SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: March 31, 1996
Commission file number: 0-16555
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Minnesota 41-1571166
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(612) 227-7333
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes [X] No
Transitional Small Business Disclosure Format:
Yes No [X]
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of March 31, 1996 and December 31, 1995
Statements for the Periods ended March 31, 1996 and 1995:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
BALANCE SHEET
MARCH 31, 1996 AND DECEMBER 31, 1995
(Unaudited)
ASSETS
1996 1995
CURRENT ASSETS:
Cash $ 1,542,170 $ 1,873,834
Receivables 50,844 54,661
----------- -----------
Total Current Assets 1,593,014 1,928,495
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 3,809,396 3,537,198
Buildings and Equipment 6,942,435 6,966,837
Property Acquisition Costs 0 14,813
Accumulated Depreciation (2,031,204) (2,274,424)
----------- -----------
Net Investments in Real Estate 8,720,627 8,244,424
----------- -----------
Total Assets $10,313,641 $10,172,919
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 83,018 $ 153,644
Distributions Payable 190,471 190,172
Deferred Income 15,680 22,212
----------- -----------
Total Current Liabilities 289,169 366,028
----------- -----------
DEFERRED INCOME - Net of Current Portion 255,299 244,193
PARTNERS' CAPITAL (DEFICIT):
General Partners (31,505) (33,570)
Limited Partners, $1,000 Unit value;
15,000 Units authorized and issued;
14,108 Units outstanding 9,800,678 9,596,268
----------- -----------
Total Partners' Capital 9,769,173 9,562,698
----------- -----------
Total Liabilities and Partners' Capital $10,313,641 $10,172,919
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
1996 1995
INCOME:
Rent $ 285,090 $ 267,587
Investment Income 24,292 12,839
----------- -----------
Total Income 309,382 280,426
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 64,025 65,155
Partnership Administration and Property
Management - Unrelated Parties 43,411 5,346
Interest 0 4,444
Depreciation 70,346 82,198
----------- -----------
Total Expenses 177,782 157,143
----------- -----------
OPERATING INCOME 131,600 123,283
GAIN ON SALE OF REAL ESTATE 286,996 0
----------- -----------
NET INCOME $ 418,596 $ 123,283
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 4,186 $ 1,233
Limited Partners 414,410 122,050
----------- -----------
$ 418,596 $ 123,283
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(14,108 and 14,226 weighted average Units
outstanding in 1996 and 1995, respectively) $ 29.37 $ 8.58
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 418,596 $ 123,283
Adjustments to Reconcile Net Income
To Net Cash Provided by Operating Activities:
Depreciation 70,346 82,198
Gain on Sale of Real Estate (286,996) 0
(Increase) Decrease in Receivables 3,817 (15,921)
Decrease in Payable to
AEI Fund Management, Inc. (70,626) (29,712)
Increase in Contract Payable 0 4,444
Increase in Deferred Income 4,574 9,110
----------- -----------
Total Adjustments (278,885) 50,119
----------- -----------
Net Cash Provided By
Operating Activities 139,711 173,402
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (1,313,603) 0
Proceeds from Sale of Real Estate 1,054,050 0
----------- -----------
Net Cash Provided By
Investing Activities (259,553) 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Distributions Payable 299 102,460
Distributions to Partners (212,121) (259,088)
----------- -----------
Net Cash Used For
Financing Activities (211,822) (156,628)
----------- -----------
NET INCREASE (DECREASE) IN CASH (331,664) 16,774
CASH, beginning of period 1,873,834 882,790
----------- -----------
CASH, end of period $ 1,542,170 $ 899,564
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid During the Year $ 0 $ 4,444
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1994 $ (32,717) $ 9,680,797 $ 9,648,080 14,225.70
Distributions (2,591) (256,497) (259,088)
Net Income 1,233 122,050 123,283
---------- ----------- ----------- ----------
BALANCE, March 31, 1995 $ (34,075) $ 9,546,350 $ 9,512,275 14,225.70
========== =========== =========== ==========
BALANCE, December 31, 1995 $ (33,570) $ 9,596,268 $ 9,562,698 14,107.70
Distributions (2,121) (210,000) (212,121)
Net Income 4,186 414,410 418,596
---------- ----------- ----------- ----------
BALANCE, March 31, 1996 $ (31,505) $ 9,800,678 $ 9,769,173 14,107.70
========== =========== =========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
(1) The condensed statements included herein have been prepared
by the Partnership, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of
operations for the interim period, on a basis consistent with
the annual audited statements. The adjustments made to these
condensed statements consist only of normal recurring
adjustments. Certain information, accounting policies, and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Partnership
believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction
with the financial statements and the summary of significant
accounting policies and notes thereto included in the
Partnership's latest annual report on Form 10-KSB.
