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, 1998
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)
(651) 227-7333
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No
Check if disclosure of delinquent filers in response to Rule 405
of Regulation S-B is not contained in this Form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Issuer's revenues for year ended December 31, 1998 were
$1,057,876.
As of February 28, 1999, there were 13,606.15 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 $13,606,150.
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.
Most of the leases provide the lessee with two to three
five-year renewal options subject to the same terms and
conditions as the initial lease. Certain lessees have been
granted options to purchase the property. Depending on the
lease, the purchase price is either determined by a formula, or
is the greater of the fair market value of the property or the
amount determined by a formula. In all cases, if the option were
to be exercised by the lessee, the purchase price would be
greater than the original cost of the property.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
The Partnership 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. 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
December, 1998, the Partnership re-analyzed the market conditions
in the area and determined the fair value of the Partnership's
interest declined to approximately $154,300. In the fourth
quarter of 1998, a charge to operations for real estate
impairment of $221,000 was recognized, which is the difference
between book value at December 31, 1998 of $375,300 and the
estimated fair value of $154,300. 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.
ITEM 1. DESCRIPTION OF BUSINESS. (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
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 December, 1998, the Partnership re-analyzed the
market conditions in the area and determined the fair value of
the Partnership's interest in the land declined to approximately
$175,000. In the fourth quarter of 1998, a charge to operations
for real estate impairment of $25,000 was recognized, which is
the difference between the book value at December 31, 1998 of
$200,000 and the estimated fair value of $175,000.
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.
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.
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. The proposed Amendment
did not receive a majority vote for adoption.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Major Tenants
During 1998, 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 1998. It is
anticipated that, based on the minimum rental payments required
under the leases, each major tenant will continue to contribute
more than ten percent of the Partnership's total rental revenue
in 1999 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 Compliance
The Year 2000 issue is the result of computer systems that
use two digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and has
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership intends to monitor and communicate with
tenants regarding Year 2000 compliance, although there can be no
assurance that the systems of the various tenants will be 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.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
Description of Properties
The Partnership's properties are all commercial, single
tenant buildings. All the properties were acquired on a debt-
free basis and are leased to various tenants under triple net
leases, which are classified as operating leases. The
Partnership holds an undivided fee simple interest in the
properties. At any time prior to selling the properties, the
Partnership may mortgage one or more of its properties in amounts
not exceeding 50% of the fair market value of the property.
The Partnership's properties are subject to the general
competitive conditions incident to the ownership of single tenant
investment real estate. Since each property is leased under a
long-term lease, there is little competition until the
Partnership decides to sell the property. At this time, the
Partnership will be competing with other real estate owners, on
both a national and local level, in attempting to find buyers for
the properties. In the event of a tenant default, the
Partnership would be competing with other real estate owners, who
have property vacancies, to attract a new tenant to lease the
property. The Partnership's tenants operate in industries that
are very competitive and can be affected by factors such as
changes in regional or local economies, seasonality and changes
in consumer preference.
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 1998.
<TABLE>
<CAPTION>
Total Property
Purchase Acquisition Annual Lease Annual Rent
Property Date Costs Lessee Payment Per Sq. Ft.
<S> <C> <C> <C> <C> <C>
Creative Years Early Creative Years
Learning Center Early Learning
Houston, TX 4/8/87 $ 483,128 Centers, Inc. $ 42,180 $ 6.13
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 ARAMARK
Sterling Heights, MI Educational
(83.6514%) 11/25/87 $ 729,486 Resources, Inc. $ 108,696 $ 21.04
Jiffy Lube Auto Care Center
Dallas, TX Lone Star
(25%) 12/10/87 $ 154,891 Lubrication, Inc. $ 21,822 $ 32.70
JEMCARE
Arkansas Lane
Arlington, TX 12/10/87 $ 450,475 JEMCARE, Inc. $ 40,649 $ 8.07
</TABLE>
ITEM 2. PROPERTIES. (Continued)
<TABLE>
<CAPTION>
Total Property
Purchase Acquisition Annual Lease Annual Rent
Property Date Costs Lessee Payment Per Sq. Ft.
