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, 1997
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, 1997 were
$1,036,455.
As of February 28, 1998, there were 13,871.40 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 $13,871,400.
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 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 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. In March,
1997, the restaurant in Mesquite was re-leased to Texas Sports
City Cafe, Ltd. under a triple net lease agreement with a primary
term of 12 years which may be renewed for up to two consecutive
five-year periods. The Partnership's share of the annual base
rent is $17,500 for the first lease year and $31,500 for the
second lease year, with rent increases in each subsequent lease
year of either three percent of the prior year's rent or three
percent of gross receipts in years two and three and six percent
of gross receipts thereafter, to the extent they exceed the base
rent.
On December 22, 1997, the Partnership sold the J.T.
McCord's restaurant in Irving, Texas to an unrelated third party.
The Partnership received net sales proceeds of $741,635 which
resulted in a net loss of $109,144. At the time of sale, the
cost and related accumulated depreciation of the property was
$1,147,333 and $296,554, respectively. While the properties were
being re-leased or sold, the Partnership was responsible for the
real estate taxes and other costs required to maintain the
properties.
The Partnership owns a 55.0958% interest in a restaurant
in Waco, Texas, which was previously closed. In June 1995, the
Partnership re-leased the restaurant to Tex-Mex Cocina of Waco,
L.C. The Lease Agreement had a primary term of eighteen months
with an annual rental payment of $29,752. The Partnership could
also receive additional rent if gross receipts from the property
exceeded certain specified amounts. In December, 1997, the
lessee elected not to exercise the renewal option in the lease.
The restaurant was closed and is listed for sale or lease. While
the property is vacant, the Partnership is responsible for the
real estate taxes and other costs required to maintain the
property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of the
Partnership's interest in the Waco property was approximately
$385,600. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $100,000 was recognized, which is
the difference between the book value at December 31, 1997 of
$485,600 and the estimated fair value of $385,600. The charge
was recorded against the cost of the land and building.
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 lessee of the Super 8 Motel in Hot
Springs, Arkansas, exercised an option in the Lease Agreement to
purchase the property. On March 29, 1996, the sale closed with
the Partnership receiving net sale proceeds of $663,386 which
resulted in a net gain of $215,017. 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
reached an agreement with the tenant and insurance company which
called 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 listed the land for sale. The
Partnership recognized net disposition proceeds of $406,892 which
resulted in a net gain of $88,207. At the time of disposition,
the cost and related accumulated depreciation was $496,967 and
$178,282, respectively. As of December 31, 1997, based on an
analysis of market conditions in the area, it was determined the
fair value of the Partnership's interest in the land was
approximately $200,000. In the fourth quarter of 1997, a charge
to operations for real estate impairment of $54,000 was
recognized, which is the difference between the book value at
December 31, 1997 of $253,747 and the estimated fair value of
$200,000.
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
$1,335,555. 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 owned a 30.8078% interest in a Sizzler
restaurant at the King's Island Theme Park near Cincinnati, Ohio.
In January, 1994, the Partnership closed the restaurant and
listed it for sale or lease. On January 23, 1997, the
Partnership sold its interest in the property to an unrelated
third party. The Partnership received net sales proceeds of
$149,201, which resulted in a net loss of $216,300, which was
recognized as a real estate impairment in the fourth quarter of
1996. Prior to the sale, the Partnership was responsible for the
real estate taxes and other costs required to maintain the
property. No rent was received in 1997 or 1996 from the
property.
In August, 1996, the Partnership entered into an agreement
to purchase a Caribou Coffee store in Atlanta, Georgia. The
property was acquired on August 15, 1997 for $1,247,571. The
property is leased to Caribou Coffee Company, Inc. under a Lease
Agreement with a primary term of 18 years and annual rental
payments of $142,025. Through December 31, 1996, the Partnership
had advanced $701,662 for the construction of the property and
was charging interest on the Note at a rate of 7%.
Pursuant to the Partnership Agreement, as amended, net
sale proceeds may be reinvested in additional properties until a
date ten years after the date on which the offer and sale of
Units is terminated. This period expired on November 6, 1997.
In February, 1998, the Managing General Partner proposed an
Amendment to the Limited Partnership Agreement that would allow
the Partnership to reinvest the majority of the sale proceeds
from the J.T. McCord's restaurant in Irving, Texas and subsequent
property sales in additional properties. Voting on this
Amendment will continue until April 17, 1998.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Major Tenants
During 1997, five of the Partnership's lessees each
contributed more than ten percent of the Partnership's total
rental revenue. The major tenants in aggregate contributed 74%
of the Partnership's total rental revenue in 1997. It is
anticipated that, based on the minimum rental payments required
under the leases, each major tenant, except for JEMCARE, Inc.,
will continue to contribute more than ten percent of the
Partnership's total rental revenue in 1998 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.
Year 2000
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. AEI is currently analyzing its
computer hardware and software systems to determine what, if any,
resources need to be dedicated regarding Year 2000 issues. The
Partnership does not anticipate any significant operational
impact or incurring material costs as a result of AEI becoming
Year 2000 compliant.
ITEM 2. DESCRIPTION OF PROPERTIES.
Investment Objectives
The Partnership's investment objectives are to acquire
existing or newly-developed commercial properties throughout the
United States that offer the potential for (i) preservation and
protection of the Partnership's capital; (ii) partially tax-
deferred cash distributions from operations which may increase
through rent participation clauses or mandated rent increases;
and (iii) long-term capital gains through appreciation in value
of the Partnership's properties realized upon sale. The
Partnership does not have a policy, and there is no limitation,
as to the amount or percentage of assets that may be invested in
any one property. However, to the extent possible, the General
Partners attempt to diversify the type and location of the
Partnership's properties.
Description of Properties
The Partnership's properties are all commercial, single
tenant buildings. All the properties were acquired on a debt-
free basis and are leased to various tenants under triple net
leases, which are classified as operating leases. The
Partnership holds an undivided fee simple interest in the
properties. At any time prior to selling the properties, the
Partnership may mortgage one or more of its properties in amounts
not exceeding 50% of the fair market value of the property.
ITEM 2. PROPERTIES. (Continued)
The Partnership's properties are subject to the general
competitive conditions incident to the ownership of single tenant
investment real estate. Since each property is leased under a
long-term lease, there is little competition until the
Partnership decides to sell the property. At this time, the
Partnership will be competing with other real estate owners, on
both a national and local level, in attempting to find buyers for
the properties. In the event of a tenant default, the
Partnership would be competing with other real estate owners, who
have property vacancies, to attract a new tenant to lease the
property. The Partnership's tenants operate in industries that
are very competitive and can be affected by factors such as
changes in regional or local economies, seasonality and changes
in consumer preference.
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 1997.
Total Property Annual
Purchase Acquisition Lease Annual Rent
Property Date Costs Lessee Payment Per Sq. Ft.
Creative Years Early Creative Years
Learning Center Early Learning
Houston, TX 4/8/87 $ 483,128 Centers, Inc. $ 41,370 $ 6.01
Grand Rapids Teachers Grand Rapids
Credit Union Teachers
Wyoming, MI 5/1/87 $ 626,239 Credit Union $ 32,370 $ 9.37
Arby's Restaurant RTM Mid-
Grand Rapids, MI 5/1/87 $ 652,880 America, Inc. $ 24,000 $ 6.89
Fuddruckers Restaurant
Omaha, NE 11/16/87 $1,151,543 Fuddruckers, Inc.$ 145,081 $ 20.94
Children's World
Daycare Center Children's
Sterling Heights, MI World Learning
(83.6514%) 11/25/87 $ 729,486 Centers, Inc. $ 107,039 $ 20.72
Jiffy Lube Auto Care Center Jiffy Lube
Dallas, TX International of
(25%) 12/10/87 $ 154,891 of Maryland, Inc. $ 21,822 $ 32.70
JEMCARE
Arkansas Lane
Arlington, TX 12/10/87 $ 450,475 JEMCARE, Inc. $ 39,466 $ 7.83
Zapata's Cantina & Cafe
Waco, TX
(55.0958%) 12/16/87 $ 674,285 <F1>
Sports City Cafe Texas
Mesquite, TX Sports City
(35%) 12/16/87 $ 520,109 Cafe, Ltd. $ 31,500 $ 12.73
ITEM 2. PROPERTIES. (Continued)
Total Property Annual
Purchase Acquisition Lease Annual Rent
Property Date Costs Lessee Payment Per Sq. Ft.
JEMCARE
Matlock Avenue
Arlington, TX 12/16/87 $ 603,641 JEMCARE, Inc. $ 45,907 $ 6.66
Cheddar's Restaurant
Indianapolis, IN
(50%) 2/16/88 $ 253,747 <F2>
Fuddruckers Restaurant
St. Louis, MO
(40%) 3/25/88 $ 761,053 Fuddruckers, Inc. $ 92,164 $ 26.40
Applebee's Restaurant Southland Restaurant
Slidell, LA Development
(73%) 5/5/93 $ 746,465 Company, L.L.C. $ 111,288 $ 33.28
Renaissant
Applebee's Restaurant Development
Victoria, TX 3/22/96 $1,335,555 Corp. $ 151,110 $ 30.26
Caribou Coffee Store Caribou Coffee
Atlanta, GA 8/15/97 $1,247,571 Company, Inc. $ 142,025 $ 33.39
<F1> The property is vacant and listed for sale or lease.
<F2> The property was destroyed by fire and the land is listed for
sale.
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. AEI Real Estate
Fund XV Limited Partnership owns the remaining interest in the
Zapata's Cantina & Cafe and the Fuddrucker's restaurant. AEI
Real Estate Fund XVII Limited Partnership owns the remaining
interests in the Jiffy Lube, the Sports City Cafe and the
Cheddar's 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
JEMCARE properties (10 years), the Credit Union (11 years), the
Creative Years daycare center (13 years), the Arby's (15 years)
and the Caribou Coffee store (18 years). Several of the Leases
have renewal options which may extend the Lease term an
additional 9 to 15 years.
ITEM 2. PROPERTIES. (Continued)
The Partnership acquired lease guarantee insurance from
United Guaranty Commercial Insurance Company of Iowa for the
Houston, Texas daycare center, and one of the Arlington, Texas
daycare centers. The policies insured approximately 80% of the
annual payments for a period of ten years. The rent guarantee
began thirty days after the occurrence of all the following: (1)
the lessee was at least thirty days in default in the payment of
rent; (2) the lessee was removed from the property; (3) the
property was listed for rent with a real estate broker and "For
Rent" signs were posted on the property; and (4) certain other
minor conditions. Once these conditions were satisfied, the
Partnership received lease insurance payments until either the
property was re-leased or the policy expired. The policies
expired on April 7, 1997 and February 28, 1997, respectively.
Pursuant to the Lease Agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they occupy. The General Partners believe the properties are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.
For tax purposes, the Partnership's properties are
depreciated under the Modified Accelerated Cost Recovery System
(MACRS). The largest depreciable component of a property is the
building which is depreciated, using the straight-line method,
over 31.5 or 40 years depending on the date when it was placed in
service. The remaining depreciable components of a property are
personal property and land improvements which are depreciated,
using an accelerated method, over 5 and 15 years, respectively.
Since the Partnership has tax-exempt Partners, the Partnership is
subject to the rules of Section 168(h)(6) of the Internal Revenue
Code which requires a percentage of the properties' depreciable
components to be depreciated over longer lives using the straight-
line method. In general the federal tax basis of the properties
for tax depreciation purposes is the same as the basis for book
depreciation purposes.
