SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d)
Of The Securities Exchange Act Of 1934
For the Fiscal Year Ended: December 31, 1998
Commission file number: 0-19838
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
(Name of Small Business Issuer 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)
(651) 227-7333
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No
Check if disclosure of delinquent filers in response to Rule 405
of Regulation S-B is not contained in this Form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Issuer's revenues for year ended December 31, 1998 were
$1,848,907.
As of February 28, 1999, there were 20,767.92 Units of limited
partnership interest in the registrant outstanding and owned by
nonaffiliates of the registrant, which Units had an aggregate
market value (based solely on the price at which they were sold
since there is no ready market for such Units) of $20,767,920.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant has not incorporated any documents by reference
into this report.
Transitional Small Business Disclosure Format:
Yes No [X]
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
AEI Net Lease Income & Growth Fund XIX Limited Partnership
(the "Partnership" or the "Registrant") is a limited partnership
which was organized pursuant to the laws of the State of
Minnesota on September 14, 1990. The registrant is comprised of
AEI Fund Management XIX, Inc. (AFM) as Managing General Partner,
Robert P. Johnson as the Individual General Partner, and
purchasers of partnership units as Limited Partners. The
Partnership offered for sale up to $30,000,000 of limited
partnership interests (the "Units") (30,000 Units at $1,000 per
Unit) pursuant to a registration statement effective February 5,
1991. 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).
The Partnership was organized to acquire existing and
newly constructed commercial properties located in the United
States, to lease such properties to tenants under triple net
leases, to hold such properties and to eventually sell such
properties. From subscription proceeds, the Partnership
purchased nineteen properties, including partial interests in
four properties, totaling $16,994,880. The balance of the
subscription proceeds was applied to organization and syndication
costs, working capital reserves and distributions, which
represented a return of capital. The properties are all
commercial, single tenant buildings leased under triple net
leases.
The Partnership's properties were purchased with
subscription proceeds without any indebtedness. The Partnership
will not finance properties in the future to obtain proceeds for
new property acquisitions. If it is required to do so, the
Partnership may incur short-term indebtedness, which may be
secured by a portion of the Partnership's properties, to finance
the day-to-day cash flow requirements of the Partnership
(including cash flow necessary to repurchase Units). The amount
of borrowings that may be secured by the Partnership's properties
is limited in the aggregate to 20% of the purchase price of all
Partnership properties. The Partnership will not incur
borrowings prior to application of the proceeds from sale of the
Units, will not incur borrowings to pay distributions, and will
not incur borrowings while there is cash available for
distributions.
The Partnership will hold its properties until the General
Partners determine that the sale or other disposition of the
properties is advantageous in view of the Partnership's
investment objectives. In deciding whether to sell properties,
the General Partners will consider factors such as potential
appreciation, net cash flow and income tax considerations. In
addition, certain lessees may be granted options to purchase
properties after a specified portion of the lease term has
elapsed. The Partnership expects to sell some or all of its
properties prior to its final liquidation and to reinvest the
proceeds from such sales in additional properties. The
Partnership reserves the right, at the discretion of the General
Partners, to either distribute proceeds from the sale of
properties to the Partners or to reinvest such proceeds in
additional properties, provided that sufficient proceeds are
distributed to the Limited Partners to pay federal and state
income taxes related to any taxable gain recognized as a result
of the sale. It is anticipated that the Partnership will
commence liquidation through the sale of its remaining properties
within twelve years after acquisition, although final liquidation
may be delayed by a number of circumstances, including market
conditions and seller financing of properties.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Leases
Although there are variations in the specific terms of the
leases, the following is a summary of the general terms of the
Partnership's leases. The properties are leased to various
tenants under triple net leases, which are classified as
operating leases. Under a triple net lease, the lessee is
responsible for all real estate taxes, insurance, maintenance,
repairs and operating expenses for the property. The initial
lease terms are for 15 to 20 years. The leases provide for base
annual rental payments, payable in monthly installments, and
contain rent clauses which entitle the Partnership to receive
additional rent in future years based on stated rent increases or
if gross receipts for the property exceed certain specified
amounts, among other conditions.
The leases provide the lessees with two to five five-year
renewal options subject to the same terms and conditions as the
initial lease. Certain lessees have been granted options to
purchase the property. Depending on the lease, the purchase
price is either determined by a formula, or is the greater of the
fair market value of the property or the amount determined by a
formula. In all cases, if the option were to be exercised by the
lessee, the purchase price would be greater than the original
cost of the property.
Through December 31, 1996, 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 year ended
December 31, 1996, the net gain was $162,457.
Through December 31, 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 years ended December
31, 1997 and 1996, the net gain was $61,611 and $102,408,
respectively.
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.
On March 28, 1996, the Partnership purchased a 40.75%
interest in a Garden Ridge retail 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.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
On December 18, 1997, the Partnership purchased a Party
City retail store in Gainesville, Georgia for $1,435,309. The
property is leased to Party City of Atlanta, Inc. under a Lease
Agreement with a primary term of 15 years and annual rental
payments of $150,752.
On December 23, 1997, the Partnership purchased a 23.95%
interest in a parcel of land in Troy, Michigan for $361,889. The
land is leased to Champps Entertainment, Inc. (Champps) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $25,332. Effective June 20, 1998, the annual rent
was increased to $37,998. Simultaneously with the purchase of
the land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to Champps
for the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7%. Effective June 20, 1998, the interest
rate was increased to 10.5%. On September 3, 1998, after the
development was completed, the Lease Agreement was amended to
require annual rental payments of $122,605. The Partnership's
share of the total acquisition costs, including the cost of the
land, was $1,181,185. The remaining interests in the property
are owned by AEI Real Estate Fund XV Limited Partnership, AEI
Real Estate Fund XVII Limited Partnership and AEI Real Estate
Fund XVIII Limited Partnership, affiliates of the Partnership.
In January, 1998, the Partnership entered into an
Agreement to purchase a 40% interest in a Tumbleweed restaurant
in Chillicothe, Ohio. On April 13, 1998, the Partnership
purchased its share of the land for $192,813. The land is leased
to Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary
term of 15 years and annual rental payments of $16,389.
Effective August 10, 1998, the annual rent was increased to
$19,763. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement under
which the Partnership advanced funds to TWI for the construction
of a Tumbleweed restaurant on the site. Initially, the
Partnership charged interest on the advances at a rate of 8.5%.
Effective August 10, 1998, the interest rate was increased to
10.25%. On November 20, 1998, after the development was
completed, the Lease Agreement was amended to require annual
rental payments of $50,946. The Partnership's share of the total
acquisition costs, including the cost of the land was $505,225.
The remaining interests in the property are owned by the
Individual General Partner and AEI Real Estate Fund XVIII Limited
Partnership.
Pursuant to the Partnership Agreement, Net Sale Proceeds
may be reinvested in additional properties until a date five
years after the date on which the offer and sale of Units
terminated. This period expired on February 5, 1998. In
October, 1998, the Managing General Partner solicited by mail a
proxy statement to propose an Amendment to the Limited
Partnership Agreement that would allow the Partnership to
reinvest the majority of net sale proceeds in additional
properties. The Amendment passed with a majority of Units voting
in favor of the Amendment.
On December 28, 1998, the Partnership purchased a 60.0%
interest in a Tumbleweed restaurant in Columbus, Ohio for
$823,496. The property is leased to TWI under a Lease Agreement
with a primary term of 15 years and annual rental payments of
$83,102. The remaining interest in the property is owned by AEI
Real Estate Fund XVIII Limited Partnership.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
As of December 31, 1997, based on an analysis of market
conditions, it was determined the fair value of the Partnership's
interest in the Media Play retail store was approximately
$726,000. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $595,100 was recognized, which is
the difference between the book value at December 31, 1997 of
$1,321,100 and the estimated market value of $726,000. The
charge was recorded against the cost of the land, building and
equipment. Also, in the fourth quarter of 1997, the Partnership
recorded a real estate impairment on the three Red Line Burgers
of $715,384, which equaled the net book value of the properties
at December 31, 1997. The charge was recorded against the cost
of the buildings and equipment. In addition, in the second
quarter of 1998, the Partnership elected to abandon one of the
properties in order to avoid ongoing expenses. In addition, on
February 14, 1997, the two Rally's properties were sold for
$500,000, which resulted in a net gain of $16,092.
Major Tenants
During 1998, four of the Partnership's lessees each
contributed more than ten percent of the Partnership's total
rental revenue. The major tenants in aggregate contributed 63%
of the Partnership's total rental revenue in 1998. It is
anticipated that, based on the minimum rental payments required
under the leases, each major tenant will continue to contribute
more than ten percent of the Partnership's total rental revenue
in 1999 and future years. In addition, four business concepts,
Taco Cabana, Denny's and Applebee's restaurants and Garden Ridge
retail store, each accounted for more than ten percent of the
Partnership's total rental revenue during 1998. It is
anticipated that these business concepts will continue to account
for more than ten percent of the Partnership's total rental
revenue in 1999 and future years. Any failure of these major
tenants or business concepts could materially affect the
Partnership's net income and cash distributions.
Competition
The Partnership is a minor factor in the commercial real
estate business. There are numerous entities engaged in the
commercial real estate business which have greater financial
resources than the Partnership. At the time the Partnership
elects to dispose of its properties, the Partnership will be in
competition with other persons and entities to find buyers for
its properties.
Employees
The Partnership has no direct employees. Management
services are performed for the Partnership by AEI Fund
Management, Inc., an affiliate of AFM.
Year 2000 Compliance
The Year 2000 issue is the result of computer systems that
use two digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and has
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
The Partnership intends to monitor and communicate with
tenants regarding Year 2000 compliance, although there can be no
assurance that the systems of the various tenants will be Year
2000 compliant.
ITEM 2. DESCRIPTION OF PROPERTIES.
Investment Objectives
The Partnership's investment objectives were to acquire
existing or newly-developed commercial properties throughout the
United States that offer the potential for (i) preservation and
protection of the Partnership's capital; (ii) partially tax-
deferred cash distributions from operations which may increase
through rent participation clauses or mandated rent increases;
and (iii) long-term capital gains through appreciation in value
of the Partnership's properties realized upon sale. The
Partnership does not have a policy, and there is no limitation,
as to the amount or percentage of assets that may be invested in
any one property. However, to the extent possible, the General
Partners attempt to diversify the type and location of the
Partnership's properties.
Description of Properties
The Partnership's properties are all commercial, single
tenant buildings. The properties were acquired on a debt-free
basis and are leased to various tenants under triple net leases,
which are classified as operating leases. The Partnership holds
an undivided fee simple interest in the properties.
The Partnership's properties are subject to the general
competitive conditions incident to the ownership of single tenant
investment real estate. Since each property is leased under a
long-term lease, there is little competition until the
Partnership decides to sell the property. At this time, the
Partnership will be competing with other real estate owners, on
both a national and local level, in attempting to find buyers for
the properties. In the event of a tenant default, the
Partnership would be competing with other real estate owners, who
have property vacancies, to attract a new tenant to lease the
property. The Partnership's tenants operate in industries that
are very competitive and can be affected by factors such as
changes in regional or local economies, seasonality and changes
in consumer preference.
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 1998.
<TABLE>
<CAPTION>
Total Property
Purchase Acquisition Annual Lease Annual Rent
Property Date Costs Lessee Payment Per Sq. Ft.