<S> <C> <C> <C> <C> <C>
Zapata's Cantina & Cafe
Waco, TX
(55.0958%) 12/16/87 $ 674,285 (1)
Sports City Cafe Texas
Mesquite, TX Sports City
(35%) 12/16/87 $ 520,109 Cafe, Ltd. $ 31,500 $ 12.73
JEMCARE
Matlock Avenue
Arlington, TX 12/16/87 $ 603,641 JEMCARE, Inc. $ 47,285 $ 8.04
Cheddar's Restaurant
Indianapolis, IN
(50%) 2/16/88 $ 253,747 (2)
Fuddruckers Restaurant
St. Louis, MO
(40%) 3/25/88 $ 761,053 Fuddruckers, Inc. $ 92,164 $ 26.40
Applebee's Restaurant
Slidell, LA Gulf Coast
(73%) 5/5/93 $ 746,465 Restaurants, Inc. $ 115,183 $ 34.44
Renaissant
Applebee's Restaurant Development
Victoria, TX 3/22/96 $1,335,555 Corp. $ 151,110 $ 27.57
Caribou Coffee Store Caribou Coffee
Atlanta, GA 8/15/97 $1,247,571 Company, Inc. $ 142,025 $ 33.39
</TABLE>
(1) The property is vacant and listed for sale or lease.
(2) 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 Fuddruckers 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.
ITEM 2. PROPERTIES. (Continued)
The initial Lease terms are 20 years except for the
JEMCARE properties (10 years), the Credit Union (11 years), the
Sports City Cafe (12 years), the Creative Years daycare center
(13 years), the Arby's (15 years) and the Caribou Coffee store
(18 years). Most of the Leases have renewal options which may
extend the Lease term an additional 9 to 15 years.
The Partnership acquired lease guarantee insurance from
United Guaranty Commercial Insurance Company of Iowa for the
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 except for properties whose book value was
reduced by a real estate impairment loss pursuant to Financial
Accounting Standards Board Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of." The real estate impairment loss, which was
recorded against the book cost of the land and depreciable
property, was not recognized for tax purposes.
During the last five years or since the date of purchase,
if purchased after December 31, 1993, 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
a 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, 1998, there were 1,473 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 1998, twenty-seven Limited Partners redeemed a
total of 313.25 Partnership Units for $161,072 in accordance with
the Partnership Agreement. In prior years, a total of 101
Limited Partners redeemed 1,080.6 Partnership Units for $829,400.
The redemptions increase the remaining Limited Partners'
ownership interest in the Partnership.
Cash distributions of $15,258 and $7,978 were made to the
General Partners and $1,349,386 and $745,729 were made to the
Limited Partners in 1998 and 1997, 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 $734,218 and $70,915 of
proceeds from property sales in 1998 and 1997, 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, 1998 and 1997, the
Partnership recognized rental income of $1,040,302 and $975,472,
respectively. During the same periods, the Partnership earned
investment income of $17,574 and $60,983, respectively. In 1998,
rental income increased as the result of rental income received
from 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 the vacancy of the restaurant
in Waco, Texas, the expiration of lease guarantee insurance
policies on two properties in 1997, and the reduction of
percentage rent on one property in 1998. The increase in rental
income was offset by a decrease in investment income earned on
net sale 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. 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
December, 1998, the Partnership re-analyzed the market conditions
in the area and determined the fair value of the Partnership's
interest declined to approximately $154,300. In the fourth
quarter of 1998, a charge to operations for real estate
impairment of $221,000 was recognized, which is the difference
between book value at December 31, 1998 of $375,300 and the
estimated fair value of $154,300. 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.
During the years ended December 31, 1998 and 1997, the
Partnership paid Partnership administration expenses to
affiliated parties of $210,718 and $207,550, 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 $49,925 and $83,197, 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 1998, when compared to 1997, is mainly due
to expenses incurred in 1997 related to the J.T. McCord's
restaurant in Irving, Texas.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
As of December 31, 1998, the Partnership's annualized cash
distribution rate was 5%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement. As a result, 99% of distributions and
income were allocated to Limited Partners and 1% to the General
Partners.
Inflation has had a minimal effect on income from
operations. It is expected that increases in sales volumes of
the tenants, due to inflation and real sales growth, will result
in an increase in rental income over the term of the leases.
Inflation also may cause the Partnership's real estate to
appreciate in value. However, inflation and changing prices may
also have an adverse impact on the operating margins of the
properties' tenants which could impair their ability to pay rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.