During the last five years or since the date of purchase,
if purchased after December 31, 1992, all properties were 100
percent occupied by the lessees noted except for the properties
discussed below. The ZapataOs Cantina & Cafe was 100 percent
vacant from January, 1993 to June, 1995 when it was re-leased to
the current lessee who occupied the property until December 31,
1997. The Sports City Cafe was 100 percent occupied by a prior
lessee until December, 1995. The property was re-leased to the
current lessee on March 15, 1997. The CheddarOs property was 100
percent occupied until January, 1996.
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, 1997, there were 1,499 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. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
During 1997, eleven Limited Partners redeemed a total of
75.3 Partnership Units for $44,105 in accordance with the
Partnership Agreement. In prior years, a total of ninety Limited
Partners redeemed 1,005.3 Partnership Units for $785,295. The
redemptions increase the remaining Limited Partners' ownership
interest in the Partnership.
Cash distributions of $7,978 and $9,189 were made to the
General Partners and $745,729 and $840,000 were made to the
Limited Partners in 1997 and 1996, 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 $70,915 and $692,793 of
proceeds from property sales in 1997 and 1996, respectively. The
distributions reduced the Limited Partners' Adjusted Capital
Contributions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
For the years ended December 31, 1997 and 1996, the
Partnership recognized rental income of $975,472 and $973,784,
respectively. During the same periods, the Partnership earned
investment income of $60,983 and $76,825, respectively. In 1997,
rental income increased as the result of rental income received
from the Applebee's in Victoria, Texas and the Caribou Coffee in
Atlanta, Georgia, rental income received from re-leasing the
restaurant in Mesquite, Texas and rent increases on five
properties. This increase was offset by a reduction in rental
income due to property sales and the expiration of lease
guarantee insurance policies on two properties in 1997. The
increase in rental income was offset by a decrease in investment
income earned on the net proceeds prior to the purchase of the
additional properties.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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. In July,
1996, the Partnership entered into an agreement to sell the J.T.
McCord's in Mesquite, Texas to an unrelated third party. In
September, 1996, the Agreement was terminated by the purchaser.
The property was listed for sale or lease until March, 1997 when
it was re-leased to Texas Sports City Cafe, Ltd. under a triple
net lease agreement with a primary term of 12 years which may be
renewed for up to two consecutive five-year periods. The
Partnership's share of the annual base rent is $17,500 for the
first lease year and $31,500 for the second lease year, with rent
increases in each subsequent lease year of either three percent
of the prior year's rent or three percent of gross receipts in
years two and three and six percent of gross receipts thereafter,
to the extent they exceed the base rent. In December, 1997, the
Irving property was sold as discussed below. While the
properties were being re-leased or sold, the Partnership was
responsible for the real estate taxes and other costs required to
maintain the properties.
The Partnership owns a 55.0958% interest in a restaurant
in Waco, Texas, which was previously closed. In June 1995, the
Partnership re-leased the restaurant to Tex-Mex Cocina of Waco,
L.C. The Lease Agreement had a primary term of eighteen months
with an annual rental payment of $29,752. The Partnership could
also receive additional rent if gross receipts from the property
exceeded certain specified amounts. In December, 1997, the
lessee elected not to exercise the renewal option in the lease.
The restaurant was closed and is listed for sale or lease. While
the property is vacant, the Partnership is responsible for the
real estate taxes and other costs required to maintain the
property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of the
Partnership's interest in the Waco property was approximately
$385,600. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $100,000 was recognized, which is
the difference between the book value at December 31, 1997 of
$485,600 and the estimated fair value of $385,600. The charge
was recorded against the cost of the land and building.
The Partnership owned a 30.8078% interest in a Sizzler
restaurant at the King's Island Theme Park near Cincinnati, Ohio.
In January, 1994, the Partnership closed the restaurant and
listed it for sale or lease. On January 23, 1997, the
Partnership sold its interest in the property to an unrelated
third party. The Partnership received net sales proceeds of
$149,201, which resulted in a net loss of $216,300, which was
recognized as a real estate impairment in the fourth quarter of
1996. Prior to the sale, the Partnership was responsible for the
real estate taxes and other costs required to maintain the
property. No rent was received in 1997 or 1996 from the
property. At December 31, 1996, the property was classified on
the balance sheet as Real Estate Held for Sale.
During the years ended December 31, 1997 and 1996, the
Partnership paid Partnership administration expenses to
affiliated parties of $207,550 and $202,324, 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 $83,197 and $130,473, 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 1997, when compared to 1996, is mainly the
result of expenses incurred in 1996 related to the J.T. McCord's
properties.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
As of December 31, 1997, the Partnership's annualized cash
distribution rate was 6.0%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement. As a result, 99% of distributions and
income were allocated to Limited Partners and 1% to the General
Partners.
Inflation has had a minimal effect on income from
operations. It is expected that increases in sales volumes of
the tenants, due to inflation and real sales growth, will result
in an increase in rental income over the term of the leases.
Inflation also may cause the Partnership's real estate to
appreciate in value. However, inflation and changing prices may
also have an adverse impact on the operating margins of the
properties' tenants which could impair their ability to pay rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. AEI is currently analyzing its
computer hardware and software systems to determine what, if any,
resources need to be dedicated regarding Year 2000 issues. The
Partnership does not anticipate any significant operational
impact or incurring material costs as a result of AEI becoming
Year 2000 compliant.
Liquidity and Capital Resources
During 1997, the Partnership's cash balances increased
$190,400 mainly as a result of the sale of the J.T. McCord's
property discussed below. Net Cash provided by operating
activities decreased from $681,415 in 1996 to $675,703 in 1997 as
a result of a decrease in income in 1997 and net timing
differences in the collection of payments from the lessees and
the payments of expenses, which was partially offset by a
reduction in expenses in 1997.
The major components of the Partnership's cash flow from
investing activities are investments in real estate and proceeds
from the sale of real estate. In 1997 and 1996, the Partnership
generated cash flow from the sale of real estate of $890,836 and
$1,051,744, respectively. During the same periods, the
Partnership expended $524,976 and $2,043,337, respectively, to
invest in real properties (inclusive of acquisition expenses) as
the Partnership reinvested the cash generated from the property
sales.
In July 1995, the lessee of the Super 8 Motel in Hot
Springs, Arkansas, exercised an option in the Lease Agreement to
purchase the property. On March 29, 1996, the sale closed with
the Partnership receiving net sale proceeds of $663,386 which
resulted in a net gain of $215,017. 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.
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
reached an 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 listed the land for sale. The
Partnership recognized net disposition proceeds of $406,892 which
resulted in a net gain of $88,207. At the time of disposition,
the cost and related accumulated depreciation was $496,967 and
$178,282, respectively. As of December 31, 1997, based on an
analysis of market conditions in the area, it was determined the
fair value of the Partnership's interest in the land was
approximately $200,000. In the fourth quarter of 1997, a charge
to operations for real estate impairment of $54,000 was
recognized, which is the difference between the book value at
December 31, 1997 of $253,747 and the estimated fair value of
$200,000.
On December 22, 1997, the Partnership sold the J.T.
McCord's restaurant in Irving, Texas to an unrelated third party.
The Partnership received net sales proceeds of $741,635 which
resulted in a net loss of $109,144. At the time of sale, the
cost and related accumulated depreciation of the property was
$1,147,333 and $296,554, respectively.
During 1997 and 1996, the Partnership distributed $71,631
and $699,791 of the net sale proceeds to the Limited and General
Partners as part of their regular quarterly distributions, which
represented a return of capital of $5.07 and $49.17 per Limited
Partnership Unit, respectively.
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
$1,335,555. The property is leased to Renaissant Development
Corporation under a Lease Agreement with a primary term of 20
years and annual rental payments of $151,110.
In August, 1996, the Partnership entered into an agreement
to purchase a Caribou Coffee store in Atlanta, Georgia. The
property was acquired on August 15, 1997 for $1,247,571. The
property is leased to Caribou Coffee Company, Inc. under a Lease
Agreement with a primary term of 18 years and annual rental
payments of $142,025. Through December 31, 1996, the Partnership
had advanced $701,662 for the construction of the property and
was charging interest on the Note at a rate of 7%.
Pursuant to the Partnership Agreement, as amended, net
sale proceeds may be reinvested in additional properties until a
date ten years after the date on which the offer and sale of
Units is terminated. This period expired on November 6, 1997.
In February, 1998, the Managing General Partner proposed an
Amendment to the Limited Partnership Agreement that would allow
the Partnership to reinvest the majority of the sale proceeds
from the J.T. McCord's restaurant in Irving, Texas and subsequent
property sales in additional properties. Voting on this
Amendment will continue until April 17, 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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. Effective April 1, 1997,
the Partnership's distribution rate was reduced from 6.5% to
6.0%. As a result, distributions during 1996 were higher when
compared to the same period in 1997.
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the number of Units
outstanding at the beginning of the year. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
During 1997, eleven Limited Partners redeemed a total of
75.3 Partnership Units for $44,105 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, a total of
ninety Limited Partners redeemed 1,005.3 Partnership Units for
$785,295. The redemptions increase the remaining Limited
Partners' ownership interest in the Partnership.
The continuing rent payments from the properties, together
with cash generated from the property sales, should be adequate
to fund continuing distributions and meet other Partnership
obligations on both a short-term and long-term basis.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
contains various "forward looking statements" within the meaning
of federal securities laws which represent management's
expectations or beliefs concerning future events, including
statements regarding anticipated application of cash, expected
returns from rental income, growth in revenue, taxation levels,
the sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements made by the Partnership, must be evaluated in
the context of a number of factors that may affect the
Partnership's financial condition and results of operations,
including the following:
<bullet> Market and economic conditions which affect the value
of the properties the Partnership owns and the cash
from rental income such properties generate;
<bullet> the federal income tax consequences of rental income,
deductions, gain on sales and other items and the
affects of these consequences for investors;
<bullet> resolution by the General Partners of conflicts with
which they may be confronted;
<bullet> the success of the General Partners of locating
properties with favorable risk return characteristics;
<bullet> the effect of tenant defaults; and
<bullet> the condition of the industries in which the tenants of
properties owned by the Partnership operate.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying Index to Financial Statements.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet as of December 31, 1997 and 1996
Statements for the Years Ended December 31, 1997 and 1996:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
REPORT OF INDEPENDENT AUDITORS
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, 1997 and 1996 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 December31,
1997 and 1996, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota Boulay, Heutmaker, Zibell & Co. P.L.L.P.