<S> <C> <C> <C> <C> <C>
Taco Cabana Restaurant
Houston, TX Texas Taco
(38.2362%) 7/31/91 $ 547,322 Cabana L.P. $ 81,599 $ 57.38
Taco Cabana Restaurant Texas Taco
San Antonio, TX 3/16/92 $1,147,274 Cabana L.P. $ 183,811 $ 67.58
Taco Cabana Restaurant
Waco, TX Texas Food
(2.4058%) 5/1/92 $ 19,720 Concepts $ 2,845 $ 42.81
</TABLE>
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
<TABLE>
<CAPTION>
Total Property
Purchase Acquisition Annual Lease Annual Rent
Property Date Costs Lessee Payment Per Sq. Ft.
<S> <C> <C> <C> <C> <C>
Applebee's Restaurant
Aurora, CO RCI
(3.3979%) 12/22/92 $ 44,782 West, Inc. $ 6,263 $ 40.08
Red Line Burgers Restaurant
Houston, TX 2/16/93 $ 299,531 (1)
Red Line Burgers Restaurant Red Line
Corpus Christi, TX 4/2/93 $ 280,378 Burgers, Inc. $ 15,000 $ 25.86
Applebee's Restaurant Gourmet
Crestwood, MO 4/14/93 $ 803,418 Systems, Inc. $ 112,982 $ 22.52
Applebee's Restaurant
Crestview Hills, KY Thomas
(1.1054%) 6/15/93 $ 14,039 and King, Inc. $ 1,966 $ 32.65
HomeTown Buffet Restaurant
Tucson, AZ Summit Family
(47.4415%) 6/16/93 $ 610,755 Restaurants, Inc. $ 80,960 $ 17.73
Applebee's Restaurant Gulf Coast
Covington, LA 6/23/93 $1,099,085 Restaurants, Inc. $ 164,239 $ 29.99
Applebee's Restaurant
Temple Terrace, FL Casual Restaurant
(9.0963%) 10/1/93 $ 96,262 Concepts II, Inc. $ 14,352 $ 34.00
Applebee's Restaurant WCM
Beaverton, OR 12/2/93 $1,760,079 Oregon, L.L.C. $ 237,681 $ 47.54
Denny's Apple Investment
Apple Valley, CA 5/2/94 $1,177,655 Group, Inc. $ 170,836 $ 32.95
Media Play Retail Store
Apple Valley, MN
(33.0%) 12/21/95 $1,389,367 (1)
Garden Ridge Retail Store
Pineville, NC Garden
(40.75%) 3/28/96 $3,615,378 Ridge L.P. $ 383,973 $ 6.65
Party City Retail Store Party City of
Gainesville, GA 12/18/97 $1,435,309 Atlanta, Inc. $ 150,752 $ 14.32
Champps
Americana Restaurant Champps
Troy, MI Entertainment,
(23.95%) 9/3/98 $1,181,185 Inc. $ 122,605 $ 46.16
</TABLE>
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
<TABLE>
<CAPTION>
Total Property
Purchase Acquisition Annual Lease Annual Rent
Property Date Costs Lessee Payment Per Sq. Ft.
<S> <C> <C> <C> <C> <C>
Tumbleweed Restaurant
Chillicothe, OH
(40.0%) 11/20/98 $ 505,225 Tumbleweed, Inc. $ 50,946 $ 23.23
Tumbleweed Restaurant
Columbus, OH
(60.0%) 12/28/98 $ 823,496 Tumbleweed, Inc. $ 83,102 $ 25.26
</TABLE>
(1) The property is vacant and listed for sale or lease.
The properties listed above with a partial ownership
percentage are owned with affiliates of the Partnership and/or
unrelated third parties. The remaining interest in the Taco
Cabana restaurant in Houston, Texas is owned by AEI Real Estate
Fund 86-A Limited Partnership. The remaining interests in the
HomeTown Buffet restaurant are owned by AEI Real Estate Fund
XVIII Limited Partnership and unrelated third parties. The
remaining interests in the Media Play and Garden Ridge retail
stores are owned by AEI Net Lease Income & Growth Fund XX and AEI
Income & Growth Fund XXI Limited Partnerships. The remaining
interests in the Champps Americana restaurant are owned by AEI
Real Estate Fund XV Limited Partnership, AEI Real Estate Fund
XVII Limited Partnership and AEI Real Estate Fund XVIII Limited
Partnership. The remaining interests in the Tumbleweed
restaurant in Chillicothe, Ohio are owned by the Individual
General Partner and AEI Real Estate Fund XVIII Limited
Partnership. The remaining interest in the Tumbleweed restaurant
in Columbus, Ohio is owned by AEI Real Estate Fund XVIII Limited
Partnership. The remaining interests in the Taco Cabana
restaurant in Waco, Texas, and the Applebee's restaurants in
Aurora, Colorado, Crestview Hills, Kentucky and Temple Terrace,
Florida are owned by unrelated third parties.
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated third
parties using the proportionate consolidation method. Each
tenant-in-common owns a separate, undivided interest in the
properties. Any tenant-in-common that holds more than a 50%
interest does not control decisions over the other tenant-in-
common interests. The financial statements reflect only this
Partnership's percentage share of the properties' land, building
and equipment, liabilities, revenues and expenses.
The initial Lease terms are for 20 years except for the
Tumbleweed restaurants, the Taco Cabana restaurants, the Party
City retail store and the Red Line restaurant in Corpus Christi,
Texas, which have lease terms of 15 years. The Leases contain
renewal options which may extend the Lease term an additional 15
years, except for the Tumbleweed restaurants, the Taco Cabana
restaurants, the Applebee's restaurants in Aurora, Colorado and
Temple Terrace, Florida, the Denny's restaurant, and the HomeTown
Buffet restaurant which have renewal options that may extend the
Lease term an additional 10 years and the Garden Ridge retail
store which has renewal options that may extend the Lease term an
additional 25 years.
Pursuant to the Lease Agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they occupy. The General Partners believe the properties are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
For tax purposes, the Partnership's properties are
depreciated under the Modified Accelerated Cost Recovery System
(MACRS). The largest depreciable component of a property is the
building which is depreciated, using the straight-line method,
over either 31.5 years or 39 years, depending on the date when it
was placed in service. The remaining depreciable components of a
property are personal property and land improvements which are
depreciated, using an accelerated method, over 5 and 15 years,
respectively. Since the Partnership has tax-exempt Partners, the
Partnership is subject to the rules of Section 168(h)(6) of the
Internal Revenue Code which requires a percentage of the
properties' depreciable components to be depreciated over longer
lives using the straight-line method. In general the federal tax
basis of the properties for tax depreciation purposes is the same
as the basis for book depreciation purposes except for properties
whose book value was reduced by a real estate impairment loss
pursuant to Financial Accounting Standards Board Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." The real estate impairment
loss, which was recorded against the book cost of the land and
depreciable property, was not recognized for tax purposes.
During the last five years or since the date of purchase,
if purchased after December 31, 1993, all properties were 100
percent occupied except for the Media Play retail store which was
100 percent occupied until January, 1997 and the Red Line Burger
restaurant in Houston, Texas which was 100% occupied until
January, 1997.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In October, 1998, the Managing General Partner solicited
my mail a proxy statement to propose an Amendment to the Limited
Partnership Agreement that would allow the Partnership to
reinvest the majority of net sale proceeds in additional
properties. In order for a proposed Amendment to be adopted, a
majority of the Units must be voted in favor of the Amendment.
Of the 20,768 outstanding Units, 10,435 voted for the Amendment,
3,792 voted against and 728 abstained. As a result, the
Amendment was adopted.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS.
As of December 31, 1998, there were 1,476 holders of
record of the registrant's Limited Partnership Units. There is
no other class of security outstanding or authorized. The
registrant's Units are not a traded security in any market.
However, the Partnership may purchase Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the total number of Units
outstanding at the beginning of the year. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
During 1998, eight Limited Partners redeemed a total of
206.7 Partnership Units for $145,775 in accordance with the
Partnership Agreement. In prior years, a total of sixteen
Limited Partners redeemed 177.3 Partnership Units for $139,225.
The redemptions increase the remaining Limited Partners'
ownership interest in the Partnership.
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS. (Continued)
Cash distributions of $16,790 and $16,967 were made to the
General Partners and $1,516,383 and $1,649,163 were made to the
Limited Partners in 1998 and 1997, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined, except as discussed below. These
distributions should not be compared with dividends paid on
capital stock by corporations.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $219,894 and $244,558 of
proceeds from property sales in 1998 and 1997, respectively. The
distributions reduced the Limited Partners' Adjusted Capital
Contributions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
For the years ended December 31, 1998 and 1997, the
Partnership recognized rental income of $1,677,876 and
$1,443,613, respectively. During the same periods, the
Partnership earned investment income of $171,031 and $348,986,
respectively. In 1998, rental income increased as a result of
additional rent received from four property acquisitions in 1997
and 1998, and rent increases on ten properties. These increases
were partially offset by a reduction in rental income due to the
restructuring of the Media Play property and the RallyOs/Red Line
Burger situation discussed below. In 1998, the Partnership
received $11,290 and $8,086 less in monthly rent from the two
lessees, respectively. The increase in rental income was
partially offset by a decrease in investment income earned on the
net proceeds prior to the purchase of the additional 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
Red Line Burger property. Effective December 1, 1995, the Leases
were amended to reduce the annual base rent from $43,742 to
$15,000 for each property. The Partnership could receive
additional rent in the future equal to 6.75% of the amount by
which gross receipts exceed $275,000. In 1997, the
reorganization plan confirmed one Red Line Lease and rejected the
other two Leases. In addition, the plan allowed the Rally's
properties to be sold and on February 14, 1997, the Partnership
received net sale proceeds of $500,000, which resulted in a net
gain of $16,092. The lessee has agreed to pay certain pre-
petition and post-petition rents due of $152,868 and other
related administrative and legal expenses. However, due to the
uncertainty of collection, the Partnership has not accrued any of
these amounts for financial reporting purposes.
Due to the rejection of the Leases, $82,563 of pre-
petition and post-petition rent related to the two properties
will not be collected by the Partnership. These amounts were not
accrued for financial reporting purposes. The Partnership, in
the fourth quarter of 1997, recorded a real estate impairment on
the three Red Line Burgers of $715,384, which equaled the net
book value of the properties at December 31, 1997. The charge
was recorded against the cost of the buildings and equipment. In
addition, in the second quarter of 1998, the Partnership elected
to abandon one of the properties in order to avoid ongoing
expenses. The Partnership is reviewing its available options for
the remaining Red Line Burger rejected in the reorganization
plan.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Musicland Group, Inc. (MGI), the lessee of the Media Play
retail store in Apple Valley, Minnesota experienced financial
difficulties and was aggressively 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.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of the
Partnership's interest in the Media Play was approximately
$726,000. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $595,100 was recognized, which is
the difference between the book value at December 31, 1997 of
$1,321,100 and the estimated market value of $726,000. The
charge was recorded against the cost of the land, building and
equipment.
During the years ended December 31, 1998 and 1997, the
Partnership paid Partnership administration expenses to
affiliated parties of $267,665 and $235,568, 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 $124,410 and $124,685, 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
Partnership administration expenses increased in 1998 compared to
1997 due to the additional management associated with Media Play
and the Red Line Burgers and additional review of lease terms
with other lessees.
As of December 31, 1998, the Partnership's annualized cash
distribution rate was 7.5%, 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.
The Year 2000 issue is the result of computer systems that
use two digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and has
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership intends to monitor and communicate with
tenants regarding Year 2000 compliance, although there can be no
assurance that the systems of the various tenants will be Year
2000 compliant.
