SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: June 30, 1997
Commission file number: 0-19838
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Minnesota 41-1677062
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(612) 227-7333
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
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 preceding 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
Transitional Small Business Disclosure Format:
Yes No [X]
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of June 30, 1997 and December 31, 1996
Statements for the Periods ended June 30, 1997 and 1996:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
BALANCE SHEET
JUNE 30, 1997 AND DECEMBER 31, 1996
(Unaudited)
ASSETS
1997 1996
CURRENT ASSETS:
Cash and Cash Equivalents $ 3,020,998 $ 2,477,783
Receivables 12,907 17,842
Current Portion of Long-Term Notes Receivable 30,914 69,049
----------- -----------
Total Current Assets 3,064,819 2,564,674
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 4,378,646 4,435,197
Buildings and Equipment 8,830,028 9,459,091
Construction Advances 626,628 0
Property Acquisition Costs 80,982 29,041
Accumulated Depreciation (950,932) (881,049)
----------- -----------
Net Investments in Real Estate 12,965,352 13,042,280
----------- -----------
OTHER ASSETS:
Long-Term Notes Receivable -
Net of Current Portion 1,476,749 2,100,919
----------- -----------
Total Assets $17,506,920 $17,707,873
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 56,287 $ 37,417
Distributions Payable 420,958 421,057
Unearned Rent 32,156 0
----------- -----------
Total Current Liabilities 509,401 458,474
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (10,446) (7,927)
Limited Partners, $1,000 Unit Value;
30,000 Units authorized; 21,152 Units issued;
21,015 Units outstanding 17,007,965 17,257,326
----------- -----------
Total Partners' Capital 16,997,519 17,249,399
----------- -----------
Total Liabilities and Partners' Capital $17,506,920 $17,707,873
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED JUNE 30
(Unaudited)
Three Months Ended Six Months Ended
6/30/97 6/30/96 6/30/97 6/30/96
INCOME:
Rent $ 354,869 $ 578,398 $ 724,838 $1,039,908
Investment Income 87,150 57,485 174,959 155,007
---------- ---------- ---------- ----------
Total Income 442,019 635,883 899,797 1,194,915
---------- ---------- ---------- ----------
EXPENSES:
Partnership Administration -
Affiliates 72,988 47,404 127,099 114,684
Partnership Administration
and Property Management -
Unrelated Parties 32,650 16,624 66,474 33,056
Depreciation 77,293 111,490 157,362 202,843
---------- ---------- ---------- ----------
Total Expenses 182,931 175,518 350,935 350,583
---------- ---------- ---------- ----------
OPERATING INCOME 259,088 460,365 548,862 844,332
GAIN ON SALE OF REAL ESTATE 0 171,013 77,703 171,013
MINORITY INTEREST IN
NET INCOME 0 (102,559) 0 (196,727)
---------- ---------- ---------- ----------
NET INCOME $ 259,088 $ 528,819 $ 626,565 $ 818,618
========== ========== ========== ==========
NET INCOME ALLOCATED:
General Partners $ 2,591 $ 5,288 $ 6,266 $ 8,186
Limited Partners 256,497 523,531 620,299 810,432
---------- ---------- ---------- ----------
$ 259,088 $ 528,819 $ 626,565 $ 818,618
========== ========== ========== ==========
NET INCOME PER
LIMITED PARTNERSHIP UNIT
(21,015 and 21,121 weighted
average Units outstanding
in 1997 and 1996,
respectively) $ 12.21 $ 24.79 $ 29.52 $ 38.37
========== ========== ========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED JUNE 30
(Unaudited)
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 626,565 $ 818,618
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 157,362 202,843
Gain on Sale of Real Estate (77,703) (171,013)
Decrease in Receivables 4,935 111,804
Increase (Decrease) in Payable to
AEI Fund Management, Inc. 18,870 (58,506)
Increase in Unearned Rent 32,156 41,299
Minority Interest 0 (57,636)
----------- -----------
Total Adjustments 135,620 68,791
----------- -----------
Net Cash Provided By
Operating Activities 762,185 887,409
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (678,569) (3,541,930)
Proceeds from Sale of Real Estate,
Net of Minority Interest 675,838 591,752
Payments Received on Long-Term Notes Receivable 662,305 12,975
----------- -----------
Net Cash Provided By (Used For)
Investing Activities 659,574 (2,937,203)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in Distributions Payable (99) (78,264)
Distributions to Partners (878,445) (880,796)
----------- -----------
Net Cash Used For
Financing Activities (878,544) (959,060)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 543,215 (3,008,854)
CASH AND CASH EQUIVALENTS, beginning of period 2,477,783 4,702,376
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 3,020,998 $ 1,693,522
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED JUNE 30
(Unaudited)
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1995 $ (9,526) $17,099,100 $17,089,574 21,121.43
Distributions (8,808) (871,988) (880,796)
Net Income 8,186 810,432 818,618
-------- ----------- ----------- -----------
BALANCE, June 30, 1996 $(10,148) $17,037,544 $17,027,396 21,121.43
======== =========== ============ ===========
BALANCE, December 31, 1996 $ (7,927) $17,257,326 $17,249,399 21,015.23
Distributions (8,785) (869,660) (878,445)
Net Income 6,266 620,299 626,565
-------- ----------- ----------- -----------
BALANCE, June 30, 1997 $(10,446) $17,007,965 $16,997,519 21,015.23
======== =========== =========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
(1) The condensed statements included herein have been prepared
by the Partnership, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission,
pursuant to the rules and regulations of the Securities and
Exchange Commission, and reflect all adjustments which are,
in the opinion of management, necessary to a fair statement
of the results of operations for the interim period, on a
basis consistent with the annual audited statements. The
adjustments made to these condensed statements consist only
of normal recurring adjustments. Certain information,
accounting policies, and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although
the Partnership believes that the disclosures are adequate to
make the information presented not misleading. It is
suggested that these condensed financial statements be read
in conjunction with the financial statements and the summary
of significant accounting policies and notes thereto included
in the Partnership's latest annual report on Form 10-KSB.
(2) Organization -
AEI Net Lease Income & Growth Fund XIX Limited Partnership
(Partnership) was formed to acquire and lease commercial
properties to operating tenants. The Partnership's
operations are managed by AEI Fund Management XIX, 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 May 31, 1991 when minimum
subscriptions of 1,500 Limited Partnership Units
($1,500,000) were accepted. The Partnership's offering
terminated February 5, 1993 when the extended offering
period expired. The Partnership received subscriptions for
21,151.928 Limited Partnership Units ($21,151,928).
Under the terms of the Limited Partnership Agreement, the
Limited Partners and General Partners contributed funds of
$21,151,928, 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.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
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 12% of their Adjusted Capital Contribution
per annum, cumulative but not compounded, to the extent not
previously distributed from Net Cash Flow; (ii) any
remaining balance will be distributed 90% to the Limited
Partners and 10% to the General Partners. Distributions to
the Limited Partners will be made pro rata by Units.
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 in the same ratio as the last dollar of Net Cash
Flow is distributed. 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 12% of their Adjusted Capital
Contributions per annum, cumulative but not compounded, to
the extent not previously allocated; (iii) third, the
balance of any remaining gain will then be allocated 90% to
the Limited Partners and 10% 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.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate -
The Partnership's properties are all commercial, single-
tenant buildings. For those properties in the table below
which do not have land costs, the lessee has entered into
long-term land leases with unrelated third parties. The
cost of the properties and related accumulated depreciation
at June 30, 1997 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Taco Cabana, Houston, TX $ 334,414 $ 212,908 $ 547,322 $ 41,990
Taco Cabana, San Antonio, TX 598,533 548,741 1,147,274 100,718
Taco Cabana, Waco, TX 7,788 11,932 19,720 2,115
Applebee's, Aurora, CO 15,969 28,813 44,782 4,825
Red Line Burger, Houston, TX 0 299,531 299,531 51,619
Red Line Burger, Houston, TX 0 303,629 303,629 52,264
Red Line Burger, Corpus Christi, TX 0 280,378 280,378 46,883
Applebee's, Crestwood, MO 0 803,418 803,418 119,075
Applebee's, Crestview Hills, KY 4,490 9,549 14,039 1,351
HomeTown Buffet, Tucson, AZ 329,136 281,619 610,755 37,940
Applebee's, Covington, LA 358,521 740,564 1,099,085 109,454
Applebee's, Temple Terrace, FL 44,568 51,694 96,262 7,196
Applebee's, Beaverton, OR 636,972 1,123,107 1,760,079 142,474
Denny's, Apple Valley, CA 461,013 716,642 1,177,655 79,658
Media Play, Apple Valley, MN 415,393 973,974 1,389,367 51,556
Garden Ridge, Pineville, NC 1,171,849 2,443,529 3,615,378 101,814
---------- ---------- ----------- ----------
$4,378,646 $8,830,028 $13,208,674 $ 950,932
========== ========== =========== ==========
Through June 30, 1997, the Partnership sold 90.9037% of the
Applebee's restaurant in Temple Terrace, Florida, in seven
separate transactions to unrelated third parties. The
Partnership received total net sale proceeds of $1,296,015
which resulted in a total net gain of $369,433. The total
cost and related accumulated depreciation of the interests
sold was $961,992 and $35,410, respectively. For the six
months ended June 30, 1997 and 1996, the net gain was
$61,611 and $29,884, respectively.
Through June 30, 1997, the Partnership sold 98.8946% of the
Applebee's restaurant in Crestview Hills, Kentucky, in nine
separate transactions to unrelated third parties. The
Partnership received total net sale proceeds of $1,627,539
which resulted in a total net gain of $436,533. The total
cost and related accumulated depreciation of the interests
sold was $1,256,017 and $65,011, respectively. For the six
months ended June 30, 1996, the net gain was $96,870.
On April 5, 1996, the Partnership sold a 12.7585% interest
in the HomeTown Buffet restaurant in Tucson, Arizona to an
unrelated third party. The Partnership received net sale
proceeds of $201,357 which resulted in a net gain of
$44,259. The total cost and related accumulated
depreciation of the interest sold was $164,251 and $7,153,
respectively.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
On November 6, 1996, the Partnership sold the Taco Cabana
restaurant in Round Rock, Texas to an unrelated third party.
The Partnership recognized net sale proceeds of $963,049,
which resulted in a net gain of $262,803. The total cost
and related accumulated depreciation was $749,710 and
$49,464, respectively. As part of the net sale proceeds,
the Partnership received a Promissory Note for $660,000.
The Note bears interest at a 9% rate. On March 27, 1997,
the Partnership received the outstanding principal and
accrued interest on the Note.
During the first six months of 1997 and the year 1996, the
Partnership distributed net sale proceeds of $154,850 and
$121,458, respectively, to the Limited and General Partners
as part of their regular quarterly distributions which
represented a return of capital of $7.29 and $5.69 per
Limited Partnership Unit, respectively. The remaining net
sale proceeds will either be re-invested in additional
properties or distributed to the Partners in the future.
On March 28, 1996, the Partnership purchased a 40.75%
interest in a Garden Ridge store in Pineville, North
Carolina for $3,615,378. The property is leased to Garden
Ridge L.P. under a Lease Agreement with a primary term of 20
years and annual rental payments of $383,973. The remaining
interest in the property was purchased by AEI Net Lease
Income & Growth Fund XX Limited Partnership and AEI Income &
Growth Fund XXI Limited Partnership, affiliates of the
Partnership.
In May, 1997, the Partnership entered into an agreement to
purchase a Party City retail store in Gainesville, Georgia
for approximately $1,450,000. The property will be leased
to Party City of Atlanta, Inc. under a Lease Agreement with
a primary term of 15 years and annual rental payments of
approximately $159,500. Through June 30, 1997, the
Partnership had advanced $626,628 for the construction of
the property and was charging interest on the Note at the
rate of 7.5%.
In August, 1995, the lessee of the three Red Line Burger and
two Rally's properties filed for reorganization. After
reviewing the operating results of the lessee, the
Partnership agreed to amend the Leases of the two Rally's
properties and one of the Red Line Burger properties.
Effective December 1, 1995, the Partnership amended the
Leases to reduce the annual base rent from $43,742 to
$15,000 for each property with additional rent of 6.75% of
the amount by which gross receipts exceed $275,000. In
1997, the reorganization plan confirmed one Red Line Lease,
as amended, and rejected the other two. In addition, the
plan allowed the Rally's properties to be sold and on
February14, 1997, the Partnership received net sales
proceeds of $500,000, which resulted in a net gain of
$16,092. The Partnership is negotiating to re-lease or sell
the other two Red Line Burger properties in Houston, Texas.
