SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d)
Of The Securities Exchange Act Of 1934
For the Fiscal Year Ended: December 31, 1995
Commission file number: 0-16555
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
(Name of Small Business Issuer 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)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No
Check if disclosure of delinquent filers in response to Rule 405
of Regulation S-B is not contained in this Form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Issuer's revenues for year ended December 31, 1995 were
$1,086,854.
As of February 29, 1996, there were 14,107.70 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 $14,107,700.
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 XVI Limited Partnership (the
"Partnership" or the "Registrant") is a limited partnership which
was organized pursuant to the laws of the State of Minnesota on
February 6, 1987. The registrant is comprised of AEI Fund
Management XVI, 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 $15,000,000 of limited partnership interests (the
"Units") (15,000 Units at $1,000 per Unit) pursuant to a
registration statement effective December 15, 1986. 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 November 6,
1987 when the maximum subscription limit of 15,000 Limited
Partnership Units ($15,000,000) 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 twenty properties, including partial
interests in eleven properties, totaling $12,910,857. The
balance of the subscription proceeds was applied to organization
and syndication costs, working capital reserves and
distributions, which represented a return of capital. The
properties are all commercial, single tenant buildings leased
under triple net leases.
The Partnership will hold its properties until the General
Partners determine that the sale or other disposition of the
properties is advantageous in view of the Partnership's
investment objectives. In deciding whether to sell properties,
the General Partners will consider factors such as potential
appreciation, net cash flow and income tax considerations. In
addition, certain lessees have been granted options to purchase
properties after a specified portion of the lease term has
elapsed. It is anticipated that the Partnership will sell its
properties within twelve years after acquisition. At any time
prior to selling the properties, the Partnership may mortgage one
or more of its properties in amounts not exceeding 50% of the of
the fair market value of the property.
Leases
Although there are variations in the specific terms of the
leases, the following is a summary of the general terms of the
Partnership's leases. The properties are leased to various
tenants under noncancelable triple net leases, which are
classified as operating leases. Under a triple net lease, the
lessee is responsible for all real estate taxes, insurance,
maintenance, repairs and operating expenses for the property.
The initial lease terms are for 10 to 20 years. The leases
provide for base annual rental payments, payable in monthly
installments, and contain rent clauses which entitle the
Partnership to receive additional rent in future years based on
stated rent increases or if gross receipts for the property
exceed certain specified amounts, among other conditions.
Several of the leases provide the lessee with two to three
five-year renewal options subject to the same terms and
conditions as the initial lease. Certain lessees have been
granted options to purchase the property. Depending on the
lease, the purchase price is either determined by a formula, or
is the greater of the fair market value of the property or the
amount determined by a formula. In all cases, if the option were
to be exercised by the lessee, the purchase price would be
greater than the original cost of the property.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
The Partnership owns a 30.8078% interest in the Sizzler
restaurant in Cincinnati, Ohio. In November, 1993, after
reviewing the lessee's operating results, the Partnership
determined that the lessee would be unable to operate the
restaurant in a manner capable of maximizing the restaurant's
sales. Consequently, at the direction of the Partnership, a
multi-unit restaurant operator assumed operation of this
restaurant while the Partnership reviewed the available options.
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 property.
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. In consideration for the lease assumption and
amendment, the Partnership received a lump sum payment from the
original lessee of $299,723. Fuddruckers, Inc. is owned by DAKA
International, which has a net worth in excess of $31 million,
making it a much higher credit lessee than the original lessee.
The Partnership owns a 35% interest in a J.T. McCord's
restaurant in Mesquite, Texas and a 100% interest in a J.T.
McCord's restaurant in Irving, Texas. In December, 1995, the
Partnership took possession of the properties after the lessee
was unable to perform under the terms of the Lease. 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.
The Partnership also owns a 55.0958% interest in a J.T.
McCord's restaurant in Waco, Texas, which was previously closed.
In June 1995, the Partnership re-leased the restaurant to Tex-Mex
Cocina of Waco, L.C. The Lease Agreement has a primary term of
eighteen months with an annual rental payment of $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 December, 1994, the lessee of the Applebee's restaurant
in Charleston, South Carolina, exercised an option in the Lease
Agreement to purchase the property. On December 15, 1994, the
sale closed with the Partnership receiving net sale proceeds of
$1,613,288 which resulted in a net gain of $691,525. At the time
of sale, the cost and related accumulated depreciation of the
property was $1,126,780 and $205,017, respectively.
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, which resulted in a net gain of
$80,500 for the Jiffy Lube in Garland, Texas. 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, which resulted in a net
gain of $35,705 for one of the Jiffy Lube's in Dallas, Texas. At
the time of sale, the cost and related accumulated depreciation
of the property was $154,781 and $29,268.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
In July 1995, the Partnership entered into an agreement to
sell the Super 8 Motel in Hot Springs, Arkansas, to the lessee.
The sale price for the Partnership's interest in the property
will be approximately $680,000, which will result in a net gain
of approximately $220,000. As of December 31, 1995, the
Partnership had received a $20,000 non-refundable earnest money
deposit and recognized a gain of $18,534. The Partnership
anticipates the sale will close on March 29, 1996.
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 approximately
$428,000 for the building and equipment and approximately $50,000
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 December 31, 1995 was $496,967 and $177,343,
respectively. The settlement would result in a net gain of
approximately $108,376. The Partnership's cost of the land is
$253,747.
In November, 1995, the Partnership entered into an
Agreement to purchase an Applebee's restaurant in Victoria,
Texas. The purchase price will be approximately $1,314,000. The
property will be leased to Renaissant Development Corporation
under a Lease Agreement with a primary term of 20 years and
annual rental payments of approximately $151,000.
Major Tenants
During 1995, two of the Partnership's lessees each
contributed more than ten percent of the Partnership's total
rental revenue. The major tenants in aggregate contributed 36%
of the Partnership's total rental revenue in 1995. It is
anticipated that, based on the minimum rental payments required
under the leases, each major tenant will continue to contribute
more than ten percent of the Partnership's total rental revenue
in 1996 and future years. Any failure of these major tenants or
business concepts could materially affect the Partnership's net
income and cash distributions.
Competition
The Partnership is a minor factor in the commercial real
estate business. There are numerous entities engaged in the
commercial real estate business which have greater financial
resources than the Partnership. At the time the Partnership
elects to dispose of its properties, the Partnership will be in
competition with other persons and entities to find buyers for
its properties.
Employees
The Partnership has no direct employees. Management
services are performed for the Partnership by AEI Fund
Management, Inc., an affiliate of AFM.
ITEM 2. DESCRIPTION OF PROPERTIES.