Liquidity and Capital Resources
During 1998, the Partnership's cash balances decreased
$728,620 as a result of cash used to purchase additional
properties and distributions made in excess of cash generated
from operating activities, which was partially offset by payments
received on a long-term note receivable. Net cash provided by
operating activities increased from $1,423,151 in 1997 to
$1,483,926 in 1998 mainly as the result of an increase in income
in 1998 and net timing differences in the collection of payments
from the lessees and the payment of expenses, which were
partially offset by an increase in expenses in 1998.
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. During the year ended December 31,
1997, the Partnership generated cash flow from the sale of real
estate of $675,838. During the years ended December 31, 1998 and
1997, the Partnership received payments on long-term notes
receivable, received as the result of property sales, of
$1,492,795 and $677,173, respectively. During the same periods,
the Partnership expended $2,055,579 and $1,860,595, respectively,
to invest in real properties (inclusive of acquisition expenses)
as the Partnership continued to reinvest the cash generated from
the property sales.
Through December 31, 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 year ended December
31, 1997, the net gain was $61,611.
During 1998 and 1997, the Partnership distributed $222,115
and $247,028 of the net sale proceeds to the Limited and General
Partners as part of their regular quarterly distributions which
represented a return of capital of $10.55 and $11.63 per Limited
Partnership Unit, respectively. The remaining net sale proceeds
will either be reinvested in additional properties or distributed
to the Partners in the future.
On December 18, 1997, the Partnership purchased a Party
City retail store in Gainesville, Georgia for $1,435,309. The
property is leased to Party City of Atlanta, Inc. under a Lease
Agreement with a primary term of 15 years and annual rental
payments of $150,752.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On December 23, 1997, the Partnership purchased a 23.95%
interest in a parcel of land in Troy, Michigan for $361,889. The
land is leased to Champps Entertainment, Inc. (Champps) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $25,332. Effective June 20, 1998, the annual rent
was increased to $37,998. Simultaneously with the purchase of
the land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to Champps
for the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7%. Effective June 20, 1998, the interest
rate was increased to 10.5%. On September 3, 1998, after the
development was completed, the Lease Agreement was amended to
require annual rental payments of $122,605. The Partnership's
share of the total acquisition costs, including the cost of the
land, was $1,181,185. The remaining interests in the property
are owned by AEI Real Estate Fund XV Limited Partnership, AEI
Real Estate Fund XVII Limited Partnership and AEI Real Estate
Fund XVIII Limited Partnership, affiliates of the Partnership.
In January, 1998, the Partnership entered into an
Agreement to purchase a 40% interest in a Tumbleweed restaurant
in Chillicothe, Ohio. On April 13, 1998, the Partnership
purchased its share of the land for $192,813. The land is leased
to Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary
term of 15 years and annual rental payments of $16,389.
Effective August 10, 1998, the annual rent was increased to
$19,763. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement under
which the Partnership advanced funds to TWI for the construction
of a Tumbleweed restaurant on the site. Initially, the
Partnership charged interest on the advances at a rate of 8.5%.
Effective August 10, 1998, the interest rate was increased to
10.25%. On November 20, 1998, after the development was
completed, the Lease Agreement was amended to require annual
rental payments of $50,946. The Partnership's share of the total
acquisition costs, including the cost of the land was $505,225.
The remaining interests in the property are owned by the
Individual General Partner and AEI Real Estate Fund XVIII Limited
Partnership.
Pursuant to the Partnership Agreement, Net Sale Proceeds
may be reinvested in additional properties until a date five
years after the date on which the offer and sale of Units
terminated. This period expired on February 5, 1998. In
October, 1998, the Managing General Partner solicited by mail a
proxy statement to propose an Amendment to the Limited
Partnership Agreement that would allow the Partnership to
reinvest the majority of net sale proceeds in additional
properties. The Amendment passed with a majority of Units voting
in favor of the Amendment.
On December 28, 1998, the Partnership purchased a 60.0%
interest in a Tumbleweed restaurant in Columbus, Ohio for
$823,496. The property is leased to TWI under a Lease Agreement
with a primary term of 15 years and annual rental payments of
$83,102. The remaining interest in the property is owned by AEI
Real Estate Fund XVIII Limited Partnership.
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. Effective October 1, 1997, the Partnership's distribution
rate was reduced from 8.5% to 7.5%. As a result, distributions
during 1997 were higher when compared to 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the number of Units
outstanding at the beginning of the year. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
During, 1998, eight Limited Partners redeemed a total of
206.7 Partnership Units for $145,775 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, a total of
sixteen Limited Partners redeemed 177.3 Partnership Units for
$139,225. 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.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
contains various "forward looking statements" within the meaning
of federal securities laws which represent management's
expectations or beliefs concerning future events, including
statements regarding anticipated application of cash, expected
returns from rental income, growth in revenue, taxation levels,
the sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements made by the Partnership, must be evaluated in
the context of a number of factors that may affect the
Partnership's financial condition and results of operations,
including the following:
<BULLET> Market and economic conditions which affect
the value of the properties the Partnership owns and
the cash from rental income such properties generate;
<BULLET> the federal income tax consequences of rental
income, deductions, gain on sales and other items and
the affects of these consequences for investors;
<BULLET> resolution by the General Partners of
conflicts with which they may be confronted;
<BULLET> the success of the General Partners of
locating properties with favorable risk return
characteristics;
<BULLET> the effect of tenant defaults; and
<BULLET> the condition of the industries in which the
tenants of properties owned by the Partnership operate.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying index to financial statements.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet as of December 31, 1998 and 1997
Statements for the Years Ended December 31, 1998 and 1997:
Operations
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
REPORT OF INDEPENDENT AUDITORS
To the Partners:
AEI Net Lease Income & Growth Fund XIX Limited Partnership
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI NET
LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP (a Minnesota
limited partnership) as of December 31, 1998 and 1997 and the
related statements of operations, cash flows and changes in
partners' capital for the years then ended. These financial
statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of AEI Net Lease Income & Growth Fund XIX Limited Partnership as
of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Minneapolis, Minnesota Boulay, Heutmaker, Zibell & Co. P.L.L.P.
January 27, 1999 Certified Public Accountants
<PAGE>
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1998 1997
CURRENT ASSETS:
Cash and Cash Equivalents $ 884,555 $ 1,613,175
Receivables 27,722 40,876
Current Portion of Long-Term Notes Receivable 0 32,496
----------- -----------
Total Current Assets 912,277 1,686,547
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 5,746,501 5,198,411
Buildings and Equipment 10,038,667 8,496,976
Construction in Progress 0 43,208
Property Acquisition Costs 0 49,230
Accumulated Depreciation (1,347,191) (1,106,715)
----------- -----------
Net Investments in Real Estate 14,437,977 12,681,110
----------- -----------
OTHER ASSETS:
Long-Term Notes Receivable-Net of Current Portion 0 1,460,299
----------- -----------
Total Assets $15,350,254 $15,827,956
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 65,196 $ 51,256
Distributions Payable 366,812 337,626
----------- -----------
Total Current Liabilities 432,008 388,882
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (32,375) (27,166)
Limited Partners, $1,000 Unit Value;
30,000 Units authorized; 21,152 Units issued;
20,768 and 20,975 Units outstanding in
1998 and 1997, respectively 14,950,621 15,466,240
----------- -----------
Total Partners' Capital 14,918,246 15,439,074
----------- -----------
Total Liabilities and Partners' Capital $15,350,254 $15,827,956
=========== ===========
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 OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
1998 1997
INCOME:
Rent $ 1,677,876 $ 1,443,613
Investment Income 171,031 348,986
----------- -----------
Total Income 1,848,907 1,792,599
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 267,665 235,568
Partnership Administration and Property
Management - Unrelated Parties 124,410 124,685
Depreciation 298,712 313,146
Real Estate Impairment 0 1,310,484
----------- -----------
Total Expenses 690,787 1,983,883
----------- -----------
OPERATING INCOME (LOSS) 1,158,120 (191,284)
GAIN ON SALE OF REAL ESTATE 0 77,703
----------- -----------
NET INCOME (LOSS) $ 1,158,120 $ (113,581)
=========== ===========
NET INCOME (LOSS) ALLOCATED:
General Partners $ 11,581 $ (2,272)
Limited Partners 1,146,539 (111,309)
----------- -----------
$ 1,158,120 $ (113,581)
=========== ===========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT
(20,923 and 21,005 weighted average Units
outstanding in 1998 and 1997, respectively.) $ 54.80 $ (5.30)
=========== ===========
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 YEARS ENDED DECEMBER 31
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 1,158,120 $ (113,581)
Adjustments To Reconcile Net Income (Loss)
To Net Cash Provided By Operating Activities:
Depreciation 298,712 313,146
Real Estate Impairment 0 1,310,484
Gain on Sale of Real Estate 0 (77,703)
(Increase) Decrease in Receivables 13,154 (23,034)
Increase in Payable to
AEI Fund Management, Inc. 13,940 13,839
----------- -----------
Total Adjustments 325,806 1,536,732
----------- -----------
Net Cash Provided By
Operating Activities 1,483,926 1,423,151
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (2,055,579) (1,860,595)
Proceeds from Sale of Real Estate 0 675,838
Payments Received on Long-Term Notes Receivable 1,492,795 677,173
----------- -----------
Net Cash Used For
Investing Activities (562,784) (507,584)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable 29,186 (83,431)
Distributions to Partners (1,531,700) (1,665,821)
Redemption Payments (147,248) (30,923)
----------- -----------
Net Cash Used For
Financing Activities (1,649,762) (1,780,175)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (728,620) (864,608)
CASH AND CASH EQUIVALENTS, beginning of period 1,613,175 2,477,783
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 884,555 $ 1,613,175
=========== ===========
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 YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1996 $ (7,927) $17,257,326 $17,249,399 21,015.23
Distributions (16,658) (1,649,163) (1,665,821)
Redemption Payments (309) (30,614) (30,923) (40.60)
Net Loss (2,272) (111,309) (113,581)
--------- ----------- ----------- ----------
BALANCE, December 31, 1997 (27,166) 15,466,240 15,439,074 20,974.63
Distributions (15,317) (1,516,383) (1,531,700)
Redemption Payments (1,473) (145,775) (147,248) (206.71)
Net Income 11,581 1,146,539 1,158,120
--------- ----------- ----------- ----------
BALANCE, December 31, 1998 $ (32,375) $14,950,621 $14,918,246 20,767.92
========= =========== =========== ==========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) 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.
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.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) Organization - (Continued)
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.
(2) Summary of Significant Accounting Policies -
Financial Statement Presentation
The accounts of the Partnership are maintained on the
accrual basis of accounting for both federal income tax
purposes and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(2) Summary of Significant Accounting Policies - (Continued)
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested
in money market accounts, certificates of deposit,
federal agency notes and commercial paper with a term of
three months or less.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
Partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under triple net
leases classified as operating leases. The Partnership
recognizes rental revenue on the accrual basis according
to the terms of the individual leases. For leases which
contain cost of living increases, the increases are
recognized in the year in which they are effective.
Real estate is recorded at the lower of cost or estimated
net realizable value. The Partnership compares the
carrying amount of its properties to the estimated future
cash flows expected to result from the property and its
eventual disposition. If the sum of the expected future
cash flows is less than the carrying amount of the
property, the Partnership recognizes an impairment loss
by the amount by which the carrying amount of the
property exceeds the fair value of the property.
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings and equipment.
The buildings and equipment of the Partnership are
depreciated using the straight-line method for financial
reporting purposes based on estimated useful lives of 30
years and 10 years, respectively.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated
third parties using the proportionate consolidation
method. Each tenant-in-common owns a separate, undivided
interest in the properties. Any tenant-in-common that
holds more than a 50% interest does not control decisions
over the other tenant-in-common interests. The financial
statements reflect only this Partnership's percentage
share of the properties' land, building and equipment,
liabilities, revenues and expenses.