(2) Organization -
AEI Real Estate Fund XVI Limited Partnership (Partnership)
was formed to acquire and lease commercial properties to
operating tenants. The Partnership's operations are managed
by AEI Fund Management XVI, Inc. (AFM), the Managing General
Partner of the Partnership. Robert P. Johnson, the
President and sole shareholder of AFM, serves as the
Individual General Partner of the Partnership. An affiliate
of AFM, AEI Fund Management, Inc., performs the
administrative and operating functions for the Partnership.
The terms of the Partnership offering call for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. The Partnership
commenced operations on February 6, 1987 when minimum
subscriptions of 2,000 Limited Partnership Units
($2,000,000) were accepted. The Partnership's offering
terminated on November 6, 1987 when the maximum subscription
limit of 15,000 Limited Partnership Units ($15,000,000) was
reached.
Under the terms of the Limited Partnership Agreement, the
Limited Partners and General Partners contributed funds of
$15,000,000 and $1,000, respectively. During the operation
of the Partnership, any Net Cash Flow, as defined, which the
General Partners determine to distribute will be distributed
90% to the Limited Partners and 10% to the General Partners;
provided, however, that such distributions to the General
Partners will be subordinated to the Limited Partners first
receiving an annual, noncumulative distribution of Net Cash
Flow equal to 10% of their Adjusted Capital Contribution, as
defined, and, provided further, that in no event will the
General Partners receive less than 1% of such Net Cash Flow
per annum. Distributions to Limited Partners will be made
pro rata by Units.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
Any Net Proceeds of Sale, as defined, from the sale or
financing of the Partnership's properties which the General
Partners determine to distribute will, after provisions for
debts and reserves, be paid in the following manner: (i)
first, 99% to the Limited Partners and 1% to the General
Partners until the Limited Partners receive an amount equal
to: (a) their Adjusted Capital Contribution plus (b) an
amount equal to 6% of their Adjusted Capital Contribution
per annum, cumulative but not compounded, to the extent not
previously distributed from Net Cash Flow; (ii) next, 99% to
the Limited Partners and 1% to the General Partners until
the Limited Partners receive an amount equal to 14% of their
Adjusted Capital Contribution per annum, cumulative but not
compounded, to the extent not previously distributed; (iii)
next, to the General Partners until cumulative distributions
to the General Partners under Items (ii) and (iii) equal 15%
of cumulative distributions to all Partners under Items (ii)
and (iii). Any remaining balance will be distributed 85% to
the Limited Partners and 15% to the General Partners.
Distributions to the Limited Partners will be made pro rata
by Units.
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
property, will be allocated first in the same ratio in
which, and to the extent, Net Cash Flow is distributed to
the Partners for such year. Any additional profits will be
allocated 90% to the Limited Partners and 10% to the General
Partners. In the event no Net Cash Flow is distributed to
the Limited Partners, 90% of each item of Partnership
income, gain or credit for each respective year shall be
allocated to the Limited Partners, and 10% of each such item
shall be allocated to the General Partners. Net losses from
operations will be allocated 98% to the Limited Partners and
2% to the General Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of the Partnership's property will be
allocated in accordance with the Partnership Agreement as
follows: (i) first, to those Partners with deficit balances
in their capital accounts in an amount equal to the sum of
such deficit balances; (ii) second, 99% to the Limited
Partners and 1% to the General Partners until the aggregate
balance in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital Contributions
plus an amount equal to 14% of their Adjusted Capital
Contributions per annum, cumulative but not compounded, to
the extent not previously allocated; (iii) third, to the
General Partners until cumulative allocations to the General
Partners equal 15% of cumulative allocations. Any remaining
balance will be allocated 85% to the Limited Partners and
15% to the General Partners. Losses will be allocated 98%
to the Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the Partnership
or withdrawal by a General Partner, the General Partners
will contribute to the Partnership an amount equal to the
lesser of the deficit balances in their capital accounts or
1% of total Limited Partners' and General Partners' capital
contributions.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate -
In May, 1990, Flagship, Inc. (Flagship), the lessee of the
J.T. McCord's properties, filed for reorganization, after
occupying the properties for approximately five years. In
March, 1993, the Partnership, along with affiliated
Partnerships which also own J.T. McCord's properties, filed
its own plan of reorganization (the "Plan") with the Court.