The Year 2000 issue is the result of computer systems that
use two digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and has
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership intends to monitor and communicate with
tenants regarding Year 2000 compliance, although there can be no
assurance that the systems of the various tenants will be Year
2000 compliant.
Liquidity and Capital Resources
During 1998, the Partnership's cash balances decreased
$757,689 mainly due to the distribution of $707,071 of net sale
proceeds to the Partners as a special distribution in April,
1998. Net Cash provided by operating activities increased from
$675,703 in 1997 to $766,940 in 1998 as a result of an increase
in income and a decrease in expenses in 1998 and net timing
differences in the collection of payments from the lessees and
the payment of expenses.
The major components of the Partnership's cash flow from
investing activities are investments in real estate and proceeds
from the sale of real estate. In 1997, the Partnership generated
cash flow from the sale of real estate of $890,836. During the
same period, the Partnership expended $524,976 to invest in real
properties (inclusive of acquisition expenses) as the Partnership
reinvested the cash generated from the property sales.
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
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. 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 December, 1998, the
Partnership re-analyzed the market conditions in the area and
determined the fair value of the Partnership's interest in the
land declined to approximately $175,000. In the fourth quarter
of 1998, a charge to operations for real estate impairment of
$25,000 was recognized, which is the difference between the book
value at December 31, 1998 of $200,000 and the estimated fair
value of $175,000.
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.
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.
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. The proposed Amendment
did not receive a majority vote for adoption.
During 1998 and 1997, the Partnership distributed $741,635
and $71,631 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 $52.78 and $5.07 per Limited
Partnership Unit, respectively.
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%
which resulted in regular distributions to the Partners of
$753,262 in 1997. In April, 1998, the Partnership distributed
net sale proceeds of $707,071 to the Partners as a special
distribution, which reduced the Limited Partners' Adjusted
Capital Contribution. Effective April 1, 1998, the Partnership
made distributions at a 5.0% rate on the reduced capital balance,
which resulted in regular distributions to the Partners of
$655,945 for 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the 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 1998, twenty-seven Limited Partners redeemed a
total of 313.25 Partnership Units for $161,072 in accordance with
the Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, a total of
101 Limited Partners redeemed 1,080.6 Partnership Units for
$829,400. The redemptions increase the remaining Limited
Partners' ownership interest in the Partnership.
The continuing rent payments from the properties should be
adequate to fund continuing distributions and meet other
Partnership obligations on both a short-term and long-term basis.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
contains various "forward looking statements" within the meaning
of federal securities laws which represent management's
expectations or beliefs concerning future events, including
statements regarding anticipated application of cash, expected
returns from rental income, growth in revenue, taxation levels,
the sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements made by the Partnership, must be evaluated in
the context of a number of factors that may affect the
Partnership's financial condition and results of operations,
including the following:
<BULLET> Market and economic conditions which affect
the value of the properties the Partnership owns and
the cash from rental income such properties generate;
<BULLET> the federal income tax consequences of rental
income, deductions, gain on sales and other items and
the affects of these consequences for investors;
<BULLET> resolution by the General Partners of
conflicts with which they may be confronted;
<BULLET> the success of the General Partners of
locating properties with favorable risk return
characteristics;
<BULLET> the effect of tenant defaults; and
<BULLET> the condition of the industries in which the
tenants of properties owned by the Partnership operate.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying Index to Financial Statements.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet as of December 31, 1998 and 1997
Statements for the Years Ended December 31, 1998 and 1997:
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, 1998 and 1997 and the related
statements of income, cash flows and changes in partners' capital
for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of AEI Real Estate Fund XVI Limited Partnership as of December
31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
/s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Minneapolis, Minnesota Boulay, Heutmaker, Zibell & Co. P.L.L.P.