Investment Objectives
The Partnership's investment objectives are to acquire
existing or newly-developed commercial properties throughout the
United States that offer the potential for (i) preservation and
protection of the Partnership's capital; (ii) partially tax-
deferred cash distributions from operations which may increase
through rent participation clauses or mandated rent increases;
and (iii) long-term capital gains through appreciation in value
of the Partnership's properties realized upon sale. The
Partnership does not have a policy, and there is no limitation,
as to the amount or percentage of assets that may be invested in
any one property. However, to the extent possible, the General
Partners attempt to diversify the type and location of the
Partnership's properties.
Description of Properties
The Partnership's properties are all commercial, single
tenant buildings. All the properties were acquired on a debt-
free basis and are leased to various tenants under noncancelable
triple net leases, which are classified as operating leases. The
Partnership holds an undivided fee simple interest in the
properties. At any time prior to selling the properties, the
Partnership may mortgage one or more of its properties in amounts
not exceeding 50% of the fair market value of the property.
The Partnership's properties are subject to the general
competitive conditions incident to the ownership of single tenant
investment real estate. Since each property is leased under a
long-term lease, there is little competition until the
Partnership decides to sell the property. At this time, the
Partnership will be competing with other real estate owners, on
both a national and local level, in attempting to find buyers for
the properties. In the event of a tenant default, the
Partnership would be competing with other real estate owners, who
have property vacancies, to attract a new tenant to lease the
property. The Partnership's tenants operate in industries that
are very competitive and can be affected by factors such as
changes in regional or local economies, seasonality and changes
in consumer preference.
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 1995.
Total Property
Purchase Acquisition Annual Lease
Property Date Costs Lessee Payment
Creative Years Early Creative Years
Learning Center Early Learning
Houston, TX 4/8/87 $ 483,128 Centers, Inc. $ 60,773
Grand Rapids Teachers Grand Rapids
Credit Union Teachers
Wyoming, MI 5/1/87 $ 626,239 Credit Union $ 30,000
Arby's Restaurant RTM Mid-
Grand Rapids, MI 5/1/87 $ 652,880 America, Inc. $ 24,000
Fuddruckers Restaurant
Omaha, NE 11/16/87 $1,151,543 Fuddruckers, Inc. $145,081
ITEM 2. PROPERTIES. (Continued)
Total Property
Purchase Acquisition Annual Lease
Property Date Costs Lessee Payment
Children's World
Daycare Center Children's
Sterling Heights, MI World Learning
(83.6514%) 11/25/87 $ 729,486 Centers, Inc. $102,553
Jiffy Lube Auto Care Center
Westmoreland Avenue Jiffy Lube
Dallas, TX International of
(25%) 12/10/87 $ 154,891 of Maryland, Inc. $ 18,975
JEMCARE
Arkansas Lane
Arlington, TX 12/10/87 $ 450,475 JEMCARE, Inc. $ 52,148
Zapata's Cantina & Cafe
Waco, TX Tex-Mex Cocina
(55.0958%) 12/16/87 $ 674,285 of Waco, L.C. $ 29,752
J.T. McCord's Restaurant
Irving, TX 12/16/87 $1,147,333 (F1)
J.T. McCord's Restaurant
Mesquite, TX
(35%) 12/16/87 $ 520,109 (F1)
JEMCARE
Matlock Avenue
Arlington, TX 12/16/87 $ 603,641 JEMCARE, Inc. $ 43,272
Cheddar's Restaurant
Indianapolis, IN Phaedra
(50%) 2/16/88 $ 750,714 Partners III, Ltd. $ 99,375
Fuddruckers Restaurant
St. Louis, MO
(40%) 3/25/88 $ 761,053 Fuddruckers, Inc. $ 92,164
Super 8 Motel
Hot Springs, AR Motel
(50%) 4/11/88 $ 583,653 Developers, Inc. $ 91,887
Sizzler Restaurant
Cincinnati, OH
(30.8078%) 1/30/90 $ 468,140 (F1)
ITEM 2. PROPERTIES. (Continued)
Total Property
Purchase Acquisition Annual Lease
Property Date Costs Lessee Payment
Applebee's Restaurant Southland Restaurant
Slidell, LA Development
(73%) 5/5/93 $ 746,465 Company, L.L.C. $103,888
(F1)The property is vacant and listed for sale or lease.
The properties listed above with a partial ownership
percentage are owned with affiliates of the Partnership. AEI
Real Estate Fund 85-B Limited Partnership owns the remaining
interest in the Children's World Daycare Center in Sterling
Heights, Michigan. AEI Real Estate Fund XV Limited Partnership
owns the remaining interest in the restaurant in Waco, Texas, the
Fuddrucker's restaurant in St. Louis, Missouri and the Super 8
Motel. AEI Real Estate Fund XVII Limited Partnership owns the
remaining interests in the Jiffy Lube property, the J.T. McCord's
restaurant in Mesquite, Texas, and the Cheddar's restaurant. AEI
Real Estate Funds XVII and XVIII Limited Partnerships own the
remaining interest in the Sizzler restaurant. AEI Real Estate
Fund XVIII Limited Partnership owns the remaining interest in the
Applebee's restaurant in Slidell, Louisiana.
Each Partnership owns a separate, undivided interest in
the properties. No specific agreement or commitment exists
between the Partnerships as to the management of their respective
interests in the properties, and the Partnership that holds more
than a 50% interest does not control decisions over the other
Partnership's interest.
The initial Lease terms are 20 years except for the
Houston daycare center, the JEMCARE properties and the Super 8
Motel (10 years), the Credit Union (11 years), the Arby's (15
years), and the Waco property discussed below. Several of the
Leases have renewal options which may extend the Lease term an
additional 9 to 15 years.
The Partnership acquired lease guarantee insurance from
United Guaranty Commercial Insurance Company of Iowa for the
three J.T. McCord's, the Houston, Texas daycare center, and one
of the Arlington, Texas daycare centers. The policies insure
approximately 80% of the annual payments for periods of ten years
for the daycare 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
December 15, 1994, the policies on the J.T. McCord's expired.
Pursuant to the Lease Agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they occupy. The General Partners believe the properties are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.
ITEM 2. PROPERTIES. (Continued)
For tax purposes, the Partnership's properties are
depreciated under the Modified Accelerated Cost Recovery System
(MACRS). The largest depreciable component of a property is the
building which is depreciated, using the straight-line method,
over 31.5 years. The remaining depreciable components of a
property are personal property and land improvements which are
depreciated, using an accelerated method, over 5 and 15 years,
respectively. Since the Partnership has tax-exempt Partners, the
Partnership is subject to the rules of Section 168(h)(6) of the
Internal Revenue Code which requires a percentage of the
properties' depreciable components to be depreciated over longer
lives using the straight-line method. In general the federal tax
basis of the properties for tax depreciation purposes is the same
as the basis for book depreciation purposes.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS.