The Partnership did not collect $213,562 of pre-petition and
post-petition rent related to the five properties, which was
not accrued for financial reporting purposes due to the
uncertainty of collection.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
On December 21, 1995, the Partnership purchased a 33.0%
interest in a Media Play retail store in Apple Valley,
Minnesota for $1,389,367. The property was leased to The
Musicland Group, Inc. (MGI) under a Lease Agreement with a
primary term of 18 years and annual rental payments of
$135,482. The remaining interest in the property was
purchased by AEI Income & Growth Fund XXI Limited
Partnership and AEI Net Lease Income & Growth Fund XX
Limited Partnership, affiliates of the Partnership.
In December, 1996, the Partnership and MGI reached an
agreement in which MGI would buy out and terminate the Lease
Agreement by making a payment of $800,000, which is equal to
approximately two years' rent. The Partnership's share of
such payment was $264,000. Under the Agreement, MGI
remained in possession of the property and performed all of
its obligations under the net lease agreement through
January 31, 1997 at which time it vacated the property and
made it available for re-let to another tenant. MGI was
responsible for all maintenance and management costs of the
property through January 31, 1997 after which date the
Partnership became responsible for its share of expenses
associated with the property until it is re-let or sold. A
specialist in commercial property leasing has been retained
to locate a new tenant for the property.
The Partnership has incurred net costs of $579,084 relating
to the review of potential property acquisitions. Of these
costs, $498,102 have been capitalized and allocated to land,
building and equipment. The remaining costs of $80,982 have
been capitalized and will be allocated to properties
acquired subsequent to June 30, 1997.
(4) Long-Term Notes Receivable -
On July 26, 1995, the Partnership received a Promissory Note
from Jackson Shaw Partners No. 51 Ltd. from the sale of the
Black-Eyed Pea restaurant in Davie, Florida. The Note
requires forty-eight monthly principal and interest payments
of $15,025 with a balloon payment for the outstanding
principal and interest due September 1, 1999. Interest is
being charged on the Note at the rate of 10% on the
outstanding principal balance. The Note is secured by the
land, building and equipment. As of June 30, 1997 and
December31, 1996, the outstanding principal due on the note
was $1,507,663 and $1,522,211, respectively.
The Partnership received a Promissory Note from the sale of
the Taco Cabana restaurant as discussed in Note 3. The Note
bears interest at a 9% rate. The Note was secured by the
land, building and equipment. On March 27, 1997, the
Partnership received the outstanding principal and accrued
interest due on the Note.
Scheduled maturities of the long-term note receivable is as
follows:
1997 $ 14,867
1998 32,497
1999 1,460,299
----------
$ 1,507,663
==========
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) Payable to AEI Fund Management, Inc. -
AEI Fund Management, Inc. performs the administrative and
operating functions for the Partnership. The payable to AEI
Fund Management represents the balance due for those
services. This balance is non-interest bearing and
unsecured and is to be paid in the normal course of
business.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the six months ended June 30, 1997 and 1996, total
rental income, which in 1996, includes the minority interests'
share of rental income, was $724,838 and $1,039,908,
respectively. The Partnership's share of 1996 rental income was
$804,466. During the same periods, the Partnership earned
investment income of $174,959 and $155,007, respectively. In
1997, the Partnership's share of rental income decreased mainly
as a result of the Media Play situation and property sales
discussed below. The decrease in rental income was partially
offset by rent received on one property acquisition and rent
increases on ten properties.
In August, 1995, the lessee of the three Red Line Burger
and two Rally's properties filed for reorganization. After
reviewing the operating results of the lessee, the Partnership
agreed to amend the Leases of the two Rally's properties and one
of the Red Line Burger properties. Effective December 1, 1995,
the Partnership amended the Leases to reduce the annual base rent
from $43,742 to $15,000 for each property with additional rent of
6.75% of the amount by which gross receipts exceed $275,000. In
1997, the reorganization plan confirmed one Red Line Lease, as
amended, and rejected the other two. In addition, the plan
allowed the Rally's properties to be sold and on February 14,
1997, the Partnership received net sales proceeds of $500,000,
which resulted in a net gain of $16,092. The Partnership is
negotiating to re-lease or sell the other two Red Line Burger
properties in Houston, Texas. The Partnership did not collect
$213,562 of pre-petition and post-petition rent related to the
five properties, which was not accrued for financial reporting
purposes due to the uncertainty of collection.
Musicland Group, Inc. (MGI), the lessee of the Media Play
retail store in Apple Valley, Minnesota has recently experienced
financial difficulties and has aggressively been restructuring
its organization. As part of the restructuring, the Partnership
and MGI reached an agreement in December, 1996 in which MGI would
buy out and terminate the Lease Agreement by making a payment of
$800,000, which is equal to approximately two years' rent. The
Partnership's share of such payment was $264,000. Under the
Agreement, MGI remained in possession of the property and
performed all of its obligations under the net lease agreement
through January 31, 1997 at which time it vacated the property
and made it available for re-let to another tenant. MGI was
responsible for all maintenance and management costs of the
property through January 31, 1997 after which date the
Partnership became responsible for its share of expenses
associated with the property until it is re-let or sold. A
specialist in commercial property leasing has been retained to
locate a new tenant for the property.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
During the six months ended June 30, 1997 and 1996, the
Partnership paid Partnership administration expenses to
affiliated parties of $127,099 and $114,684, 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 $66,474 and $33,056, 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 increase
in these expenses in 1997, when compared to 1996, is the result
of expenses incurred in 1997 related to the Media Play and Red
Line/Rally's situations discussed above.
As of June 30, 1997, the Partnership's annualized cash
distribution rate was 8.50%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners are 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.
Liquidity and Capital Resources
During the six months ended June 30, 1997, the
Partnership's cash balances increased $543,215 as a result of
proceeds received from the sale of real estate and payments
received on long-term notes, as discussed below. This increase
was partially offset by cash expended to reinvest the sales
proceeds in new property and distributions made in excess of cash
generated from operating activities. Net cash provided by
operating activities decreased from $887,409 in 1996 to $762,185
in 1997 mainly as the result of a decrease in rental income and
an increase in expenses in 1997.
The major components of the Partnership's cash flow from
investing activities are investments in real estate and proceeds
from the sale of real estate. For the six months ended June30,
1997 and 1996, the Partnership generated cash flow from the sale
of real estate, as discussed below, of $675,838 and $591,752,
respectively. During the same periods, the Partnership expended
$678,569 and $3,541,930, respectively, to invest in real
properties (inclusive of acquisition expenses), as the
Partnership continued to reinvest the cash generated from the
property sales.
Through June 30, 1997, the Partnership sold 90.9037% of
the Applebee's restaurant in Temple Terrace, Florida, in seven
separate transactions to unrelated third parties. The
Partnership received total net sale proceeds of $1,296,015 which
resulted in a total net gain of $369,433. The total cost and
related accumulated depreciation of the interests sold was
$961,992 and $35,410, respectively. For the six months ended
June 30, 1997 and 1996, the net gain was $61,611 and $29,884,
respectively.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Through June 30, 1997, the Partnership sold 98.8946% of
the Applebee's restaurant in Crestview Hills, Kentucky, in nine
separate transactions to unrelated third parties. The
Partnership received total net sale proceeds of $1,627,539 which
resulted in a total net gain of $436,533. The total cost and
related accumulated depreciation of the interests sold was
$1,256,017 and $65,011, respectively. For the six months ended
June 30, 1996, the net gain was $96,870.
On April 5, 1996, the Partnership sold a 12.7585% interest
in the HomeTown Buffet restaurant in Tucson, Arizona to an
unrelated third party. The Partnership received net sale
proceeds of $201,357 which resulted in a net gain of $44,259.
The total cost and related accumulated depreciation of the
interest sold was $164,251 and $7,153, respectively.
On November 6, 1996, the Partnership sold the Taco Cabana
restaurant in Round Rock, Texas to an unrelated third party. The
Partnership recognized net sale proceeds of $963,049, which
resulted in a net gain of $262,803. The total cost and related
accumulated depreciation was $749,710 and $49,464, respectively.
As part of the net sale proceeds, the Partnership received a
Promissory Note for $660,000. The Note bears interest at a 9%
rate. On March 27, 1997, the Partnership received the
outstanding principal and accrued interest on the Note.
During the first six months of 1997 and the year 1996, the
Partnership distributed net sale proceeds of $154,850 and
$121,458, respectively, to the Limited and General Partners as
part of their regular quarterly distributions which represented a
return of capital of $7.29 and $5.69 per Limited Partnership
Unit, respectively. The remaining net sale proceeds will either
be re-invested in additional properties or distributed to the
Partners in the future.
On March 28, 1996, the Partnership purchased a 40.75%
interest in a Garden Ridge store in Pineville, North Carolina for
$3,615,378. The property is leased to Garden Ridge L.P. under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $383,973. The remaining interest in the property was
purchased by AEI Net Lease Income & Growth Fund XX Limited
Partnership and AEI Income & Growth Fund XXI Limited Partnership,
affiliates of the Partnership.
In May, 1997, the Partnership entered into an agreement to
purchase a Party City retail store in Gainesville, Georgia for
approximately $1,450,000. The property will be leased to Party
City of Atlanta, Inc. under a Lease Agreement with a primary term
of 15 years and annual rental payments of approximately $159,500.
Through June 30, 1997, the Partnership had advanced $626,628 for
the construction of the property and was charging interest on the
Note at the rate of 7.5%.
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 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.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
During, 1996, seven Limited Partners redeemed a total of
106.2 Partnership Units for $83,145 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In 1995, three Limited
Partners redeemed a total of 30.5 Partnership Units for $25,466.
The redemptions increase the remaining Limited Partners'
ownership interest in the Partnership.
The continuing rent payments from the properties, together
with cash generated from the property sales, should be adequate
to fund continuing distributions and meet other Partnership
obligations on both a short-term and long-term basis.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the Partnership is a party or of which the Partnership's
property is subject.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
Description
10.1 Promissory Note and Construction
Loan Agreement dated June27, 1997 between
the Partnership and Party City of
Atlanta, Inc. relating to the property at
679 Dawsonville Highway, Gainesville,
Georgia.
27 Financial Data Schedule for period
ended June 30, 1997.
b. Reports filed on Form 8-K - None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: August 5, 1997 AEI Net Lease Income & Growth Fund XIX
Limited Partnership
By: AEI Fund Management XIX, Inc.
Its: Managing General Partner
By:/s/ Robert P Johnson
Robert P. Johnson
President
(Principal Executive Officer)
By:/s/ Mark E Larson
Mark E. Larson
Chief Financial Officer
(Principal Accounting Officer)
PROMISSORY NOTE
$1,450,000.00 Effective as of June 27, 1997
FOR VALUE RECEIVED, the undersigned hereby agrees and
promises to pay to the order of AEI Net Lease Income & Growth
Fund XIX Limited Partnership, a Minnesota limited partnership
(the "Partnership", or "Lender", or "holder"), at the principal
office of its corporate general partner, AEI Fund Management XIX,
Inc., a Minnesota corporation, located at Suite 1300, Minnesota
World Trade Center, Saint Paul, Minnesota or such other place as
the holder of this Note may from time to time designate, the
principal sum of One Million Four Hundred Fifty Thousand Dollars
($1,450,000), or so much thereof as shall have been advanced
pursuant to the terms and conditions of that certain Construction
Loan Agreement dated effective of even date herewith by and
between the undersigned and the Partnership, together with
interest on the unpaid principal balance at the rates of interest
hereinafter specified per annum, payable in lawful money of the
United States, as follows:
Interest on the outstanding principal balance hereof shall
be payable monthly on the first day of each month at a
definite and certain per annum interest rate equal to Seven
and one-half percent (7..5%), with a final payment on
December 15, 1997, on which date the entire unpaid principal
amount together with interest accrued thereon shall at the
option of the holder hereof become due and payable, unless
extended in writing for 30 days pursuant to the option to
extend or due to force majeure as set forth in the
Construction Loan Agreement. No event of default occurs
hereunder with respect to payment of accrued interest or Out
of Pocket Interest (defined below) until: (a) payment of Out
of Pocket Interest is not made within five (5) days after
written notice of non-payment from the Partnership given
after the due date thereof, or (b) other accrued interest is
not paid when the entire balance of principal and accrued
interest is due and payable. If after maturity of this Note
due to acceleration, a default is corrected and this Note
and the Security Deed or Mortgages securing it are
reinstated, then the annual interest rate on this Note from
and after the date of reinstatement shall be equal to the
rate stated above. In the event a transfer of monies to or
for the benefit of Borrower or otherwise as permitted by
Lender under the Loan Documents pursuant to a request for
funds by the undersigned under this Note ("Transfer") causes
the Partnership to lose any interest on such funds or incur
any costs, then interest on such funds shall begin to accrue
on the date of the Transfer. Interest shall be calculated
on the balances outstanding at the end of each day and on
the basis of actual days elapsed and a year of three hundred
sixty-five (365) days. Interest shall accrue from and
including the date hereof.