January 27, 1999 Certified Public Accountants
<PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1998 1997
CURRENT ASSETS:
Cash and Cash Equivalents $ 78,013 $ 835,702
Receivables 35,703 23,306
----------- -----------
Total Current Assets 113,716 859,008
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 3,474,363 3,580,192
Buildings and Equipment 6,341,958 6,457,129
Accumulated Depreciation (2,320,311) (2,120,686)
----------- -----------
7,496,010 7,916,635
Real Estate Held for Sale 174,747 199,747
----------- -----------
Net Investments in Real Estate 7,670,757 8,116,382
----------- -----------
Total Assets $ 7,784,473 $ 8,975,390
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 64,626 $ 60,310
Distributions Payable 138,384 137,297
Deferred Income 22,212 22,212
----------- -----------
Total Current Liabilities 225,222 219,819
----------- -----------
DEFERRED INCOME - Net of Current Portion 177,557 199,769
PARTNERS' CAPITAL (DEFICIT):
General Partners (55,381) (43,639)
Limited Partners, $1,000 Unit value;
15,000 Units authorized and issued;
13,606 and 13,919 outstanding in 1998
and 1997, respectively 7,437,075 8,599,441
----------- -----------
Total Partners' Capital 7,381,694 8,555,802
----------- -----------
Total Liabilities and Partners' Capital $ 7,784,473 $ 8,975,390
=========== ===========
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
1998 1997
INCOME:
Rent $ 1,040,302 $ 975,472
Investment Income 17,574 60,983
----------- -----------
Total Income 1,057,876 1,036,455
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 210,718 207,550
Partnership Administration and Property
Management - Unrelated Parties 49,925 83,197
Depreciation 199,625 269,297
Real Estate Impairment 246,000 154,000
----------- -----------
Total Expenses 706,268 714,044
----------- -----------
OPERATING INCOME 351,608 322,411
LOSS ON SALE OF REAL ESTATE 0 (109,144)
----------- -----------
NET INCOME $ 351,608 $ 213,267
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 3,516 $ 2,133
Limited Partners 348,092 211,134
----------- -----------
$ 351,608 $ 213,267
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(13,840 and 13,976 weighted average Units outstanding
in 1998 and 1997, respectively) $ 25.15 $ 15.11
=========== ===========
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
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 351,608 $ 213,267
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 199,625 269,297
Real Estate Impairment 246,000 154,000
Loss on Sale of Real Estate 0 109,144
Increase in Receivables (12,397) (6,022)
Increase (Decrease) in Payable to
AEI Fund Management, Inc. 4,316 (41,772)
Decrease in Deferred Income (22,212) (22,212)
----------- -----------
Total Adjustments 415,332 462,435
----------- -----------
Net Cash Provided By
Operating Activities 766,940 675,702
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate 0 (524,976)
Proceeds from Sale of Real Estate 0 890,836
----------- -----------
Net Cash Provided By
Investing Activities 0 365,860
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable 1,087 (53,350)
Distributions to Partners (1,363,016) (753,262)
Redemption Payments (162,700) (44,550)
----------- -----------
Net Cash Used For
Financing Activities (1,524,629) (851,162)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (757,689) 190,400
CASH AND CASH EQUIVALENTS, beginning of period 835,702 645,302
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 78,013 $ 835,702
=========== ===========
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, 1996 $ (37,794) $ 9,178,141 $ 9,140,347 13,994.70
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
Distributions (13,630) (1,349,386) (1,363,016)
Redemption Payments (1,628) (161,072) (162,700) (313.25)
Net Income 3,516 348,092 351,608
---------- ----------- ----------- -----------
BALANCE, December 31, 1998 $ (55,381) $ 7,437,075 $ 7,381,694 13,606.15
========== =========== =========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(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 PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) Organization - (Continued)
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
property, will be allocated first in the same ratio in
which, and to the extent, Net Cash Flow is distributed to
the Partners for such year. Any additional profits will be
allocated 90% to the Limited Partners and 10% to the General
Partners. In the event no Net Cash Flow is distributed to
the Limited Partners, 90% of each item of Partnership
income, gain or credit for each respective year shall be
allocated to the Limited Partners, and 10% of each such item
shall be allocated to the General Partners. Net losses from
operations will be allocated 98% to the Limited Partners and
2% to the General Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of the Partnership's property will be
allocated in accordance with the Partnership Agreement as
follows: (i) first, to those partners with deficit balances
in their capital accounts in an amount equal to the sum of
such deficit balances; (ii) second, 99% to the Limited
Partners and 1% to the General Partners until the aggregate
balance in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital Contributions
plus an amount equal to 14% of their Adjusted Capital
Contributions per annum, cumulative but not compounded, to
the extent not previously allocated; (iii) third, to the
General Partners until cumulative allocations to the General
Partners equal 15% of cumulative allocations. Any remaining
balance will be allocated 85% to the Limited Partners and
15% to the General Partners. Losses will be allocated 98%
to the Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(2) Summary of Significant Accounting Policies -
Financial Statement Presentation
The accounts of the Partnership are maintained on the
accrual basis of accounting for both federal income tax
purposes and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested
in money market accounts, certificates of deposit,
federal agency notes and commercial paper with a term of
three months or less.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
Partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under triple net
leases classified as operating leases. The Partnership
recognizes rental revenue on the accrual basis according
to the terms of the individual leases. For leases which
contain cost of living increases, the increases are
recognized in the year in which they are effective.