That Plan provided for an assignee of the Partnerships (a
replacement tenant) to purchase the assets of Flagship and
operate the restaurants with financial assistance from the
Partnerships. This Plan was expected to allow the
Partnerships to avoid closing these properties, allow
operations to continue uninterrupted, and avoid further
costly litigation with Flagship and its creditors. The Plan
was confirmed by the Court and the creditors April 16, 1993
and became effective July 20, 1993.
To entice the assignee, WIM, Inc. (WIM) to operate the
restaurants and enter into the Lease Agreements, the
Partnership provided funds to renovate the restaurants and
paid for operating expenses. The Partnership's share of
renovation and operating expenses during this period was
$755,773 which was expensed in the fourth quarter of 1994.
However, WIM was not able to operate the properties
profitably and was unable to make rental payments as
provided in the Lease Agreements. To reduce expenses and
minimize the losses produced by these properties, the Waco
restaurant was closed and listed for sale or lease and the
Partnership amended the agreements for the Irving and
Mesquite locations to provide for WIM to make annual rental
payments of the greater of $60,000 or 5.5% of sales
beginning October 1, 1994. In December, 1995, the
Partnership took possession of the properties after WIM was
unable to perform under the terms of the Leases. The
properties are currently listed for sale or lease. While
the properties are being re-leased or sold, the Partnership
is responsible for the real estate taxes and other costs
required to maintain the properties.
As part of the Plan, the Partnerships, which own these
properties, were responsible for an annual payment to the
Creditors Trust of approximately $110,000 for the next five
years. The Partnership's share of the annual payment was
$69,702. In 1994, the Partnership expensed $302,652 to
record this liability and administrative costs related to
the bankruptcy.
In 1995, the Partnership negotiated a settlement, with the
trustee, for a lump sum payment of the minimum amount due
over the remaining term of the Plan for release of the
Partnership and WIM from any other financial obligations and
reporting requirements to the trustee. The settlement of
$215,442 was completed in the fourth quarter of 1995.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
In June 1995, the Partnership re-leased the Waco property to
Tex-Mex Cocina of Waco, L.C. The Lease Agreement has a
primary term of eighteen months with an annual rental
payment of $29,752. The Partnership could also receive
additional rent if gross receipts from the property exceed
certain specified amounts. The Lease contains renewal
options which may extend the lease term an additional 10
years. The property is now operated as a Zapata's Cantina &
Cafe.
In March, 1995, the lessee of the Applebee's restaurant in
Columbia, South Carolina, exercised an option in the Lease
Agreement to purchase the property. On July 28, 1995, the
sale closed with the Partnership receiving net sale proceeds
of $990,453 which resulted in a net gain of $437,915. At
the time of sale, the cost and related accumulated
depreciation of the property was $723,823 and $171,285,
respectively.
On October 25, 1995, the Partnership sold two of the Jiffy
Lube Auto Care Centers to the lessee. The Partnership
recognized net sale proceeds of $322,443 for the Jiffy Lube
in Garland, Texas, which resulted in a net gain of $80,500.
At the time of sale, the cost and related accumulated
depreciation of the property was $301,884 and $59,941,
respectively. The Partnership recognized net sale proceeds
of $161,218 for the Jiffy Lube in Dallas, Texas, which
resulted in a net gain of $35,705. At the time of sale, the
cost and related accumulated depreciation of the property
was $154,781 and $29,268.
In July 1995, the lessee of the Super 8 Motel in Hot
Springs, Arkansas, exercised an option in the Lease
Agreement to purchase the property. On March 29, 1996, the
sale closed with the Partnership receiving net sale proceeds
of $665,691 which resulted in a net gain of $217,323. The
Partnership recognized $18,534 of this gain in 1995 due to
nonrefundable deposits received from the purchaser. At the
time of sale, the cost and related accumulated depreciation
of the property was $583,653 and $135,284, respectively.