(3) Related Party Transactions -
The Partnership owns a 38.2362% interest in a Taco Cabana
restaurant in Houston, Texas. The remaining interest in the
property is owned by AEI Real Estate Fund 86-A Limited
Partnership, an affiliate of the Partnership. The
Partnership owns a 3.3979% interest in an Applebee's
restaurant in Aurora, Colorado. The remaining interests in
this property are owned by unrelated third parties. AEI
Institutional Net Lease Fund '93 Limited Partnership owned a
9.3385% interest in this property until January 20, 1998
when its interest was sold to an unrelated third party. The
Partnership owns a 47.4415% interest in a HomeTown Buffet
restaurant. The remaining interests in this property are
owned by AEI Real Estate Fund XVIII Limited Partnership, an
affiliate of the Partnership, and unrelated third parties.
AEI Institutional Net Lease Fund '93 Limited Partnership
owned a 15.8% interest in this property until December 4,
1998 when its interest was sold to an unrelated third party.
The Partnership owns a 33.0% interest in a Media Play retail
store and a 40.75% interest in a Garden Ridge retail store.
The remaining interests in these properties are owned by AEI
Net Lease Income & Growth Fund XX Limited Partnership and
AEI Income & Growth Fund XXI Limited Partnership, affiliates
of the Partnership. The Partnership owns a 23.95% interest
in the Champps Americana restaurant. The remaining
interests in this property are owned by AEI Real Estate Fund
XV Limited Partnership, AEI Real Estate Fund XVII Limited
Partnership and AEI Real Estate Fund XVIII Limited
Partnership, affiliates of the Partnership. The Partnership
owns a 40.0% interest in a Tumbleweed restaurant in
Chillicothe, Ohio. The remaining interests in this property
are owned by the Individual General Partner and AEI Real
Estate Fund XVIII Limited Partnership. The Partnership owns
a 60.0% interest in a Tumbleweed restaurant in Columbus,
Ohio. The remaining interest in this property is owned by
AEI Real Estate Fund XVIII Limited Partnership.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(3) Related Party Transactions - (Continued)
AEI and AFM received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 31
1998 1997
a.AEI and AFM are reimbursed for all costs
incurred in connection with managing the
Partnership's operations, maintaining the
Partnership's books and communicating
the results of operations to the Limited
Partners. $ 267,665 $ 235,568
======== ========
b.AEI and AFM are reimbursed for all direct
expenses they have paid on the Partnership's
behalf to third parties. These expenses included
printing costs, legal and filing fees, direct
administrative costs and outside audit and
accounting costs, taxes, insurance and other
property costs. $ 124,410 $ 124,685
======== ========
c.AEI is reimbursed for all property acquisition
costs incurred by it in acquiring properties on
behalf of the Partnership. The amounts are net
of financing and commitment fees and expense
reimbursements received by the Partnership from
the lessees in the amount of $64,640 and $26,935
for 1998 and 1997, respectively. $(50,818) $ 85,188
======== ========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a, b and c. This
balance is non-interest bearing and unsecured and is to be
paid in the normal course of business.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through triple net leases, which are classified as operating
leases. Under a triple net lease, the lessee is responsible
for all real estate taxes, insurance, maintenance, repairs
and operating expenses of the property. The initial Lease
terms are for 20 years except for the Tumbleweed
restaurants, the Taco Cabana restaurants, the Party City
retail store and the Red Line restaurant in Corpus Christi,
Texas, which have lease terms of 15 years. The Leases
contain renewal options which may extend the Lease term an
additional 15 years, except for the Tumbleweed restaurants,
the Taco Cabana restaurants, the Applebee's restaurants in
Aurora, Colorado and Temple Terrace, Florida, the Denny's
restaurant, and the HomeTown Buffet restaurant which have
renewal options that may extend the Lease term an additional
10 years and the Garden Ridge retail store which has renewal
options that may extend the Lease term an additional 25
years. The Leases contain rent clauses which entitle the
Partnership to receive additional rent in future years based
on stated rent increases or if gross receipts for the
property exceed certain specified amounts, among other
conditions. Certain lessees have been granted options to
purchase the property. Depending on the lease, the purchase
price is either determined by a formula, or is the greater
of the fair market value of the property or the amount
determined by a formula. In all cases, if the option were
to be exercised by the lessee, the purchase price would be
greater than the original cost of the property.
The Partnership's properties are all commercial, single-
tenant buildings. The Taco Cabana restaurant in Houston,
Texas was constructed in 1987 and acquired in 1991. The
DennyOs restaurant was constructed and acquired in 1994.
The Media Play retail store was constructed and acquired in
1995. The Garden Ridge retail store was constructed and
acquired in 1996. The Party City retail store was
constructed and acquired in 1997. The Champps Americana and
Tumbleweed restaurants were constructed and acquired in
1998. The remaining properties were constructed and
acquired in either 1992 or 1993. There have been no costs
capitalized as improvements subsequent to the acquisitions.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate - (Continued)
For those properties in the table below which do not have
land costs, the lessee has entered into land leases with
unrelated third parties. The cost of the properties and
related accumulated depreciation at December 31, 1998 are as
follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Taco Cabana, Houston, TX $ 334,414 $ 212,908 $ 547,322 $ 52,636
Taco Cabana, San Antonio, TX 598,533 548,741 1,147,274 129,267
Taco Cabana, Waco, TX 7,788 11,932 19,720 2,730
Applebee's, Aurora, CO 15,969 28,813 44,782 6,375
Red Line Burger, Houston, TX 0 57,519 57,519 57,519
Red Line Burger,
Corpus Christi, TX 0 52,398 52,398 52,398
Applebee's, Crestwood, MO 0 803,418 803,418 161,518
Applebee's, Crestview Hills, KY 4,490 9,549 14,039 1,852
HomeTown Buffet, Tucson, AZ 329,136 281,619 610,755 52,021
Applebee's, Covington, LA 358,521 740,564 1,099,085 150,076
Applebee's, Temple Terrace, FL 44,568 51,694 96,262 10,074
Applebee's, Beaverton, OR 636,972 1,123,107 1,760,079 202,114
Denny's, Apple Valley, CA 461,013 716,642 1,177,655 117,392
Media Play, Apple Valley, MN 230,305 563,962 794,267 86,006
Garden Ridge, Pineville, NC 1,171,849 2,443,529 3,615,378 223,990
Party City, Gainesville, GA 642,964 792,345 1,435,309 29,913
Champps Americana, Troy, MI 381,640 799,545 1,181,185 9,253
Tumbleweed, Chillicothe, OH 206,725 298,500 505,225 1,330
Tumbleweed, Columbus, OH 321,614 501,882 823,496 727
----------- ----------- ----------- ----------
$ 5,746,501 $10,038,667 $15,785,168 $1,347,191
=========== =========== =========== ==========
Through December 31, 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 year
ended December 31, 1997, the net gain was $61,611.
The Partnership owns a 2.4058% interest in the Taco Cabana
restaurant in Waco, Texas. Prior to 1996, the Partnership
sold 97.5942% of the property to unrelated third parties,
who own the property with the Partnership as tenants-in-
common.
The Partnership owns a 1.1054% interest in the Applebee's
restaurant in Crestview Hills, Kentucky. Prior to 1997, the
Partnership sold 98.8946% of the property to unrelated third
parties, who own the property with the Partnership as
tenants-in-common.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate - (Continued)
During 1998 and 1997, the Partnership distributed $222,115
and $247,028 of the net sale proceeds to the Limited and
General Partners as part of their regular quarterly
distributions which represented a return of capital of
$10.55 and $11.63 per Limited Partnership Unit,
respectively. The remaining net sale proceeds will either
be reinvested in additional properties or distributed to the
Partners in the future.
On December 18, 1997, the Partnership purchased a Party City
retail store in Gainesville, Georgia for $1,435,309. The
property is leased to Party City of Atlanta, Inc. under a
Lease Agreement with a primary term of 15 years and annual
rental payments of $150,752.
On December 23, 1997, the Partnership purchased a 23.95%
interest in a parcel of land in Troy, Michigan for $361,889.
The land is leased to Champps Entertainment, Inc. (Champps)
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $25,332. Effective June 20, 1998,
the annual rent was increased to $37,998. Simultaneously
with the purchase of the land, the Partnership entered into
a Development Financing Agreement under which the
Partnership advanced funds to Champps for the construction
of a Champps Americana restaurant on the site. Initially,
the Partnership charged interest on the advances at a rate
of 7%. Effective June 20, 1998, the interest rate was
increased to 10.5%. On September 3, 1998, after the
development was completed, the Lease Agreement was amended
to require annual rental payments of $122,605. The
Partnership's share of the total acquisition costs,
including the cost of the land, was $1,181,185.
In January, 1998, the Partnership entered into an Agreement
to purchase a 40% interest in a Tumbleweed restaurant in
Chillicothe, Ohio. On April 13, 1998, the Partnership
purchased its share of the land for $192,813. The land is
leased to Tumbleweed, Inc. (TWI) under a Lease Agreement
with a primary term of 15 years and annual rental payments
of $16,389. Effective August 10, 1998, the annual rent was
increased to $19,763. Simultaneously with the purchase of
the land, the Partnership entered into a Development
Financing Agreement under which the Partnership advanced
funds to TWI for the construction of a Tumbleweed restaurant
on the site. Initially, the Partnership charged interest on
the advances at a rate of 8.5%. Effective August 10, 1998,
the interest rate was increased to 10.25%. On November 20,
1998, after the development was completed, the Lease
Agreement was amended to require annual rental payments of
$50,946. The Partnership's share of the total acquisition
costs, including the cost of the land was $505,225.
Pursuant to the Partnership Agreement, Net Sale Proceeds may
be reinvested in additional properties until a date five
years after the date on which the offer and sale of Units
terminated. This period expired on February 5, 1998. In
October, 1998, the Managing General Partner solicited by
mail a proxy statement to propose an Amendment to the
Limited Partnership Agreement that would allow the
Partnership to reinvest the majority of net sale proceeds in
additional properties. The Amendment passed with a majority
of Units voting in favor of the Amendment.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate - (Continued)
On December 28, 1998, the Partnership purchased a 60.0%
interest in a Tumbleweed restaurant in Columbus, Ohio for
$823,496. The property is leased to TWI under a Lease
Agreement with a primary term of 15 years and annual rental
payments of $83,102.
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 Red Line Burger property. Effective
December 1, 1995, the Leases were amended to reduce the
annual base rent from $43,742 to $15,000 for each property.
The Partnership could receive additional rent in the future
equal to 6.75% of the amount by which gross receipts exceed
$275,000. In 1997, the reorganization plan confirmed one
Red Line Lease and rejected the other two Leases. In
addition, the plan allowed the Rally's properties to be sold
and on February 14, 1997, the Partnership received net sale
proceeds of $500,000, which resulted in a net gain of
$16,092. The lessee has agreed to pay certain pre-petition
and post-petition rents due of $152,868 and other related
administrative and legal expenses. However, due to the
uncertainty of collection, the Partnership has not accrued
any of these amounts for financial reporting purposes.
Due to the rejection of the Leases, $82,563 of pre-petition
and post-petition rent related to the two properties will
not be collected by the Partnership. These amounts were not
accrued for financial reporting purposes. The Partnership,
in the fourth quarter of 1997, recorded a real estate
impairment on the three Red Line Burgers of $715,384, which
equaled the net book value of the properties at December 31,
1997. The charge was recorded against the cost of the
buildings and equipment. In addition, in the second quarter
of 1998, the Partnership elected to abandon one of the
properties in order to avoid ongoing expenses. The
Partnership is reviewing its available options for the
remaining Red Line Burger rejected in the reorganization
plan.