All payments shall be applied first to interest and then to
principal, except that if any advance made by the holder of this
Note under the terms of any instruments securing the Note is not
repaid within applicable cure periods, any monies received, at
the option of the holder, may first be applied to repay such
advances, plus interest thereon as specified under the terms of
said instruments, and the balance, if any, shall be applied on
account of any installments then due. This note may be prepaid
at any time without penalty or premium.
This Note will be governed by the laws of the State of
Georgia and is the Note referenced in and secured by a Security
Deed ("Security Deed") of even date herewith given by the
undersigned to the Partnership as Grantee therein for the benefit
of the holder concerning real and personal property situated in
Gainesville, Georgia.
If default (after expiration of any applicable written
notice and cure period) be made in any payment of principal or
interest when due in accordance with the terms and conditions of
this Note (an "Event of Default"), or if an event of default
occurs under the Security Deed or any other instrument securing
this Note, unless cured prior to the expiration of any applicable
written notice and cure period, the entire unpaid disbursed
principal balance together with accrued interest thereon shall
become immediately due and payable at the option of the holder
hereof.
Prior to the occurrence of an Event of Default hereunder,
the unpaid principal shall bear interest at the rate provided in
this Note. While an Event of Default is in existence under this
Note, and at the option of the holder hereof, interest shall
thereafter be payable on the whole of the unpaid principal sum at
the rate of eighteen percent (18%) per annum or the highest rate
allowed by law if the highest rate allowed by law is less than
eighteen percent (18%) per annum, whether or not the holder
hereof has exercised its option to accelerate the maturity of
this Note and declare the entire unpaid principal indebtedness
due and payable.
No delay or omission on the part of the holder hereof in
exercising any right hereunder shall operate as a waiver of such
right or of any other remedy under this Note. A waiver on any
one occasion shall not be construed as a bar to, or waiver of,
any such right or remedy on a future occasion.
In the Event of Default hereunder the undersigned agrees to
pay the costs of collection including reasonable attorney's fees
actually incurred.
The makers, endorsers, sureties, guarantors and all other
persons liable for all or any part of the principal balance
evidenced by this Note severally waive presentment for payment,
protest and notice of non-payment. Such parties hereby consent
to, without affecting their liability to any extension or
alteration of the time or terms of payment hereof, any renewal,
any release of all or any part of the security given for the
payment hereof, any acceptance of additional security of any
kind, and any release of, or resort to any party liable for
payment hereof.
All agreements between the undersigned and the holder hereof
are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the
indebtedness evidenced hereby or otherwise, shall the amount paid
or agreed to be paid to the holder for the use, forbearance,
loaning or detention of the indebtedness evidenced hereby exceed
the maximum interest rate permissible under applicable law. If
from any circumstances whatsoever, fulfillment of any provisions
hereof or of the Security Deed or any other security instrument
at any time given for the performance of such provision shall be
due, shall involve transcending the limit of validity prescribed
by law, then, the obligation to be fulfilled shall automatically
be reduced to the limit of such validity and if from any
circumstances the holder of this Note should ever receive as
interest an amount which would exceed the highest lawful rate,
such amount which would be in excess of interest shall be applied
to the reduction of the principal balance evidenced hereby and
not to the payment of interest. This provision shall control
every other provision of all agreements between the undersigned
and holder hereof and shall also be binding upon and available to
any subsequent holder or endorsee of this Note.
In the event the undersigned shall sell, convey, transfer,
further mortgage or encumber or dispose of the subject property
of the Security Deed, or any part thereof, or any interest
therein, or agrees so to do,then at the sole option of said
holder, the holder may declare the entire unpaid principal
balance due hereunder, together with accrued interest, due and
payable in full and call for payment of the same in full at once.
In the event accrued interest shall exceed the amount set
forth in the Total Project Construction Budget attached as
Exhibit B to the Construction Loan Agreement, or Borrower shall
have not satisfied the terms of the Sale and Leaseback Financing
Commitment (the "Leaseback Commitment") between Borrower and
Lender to close on the sale of the subject property to Lender by
the stated closing date within such Leaseback Commitment for the
subject property and all of the budgeted interest in the Total
Project Construction Budget has been disbursed, Borrower shall,
payable within 5 business days after delivery of written invoice
from Lender, make monthly payments of accrued interest ("Out of
Pocket Interest") on the entire outstanding Loan amount until the
entire outstanding principal and accrued interest pursuant hereto
has been paid in full.
In the event that any installment of accrued interest
required hereunder is not paid within ten (10) days, or such
longer period as may be required by law, after written notice
from the Partnership that payment of such installment was not
made by its due date, the undersigned agrees to pay a late charge
each month of $.02 per $1.00 of unpaid installment payment to
defray the costs of holder incident to collecting such late
payment. This provision shall not be deemed to excuse a late
payment or be deemed a waiver of any other rights the holder of
this Note may have, including the right to declare the entire
unpaid principal and interest immediately due and payable.
Party City of Atlanta, Inc.,
a Georgia corporation
By: /s/ Frank S Buonanotte
Its: Pres.
CONSTRUCTION LOAN AGREEMENT
THIS AGREEMENT, made and entered into effective as of this
27th day of June, 1997, by and between Party City of Atlanta,
Inc., a Georgia corporation ("Borrower"), whose address is
Attention: Frank Buonanotte, c/o The Shopping Center Group, 6520
Powers Ferry Road, Suite 250, Atlanta, GA 30339, and AEI Net
Lease Income & Growth Fund XIX Limited Partnership, a Minnesota
limited partnership, whose corporate general partner is AEI Fund
Management XIX, Inc., a Minnesota corporation, whose address is
Suite 1300, World Trade Center, Saint Paul, Minnesota 55101.
("Lender").
W I T N E S S E T H, that:
WHEREAS, Borrower is contemplating building on the premises
described in Exhibit "A" attached hereto the following
Improvements :
Construction of an approximately 10,500 square foot building
and improvements to be used initially as a Party City store.
WHEREAS, Lender desires to make a loan to Borrower upon the
terms and conditions herein for the aforesaid purposes;
NOW, THEREFORE, in consideration of the making of the
construction loan and other good and valuable consideration, the
receipt of which is hereby acknowledged by the parties hereto,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall
have the following meanings:
1. "Commitment" shall mean the Borrower's Construction
Loan Commitment dated May 15, 1997 with the Lender's
assignee, AEI Fund Management, Inc., for the Loan, the terms
and conditions of which are incorporated herein by
reference.
2. "Architect's Contract" shall mean Borrower's contract
with the Project Architect.
3. "Completion Date" shall mean midnight December 15,
1997, provided, however, if Borrower exercises its extension
right in Article 12, paragraph 12 hereof, then the
Completion Date shall be extended accordingly by said thirty
days.
4. "Construction Costs" shall mean land costs, all costs
paid to construct and complete the Improvements specified on
Exhibit "B" attached hereto and made a part hereof.
5. "Construction Contracts" shall mean the contracts
between Borrower and Contractors for the furnishing of
labor, services or materials to the Premises in connection
with the construction of the Improvements.
6. "Contractors" shall mean those firms directly engaged
by Borrower to construct the Improvements, whether one or
more.
7. "Contract Documents" shall mean the Project Architect's
Contract, Plans and Specifications and the contract with the
Contractor.
8. "Escrowee" shall mean the designated department or
agent of Lender monitoring disbursements of loan proceeds as
Escrowee under the Construction Loan Disbursement Agreement
executed by and between the parties of even date herewith.
9. "Financing Statements" shall mean one or more financing
statements between Borrower and Lender covering the personal
property and fixtures included in the Premises.
10. "Improvements" shall mean the structures and other
improvements to be constructed on the Premises in accordance
with the Plans and Specifications within standard
construction industry tolerances.
11. "Inspecting Architect" shall mean the architect, if
any, hired by Lender, if Borrower is in default under the
Loan Documents, or Lender reasonably believes Borower to be
in default, to perform inspections of the premises.
12. "Loan" shall mean the loan to be made pursuant to the
terms hereof and not to exceed the lesser of the total
Construction Costs or the maximum loan amount set forth in
the Note.
13. "Loan and Carrying Charges" shall mean all fees, taxes
and charges incurred under the Loan and in the construction
of the Improvements including, but not limited to, non-
refundable commitment fees, loan or brokerage fees paid to
the Lender; interest charges, service and inspection fees,
attorney's fees, title insurance fees and charges, recording
fees and insurance premiums.
14. "Loan Documents" shall mean the Note, Security Deed
(hereinafter referred to as "Security Deed"), Financing
Statements, Guarantee, and such other documents as Lender
has required to be given to the Lender as security for the
Loan pursuant to this Loan Agreement.
15. "Security Deed" shall mean the Security Deed and
Assignment of Rents and Leases to be executed and delivered
by Borrower to the Lender named therein for the benefit of
Lender, covering the Premises.
16. "Note" shall mean a Promissory Note to be made by
Borrower payable to the order of Lender to evidence the Loan
and being in the principal amount of One Million Four
Hundred Fifty Thousand ($1,450,000) of the Loan.
17. "Owner Equity" shall mean the total Construction Costs
plus the amount of any cost overruns or change orders
increasing Construction Costs and not accounted for by a re-
allocation approved by Lender among line items of the
Construction Budget, less the amount of the Loan.
18. "Plans and Specifications" shall mean the plans and
specifications prepared by the Project Architect.
19. "Premises" shall mean the real property described in
the Exhibit "A" attached to this Agreement, together with
all Improvements, equipment and fixtures thereon, exclusive
of Borrower's trade fixtures and inventory, and property of
third parties.
20. "Project" shall mean the construction of the
Improvements on the Premises.
21. "Project Architect" shall mean the architect retained
by Borrower to design and supervise construction of the
Improvements.
22. "Sub-Contractors" shall mean those persons furnishing
labor or materials for the Project pursuant to the Sub-
Contracts.
23. "Sub-Contracts" shall mean the contracts between the
Contractor and its materialmen and mechanics in the
furnishing of labor or materials for the Project.
24. "Title" shall mean the title insurer (Lawyers Title
Insurance Corporation) approved by Lender issuing the
mortgagee's title insurance policy.
ARTICLE II
THE LOAN
Subject to compliance with the provisions of this Agreement,
Lender agrees to loan to Borrower, and Borrower agrees to borrow
the Loan from Lender. The Loan shall be advanced in stages by
Lender to Escrowee and disbursed by Escrowee pursuant to the
provisions of Article VIII hereof. The Loan, or so much thereof
as has been advanced hereunder, shall bear interest at the rate
and shall be repaid in accordance with the terms of the Loan
Documents. The proceeds of the Loan shall be used exclusively
for the purposes of defraying total Construction Costs.
ARTICLE III
EXECUTION OF LOAN DOCUMENTS
Prior to any request for funds, and prior to the
commencement of the first item of work in connection with the
construction of the Improvements, Borrower agrees to authorize,
execute and deliver to Lender and to record the Loan Documents
and other items required by this Agreement.
ARTICLE IV
CONSTRUCTION OF IMPROVEMENTS
Borrower agrees to commence construction of the Improvements
within thirty (30) days from the date of this Agreement. After
commencement of construction of any Improvements, Borrower agrees
to diligently pursue said construction to completion, and to
supply such funds necessary to complete construction of the
Project as may be required in excess of the funds required to be
disbursed by Lender in accordance with the terms hereof and to
perform such duties as may be necessary to complete the
construction of said Improvements pursuant to the Plans and
Specifications subject to standard construction industry
tolerances and in full compliance with all terms and conditions
of this Agreement and the Loan Documents, all of which shall be
accomplished on or before the Completion Date, and without liens,
claims or assessments (actual or contingent) asserted against the
Premises for any material, labor or other items furnished in
connection therewith, except those that are being in good faith
contested by Borrower and which are bonded off or otherwise
removed in a manner consistent with Georgia law and practice
before the same shall result in a non-dischargeable claim adverse
to Lender's secured position in the Premises, and all in full
compliance with all construction, use, building, zoning and other
similar requirements of any pertinent governmental jurisdiction.