Real estate is recorded at the lower of cost or estimated
net realizable value. The Partnership compares the
carrying amount of its properties to the estimated future
cash flows expected to result from the property and its
eventual disposition. If the sum of the expected future
cash flows is less than the carrying amount of the
property, the Partnership recognizes an impairment loss
by the amount by which the carrying amount of the
property exceeds the fair value of the property.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(2) Summary of Significant Accounting Policies - (Continued)
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. The remaining
interests in these properties are 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 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
1998 1997
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. $ 210,718 $ 207,550
======== ========
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(3) Related Party Transactions - (Continued)
Total Incurred by the Partnership
for the Years Ended December 3l
1998 1997
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. $ 49,925 $ 83,197
======== ========
c.AEI is reimbursed for all property acquisition
costs incurred by it in acquiring properties on
behalf of the Partnership. The amount is net
of financing and commitment fees and expense
reimbursements received by the Partnership from
the lessees in the amount of $22,178 for 1997. $ 0 $ (8,362)
======== ========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a, b and c. This
balance is non-interest bearing and unsecured and is to be
paid in the normal course of business.
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through triple net leases, which are classified as operating
leases. Under a triple net lease, the lessee is responsible
for all real estate taxes, insurance, maintenance, repairs
and operating expenses of the property. The initial Lease
terms are 20 years except for the JEMCARE properties (10
years), the Credit Union (11 years), the Sports City Cafe
(12 years), the Creative Years daycare center (13 years),
the Arby's (15 years) and the Caribou Coffee store (18
years). Most 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.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate - (Continued)
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 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 Caribou
Coffee store in 1997. There have been no costs capitalized
as improvements subsequent to the acquisitions.
The cost of the properties not held for sale and the related
accumulated depreciation at December 31, 1998 are as
follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Creative Years,
Houston, TX $ 147,753 $ 335,375 $ 483,128 $ 155,534
Credit Union, Wyoming, MI 166,434 459,805 626,239 215,342
Arby's, Grand Rapids, MI 195,229 457,651 652,880 214,333
Fuddruckers, Omaha, NE 307,913 843,630 1,151,543 476,950
Children's World,
Sterling Heights, MI 138,133 591,353 729,486 241,073
Jiffy Lube, Dallas, TX 65,918 88,973 154,891 40,198
JEMCARE, Arlington, TX 148,214 302,261 450,475 131,878
Zapata's, Waco, TX 73,880 279,405 353,285 199,005
Sports City Cafe, Mesquite, TX 230,337 289,772 520,109 130,452
JEMCARE, Arlington, TX 323,671 279,970 603,641 120,190
Fuddruckers, St. Louis, MO 396,943 364,110 761,053 171,172
Applebee's, Slidell, LA 278,879 467,586 746,465 88,322
Applebee's, Victoria, TX 379,644 955,911 1,335,555 106,322
Caribou Coffee, Atlanta, GA 621,415 626,156 1,247,571 29,540
----------- ----------- ----------- -----------
$ 3,474,363 $ 6,341,958 $ 9,816,321 $ 2,320,311
=========== =========== =========== ===========
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate - (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.
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.
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 December, 1998, the
Partnership re-analyzed the market conditions in the area
and determined the fair value of the Partnership's interest
declined to approximately $154,300. In the fourth quarter
of 1998, a charge to operations for real estate impairment
of $221,000 was recognized, which is the difference between
book value at December 31, 1998 of $375,300 and the
estimated fair value of $154,300. The charge was recorded
against the cost of the land and building.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate - (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 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. 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 December, 1998, the Partnership re-
analyzed the market conditions in the area and determined
the fair value of the Partnership's interest in the land
declined to approximately $175,000. In the fourth quarter
of 1998, a charge to operations for real estate impairment
of $25,000 was recognized, which is the difference between
the book value at December 31, 1998 of $200,000 and the
estimated fair value of $175,000.