February 4, 1998 Certified Public Accountants
<PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1997 1996
CURRENT ASSETS:
Cash and Cash Equivalents $ 835,702 $ 645,302
Receivables 23,306 17,284
----------- -----------
Total Current Assets 859,008 662,586
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 3,580,192 3,446,635
Buildings and Equipment 6,457,129 6,590,448
Construction Advances 0 701,662
Property Acquisition Costs 0 20,933
Accumulated Depreciation (2,120,686) (2,148,068)
----------- -----------
7,916,635 8,611,610
Real Estate Held for Sale 199,747 403,073
----------- -----------
Net Investments in Real Estate 8,116,382 9,014,683
----------- -----------
Total Assets $ 8,975,390 $ 9,677,269
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 60,310 $ 102,082
Distributions Payable 137,297 190,647
Deferred Income 22,212 22,212
----------- -----------
Total Current Liabilities 219,819 314,941
----------- -----------
DEFERRED INCOME - Net of Current Portion 199,769 221,981
PARTNERS' CAPITAL (DEFICIT):
General Partners (43,639) (37,794)
Limited Partners, $1,000 Unit value;
15,000 Units authorized and issued;
13,919 and 13,995 outstanding in 1997
and 1996, respectively 8,599,441 9,178,141
----------- -----------
Total Partners' Capital 8,555,802 9,140,347
----------- -----------
Total Liabilities and Partners' Capital $ 8,975,390 $ 9,677,269
=========== ===========
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 YEARS ENDED DECEMBER 3l
1997 1996
INCOME:
Rent $ 975,472 $ 973,784
Investment Income 60,983 76,825
----------- -----------
Total Income 1,036,455 1,050,609
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 207,550 202,324
Partnership Administration and Property
Management - Unrelated Parties 83,197 130,473
Depreciation 269,297 289,724
Real Estate Impairment 154,000 216,300
----------- -----------
Total Expenses 714,044 838,821
----------- -----------
OPERATING INCOME 322,411 211,788
GAIN (LOSS) ON SALE OF REAL ESTATE (109,144) 284,690
----------- -----------
NET INCOME $ 213,267 $ 496,478
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 2,133 $ 4,965
Limited Partners 211,134 491,513
----------- -----------
$ 213,267 $ 496,478
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(13,976 and 14,079 weighted average Units outstanding
in 1997 and 1996, respectively) $ 15.11 $ 34.91
=========== ===========
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 YEARS ENDED DECEMBER 31
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 213,267 $ 496,478
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 269,297 289,724
Real Estate Impairment 154,000 216,300
(Gain) Loss on Sale of Real Estate 109,144 (284,690)
(Increase) Decrease in Receivables (6,022) 37,377
Decrease in Payable to
AEI Fund Management, Inc. (41,772) (51,562)
Decrease in Deferred Income (22,212) (22,212)
----------- -----------
Total Adjustments 462,435 184,937
----------- -----------
Net Cash Provided By
Operating Activities 675,702 681,415
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (524,976) (2,043,337)
Proceeds from Sale of Real Estate 890,836 1,051,744
----------- -----------
Net Cash Provided By (Used For)
Investing Activities 365,860 (991,593)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (53,350) 475
Distributions to Partners (753,262) (848,485)
Redemption Payments (44,550) (70,344)
----------- -----------
Net Cash Used For
Financing Activities (851,162) (918,354)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 190,400 (1,228,532)
CASH AND CASH EQUIVALENTS, beginning of period 645,302 1,873,834
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 835,702 $ 645,302
=========== ===========
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 YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1995 $ (33,570) $ 9,596,268 $ 9,562,698 14,107.70
Distributions (8,485) (840,000) (848,485)
Redemption Payments (704) (69,640) (70,344) (113.00)
Net Income 4,965 491,513 496,478
--------- ----------- ----------- ----------
BALANCE, December 31, 1996 (37,794) 9,178,141 9,140,3471 3,994.70
Distributions (7,533) (745,729) (753,262)
Redemption Payments (445) (44,105) (44,550) (75.30)
Net Income 2,133 211,134 213,267
--------- ----------- ----------- ----------
BALANCE, December 31, 1997 $ (43,639) $ 8,599,441 $ 8,555,802 13,919.40
========= =========== =========== ==========
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, 1997 AND 1996
(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, 1997 AND 1996
(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 -
Newly Issued Accounting Standards
In June, 1997, Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" was
approved for issuance for fiscal years beginning after
December 15, 1997. The Partnership adopted this
Statement in the fourth quarter of 1997. The effect of
this Statement has been determined that net income/loss
for financial statements and comprehensive income/loss is
primarily the same in all material respects.
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.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(2) Summary of Significant Accounting Policies - (Continued)
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.
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested
in money market accounts, certificates of deposit,
federal agency notes and commercial paper with a term of
three months or less.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
Partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under triple net
leases classified as operating leases. The Partnership
recognizes rental revenue on the accrual basis according
to the terms of the individual leases. For leases which
contain cost of living increases, the increases are
recognized in the year in which they are effective.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(2) Summary of Significant Accounting Policies - (Continued)
Real estate is recorded at the lower of cost or estimated
net realizable value. The Financial Accounting Standards
Board issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" which was effective for the
Partnership's fiscal year ended December 31, 1996. This
standard requires the Partnership to compare the carrying
amount of its properties to the estimated future cash
flows expected to result from the property and its
eventual disposition. If the sum of the expected future
cash flows is less than the carrying amount of the
property, the Statement requires the Partnership to
recognize an impairment loss by the amount by which the
carrying amount of the property exceeds the fair value of
the property.
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings and equipment.
The buildings and equipment of the Partnership are
depreciated using the straight-line method for financial
reporting purposes based on estimated useful lives of 30
years and 10 years, respectively.
(3) Related Party Transactions -
The Partnership owns an 83.6514% interest in the Children's
World Daycare Center. The remaining interest is owned by
AEI Real Estate Fund 85-B Limited Partnership, an affiliate
of the Partnership. The Partnership owns a 55.0958%
interest in the restaurant in Waco, Texas and a 40% interest
in the St. Louis Fuddruckers restaurant. In addition, the
Partnership owned a 50% interest in a Super 8 Motel. The
remaining interests in these properties are or were owned by
AEI Real Estate Fund XV Limited Partnership, an affiliate of
the Partnership. The Partnership owns a 35% interest in a
Sports City Cafe, a 25% interest in a Jiffy Lube and a 50%
interest in a parcel of land in Indianapolis, Indiana. The
remaining interests in these properties are owned by AEI
Real Estate Fund XVII Limited Partnership, an affiliate of
the Partnership. The Partnership owns 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. The Partnership owned a 30.8078%
interest in a Sizzler restaurant. The remaining interests
in this property were owned by AEI Real Estate Fund XVII
Limited Partnership and 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, 1997 AND 1996
(3) Related Party Transactions - (Continued)
AEI and AFM received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 3l
1997 1996
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. $ 207,550 $ 202,324
========= =========
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. $ 83,197 $ 130,473
========= =========
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 $22,178 and
$48,543 for 1997 and 1996, respectively. $ (8,362) $ 1,395
========= =========
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 PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through triple net leases, which are classified as operating
leases. Under a triple net lease, the lessee is responsible
for all real estate taxes, insurance, maintenance, repairs
and operating expenses of the property. The initial Lease
terms are 20 years except for the JEMCARE properties (10
years), the Credit Union (11 years), the Creative Years
daycare center (13 years), the Arby's (15 years) and the
Caribou Coffee store (18 years). 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
Sports City Cafe and the Creative Years daycare center were
constructed in 1984. The Omaha Fuddruckers restaurant was
constructed in 1985 and remodeled in 1987. The Applebee's
restaurant in Slidell, Louisiana, was constructed in 1991.
The Applebee's restaurant in Victoria, Texas was constructed
in 1996. The Caribou Coffee store in Atlanta, Georgia was
constructed in 1997. All other properties were constructed
in 1986, 1987 or 1988. All properties were acquired in 1987
or 1988, except for the Slidell Applebee's restaurant which
was acquired in 1993, the Victoria Applebee's restaurant in
1996, and the Atlanta Caribou Coffee store in 1997. 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, 1997 AND 1996
(4) Investments in Real Estate - (Continued)
The cost of the properties not held for sale and the related
accumulated depreciation at December 31, 1997 are as
follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Creative Years,
Houston, TX $ 147,753 $ 335,375 $ 483,128 $ 145,680
Credit Union, Wyoming, MI 166,434 459,805 626,239 202,008
Arby's, Grand Rapids, MI 195,229 457,651 652,880 201,061
Fuddruckers, Omaha, NE 307,913 843,630 1,151,543 457,524
Children's World,
Sterling Heights, MI 138,133 591,353 729,486 222,515
Jiffy Lube, Dallas, TX 65,918 88,973 154,891 37,626
JEMCARE, Arlington, TX 148,214 302,261 450,475 122,891
Zapata's, Waco, TX 179,709 394,576 574,285 188,689
Sports City Cafe, Mesquite, TX 230,337 289,772 520,109 122,048
JEMCARE, Arlington, TX 323,671 279,970 603,641 111,762
Fuddruckers, St. Louis, MO 396,943 364,110 761,053 159,855
Applebee's, Slidell, LA 278,879 467,586 746,465 72,735
Applebee's, Victoria, TX 379,644 955,911 1,335,555 68,236
Caribou Coffee, Atlanta, GA 621,415 626,156 1,247,571 8,056
---------- ---------- ----------- ----------
$3,580,192 $6,457,129 $10,037,321 $ 2,120,686
========== ========== =========== ==========
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.
In July, 1996, the Partnership entered into an agreement to
sell the J.T. McCord's in Mesquite, Texas to an unrelated
third party. In September, 1996, the Agreement was
terminated by the purchaser. The property was listed for
sale or lease until March, 1997 when it was re-leased to
Texas Sports City Cafe, Ltd. under a triple net lease
agreement with a primary term of 12 years which may be
renewed for up to two consecutive five-year periods. The
Partnership's share of the annual base rent is $17,500 for
the first lease year and $31,500 for the second lease year,
with rent increases in each subsequent lease year of either
three percent of the prior year's rent or three percent of
gross receipts in years two and three and six percent of
gross receipts thereafter, to the extent they exceed the
base rent.
On December 22, 1997, the Partnership sold the J.T. McCord's
restaurant in Irving, Texas to an unrelated third party.
The Partnership received net sales proceeds of $741,635
which resulted in a net loss of $109,144. At the time of
sale, the cost and related accumulated depreciation of the
property was $1,147,333 and $296,554, respectively. While
the properties were being re-leased or sold, the Partnership
was responsible for the real estate taxes and other costs
required to maintain the properties.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(4) Investments in Real Estate - (Continued)
The Partnership owns a 55.0958% interest in a restaurant in
Waco, Texas, which was previously closed. In June 1995, the
Partnership re-leased the restaurant to Tex-Mex Cocina of
Waco, L.C. The Lease Agreement had a primary term of
eighteen months with an annual rental payment of $29,752.
The Partnership could also receive additional rent if gross
receipts from the property exceeded certain specified
amounts. In December, 1997, the lessee elected not to
exercise the renewal option in the lease. The restaurant
was closed and is listed for sale or lease. While the
property is vacant, the Partnership is responsible for the
real estate taxes and other costs required to maintain the
property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of
the Partnership's interest in the Waco property was
approximately $385,600. In the fourth quarter of 1997, a
charge to operations for real estate impairment of $100,000
was recognized, which is the difference between the book
value at December 31, 1997 of $485,600 and the estimated
fair value of $385,600. The charge was recorded against the
cost of the land and building.
In July 1995, the lessee of the Super 8 Motel in Hot
Springs, Arkansas, exercised an option in the Lease
Agreement to purchase the property. On March 29, 1996, the
sale closed with the Partnership receiving net sale proceeds
of $663,386 which resulted in a net gain of $215,017. 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 reached an
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 listed the land for sale.
The Partnership recognized net disposition proceeds of
$406,892 which resulted in a net gain of $88,207. At the
time of disposition, the cost and related accumulated
depreciation was $496,967 and $178,282, respectively. As of
December 31, 1997, based on an analysis of market conditions
in the area, it was determined the fair value of the
Partnership's interest in the land was approximately
$200,000. In the fourth quarter of 1997, a charge to
operations for real estate impairment of $54,000 was
recognized, which is the difference between the book value
at December 31, 1997 of $253,747 and the estimated fair
value of $200,000.
