UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 033-33504
AAA NET REALTY FUND IX, LTD.
NEBRASKA LIMITED PARTNERSHIP IRS IDENTIFICATION
NO. 76-0318157
8 GREENWAY PLAZA, SUITE 824 HOUSTON, TX 77046
(713) 850-1400
Indicate by check mark whether the issuer (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the issuer was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
AAA NET REALTY FUND IX, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEET
JUNE 30, 1998
(Unaudited)
ASSETS
Cash and cash equivalents $ 205,571
Property:
Land 1,490,494
Buildings 2,946,375
4,436,869
Accumulated depreciation (593,333)
Total property 3,843,536
Other assets:
Accrued rental income 17,650
TOTAL ASSETS $4,066,757
LIABILITIES AND PARTNERSHIP EQUITY
Liabilities:
Accounts payable $ 11,025
TOTAL LIABILITIES 11,025
Partnership equity (deficit):
General partners (3,388)
Limited partners 4,059,120
TOTAL PARTNERSHIP EQUITY 4,055,732
TOTAL LIABILITIES AND PARTNERSHIP EQUITY $4,066,757
See Notes to Financial Statements.
2
AAA NET REALTY FUND IX, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(Unaudited)
Quarter Year To Date
1998 1997 1998 1997
Revenues:
Rental income $137,849 $123,575 $275,698 $247,150
Interest income 1,041 1,494 1,910 2,949
Total revenues 138,890 125,069 277,608 250,099
Expenses:
Advisory fees to related party 4,389 4,025 8,778 8,075
Depreciation 23,384 23,384 46,768 46,768
Professional fees 2,220 3,062 12,424 11,022
Total expenses 29,993 30,471 67,970 65,865
Net income $108,897 $ 94,598 $209,638 $184,234
Allocation of net income:
General partners $ 1,089 $ 946 $ 2,096 $ 1,842
Limited partners 107,808 93,652 207,542 182,392
$108,897 $ 94,598 $209,638 $184,234
Net income per unit $ 20.20 $ 17.55 $ 38.89 $ 34.18
Weighted average units outstanding 5,390.5 5,390.5 5,390.5 5,390.5
See Notes to Financial Statements.
3
<TABLE>
AAA NET REALTY FUND IX, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(Unaudited)
<CAPTION>
Quarter Year To Date
<S> <C> <C> <C> <C>
1998 1997 1998 1997
Cash flows from operating activities:
Net income $108,897 $ 94,598 $209,638 $184,234
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation 23,384 23,384 46,768 46,768
Decrease in accounts receivable - - 46,875 -
Increase in accrued rental income (5,295) - (10,590) -
Decrease in accounts payable (1,067) (364) (4,449) (4,656)
Net cash provided by operating activities 125,919 117,618 288,242 226,346
Cash flows from financing activities:
Distributions paid to partners (116,376) (115,838) (232,590) (231,513)
Net cash used in financing activities (116,376) (115,838) (232,590) (231,513)
Net increase (decrease) in cash and cash equivalents 9,543 1,780 55,652 (5,167)
Cash and cash equivalents at beginning of period 196,028 173,195 149,919 180,142
Cash and cash equivalents at end of period $205,571 $174,975 $205,571 $174,975
See Notes to Financial Statements
</TABLE>
4
AAA NET REALTY FUND IX, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AAA Net Realty Fund IX, Ltd. ("the Partnership"), is a limited
partnership formed February 1, 1990 under the laws of the
State of Nebraska. American Asset Advisers Management
Corporation IX (a Nebraska corporation) is the managing
general partner and H. Kerr Taylor is the individual general
partner. The Partnership commenced operations as of June 6,
1990.
The Partnership was formed to acquire commercial properties
for cash, own, lease, operate, manage and eventually sell the
properties. Prior to June 5, 1998, the supervision of the
operations of the properties was managed by American Asset
Advisers Realty Corporation, ("AAA"), a related party.
Beginning June 5, 1998, the supervision of the operations of
the properties is managed by AmREIT Operating Corporation,
("AmREIT"), a related party.
The financial records of the Partnership are maintained on the
accrual basis of accounting whereby revenues are recognized
when earned and expenses are reflected when incurred.
For purposes of the statement of cash flows, the Partnership
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. There
has been no cash paid for income taxes or interest during 1998
or 1997.
Land and buildings are stated at cost. Buildings are
depreciated on a straight-line basis over an estimated useful
life of 31.5 years.
The final property acquisition was completed as a joint
venture. The Partnership's interest in the joint venture is
4.8%. At June 30, 1998, the net book value of this property
comprised 1.7% of total assets, the rental income of $4,361
comprised 1.6% of total rental income and 2.1% of net income.
Because of the immateriality of these amounts to the financial
statements as a whole, the initial purchase and the subsequent
rental income and depreciation have been accounted for on the
proportionate consolidation method.
All income and expense items flow through to the partners for
tax purposes. Consequently, no provision for federal or state
income taxes is provided in the accompanying financial
statements.
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-QSB
and do not include all of the disclosures required by
generally accepted accounting principles.
The financial statements reflect all normal and recurring
adjustments which are, in the opinion of management, necessary
to present a fair statement of results for the three and six
month periods ended June 30, 1998 and June 30, 1997.