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.
In November, 1997, the Partnership entered into an agreement
to sell the Fuddruckers restaurant in St. Louis, Missouri to
an unrelated third party. In March, 1998, the agreement was
terminated by the purchaser.
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.
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. The proposed Amendment did not receive a
majority vote for adoption.
During 1998 and 1997, the Partnership distributed $741,635
and $71,631 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
$52.78 and $5.07 per Limited Partnership Unit, respectively.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate - (Continued)
The minimum future rentals on the Leases for years
subsequent to December 31, 1998 are as follows:
1999 $ 1,032,134
2000 1,043,824
2001 956,669
2002 974,428
2003 953,492
Thereafter 7,552,573
-----------
$12,513,120
===========
In 1998 and 1997, the Partnership recognized contingent
rents of $16,340 and $24,974, respectively.
(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, 1998 and 1997, the
Partnership has recognized $99,954 and $77,742,
respectively, of this payment as income.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(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:
1998 1997
Tenants Industry
Fuddruckers, Inc. Restaurant $ 259,457 $ 259,457
Renaissant Development Corp. Restaurant 151,110 151,110
Caribou Coffee Company, Inc. Restaurant 142,025 N/A
Gulf Coast Restaurants, Inc. Restaurant 113,560 109,720
ARAMARK Educational
Resources, Inc. Child Care 107,205 105,309
JEMCARE, Inc. Child Care N/A 98,869
---------- ----------
Aggregate rent revenue of major tenants $ 773,357 $ 724,465
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 74% 74%
========== ==========
(7) Partners' Capital -
Cash distributions of $15,258 and $7,978 were made to the
General Partners and $1,349,386 and $745,729 were made to
the Limited Partners for the years ended December 31, 1998
and 1997, respectively. The Limited Partners' distributions
represent $97.50 and $53.36 per Limited Partnership Unit
outstanding using 13,840 and 13,976 weighted average Units
in 1998 and 1997, respectively. The distributions represent
$13.31 and $11.94 per Unit of Net Income and $84.19 and
$41.42 per Unit of return of contributed capital in 1998 and
1997, respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $734,218 and $70,915 of
proceeds from property sales in 1998 and 1997, respectively.
The distributions reduced the Limited Partners' Adjusted
Capital Contributions.
Distributions of Net Cash Flow to the General Partners
during 1998 and 1997 were subordinated to the Limited
Partners as required in the Partnership Agreement. As a
result, 99% of distributions and income were allocated to
the Limited Partners and 1% to the General Partners.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(7) Partners' Capital - (Continued)
The Partnership may acquire Units from Limited Partners who
have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated
to purchase in any year more than 5% of the number of Units
outstanding at the beginning of the year. In no event shall
the Partnership be obligated to purchase Units if, in the
sole discretion of the Managing General Partner, such
purchase would impair the capital or operation of the
Partnership.
During 1998, twenty-seven Limited Partners redeemed a total
of 313.25 Partnership Units for $161,072 in accordance with
the Partnership Agreement. The Partnership acquired these
Units using Net Cash Flow from operations. In 1997, eleven
Limited Partners redeemed a total of 75.3 Partnership Units
for $44,105. 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
$892.63 per original $1,000 invested.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(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:
1998 1997
Net Income for Financial
Reporting Purposes $ 351,608 $ 213,267
Depreciation for Tax Purposes
Under Depreciation for Financial
Reporting Purposes 2,082 47,395
Income Accrued for Tax Purposes
Under Income for Financial
Reporting Purposes (27,512) (24,813)
Property Expenses for Tax Purposes
Under Expenses for Financial
Reporting Purposes 1,995 6,639
Real Estate Impairment Loss
Not Recognized for Tax Purposes 246,000 154,000
Gain on Sale of Real Estate for Tax
Purposes Under Gain for Financial
Reporting Purposes 0 (398,704)
---------- ----------
Taxable Income (Loss) to Partners $ 574,173 $ (2,216)
========== ==========
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(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:
1998 1997
Partners' Capital for
Financial Reporting Purposes $ 7,381,694 $ 8,555,802
Adjusted Tax Basis of Investments
in Real Estate Over Net Investments
in Real Estate for Financial
Reporting Purposes 787,467 539,385
Income Accrued for Tax Purposes Over
Income for Financial
Reporting Purposes 266,729 294,241
Property Expenses for Tax Purposes
Under Expenses for Financial
Reporting Purposes 8,634 6,639
Syndication Costs Treated as
Reduction of Capital for
Financial Reporting Purposes 1,981,686 1,981,686
----------- -----------
Partners' Capital for
Tax Reporting Purposes $10,426,210 $11,377,753
=========== ===========
(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:
1998 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 348 $ 348 $ 336 $ 366
Money Market Funds 77,665 77,665 835,366 835,366
--------- --------- --------- ---------
Total Cash and
Cash Equivalents $ 78,013 $ 78,013 $ 835,702 $ 835,702
========= ========= ========= =========
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 54, 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 December, 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 seventeen other limited
partnerships.