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.
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 was 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.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate - (Continued)
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of
the Partnership's interest in the Media Play was
approximately $726,000. In the fourth quarter of 1997, a
charge to operations for real estate impairment of $595,100
was recognized, which is the difference between the book
value at December 31, 1997 of $1,321,100 and the estimated
market value of $726,000. The charge was recorded against
the cost of the land, building and equipment.
The minimum future rentals on the Leases for years
subsequent to December 31, 1998 are as follows:
1999 $ 1,885,752
2000 1,920,855
2001 1,947,173
2002 1,984,655
2003 2,016,820
Thereafter 21,334,798
-----------
$31,090,053
===========
There were no contingent rents recognized in 1998 or 1997.
(5) 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 was
charged on the Note at the rate of 10% on the outstanding
principal balance. The Note was secured by the land,
building and equipment. As of December 31, 1997, the
outstanding principal due on the note was $1,492,795. On
April 8, 1998, the Partnership received the outstanding
principal and accrued interest due on the Note.
On November 6, 1996, the Partnership received a Promissory
Note from the sale of the Taco Cabana restaurant in Round
Rock, Texas, to an unrelated third party. The Note earned
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.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(6) Major Tenants -
The following schedule presents rent revenue from individual
tenants, or affiliated groups of tenants, who each
contributed more than ten percent of the Partnership's total
rent revenue for the years ended December 31:
1998 1997
Tenants Industry
Garden Ridge L.P. Retail $ 383,973 $ 383,973
Texas Taco Cabana L.P. Restaurant 263,150 258,756
WCM Oregon, L.L.C. Restaurant 237,681 229,644
Apple Investment
Group, Inc. Restaurant 168,910 162,234
Gulf Coast Restaurants, Inc. Restaurant N/A 156,002
---------- ----------
Aggregate rent revenue of major tenants $1,053,714 $1,190,609
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 63% 82%
========== ==========
(7) Partners' Capital -
Cash distributions of $16,790 and $16,967 were made to the
General Partners and $1,516,383 and $1,649,163 were made to
the Limited Partners for the years ended December 31, 1998
and 1997, respectively. The Limited Partners' distributions
represent $72.47 and $78.51 per Limited Partnership Unit
outstanding using 20,923 and 21,005 weighted average Units
in 1998 and 1997, respectively. The distributions represent
$47.78 and $-0- per Unit of Net Income and $24.69 and $78.51
per Unit of return of contributed capital in 1998 and 1997,
respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $219,894 and $244,558 of
proceeds from property sales in 1998 and 1997, respectively.
The distributions reduced the Limited Partners' Adjusted
Capital Contributions.
Distributions of Net Cash Flow to the General Partners
during 1998 and 1997 were subordinated to the Limited
Partners as required in the Partnership Agreement. As a
result, 99% of distributions and income were allocated to
the Limited Partners and 1% to the General Partners.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(7) Partners' Capital - (Continued)
The Partnership may acquire Units from Limited Partners who
have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated
to purchase in any year more than 5% of the number of Units
outstanding at the beginning of the year. In no event shall
the Partnership be obligated to purchase Units if, in the
sole discretion of the Managing General Partner, such
purchase would impair the capital or operation of the
Partnership.
During 1998, eight Limited Partners redeemed a total of
206.7 Partnership Units for $145,775 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In 1997, six Limited
Partners redeemed a total of 40.6 Partnership Units for
$30,614. The redemptions increase the remaining Limited
Partners' ownership interest in the Partnership.
After the effect of redemptions and the return of capital
from the sale of property, the Adjusted Capital
Contribution, as defined in the Partnership Agreement, is
$962.44 per original $1,000 invested.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(8) Income Taxes -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the years ended December 31:
1998 1997
Net Income (Loss) for Financial
Reporting Purposes $1,158,120 $ (113,581)
Depreciation for Tax Purposes (Over)
Under Depreciation for Financial
Reporting Purposes (6,841) 25,180
Amortization of Start-Up and
Organization Costs (25,130) (50,390)
Income Accrued for Tax Purposes
Under Income for Financial
Reporting Purposes 0 (94,352)
Property Expenses for Tax Purposes
Over Expenses for Financial
Reporting Purposes 0 (46,641)
Real Estate Impairment Loss
Not Recognized for Tax Purposes 0 1,310,484
Gain (Loss) on Sale of Real Estate for
Tax Purposes Over Gain
for Financial Reporting Purposes (238,075) 16,052
---------- ----------
Taxable Income to Partners $ 888,074 $1,046,752
========== ==========
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(8) Income Taxes - (Continued)
The following is a reconciliation of Partners' capital for
financial reporting purposes to Partners' capital reported
for federal income tax purposes for the years ended December
31:
1998 1997
Partners' Capital for
Financial Reporting Purposes $14,918,246 $15,439,074
Adjusted Tax Basis of Investments
in Real Estate Over Net Investments
in Real Estate for Financial
Reporting Purposes 1,050,950 1,295,866
Capitalized Start-Up Costs
Under Section 195 258,641 258,641
Amortization of Start-Up and
Organization Costs (262,772) (237,642)
Organization and Syndication Costs
Treated as Reduction of Capital
For Financial Reporting Purposes 3,018,278 3,018,278
----------- -----------
Partners' Capital for
Tax Reporting Purposes $18,983,343 $19,774,217
=========== ===========
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(9) Fair Value of Financial Instruments -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, for the years ended
December 31:
1998 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 309 $ 309 $ 329 $ 329
Money Market Funds 884,246 884,246 1,612,846 1,612,846
---------- ---------- ---------- ----------
Total Cash and
Cash Equivalents $ 884,555 $ 884,555 $1,613,175 $1,613,175
========== ========== ========== ==========
Notes Receivable $ 0 $ 0 $1,492,795 $1,492,795
========== ========== ========== ==========
The notes receivable carrying amounts approximate fair
value.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The registrant is a limited partnership and has no
officers, directors, or direct employees. The General Partners
of the registrant are Robert P. Johnson and AFM. The General
Partners manage and control the Partnership's affairs and have
general responsibility and the ultimate authority in all matters
affecting the Partnership's business. The director and officers
of AFM are as follows:
Robert P. Johnson, age 54, is Chief Executive Officer,
President and Director and has held these positions since the
formation of AFM in September, 1990, and has been elected to
continue in these positions until December, 1999. From 1970 to
the present, he had been employed exclusively in the investment
industry, specializing in tax-advantaged limited partnership
investments. In that capacity, he has been involved in the
development, analysis, marketing and management of public and
private investment programs investing in net lease properties as
well as public and private investment programs investing in
energy development. Since 1971, Mr. Johnson has been the
president, a director and a registered principal of AEI
Securities, Inc. (formerly AEI Incorporated), which is registered
with the Securities and Exchange Commission as a securities
broker-dealer, is a member of the National Association of
Securities Dealers, Inc. (NASD) and is a member of the Security
Investors Protection Corporation (SIPC). Mr. Johnson has been
president, a director and the principal shareholder of AEI Fund
Management, Inc., a real estate management company founded by
him, since 1978. Mr. Johnson is currently a general partner or
principal of the general partner in seventeen other limited
partnerships.
Mark E. Larson, age 46, is Executive Vice President,
Treasurer and Chief Financial Officer and has held these
positions since the formation of AFM in September, 1990, and has
been elected to continue in these positions until December, 1999.
In January, 1993, Mr. Larson was elected to serve as Secretary of
AFM and will continue to serve until December, 1999. Mr. Larson
has been employed by AEI Fund Management, Inc. and affiliated
entities since 1985. From 1979 to 1985, Mr. Larson was with
Apache Corporation as manager of Program Accounting responsible
for the accounting and reports for approximately 46 public
partnerships. Mr. Larson is responsible for supervising the
accounting functions of AFM and the registrant.
ITEM 10. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative and management services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information pertaining to
the ownership of the Units by each person known by the
Partnership to beneficially own 5% or more of the Units, by each
General Partner, and by each officer or director of the Managing
General Partner as of February 28, 1999:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
AEI Fund Management XIX, Inc. 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Robert P. Johnson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Mark E. Larson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
The General Partners know of no holders of more than 5% of the
outstanding Units.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The registrant, AFM and its affiliates have common
management and utilize the same facilities. As a result, certain
administrative expenses are allocated among these related
entities. All of such activities and any other transactions
involving the affiliates of the General Partner of the registrant
are governed by, and are conducted in conformity with, the
limitations set forth in the Limited Partnership Agreement of the
registrant.
The following table sets forth the forms of compensation,
distributions and cost reimbursements paid by the registrant to
the General Partners or their Affiliates in connection with the
operation of the Fund and its properties for the period from
inception through December 31, 1998.
Person or Entity Amount Incurred From
Receiving Form and Method Inception (September 14, 1990)
Compensation of Compensation To December 31, 1998
AEI Securities, Inc. Selling Commissions equal to 7% $2,115,193
(formerly AEI of proceeds plus a 3% nonaccountable
Incorporated) expense allowance, most of which was
reallowed to Participating Dealers.
General Partners and Reimbursement at Cost for other $ 903,786
Affiliates Organization and Offering Costs.
General Partners and Reimbursement at Cost for all $ 561,347
Affiliates Acquisition Expenses
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Continued)
Person or Entity Amount Incurred From
Receiving Form and Method Inception (September 14, 1990)
Compensation of Compensation To December 31, 1998
General Partners 1% of Net Cash Flow in any fiscal $ 112,889
year until the Limited Partners have
received annual, non-cumulative
distributions of Net Cash Flow equal
to 10% of their Adjusted Capital
Contributions and 10% of any remaining
Net Cash Flow in such fiscal year.
General Partners and Reimbursement at Cost for all $1,891,548
Affiliates Administrative Expenses attributable
to the Fund, including all expenses
related to management and disposition
of the Fund's properties and all other
transfer agency, reporting, partner
relations and other administrative
functions.
General Partners 1% of distributions of Net Proceeds $ 11,758
of Sale until Limited Partners have
received an amount equal to(a) their
Adjusted Capital Contributions, plus
(b) an amount equal to 12% of their
Adjusted Capital Contributions per
annum, cumulative but not compounded,
to the extent not previously
distributed. 10% of distributions of
Net Proceeds of Sale there-after.
The limitations included in the Partnership Agreement
require that the cumulative reimbursements to the General
Partners and their affiliates for administrative expenses not
allowed under the NASAA Guidelines ("Guidelines") will not exceed
the sum of (i) the front-end fees allowed by the Guidelines less
the front-end fees paid, (ii) the cumulative property management
fees allowed but not paid, (iii) any real estate commission
allowed under the Guidelines, and (iv) 10% of Net Cash Flow less
the Net Cash Flow actually distributed. The reimbursements not
allowed under the Guidelines include a controlling person's
salary and fringe benefits, rent and depreciation. As of
December 31, 1998, the cumulative reimbursements to the General
Partners and their affiliates did not exceed these amounts.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A.
A. Exhibits -
Description
3.1 Certificate of Limited
Partnership (incorporated by reference to
Exhibit 3.1 of the registrant's
Registration Statement on Form S-11 filed
with the Commission on October 10, 1990
[File No. 33-37239]).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
3.2 Limited Partnership
Agreement (incorporated by reference to
Exhibit 3.2 of the registrant's
Registration Statement on Form S-11 filed
with the Commission on October 10, 1990
[File No. 33-37239]).