As of December 31, 1995, there were 1,528 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 purchase 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.
Cash distributions of $10,531 and $10,936 were made to the
General Partners and $962,829 and $979,239 were made to the
Limited Partners in 1995 and 1994, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined, except as discussed below. These
distributions should not be compared with dividends paid on
capital stock by corporations.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $643,138 and $193,255 of
proceeds from property sales in 1995 and 1994, respectively. The
distributions reduced the Limited Partners' Adjusted Capital
Contributions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
The Partnership's rental income is derived from long-term,
triple net lease agreements on the Partnership's properties. For
the years ended December 31, 1995 and 1994, the Partnership
recognized rental income of $1,009,008 and $1,254,459,
respectively. During the same periods, the Partnership earned
investment income of $77,846 and $10,300, respectively. In 1995,
rental income decreased mainly as the result of the property
sales discussed below. The decrease in rental income was
partially offset by additional investment income earned on the
net proceeds from the property sales.
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. Flagship
continued to operate the properties while attempting to develop a
plan of reorganization which would be acceptable to the
bankruptcy court and its creditors. In 1992, it became apparent
that Flagship did not have the financial resources to operate the
properties in compliance with the Leases. In March, 1993, the
Partnership, along with affiliated Partnerships which also own
J.T. McCord's properties, filed its own plan of reorganization
(the "Plan") with the Court. That Plan provided for an assignee
of the Partnerships (a replacement tenant) to purchase the assets
of Flagship and operate the restaurants with financial assistance
from the Partnerships. This Plan was expected to allow the
Partnerships to avoid closing these properties, allow operations
to continue uninterrupted, and avoid further costly litigation
with Flagship and its creditors. The Plan was confirmed by the
Court and the creditors April 16, 1993 and became effective July
20, 1993. At that time, various claims between Flagship and the
Partnership were dismissed. On April 21, 1993, the Partnership's
assignee, WIM, Inc. (WIM), took over management of the
restaurants.
To entice WIM to operate the restaurants and enter into
the Lease Agreements, the Partnership provided funds to renovate
the restaurants and paid for operating expenses. However, WIM
was not able to operate the properties profitably and was unable
to make rental payments as provided in the Lease Agreements. The
Partnership's share of renovation and operating expenses during
this period was $755,773. 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (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.
The Partnership owns a 30.8078% interest in the Sizzler
restaurant in Cincinnati, Ohio. In November, 1992, after
reviewing the operating results of the lessee, the Partnership
agreed to amend the Lease Agreement of the Sizzler restaurant.
As of November, 1993, the lessee was in default under the amended
Lease Agreement. After reviewing the lessee's operating results,
the Partnership determined that the lessee would be unable to
operate the restaurant in a manner capable of maximizing the
restaurant's sales. Consequently, at the direction of the
Partnership, a multi-unit restaurant operator assumed operation
of this restaurant while the Partnership reviewed the available
options. 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 property.
No rent was received in 1995 and 1994. The total amount of rent
not collected in 1995 and 1994 was $64,831 and $62,943,
respectively. These amounts were not accrued for financial
reporting purposes.
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 the current annual rent of $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.
During the years ended December 31, 1995 and 1994, the
Partnership paid Partnership administration expenses to
affiliated parties of $223,782 and $238,489, 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 $138,202 and $1,204,968, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, taxes, insurance and other property costs. The decrease
in these expenses in 1995, when compared to 1994, is the result
of expenses incurred in 1994 related to the J.T. McCord's
situation discussed above.
As of December 31, 1995, the Partnership's annualized cash
distribution rate was 6.16%, 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.
ITEM 6. 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.
Liquidity and Capital Resources
During 1995, the Partnership's cash balances increased
$991,044 due to the sale of three of the Partnership's
properties. Net cash provided by operating activities increased
from $255,982 in 1994 to $543,413 in 1995. In 1995, net cash
income before depreciation, when compared to 1994, increased by
approximately $943,000. In 1994, net cash income before
depreciation was depressed mainly due to property management
expenses incurred related to the J.T. McCord's situation
discussed above. The increase in net cash income before
depreciation was partially offset by net timing differences in
the collection of payments from the lessees and the payment of
expenses by the Partnership.
In 1995 and 1994, net cash provided by investing
activities was $1,440,335 and $2,005,575, respectively. The
majority of these amounts represent net proceeds from the sale of
the Partnership's properties.
In December, 1994, the lessee of the Applebee's restaurant
in Charleston, South Carolina, exercised an option in the Lease
Agreement to purchase the property. On December 15, 1994, the
sale closed with the Partnership receiving net sale proceeds of
$1,613,288 which resulted in a net gain of $691,525. At the time
of sale, the cost and related accumulated depreciation of the
property was $1,126,780 and $205,017, respectively. A portion of
the net sale proceeds was used to pay off the bank note and
satisfy the mortgage on the property discussed below.
In 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, which resulted in a net gain of
$80,500 for the Jiffy Lube in Garland, Texas. 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, which resulted in a net
gain of $35,705 for one of the Jiffy Lube's in Dallas, Texas. At
the time of sale, the cost and related accumulated depreciation
of the property was $154,781 and $29,268.
In July 1995, the Partnership entered into an agreement to
sell the Super 8 Motel in Hot Springs, Arkansas, to the lessee.
The sale price for the Partnership's interest in the property
will be approximately $680,000, which will result in a net gain
of approximately $220,000. As of December 31, 1995, the
Partnership had received a $20,000 non-refundable deposit and
recognized a gain of $18,534. The Partnership anticipates the
sale will close on March 29, 1996.
ITEM 6. 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 approximately
$428,000 for the building and equipment and approximately $50,000
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 December 31, 1995 was $496,967 and $177,343,
respectively. The settlement would result in a net gain of
approximately $108,376. The Partnership's cost of the land is
$253,747.
During 1995 and the fourth quarter of 1994, the
Partnership distributed $730,214 and $299,667, respectively, of
the net sale proceeds to the Limited and General 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 $50.98 and $20.85 per Limited Partnership
Unit, respectively. The majority of the remaining net proceeds
will be reinvested in additional properties.