The Partnership owned a 30.8078% interest in a Sizzler
restaurant at the King's Island Theme Park near Cincinnati,
Ohio. In January, 1994, the Partnership closed the
restaurant and listed it for sale or lease. On January 23,
1997, the Partnership sold its interest in the property to
an unrelated third party. The Partnership received net
sales proceeds of $149,201, which resulted in a net loss of
$216,300, which was recognized as a real estate impairment
in the fourth quarter of 1996. Prior to the sale, the
Partnership was responsible for the real estate taxes and
other costs required to maintain the property. No rent was
received in 1997 or 1996 from the property. At December 31,
1996, the property was classified on the balance sheet as
Real Estate Held for Sale.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(4) Investments in Real Estate - (Continued)
During 1997 and 1996, the Partnership distributed $71,631
and $699,791 of the net sale proceeds to the Limited and
General Partners as part of their regular quarterly
distributions, which represented a return of capital of
$5.07 and $49.17 per Limited Partnership Unit, respectively.
In November, 1997, the Partnership entered into an agreement
to sell the Fuddruckers restaurant in St. Louis, Missouri to
an unrelated third party. The net sale price for the
Partnership's interest in the property will be approximately
$758,000, which will result in a net gain of approximately
$163,000.
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 $1,335,555.
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 $151,110.
In August, 1996, the Partnership entered into an agreement
to purchase a Caribou Coffee store in Atlanta, Georgia. The
property was acquired on August 15, 1997 for $1,247,571.
The property is leased to Caribou Coffee Company, Inc. under
a Lease Agreement with a primary term of 18 years and annual
rental payments of $142,025. Through December 31, 1996, the
Partnership had advanced $701,662 for the construction of
the property and was charging interest on the Note at a rate
of 7%.
Pursuant to the Partnership Agreement, as amended, net sale
proceeds may be reinvested in additional properties until a
date ten years after the date on which the offer and sale of
Units is terminated. This period expired on November 6,
1997. In February, 1998, the Managing General Partner
proposed an Amendment to the Limited Partnership Agreement
that would allow the Partnership to reinvest the majority of
the sale proceeds from the J.T. McCord's restaurant in
Irving, Texas and subsequent property sales in additional
properties. Voting on this Amendment will continue until
April 17, 1998.
The minimum future rentals on the Leases for years
subsequent to December 31, 1997 are as follows:
1998 $ 1,012,995
1999 1,030,476
2000 1,042,166
2001 955,011
2002 972,771
Thereafter 8,497,946
-----------
$13,511,365
===========
In 1997 and 1996, the Partnership recognized contingent
rents of $24,974 and $27,187, respectively.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(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 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, 1997 and 1996, the
Partnership has recognized $77,742 and $55,530,
respectively, of this payment as income.
(6) Major Tenants -
The following schedule presents rent revenue from individual
tenants, or affiliated groups of tenants, who each
contributed more than ten percent of the Partnership's total
rent revenue for the years ended December 31:
1997 1996
Tenants Industry
Fuddruckers, Inc. Restaurant $ 259,457 $ 259,457
Renaissant Development Corp. Restaurant 151,110 117,395
Southland Restaurant
Development Company, L.L.C. Restaurant 109,720 106,009
JEMCARE, Inc. Child Care 98,869 103,177
Children's World
Learning Centers, Inc. Child Care 105,309 102,809
---------- ----------
Aggregate rent revenue of major tenants $ 724,465 $ 688,847
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 74% 71%
========== ==========
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(7) Partners' Capital -
Cash distributions of $7,978 and $9,189 were made to the
General Partners and $745,729 and $840,000 were made to the
Limited Partners for the years ended December 31, 1997 and
1996, respectively. The Limited Partners' distributions
represent $53.36 and $59.66 per Limited Partnership Unit
outstanding using 13,976 and 14,079 weighted average Units
in 1997 and 1996, respectively. The distributions represent
$11.94 and $29.93 per Unit of Net Income and $41.42 and
$29.73 per Unit of return of contributed capital in 1997 and
1996, respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $70,915 and $692,793 of
proceeds from property sales in 1997 and 1996, respectively.
The distributions reduced the Limited Partners' Adjusted
Capital Contributions.
Distributions of Net Cash Flow to the General Partners
during 1997 and 1996 were subordinated to the Limited
Partners as required in the Partnership Agreement. As a
result, 99% of distributions and income were allocated to
the Limited Partners and 1% to the General Partners.
The Partnership may acquire Units from Limited Partners who
have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated
to purchase in any year more than 5% of the number of Units
outstanding at the beginning of the year. In no event shall
the Partnership be obligated to purchase Units if, in the
sole discretion of the Managing General Partner, such
purchase would impair the capital or operation of the
Partnership.
During 1997, eleven Limited Partners redeemed a total of
75.3 Partnership Units for $44,105 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In 1996, thirteen
Limited Partners redeemed a total of 113 Partnership Units
for $69,640. 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
$925.29 per original $1,000 invested.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(8) Income Taxes -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the years ended December 31:
1997 1996
Net Income for Financial
Reporting Purposes $ 213,267 $ 496,478
Depreciation for Tax Purposes
Under Depreciation for Financial
Reporting Purposes 47,395 56,498
Income Accrued for Tax Purposes
Under Income for Financial
Reporting Purposes (24,813) (24,256)
Property Expenses for Tax Purposes
Under Expenses for Financial
Reporting Purposes 6,639 0
Real Estate Impairment Loss
Not Recognized for Tax Purposes 154,000 216,300
Gain on Sale of Real Estate for Tax
Purposes Under Gain for Financial
Reporting Purposes (398,704) (31,090)
----------- -----------
Taxable Income (Loss) to Partners $ (2,216) $ 713,930
=========== ===========
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(8) Income Taxes - (Continued)
The following is a reconciliation of Partners' capital for
financial reporting purposes to Partners' capital reported
for federal income tax purposes for the years ended
December 31:
1997 1996
Partners' Capital for
Financial Reporting Purposes $8,555,802 $9,140,347
Adjusted Tax Basis of Investments
in Real Estate Over Net Investments
in Real Estate for Financial
Reporting Purposes 539,385 736,694
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 294,241 319,055
Property Expenses for Tax Purposes
Under Expenses for Financial
Reporting Purposes 6,639 0
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 $11,377,753 $12,177,782
=========== ===========
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(9) Fair Value of Financial Instruments -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, are as follows at
December 31:
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 336 $ 366 $ 416 $ 416
Money Market Funds 835,366 835,366 644,886 644,886
--------- --------- --------- ---------
Total Cash and
Cash Equivalents $ 835,702 $ 835,702 $ 645,302 $ 645,302
========= ========= ========== =========
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 53, 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, 1999. From 1970 to the
present, he has been employed exclusively in the investment
industry, specializing in tax-advantaged limited partnership
investments. In that capacity, he has been involved in the
development, analysis, marketing and management of public and
private investment programs investing in net lease properties as
well as public and private investment programs investing in
energy development. Since 1971, Mr. Johnson has been the
president, a director and a registered principal of AEI
Securities, Inc. (formerly AEI Incorporated), which is registered
with the Securities and Exchange Commission as a securities
broker-dealer, is a member of the National Association of
Securities Dealers, Inc. (NASD) and is a member of the Security
Investors Protection Corporation (SIPC). Mr. Johnson has been
president, a director and the principal shareholder of AEI Fund
Management, Inc., a real estate management company founded by
him, since 1978. Mr. Johnson is currently a general partner or
principal of the general partner in sixteen other limited
partnerships.
Mark E. Larson, age 45, is Executive Vice President,
Treasurer and Chief Financial Officer and has been elected to
continue in these positions until March, 1999. 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, 1999. Mr. Larson has been
employed by AEI Fund Management, Inc. and affiliated entities
since 1985. From 1979 to 1985, Mr. Larson was with Apache
Corporation as manager of Program Accounting responsible for the
accounting and reports for approximately 45 public partnerships.
Mr. Larson is responsible for supervising the accounting
functions of AFM and the registrant.
ITEM 10. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative and management services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information pertaining to
the ownership of the Units by each person known by the
Partnership to beneficially own 5% or more of the Units, by each
General Partner, and by each officer or director of the Managing
General Partner as of February 28, 1998:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
AEI Fund Management XVI, Inc. 10 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
AEI Fund Management, Inc. ** 32 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Robert P. Johnson 6 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Mark E. Larson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
* Less than 1%
**A corporation controlled by Mr. Johnson that provides
administrative services to the Partnership.
The persons set forth in the preceding table hold sole voting
power and power of disposition with respect to all of the Units
set forth opposite their names. The General Partners know of no
holders of more than 5% of the outstanding Units.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The registrant, AFM and its affiliates have common
management and utilize the same facilities. As a result, certain
administrative expenses are allocated among these related
entities. All of such activities and any other transactions
involving the affiliates of the General Partner of the registrant
are governed by, and are conducted in conformity with, the
limitations set forth in the Limited Partnership Agreement of the
registrant.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Continued)
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, 1997.
Person or Entity Amount Incurred From
Receiving Form and Method Inception (February 6, 1987)
Compensation of Compensation To December 31, 1997
AEI Incorporated Selling Commissions equal to 9% $1,500,000
of 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 $ 215,052
and Affiliates Acquisition Expenses
General Partners 1% of Net Cash Flow in any fiscal year $ 96,641
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 $2,270,954
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.
General Partners 15% of distribution of Net Proceeds of $ 21,419
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.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Continued)
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, 1997, 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
10.1 Net Lease Agreement dated
March 22, 1996, between the Partnership and
Renaissant Development Corporation relating
to the property at 6409 N. Navarro Road,
Victoria, Texas (incorporated by reference
to Exhibit 10.3 of Form 8-K filed with the
Commission on April 4, 1996).
10.2 Purchase Agreement dated
July 10, 1996, between the Partnership, AEI
Real Estate Fund XVII Limited Partnership,
and BW, Incorporated relating to the
property at 3808 Town Crossing Boulevard,
Mesquite, Texas (incorporated by reference
to Exhibit 10.1 of Form 10-QSB filed with
the Commission on August 7, 1996).
10.3 Assignment of Construction
Loan Commitment and Sale and Leaseback
Financing Commitment dated August 8, 1996,
concerning those documents with Caribou
Coffee store and AEI Fund Management, Inc.
to the Partnership, relating to the sale
and leaseback of a Caribou Coffee store at
Johnson Ferry Road in Atlanta, Georgia
(incorporated by reference to Exhibit 10.1
of Form 10-QSB filed with the Commission on
November 13, 1996).
10.4 Net Lease Agreement dated
March 15, 1997 between the Partnership, AEI
Real Estate Fund XVI Limited Partnership,
and Texas Sports City Cafe, Ltd. relating
to the property at 3808 Towne Crossing
Boulevard, Mesquite, Texas (incorporated by
reference to Exhibit 10.7 of Form 10-KSB
filed with the Commission on March 24,
1997).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A.
(Continued)
A. Exhibits -
Description
10.5 Guarantee of Lease dated
March 15, 1997 between the Partnership, AEI
Real Estate Fund XVI Limited Partnership,
and Texas Sports City Cafe, Ltd. relating
to the property at 3808 Towne Crossing
Boulevard, Mesquite, Texas (incorporated by
reference to Exhibit 10.8 of Form 10-KSB
filed with the Commission on March 24,
1997).
10.6 Purchase Agreement dated
December 19, 1996 between the Partnership,
AEI Real Estate Fund XVIII Limited
Partnership, AEI Real Estate Fund XVII
Limited Partnership and James Chantilas
relating to the property at 2711 Waterpark
Drive, Mason, Ohio (incorporated by
reference to Exhibit 10.1 of Form 8-K filed
with the Commission on February 3, 1997).