10.1 Net Lease Agreement dated
March 16, 1992 between the Partnership and
Taco Cabana, Inc. relating to the property
at 6040 Bandera Road, San Antonio, Texas
(incorporated by reference to Exhibit 10.1
of Post-Effective Amendment No. 1 to the
registrant's Registration Statement on Form
S-11 filed with the Commission on June 15,
1992 [File No. 33-37239]).
10.2 Net Lease Agreement dated
July 31, 1991 between the Partnership and
Taco Cabana, Inc. relating to the property
at 700 North Loop West IH-610, Houston,
Texas (incorporated by reference to Exhibit
10.2 of Post-Effective Amendment No. 1 to
the registrant's Registration Statement on
Form S-11 filed with the Commission on June
15, 1992 [File No. 33-37239]).
10.3 Net Lease Agreement dated
May 1, 1992 between the Partnership and
Taco Cabana, Inc. relating to the property
at 825 South 6th Street, Waco, Texas
(incorporated by reference to Exhibit 10.3
of Post-Effective Amendment No. 1 to the
registrant's Registration Statement on Form
S-11 filed with the Commission on June 15,
1992 [File No. 33-37239]).
10.4 Net Lease Agreement dated
December 22, 1992 between the Partnership
and RCI West, Inc. relating to the property
at East Iliff Avenue and Blackhawk Street,
Aurora, Colorado (incorporated by reference
to Exhibit 10.6 of Form 10-K filed with the
Commission on March 29, 1993).
10.5 Co-Tenancy Agreement dated
December 30, 1992 between the Partnership
and Bruce R. Logan relating to the property
at East Iliff Avenue and Blackhawk Street,
Aurora, Colorado (incorporated by reference
to Exhibit 10.7 of Form 10-K filed with the
Commission on March 29, 1993).
10.6 Co-Tenancy Agreement dated
January 28, 1993 between the Partnership
and Frederick G. and Nicole A. Hamer
relating to the property at East Iliff
Avenue and Blackhawk Street, Aurora,
Colorado (incorporated by reference to
Exhibit 10.8 of Form 10-K filed with the
Commission on March 29, 1993).
10.7 Net Lease Agreement dated
April 2, 1993 between the Partnership and
Red Line Burgers, Inc. relating to the
property at 4989 Ayers Street, Corpus
Christi, Texas. (incorporated by reference
to Exhibit 10.17 of Form 10-K filed with
the Commission on March 29, 1994)
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.8 Net Lease Agreement dated
April 14, 1993 between the Partnership and
Apple Partners Limited Partnership relating
to the property at 9041-E Watson Road,
Crestwood, Missouri (incorporated by
reference to Exhibit 10.18 of Form 10-K
filed with the Commission on March 29,
1994).
10.9 Co-Tenancy Agreement dated
April 29, 1993 between the Partnership and
Charles Kimball relating to the property at
825 South 6th Street, Waco, Texas
(incorporated by reference to Exhibit 10.19
of Form 10-K filed with the Commission on
March 29, 1994).
10.10 Net Lease Agreement
dated June 15, 1993 between the Partnership
and Thomas and King, Inc. relating to the
property at Turkeyfoot at I-275, Crestview
Hills, Kentucky (incorporated by reference
to Exhibit 10.20 of Form 10-K filed with
the Commission on March 29, 1994).
10.11 Net Lease Agreement
dated June 16, 1993 between the Partnership
and JB's Restaurants, Inc. relating to the
property at 330 South Wilmot Road, Tucson,
Arizona (incorporated by reference to
Exhibit 10.21 of Form 10-K filed with the
Commission on March 29, 1994).
10.12 Net Lease Agreement
dated June 23, 1993 between the Partnership
and GC Covington, Inc. relating to the
property at Highway 190 and I-12,
Covington, Louisiana (incorporated by
reference to Exhibit 10.22 of Form 10-K
filed with the Commission on March 29,
1994).
10.13 Net Lease Agreement
dated September 30, 1993 between the
Partnership and Casual Restaurant Concepts
II, Inc. relating to the property at
Terrace Walk Shopping Plaza, 56th Street
and Fowler Avenue, Temple Terrace, Florida
(incorporated by reference to Exhibit 10.28
of Form 10-K filed with the Commission on
March 29, 1994).
10.14 Net Lease Agreement
dated December 2, 1993 between the
Partnership and Apple Partners Limited
Partnership relating to the property at
1220 N.W. 185th Avenue, Beaverton, Oregon
(incorporated by reference to Exhibit 10.31
of Form 10-K filed with the Commission on
March 29, 1994).
10.15 Co-Tenancy Agreement
dated January 11, 1994 between the
Partnership and the Lee Revocable Trust
relating to the property at Terrace Walk
Shopping Plaza, 56th Street and Fowler
Avenue, Temple Terrace, Florida
(incorporated by reference to Exhibit 10.32
of Form 10-K filed with the Commission on
March 29, 1994).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.16 Co-Tenancy Agreement
dated March 31, 1994 between the
Partnership and Robert E. Miller relating
to the property at 5779 East Fowler Avenue,
Temple Terrace, Florida (incorporated by
reference to Exhibit 10.30 of Form 10-KSB
filed with the Commission on March 30,
1995).
10.17 Amendment to Co-Tenancy
Agreement dated April 8, 1994 between the
Partnership and Bruce R. Logan relating to
the property at East Iliff Avenue and
Blackhawk Street, Aurora, Colorado
(incorporated by reference to Exhibit 10.31
of Form 10-KSB filed with the Commission on
March 30, 1995).
10.18 Net Lease Agreement
dated April 28, 1994 between the
Partnership and Apple Investment Group,
Inc. relating to the property at Bear
Valley Road and Apple Valley Road, Apple
Valley, California (incorporated by
reference to Exhibit 10.33 of Form 10-KSB
filed with the Commission on March 30,
1995).
10.19 Co-Tenancy Agreement
dated May 25, 1994 between the Partnership
and the Tilson Trust relating to the
property at 30 Crestview Hills Mall Road,
Crestview Hills, Kentucky (incorporated by
reference to Exhibit 10.36 of Form 10-KSB
filed with the Commission on March 30,
1995).
10.20 Co-Tenancy Agreement
dated June 27, 1994 between the Partnership
and Bruce R. Logan relating to the property
at 825 South 6th Street, Waco, Texas
(incorporated by reference to Exhibit 10.40
of Form 10-KSB filed with the Commission on
March 30, 1995).
10.21 Co-Tenancy Agreement
dated July 7, 1994 between the Partnership
and Richard Bagot relating to the property
at 825 South 6th Street, Waco, Texas
(incorporated by reference to Exhibit 10.43
of Form 10-KSB filed with the Commission on
March 30, 1995).
10.22 Co-Tenancy Agreement
dated July 15, 1994 between the Partnership
and Richard Bagot relating to the property
at 30 Crestview Hills Mall Road, Crestview
Hills, Kentucky (incorporated by reference
to Exhibit 10.44 of Form 10-KSB filed with
the Commission on March 30, 1995).
10.23 Co-Tenancy Agreement
dated September 9, 1994 between the
Partnership and Patricia J. Grant relating
to the property at East Iliff Avenue and
Blackhawk Street, Aurora, Colorado
(incorporated by reference to Exhibit 10.48
of Form 10-KSB filed with the Commission on
March 30, 1995).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.24 Co-Tenancy Agreement
dated September 9, 1994 between the
Partnership and The Potloff Living Trust
relating to the property at 30 Crestview
Hills Mall Road, Crestview Hills, Kentucky
(incorporated by reference to Exhibit 10.49
of Form 10-KSB filed with the Commission on
March 30, 1995).
10.25 Co-Tenancy Agreement
dated January 12, 1994 between the
Partnership and the William W. and Jean E.
Herich Family Trust relating to the
property at 825 South 6th Street, Waco,
Texas (incorporated by reference to Exhibit
10.52 of Form 10-KSB filed with the
Commission on March 30, 1995).
10.26 Property Co-Tenancy
Ownership Agreement dated March 31, 1995
between the Partnership and The William W.
and Jean E. Herich Family Trust relating to
the property at East Iliff Avenue and
Blackhawk Street, Aurora, Colorado
(incorporated by reference to Exhibit 10.49
of Form 10-KSB filed with the Commission on
March 21, 1996).
10.27 Property Co-Tenancy
Ownership Agreement dated June 15, 1995
between the Partnership and Scott L.
Skogman relating to the property at East
Iliff Avenue and Blackhawk Street, Aurora,
Colorado (incorporated by reference to
Exhibit 10.54 of Form 10-KSB filed with the
Commission on March 21, 1996).
10.28 Property Co-Tenancy
Ownership Agreement dated June 16, 1995
between the Partnership and Scott L.
Skogman relating to the property at 825
South 6th Street, Waco, Texas (incorporated
by reference to Exhibit 10.55 of Form
10-KSB filed with the Commission on March
21, 1996).
10.29 Property Co-Tenancy
Ownership Agreement dated June 16, 1995
between the Partnership and Frank P. Scalzo
relating to the property at East Iliff
Avenue and Blackhawk Street, Aurora,
Colorado (incorporated by reference to
Exhibit 10.56 of Form 10-KSB filed with the
Commission on March 21, 1996).
10.30 Property Co-Tenancy
Ownership Agreement dated July 14, 1995
between the Partnership and Menzel Polzin
Partners relating to the property at 30
Crestview Hills Mall Road, Crestview Hills,
Kentucky (incorporated by reference to
Exhibit 10.58 of Form 10-KSB filed with the
Commission on March 21, 1996).
10.31 Property Co-Tenancy
Ownership Agreement dated September 28,
1995 between the Partnership and Patricia
S. Marshall relating to the property at
Terrace Walk Shopping Plaza, 56th Street
and Fowler Avenue, Temple Terrace, Florida
(incorporated by reference to Exhibit 10.61
of Form 10-KSB filed with the Commission on
March 21, 1996).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.32 Property Co-Tenancy
Ownership Agreement dated December 7, 1995
between the Partnership and The Joan Koller
Trust relating to the property at Terrace
Walk Shopping Plaza, 56th Street and Fowler
Avenue, Temple Terrace, Florida
(incorporated by reference to Exhibit 10.66
of Form 10-KSB filed with the Commission on
March 21, 1996).
10.33 Property Co-Tenancy
Ownership Agreement dated December 8, 1995
between the Partnership and The Joan Koller
Trust relating to the property at 30
Crestview Hills Mall Road, Crestview Hills,
Kentucky (incorporated by reference to
Exhibit 10.67 of Form 10-KSB filed with the
Commission on March 21, 1996).
10.34 Property Co-Tenancy
Ownership Agreement dated December 8, 1995
between the Partnership and The Nicoletta
Trust relating to the property at 30
Crestview Hills Mall Road, Crestview Hills,
Kentucky (incorporated by reference to
Exhibit 10.68 of Form 10-KSB filed with the
Commission on March 21, 1996).
10.35 Net Lease Agreement
dated August 2, 1995, between TKC X, LLC
and Garden Ridge, Inc. relating to the
property at 11415 Carolina Place Parkway,
Pineville, North Carolina (incorporated by
reference to Exhibit 10.1 of Form 8-K filed
with the Commission on April 10, 1996).
10.36 First Amendment to
Lease Agreement dated March 1, 1996 between
TKC X, LLC and Garden Ridge, L.P. relating
to the property at 11415 Carolina Place
Parkway, Pineville, North Carolina
(incorporated by reference to Exhibit 10.3
of Form 8-K filed with the Commission on
April 10, 1996).