Borrower will provide to Lender, upon request, evidence of
satisfactory compliance with all the above requirements.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Borrower hereby represents and warrants to the Lender that:
1. VALIDITY OF LOAN DOCUMENTS - The Loan Documents are in all
respects legal, valid and binding according to their terms and
grant to Lender a direct, valid and enforceable first lien upon,
and security interest in, the Premises and the Improvements and
fixtures to be located thereon, as well as the rents and leases
of the Premises, but excluding the removable trade fixtures,
inventory and personal property of Borrower or others.
2. PRIORITY OF LIEN ON PERSONALTY - Except as otherwise
consented to by Lender in writing, no chattel mortgage, bill of
sale, security agreement, financing statement, or other title
retention agreement (except those executed in favor of Lender)
has been, or will be, executed with respect to any personal
property, chattel or fixture used in conjunction with the
construction, operation or maintenance of the improvements,
except as described in the Security Deed.
3. CONFLICTING TRANSACTION OF BORROWER - The consummation of
the transactions hereby contemplated and the performance of the
obligations of Borrower under and by virtue of the Loan Documents
will not result in any breach of, or constitute a default under,
any mortgage, lease, bank loan or credit agreement, corporate
charter, by-laws, partnership agreement, or other instrument to
which Borrower is a party or by which it may be bound or
affected.
4. PENDING LITIGATION - There are no actions, suits or
proceedings pending, or to the knowledge of Borrower threatened,
against or affecting it or the Premises, or involving the
validity or enforceability of any of the Loan Documents or the
priority of the lien thereof, at law or in equity, or before or
by any governmental authority, except actions, suits and
proceedings which are fully covered by insurance or which, if
adversely determined would not substantially impair the ability
of Borrower to perform each and every one of its obligations
under and by virtue of the Loan Documents; and to the best of
Borrower's actual knowledge after commercially reasonable due
inquiry it is not in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental
authority.
5. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR REGULATIONS -
Borrower certifies and represents that to the best of Borrower's
actual knowledge after commercially reasonable due inquiry, there
are no violations or notices of violations by Borrower or
concerning the Premises, of any federal or state law or municipal
ordinance or order or requirement of the State in which the
Premises are located or any municipal department or other
governmental authority having jurisdiction affecting the
Premises, which violations in any way have a material adverse
affect on the Premises.
6. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS -
Borrower certifies and represents that the Plans and
Specifications and construction pursuant thereto and the use of
the Premises contemplated thereby comply and will comply with all
governmental laws and regulations and requirements, zoning
ordinances, standards, and regulations of all governmental bodies
exercising jurisdiction over the Premises, including
environmental protection and equal employment regulations, and
appropriate supervising boards of fire underwriters and similar
agencies. Borrower also agrees to provide the Project
Architect's certification to such effect.
7. BORROWER'S STATUS AND AUTHORITY - Borrower warrants and
represents that (i) it is duly organized, existing and in good
standing under the laws of the state in which it is incorporated
or created; (ii) it is duly qualified to do business and is in
good standing in the state in which the Premises are located;
(iii) it has the corporate or other power, authority and legal
right to carry on the business now being conducted by it and to
engage in the transactions contemplated by this Agreement and the
Loan Documents; and (iv) the execution and delivery of this
Agreement and the Loan Documents and the performance and
observance of the provisions hereof and thereof have been duly
authorized by all necessary trust, partnership, or corporate
actions of Borrower. Borrower will furnish such resolutions,
affidavits and opinions of counsel to such effect as Lender may
reasonably require.
8. AVAILABILITY OF UTILITIES - All utility services necessary
for the proper operation of the Improvements for their intended
purposes are available at the Premises or will be available at
the Premises prior to commencement of Construction, without
special use permit or varinace, at standard utility rates and
hook-up charges, including water supply, storm and sanitary sewer
facilities, gas, electricity and telephone facilities, the rates
and hook-up charges the payment of which has been adequately
reflected in the Construction Loan budget. Borrower shall
furnish evidence of such availability of utilities from time to
time at Lender's request.
9. BUILDING PERMITS - All building permits required for the
construction of the Improvements have been, or will be, if not
issuable as of the date hereof, can be obtained but for payment
of the fees therefore only, prior to the commencement of the
construction of the Improvements and copies of same will be
delivered to Lender.
10. CONDITION OF PREMISES - The Premises are not as of the date
hereof damaged or injured as a result of any fire, explosion,
accident, flood or other casualty, nor subject to any action in
eminent domain.
11. APPROVAL OF PLANS AND SPECIFICATIONS - Borrower certifies
and represents that the Plans and Specifications conform to the
requirements and conditions set out by applicable law or any
effective restrictive covenant, to all governmental authorities
which exercise jurisdiction over the Premises or the construction
thereon.
12. CONSTRUCTION CONTRACTS - Borrower has entered into contracts
with the Contractors or separate contracts with materialmen and
laborers providing for the construction of the Improvements.
Borrower will cause the Contractors to promptly furnish Lender
with the complete list of all Sub-contractors or entities which
Contractors propose to engage to furnish labor and/or materials
in constructing the Improvements and will from time to time
furnish Lender with true copies of all Contracts and Sub-
contracts therefor and with the terms of all verbal agreements
therefor.
13. BROKERAGE COMMISSIONS - No brokerage commissions are due in
connection with the transaction contemplated hereby or if there
are commissions due or payable the same will be paid by Borrower.
Borrower agrees to and shall indemnify Lender from any liability,
claims or losses arising by reason of any such brokerage
commissions except claimed under, through, or by reason of Lender
or its agents or representatives. This provision shall survive
the repayment of the Loan and shall continue in full force and
effect so long as the possibility of such liability, claims or
losses exists.
14. NO PRIOR WORK - Except as may have been permitted or
acknowledged by Lender and Title in writing, and as does not
present an exception to title unacceptable to Lender, no work or
construction has been commenced or will be commenced by or on
behalf of Borrower on the Premises, nor has Borrower entered into
any contracts or agreements for such work or construction which
could result in the imposition of a mechanic's or materialmen's
lien on the Premises or the Improvements prior to or on parity
with the security title and lien of the security interest
evidenced by the Security Deed.
15. ENVIRONMENTAL IMPACT STATEMENT - All required environmental
impact statements as required by any governmental authority
having jurisdiction over the Premises or the construction of the
Improvements have been duly filed and approved.
16. ACCESS - The Premises front on a publicly maintained road or
street or have access to such a road or street under easement
which is not subject to a reversion in favor of any party.
17. FINANCIAL INFORMATION - Any financial statements heretofore
delivered to Lender are true and correct in all respects, have
been prepared in accordance with generally accepted accounting
practice, and fairly present the respective financial conditions
of the subject thereof as of the respective dates thereof and no
materially adverse change has occurred in the financial
conditions reflected therein since the respective dates thereof.
ARTICLE VI
COVENANTS OF BORROWER
Borrower hereby covenants and agrees with Lender as follows:
1. SURVEYS - Prior to execution of any Loan Documents and prior
to the initial request for a Disbursement, Borrower shall furnish
to Lender three copies of a current perimeter land survey, in
form and substance satisfactory to Lender, certified to Lender,
giving a description of the Premises and showing all
encroachments onto or from the Premises, currently certified by a
registered surveyor and bearing his registry number and showing
access rights, easements, or utilities, rights of way, all
setback requirements upon the Premises, improvements, matters
affecting title and such other items as Lender may reasonably
request. If Borrower shall change the existing perimeter of the
foundation as shown on the perimeter land survey, after the
foundation walls for all or any portion of the Improvements are
completed, the Borrower shall promptly furnish the Lender with
three copies of the survey revised to show the location of the
Improvements and certifying that the Improvements are within the
boundary lines of the Premises and the building restriction
lines, if any, and that the Improvements do not encroach upon any
easement, utility or right of way.
2. TITLE INSURANCE - Prior to the initial request for
Disbursement the Borrower shall furnish Lender with an ALTA
policy of title insurance, and prior to any subsequent request
for Disbursement such ALTA policy of title insurance shall be
brought down to the date of Disbursement by endorsement, all in
form and substance reasonably satisfactory to Lender issued at
the Borrower's expense and written by Title insuring the Premises
to be marketable, free from exceptions for mechanic's and
materialmen's liens and free from other exceptions not previously
approved by the Lender, naming Lender as an insured and insuring
that the Security Deed is a valid first security title to the
extent of advances made or to be made hereunder subject only to
such exceptions as may be approved by Lender.
3. RESTRICTIONS ON CONVEYANCE OR SECONDARY FINANCING - Borrower
will not transfer, sell, convey or encumber the Premises or
subject the Premises to any secondary financing in any way
without the written consent of the Lender.
4. INSURANCE - To obtain or cause Contractor to obtain and
maintain such insurance or evidence of insurance as Lender
may reasonably require, including but not limited to the
following:
(a) BUILDERS' RISK INSURANCE - Builders' Risk Insurance written
on the so-called
"Builders' Risk-Completed Value Basis" in an amount equal to the
full replacement cost of the improvements at the date of
completion with coverage available on the so-called multiple
peril form of policy, including coverages against collapse,
mudslide or mudflow and sinkhole collapse, water damage, building
materials and property in transit, with standard noncontributing
mortgagee clauses, such insurance to be in amounts and form and
written by such companies rated "A" or better by Best Key Rating
Guide (the most current edition) or similar quality under a
successor guide if Best s Key Rating shall cease to be published,
and the originals of such policies (together with appropriate
endorsement thereto, evidence of payment of premiums thereon and
written agreements by the insurer or insurers therein to give
Lender thirty (30) days' prior written notice of any intention to
cancel or adversely modify or amend) shall be promptly delivered
to Lender, said insurance coverage to be kept in full force and
effect at all times until the completion of construction of the
improvements. Deductible shall not exceed $ 1 0,000 per
occurrence.
(b) PROPERTY INSURANCE - Fire and Extended Coverage Insurance,
and such other property insurance as Lender may require in an
amount equal to the full replacement cost of the improvements
with standard non-contributing mortgagee clauses, such insurance
to be in amounts and form and written by such companies rated "A"
or better by Best Key Rating Guide (the most current edition) or
similar quality under a successor guide if Best's Key Rating
shall cease to be published, and the originals of such policies
(together with appropriate endorsement thereto, evidence of
payment of premiums thereon and written agreements by the insurer
or insurers therein to give Lender thirty (30) days' prior
written notice of any intention to cancel or adversely modify or
amend) shall be promptly obtained and delivered to Lender,
immediately upon completion of the construction of the
improvements and before any portion is occupied by Borrower or
any tenant of Borrower with such insurance to be kept in full
force and effect at all times thereafter until the payment in
fall of the loan evidenced by the Note.
(c) FLOOD INSURANCE - Flood insurance shall be required, in
amounts of $500,000, unless evidence is provided that the
property is not located in a designated flood area or storm surge
area. Satisfactory evidence to determine if coverage is
necessary shall be a Base Flood Elevation Certificate and/or a
National Geodetic Vertical Datum (NGVD)-National standard
reference datum for elevations, formerly referred to as mean Sea
Level (MSL) of 1929. The deductible shall not exceed $ 10,000
per occurrence.
(d) EARTHQUAKE INSURANCE - Earthquake insurance shall be
required, in the amounts acceptable to Lender, unless evidence is
provided that the Parcel is not located in a federally designated
earthquake prone area or is not an ISO High Risk Earthquake Zone.
The deductible shall not exceed $25,000 per occurrence.
(e) PUBLIC LIABILITY - Lender shall receive Comprehensive
General Liability insurance from the general contractor (which
coverage shall extend to acts while on the project of the agents
or subcontractors hired by the general contractor) to cover the
property under Construction, with limits of $2,000,000 per
occurrence and $5,000,000 general aggregate. Lender shall
receive Comprehensive General Liability insurance from any other
contractor or supplier covering the parcel under construction
with limits of $ 1,000,000 per occurrence and $3,000,000 general
aggregate. These limits can be accomplished either by underlying
liability policies or by the sum of the underlying policy plus
an excess or umbrella policy. The coverage shall include an
endorsement in favor of Lender which is ISO form CG 20 11 11 85 -
"Additional Insured Managers Or Lessors Of Premises", or an
equivalent endorsement and shall include Broad Form Contractual
Liability coverage. The claims made form of coverage is not
acceptable.