10.7 Net Lease Agreement dated
August 15, 1997 between the Partnership and
Caribou Coffee Company, Inc. relating to
the property at 1275 Johnson Ferry Road,
Marietta, Georgia (incorporated by
reference to Exhibit 10.1 of Form 8-K filed
with the Commission on August 21, 1997).
10.8 Purchase Agreement dated
October 24, 1997 between the Partnership
and Spaghetti Warehouse of Texas, L.P.
relating to the property at 2849 W. Airport
Freeway, Irving, Texas (incorporated by
reference to Exhibit 10.1 of Form 10-QSB
filed with the Commission on November 7,
1997).
10.9 Purchase Agreement dated
November 20, 1997 between the Partnership
and Home Depot USA, Inc. relating to the
property at 2175 Barrett Station Road, St.
Louis, Missouri.
27 Financial Data Schedule for
year ended December 31, 1997.
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 16, 1998 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 16, 1998
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 16, 1998
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
PURCHASE AGREEMENT
BETWEEN
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
AND
HOME DEPOT U.S.A., INC.
CONTENTS OF PURCHASE AGREEMENT
1 Purchase Price
2 Earnest Money
3 Right of Entry
4 Conditions Precedent
5 Due Diligence and Approval Period Extensions
6 Closing
7 Conveyance of Title
8 Closing Costs
9 Prorations
10 Casualty and Condemnation
11 Buyer's Representations and Warranties
12 Seller's Representations and Warranties 13 Default
14 Brokers
15 Seller's Affirmative Obligations
16 Miscellaneous
17 Notices
18 Non-Foreign Certificate
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into
by and between AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP, a Delaware
limited partnership, acting by and through its corporate general
partner AEI Fund Management XVI, Inc., a Minnesota corporation
("Seller") and HOME DEPOT U.S.A., INC., a Delaware corporation
("Buyer").
WITNESSETH THAT:
A. Seller is the owner of an undivided forty percent (40%) interest
in a certain outparcel located in an existing shopping center
development commonly known as "Barrett Station Shopping Center"
located at the northwest corner of Barrett Station Road and
Manchester Road in unincorporated St. Louis County, Missouri (the
"Shopping Center"), which outparcel consists of approximately 1.4
acres currently improved with an existing one (1) story restaurant
building approximately as depicted on the drawing attached hereto as
Exhibit A and legally described on Exhibit Battached hereto. The
outparcel described in the preceding sentence, together with all
rights, easements and appurtenances pertaining thereto, and all
buildings, improvements, trees, bushes, landscaping, foliage and
crops located thereon, is collectively referred to herein as the
"Property". The remaining undivided sixty percent (60%) interest in
the Property is owned by AEI Real Estate Fund XV Limited
Partnership, a Delaware limited partnership ("AEI Fund XV"). The
Property is currently leased to Fuddrucker's, Inc., a Texas
corporation (the "Tenant").
B. Seller now desires to sell, and Buyer desires to buy, all of Seller's
right, title and interest in and to the Property upon and subject to the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, the
mutual covenants and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller agrees to sell and Buyer agrees to buy the
Property from Seller, on the terms and under the conditions set forth
in this Agreement.
1. Purchase Price
The purchase price for Seller's right, title and interest in the
Property (the "Purchase Price") shall be SIX HUNDRED FORTY THOUSAND
DOLLARS ($640,000.00), which shall be paid by Buyer in cash or
immediately available funds at Closing (as hereinafter defined), less
any credits as stated in this Agreement.
2. Earnest Money
Buyer shall deposit with the Title Company (as hereinafter defined),
within five (5) business days after the Effective Date of this Agreement
(as defined in Section 16(l)hereof), an earnest money deposit of TEN
THOUSAND DOLLARS ($10,000.00) (which deposit, together with all interest
earned thereon, shall be collectively referred to herein as the
"Earnest Money"). Buyer may, at its option, direct the Title Company
to invest the Earnest Money in an interest bearing account designated by
Buyer. The Earnest Money shall be held in escrow by the Title Company to
be applied as a credit against the Purchase Price at Closing or disbursed
in accordance with this Agreement. If a dispute arises concerning
distribution of the Earnest Money, the Title Company may apply to a court
of competent jurisdiction for an order directing distribution of the
Earnest Money or other escrow funds. Except as otherwise expressly
provided in this Agreement, the Earnest Money shall be refundable to Buyer
upon termination of this Agreement pursuant to failure to satisfy any
condition precedent listed in this Agreement.
3. Right of Entry
At Buyer's sole cost and expense, Buyer and its agents and
representatives may, at all times before Closing, enter the Property
for any lawful purpose, including but not limited to, the right to
inspect, examine, and perform topographical surveys, soil tests,
borings, percolation tests, environmental studies and all other tests
needed to determine surface, subsurface, topographic and environmental
conditions and the general useability of the Property for Buyer's
purposes. Buyer shall use reasonable efforts to promptly restore the
Property to its condition existing prior to Buyer's entry. Buyer shall
indemnify and hold Seller harmless from all loss, cost, damage and
expense (including reasonable attorneys' fees) resulting from any of
the activities conducted or authorized by Buyer and its agents and
representatives described in this Section 3.
The parties acknowledge that they previously entered into that certain
Access Agreement with AEI Fund XV and Tenant (the "Access Agreement"). In
addition to providing Buyer with the consent of all parties thereto to
enable Buyer's access to the Property prior to the Effective Date of this
Agreement, the Access Agreement provided Buyer with Tenant's consent to
the right of entry pursuant to this Section 3 without requiring any
further approval by Tenant with respect thereto provided that Buyer
complies with the continuing conditions attached to such consent as
provided in Section 3 of the Access Agreement. Buyer shall also continue
to comply with the advance notice provisions of Section 2 of the Access
Agreement prior to Buyer's exercise of the right of entry hereunder.
4. Conditions Precedent
Seller acknowledges that Buyer's intended use ("Use") of the Property is
in conjunction with Buyer's demolition of the existing improvements in the
Shopping Center and the development, construction and operation of a home
improvement center (and other development if shown on Buyer's tentative
site plan for the Property). The center (and other development, if any)
shall be referred to in this Agreement as the "Project". This Section 4
sets forth conditions precedent ("Conditions") to Buyer's obligation to
Close this transaction. For each Condition, if Buyer does not expressly
notify Seller in writing within the time period stated for the Condition
that Buyer is waiving the Condition or that Buyer is satisfied with the
matters covered by the Condition (which satisfaction and the terms imposed
thereon or relative thereto shall be at the sole and absolute discretion of
Buyer), this Agreement shall terminate, and the Earnest Money (including
all interest accrued thereon) shall be refunded to Buyer, and this
Agreement shall be deemed of no further force or effect. If Buyer
determines that any Condition will not be satisfied within the time period
specified, Buyer need not wait until the time period elapses, but may so
notify Seller and terminate the Agreement at the time of Buyer's
determination.
CONDITION 1 Title Insurance. Not later than twenty (20)
days after the Effective Date, Buyer shall, at its expense,
obtain a current title insurance commitment ("Title
Commitment") for the Property issued by Commonwealth Land
Title Insurance Company (the "Title Company"). Within
thirty (30) days after Buyer's receipt of the last of the
following items (a) the Title Commitment, (b) the Survey,
and (c) legible copies all plats, documents, instruments or
agreements appearing as exceptions in the Title Commitment,
referenced on the Survey or otherwise affecting title to the
Property, Buyer shall notify Seller of any exceptions or
terms in the Title Commitment which are not acceptable to
Buyer or any objections to matters appearing in or omitted
from the Survey. Title exceptions or Survey matters which
Buyer does not designate as unacceptable shall be deemed
"Permitted Exceptions". Within ten (10) business days after
receipt of Buyer's list of Permitted Exceptions (and
unacceptable exceptions and Survey matters), Seller shall
provide Buyer a list of unacceptable exceptions and Survey
matters which Seller does not intend to cure, remove or
cause the Title Company to delete, failing which Seller
shall be deemed to have elected to not cure, remove or cause
the Title Company to delete such unacceptable exceptions and
Survey matters. Thereafter, if Seller and Buyer cannot
agree on a final list of Permitted Exceptions within ten
(10) business days after Buyer receives Seller's list or by
the end of the 10-day period described in the immediately
preceding sentence, whichever occurs first, then this
Agreement shall be deemed terminated, the Earnest Money
shall be promptly returned to Buyer and neither party shall
have any further rights or obligations hereunder except as
otherwise expressly provided herein.
As a condition to Closing, the Title Company shall be prepared to issue
to Buyer at Closing a title insurance policy ("Title Policy") in its then
current standard ALTA Form in an amount equal to the Purchase Price, and
containing no exceptions other than the Permitted Exceptions. The Title
Policy shall include the following endorsements or affirmative insurance,
as the case may be, unless otherwise approved by Buyer: (i) an extended
coverage endorsement removing the general or standard exceptions from the
Title Policy; (ii) an access endorsement insuring that the Property has
unrestricted and unqualified legal, pedestrian and vehicular access to the
publicly dedicated roadways known as Barrett Station Road and Manchester
Road; (iii) a contiguity endorsement insuring contiguity between all
parcels comprising the Property with no gaps or gores and between the
Property and any adjacent parcels to which the Property has appurtenant
easements and rights; (iv) an ALTA zoning endorsement form 3.0; (v) if for
any reason the legal description(s) of the Property on the Survey is
different than the legal description(s) of the Property in the Title
Commitment, a survey identicality endorsement insuring that the legal
descriptions describe one and the same property; (vi) a creditor's rights
endorsement deleting all creditor's rights exclusions; (vii) if any
portion of the Property is covered by covenants or restrictions, a
restrictions endorsement will be required; (viii) affirmative insurance
insuring that Buyer (and the Property) has the benefit of all easements
and appurtenant rights benefitting the Property whether created before or
in conjunction with the Closing; and (ix) a pending improvements
endorsement in an amount determined by Buyer prior to closing. Seller
agrees to take all actions and execute all customary documents reasonably
required by the Title Company to enable the Title Company to issue the
foregoing endorsements. A document shall not be reasonably required in
the preceding sentence if Seller is required to state, certify or
otherwise indicate any fact or matter which Seller knows to be untrue or
which Seller cannot qualify same to the best of its knowledge. Nothing in
the two preceding sentences shall obligate Seller to incur any costs or
expenses in connection with any cure or removal of conditions of title
which Seller did not agree to do pursuant to the procedure outlined in the
first grammatical paragraph of this Condition 1. As to Title Company's
customary GAP Undertaking required to cause the Title Company to issue
Buyer the Title Policy on the Closing Date, Buyer acknowledges that Seller
shall execute same only to the extent its liability is limited to the acts
of Seller or any party claiming by, through or under Seller.
CONDITION 2 Survey. Within thirty (30) days after the Effective Date,
Buyer shall, at its expense, cause to be prepared a topographic and
boundary line survey, surveyor's report and surveyor's certificate
(collectively the "Survey"). The Survey shall: (i) be prepared by a
registered land surveyor licensed in the state in which the Property is
located that is acceptable to Buyer; (ii) show the location of all
recorded easements listed on the Title Commitment and all unrecorded
easements; (iii) be certified to the Title Company, Buyer, and Buyer's
counsel in accordance with ALTA/ACSM standards; (iv) be prepared pursuant
to Buyer's Site Criteria Requirements (Southeast, Northeast, Midwest
edition, prepared by Greenberg Farrow Architecture dated March 1987, last
revised April 19, 1996); and (v) be sufficient for removal of the Title
Policy survey exceptions. The Survey may, at Buyer's option and expense,
be updated prior to Closing, which updated Survey shall contain no
information that would result in any exceptions to the Title Policy other
than the Permitted Exceptions.