In November, 1995, the Partnership entered into an
Agreement to purchase an Applebee's restaurant in Victoria,
Texas. The purchase price will be approximately $1,314,000. The
property will be 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'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. The redemption payments generally are funded with cash
that would normally be paid as part of the regular quarterly
distributions. As a result, total distributions and
distributions payable have fluctuated from year to year due to
cash used to fund redemption payments. This is one of the
reasons why distributions to Partners were higher in 1994 when
compared to 1995.
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 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On January 31, 1994, the Partnership entered into a five-
year bank term Note for $570,287 with interest at the prime rate
plus one half percent. Proceeds from the Note were advanced to
WIM for refurbishing and other restaurant costs related to the
J.T. McCord's properties. The Partnership provided a mortgage
and a Lease Assignment Agreement on its Applebee's restaurant in
Charleston, South Carolina as collateral for the loan. On
December 15, 1994, the Partnership sold the property and a
portion of the net proceeds was used to pay off the outstanding
principal balance of the bank Note and satisfy the mortgage. In
1994, interest expense on the Note was $34,749.
In November, 1993, the Partnership established a $350,000
unsecured line of credit at Fidelity Bank of Edina, Minnesota.
The line of credit bears interest at the prime rate plus one
percent on the outstanding balance, which was due on demand, but
in any event no later than November 1, 1994. The line of credit
was established to provide short-term financing to cover any
temporary cash deficits. In December, 1994, the line of credit
was cancelled. For the year ended December 31, 1994, interest
expense related to the line of credit was $6,985.
The continuing rent payments from the properties, together
with cash generated from the property sales, should be adequate
to fund continuing distributions and meet other Partnership
obligations on both a short-term and long-term basis.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying Index to Financial Statements.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report
Balance Sheet as of December 31, 1995 and 1994
Statements for the Years Ended December 31, 1995 and 1994:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
INDEPENDENT AUDITOR'S REPORT
To the Partners:
AEI Real Estate Fund XVI Limited Partnership
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI REAL
ESTATE FUND XVI LIMITED PARTNERSHIP (a Minnesota limited
partnership) as of December 31, 1995 and 1994 and the related
statements of income, cash flows and changes in partners' capital
for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of AEI Real Estate Fund XVI Limited Partnership as of December
31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota /s/ Boulay, Heutmaker, Zibell &Co. P.L.L.P.
February 6, 1996 Certified Public Accountants
<PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1995 1994
CURRENT ASSETS:
Cash $ 1,873,834 $ 882,790
Receivables 54,661 65,157
----------- -----------
Total Current Assets 1,928,495 947,947
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 3,537,198 3,873,470
Buildings and Equipment 6,966,837 7,811,053
Property Acquisition Costs 14,813 0
Accumulated Depreciation (2,274,424) (2,217,859)
----------- -----------
Net Investments in Real Estate 8,244,424 9,466,664
----------- -----------
Total Assets $10,172,919 $10,414,611
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 153,644 $ 111,970
Distributions Payable 190,172 129,742
Current Portion of Contract Payable 0 38,698
Deferred Income 22,212 21,012
----------- -----------
Total Current Liabilities 366,028 301,422
----------- -----------
CONTRACT PAYABLE - Net of Current Portion 0 197,504
DEFERRED INCOME - Net of Current Portion 244,193 267,605
PARTNERS' CAPITAL (DEFICIT):
General Partners (33,570) (32,717)
Limited Partners, $1,000 Unit value;
15,000 Units authorized and issued;
14,108 and 14,226 outstanding in
1995 and 1994, respectively 9,596,268 9,680,797
----------- -----------
Total Partners' Capital 9,562,698 9,648,080
----------- -----------
Total Liabilities and Partners' Capital $10,172,919 $10,414,611
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
<PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 3l
1995 1994
INCOME:
Rent $ 1,009,008 $ 1,254,459
Investment Income 77,846 10,300
----------- -----------
Total Income 1,086,854 1,264,759
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 223,782 238,489
Partnership Administration and Property
Management - Unrelated Parties 138,202 1,204,968
Interest 12,713 52,099
Depreciation 317,059 356,529
----------- -----------
Total Expenses 691,756 1,852,085
----------- -----------
OPERATING INCOME (LOSS) 395,098 (587,326)
GAIN ON SALE OF REAL ESTATE 572,654 691,525
----------- -----------
NET INCOME $ 967,752 $ 104,199
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 9,678 $ 1,042
Limited Partners 958,074 103,157
----------- -----------
$ 967,752 $ 104,199
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(14,196 and 14,330 weighted average Units
outstanding in 1995 and 1994, respectively) $ 67.49 $ 7.20
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
<PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 967,752 $ 104,199
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 317,059 356,529
Gain on Sale of Real Estate (572,654) (691,525)
Decrease in Receivables 47,996 16,754
Increase (Decrease) in Payable to
AEI Fund Management, Inc. 41,674 (37,794)
Increase (Decrease) in Contract Payable (236,202) 236,202
Decrease in Security Deposit 0 (15,361)
Increase (Decrease) in Deferred Income (22,212) 286,978
----------- -----------
Total Adjustments (424,339) 151,783
----------- -----------
Net Cash Provided By
Operating Activities 543,413 255,982
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (14,813) 0
Proceeds from Sale of Real Estate 1,455,148 1,613,288
Decrease in Long-Term Receivable 0 392,287
----------- -----------
Net Cash Provided By
Investing Activities 1,440,335 2,005,575
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable 60,430 (74,386)
Distributions to Partners (972,554) (989,130)
Redemption Payments (80,580) (104,461)
Decrease in Line of Credit 0 (263,000)
----------- -----------
Net Cash Used For
Financing Activities (992,704) (1,430,977)
----------- -----------
NET INCREASE IN CASH 991,044 830,580
CASH, beginning of period 882,790 52,210
----------- -----------
CASH, end of period $ 1,873,834 $ 882,790
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid During the Year $ 17,157 $ 47,655
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Note Receivable Acquired in Sale of Property $ 37,500
===========
The accompanying notes to financial statements are an integral
part of this statement.
<PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1993 $ (22,823) $10,660,295 $10,637,472 14,364.70
Distributions (9,891 ) (979,239) (989,130)
Redemption Payments (1,045) (103,416) (104,461) (139.00)
Net Income 1,042 103,157 104,199
---------- ----------- ---------- ----------
BALANCE, December 31, 1994 (32,717) 9,680,797 9,648,080 14,225.70
Distributions (9,725) (962,829) (972,554)
Redemption Payments (806) (79,774) (80,580) (118.00)
Net Income 9,678 958,074 967,752
---------- ----------- ---------- ----------
BALANCE, December 31, 1995 $ (33,570) $ 9,596,268 $ 9,562,698 14,107.70
========== =========== ========== ==========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(1) 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. (AEI), 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.