(f) WORKERS' COMPENSATION - Evidence of compliance with the
required coverage under statutory workmens' compensation
requirements.
(g) BUSINESS AUTO LIABILITY - Lender shall receive Certificates
of Insurance for Business Auto Liability, from all contractors
and suppliers whose vehicles will be present on the jobsite. The
coverage limits shall be $1,000,000 combined single limit.
(h) The following will be required for all insurance policies.
1. All property policies shall name Lender as Loss Payee and
Additional Insured.
2. All liability policies shall name lender as an Additional
Insured.
3. The following Definition of Lender will be used for all
Additional Insured and Loss
Payee Endorsements:
The additional insured and loss payee clause for property
and the additional insured for general liability will read:
AEI Net Lease Income & Growth Fund XIX Limited Partnership,
AEI Fund Management XIX, Inc., Robert P. Johnson its
individual general partner, its successors and assigns and
any other owners as their interests may appear.
4. Lender shall receive a thirty (30) day written notice
in the event of cancellation, material amendment, or
expiration of any of the insurance policies. The following
words will be crossed out: "will endeavor to mail" and "but
failure to mail such notice shall impose no obligation or
liability of any kind upon the company, its agents or
representatives".
5. Lessee agrees that it will not settle any property
insurance claims affecting the Leased Premises in excess of
$25,000 without lessor's prior written consent, such consent
not to be unreasonably withheld or delayed.
6. All property and liability policies shall contain
Waiver of Subrogation Endorsements waiving all rights of
subrogation, if any, against Lender as defined above.
7. All insurance companies shall be approved in writing by
Lender, subject to paragraph 4(b) above.
5. COLLECTION OF INSURANCE PROCEEDS - To cooperate with Lender
in obtaining for Lender the benefits of any insurance or other
proceeds lawfully or equitably payable to it in connection with
the transaction contemplated hereby and the collection of any
indebtedness or obligation of the Borrower to Lender incurred
hereunder (including the payment by Borrower of the expense of an
independent appraisal on behalf of Lender in case of a fire or
other casualty affecting the Premises).
6. APPLICATION OF LOAN PROCEEDS - To use the proceeds of the
Loan solely for the purpose of acquiring the premises and paying
for Construction Costs and such incidental costs relative to the
construction as may be approved from time to time in writing by
Lender, and in no event to use any of the Loan proceeds for
personal, corporate or other purposes.
7. EXPENSES - To pay all costs of closing the Loan and all
expenses of Lender with respect thereto, including, but not
limited to, legal fees by Lender's counsel and all other
attorney's fees, costs of title insurance, transfer taxes,
license and permit fees, recording expenses, surveys, intangible
taxes, appraisal fees, Inspecting Architect fees, expenses of
foreclosure (including reasonable attorney's fees) and similar
items as set forth in the Commitment. Absent the occurrence of a
default by Borrower hereunder, legal fees of Lender in connection
with the closing of the Loan shall be capped at $9,000 (inclusive
of the Sale\Leaseback transaction contemplated between the
Borrower and Lender). Notwithstanding the foregoing, nothing
herein or in the Sale and Leaseback Financing Commitment shall be
construed to prevent Lender from recovering from Borrower
Lender's costs of enforcing this Agreement, including reasonable
attorney's fees to the extent otherwise contemplated hereby. For
purposes of this Agreement and all other Loan Documents, the term
"reasonable attorneys fees" shall mean reasonable attorneys fees
actually incurred at standard hourly rates.
8. LAWS, ORDINANCES AND ETC. - To comply promptly with any law,
ordinance, order, rule or regulation of all authorities
exercising jurisdiction over the Premises or the construction
thereon, including appropriate supervising boards of fire
underwriters and similar agencies and the requirements of any
insurer issuing coverage on the Project.
9. RIGHT OF LENDER TO INSPECT PREMISES - To permit Lender and
its representatives and agents, after 24 hours prior notice
(except where Borrower shall be in default hereunder after the
expiration of any applicable notice and cure period or in cases
which Lender reasonably believes to be an emergency) to enter
upon the Premises and to inspect the Improvements and all
materials to be used in construction thereof and to cooperate and
cause Contractor to cooperate with Lender or Title and their
representatives and agents during such inspections; provided,
however, that this provision shall not be deemed to impose upon
Lender or its representatives any duty or obligation whatsoever
to undertake such inspections, to correct any defects in the
Improvements or to notify any person with respect thereto.
10. BOOKS AND RECORDS - To set up and maintain accurate and
complete books, accounts and records pertaining to the Project
including the working drawings in a manner reasonably acceptable
to Lender. The Lender, its representatives and Inspecting
Architect shall have the right at all reasonable times to
inspect, examine and copy all books and records of Borrower
relating to the Project, and to enter and have free access to the
Premises and Improvements and to inspect all work done, labor
performed and material furnished in or about the Project.
Notwithstanding the foregoing, Borrower shall be responsible for
making inspections as to the Improvements during the course of
construction and shall determine to its own satisfaction that the
work done or materials supplied by the Contractors and all
Subcontractors has been properly supplied or done in accordance
with the applicable contracts. Borrower will hold Lender harmless
from and Lender shall have and have no liability or obligation of
any kind to Borrower or creditors of Borrower in connection with
any defective, improper or inadequate workmanship or materials
brought in or related to the Improvements or the Premises, or any
mechanic's liens arising as a result of such workmanship or
materials. Upon Lender's request, Borrower shall replace or
cause to be replaced any such work or material found to be
deficient. Any inspections made by Inspecting Architect, or
Lender are for the sole benefit of Lender and neither Borrower
nor any creditor, tenant or vendee of Borrower shall be entitled
to rely on such inspection.
11. CORRECTION OF DEFECTS - To promptly correct any structural
defects in the Improvements or any departure from the Plans and
Specifications not previously approved by Lender, except those
changes not requiring Lender's consent as set forth in Article V,
paragraph 11 herein. The advance of any loan proceeds shall not
constitute a waiver of Lender's right to require compliance with
this covenant.
12. SIGN REGARDING CONSTRUCTION FINANCING - Subject to
applicable law, to allow Lender to erect and maintain at a
suitable site on the Premises a sign indicating that construction
financing is being provided by Lender.
13. ADDITIONAL DOCUMENTS - To furnish to Lender all instruments,
documents, initial surveys, footing or foundation surveys,
certificates, plans and specifications, appraisals, financial
statements, title and other insurance reports and agreements and
each and every other document and instrument required to be
furnished by the terms of this Agreement, all at Borrower's
expense; to assign and deliver to Lender such documents,
instruments, assignments and other writings consistent with the
intent of the parties as provided herein and which documents,
instruments, assignments and writings do not alter the rights and
obligations of the parties set forth herein, and to do such other
acts necessary or desirable to preserve and protect the
collateral at any time securing the Note, as Lender may
reasonably require; and to do and execute all and such further
lawful and reasonable acts, conveyances and assurances for the
carrying out of the intents and purposes of this Agreement as
Lender shall reasonably require from time to time, consistent
with the intent of the parties as provided herein and which acts,
conveyances, and assurances do not alter the rights and
obligations of the parties set forth herein.
14. ARCHITECTS AND CONSTRUCTION CONTRACTS - To commit no default
or knowingly permit the same under the terms of the Architects or
Construction Contracts; To waive none of the obligations of the
parties thereunder; To do no act which would relieve such parties
from their obligations thereunder; To make no amendments (except
as otherwise set forth herein) to such contracts, without the
prior written consent of Lender; To enter into no change orders
or extras without Lender's consent (except as otherwise set forth
herein); To allow all such contracts to be subject to the
approval of Lender for its loan purposes; To allow Lender to take
advantage of all the rights and benefits of the contracts upon
any default by Borrower; and to submit evidence to Lender that
both the Architect and the Contractors will permit Lender to
acquire Borrower's interest under their respective contracts and
the Contract Documents without additional charge or fee should an
event of default occur hereunder.
15. ENFORCE PERFORMANCE OF SUB-CONTRACTS - To enforce, or cause
to be enforced, the prompt performance of the Sub-Contracts in
accordance with their terms and not to approve any changes in the
same without Lender's prior written consent.
16. COMPLIANCE WITH RULES - To comply with, and to require the
Contractors to comply with, all rules, regulations, ordinances
and laws bearing on the conduct of the work on the Improvements,
including the requirements of any insurer issuing coverage on the
Project and the requirements of any supervising boards of fire
underwriters or similar agencies.
17. MARKETABLE TITLE - To execute and deliver or cause to be
executed and delivered such instruments as may be required by the
Lender and Title to provide Lender with a marketable, valid and
first-priority security title to and lien upon the Premises
subject only to such exceptions to title as may be approved by
Lender.
18. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR REGULATIONS -
To permit no violations (or to correct the same upon notices of
violations) of any federal or state law or municipal ordinance or
order or requirement of the State in which the Premises are
located or any municipal department or other governmental
authority having jurisdiction affecting the Premises, which
violations in any way have a material adverse affect on the
Premises.
19. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS -To cause
the Plans and Specifications and construction pursuant thereto
and the use of the Premises contemplated thereby to comply with
all governmental laws and regulations and requirements, zoning
ordinances, standards, and regulations of all governmental bodies
exercising jurisdiction over the Premises, including
environmental protection and equal employment regulations, and
appropriate supervising boards of fire underwriters and similar
agencies.
20. APPROVAL OF PLANS AND SPECIFICATIONS - To cause (and to
knowingly permit no deviation therefrom) the Plans and
Specifications to conform to the requirements and conditions set
out by applicable law or any effective restrictive covenant, to
all governmental authorities which exercise jurisdiction over the
Premises or the construction thereon. No construction will be
commenced upon the Premises until said Plans and Specifications
shall have been submitted to Lender. No changes are to be made in
the Plans and Specifications as submitted to Lender, without
Lender's prior consent, which shall not be unreasonably withheld,
except after prior written notice to Lender. Provided the Loan
shall remain in balance as set forth in Article VII, paragraph 3
herein, Lender shall consent to reallocation among line items or
use of the Construction Contingency on the Construction Budget
attached hereto as Exhibit B of not more than $10,000 each or in
the aggregate of not more than the amount budgeted for
Construction Contingency, unless Borrower shall deposit Owner
Equity with the Escrowee in the amount of such excess over such
budgeted amount after reallocation or use of the Construction
Contingency.
ARTICLE VII
CONDITIONS PRECEDENT TO A DISBURSEMENT
It shall be a condition precedent to each Disbursement under this
Loan Agreement that:
1. LOAN DOCUMENTS - The Loan Documents shall have been duly
executed and delivered to Lender and shall be in full force and
effect.
2. OWNER EQUITY - Borrower shall have paid all of the Owner
Equity funds, if (and when, if any shall subsequently become
necessary) any shall become necessary, into the Project before
the Disbursement and Borrower shall deliver evidence of such
payment reasonably satisfactory to Lender. The parties hereto
agree that no Owner Equity funds are required as of the effective
date hereof.
3. LOAN BALANCE - As of the date immediately prior to any
Disbursement, the total amount of unadvanced proceeds of the Loan
shall be sufficient, in the opinion of Lender to complete the
Improvements free of liens. To the extent the total of the
unadvanced proceeds of the Loan shall be insufficient, at any
time, in Lender's reasonable opinion, to complete the
Improvements, or be less than the Total Construction Costs not
yet paid for or not yet incurred (including construction loan
interest necessary for the remainder of the term or extensions
thereof, if any), the Borrower shall immediately deposit with the
Lender or with Title, as additional Owner Equity funds, an amount
equal to such deficiency and such additional Owner Equity funds
shall be disbursed by Escrowee prior to the Disbursement of any
further advance or advances under this Agreement.
4. NO DEFAULT - No event of default shall exist under this
Agreement or the Loan Documents.
5. REPRESENTATIONS AND WARRANTIES - The representations and
warranties in Article V hereof shall be true and correct on and
as of the date of each Disbursement.
6. SWORN CONSTRUCTION STATEMENT - Prior to the initial
disbursement hereunder, the Borrower shall have submitted to
Lender and Title a Construction Cost Statement sworn to by
Borrower. The list should show the name of each and every
Contractor, Sub-Contractor and materialman, his address and an
estimate of the dollar value of the work, labor and materials to
be done or supplied and a general statement of the nature of the
work to be done or materials to be supplied by each Contractor.
The Borrower shall furnish to the Lender any amendments or
additions to the original statement as so submitted. The
Borrower shall also submit a sworn statement of all Loan and
carrying charges certified to Lender.