CONDITION 3 Existing Documentation. Within five (5) business days
after the Effective Date, Seller shall deliver to Buyer all of the
following documentation related to the Shopping Center or the Property
in Seller's possession, if any: (i) copies of all existing surveys,
title policies documents or instruments of record and any other title
related materials; (ii) plans and specifications for the existing
improvements (as-builts, if available); (iii) the most recent real
estate tax bills and assessment notices; (iv) all feasibility studies,
soil reports, environmental audits and any other appraisals,
inspections, tests, reports, studies or information; (v) asbuilt
drawings of underground utilities located on the Property; (vi) copies
of all leases, tenancies and rental agreements with respect to the
Property (including, without limitation, the Lease (as hereinafter
defined)), and all written modifications, extensions, amendments and
guaranties thereof; (vii) copies of all permits, licenses and
approvals issued by any governmental authority related to the
ownership or operation of the Property; and (vii) copies of all
written (or written descriptions of any oral) contracts related to the
Property pursuant to which goods, services and supplies are furnished,
or persons are employed on a continuing basis, for the operation of
the Property including, without limitation, equipment leases and
guaranties or warranties in effect with respect to the Property or any
portion thereof. Buyer acknowledges that the Existing Documentation
will serve to benefit Buyer in connection with its due diligence
investigations of the Property. However, if Seller does not have any
of the foregoing materials in its possession, it shall so notify Buyer
in the correspondence transmitting the materials that it does have in
its possession, if any, and Seller shall thereafter be released from
any other delivery obligation hereunder with respect to such materials
and shall in no event be deemed in default hereunder for the failure
to produce such materials.
CONDITION 4 Utilities. Not later than ninety (90) days after the
Effective Date (which 90-day period shall be referred to in this
Agreement as the "Due Diligence Period"), Buyer shall determine to its
satisfaction whether (a) all utility services (including, without
limitation, lines, equipment and facilities) necessary for the
construction and operation of the Project, including but not limited to
water, telephone, sanitary sewer, storm sewer and/or storm water
detention areas, facilities or rights, natural gas and electricity, are
available and sufficient for development of the Project, and (b) Buyer
may obtain all such utility services solely by paying such fees as are
satisfactory to Buyer; provided, however, that nothing in this Condition
4 shall limit the terms of Condition 9 hereof insofar as any
utility/engineering approvals, permits, agreements, etc. are required,
it being expressly understood that such matters shall be deemed to be
included in Condition 9 to be satisfied or waived within the Approval
Period (as hereinafter defined).
CONDITION 5 Executive Committee Approval. Within the Due Diligence
Period, Buyer shall obtain approval of its Real Estate Executive
Committee with respect to this transaction.
CONDITION 6 General Feasibility. Within the Due Diligence Period,
Buyer shall determine to Buyer's satisfaction that the Property is
otherwise suitable for the Project and that there exists no facts,
matters or circumstances concerning the Shopping Center or the Property
that are unacceptable to Buyer in Buyer's sole and absolute discretion.
CONDITION 7 Environmental Condition. Within the Due Diligence Period,
Buyer shall determine whether the environmental condition of the
Property is acceptable to Buyer. Buyer's obligation to Close is
expressly conditioned upon the absence of any regulated wetlands or
protected areas within the property.
CONDITION 8 Rezoning. Within one hundred eighty (180) days after the
Effective Date (which 180-day period shall be referred to in this
Agreement as the "Approval Period"), Buyer, at Buyer's cost and
expense, shall either rezone the Property from its existing zoning
classification to the zoning classification applicable to the Use,
determine to Buyer's satisfaction that the Property may be rezoned to
the zoning classification applicable to the Use, or determine that the
existing zoning classification is acceptable to Buyer.
CONDITION 9 Permits and Approvals. Within the Approval Period, Buyer
shall either obtain or determine to Buyer's satisfaction that Buyer may
later obtain all land use, site plan, zoning/PUD, building code,
building, subdivision/consolidation, development, on-site or off-site
improvements, environmental/wetlands, landscaping, parking, signage,
traffic, traffic signalization, access, driveway, curb cut, engineering,
utility, design, fencing, screening, use, outside sales and display
areas and any other related approvals, consents, requirements,
variances, permits, licenses, certifications, authorizations, plats,
clearances, agreements, services, assurances and relief (whether
foreseen or unforeseen) of any kind or nature whatsoever from other
owners or tenants in the Shopping Center, if and to the extent
necessary, from all applicable governmental and quasi-governmental
authorities and from all applicable utility agencies, districts or
companies as may be necessary or required in connection with the
development, construction and use of the Property in accordance with the
Use. At no cost to Seller, Seller agrees to cooperate with Buyer in
connection with Buyer's efforts pursuant to this Condition 9 and agrees
to do all things reasonably necessary including, without limitation,
timely review submittals and execute all applications or other documents
required of ownership. Buyer agrees that any rezoning which would serve
to restrict the present land uses available with respect to the Property
shall become effective only on Buyer's acquisition of fee simple title
to the Property.
CONDITION 10 Other Property in Shopping Center. Within the Due
Diligence Period, Buyer shall enter into such agreements
(collectively, the "Acquisition Agreements") as may be necessary to
acquire (or acquire the right to use) all other parcels of real estate
within the Shopping Center as Buyer may require for the Project and
the Use in its sole and absolute discretion (the "Other Parcels").
Buyer's obligation to close the transaction contemplated hereunder
shall be subject to and conditioned upon the occurrence of the
following events at or prior to the Closing Date (as hereinafter
defined): (i) Buyer's closing and acquisition of fee simple title to
such Other Parcels including, without limitation, the undivided 60%
interest in the Property owned by AEI Fund XV (in the case any such
Acquisition Agreement is a purchase agreement); (ii) any non-purchase
Acquisition Agreement being in full force and effect and constituting
the legal, valid and binding obligation of the parties thereto other
than Buyer, enforceable against such other parties in accordance with
their respective terms; and (iii) Buyer amending or terminating any
existing operational documents affecting the Shopping Center
(including, without limitation, any type of reciprocal easement and
operation agreement affecting the Property) as required by Buyer in
the event such operational documents are determined by Buyer to
adversely affect the Project or the Use; provided, however, that the
effective date of any such documents shall be conditioned upon the
Closing hereunder.
CONDITION 11 Lease Termination.
(a) The parties acknowledge that the Property is subject to that
certain Net Lease Agreement dated February 1, 1988 (the "Lease") between
Seller, AEI Fund XV and Tenant, as successor in interest to the original
named tenant, Discus of St. Louis, Inc, which Lease has an original term
fixed to expire on January 31, 2008 and granted Tenant an option to
purchase the Property. Buyer's obligation to close this transaction is
subject to and conditioned upon: (i) the execution of a lease termination
agreement by Seller, Buyer and Tenant in form and substance satisfactory
to Seller, Buyer and Tenant within the first thirty (30) days of the Due
Diligence Period; (ii) the termination of the Lease on or before the
Closing Date; and (iii) the vacation and surrender of possession of the
premises demised under the Lease by Tenant on or before the Closing Date.
(b) Within the first thirty (30) days of the Due Diligence Period,
Seller, Buyer and Tenant shall negotiate and execute a lease termination
agreement which shall be satisfactory in form and substance to Seller,
Buyer and Tenant and shall provide, among other things:
(i) for the unconditional termination of the Lease and Tenant's
tenancy effective upon the closing of the transaction contemplated under
this Agreement;
(ii) an express acknowledgment (1) that Buyer is an intended,
direct third party beneficiary of such lease termination agreement
and that Buyer would suffer substantial damages in the event Tenant
took any action inconsistent with the terms of such lease
termination agreement the affect of which would be to delay the
demolition of the improvements on the Property and the development
of Buyer's Project, and (2) providing Buyer with the right to
enforce all rights and remedies available at law or in equity
resulting from Tenant's default thereunder directly against Tenant
to enforce the termination of its tenancy, to regain possession of
the Property and for any damages incurred by Buyer resulting
therefrom;
(iii) that, for as long as this Agreement is in full force and
effect or any period during which good faith negotiations of terms
for this transaction continue between Buyer and Seller, Tenant
shall not have the right to exercise the purchase option under the
Lease;
(iv) obligating Tenant to vacate and surrender possession of
the Property on the Closing Date hereunder;
(v) that Buyer and the Property shall not be subject to any
payment or performance obligations or any other liability or
encumbrance related to the Lease or Tenant's tenancy following the
Closing; and
(vi) Tenant shall, at its sole cost and expense: (1) cause
any service contracts or other agreements affecting the Property
and to which Tenant is either a party or has otherwise consented
to be terminated at or prior to Closing, (2) cause all legal and
contractual claims and obligations under all such terminated
contracts and agreements to be paid, performed and satisfied such
that there shall exist no outstanding unsatisfied claim,
obligation or liability with respect thereto that exists or may
arise with respect to the Property after the Closing Date; and (3)
deliver evidence of the foregoing to Buyer at or prior to Closing.
Buyer acknowledges that Tenant's failure or refusal to execute a
lease termination agreement shall be a failure of a condition
precedent entitling Buyer to the return of its Earnest Money
hereunder, and in no event shall such failure or refusal be deemed
a Seller default hereunder.
(c) Concurrent with the execution of this Agreement, Tenant has
tendered into escrow with the Title Company (acting in its capacity as
escrow agent) an executed promissory note payable to Seller in the
original principal amount of One Hundred Twenty One Thousand Five
Hundred Dollars ($121,500.00) (the "Tenant's Note") pursuant to escrow
instructions satisfactory to Buyer and Tenant. The delivery of
Tenant's Note to Seller shall: (1) be deemed a condition precedent to
Seller's obligation to deliver the Deed (as hereinafter defined)
hereunder; and (2) be conditioned only upon the closing of this
transaction. Seller acknowledges that if, at the time of closing, the
Title Company notifies Seller that the only condition on the delivery
of Tenant's Note to Seller is the Closing hereunder and that as of the
time of Closing no demand has been made upon Title Company for the
return of Tenant's Note or containing any instruction contrary to the
terms of the escrow instructions therefor, then the condition precedent
in clause (1) above shall be deemed satisfied and waived. While the
parties acknowledge that the Tenant's Note is additional consideration
for Seller to enter into this Agreement, the validity, enforceability
or collection of Tenant's Note or any amounts due thereunder shall not
be a continuing condition of Seller's obligations under this Agreement.
5. Due Diligence and Approval Period Extensions
(a) Buyer shall have two (2) options to extend the Due Diligence
Period for additional periods of thirty (30) days each for no additional
consideration via written notice to Seller given no later than five (5)
days prior to the end of the initial Due Diligence Period or the first
extension thereof pursuant to this Section 5(a), as the case may be. For
purposes of this Agreement, whenever the term "Due Diligence Period" is
used, it shall in each case refer to the Due Diligence Period, as extended
in accordance with the terms of this Agreement (regardless of whether
there is an express reference to any such extension).
(b) Buyer shall have two (2) options to extend the Approval Period
for additional periods of thirty (30) days each for no additional
consideration via written notice to Seller given no later than five (5)
days prior to the end of the initial Approval Period or the first
extension thereof pursuant to this Section 5(b), as the case may be. For
purposes of this Agreement, whenever the term "Approval Period" is used,
it shall in each case refer to the Approval Period, as extended in
accordance with the terms of this Agreement (regardless of whether there
is an express reference to any such extensions).