Any Net Proceeds of Sale, as defined, from the sale or
financing of the Partnership's properties which the General
Partners determine to distribute will, after provisions for
debts and reserves, be paid in the following manner: (i)
first, 99% to the Limited Partners and 1% to the General
Partners until the Limited Partners receive an amount equal
to: (a) their Adjusted Capital Contribution plus (b) an
amount equal to 6% of their Adjusted Capital Contribution
per annum, cumulative but not compounded, to the extent not
previously distributed from Net Cash Flow; (ii) next, 99% to
the Limited Partners and 1% to the General Partners until
the Limited Partners receive an amount equal to 14% of their
Adjusted Capital Contribution per annum, cumulative but not
compounded, to the extent not previously distributed; (iii)
next, to the General Partners until cumulative distributions
to the General Partners under Items (ii) and (iii) equal 15%
of cumulative distributions to all Partners under Items (ii)
and (iii). Any remaining balance will be distributed 85% to
the Limited Partners and 15% to the General Partners.
Distributions to the Limited Partners will be made pro rata
by Units.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(1) Organization - (Continued)
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
property, will be allocated first in the same ratio in
which, and to the extent, Net Cash Flow is distributed to
the Partners for such year. Any additional profits will be
allocated 90% to the Limited Partners and 10% to the General
Partners. In the event no Net Cash Flow is distributed to
the Limited Partners, 90% of each item of Partnership
income, gain or credit for each respective year shall be
allocated to the Limited Partners, and 10% of each such item
shall be allocated to the General Partners. Net losses from
operations will be allocated 98% to the Limited Partners and
2% to the General Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of the Partnership's property will be
allocated in accordance with the Partnership Agreement as
follows: (i) first, to those partners with deficit balances
in their capital accounts in an amount equal to the sum of
such deficit balances; (ii) second, 99% to the Limited
Partners and 1% to the General Partners until the aggregate
balance in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital Contributions
plus an amount equal to 14% of their Adjusted Capital
Contributions per annum, cumulative but not compounded, to
the extent not previously allocated; (iii) third, to the
General Partners until cumulative allocations to the General
Partners equal 15% of cumulative allocations. Any remaining
balance will be allocated 85% to the Limited Partners and
15% to the General Partners. Losses will be allocated 98%
to the Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(2) Summary of Significant Accounting Policies -
Financial Statement Presentation
The accounts of the Partnership are maintained on the
accrual basis of accounting for both federal income tax
purposes and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(2) Summary of Significant Accounting Policies - (Continued)
Given that the Partnership has had limited success in its
efforts to lease or dispose of certain properties, it is
reasonably possible that the Partnership's estimate that
it will recover the carrying amount of these properties
from future operations or sales will change in the near
term.
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
Partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under long-term
triple net leases classified as operating leases. The
Partnership recognizes rental revenue on the accrual
basis according to the terms of the individual leases.
For leases which contain cost of living increases, the
increases are recognized in the year in which they are
effective.
Real estate is recorded at the lower of cost or estimated
net realizable value. The Financial Accounting Standards
Board has issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" which is effective for the
Partnership's fiscal year ended December 31, 1996. The
Partnership regularly reviews the carrying value of its
properties and will reduce properties to their net
realizable value as needed. Adoption of Statement 121 is
not expected to have a material effect on the
Partnership's operations.
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings and equipment.
The buildings and equipment of the Partnership are
depreciated using the straight-line method for financial
reporting purposes based on estimated useful lives of 30
years and 10 years, respectively.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(3) Related Party Transactions -
In 1987, the Partnership acquired an 83.6514% interest in
the Children's World Daycare Center located in Sterling
Heights, Michigan. The remaining interest is owned by an
affiliate of the Partnership, AEI Real Estate Fund 85-B
Limited Partnership.
In 1987 and 1988, the Partnership acquired a 55.0958%
interest in the restaurant in Waco, Texas, a 40% interest in
the St. Louis Fuddruckers restaurant and a 50% interest in a
Super 8 Motel. The remaining interests in these properties
are owned by an affiliate of the Partnership, AEI Real
Estate Fund XV Limited Partnership.
In 1988, the Partnership purchased a 50% interest in a
Cheddar's restaurant and a 58.12% interest in the Columbia
Applebee's restaurant. The remaining interests in these
properties are owned by an affiliate of the Partnership, AEI
Real Estate Fund XVII Limited Partnership.
In February and March, 1988, the Partnership sold, at its
original cost of $2,101,052, a majority interest in four
properties to an affiliated partnership, AEI Real Estate
Fund XVII Limited Partnership. The Partnership sold a 65%
interest in the Mesquite J.T. McCord's restaurant, a 50%
interest in the Jiffy Lube in Garland, Texas and a 75%
interest in both of the Jiffy Lubes in Dallas, Texas. The
Partnership recognized a $9,272 gain on the sale of the
interests in the properties, which represents recapture of
the accumulated depreciation on the property interests at
the time of sale. The sale of these interests allowed the
Partnership to acquire all of its commitments without
financing and provided a greater diversification of its
property portfolio.
In 1990, the Partnership acquired a 30.8078% interest in a
Sizzler restaurant. The remaining interest in this property
is owned by AEI Real Estate Funds XVII and XVIII Limited
Partnerships, affiliates of the Partnership.
In May, 1993, the Partnership acquired a 73% interest in an
Applebee's restaurant in Slidell, Louisiana. The remaining
interest in this property is owned by AEI Real Estate Fund
XVIII Limited Partnership.
Each Partnership owns a separate undivided interest in the
properties. No specific agreement or commitment exists
between the Partnerships as to the management of their
respective interests in the properties, and the Partnership
that holds more than a 50% interest does not control
decisions over the other Partnership's interest. The
financial statements reflect only this Partnership's
percentage share of the properties' land, building and
equipment, liabilities, revenues and expenses.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(3) Related Party Transactions -(Continued)
AFM and AEI received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 3l
1995 1994
a. AEI and AFM are reimbursed for all costs
incurred in connection with managing the
Partnership's operations, maintaining the
Partnership's books and communicating
the results of operations to the Limited
Partners. $ 223,782 $ 238,489
======== ========
b. AEI and AFM are reimbursed for all direct
expenses they have paid on the Partnership's
behalf to third parties. These expenses
included printing costs, legal and filing fees,
direct administrative costs, outside audit and
accounting costs, taxes, insurance and
other property costs. In 1994, this amount
includes $1,058,425 of property operating
and renovation costs related to the J.T. McCord's
properties as discussed in Note 4. $ 138,202 $1,204,968
======== =========
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 $6,250 for 1995. $ 14,813 $ 0
======== ========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a, b and c. This
balance is non-interest bearing and unsecured and is to be
paid in the normal course of business.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through non-cancelable triple net leases, which are
classified as operating leases. Under a triple net lease,
the lessee is responsible for all real estate taxes,
insurance, maintenance, repairs and operating expenses of
the property. The initial Lease terms are 20 years except
for the Houston daycare center, the JEMCARE properties and
the Super 8 Motel (10 years), the Credit Union (11 years),
the Arby's (15 years), and the Waco property discussed
below. Several of the Leases have renewal options which may
extend the Lease term an additional 9 to 15 years. The
Leases contain rent clauses which entitle the Partnership to
receive additional rent in future years based on stated rent
increases or if gross receipts for the property exceed
certain specified amounts, among other conditions. Certain
lessees have been granted options to purchase the property.