7. APPLICATION FOR PAYMENT - Lender shall have received an
Application for Payment pursuant to Article VIII hereof.
8. TITLE - Title shall issue its endorsement to the title
policy insuring the Security Deed to be a first priority security
title under the policy in the aggregate amounts of all prior
Disbursements and the requested Disbursement.
10. WORK IN PLACE - All work or materials for which a
Disbursement is requested shall be in place and incorporated into
the Improvements.
ARTICLE VIII
METHODS OF DISBURSEMENTS OF LOAN PROCEEDS
The Loan shall be disbursed as follows:
1. PROCEDURE - Not more often than monthly, Borrower may submit
an Application for Payment in the form attached hereto as Exhibit
"C" requesting the Disbursement of proceeds under the Loan, which
request shall be submitted to Lender and to Escrowee at least
five (5) business days prior to the date on which a Disbursement
is requested. Provided the conditions of this Loan Agreement are
met on the date requested for such advance, Lender shall advance
to Escrowee amounts certified to be currently payable by Borrower
(excluding the retainage hereinafter specified) for the then
incurred portion of Total Construction Costs pursuant to the
Application for Payment. All costs shall have been approved in
writing by the Project Architect, Borrower, Contractor, and if
required by Lender, by the Inspecting Architect. All interest
payable on the Note and all Loan and Carrying Charges shall be
approved by the Lender and to the extent payable to Lender need
not be disbursed to Escrowee, but may be immediately and
automatically credited by Lender to the Loan account. Escrowee
shall disburse all funds advanced to it by Lender in accordance
with the terms and provisions of this Agreement and any special
escrow requirements imposed by Escrowee as a condition to its
acting as the disbursing agent hereunder. The Proceeds of the
Loan shall bear interest from and including the date of
disbursement to Escrowee or the date of credit by Lender provided
that in the event Escrowee shall fail to disburse any advances
within five (5) business days after the date set for an advance,
the Borrower may request Escrowee to return said advance to
Lender and interest on such advance shall abate from and after
the date of such return. Any amounts disbursed to Escrowee and
returned by Escrowee to the Lender shall not be deemed to be
advanced under the Loan Documents. Each Application for Payment
shall clearly set forth the amounts due to Borrower and to each
Contractor out of the requested Loan and shall be accompanied by
the following:
a. A Draw Request Certificate in the form attached hereto
as Exhibit "D" certifying that each contractor or
materialman for which payment is requested in the relevant
Application for Payment has satisfactorily completed the
work or furnished the materials for which payment is
requested in accordance with the applicable contract; that
all work for which an Application for Payment is made
conforms to the Plans and Specifications within standard
construction tolerances and any approved or permitted
changes, and is in place; and that sufficient funds remain
of the undisbursed loan amounts to complete the Project and
that all funds previously disbursed have been applied as per
the previous Application for Payment.
b. Waivers of Mechanics' Liens and Materialmen's Liens
executed by all Contractors for all work done and all
materials furnished by them to the Premises and included in
such current Application for Payment.
c. Waivers of Mechanics' Liens and Materialmen's Liens
executed by all Sub-Contractors and workmen and materialmen
for all work done and all materials furnished by them to the
Premises and included in the immediately preceding
Application for Payment.
d. Such other supporting evidence, including invoices and
receipts as may be reasonably requested by Lender or
Escrowee to substantiate all payments which are to be made
out of the Disbursement or to substantiate all payments then
made in respect to the Project.
2. INTEREST ADVANCE - If interest has accrued on the Loan and
is unpaid or fees are payable to the Lender hereunder
constituting an event of default under the Note, Lender shall be,
and hereby is, authorized at any time to advance to itself from
the proceeds of the Loan the total amount of such accrued
interest and fees, whether or not an Application for Payment has
been submitted by the Borrower and the same shall be deemed to be
an advance of the proceeds of the Loan under this Agreement in
the same manner and with the same effect as if advanced under the
provisions above. It is understood Lender may establish an
automatic interest reserve whereby Lender may withdraw from the
Loan account on a regular basis the accrued interest on the Loan
and credit the Loan balance with the same. Lender shall advance
to itself up to the amount shown on Exhibit B itemizing
Construction Costs for interest accrued on disbursed Loan
proceeds.
3. ASSESSMENT AND TAX ADVANCE - As taxes and assessments become
due on the Premises, and if not paid by Borrower within
applicable notice and cure periods hereunder, Lender shall be,
and hereby is, authorized to advance to itself automatically from
the proceeds of the Loan, the total amount of such taxes and
assessments and the same shall be deemed to be an advance of the
proceeds of the Loan under this Agreement in the same manner and
with the same effect as if advances under the provisions above.
4. DISBURSE UNDER LOAN DOCUMENT - All sums advanced and
disbursed hereunder shall be disbursed under and shall be secured
by the Loan Documents.
5. PAYMENTS TO SUBCONTRACTORS - In its discretion Escrowee may
make payments directly to any subcontractor or materialman.
6. RETAINAGE - Each Disbursement for lienable Construction
Costs shall be limited to an amount equal to ninety percent (90%)
of the value, exclusive of Borrower and/or Contractor's profit
and overhead, of the materials and labor furnished to the
Premises and the balance (herein called the Retainage) shall be
retained by Lender, provided that thirty (30) days after
completion by each subcontractor or materialman of his
subcontract Lender shall, provided Borrower is not in default
hereunder, disburse to such party, or to the Contractor on
behalf of such party the Retainage withheld from said party,
provided that as a condition to such disbursement the Borrower
and Project Architect and the Inspecting Architect, if any shall
have been hired by Lender, shall certify to Lender the date that
such Party's subcontract has been fully and satisfactorily
completed and the subcontractor or materialmen shall have
supplied Title with satisfactory final lien waivers, including
final lien waivers for any of its submaterialmen or sub-
contractors and the requirements of any bonding company issuing
the Bonds shall have been fulfilled. No Retainage shall be taken
for "soft" Construction Costs, the non payment of which may not
result in a mechanic's or materialman's lien on the Premises.
Any Retainage due the Contractor for work performed or materials
furnished by the Contractor (and any profit and overhead) and due
any developer or the Borrower shall be disbursed on a percentage
completion basis relative to the completion of the Improvements
as may be certified by the Project Architect.
ARTICLE IX
FINAL LOAN BALANCE
At no time and in no event shall Lender be obligated to disburse
the balance of the proceeds of the loan, including any Retainage
until:
1. Lender shall have received satisfactory evidence of the
final completion of the Improvements in accordance with the
Contract Documents subject to standard construction industry
tolerances and the Certificate of Final Completion (without
exception for material "punch-list" items) from the Project
Architect accepted by the Contractor and Borrower.
2. Lender shall have received satisfactory as-built
surveys reflecting the final location of the Improvements as
fully completed on the Premises in accordance with the
Contract Documents, said survey to be prepared by a
registered or licensed surveyor bearing his registry number,
certifying to Lender as to the legal description of the
Premises and showing all Improvements located on the
Premises and indicating the street address of the
Improvements, absence of any encroachments on the Premises
or from the Premises onto adjacent land, showing all access
points, and showing conformance to all set back requirements
and delineating all utility easements, rights of way and
other matters affecting the Premises, and certifying as to
the total acreage of the land, the exterior dimensions of
the Improvements, and the number of parking spaces, if any,
and such other matters as Lender may reasonably request.
3. Lender shall have received a requisite affidavit of the
Borrower, Contractor and Project Architect, and approved by
the Inspecting Architect, if any, certifying as to the final
cost of the Improvements.
4. Title shall have been furnished with such final lien
waivers sufficient in the opinion of Title to dissolve any
possible Mechanic's and Materialman's Liens affecting title
to the Premises and Title shall have issued its endorsements
to the title policy increasing the insured coverage to the
full amount of all sums disbursed under this Loan Agreement.
5. Lender shall have received evidence reasonably
satisfactory to Lender that all of the terms, provisions and
conditions on the part of the Borrower to be performed or
caused to be performed have been fulfilled.
6. Lender shall have received a Final Certificate of
Occupancy issued by the appropriate governmental authority
covering the Improvements indicating that the Improvements
as built comply with all building codes and zoning
ordinances.
7. All remaining uncompleted material "punch list" items
shall have been satisfactorily completed, and an escrow
reasonably satisfactory to Lender shall have been
established for any uncompleted minor punch list items.
8. The requirements, if any, of all bonding companies, if
any, with respect to release of retainage shall have been
met.
9. The terms of Lender's conditions precedent to the close
of the sale of the Premises pursuant to the Sale and
Leaseback Financing Commitment shall have been satisfied.
ARTICLE X
EVENTS OF DEFAULT
An "event of default" shall be deemed to have occurred hereunder
if:
1. DEFAULT UNDER LOAN DOCUMENTS - Any event of default that
remains uncured after the expiration of any applicable notice and
cure period under any of the Loan Documents as defined therein;
or
2. FAILURE TO COMPLETE CONSTRUCTION - Borrower shall fail for
any reason to complete the construction of the Improvements by
the Completion Date; or
3. BREACH OF AGREEMENT - Borrower breaches or fails to perform,
observe or meet any non-monetary covenant or condition of this
Agreement within thirty (30) days after notice from Lender, or if
such default is incapable of cure within thirty (30) days, and
Borrower is diligently pursuing a course of conduct reasonably
capable of effecting a cure, such reasonable time as may be
necessary to cure the default (but in any event not to exceed 120
days); or
4. BREACH OF WARRANTY - Any warranties made or agreed to be
made in any of the Loan Documents or this Agreement shall be
breached by Borrower or shall prove to be materially false or
misleading, and shall not be cured or made to be true and correct
within the notice and cure period provided for in Section 3
above; or
5. FILING OF LIENS AGAINST THE PREMISES - Any lien for labor,
material, taxes or otherwise shall be filed against the Premises
and such lien shall not be immediately bonded over within 20 days
following Borrower's actual knowledge thereof, except those that
are being in good faith contested by Borrower and which are
bonded off or otherwise removed in a manner consistent with
Georgia law and practice before the same shall result in a non-
dischargeable claim adverse to Lender's secured position in the
Premises; or
6. LITIGATION AGAINST BORROWER - Any suit shall be filed
against Borrower, which if adversely determined, could
substantially impair the ability of Borrower to perform each and
every one of its obligations under and by virtue of the Loan
Documents; or
7. LEVY UPON THE PREMISES - A levy be made under any process on
the Premises and such levy shall not be immediately Bonded over
and shall continue unstayed for thirty (30) days or more; or
8. ACCELERATION OF OTHER DEBTS - Borrower does, or omits to do,
any act, or any event occurs, as a result of which any material
obligation of Borrower, not arising hereunder, may be declared
immediately due and payable by the Holder thereof and which
materially, adversely affects Borrower's ability to perform its
obligations hereunder; or
9. TRANSFER OF PREMISES - Borrower shall without the prior
written consent of Lender, voluntarily or by operation of law,
sell, transfer, convey or encumber all or any part of its
interest in the Premises; the foregoing shall not apply to the
issuance or transfer of stock in Borrower; or
10. FAILURE TO DISPROVE DEFAULT - Lender shall reasonably
suspect the occurrence of one or more events of default and
Borrower, upon request of the Lender, shall fail to provide
evidence reasonably satisfactory to Lender that such event or
events of default have not in fact occurred, subject to the
notice and cure period set forth in section 3 above; or
11. ABANDONMENT - Borrower abandons the project or delays or
ceases work thereon for a period of fifteen (l5) days, or delays
construction or suffers construction to be delayed for any period
of time for any reason whatsoever so that completion of
Improvements cannot be accomplished in the judgment of Lender and
Project Architect on or before the Completion Date; or
12. BANKRUPTCY - Borrower shall make an assignment for the
benefit of its creditors or shall admit in writing its inability
to pay its debts as they become due or shall file a petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent or
shall file a petition seeking any reorganization, dissolution,
liquidation, arrangement, composition, readjustment, or similar
relief under any present or future bankruptcy or insolvency
statute, law or regulation, or shall file an answer admitting to
or not contesting the material allegations of a petition filed
against it in any such proceedings, or shall not have the same
dismissed or vacated, or shall seek or consent or acquiesce in
the appointment of any trustee, receiver or liquidator of a
material part of its properties, or shall not after the
appointment without the consent or acquiescence of it of a
trustee, receiver, or liquidator of any material part of its
properties have such receiver, liquidator or appointment vacated;
or
13. EXECUTION LEVY - Execution shall have been levied against
the Premises or other properties subject to the Security Deed or
any lien creditors commence suit to enforce a judgment lien
against the Premises or such action or suit shall have been
brought and shall not be immediately bonded over and shall
continue unstayed and in effect for a period of more than 60
consecutive days; or
14. ATTACHMENT - Any part of the Lender's commitment to make the
advances hereunder shall at any time be subject or liable to
attachment or levy at the suit of any creditor of the Borrower or
at the suit of any subcontractor or creditor of the Contractor,
and the same shall not be removed or released prior to the time
Lender must comply with the same or 10 business days after notice
to Borrower, whichever is less; or
15. DESTRUCTION - Any part of the Improvements are materially
damaged or destroyed by fire or other casualty and the loss shall
prove not to be adequately covered by insurance actually
collected or in the process of collection;
ARTICLE XI
REMEDIES OF LENDER
Borrower hereby agrees that the occurrence of any one or
more of the events of default set out in Article X hereof shall
also constitute an event of default under each of the Loan
Documents, thereby entitling Lender, at its option, to proceed to
exercise any or all of the following remedies:
1. EXERCISE OF REMEDIES - To exercise any of the various
remedies provided in any of the Loan Documents, including the
acceleration of the indebtedness evidenced by the Note and the
foreclosure of the Security Deed;
2. CUMULATIVE RIGHTS - Cumulatively to exercise all other
rights, options and privileges provided by law;
3. CEASE MAKING ADVANCES - To refrain from making any advances
under this Agreement but Lender may make advances after the
happening of any such event without thereby waiving the right to
refrain from making other further advances or to exercise any of
the other rights Lender may have.