Mark E. Larson, age 46, is Executive Vice President,
Treasurer and Chief Financial Officer and has been elected to
continue in these positions until December, 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 December, 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, 1999:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
AEI Fund Management XVI, Inc. 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Robert P. Johnson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Mark E. Larson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
* Less than 1%
The persons set forth in the preceding table hold sole voting
power and power of disposition with respect to all of the Units
set forth opposite their names. The General Partners know of no
holders of more than 5% of the outstanding Units.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The registrant, AFM and its affiliates have common
management and utilize the same facilities. As a result, certain
administrative expenses are allocated among these related
entities. All of such activities and any other transactions
involving the affiliates of the General Partner of the registrant
are governed by, and are conducted in conformity with, the
limitations set forth in the Limited Partnership Agreement of the
registrant.
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, 1998.
Person or Entity Amount Incurred From
Receiving Form and Method Inception (February 6, 1987)
Compensation of Compensation To December 31, 1998
AEI Securities, Inc. 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 and Reimbursement at Cost for other $ 487,080
Affiliates Organization and Offering Costs.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Continued)
Person or Entity Amount Incurred From
Receiving Form and Method Inception (February 6, 1987)
Compensation of Compensation To December 31, 1998
General Partners and Reimbursement at Cost for all $ 215,052
Affiliates Acquisition Expenses
General Partners 1% of Net Cash Flow in any fiscal $ 104,481
year 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 and Reimbursement at Cost for all $2,481,672
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 $ 28,836
of Sale other than distributions
necessary to restore Adjusted Capital
Contributions and provide a 6% cumulative
return to Limited Partners. The General
Partners will receive only 1% of
distributions of Net Proceeds of Sale
until the Limited Partners have received
an amount equal to: (a) their Adjusted
Capital Contributions, plus (b) an
amount equal to 14% of their Adjusted
Capital Contributions per annum, cumulative
but not compounded, less (c) all previous
cash distributions to the Limited Partners.
The limitations included in the Partnership Agreement
require that the cumulative reimbursements to the General
Partners and their affiliates for administrative expenses not
allowed under the NASAA Guidelines ("Guidelines") will not exceed
the sum of (i) the front-end fees allowed by the Guidelines less
the front-end fees paid, (ii) the cumulative property management
fees allowed but not paid, (iii) any real estate commission
allowed under the Guidelines, and (iv) 10% of Net Cash Flow less
the Net Cash Flow actually distributed. The reimbursements not
allowed under the Guidelines include a controlling person's
salary and fringe benefits, rent and depreciation. As of
December 31, 1998, 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 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).
10.3 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).
10.4 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).
10.5 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).
10.6 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 (incorporated by reference
to Exhibit 10.9 of Form 10-KSB filed with
the Commission on March 16, 1998).
27 Financial Data Schedule for
year ended December 31, 1998.
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 12, 1999 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 12,1999
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 12, 1999
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000804127
<NAME> AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 78,013
<SECURITIES> 0
<RECEIVABLES> 35,703
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 113,716
<PP&E> 9,991,068
<DEPRECIATION> (2,320,311)
<TOTAL-ASSETS> 7,784,473
<CURRENT-LIABILITIES> 225,222
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,502,694
<TOTAL-LIABILITY-AND-EQUITY> 7,905,473
<SALES> 0
<TOTAL-REVENUES> 1,057,876
<CGS> 0
<TOTAL-COSTS> 706,268
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 351,608
<INCOME-TAX> 0
<INCOME-CONTINUING> 351,608
<DISCONTINUED> 0
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