In January, 1996, the Cheddar's restaurant in Indianapolis,
Indiana was destroyed by a fire. The Partnership has
reached a preliminary agreement with the tenant and
insurance company which calls for termination of the Lease,
demolition of the building and payment to the Partnership of
$407,282 for the building and equipment and $49,688 for lost
rent. The property will not be rebuilt and the Partnership
will list the land for sale. The Partnership's cost and
related accumulated depreciation in the building and
equipment at March 31, 1996 was $496,967 and $178,282,
respectively. The settlement resulted in a net gain of
$88,207. The Partnership's cost of the land is $253,747.
In the first quarter of 1996 and the fourth quarter of 1995,
the Partnership distributed $210,000 and $79,774 of the net
sale proceeds to the Partners as part of their regular
quarterly distributions and to pay for the redemption of
Partnership Units. The distributions represented a return
of capital of $14.89 and $5.65 per Limited Partnership Unit,
respectively. The majority of the remaining net proceeds
will be reinvested in additional properties.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
In November, 1995, the Partnership entered into an Agreement
to purchase an Applebee's restaurant in Victoria, Texas.
The property was acquired on March 22, 1996 for $1,328,416.
The property is leased to Renaissant Development Corporation
under a Lease Agreement with a primary term of 20 years and
annual rental payments of approximately $151,000.
The Partnership owns a 30.8078% interest in the Sizzler
restaurant in Cincinnati, Ohio. In January, 1994, the
Partnership closed the restaurant and listed it for sale or
lease. While the property is being re-leased or sold, the
Partnership is responsible for the real estate taxes and
other costs required to maintain the properties. No rent
was received in 1996 or 1995 from the property.
(4) Payable to AEI Fund Management -
AEI Fund Management, Inc. performs the administrative and
operating functions for the Partnership. The payable to AEI
Fund Management represents the balance due for those
services. This balance is non-interest bearing and
unsecured and is to be paid in the normal course of
business.
(5) Deferred Income -
In June, 1994, Fuddruckers, Inc., the restaurant concept's
franchisor, acquired the operations of the Fuddruckers
restaurants in St. Louis, Missouri and Omaha, Nebraska, and
assumed the lease obligations from the original lessee. As
part of the agreement, the Partnership amended the Leases to
reduce the base rent from $109,033 to $92,164 for the St.
Louis property and $167,699 to $145,081 for the Omaha
property. The Partnership could receive additional rent in
the future if 10% of gross receipts from the properties
exceed the base rent. In consideration for the lease
assumption and amendment, the Partnership received a lump
sum payment from the original lessee of $299,723. The lump
sum payment will be recognized as income over the remainder
of the Lease terms which expire January 31, 2008 and
November 30, 2007, using the straight line method. As of
March 31, 1996 and December 31, 1995, the Partnership had
recognized $38,871 and $33,318 of this payment as income.
At March 31, 1996, the remaining deferred income of $10,127
was prepaid rent related to certain other Partnership
properties.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The Partnership's rental income is derived from long-term
lease agreements on the Partnership's properties. It increased
in the first quarter of 1996 by $17,503 over the first quarter of
1995 due primarily to rental income received from the re-leasing
of the property in Waco, Texas, additional rent received from the
lessee of the Matlock Jem Care, and a lump sum insurance
settlement for rent on the Cheddar's property in Indianapolis,
Indiana due to a fire. These increases were partially offset by
no recognition of rent in 1996 on the J.T. McCord's properties in
Irving, Texas and Mesquite, Texas. Investment income increased
by $11,453 in the first quarter of 1996 over the same period in
1995 due to proceeds from property sales made in 1995 which were
invested in interest earning instruments.
The Partnership acquired lease guarantee insurance from
United Guaranty Commercial Insurance Company of Iowa for the
Columbia Applebee's, the Houston, Texas child care center, and
one of the Arlington, Texas child care centers. The policies
insure approximately 80% of the annual payments for periods of
ten years for the child care centers and a twelve month period
(over seven years) for the other properties. The rent guarantee
begins thirty days after the occurrence of all the following:
(1) the lessee is at least thirty days in default in the payment
of rent; (2) the lessee has been removed from the property; (3)
the property has been listed for rent with a real estate broker
and "For Rent" signs have been posted on the property; and (4)
certain other minor conditions. Once these conditions have been
satisfied, the Partnership will receive lease insurance payments
until either the property is re-leased or the policy expires. On
May 5, 1995, the Applebee's policy expired.