10.37 Assignment and
Assumption of Lease dated March 28, 1996
between the Partnership, AEI Income &
Growth Fund XXI Limited Partnership, AEI
Net Lease Income & Growth Fund XX Limited
Partnership, and TKC X, LLC relating to the
property at 11415 Carolina Place Parkway,
Pineville, North Carolina (incorporated by
reference to Exhibit 10.4 of Form 8-K filed
with the Commission on April 10, 1996).
10.38 Property Co-Tenancy
Ownership Agreement dated April 5, 1996
between the Partnership, Larry Z. White and
Mary J. White relating to the property at
330 South Wilmot Road, Tucson, Arizona
(incorporated by reference to Exhibit 10.2
of Form 10-QSB filed with the Commission on
May 13, 1996).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.39 Property Co-Tenancy
Ownership Agreement dated April 26, 1996
between the Partnership and the
Gummersheimer Living Trust relating to the
property at 30 Crestview Hills Mall Road,
Crestview Hills, Kentucky (incorporated by
reference to Exhibit 10.4 of Form 10-QSB
filed with the Commission on May 13, 1996).
10.40 Property Co-Tenancy
Ownership Agreement dated May 15, 1996
between the Partnership and Marshall
Kilduff relating to the property at 30
Crestview Hills Mall Road, Crestview Hills,
Kentucky (incorporated by reference to
Exhibit 10.2 of Form 10-QSB filed with the
Commission on August 12, 1996).
10.41 Property Co-Tenancy
Ownership Agreement dated June 7, 1996
between the Partnership and Janet Y.
Thompson relating to the property at
Terrace Walk Shopping Plaza, 56th Street
and Fowler Avenue, Temple Terrace, Florida
(incorporated by reference to Exhibit 10.4
of Form 10-QSB filed with the Commission on
August 12, 1996).
10.42 Property Co-Tenancy
Ownership Agreement dated October 17, 1996
between the Partnership and Mark A. Benson
Living Trust relating to the property at 30
Crestview Hills Mall Road, Crestview Hills,
Kentucky (incorporated by reference to
Exhibit 10.2 of Form 10-QSB filed with the
Commission on November 14, 1996).
10.43 Property Co-Tenancy
Agreement dated November 15, 1996 between
the Partnership and Teresa E. and William
H. Balster relating to the property at
Terrace Walk Shopping Plaza, 56th Street
and Fowler Avenue, Temple Terrace, Florida
(incorporated by reference to Exhibit 10.91
of Form 10-KSB filed with the Commission on
March 26, 1997).
10.44 Property Co-Tenancy
Ownership Agreement dated January 2, 1997
between the Partnership and William E.
Mason and Hazel Mason relating to the
property at Terrace Walk Shopping Plaza,
56th Street and Fowler Avenue, Temple
Terrace, Florida (incorporated by reference
to Exhibit 10.93 of Form 10-KSB filed with
the Commission on March 26, 1997).
10.45 Promissory Note and
Construction Loan Agreement dated June 27,
1997 between the Partnership and Party City
of Atlanta, Inc. relating to the property
at 679 Dawsonville Highway, Gainesville,
Georgia (incorporated by reference to
Exhibit 10.1 of Form 10-QSB filed with the
Commission on August 5, 1997).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.46 Net Lease Agreement
dated December 18, 1997 between the
Partnership and Party City of Atlanta, Inc.
relating to the property at 679 Dawsonville
Highway, Gainesville, Georgia (incorporated
by reference to Exhibit 10.60 of Form 10-
KSB filed with the Commission on March 23,
1998).
10.47 Development Financing
Agreement dated December 23, 1997 between
the Partnership, AEI Real Estate Fund XV
Limited Partnership, AEI Real Estate Fund
XVIII Limited Partnership, AEI Real Estate
Fund XVII Limited Partnership and Champps
Entertainment, Inc. relating to the
property at 301 West Big Beaver Road, Troy,
Michigan (incorporated by reference to
Exhibit 10.61 of Form 10-KSB filed with the
Commission on March 23, 1998).
10.48 Net Lease Agreement
dated December 23, 1997 between the
Partnership, AEI Real Estate Fund XV
Limited Partnership, AEI Real Estate Fund
XVIII Limited Partnership, AEI Real Estate
Fund XVII Limited Partnership and Champps
Entertainment, Inc. relating to the
property at 301 West Big Beaver Road, Troy,
Michigan (incorporated by reference to
Exhibit 10.62 of Form 10-KSB filed with the
Commission on March 23, 1998).
10.49 Assignment of
Development Financing and Leasing
Commitment dated January 26, 1998 between
the Partnership and AEI Fund Management,
Inc. relating to the property at 1150 North
Bridge Street, Chillicothe, Ohio
(incorporated by reference to Exhibit 10.63
of Form 10-KSB filed with the Commission on
March 23, 1998).
10.50 Development Financing Agreement
dated April 13, 1998 between the
Partnership, AEI Real Estate Fund XVIII
Limited Partnership, Robert P. Johnson, and
Tumbleweed, LLC relating to the property at
1150 North Bridge Street, Chillicothe, Ohio
(incorporated by reference to Exhibit 10.1
of Form 10-QSB filed with the Commission on
May 12, 1998).
10.51 Net Lease Agreement dated April
13, 1998 between the Partnership, AEI Real
Estate Fund XVIII Limited Partnership,
Robert P. Johnson, and Tumbleweed, LLC
relating to the property at 1150 North
Bridge Street, Chillicothe, Ohio
(incorporated by reference to Exhibit 10.2
of Form 10-QSB filed with the Commission on
May 12, 1998).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.52 First Amendment to Net Lease
Agreement dated September 3, 1998 between
the Partnership, AEI Real Estate Fund XVII
Limited Partnership, AEI Real Estate Fund
XVIII Limited Partnership, AEI Real Estate
Fund XV Limited Partnership and Champps
Entertainment, Inc. relating to the
property at 301 West Big Beaver Road, Troy,
Michigan (incorporated by reference to
Exhibit 10.1 of Form 10-QSB filed with the
Commission on November 9, 1998).
10.53 First Amendment to Net
Lease Agreement dated November 20, 1998
between the Partnership, AEI Real Estate
Fund XVIII Limited Partnership, Robert P.
Johnson and Tumbleweed, LLC relating to the
property at 1150 North Bridge Street,
Chillicothe, Ohio.
10.54 Purchase Agreement for
Fee Simple Undivided Interest and
Assignment of Net Lease Agreement dated
December 28, 1998 between the Partnership
and AEI Real Estate Fund XVIII Limited
Partnership relating to the property at
6959 East Broad Street, Columbus, Ohio.
10.55 First Amendment to Net
Lease Agreement dated December 28, 1998
between the Partnership, AEI Real Estate
Fund XVIII Limited Partnership and
Tumbleweed, LLC relating to the property at
6959 East Broad Street, Columbus, Ohio.
27 Financial Data Schedule for
period ended December 31, 1998.
B. Reports on Form 8-K and 8-K/A None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AEI NET LEASE INCOME & GROWTH FUND XIX
Limited Partnership
By: AEI Fund Management XIX, Inc.
Its Managing General Partner
March 12, 1999 By: /s/ Robert P. Johnson
Robert P. Johnson, President and
Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Name Title Date
/s/ Robert P. Johnson President (Principal Executive Officer) March 12, 1999
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 12, 1999
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
FIRST AMENDMENT TO NET LEASE AGREEMENT
THIS AMENDMENT TO NET LEASE AGREEMENT, made and entered
into effective as of the 20th day of November, 1998, by and
between AEI Real Estate Fund XVIII Limited Partnership, a
Minnesota limited partnership whose corporate general partner is
AEI Fund Management XVIII, Inc., a Minnesota corporation ("Fund
XVIII"); 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 ("Fund XIX"); and Robert P. Johnson ("Johnson"), all
of whose principal business address is 1300 Minnesota World Trade
Center, 30 East Seventh Street, St. Paul, Minnesota 55101
(hereinafter collectively referred to as "Lessor"), and
Tumbleweed, LLC., a Kentucky limited liability company
(hereinafter referred to as "Lessee"), whose principal business
address is 1900 Mellwood Avenue, Louisville, Kentucky;
WITNESSETH:
WHEREAS, Lessor is the fee owner of a certain parcel of real
property and improvements located at Chillicothe, Ohio, and
legally described in Exhibit "A", which is attached hereto and
incorporated herein by reference; and
WHEREAS, Lessee has constructed the building and
improvements (together the "Building") on the real property
described in Exhibit "A", which Building is described in the
plans and specifications heretofore submitted to Lessor; and
WHEREAS, Lessee and Lessor have entered into that certain
Net Lease Agreement dated April 13, 1998 (the ALease@) providing
for the lease of said real property and Building (said real
property and Building hereinafter referred to as the "Leased
Premises"), from Lessor upon the terms and conditions therein
provided in the Lease;
NOW, THEREFORE, in consideration of the Rents, terms,
covenants, conditions, and agreements hereinafter described to be
paid, kept, and performed by Lessee, including the completion of
the Building and other improvements constituting the Leased
Premises, Lessee and Lessor do hereby agree to amend the Lease as
follows:
1. Article 2(A) and (B) of the Lease shall henceforth read as
follows:
ARTICLE 2. TERM
(A) The term of this Lease ("Term") shall be Fifteen (15)
consecutive "Lease Years", as hereinafter defined, commencing
November 20th, 1998, plus the period commencing April 13, 1998
("Occupancy Date") through November 20th, with the contemplated
initial term hereof ending on November 30, 2013.
(B) The first full Lease Year shall commence on the date of
this First Amendment and continue through November 30, 1999.
2. Article 4(A) of the Lease shall henceforth read as follows:
ARTICLE 4. RENT PAYMENTS
(A) Annual Rent Payable for the first and second Lease
Years: Lessee shall pay to Lessor an annual Base Rent of
$127,363.93, which amount shall be payable in advance on the
first day of each month in equal monthly installments of $4776.15
to Fund XVIII, $4,245.46 to Fund XIX, and $ 1,592.05 to Robert
P. Johnson. If the first day of the Lease Term is not the first
day of a calendar month, then the monthly Rent payable for that
partial month shall be a prorated portion of the equal monthly
installment of Base Rent.
Article 35 is hereby deleted in its entirety; Lessor and Lessee
agree that the referenced Development Financing Agreement is
terminated in accordance with its terms. All other terms and
conditions of the Lease shall remain in full force and effect.
Lessee has accepted delivery of the Leased Premises and has
entered into occupancy thereof;
Lessee has fully inspected the Premises and found the same to be
as required by the Lease, in good order and repair, and all
conditions under the Lease to be performed by the Lessor have
been satisfied;
As of this date, the Lessor is not in default under any of the
terms, conditions, provisions or agreements of the Lease and the
undersigned has no offsets, claims or defenses against the Lessor
with respect to the Lease.
This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee have respectively signed
and sealed this Lease as of the day and year first above written.
LESSEE: Tumbleweed, LLC.,
By:/s/ James Mulrooney
Its:EVP & CFO
Witness
/s/ Kristen Sipes
Kristen Sipes
Print Name
Witness
/s/ Tami Embry
Tami Embry
Print Name
STATE OF KENTUCKY )
)SS.
COUNTY OF JEFFERSON)
The foregoing instrument was acknowledged before me this
16th day of November, 1998, by James M Mulrooney, as Exec VP &
CFO of Tumbleweed, LLC, on behalf of said limited liability
company.
/s/ Donna Sanders
Notary Public
[notary seal]
[Remainder of page intentionally left blank]
LESSOR:
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
By: AEI Fund Management XVIII, Inc.