4. RIGHTS TO ENTER - To require Borrower to vacate the Premises
and permit Lender (whether prior to a foreclosure sale or during
any period of redemption after a foreclosure sale):
(a) To enter into possession;
(b) To perform or cause to be performed any and all work
and labor necessary to complete the Improvements in
accordance with the Plans and Specifications;
(c) To employ security watchmen to protect the Premises;
and
(d) To disburse that portion of the Loan Proceeds not
previously disbursed (including any Retainage) to the extent
necessary to complete the construction of the Improvements
in accordance with the Contract Documents and if the
completion requires a larger sum than the remaining
undisbursed portion of the Loan, to disburse such additional
funds, all of which funds so disbursed by Lender shall be
deemed to have been disbursed to Borrower and shall be
secured by the Security Deed. For this purpose, Borrower
hereby constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution to complete
the construction of the Improvements in the name of the
Borrower, and hereby empowers Lender as said attorney to
take all actions necessary in connection therewith including
but not limited to using any funds of Borrower including any
balance which may be held in escrow and any funds which may
remain unadvanced hereunder for the purpose of completing
the said portion of the Improvements in the manner called
for by the Contract Documents; to make such additions and
changes and corrections in the Contract Documents which
shall be reasonably necessary or desirable to complete the
said portion of the Improvements in substantially the manner
contemplated by the Contract Documents; to employ such
contractors, subcontractors, agents, architects, and
inspectors as shall be required for said purposes; to pay,
settle or compromise all existing or future bills and claims
which are or may be liens against said Premises, or may be
necessary or desirable for the completion of the said
portion of the Improvements or the clearance of title to the
Premises; to execute all applications and certificates in
the name of Borrower which may be required by any
construction contract and to do any and every act with
respect to the construction of the said portion of the
Improvements which Borrower may do in its own behalf. It is
understood and agreed that this power of attorney shall be
deemed to be a power coupled with an interest which cannot
be revoked by death or otherwise. Said attorney-in-fact
shall also have power to prosecute and defend all actions
and proceedings in connection with the construction of the
said portion of the Improvements and to take such action and
require such performance as it deems necessary. In
accordance therewith, Borrower hereby assigns and quitclaims
unto Lender all sums to be advanced hereunder including
Retainage. Any funds so disbursed or fees or charges so
incurred shall be included in any amount necessary for the
Borrower to pay to redeem the premises after any foreclosure
sale over and above and notwithstanding the bid price at any
foreclosure sale.
(e) To discontinue making advances hereunder to the
Borrower and to terminate Lender's obligations under this
Agreement.
5. RIGHTS NON CUMULATIVE - No right or remedy by this Agreement
or by any Loan Document or instrument delivered by the Borrower
pursuant hereto, conferred upon or reserved to the Lender shall
be or is intended to be exclusive of any other right or remedy
and each and every right and remedy shall be cumulative and in
addition to any other right or remedy or now or hereafter arising
at a law or in equity or by statute. Except as Lender may
hereafter otherwise agree in writing, no waiver by Lender or any
breach by or default of Borrower of any of its obligations,
agreements, or covenants under this Agreement shall be deemed to
be a waiver of any subsequent breach of the same or any other
obligation, agreement or covenant, nor shall any forbearance by
Lender to seek a remedy for such breach be deemed a waiver of its
rights and remedies with respect to such a breach, nor shall
Lender be deemed to have waived any of its rights and remedies
unless it be in writing and executed with the same formality as
this Agreement.
6. EXPENSES - To the extent provided for in the Commitment, the
Loan and this Agreement and the performance by the Lender or
Borrower of their obligations hereunder shall be without cost and
expense to the Lender, all of which costs and expenses the
Borrower agrees to pay and hold Lender harmless of and payment of
which shall be secured by the Loan Documents. Specifically,
Borrower agrees to pay all title charges, surveyor's fees,
appraisals, loan fees and attorney's fees and costs and the like
incurred in connection with this Agreement. Provided Borrower
shall not be in default hereunder beyond the expiration of all
applicable notice and cure periods, Borrower need not pay
Lender's attorney's fees in excess of $9,000 (inclusive of the
Sale\Leaseback transaction contemplated between the Lender and
Borrower). Notwithstanding the foregoing, nothing herein or in
the Sale and Leaseback Financing Commitment shall be construed to
prevent Lender from recovering from Borrower Lender's costs of
enforcing this Agreement, including reasonable attorney's fees,
to the extent otherwise contemplated hereby.
ARTICLE XII
GENERAL CONDITIONS AND MISCELLANEOUS
The following conditions shall be applicable throughout the term
of this Agreement:
1. RIGHTS OF THIRD PARTIES - All conditions of the obligations
of Lender hereunder, including the obligation to make
disbursements are imposed solely and exclusively for the benefit
of Borrower, and no other person shall have standing to require
satisfaction of such conditions in accordance with their terms or
be entitled to assume that Lender will refuse to make advances in
the absence of strict compliance with any or all thereof, and no
other person shall, under any circumstances, be deemed to be a
beneficiary of such conditions, any and all of which may be
freely waived in whole or in part by Lender at any time if in its
sole discretion it deems it desirable to do so. In particular,
Lender makes no representations and assumes no duties or
obligations as to third parties concerning the quality of the
construction of the Improvements or the absence therefrom of
defects. In this connection, Borrower agrees to and shall
indemnify Lender from any liability, claims or losses resulting
from the disbursement of the Loan proceeds or from the condition
of the Premises whether related to the quality of construction or
otherwise and whether arising during or after the term of the
Loan made by Lender to Borrower in connection therewith, except
for Lender's gross negligence or willful misconduct. This
provision shall survive for four years after the foreclosure or
deed in lieu thereof, except as to latent defects, and in such
case, this provision shall continue in full force and effect so
long as the possibility of any such liability, claims or losses
exists, for four years after such latent defects are or should
have been discovered.
2. EVIDENCE OF SATISFACTION OF CONDITIONS - Any condition of
this Agreement which requires the submission of evidence of the
existence or non-existence of a specified fact or facts implies
as a condition the existence or non- existence, as the case may
be, of such fact or facts, and Lender shall, at all times, be
free independently to establish to its reasonable satisfaction
such existence or non-existence.
3. ASSIGNMENT - Borrower may not assign this Loan Agreement or
any of its rights or obligations hereunder without the prior
written consent of Lender.
4. SUCCESSORS AND ASSIGNS INCLUDING IN PARTIES - Whenever in
this Agreement one of the parties hereto is named or referred to,
the heirs, legal representatives, successors and assigns of such
parties shall be included and all covenants and agreements
contained in this Agreement by or on behalf of the Borrower or by
or on behalf of the Lender shall bind and inure to the benefit of
their respective heirs, legal representatives, successors and
assigns, whether so expressed or not.
5. HEADINGS - The headings of the sections, paragraphs and
subdivisions of this Agreement are for the convenience of
reference only, and are not to be considered a part hereof and
shall not limit or otherwise affect any of the terms hereof.
6. INVALID PROVISIONS TO AFFECT NO OTHERS - If fulfillment of
any provision hereof, or any transaction related thereto at the
time performance of any such provision shall be due, shall
involve transcending the limit of validity prescribed by law,
then, ipso facto, the obligation to be fulfilled shall be reduced
to the limit of such validity; and such clause or provision shall
be deemed invalid as though not herein contained, and the
remainder of this Agreement shall remain operative in full force
and effect.
7. NUMBER AND GENDER - Whenever the singular or plural number,
masculine or feminine or neuter gender is used herein, it shall
equally include the other.
8. AMENDMENTS - Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only
by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is
sought.
9. NOTICES - Any notice which any party hereto may desire or
may be required to give to any of the parties shall be in writing
and the mailing thereof by personal delivery (including courier)
or by certified mail return receipt requested, to the respective
parties' addresses set forth hereinabove or to such other place
such party may by notice in writing designate as its address
shall constitute service of notice hereunder. Notices shall be
deemed delivered by the date on the return receipt, if sent by
certified mail, or on the date of delivery if sent by personal
delivery (as evidenced by the date of the courier's receipt, if
sent by courier). Any notice that is rejected by any party shall
be deemed delivered on the date that it is rejected.
10. GOVERNING LAW - This Construction Loan Agreement is made
and executed pursuant to and is intended to be governed by the
laws of the State where the Premises are located.
11. FORCE MAJEURE - Anything in this Agreement to the contrary
notwithstanding, Borrower shall not be deemed in default with
respect to the performance of any of the terms, provisions,
covenants, and conditions of this Agreement (except for the
payment of all other monetary sums payable hereunder, to which
the provisions of this Section shall not apply) and the
Completion Date shall be appropriately extended, if the same
shall be due to any strike, lockout, civil commotion, warlike
operations, invasion, rebellion, hostilities, sabotage,
governmental regulations or controls, impracticability of
obtaining any materials or labor (except due to the payment of
monies at the then current market rates), shortage or
unavailability of a source of energy or utility service, Act of
God, casualty, adverse weather conditions, or any cause beyond
the reasonable control of Borrower or its General Contractor
(except due to the payment of monies at the then current market
rates). Delay due to Force Majeure shall in no event exceed 120
days from the occurrence of such event.
12. EXTENSION OF TIME - If Borrower shall not be in default
with respect to any of the terms or conditions of this Agreement
or any other document securing the Loan, Borrower shall have the
right to extend the date upon which the Loan becomes due and
payable for a period of thirty days by giving Lender written
notice of Borrower's intent to so extend at least ten days prior
to the original due date of the Loan and accompanied by a
cashier's check in the amount of $2,500 made payable to Lender.
If required by Lender, Borrower will enter into such documents as
may be reasonably required to evidence the extension.
IN WITNESS WHEREOF, Borrower and Lender have hereunto caused
these presents to be executed on the date first above written.
Party City of Atlanta, Inc., a Georgia corporation
By: /s/ Frank S Buonanotte
Its Pres
AEI NET LEASE INCOME & GROWTH FUND XIX
LIMITED PARTNERSHIP
By: AEI FUND MANAGEMENT XIX, INC.,
a Minnesota corporation,
Its corporate general partner
By: /s/ Robert P Johnson
Robert P. Johnson, President
EXHIBIT "A"
All that tract or parcel of land lying and being in Land Lot
171 of the 9th Land District, City of Gainesville, Hall County,
Georgia, said tract of parcel being more particularly described
as follows:
To find the Point of Beginning Commence at the instersection
of the southerly right-of-way line of Georgia State Route 53 (r/w
varies) and the easterly right-of-way line of Relocated Green
Hill Circle (r/w varies), if said right-of-way lines were
extended to form a point instead of a miter.
THENCE South 48 degrees 54 minutes 00 seconds East for a
distance of 23.86 feet along the extension of the southerly right-
of-way line of Georgia State Route 53 to an iron pin set at the
intersection of the easterly right-of-way line of Relocated Green
Hill Cirlce, said iron pin set being the Point of Beginning.