6. Closing
Conveyance of title and payment of the Purchase Price as contemplated
under this Agreement (the "Closing") shall be held on a date and time
mutually agreed between Seller and Buyer and within thirty (30) days after
Buyer's satisfaction with or waiver of all of the Conditions set forth in
this Agreement which are to be satisfied or waived within the Due Diligence
Period and Approval Period and the fulfillment of all other terms of this
Agreement; provided, however, if the Buyer's other acquisition transactions
in the Shopping Center have not yet closed on the date set forth herein for
Closing, then the Closing shall be extended for a reasonable period of time
(not to exceed an additional sixty (60) days) to enable Buyer to close all
such transactions concurrently. The Closing shall be held at an office of
the Title Company in the county in which the Property is located or at
another mutually agreed location, but may also be effectuated by courier
delivery of the Closing documents and other Closing items to the Title
Company with instructions as to disposition. Seller shall deliver sole and
exclusive possession of the Property to Buyer at Closing, and the Property
shall be unoccupied and subject to no claim of possession by any party
other than Buyer.
7. Conveyance of Title
(a) Seller shall convey good and marketable fee simple title to the
Property to Buyer by a recordable statutory form special warranty deed
("Deed") together with any required real estate transfer valuation
affidavit ("Affidavit"). For purposes of this Agreement, the phrase "good
and marketable title" shall mean ownership of marketable title to the
Property which is insurable by the Title Company in favor of Buyer under
the Title Policy at standard rates, free of all exceptions other than the
Permitted Exceptions, and providing affirmative coverage of all appurtenant
rights of Seller existing on the Property before or created at the Closing.
The legal description in the Deed and the Title Policy shall be identical
to that contained in the Survey.
(b) Seller shall deliver to Buyer and Title Company at Closing a title
affidavit (in the Title Company's customary form) acceptable to Buyer and
Title Company stating that Seller has sole and exclusive possession of the
Property and stating, among other things reasonably required by Buyer and
Title Company, that to the best of its knowledge either (i) there have been
no improvements, repairs or changes to the Property between the Effective
Date and Closing, or (ii) if there have been any such improvements, repairs
or changes, all lienors or potential lienors in connection with such
improvements, repairs or changes have been paid in full.
8. Closing Costs
(a) Seller shall pay: (i) Seller's attorney's fees; (ii) the cost of
recording all documents necessary to deliver good and marketable title to
Buyer hereunder; and (iii) all other costs and expenses specifically
allocable to Seller pursuant to the terms of this Agreement or any other
document or agreement to which Seller is a party in connection with the
transactions contemplated hereunder.
(b) Buyer shall pay: (i) Buyer's attorney's fees; (ii) the expense of the
Title Policy (including all endorsements thereto); (iii) the expense of the
Survey; (iv) all transfer, documentary, conveyance or similar taxes, if any;
(v) the entire earnest money escrow fee; (vi) the entire Closing escrow fee,
if any; (vii) all other recording fees with respect to documents to which
Buyer is a party to be recorded pursuant to the Closing; and (viii) all other
costs and expenses specifically allocable to Buyer pursuant to the terms of
this Agreement or any other document or agreement to which Buyer is a party in
connection with the transactions contemplated hereunder.
9. Prorations
All real property ad valorem taxes shall be prorated (on a 365-day year
basis) between Buyer and Seller as of Closing based upon 100% of each of the
most recently available property assessment valuation and tax rate. If
there is no assessment valuation or tax rate available for the year in which
Closing occurs or for one or more years prior to Closing, 100% of each of
the last known assessment and tax rate shall apply cumulatively to each year
for which there is no known assessment valuation or tax rate. If Buyer
becomes aware of any so-called "greenbelt", "roll-back" or other tax
attributable to any period prior to Closing which becomes retroactively due
pursuant to a change in zoning, use, ownership or otherwise, Buyer may, at
its option, elect to: (i) accept title to the Property subject to such
retroactive taxes; or (ii) terminate this Agreement, in which event, the
Earnest Money shall be returned to Buyer and thereafter neither party shall
have any further rights or obligations hereunder except as otherwise
provided herein. A reproration shall occur when actual taxes are billed for
the period up to Closing. All installments of special or installment
assessments levied against the Property and due or mature as of Closing
shall be paid in full by Seller on or before Closing.
10. Casualty and Condemnation.
(a) If, prior to the Closing Date, the Property and the improvements
thereon shall be destroyed or damaged by fire or other casualty, Buyer shall
have the option (to be exercised in the manner hereinafter provided) to: (i)
terminate this Agreement, in which event the Earnest Money shall be promptly
returned to Buyer, and thereupon, this Agreement shall become null and void,
and neither party shall have any further rights or obligations hereunder,
except as otherwise expressly provided herein; or (ii) upon the Closing Date
Seller shall (i) assign to Buyer the interest of Seller in and to any
insurance proceeds with respect to said damage, and (ii) credit against the
Purchase Price the amount of any deductible on Seller's casualty and
insurance policies covering said damage. Seller agrees to give Buyer notice
of any fire or other casualty within seventy-two (72) hours after any such
event, and Buyer may exercise such option by delivering written notice to
Seller within twenty (20) days following the receipt of such notice. If the
Closing Date is less than twenty (20) days following the last day on which
Buyer is entitled to elect to terminate this Agreement, then the Closing
shall be delayed until Buyer makes such election.
(b) If after the Effective Date and before Closing, all or any
portion of the Property is condemned by any legally constituted authority,
a notice of intent to condemn is issued for any portion of the Property,
or any portion of the Property is sold in lieu of condemnation (all of
which actions shall generically be referred to as a "condemnation"), Buyer
shall determine, in its sole and absolute discretion, the effect of the
condemnation on the Property and the financial viability of this
Agreement. Within 60 days after notice of intent to condemn is received by
Buyer, Buyer shall notify Seller in writing of Buyer's decision to either:
(i) terminate this Agreement, in which event all Earnest Money paid by
Buyer shall be immediately refunded by Title Company to Buyer, or (ii)
leave this Agreement in full force and effect and proceed to Close, in
which case Seller shall assign to Buyer all of Seller's rights under the
condemnation, or if the amount of the award is then ascertained or has
been paid to Seller, the Purchase Price shall be reduced by an amount
equal to the award, and Seller shall retain the rights to the award. If
this Agreement is terminated by Buyer under alternative (i) above, all
Earnest Money shall be returned to Buyer, and neither Buyer nor Seller
shall have any further obligations or rights under this Agreement other
than those which are expressly stated to survive a termination. If Buyer
does not terminate this Agreement, the term "Property" as used herein
shall refer to the remainder of the Property after condemnation. If the
Closing Date is less than sixty (60) days following the last day on which
Buyer is entitled to elect to terminate this Agreement, then the Closing
shall be delayed until Buyer makes such election.
11. Buyer's Representations and Warranties
Buyer shall defend, indemnify and hold Seller harmless from and
against any and all claims, actions, loss, cost, damage and expense
(including reasonable attorneys' fees) resulting from any intentional
misrepresentation or a willful breach by Buyer of Buyer's
representations, warranties and covenants in this Agreement. All
representations, warranties and covenants made herein by Buyer shall be
deemed to be repeated as of Closing and shall survive Closing. Buyer
represents, warrants and covenants to Seller that:
(a) Buyer's execution, delivery and consummation of this Agreement
is not prohibited by any agreement or instrument to which Buyer is a
party.
(b) Buyer's execution, delivery and consummation of this Agreement is
not subject to any consent or approval from or registration with any
governmental authority.
(c) Subject to Condition 5 in Section 4 hereof pertaining to Buyer's
Executive Committee Approval, this Agreement has been duly authorized,
executed and delivered by Buyer, is a valid and binding obligation of
Buyer and is enforceable against Buyer in accordance with its terms.
12. Seller's Representations and Warranties
Seller shall defend, indemnify and hold Buyer harmless from and
against any and all claims, actions, loss, cost, damage and expense
(including reasonable attorneys' fees) resulting from any inaccuracy or
breach in any of Seller's representations, warranties and covenants in
this Agreement. All representations, warranties, and covenants made
herein by Seller shall be deemed to be repeated as of Closing and shall
survive Closing for a period of one (1) year. Seller represents,
warrants and covenants to Buyer that:
(a) Seller has complete and full authority to execute this Agreement
and to convey to Buyer an undivided 40% interest in good and marketable
fee simple title to the Property in accordance with this Agreement, the
individuals executing this Agreement are authorized to do so, all
necessary action has been taken to authorize such execution, and Seller
will execute and deliver to Buyer and the Title Company at or prior to
Closing, as the case may require, such other documents, instruments,
agreements, including but not limited to affidavits and certificates
reasonably required (and reasonably satisfactory to Seller) to effectuate
the transactions contemplated by this Agreement including, without
limitation, evidence of Seller's authority to consummate the sale and the
documents and instruments required by the terms of this Agreement.
(b) Seller has received no notice of and has no knowledge of any
pending or threatened action, litigation, or proceeding against the Seller
or the Property, or taking or condemnation of the Property or any portion
thereof.
(c) Seller has received no notice of and has no knowledge of any
violation of any law, ordinance, regulation or other legal requirement
pertaining to the Property.
(d) Seller's execution of this Agreement and Closing will not violate
or breach any judgment, order, writ, injunction or decree issued against or
imposed upon Seller, nor result in a violation of any applicable law, order,
rule or regulation of any governmental authority. To the best of Seller's
knowledge, there is no action, suit, proceeding or investigation pending in
any court or before or by any federal, district, county, or municipal
department, commission, board, bureau, agency or other governmental
instrumentality which would affect title to the Property or any portion
thereof or which questions the validity or enforceability of the transaction
contemplated by this Agreement or any action which will be taken pursuant to
this Agreement.
(e) Except for the Lease (which shall terminate upon the closing
hereunder), Seller has executed no unrecorded agreement which affects title
to, the possession, use, operation or management of, the right to purchase,
or the development of, the Property (or any portion thereof), and during the
pendency of this Agreement Seller will execute no such agreement. There are
no employees of Seller that provide services exclusively with respect to the
Property, and during the pendency of this Agreement Seller will not hire any
such person as an employee such that there shall exist no outstanding
unsatisfied claim, obligation or liability with respect thereto that exists
or may arise with respect to the Property after the Closing Date. Seller
shall, at its sole cost and expense: (i) cause any service contracts or
other agreements affecting the Property and to which Seller is either a
party or has otherwise consented to be terminated at or prior to Closing,
(ii) cause all legal and contractual claims and obligations under all such
terminated contracts and agreements to be paid, performed and satisfied such
that there shall exist no outstanding unsatisfied claim, obligation or
liability with respect thereto that exists or may arise with respect to the
Property after the Closing Date; and (iii) deliver evidence of the foregoing
to Buyer at or prior to Closing.
(f) To the best of Seller's knowledge, all liens against the Property
are shown in the official records of the taxing authorities or the office of
the recorder of deeds in whose jurisdiction the Property is located.
(g) To the best of Seller's knowledge, there is unlimited pedestrian
and vehicular access to and from the Property to all streets abutting or
bordering the Property.
(h) To the best of Seller's knowledge, the Property (including any
personalty located thereon) is not contaminated with, nor threatened with
contamination by any chemical, material or substance to which exposure is
prohibited or which is in excess of the amount limited by any federal,
state, county, local or regional authority, nor has Seller been put on
notice by any non-governmental expert that any chemical, material or
substance poses a hazard to health, safety or property. In addition, to
the best of Seller's knowledge, the Property has never been used for a
landfill, dump site or for the storage of hazardous substances and there
are no underground storage tanks on the Property.