In May, 1990, Flagship, Inc. (Flagship), the lessee of the
J.T. McCord's properties, filed for reorganization, after
occupying the properties for approximately five years. In March,
1993, the Partnership, along with affiliated Partnerships which
also own J.T. McCord's properties, filed its own plan of
reorganization (the "Plan") with the Court. That Plan provided
for an assignee of the Partnerships (a replacement tenant) to
purchase the assets of Flagship and operate the restaurants with
financial assistance from the Partnerships. This Plan was
expected to allow the Partnerships to avoid closing these
properties, allow operations to continue uninterrupted, and avoid
further costly litigation with Flagship and its creditors. The
Plan was confirmed by the Court and the creditors April 16, 1993
and became effective July 20, 1993.
To entice WIM to operate the restaurants and enter into
the Lease Agreements, the Partnership provided funds to renovate
the restaurants and paid for operating expenses. The
Partnership's share of renovation and operating expenses during
this period was $755,773, which was expensed in the fourth
quarter of 1994. However, WIM was not able to operate the
properties profitably and was unable to make rental payments as
provided in the Lease Agreements. To reduce expenses and
minimize the losses produced by these properties, the Waco
restaurant was closed and listed for sale or lease and the
Partnership amended the agreements for the Irving and Mesquite
locations to provide for WIM to make annual rental payments of
the greater of $60,000 or 5.5% of sales beginning October 1,
1994. In December, 1995, the Partnership took possession of the
properties after WIM was unable to perform under the terms of the
Leases. The properties are currently listed for sale or lease.
While the properties are being re-leased or sold, the Partnership
is responsible for the real estate taxes and other costs required
to maintain the properties.
As part of the Plan, the Partnerships, which own these
properties, were responsible for an annual payment to the
Creditors Trust of approximately $110,000 for the next five
years. The Partnership's share of the annual payment was
$69,702. In 1994, the Partnership expensed $302,652 to record
this liability and administrative costs related to the
bankruptcy.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
In 1995, the Partnership negotiated a settlement, with the
trustee, for a lump sum payment of the minimum amount due over
the remaining term of the Plan for release of the Partnership and
WIM from any other financial obligations and reporting
requirements to the trustee. The settlement of $215,442 was
completed in the fourth quarter of 1995.
In June 1995, the Partnership re-leased the Waco property
to Tex-Mex Cocina of Waco, L.C. The Lease Agreement has a
primary term of eighteen months with an annual rental payment of
$29,752. The Partnership could also receive additional rent if
gross receipts from the property exceed certain specified
amounts. The Lease contains renewal options which may extend the
lease term an additional 10 years. The property is now operated
as a Zapata's Cantina & Cafe.
In June, 1994, Fuddruckers, Inc., the restaurant concept's
franchisor, acquired the operations of the Fuddruckers
restaurants in St. Louis, Missouri and Omaha, Nebraska, and
assumed the lease obligations from the original lessee. As part
of the agreement, the Partnership amended the Leases to reduce
the base rent from $109,033 to $92,164 for the St. Louis property
and $167,699 to $145,081 for the Omaha property. The Partnership
could receive additional rent in the future if 10% of gross
receipts from the properties exceed the base rent. In
consideration for the lease assumption and amendment, the
Partnership received a lump sum payment from the original lessee
of $299,723. The lump sum payment will be recognized as income
over the remainder of the Lease terms which expire January 31,
2008 and November 30, 2007, using the straight line method.
Fuddruckers, Inc. is owned by DAKA International, which has a net
worth in excess of $64 million, making it a much higher credit
lessee than the original lessee.
In March, 1995, the lessee of the Applebee's restaurant in
Columbia, South Carolina, exercised an option in the Lease
Agreement to purchase the property. On July 28, 1995, the sale
closed with the Partnership receiving net sale proceeds of
$990,453 which resulted in a net gain of $437,915. At the time
of sale, the cost and related accumulated depreciation of the
property was $723,823 and $171,285, respectively.
In July 1995, the lessee of the Super 8 Motel in Hot
Springs, Arkansas, exercised an option in the Lease Agreement to
purchase the property. On March 29, 1996, the sale closed with
the Partnership receiving net sale proceeds of $665,691 which
resulted in a net gain of $217,323. The Partnership recognized
$18,534 of this gain in 1995 due to nonrefundable deposits
received from the purchaser. At the time of sale, the cost and
related accumulated depreciation of the property was $583,653 and
$135,284, respectively.
