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 September 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
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
AAA NET REALTY FUND IX, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEET
SEPTEMBER 30, 1998
(Unaudited)
ASSETS
Cash and cash equivalents $ 216,186
Property:
Land 1,490,494
Buildings 2,946,375
__________
4,436,869
Accumulated depreciation (616,717)
__________
Total property 3,820,152
Other assets:
Accrued rental income 22,945
__________
TOTAL ASSETS $4,059,283
==========
LIABILITIES AND PARTNERSHIP EQUITY
Liabilities:
Accounts payable $ 11,212
__________
TOTAL LIABILITIES 11,212
Partnership equity (deficit):
General partners (3,049)
Limited partners 4,051,120
__________
TOTAL PARTNERSHIP EQUITY 4,048,071
TOTAL LIABILITIES AND PARTNERSHIP EQUITY $4,059,283
==========
See Notes to Financial Statements.
2
<PAGE>
<TABLE>
AAA NET REALTY FUND IX, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(Unaudited)
<CAPTION>
Quarter Year To Date
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Rental income $137,848 $129,720 $413,546 $376,870
Interest income 2,121 1,236 4,031 4,185
________ ________ ________ ________
Total revenues 139,969 130,956 417,577 381,055
Expenses:
Advisory fees to related party 4,389 5,100 13,167 13,175
Depreciation 23,384 23,384 70,152 70,152
Professional fees 3,372 4,958 15,796 15,980
_______ _______ ________ ________
Total expenses 31,145 33,442 99,115 99,307
Net income $108,824 $ 97,514 $318,462 $281,748
======== ======== ======== ========
Allocation of net income:
General partners $ 1,089 $ 975 $ 3,185 $ 2,817
Limited partners 107,735 96,539 315,277 278,931
-------- -------- -------- --------
$108,824 $ 97,514 $318,462 $281,748
======== ======== ======== ========
Net income per unit $ 20.19 $ 18.09 $ 59.08 $ 52.27
======== ======== ======== ========
Weighted average units outstanding 5,390.5 5,390.5 5,390.5 5,390.5
======== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
<TABLE>
AAA NET REALTY FUND IX, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(Unaudited)
<CAPTION>
Quarter Year To Date
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $108,824 $ 97,514 $318,462 $281,748
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation 23,384 23,384 70,152 70,152
Decrease in accounts receivable - 1,050 46,875 1,050
Increase in accrued rental income (5,295) (1,765) (15,885) (1,765)
Increase (decrease) in accounts payable 186 2,133 (4,263) (2,523)
-------- -------- -------- --------
Net cash provided by operating activities 127,099 122,316 415,341 348,662
Cash flows from financing activities:
Distributions paid to partners (116,484) (115,973) (349,074) (347,486)
-------- -------- --------
Net cash used in financing activities (116,484) (115,973) (349,074) (347,486)
Net increase in cash and cash equivalents 10,615 6,343 66,267 1,176
Cash and cash equivalents at beginning of period 205,571 174,975 149,919 180,142
-------- -------- -------- --------
Cash and cash equivalents at end of period $216,186 $181,318 $216,186 $181,318
======== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
AAA NET REALTY FUND IX, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 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 September 30, 1998, the net book value of this
property comprised 1.6% of total assets, the rental income of
$6,542 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 nine
month periods ended September 30, 1998 and September 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
<PAGE>
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 $13,167 was
incurred and paid to AAA or AmREIT for the three and nine
months ended September 30, 1998, respectively and $5,100 and
$13,175 was incurred and paid to AAA for the three and nine
months ended September 30, 1997, respectively.
4. MAJOR LESSEES
The following schedule summarizes total rental income by
lessee for the three and nine months ended September 30, 1998
and September 30, 1997:
Quarter Year to Date
1998 1997 1998 1997
Foodmaker, Inc. (Texas) $ 17,248 $ 17,094 $ 51,746 $ 48,962
Tandy Corporation (Tennessee) - 27,474 - * 109,896
Baptist Memorial Health
Services, Inc. (Tennessee) 52,170 17,389 156,510 17,389
Payless Shoe Source/WaldenBooks
(Texas) 20,500 19,833 61,500 56,833
Golden Corral Corporation (Texas) 47,930 47,930 143,790 143,790
--------- --------- --------- ---------
Total $137,848 $129,720 $413,546 $376,870
* Lease terminated during 1997
6
<PAGE>
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 is conducting 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. The Partnership believes that the cost of
remediation associated with its computer systems will be minimal
and the remediation is anticipated to be completed in the third
quarter of 1999. The other essential component of the Year 2000
issue is to ensure that the Partnership's significant tenants are
assessed for Year 2000 compliance. The Partnership has initiated
discussions with its significant tenants in order to assess their
readiness for the Year 2000 issue. Due to the nature of the
tenants' businesses, the Partnership does not believe the Year
2000 issue will materially impact the tenants' ability to pay
rent. However, the failure of one or more tenants as a result of
the Year 2000 issue could have a material adverse effect on the
Partnership's results of operation or financial position. Upon
completion of its assessment program, the Partnership will
consider the necessity of implementing a contingency plan to
mitigate any adverse effects associated with the Year 2000 issue.
Though the Partnership does not expect the Year 2000 issue to
have a material adverse effect on its results of operation or
financial position there can be no assurances of that position.
RESULTS OF OPERATIONS
For the three months ended September 30, 1998, revenues totaled
$139,969 which was comprised of $137,848 of rental income and
$2,121 of interest income. Rental income increased from the
rental income recorded in the third 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
$2,297 primarily from a decrease in professional fees. The
Partnership recorded net income for the third quarter of 1998 of
$108,824 as compared to net income of $97,514 for the third
quarter of 1997.
For the nine months ended September 30, 1998, revenues totaled
$417,577 which was comprised of $413,546 of rental income and
$4,031 of interest income. Rental income increased from the
rental income recorded in the first nine 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
decreased slightly by $192 primarily from a decrease in
professional fees. The Partnership recorded net income for the
first nine months of 1998 of $318,462 as compared to net income
of $281,748 for the first nine months of 1997.
7
<PAGE>
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
<PAGE>
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)
November 13, 1998 /s/ H. Kerr Taylor
Date H. Kerr Taylor, President of General Partner
November 13, 1998 /s/ L. Larry Mangum
Date L. Larry Mangum (Principal Accounting Officer)
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 216,186
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 216,186
<PP&E> 4,436,869
<DEPRECIATION> 616,717
<TOTAL-ASSETS> 4,059,283
<CURRENT-LIABILITIES> 11,212
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,048,071
<TOTAL-LIABILITY-AND-EQUITY> 4,059,283
<SALES> 413,546
<TOTAL-REVENUES> 417,577
<CGS> 0
<TOTAL-COSTS> 99,115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 318,462
<INCOME-TAX> 0
<INCOME-CONTINUING> 318,462
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 318,462
<EPS-PRIMARY> 59.08
<EPS-DILUTED> 0
</TABLE>