Witness
/s/ Thomas E Lehmann By:/s/ Robert P Johnson
Thomas E Lehmann Robert P. Johnson, President
Print Name
Witness
/s/ Daniel G Happee
Daniel G Happee
Print Name
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the 20th
day of November, 1998, by Robert P Johnson, the President of AEI
Fund Management XVIII, Inc., a Minnesota corporation, corporate
general partner of AEI Real Estate Fund XVIII Limited
Partnership, on behalf of said limited partnership.
/s/ Barbra J Kochevar
Notary Public
[notary seal]
[Remainder of page intentionally left blank]
AEI NET LEASE INCOME & GROWTH FUND XIX
LIMITED PARTNERSHIP
By: AEI Fund Management XIX, Inc.
Witness
/s/ Thomas E Lehmann By: /s/ Robert P Johnson
Thomas E Lehmann Robert P. Johnson, President
Print Name
Witness
/s/ Daniel G Happee
Daniel G Happee
Print Name
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the 20th
day of November, 1998, by Robert P Johnson, the President of AEI
Fund Management XIX, Inc., a Minnesota corporation, corporate
general partner of AEI Real Estate Fund XIX Limited Partnership,
on behalf of said limited partnership.
/s/ Barbara J Kochevar
Notary Public
[notary seal]
[Remainder of page intentionally left blank]
ROBERT P. JOHNSON, INDIVIDUALLY
Witness
/s/ Thomas E Lehmann By:/s/ Robert P Johnson
Thomas E Lehmann Robert P. Johnson
Print Name
Witness
/s/ Daniel G Happee
Daniel G Happee
Print Name
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the 20th
day of November, 1998, by Robert P. Johnson.
/s/ Barbara J Kochevar
Notary Public
[notary seal]
Exhibit "A"
1150 North Bridge Street, Chillicothe, Ohio
Situate in the City of Chillicothe, County of Ross, State of
Ohio, being part of the 15.983 acre tract conveyed to The ABCO
Land Development Corp. And the The Beerman Corporation (Deed Vol.
534 Page 800 Ross County Deed Records), bounded and described as
follows:
Beginning at an iron pin set in the west R/W line of North Bridge
Street (aka State Route 159 and Business Loop U.S. Route 23),
said iron pin being the northeast corner of the 0.723 acre tract
leased to RTM Operating Company, a Delaware Corporation (O.R.
Vol. 77 Page 0691) (Arby's Restaurant);
thence with the north line of said 0.723 acre tract, N 86 deg.
23' 40" W. 150.77 ft. to a Mag-Nail
thence with new lines through the tract of which this is a part
the following (2) courses,
1. N. 03 deg. 36' 20" E. 200.00 ft. to a Mag-Nail set and
2. S. 86 deg. 23' 40" E. 152.29 ft. to a Mag-Nail set;
thence with the west R/W line of North Bridge Street and with the
east line of the tract of which this is a part, S. 04 deg. 02'
25" W. 200.01 ft. to the point of beginning, containing 0.696
acres, subject to all easements and rights-of-way of record
pertinent to this tract.
PURCHASE AGREEMENT FOR FEE SIMPLE UNDIVIDED INTEREST AND
ASSIGNMENT
OF
NET LEASE AGREEMENT
THIS ASSIGNMENT made and entered into this 28th day of
December, 1998, by and between AEI REAL ESTATE FUND XVIII
LIMITED PARTNERSHIP, a Minnesota Limited Partnership,
("Assignor") and AEI NET LEASE INCOME & GROWTH FUND XIX
LIMITED PARTNERSHIP, a Minnesota limited partnership,
("Assignee");
WITNESSETH, that:
WHEREAS, on the 28th day of December, 1998, Assignor
entered into Commitment, Net Lease Agreement, ("the
Agreements") for that certain property located at 6959 East
Broad Street, Columbus, OH (the "Property") with Tumbleweed,
LLC, as Seller/Lessee; and
WHEREAS, Assignor desires to assign an undivided
interest of its rights, title and interest in, to and under
the Agreement and as to the fee simple interest in the
Leased Premises to the Assignees as hereinafter provided;
AEI NET LEASE INCOME & GROWTH FUND XIX
LIMITED PARTNERSHIP 60.00%
undivided interest as tenant in common
NOW, THEREFORE, for One Dollar ($1.00) and other good
and valuable consideration, receipt of which is hereby
acknowledged, it is hereby agreed between the parties as
follows:
1. Assignor maintains as tenant in common a forty
percent (40.00%) right, title and interest in, to and
under the Agreements and in the fee simple interest in
the Leased Premises, to have and to hold the same unto
its successors and assigns;
2. Assignor assigns all of its rights, title and
interest in, to and under the Agreements and in the fee
simple interest in the Leased Premises to the Assignee
as noted above, to have and to hold the same unto the
Assignee, its successors and assigns;
3. Assignee hereby assumes all rights, promises,
covenants, conditions and obligations under the
Agreements to be performed by the Assignor thereunder,
and agrees to be bound for all of the obligations of
Assignor under the Agreements from this day forward.
4. The Purchase Price paid by the Assignees
designated herein is equal to the prorata share of the
amounts funded as of the date of this Agreement.
All other terms and conditions of the Agreements shall
remain unchanged and continue in full force and effect.
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
("Assignor")
BY: AEI FUND MANAGEMENT XVIII, INC.
By: /s/ Robert P Johnson
Robert P. Johnson, its President
AEI NET LEASE INCOME & GROWTH FUND XIX
LIMITED PARTNERSHIP ("Assignee")
BY: AEI FUND MANAGEMENT XIX, INC.
By: /s/ Robert P Johnson
Robert P. Johnson, its President
FIRST AMENDMENT TO NET LEASE AGREEMENT
THIS AMENDMENT TO NET LEASE AGREEMENT, made and entered into
effective as of the 28th day of December, 1998, by and between
AEI Real Estate Fund XVIII Limited Partnership, a Minnesota
limited partnership whose corporate general partner is AEI Fund
Management XVIII, Inc., a Minnesota corporation ("Fund XVIII"),
and AEI Net Lease Income & Growth Fund XIX Limited Partnership,
whose corporate general partner is AEI Fund Management XIX, Inc.,
a Minnesota corporation ("Fund XIX"), both of whose principal
business address is 1300 Minnesota World Trade Center, 30 East
Seventh Street, St. Paul, Minnesota 55101 (hereinafter
collectively referred to as "Lessor"), and Tumbleweed, LLC., a
Kentucky limited liability company (hereinafter referred to as
"Lessee"), whose principal business address is 1900 Mellwood
Avenue, Louisville, Kentucky;
WITNESSETH:
WHEREAS, Lessor is the fee owner of a certain parcel of real
property and improvements located at East Broad Street, Columbus,
Ohio, and legally described in Exhibit "A", which is attached
hereto and incorporated herein by reference; and
WHEREAS, Lessee has constructed the building and improvements
(together the "Building") on the real property described in
Exhibit "A", which Building is described in the plans and
specifications heretofore submitted to Lessor; and
WHEREAS, Lessee and Lessor Fund XVIII have entered into that
certain Net Lease Agreement dated May 1, 1998 (the ALease@)
providing for the lease of said real property and Building (said
real property and Building hereinafter referred to as the "Leased
Premises"), from Lessor upon the terms and conditions therein
provided in the Lease;
WHEREAS, Lessor Fund XVIII has sold an undivided 60% interest as
a Tenant in Common in the Leased Premises and the Lease to Fund
XIX;
NOW, THEREFORE, in consideration of the Rents, terms, covenants,
conditions, and agreements hereinafter described to be paid,
kept, and performed by Lessee, including the completion of the
Building and other improvements constituting the Leased Premises,
Lessee and Lessor do hereby agree to amend the Lease as follows:
1. Article 2(A) and (B) of the Lease shall henceforth read as
follows:
ARTICLE 2. TERM
(A) The term of this Lease ("Term") shall be Fifteen (15)
consecutive "Lease Years", as hereinafter defined, commencing
December 28th, 1998, plus the period commencing May 1, 1998
("Occupancy Date") through December, 28th, with the contemplated
initial term hereof ending on December 30, 2013.
(B) The first full Lease Year shall commence on the date of this
First Amendment and continue through December 30, 1999.
2. Article 4(A) of the Lease shall henceforth read as follows:
ARTICLE 4. RENT PAYMENTS
(A) Annual Rent Payable for the first and second Lease Years:
Lessee shall pay to Lessor an annual Base Rent of $138,503.13,
which amount shall be payable in advance on the first day of each
month in equal monthly installments of $4,616.77 to Fund XVIII
and of $6,925.16 to Fund XIX. If the first day of the Lease Term
is not the first day of a calendar month, then the monthly Rent
payable for that partial month shall be a prorated portion of the
equal monthly installment of Base Rent.
Article 35 is hereby deleted in its entirety; Lessor and Lessee
agree that the referenced Development Financing Agreement is
terminated in accordance with its terms. All other terms and
conditions of the Lease shall remain in full force and effect.
Lessee has accepted delivery of the Leased Premises and has
entered into occupancy thereof;
Lessee has fully inspected the Premises and found the same to be
as required by the Lease, in good order and repair, and all
conditions under the Lease to be performed by the Lessor have
been satisfied;
As of this date, the Lessor is not in default under any of the
terms, conditions, provisions or agreements of the Lease and the
undersigned has no offsets, claims or defenses against the Lessor
with respect to the Lease.
This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee have respectively signed
and sealed this Lease as of the day and year first above written.
LESSEE: Tumbleweed, LLC.,
By: /s/ James Mulrooney
Its: Executive Vice President & CFO
Witness
/s/ Tracy Abner
Tracy Abner
Print Name
Witness
/s/ Lisa Hale
Lisa Hale
Print Name
STATE OF KENTUCKY )
)SS.
COUNTY OF JEFFERSON )
The foregoing instrument was acknowledged before me this 23rd day
of December, 1998, by James Mulrooney, as Exec VP & CFO of
Tumbleweed, LLC, on behalf of said limited liability company.
/s/ Donna Sanders
Notary Public
/s/ my commission
expires 6-29-2000
[Remainder of page intentionally left blank]
LESSOR:
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
By: AEI Fund Management XVIII, Inc.
Witness
/s/ Daniel G Happe By: /s/ Robert P Johnson
Daniel G Happe Robert P. Johnson, President
Print Name
Witness
/s/ Rick J Vitale
Rick J Vitale
Print Name
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the 28th day
of December, 1998, by Robert P Johnson, the President of AEI Fund
Management XVIII, Inc., a Minnesota corporation, corporate
general partner of AEI Real Estate Fund XVIII Limited
Partnership, on behalf of said limited partnership.
/s/ Stacey R.E. Jones
Notary Public
[notary seal]
LEASE AMENDMENT, TUMBLEWEED, COLUMBUS, OHIO
[Remainder of page intentionally left blank]
LESSOR:
AEI NET LEASE INCOME & GROWTH FUND XIX
LIMITED PARTNERSHIP
By: AEI Fund Management XIX, Inc.
Witness
/s/ Daniel G Happe By:/s/ Robert P Johnson
Daniel G Happe Robert P. Johnson, President
Print Name
Witness
/s/ Rick J Vitale
Rick J Vitale
Print Name
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the 28th day
of December, 1998, by Robert P Johnson, the President of AEI Fund
Management XIX, Inc., a Minnesota corporation, corporate general
partner of AEI Net Lease Income & Growth Fund XIX Limited
Partnership, on behalf of said limited partnership.
/s/ Stacey R. E. Jones
Notary Public
[notary seal]
LEASE AMENDMENT, TUMBLEWEED, COLUMBUS, OHIO
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<NAME> AEI NET LEASE INCOME & GROWTH FUND XIX LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
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<RECEIVABLES> 27,722
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0
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