THENCE South 48 degrees 54 minues 00 seconds East for a
distance of 223.00 feet along the southerly right-of-way line of
Gerogia State Route 53 to an iron pin set a the northwesterly
conrener of Lot 2.
THENCE South 41 degrees 06 minutes 00 seconds West for a
distance of 60.00 feet leaving the southerly right-of-way line of
Georgia State Route 53 and along the westerly line of Lot 2 to an
iron pin set.
THENCE North 48 degrees 54 minutes 00 seconds West fo a
distance of 20.50 feet along the westerly line of Lot 2 to an
iron pin set.
THENCE South 41 degrees 06 minutes 00 seconds West for
distance of 136.48 feet along the westerly line of Lot 2 to an
iron pin set.
THENCE North 48 degrees 54 minutes 00 seconds West for a
distance of 166.20 feet along the northerly line of a Detention
Pond to an iorn pin set.
THENCE South 86 degrees 55 minutes 03 seconds West for a
distnce of 40.85 feet along the northerly line of a Detention
Pond to an iron pin set on the easterly right-of-way line of
Relocated Green Hill Circle.
THENCE the following course and distances along the easterly
rith-of-way line of Relocated Green Hill Circle to the Point of
Beginning.
Along a curve to the right having a radius of 260.00 feet
and an arc length of 127.79 feet, being subtended by a chrd of
North 27 degrees 01 minutes 13 seconds East for a distance of
126.51 feet to a hub and tac found.
THENCE North 41 degrees 03 minutes 05 seconds East for
distance of 83.16 feet to a hub and tac found.
THENCE South 87 degrees 34 minutes 02 seconds East for a
distance of 30.54 feet to an iron pin set at the intersection of
the southerly right-of-way line of Georgia State Route 53, said
iron pin set being the Point of Beginning.
Said tract contains 1.045 acres is depicted as "Lot 1" on the
Final Plat Phase I, Gainesville Market, recorded at Plat Slide
595, Page 39A, Hall County, Georgia records.
TOGETHER WITH easements appurtenant to the subject property
contained in that certain Declaration of Restrictive Covenants
and Grant of Easements by Stafford Properties, Inc. dated
February 14, 1997, recorded in Deed Book 2806, Page 218-239, Hall
County, Georgia records.
EXHIBIT B
CONSTRUCTION LOAN BUDGET
LAND ACQUISITION $ 550,000
BUILDING GENERAL CONSTRUCTION 479,000
SITE IMPROVEMENTS 170,000
LANDSCAPING 9,000
PERMITS & FEES 15,000
ARCHITECT 15,100
ENGINEERING 8,500
ENVIRONMENTAL REPORT 1,000
SOILS REPORT 1,200
SURVEYS 1,200
APPRAISAL 2,500
TITLE INSURANCE - (construction) 5,000
TIME INSURANCE - (saleleaseback) 5,000
ATTORNEY FEES - (borrower/lessee) 12,000
ATTORNEY FEES - AEI 9,000
MISCELLANEOUS 3,264
REAL ESTATE TAXES 3,000
PROMESA FEES 500
DEVELOPMENT FEE 30,000
CONTINGENCY 80,000
CONSTRUCTION MORTGAGE FEES (1% TC) 14,500
AEI SALE/LEASE BACK
COMMITMENT FEE (.5%) 7,200
LOAN INTEREST (8%) 28,036
TOTAL COSTS 1,450,000
Exhibit C
APPLICATION FOR PAYMENT
Party City of Atlanta, Inc. ("Borrower") hereby requests a
disbursement in the amount of______________________
($____________________) pursuant to that certain Construction
Loan Agreement dated effective as of June _____, 1997 by and
between Borrower, AEI Income & Growth Fund XXI Limited
Partnership, a Minnesota limited partnership ("Lender"). The
amounts requested have been or will be used to pay the items
identified on Exhibit "A" attached hereto and made a part hereof.
After payment of the amounts requested herein, the balance
of undisbursed Loan proceeds of $_____________________ will be
sufficient to complete construction and pay all related project
costs currently known. In the event of cost overruns which
cannot be accounted for by re-allocation among line items
reasonably approved by Lender, Borrower agrees to contribute the
necessary equity pursuant to Construction Loan Disbursement
Agreement.
All representations and warranties made by the Borrower in
the Loan Documents (as defined in the Construction Loan Agreement
dated effective as of June , 1997, between Lender and
Borrower) are true and correct as of the date hereof and Borrower
is not in default of any of the provisions thereof.
The total cost of the items for which Lender is funding is
estimated to be $ . To date,
$______________(exclusive of this request) has been disbursed
pursuant to the Construction Loan Disbursing Agreement.
Dated:______________________________
BORROWER:
Party City of Atlanta, Inc., a Georgia
corporation
By:______________________________
Its________________________
STATE OF )
)ss.
COUNTY OF )
I, _______________________________________________, a Notary
public of the said State and County do hereby certify that
_________________________________________ personally appeared
before me this day and he is the ____________________________ of
Party City of Atlanta, Inc., a Georgia corporation, and that by
authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by said officer.
Witness my hand and official stamp or seal, this ______ day
of June, 1997.
_________________________________________
Notary Public
BORROWER
Exhibit D-1
DRAW REQUEST CERTIFICATE
This Certificate made by Party City of Atlanta,
Inc.("Borrower").
RECITALS
WHEREAS, Borrower and AEI Income & Growth Fund XXI Limited
Partnership, a Minnesota limited partnership ("Lender") have
entered into a Construction Loan Agreement dated effective as of
June , 1997 (the "Loan Agreement") pursuant to which Lender
agreed to loan $1,450,000 to Borrower for the purpose of
constructing a Party City store on certain real property
described on Exhibit "A" attached to the Construction Loan
Agreement ("Project"); and
WHEREAS, Borrower and Contractor have entered into a
contract dated , 1997, ("Construction Contract"); and
WHEREAS, the Loan Agreement requires the submission to
Escrowee and Lender of this Certificate prior to the advancement
of any loan proceeds under the Loan Agreement.
NOW, THEREFORE, Borrower does hereby certify to Escrowee and
Lender as follows:
1. This Draw Request for the period from
____________________________, 1997 to _____________________,
1997, showing work completed to date of $
and requesting a current payment of $________________________
relates to costs incurred pursuant to the Construction Contract,
and other line items, all as shown on the Construction Loan
Budget attached to the Loan Agreement, and are costs only
pertaining to the Project and are included in the Loan Agreement.
2. As of the date of this Draw Request, the balance
remaining due for all costs under the Construction Contract,
including retainage and approved change orders, to complete the
Project after receipt of payments requested herein will be
$________________.
3. As of the date of this Draw Request, the remaining
balance due on the Loan Agreement as set forth above is
sufficient to complete the Project in accordance with the Plans
and Specifications (as defined in the Loan Agreement) to the
degree set forth by the Loan Agreement.
4. That all work covered by this Draw Request has been
completed in accordance with the Construction Contract, Plans and
Specifications, and any amendments thereto approved by Lender.
5. That all work completed to date conforms to the
Construction Contract, Plans and Specifications, and any
amendments thereto approved by Lender.
6. That all funds previously disbursed for costs incurred
pursuant to the Construction Contract under the Loan Agreement
have been applied as provided in all previous Draw Request
Certificates.
7. That as of the date hereof, to the best of Borrower's
knowledge after due inquiry, the Project complies with the
requirements of all zoning and building laws, ordinances,
regulations and permits; the requirements of all governmental
agencies having jurisdiction over the Project; and there is no
action or proceeding pending before any court or administrative
agency with respect to such laws, ordinances, regulations and/or
any certifications or permits issued thereunder.
Dated this ______ day of ____________________, 1997.
BORROWER: Party City of Atlanta, Inc., a
Georgia corporation
By:______________________________
Its________________________
STATE OF )
)ss.
COUNTY OF )
I, _______________________________________________, a Notary
public of the said State and County do hereby certify that
_________________________________________ personally appeared
before me this day and he is the ____________________________ of
Party City of Atlanta, Inc., a Georgia corporation, and that by
authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by said officer.
Witness my hand and official stamp or seal, this ______ day of
_________________, 1997.
_____________________________
____________
Notary Public
CONTRACTOR AND ARCHITECT
Exhibit D-2
DRAW REQUEST CERTIFICATE
This Certificate made by
,("Contractor"), AND
("Architect").
RECITALS
WHEREAS, Party City of Atlanta, Inc. ("Borrower") and AEI
Income & Growth Fund XXI Limited Partnership, a Minnesota limited
partnership ("Lender") have entered into a Construction Loan
Agreement dated effective as of June , 1997 (the "Loan
Agreement") pursuant to which Lender agreed to loan $1,450,000 to
Borrower for the purpose of constructing a Party City store on
certain real property described on Exhibit "A" attached to the
Construction Loan Agreement ("Project"); and
WHEREAS, Borrower and Contractor have entered into a
contract dated , 1997, ("Construction Contract"); and
WHEREAS, Borrower and Architect have entered into a contract
dated , 1997, ("Architect Contract"); and
WHEREAS, the Loan Agreement requires the submission to
Escrowee and Lender of this Certificate prior to the advancement
of any loan proceeds under the Loan Agreement.
NOW, THEREFORE, Contractor and Architect do hereby certify
to Escrowee and Lender as follows:
1. This Draw Request for the period from
____________________________, 1997 to _____________________,
1997, showing work completed to date of $
and requesting a current payment of $________________________
relates to costs incurred pursuant to the Construction Contract,
and are costs only pertaining to the Project.
2. As of the date of this Draw Request, the balance
remaining due for all costs under the Construction Contract,
including retainage and approved change orders, to complete the
Project after receipt of payments requested herein will be
$________________.
3. As of the date of this Draw Request, the remaining
balance due on the Construction Contract as set forth above is
sufficient to complete the Project in accordance with the Plans
and Specifications (as defined in the Construction Contract) to
the degree set forth by the Construction Contract.
4. That all work covered by this Draw Request has been
completed in accordance with the Construction Contract, Plans and
Specifications, and any amendments thereto approved by Lender.
5. That each subcontractor or materialmen for which payment
is requested in this Draw Request has satisfactorily completed
the work or furnished materials for which payment is requested in
accordance with the Construction Contract.
6. That all work completed to date
conforms to the Construction Contract, Plans and Specifications,
and any amendments thereto approved by Lender.
7. That all funds previously disbursed for costs incurred
pursuant to the Construction Contract have been applied as
provided in all previous Draw Request Certificates.
8. That as of the date hereof, the Project complies with the
requirements of all zoning and building laws, ordinances,
regulations and permits; the requirements of all governmental
agencies having jurisdiction over the Project; and there is no
action or proceeding pending before any court or administrative
agency with respect to such laws, ordinances, regulations and/or
any certifications or permits issued thereunder.
Dated this ______ day of ____________________, 1997.
CONTRACTOR:
By:
Its:
ARCHITECT:
By:
Its:
STATE OF )
)ss.
COUNTY OF )
I, _______________________________________________, a Notary
public of the said State and County do hereby certify that
_________________________________________ personally appeared
before me this day and he is the ____________________________ of
, a corporation, and that by authority duly
given and as the act of the corporation, the foregoing instrument
was signed in its name by said officer.
Witness my hand and official stamp or seal, this ______ day of
_________________, 1997.
_____________________________
____________
My commission expires:________ Notary Public
STATE OF )
)ss.
COUNTY OF )
I, _______________________________________________, a Notary
public of the said State and County do hereby certify that
_________________________________________ personally appeared
before me this day and he is the ____________________________ of
, a corporation, and that by authority duly
given and as the act of the corporation, the foregoing instrument
was signed in its name by said officer.
Witness my hand and official stamp or seal, this ______ day of
_________________, 1997.
_____________________________
____________
My commission expires:________ Notary Public
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000868740
<NAME> AEI NET LEASE INCOME & GROWTH FUND XIX LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,020,998
<SECURITIES> 0
<RECEIVABLES> 43,821
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,064,819
<PP&E> 13,916,284
<DEPRECIATION> (950,932)
<TOTAL-ASSETS> 17,506,920
<CURRENT-LIABILITIES> 509,401
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 16,997,519
<TOTAL-LIABILITY-AND-EQUITY> 17,506,920
<SALES> 0
<TOTAL-REVENUES> 899,797
<CGS> 0
<TOTAL-COSTS> 350,935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 626,565
<INCOME-TAX> 0
<INCOME-CONTINUING> 626,565
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 626,565
<EPS-PRIMARY> 29.52
<EPS-DILUTED> 29.52
</TABLE>