Depending on the lease, the purchase price is either
determined by a formula, or is the greater of the fair
market value of the property or the amount determined by a
formula. In all cases, if the option were to be exercised
by the lessee, the purchase price would be greater than the
original cost of the property.
The Partnership's properties are all commercial, single-
tenant buildings. The restaurant in Waco, Texas was
constructed in 1980 and enlarged in 1982 and 1983. The
Irving and Mesquite J.T. McCord's restaurants and the
Houston daycare center were constructed in 1984. The Omaha
Fuddruckers restaurant was constructed in 1985 and remodeled
in 1987. The Sizzler restaurant was constructed in 1989.
The Applebee's restaurant in Slidell, Louisiana, was
constructed in 1993. All other properties were constructed
in 1986, 1987 or 1988. All properties were acquired in 1987
or 1988, except for the Sizzler restaurant which was
acquired in 1990, and the Slidell Applebee's restaurant in
1993. There have been no costs capitalized as improvements
subsequent to the acquisitions.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(4) Investments in Real Estate - (Continued)
The cost of the properties and the related accumulated
depreciation at December 31, 1995 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Daycare Center
Houston, TX $ 147,753 $ 335,375 $ 483,128 $ 121,003
Credit Union, Wyoming, MI 166,434 459,805 626,239 167,369
Arby's, Grand Rapids, MI 195,229 457,651 652,880 166,585
Fuddruckers, Omaha, NE 307,913 843,630 1,151,543 369,765
Children's World,
Sterling Heights, MI 138,133 591,353 729,486 178,909
Jiffy Lube, Dallas, TX 65,918 88,973 154,891 30,171
JEMCARE, Arlington, TX 148,214 302,261 450,475 89,593
Zapata's, Waco, TX 226,315 447,970 674,285 151,302
J.T. McCord's, Irving, TX 441,252 706,081 1,147,333 238,479
J.T. McCord's, Mesquite, TX 230,337 289,772 520,109 97,861
JEMCARE, Arlington, TX 323,671 279,970 603,641 98,524
Cheddar's, Indianapolis, IN 253,747 496,967 750,714 177,343
Fuddruckers, St. Louis, MO 396,943 364,110 761,053 127,208
Super 8, Hot Springs, AR 105,417 478,236 583,653 131,056
Sizzler, Cincinnati, OH 111,043 357,097 468,140 87,693
Applebee's, Slidell, LA 278,879 467,586 746,465 41,563
----------- ------------ ----------- -----------
$ 3,537,198 $ 6,966,837 $10,504,035 $ 2,274,424
=========== ============ =========== ===========
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.
Flagship continued to operate the properties while
attempting to develop a plan of reorganization which would
be acceptable to the bankruptcy court and its creditors. In
1992, it became apparent that Flagship did not have the
financial resources to operate the properties in compliance
with the leases. In March, 1993, the Partnership, along
with affiliated Partnerships which also own J.T. McCord's
properties, filed its own plan of reorganization (the
"Plan") with the Court. That Plan provided for an assignee
of the Partnerships (a replacement tenant) to purchase the
assets of Flagship and operate the restaurants with
financial assistance from the Partnerships. This Plan was
expected to allow the Partnerships to avoid closing these
properties, allow operations to continue uninterrupted, and
avoid further costly litigation with Flagship and its
creditors. The Plan was confirmed by the Court and the
creditors April 16, 1993 and became effective July 20, 1993.
At that time, various claims between Flagship and the
Partnership were dismissed. On April 21, 1993, the
Partnership's assignee, WIM, Inc. (WIM), took over
management of the restaurants.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(4) Investments in Real Estate - (Continued)
To entice WIM to operate the restaurants and enter into the
Lease Agreements, the Partnership provided funds to renovate
the restaurants and paid for operating expenses. However,
WIM was not able to operate the properties profitably and
was unable to make rental payments as provided in the Lease
Agreements. The Partnership's share of renovation and
operating expenses during this period was $755,773 which was
included in Partnership Administration and Property
Management - Unrelated Parties. 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.
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 December, 1994, the lessee of the Applebee's restaurant
in Charleston, South Carolina, exercised an option in the
Lease Agreement to purchase the property. On December 15,
1994, the sale closed with the Partnership receiving net
sale proceeds of $1,613,288 which resulted in a net gain of
$691,525. At the time of sale, the cost and related
accumulated depreciation of the property was $1,126,780 and
$205,017, respectively. A portion of the net sale proceeds
was used to pay off the bank note and satisfy the mortgage
on the property discussed in Note 7.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(4) Investments in Real Estate - (Continued)
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, which resulted in
a net gain of $80,500 for the Jiffy Lube in Garland, Texas.
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, which resulted in a net gain of $35,705 for one
of the Jiffy Lube's in Dallas, Texas. At the time of sale,
the cost and related accumulated depreciation of the
property was $154,781 and $29,268.
In July 1995, the Partnership entered into an agreement to
sell the Super 8 Motel in Hot Springs, Arkansas, to the
lessee. The sale price for the Partnership's interest in
the property will be approximately $680,000, which will
result in a net gain of approximately $220,000. As of
December 31, 1995, the Partnership had received a $20,000
non-refundable earnest money deposit and recognized a gain
of $18,534. The Partnership anticipates the sale will close
on March 29, 1996.
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
approximately $428,000 for the building and equipment and
approximately $50,000 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 December 31, 1995 was
$496,967 and $177,343, respectively. The settlement will be
in excess of the net book value of the building and
equipment at December 31, 1995. The Partnership's cost of
the land is $253,747.
During 1995 and the fourth quarter of 1994, the Partnership
distributed $730,214 and $299,667, respectively, of the net
sale proceeds to the Limited and General 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 $50.98 and $20.85 per
Limited Partnership Unit, respectively. The majority of the
remaining net proceeds will be reinvested in additional
properties.