On October 25, 1995, the Partnership sold two of the Jiffy
Lube Auto Care Centers to the lessee. The Partnership recognized
net sale proceeds of $322,443 for the Jiffy Lube in Garland,
Texas, which resulted in a net gain of $80,500. At the time of
sale, the cost and related accumulated depreciation of the
property was $301,884 and $59,941, respectively. The Partnership
recognized net sale proceeds of $161,218 for the Jiffy Lube in
Dallas, Texas, which resulted in a net gain of $35,705. At the
time of sale, the cost and related accumulated depreciation of
the property was $154,781 and $29,268.
In November, 1995, the Partnership entered into an
agreement to purchase an Applebee's restaurant in Victoria,
Texas. The property was acquired on March 22, 1996 for
$1,328,416. The property is leased to Renaissant Development
Corporation under a Lease Agreement with a primary term of 20
years and annual rental payments of approximately $151,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
In January, 1996, the Cheddar's restaurant in
Indianapolis, Indiana was destroyed by a fire. The Partnership
has reached a preliminary agreement with the tenant and insurance
company which calls for termination of the Lease, demolition of
the building and payment to the Partnership of $407,282 for the
building and equipment and $49,688 for lost rent. The property
will not be rebuilt and the Partnership will list the land for
sale. The Partnership's cost and related accumulated
depreciation in the building and equipment at March31, 1996 was
$496,967 and $178,282, respectively. The settlement resulted in
a net gain of $88,207. The Partnership's cost of the land is
$253,747.
The Partnership owns a 30.8078% interest in the Sizzler
restaurant in Cincinnati, Ohio. In January, 1994, the
Partnership closed the restaurant and listed it for sale or
lease. While the property is being re-leased or sold, the
Partnership is responsible for the real estate taxes and other
costs required to maintain the properties. No rent was received
in 1996 or 1995 from the property.
During the first three months of 1996 and 1995, the
Partnership incurred Partnership administration and property
management expenses from unrelated parties of $43,411 and $5,346,
respectively. The increase in these expenses in 1996, when
compared to the same period in 1995, is due to costs related to
the vacant J.T. McCord's properties. The administration and
property management expenses represent direct payments to third
parties for legal and filing fees, direct administrative costs,
outside audit and accounting costs, interest, taxes, insurance
and other property costs. The Partnership administration
expenses incurred from affiliates include costs associated with
the management of the properties, processing distributions,
reporting requirements and correspondence to the Limited
Partners.
In the first quarter of 1996 and the fourth quarter of
1995, the Partnership distributed $210,000 and $79,774 of the net
sale proceeds, from the sales discussed above, to the Partners as
part of their regular quarterly distributions and to pay for the
redemption of Partnership Units. The distributions represented a
return of capital of $14.89 and $5.65 per Limited Partnership
Unit, respectively. The majority of the remaining net proceeds
will be reinvested in additional properties.
As of March 31, 1996, the Partnership's annualized cash
distribution rate was 5.6%, 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
were allocated to Limited Partners and 1% to the General
Partners.
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the total number of Units
outstanding at the beginning of the year and in no event,
obligated to purchase Units if such purchase would impair the
capital or operation of the Partnership.
During 1995, twelve Limited Partners redeemed a total of
118 Partnership Units for $79,774 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using proceeds from the Applebee's sale, which reduced the
Limited Partners' Adjusted Capital Contribution. In prior years,
a total of sixty-five Limited Partners redeemed 774.3 Partnership
Units for $635,881. The redemptions increase the remaining
Limited Partners' ownership interest in the Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the Partnership is a party or of which the Partnership's
property is subject.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits - None.
b. Reports filed on Form 8-K - See previously filed reports dated
March 22, 1996 and March 29, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: May 8, 1996 AEI Real Estate Fund XVI
Limited Partnership
By: AEI Fund Management XVI, Inc.
Its: Managing General Partner
By: /s/ Robert P. Johnson
Robert P. Johnson
President
By: /s/ Mark E. Larson
Mark E. Larson
Chief Financial Officer
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<NAME> AEI REAL ESTATE FUND XVI LTD PARTNERSHIP
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<PERIOD-END> MAR-31-1996
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