrow agent a notice containing the address of the party
in breach and stating that this Contract shall be cancelled
unless the breach is cured within 10 days following the
delivery of the notice to the escrow agent. Within three
days after receipt of such notice, the escrow agent shall
send it by United States Mail to the party in breach at the
address contained in the Notice and no further notice shall
be required. If the breach is not cured within the 10 days
following the delivery of the notice to the escrow agent,
this Contract shall be cancelled.
19. MISCELLANEOUS.
(a) This Agreement may be amended only by written agreement
signed by both Seller and Buyer, and all waivers must be in
writing and signed by the waiving party. Time is of the
essence. This Agreement will not be construed for or
against a party whether or not that party has drafted this
Agreement. If there is any action or proceeding between the
parties relating to this Agreement the prevailing party will
be entitled to recover attorney's fees and costs. This is
an integrated agreement containing all agreements of the
parties about the Property and the other matters described,
and it supersedes any other agreements or understandings.
Exhibits attached to this Agreement are incorporated into
this Agreement.
(b) If this escrow has not closed by November 30, 1999,
through no fault of Seller, Seller may either, at its
election, extend the closing date or exercise any remedy
available to it by law, including terminating this
Agreement.
(c) Funds to be deposited or paid by Buyer must be good and
clear funds in the form of cash, cashier's checks or wire
transfers.
(d) All notices from either of the parties hereto to the
other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified
mail, return receipt requested, postage prepaid, or by a
nationally recognized courier service guaranteeing overnight
delivery to the party at his or its address set forth below,
or to such other address as such party may hereafter
designate by written notice to the other party.
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
If to Sellers:
Attention: Robert P. Johnson
AEI Real Estate Fund XV Limited Partnership &
AEI Real Estate Fund XVII Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
If to Buyer:
Marshall M. Kilduff, Trustee
Pat S. Kilduff, Trustee
321 Lake Street
San Francisco, CA 94108
When accepted, this offer will be a binding agreement for
valid and sufficient consideration which will bind and benefit
Buyer, Seller and their respective successors and assigns. Buyer
is submitting this offer by signing a copy of this offer and
delivering it to Seller. Seller has five (5) business days from
receipt within which to accept this offer.
This Agreement shall be governed by, and interpreted in
accordance with, the laws of the state of Minnesota.
IN WITNESS WHEREOF, the Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
BUYER: Marshall M. Kilduff, Trustee, and Pat S. Kilduff,
Trustee, of the Kilduff 1996 Revocable Trust, dated June 20, 1996
By:/s/ Marshall M Kilduff Trustee
Marshall M. Kilduff, Trustee
By:/s/ Pat S Kilduff Trustee
Pat S. Kilduff, Trustee
WITNESS: /s/ Sheldon Zimmerman
Sheldon Zimmerman
(Print Name)
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
SELLER: AEI Real Estate Fund XV Limited Partnership
By: AEI Fund Management 86-A, Inc., its
corporate general partner
By: /s/ Robert P Johnson
Robert P. Johnson, President
AND
AEI Real Estate Fund XVII Limited Partnership
By: AEI Fund Management XVII, Inc., its
corporate general partner
By: /s/ Robert P Johnson
Robert P. Johnson, President
WITNESS:
(as to both signatures)
/s/ Jill Rayburn
Jill Rayburn
(Print Name)
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000793631
<NAME> AEI REAL ESTATE FUND XV LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 956,627
<SECURITIES> 0
<RECEIVABLES> 22,460
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 979,087
<PP&E> 5,548,847
<DEPRECIATION> (931,974)
<TOTAL-ASSETS> 5,595,960
<CURRENT-LIABILITIES> 142,095
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,453,865
<TOTAL-LIABILITY-AND-EQUITY> 5,595,960
<SALES> 0
<TOTAL-REVENUES> 809,646
<CGS> 0
<TOTAL-COSTS> 266,489
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 899,327
<INCOME-TAX> 0
<INCOME-CONTINUING> 899,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 899,327
<EPS-BASIC> 121.45
<EPS-DILUTED> 121.45
</TABLE>