In November, 1995, the Partnership entered into an Agreement
to purchase an Applebee's restaurant in Victoria, Texas.
The purchase price will be approximately $1,314,000. The
property will be 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 has incurred net costs of $14,813
related to the acquisition of the property. The costs have
been capitalized and will be allocated to land, building and
equipment.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(4) Investments in Real Estate - (Continued)
The Partnership owns a 30.8078% interest in the Sizzler
restaurant in Cincinnati, Ohio. In November, 1992, after
reviewing the operating results of the lessee, the
Partnership agreed to amend the Lease Agreement of the
Sizzler restaurant. As of November, 1993, the lessee was in
default under the amended Lease Agreement. After reviewing
the lessee's operating results, the Partnership determined
that the lessee would be unable to operate the restaurant in
a manner capable of maximizing the restaurant's sales.
Consequently, at the direction of the Partnership, a multi-
unit restaurant operator assumed operation of this
restaurant while the Partnership reviewed the available
options. 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 property. No rent was received in
1995 and 1994. The total amount of rent not collected in
1995 and 1994 was $64,831 and $62,943, respectively. These
amounts were not accrued for financial reporting purposes.
The minimum future rentals on the non-cancelable Leases for
years subsequent to December 31, 1995 are as follows:
1996 $ 924,261
1997 879,750
1998 814,890
1999 788,336
2000 752,143
Thereafter 5,509,836
---------
$9,669,216
=========
The Partnership recognized contingent rents in 1995 and 1994
of $19,971 and $58,578, respectively.
(5) Line of Credit -
In November, 1993, the Partnership established a $350,000
unsecured line of credit at Fidelity Bank of Edina,
Minnesota. The line of credit bears interest at the prime
rate plus one percent on the outstanding balance, which was
due on demand, but in any event no later than November 1,
1994. The line of credit was established to provide short-
term financing to cover any temporary cash deficits. In
December, 1994, the line of credit was cancelled. For the
year ended December 31, 1994, interest expense related to
the line of credit was $6,985.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(6) 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 the current annual rent of
$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 December 31, 1995 and 1994, the
Partnership recognized $33,318 and $11,106, respectively, of
this payment as income.
(7) Long-Term Debt -
On January 31, 1994, the Partnership entered into a five-
year bank term Note for $570,287 with interest at the prime
rate plus one half percent. Proceeds from the Note were
advanced to WIM for renovation and other restaurant costs
related to the J.T. McCord's properties. The Partnership
provided a mortgage and a Lease Assignment Agreement on the
Applebee's restaurant located in Charleston, South Carolina
as collateral for the loan. On December 15, 1994, a portion
of the net proceeds from the sale of the Applebee's property
was used to pay off the outstanding principal balance of the
bank Note and satisfy the mortgage. In 1994, interest
expense on the Note was $34,749.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(8) Major Tenants -
The following schedule presents rent revenue from individual
tenants, or affiliated groups of tenants, who each
contributed more than ten percent of the Partnership's total
rent revenue for the years ended December 31:
Tenants who individually generate
10% or more of total rent revenue:
1995 1994
Tenants Industry
Fuddruckers, Inc. Restaurant $ 259,457 $ 267,856
Southland Restaurant
Development Company, L.L.C. Restaurant 102,424 N/A
Apple South, Inc. Restaurant N/A 288,204
-------- --------
Aggregate rent revenue of major tenants $ 361,881 $ 556,060
======== ========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 36% 44%
======== ========
(9) Partners' Capital -
Cash distributions of $10,531 and $10,936 were made to the
General Partners and $962,829 and $979,239 were made to the
Limited Partners in 1995 and 1994, respectively. The
Limited Partners' distributions represent $67.82 and $68.33
per Limited Partnership Unit outstanding using 14,196 and
14,330 weighted average Units in 1995 and 1994,
respectively. The distributions represent $67.49 and $7.20
per Unit of Net Income and $.33 and $61.13 per Unit of
return of contributed capital in 1995 and 1994,
respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $643,138 and $193,255 of
proceeds from property sales in 1995 and 1994, respectively.
The distributions reduced the Limited Partners' Adjusted
Capital Contributions.
Distributions of Net Cash Flow to the General Partners
during 1995 and 1994 were subordinated to the Limited
Partners as required in the Partnership Agreement. As a
result, 99% of distributions and income were allocated to
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 and in no
event, obligated to purchase Units if such purchase would
impair the capital or operation of the Partnership.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(9) Partners' Capital - (Continued)
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 1994,
seven Limited Partners redeemed a total of 139 Partnership
Units for $103,416 using proceeds from the Applebee's sale.
The redemptions increase the remaining Limited Partners'
ownership interest 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
$967.07 per original $1,000 invested.
(10) Income Taxes -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the years ended December 31:
1995 1994
Net Income For Financial
Reporting Purposes $ 967,752 $ 104,199
Depreciation for Tax Purposes
Under Depreciation For Financial
Reporting Purposes 56,416 84,612
Income Accrued for Tax Purposes Over
(Under) Income For Financial
Reporting Purposes (4,324) 59,568
Property Expenses For Tax Purposes
Under (Over) Expenses For Financial
Reporting Purposes (234,439) 565,968
Gain on Sale of Real Estate For Tax
Purposes Under Gain For Financial
Reporting Purposes (25,031) (13,866)
--------- ---------
Taxable Income to Partners $ 760,374 $ 800,481
========= =========
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(10) 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:
1995 1994
Partners' Capital For
Financial Reporting Purposes $ 9,562,698 $ 9,648,080
Depreciation For Tax Purposes
Under Depreciation For Financial
Reporting Purposes 80,206 23,790
Capitalized Start-Up Costs
Under Section 195 185,558 185,558
Amortization of Start-Up and
Organization Costs (190,952) (190,952)
Income Accrued For Tax Purposes Over
Income For Financial
Reporting Purposes 332,908 337,232
Property Expenses For Tax Purposes
Under Expenses For Financial Reporting
Purposes 377,613 612,052
Gain on Sale of Real Estate For Tax
Purposes Over Gain For Financial
Reporting Purposes 47,570 72,601
Organization and Syndication Costs
Treated as Reduction of Capital
For Financial Reporting Purposes 1,987,080 1,987,080
----------- -----------
Partners' Capital For
Tax Reporting Purposes $12,382,681 $12,675,441
=========== ===========
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
(11) Fair Value of Financial Instruments -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, are as follows at
December 31, 1995:
1995
Carrying Fair
Amount Value
Cash $1,873,834 $1,873,834
Note Receivable 37,500 37,500
The carrying values of cash and the note receivable
approximate fair values.