(i) Seller has received no notice of any pending or threatened
termination of any utility services for the Property or the right to use any
easement required for any utility service.
(j) To the best of Seller's knowledge, there are no obligations in
connection with the Property of any so-called "recapture agreement"
involving refund for sewer extension, oversizing utility, road work,
lighting or like expense or charge for work or services done upon or
relating to the Property or otherwise, and there exist no special taxes or
assessments which have been imposed or are threatened to be imposed with
respect to the Property.
(k) To the best of Seller's knowledge, there are no leasing
commissions or property management fees due as of the date hereof in
connection with the Property arising out of any acts of Seller or any
document to which Seller is a party or has otherwise consented to and
there will be none due as of the Closing Date or which may become due
thereafter.
For purposes of this Agreement, the terms "Seller has no knowledge,"
"known to Seller," "Seller knows of," "to Seller's knowledge," "to the
best of Seller's knowledge" and similar terms or phrases shall mean the
actual knowledge of Seller or its partners, agents, employees, attorneys
and consultants and the investigation of files in the possession or
control of such parties, but shall not include any duty of additional
investigation.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER MAKES
NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE CONDITION OF THE PROPERTY CONVEYED HEREBY,
INCLUDING, WITHOUT LIMITATION, THE CONFIGURATION, ACREAGE OR
SQUARE FOOTAGE OF THE PROPERTY OR THE HABITABILITY,
CONDITION OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE, AND
BUYER AGREES THAT IT IS PURCHASING THE PROPERTY IN AN "AS-
IS, WHERE-IS" CONDITION. BUYER FURTHER ACKNOWLEDGES THAT
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN: (1) SELLER
HAS NO OBLIGATION TO PROVIDE BY ANY INFORMATION RELATING TO
THE PROPERTY; (2) SELLER DOES NOT GUARANTEE OR REPRESENT
THE ACCURACY OR COMPLETENESS OF ANY INFORMATION OR REPORTS
RELATING TO THE PROPERTY THAT MAY HAVE BEEN OR MAY BE
PROVIDED TO BUYER; AND (3) BUYER SHALL RELY ONLY UPON
BUYER'S OWN INVESTIGATION OF THE PROPERTY IN DECIDING
WHETHER TO PURCHASE THE PROPERTY HEREUNDER.
13. Default
(a) If this transaction is not consummated due to Seller's default,
Buyer may elect to enforce the specific performance of this Agreement or
terminate this Agreement, in which event, the Title Company shall pay the
Earnest Money to Buyer; provided, however, if specific performance of this
Agreement is frustrated due to Seller's conveyance of all or part of the
Property to a third party, or due to Seller's encumbering all or any part
of or interest in the Property with a lien, lease, easement, restriction
or other encumbrance after the Effective Date and not eliminated at or
prior to Closing, or due to any other act or omission of Seller, it
agents, employees or contractors, then Buyer may pursue any all remedies
available to Buyer against Seller at law or in equity.
(b) If this transaction is not consummated due to Buyer's default, the
parties agree that due to the difficulty or impossibility of ascertainment
of damages accruing to Seller, Title Company shall pay the Earnest Money to
Seller as full and final liquidated damages, in lieu of all other legal or
equitable rights or remedies Seller may have against Buyer.
14. Brokers
Seller represents and warrants to the Buyer that it has dealt with no
real estate broker or agent with respect to the Property. Buyer
represents and warrants to Seller that it has dealt with no real estate
broker or agent with respect to the Property other than Gershman Brown
Associates, Inc. (the "Broker"). Buyer shall pay all commissions, fees
or compensation payable to the Broker arising out of this transaction.
Each warranting party shall indemnify and save the other party harmless
from any loss, cost, or damages, including reasonable attorney's fees,
arising from the warranting party's breach of its warranty.
15. Seller's Affirmative Covenants
(a) Seller shall maintain the Property free from waste and neglect
and in good order and repair and shall keep and perform or cause to be
performed all obligations of the owner under the Lease and the lease
termination agreement described in Condition 11 of Section 4 hereof, and
all obligations of the owner of the Property under any recorded title
documents or other documents affecting the Property and under applicable
laws, codes, ordinances, rules and regulations through the Closing Date or
termination of this Agreement, and Seller shall tender possession of the
Property to Buyer in the same environmental condition the Property was in
when last inspected by Buyer. Seller shall only be deemed in default
pursuant to the last portion of the preceding sentence if the
environmental condition thereof has adversely changed by reason of any act
or omission of Seller. If any such adverse environmental change is due to
any other reason, Buyer may, at its option, either accept such condition
and proceed to close, or terminate this Agreement, in which event, the
Earnest Money shall be promptly returned to Buyer.
(b) From the date hereof to the Closing Date, Seller shall maintain or
cause to be maintained liability, casualty and other insurance upon and in
respect to the Property against such hazards and risks as are customarily
insured by owners of similar properties.
(c) Except as otherwise expressly permitted or required hereunder,
from the date hereof to the Closing Date or earlier termination of this
Agreement, Seller shall not do, suffer or permit, or agree to do, any of
the following: (i) enter into any transaction with respect to or affecting
the Property that would in any way prevent Seller's full performance
hereunder, limit or adversely affect Buyer's rights hereunder or as an
owner of the Property following Closing (including, without limitation,
anything that may delay or increase the cost of Buyer's development of the
Property); (ii) sell, encumber or grant any interest in the Property or
any part thereof in any form or manner whatsoever; or (iii) enter into,
amend, waive any rights under, terminate or extend any document or
instrument affecting the Property without the prior written consent of
Buyer, which consent shall not be unreasonably withheld or delayed. For
purposes of the preceding sentence, it shall not be unreasonable for Buyer
to refuse to consent to any matter that will impose any cost, liability or
expense on Buyer either before or after the Closing or otherwise serve to
delay or interfere with the Use or the Project.
16. Miscellaneous
(a) Amendment. No amendment to this Agreement shall be effective
unless in writing and signed by both parties.
(b) Applicable Law. This Agreement shall be construed and enforced
in accordance with the laws of the state in which the Property is located.
(c) Waiver. Failure of a party to exercise any right under this
Agreement or to insist upon strict compliance with regard to any term,
condition or covenant specified herein shall not constitute a waiver of
that right nor of strict compliance by the other party with any term,
condition or covenant under this Agreement.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of such
counterparts together shall constitute one and the same agreement.
(e) Captions. All captions and headings are for reference purposes
and shall not be deemed to modify the text of this Agreement.
(f) Severability. The invalidity or unenforceability of a particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if that invalid or
unenforceable provision were omitted.
(g) Entire Agreement. This Agreement constitutes the sole and
entire agreement of the parties and is binding upon Seller and Buyer,
their heirs, successors, legal representatives and assigns.
(h) Agreement Assignable by Buyer. This Agreement may be assigned
or transferred by Buyer, but Buyer shall remain liable for the
obligations of Buyer under this Agreement.
(i) Exhibits. All exhibits attached to this Agreement are by
reference incorporated herein and made a part of this Agreement.
(j) Nomenclature. Any reference to a party shall include the
employees, officers, agents, contractors, assigns and successors-in-
interest of that party.
(k) Timing. Time is of the essence of this Agreement. If the time
for the performance of any act, giving of Notice, or making any payment
falls on a Saturday, Sunday or legal holiday, such time for performance
shall be extended to the next business day.
(l) Effective Date. If this Agreement is not signed
simultaneously by both parties, the first party to execute it
("Offeror") shall send an executed copy to the other party ("Offeree")
in the manner provided for Notices, and it shall be deemed an offer
which Offeree may accept only if Offeree delivers to an overnight
courier for next day delivery a fully executed copy on or before the
fifth (5th) day after the day on which Offeree received the executed
copy. The "Effective Date" of this Agreement shall be the date upon
which Offeree delivers the fully executed copy to the overnight courier
as provided in the foregoing sentence.
17. Notices
All notices, requests, demands or other communications ("Notices")
hereunder shall be in writing and given by national overnight courier
(e.g., Fed Ex, UPS, Airborne) and shall be effective as of the date of
delivery to the intended recipient as shown on the courier's records;
delivery shall be deemed to have been made if the courier was not able to
deliver due to change of address for which no notice was given. Notices
(and copies as shown) shall be addressed as shown below or to such other
address as may be specified from time to time in writing by either party:
To Seller: AEI Real Estate Fund XVI
1300 Minnesota World Trade Center
30 East Seventh Street
St. Paul, Minnesota 55101
Attention: Mr. Robert P. Johnson
Telephone No. (612) 227-7333
Fax No. (612) 227-7705
with a copy to: Michael Daugherty, Esq.
1300 Minnesota World Trade Center
30 East Seventh Street
St. Paul, Minnesota 55101
Telephone No. (612) 720-0777
Fax No. (612) 221-9702
To Buyer: Home Depot U.S.A., Inc.
2800 Forest Lane
Dallas, Texas 75229
Attention: John Luscher
Southwest Real Estate Manager
Telephone No. (847) 413-4954
Fax No. (847) 413-4973
Copy to: Altman, Kritzer & Levick, Ltd.
1101 Perimeter Road, Suite 700 Schaumburg, IL 60173
Attention: Gregg M. Dorman, Esq.
Telephone No. (847) 240-0340
Fax No. (847) 240-0344
Telephone and fax numbers shown above are for convenience of the parties
only and do not in any manner modify the terms of this Section 17.
18. Non-Foreign Certificate.
At Closing, Seller shall furnish Buyer with a non-foreign certificate
sufficient in form and substance to relieve Buyer of any and all
withholding obligations under federal law, which certificate shall be
reasonably satisfactory to Buyer and the Title Company. In the event
that Seller does not furnish Buyer with said certificate, or if Buyer has
reason to believe that said certificate would be wholly or partially
false if given and so notifies Seller, in writing, on or before the
Closing Date, Buyer shall be entitled to withhold up to ten (10%) percent
of the Purchase Price in an escrow account to be held by Title Company
until such time as Seller furnishes Buyer with a qualifying statement
from the Internal Revenue Service sufficient to relieve Buyer of any and
all withholding obligations under federal law, or until Buyer is required
to deliver said funds to the Internal Revenue Service, whichever first
occurs.
TEXT OF AGREEMENT ENDS HERE; SIGNATURE PAGE TO FOLLOW
IN WITNESS WHEREOF, Seller and Buyer have each duly executed
this
Agreement as of the dates shown adjacent to their signatures
below.
SELLER: AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP,
a Minnesota limited partnership
By: AEI Fund Management XVI, Inc.,
a Minnesota corporation,
its general partner
By:/s/ Robert P Johnson
Printed Name: Robert P Johnson
Title:President
Date of Execution by Seller: 11-17, 1997
BUYER: HOME DEPOT U.S.A., INC.,
a Delaware corporation
By: /s/ Kathryn E Lee
Printed Name: Kathryn E. Lee
Title: Senior Corporate Counsel
Date of Execution by Buyer: 11-20, 1997
EXHIBIT A
Depiction of Property
EXHIBIT B
Legal Description
[The legal description below shall be amended to reflect
the legal description determined by the Survey]
Parcel No. 4 of the Marketplace, being a Subdivision according to
the plat thereof recorded in Plat Book 253, Page 58 of the St. Louis
County Records.
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<NAME> AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
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<RECEIVABLES> 23,306
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 8,975,390
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