The financial statements of AAA Net Realty Fund IX, Ltd.
contained herein should be read in conjunction with the
financial statements included in the Partnership's annual
report on Form 10-KSB for the year ended December 31, 1997.
5
2. PARTNERSHIP EQUITY
The managing general partner, American Asset Advisers
Management Corporation IX, and the individual general partner,
H. Kerr Taylor, have made capital contributions in the amounts
of $990 and $10, respectively. The general partners shall not
be obligated to make any other contributions to the
Partnership, except that, in the event that the general
partners have negative balances in their capital accounts
after dissolution and winding up of, or withdrawal from, the
Partnership, the general partners will contribute to the
Partnership an amount equal to the lesser of the deficit
balances in their capital accounts or 1.01% of the total
capital contributions of the limited partners' over the amount
previously contributed by the general partners.
3. RELATED PARTY TRANSACTIONS
The Partnership Agreement provides for the reimbursement for
administrative services necessary for the prudent operation of
the Partnership and its assets with the exception that no
reimbursement is permitted for rent, utilities, capital
equipment, salaries, fringe benefits or travel expenses
allocated to the individual general partner or to any
controlling persons of the managing general partner. In
connection therewith, a total of $4,389 and $8,778 was
incurred and paid to AAA or AmREIT for the three and six
months ended June 30, 1998, respectively and $4,025 and $8,075
was incurred and paid to AAA for the three and six months
ended June 30, 1997, respectively.
4. MAJOR LESSEES
The following schedule summarizes total rental income by
lessee for the three and six months ended June 30, 1998 and
June 30, 1997:
Quarter Year to Date
1998 1997 1998 1997
Foodmaker, Inc. (Texas) $ 17,249 $ 15,934 $ 34,498 $ 31,868
Tandy Corporation (Tennessee) - 41,211 - * 82,422
Baptist Memorial Health
Services, Inc. (Tennessee) 52,170 - 104,340 -
Payless Shoe Source/WaldenBooks
(Texas) 20,500 18,500 41,000 37,000
Golden Corral Corporation (Texas) 47,930 47,930 95,860 95,860
Total $ 137,849 $ 123,575 $ 275,698 $ 247,150
* Lease terminated during 1997
6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
AAA Net Realty Fund IX, Ltd., a Nebraska limited partnership, was
formed February 1, 1990 to acquire on a debt-free basis, existing
and newly constructed commercial properties located in the
continental United States and particularly in the Southwest, to
lease these properties to tenants under generally "triple net"
leases, to hold the properties with the expectation of equity
appreciation and eventually to resell the properties.
The Partnership's overall investment objectives are to acquire
properties that offer investors the potential for (i)
preservation and protection of the Partnership's capital; (ii)
partially tax-deferred cash distributions from operations; and
(iii) long-term capital gains through appreciation in value of
the Partnership's properties realized upon sale.
AmREIT has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the
Year 2000 Issue. The Year 2000 Issue is the result of computer
programs being written using two digits rather than four to
define the applicable year. Any programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather
than the year 2000. AmREIT's hardware and software are believed
to be Year 2000 compliant. Accordingly, the Partnership does not
expect to incur any material costs in connection with the
compliance of the Year 2000 Issue.
RESULTS OF OPERATIONS
For the three months ended June 30, 1998, revenues totaled
$138,890 which was comprised of $137,849 of rental income and
$1,041 of interest income. Rental income increased from the
rental income recorded in the second quarter of 1997 primarily as
a result of negotiating a lease on one property with a new tenant
at a higher rental rate. In addition, the rental income from two
other properties increased based upon a specified measure of the
increase in the consumer price index. Expenses decreased by $478
primarily from a decrease in professional fees. The Partnership
recorded net income for the second quarter of 1998 of $108,897 as
compared to net income of $94,598 for the second quarter of 1997.
For the six months ended June 30, 1998, revenues totaled $277,608
which was comprised of $275,698 of rental income and $1,910 of
interest income. Rental income increased from the rental income
recorded in the first six months of 1997 primarily as a result of
negotiating a lease on one property with a new tenant at a higher
rental rate. In addition, the rental income from two other
properties increased based upon a specified measure of the
increase in the consumer price index. Expenses increased
slightly by $2,105 primarily from an increase in professional
fees. The Partnership recorded net income for the first six
months of 1998 of $209,638 as compared to net income of $184,234
for the first six months of 1997.
7
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
8
SIGNATURES
Pursuant to the requirements 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.
AAA Net Realty Fund IX, Ltd.
(Issuer)
August 14, 1998 /s/ H. Kerr Taylor
Date H. Kerr Taylor, President of General Partner
August 14, 1998 /s/ L. Larry Mangum
Date L. Larry Mangum
(Principal Accounting Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 205,571
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 205,571
<PP&E> 4,436,869
<DEPRECIATION> 593,333
<TOTAL-ASSETS> 4,066,757
<CURRENT-LIABILITIES> 11,025
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,055,732
<TOTAL-LIABILITY-AND-EQUITY> 4,066,757
<SALES> 275,698
<TOTAL-REVENUES> 277,608
<CGS> 0
<TOTAL-COSTS> 67,970
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 209,638
<INCOME-TAX> 0
<INCOME-CONTINUING> 209,638
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 209,638
<EPS-PRIMARY> 38.89
<EPS-DILUTED> 0
</TABLE>