(12) Contingencies -
The Partnership is subject to legal proceedings and claims
which arise in the ordinary course of its business. In the
opinion of management, these matters are adequately covered
by insurance, or if not so covered, are without merit or are
of such a nature, or involve such amounts, as would not
materially affect the financial position or results of
operations of the Partnership.
ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The registrant is a limited partnership and has no
officers, directors, or direct employees. The General Partners
of the registrant are Robert P. Johnson and AFM. The General
Partners manage and control the Partnership's affairs and have
general responsibility and the ultimate authority in all matters
affecting the Partnership's business. The director and officers
of AFM are as follows:
Robert P. Johnson, age 51, is Chief Executive Officer,
President and Director and has held these positions since the
formation of AFM in September, 1986, and has been elected to
continue in these positions until March, 1997. From 1970 to the
present, he has been employed exclusively in the investment
industry, specializing in tax-advantaged limited partnership
investments. In that capacity, he has been involved in the
development, analysis, marketing and management of public and
private investment programs investing in net lease properties as
well as public and private investment programs investing in
energy development. Since 1971, Mr. Johnson has been the
president, a director and a registered principal of AEI
Incorporated, which is registered with the Securities and
Exchange Commission as a securities broker-dealer, is a member of
the National Association of Securities Dealers, Inc. (NASD) and
is a member of the Security Investors Protection Corporation
(SIPC). Mr. Johnson has been president, a director and the
principal shareholder of AEI Fund Management, Inc., a real estate
management company founded by him, since 1978. Mr. Johnson is
currently a general partner or principal of the general partner
in fifeen other limited partnerships.
Mark E. Larson, age 43, is Executive Vice President,
Treasurer and Chief Financial Officer and has been elected to
continue in these positions until March, 1997. Mr. Larson has
been Treasurer and Executive Vice President since December, 1987
and Chief Financial Officer since January, 1990. In January,
1993, Mr. Larson was elected to serve as Secretary of AFM and
will continue to serve until March, 1997. Mr. Larson has been
employed by AEI Fund Management, Inc. and affiliated entities
since 1985. From 1979 to 1985, Mr. Larson was with Apache
Corporation as manager of Program Accounting responsible for the
accounting and reports for approximately 45 public partnerships.
Mr. Larson is responsible for supervising the accounting
functions of AFM and the registrant.
ITEM 10. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative and management services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
AFM, the Managing General Partner of the registrant, and
Robert P. Johnson, its Individual General Partner, contributed
$1,000 in total for their interest in the registrant. See Item 1
for a discussion of their share of the registrant's profits and
losses. Neither the General Partners nor their affiliates have
purchased Limited Partnership 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.
The following table sets forth the forms of compensation,
distributions and cost reimbursements paid by the registrant to
the General Partners or their Affiliates in connection with the
operation of the Fund and its properties for the period from
inception through December 31, 1995.
Person or Entity Amount Incurred From
Receiving Form and Method Inception (February 6, 1987)
Compensation of Compensation To December 31, 1995
AEI Incorporated Selling Commissions equal to 9% of $1,500,000
proceeds plus a 1% nonaccountable
expense allowance, most of which was
reallowed to Participating Dealers.
General Partners Reimbursement at Cost for other $ 487,080
and Affiliates Organization and Offering Costs.
General Partners Reimbursement at Cost for all $ 222,019
and Affiliates Acquisition Expenses
General Partners 1% of Net Cash Flow in any fiscal year $ 87,188
until the Limited Partners have received
annual, non-cumulative distributions of
Net Cash Flow equal to 10% of their
Adjusted Capital Contributions and
10% of any remaining Net Cash Flow in
such fiscal year.
General Partners Reimbursement at Cost for all $1,861,080
and Affiliates Administrative Expenses attributable to
the Fund, including all expenses related
to management and disposition of the Fund's
properties and all other transfer agency,
reporting, partner relations and other
administrative functions.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Continued)
Person or Entity Amount Incurred From
Receiving Form and Method Inception (February 6, 1987)
Compensation of Compensation To December 31, 1995
General Partners 15% of distribution of Net Proceeds $ 13,705
of Sale other than distributions
necessary to restore Adjusted Capital
Contributions and provide a 6% cumulative
return to Limited Partners. The General
Partners will receive only 1% of
distributions of Net Proceeds of Sale
until the Limited Partners have received
an amount equal to: (a) their Adjusted
Capital Contributions, plus (b) an
amount equal to 14% of their Adjusted
Capital Contributions per annum, cumulative
but not compounded, less (c) all previous cash
distributions to the Limited Partners.
The limitations included in the Partnership Agreement
require that the cumulative reimbursements to the General
Partners and their affiliates for administrative expenses not
allowed under the NASAA Guidelines ("Guidelines") will not exceed
the sum of (i) the front-end fees allowed by the Guidelines less
the front-end fees paid, (ii) the cumulative property management
fees allowed but not paid, (iii) any real estate commission
allowed under the Guidelines, and (iv) 10% of Net Cash Flow less
the Net Cash Flow actually distributed. The reimbursements not
allowed under the Guidelines include a controlling person's
salary and fringe benefits, rent and depreciation. As of
December 31, 1995, the cumulative reimbursements to the General
Partners and their affiliates did not exceed these amounts.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A.
A. Exhibits -
Description
27 Financial Data Schedule
for year ended December 31, 1995.
B. Reports on Form 8-K and Form 8-K/A - None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AEI REAL ESTATE FUND XVI
Limited Partnership
By: AEI Fund Management XVI, Inc.
Its Managing General Partner
March 21, 1996 By: /s/ Robert P. Johnson
Robert P.Johnson, President and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Name Title Date
/s/ Robert P. Johnson President (Principal Executive Officer) March 21, 1996
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 21, 1996
Mark E. Larson and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000804127
<NAME> AEI REAL ESTATE FUND XVI LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,873,834
<SECURITIES> 0
<RECEIVABLES> 54,661
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,928,495
<PP&E> 10,518,848
<DEPRECIATION> (2,274,424)
<TOTAL-ASSETS> 10,172,919
<CURRENT-LIABILITIES> 366,028
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,562,698
<TOTAL-LIABILITY-AND-EQUITY> 10,172,919
<SALES> 0
<TOTAL-REVENUES> 1,086,854
<CGS> 0
<TOTAL-COSTS> 679,043
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,713
<INCOME-PRETAX> 967,752
<INCOME-TAX> 0
<INCOME-CONTINUING> 967,752
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 967,752
<EPS-PRIMARY> 67.49
<EPS-DILUTED> 67.49
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