UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-25436
AAA NET REALTY FUND X, LTD.
NEBRASKA LIMITED PARTNERSHIP IRS IDENTIFICATION NO.
76-0381949
8 GREENWAY PLAZA, SUITE 824 HOUSTON, TX 77046
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. X Yes _____ No
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
H (1) (a) AND (b) OF FORM 10-Q AND IS, THEREFORE, FILING THIS FORM WITH THE
REDUCED DISCLOSURE FORMAT.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
MARCH 31, DECEMBER 31,
1996 1995
(Unaudited)
ASSETS
CASH & CASH EQUIVALENTS $ 814,353 $ 824,805
ACCOUNTS RECEIVABLE 28,873 14,780
PROPERTY:
Land 2,566,250 2,566,250
Building 5,370,984 5,370,984
7,937,234 7,937,234
Accumulated depreciation (292,445) (255,950)
TOTAL PROPERTY 7,644,789 7,681,284
NET INVESTMENT IN DIRECT FINANCING LEASE 614,663 615,410
INVESTMENT IN JOINT VENTURE 722,283 724,549
OTHER ASSETS:
Acquisition costs 23,284 23,231
Organization costs, net of accumulated
amortization of $137,245 and $152,245
respectively 132,755 147,755
Accrued rental income 45,199 37,230
TOTAL OTHER ASSETS 201,238 208,216
TOTAL ASSETS 10,026,199 10,069,044
LIABILITIES & PARTNERSHIP EQUITY
LIABILITIES:
Accounts payable 19,459 8,445
Security deposits 12,000 12,000
TOTAL LIABILITIES 31,459 20,445
PARTNERSHIP EQUITY:
General partners 7,897 7,333
Limited partners 9,986,843 10,041,266
TOTAL PARTNERSHIP EQUITY 9,994,740 10,048,599
TOTAL LIABILITIES & PARTNERSHIP EQUITY $ 10,026,199 $ 10,069,044
See Notes to Financial Statments.
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
REVENUES
Rental income from operating
leases $ 215,504 $ 203,697
Earned income from direct
financing lease 14,739 14,812
Interest income 9,235 15,193
Equity income from investment
in joint venture 16,985 15,954
TOTAL REVENUES 256,463 249,656
EXPENSES
Accounting 6,774 3,917
Administrative expenses 16,179 11,205
Amortization 15,000 15,000
Bank charges 25 0
Depreciation 36,494 35,029
Filing fees 265 265
Legal & professional fees 5,081 2,069
Printing 140 901
Other 92 135
TOTAL EXPENSES 80,050 68,521
NET INCOME $ 176,413 $ 181,135
ALLOCATION OF NET INCOME
General partners $ 1,764 $ 1,811
Limited partners 174,649 179,324
$ 176,413 $ 181,135
NET INCOME PER UNIT $ 15.40 $ 15.81
UNITS OUTSTANDING 11,454 11,454
See Notes to Financial Statements.
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENT OF PARTNERSHIP EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
PARTNERSHIP EQUITY AT DECEMBER 31, 1995 $ 7,333 $10,041,266 $10,048,599
NET INCOME 1,764 174,649 176,413
DISTRIBUTIONS (1,200) (229,072) (230,272)
PARTNERSHIP EQUITY AT MARCH 31, 1996 $ 7,897 $ 9,986,843 $ 9,994,740
See Notes to Financial Statements.
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(Unaudited)
1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 176,413 $ 181,135
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 36,494 35,029
Amortization 15,000 15,000
(Increase) decrease in accounts receivable (14,093) 1,608
Increase (decrease) in accounts payable 11,014 (3,170)
Increase in security deposits 0 12,000
Decrease in escrow deposits 0 50,000
Cash received from direct financing lease
in excess of income recognized 747 674
Investment in joint venture:
Equity income (16,985) (15,954)
Distributions received 16,985 15,954
Increase in accrued rental income (7,969) (2,755)
NET CASH FLOWS FROM OPERATING
ACTIVITIES 217,606 289,521
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate:
Accounted for under the equity method 0 (1,477,390)
Acquisition costs (53) 60,864
Joint venture distributions in excess of income 2,267 3,298
NET CASH FLOWS FROM INVESTING
ACTIVITIES 2,214 (1,413,228)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (230,272) (207,065)
NET CASH FLOWS FROM FINANCING
ACTIVITIES (230,272) (207,065)
NET DECREASE IN CASH
AND CASH EQUIVALENTS (10,452) (1,330,772)
CASH and CASH EQUIVALENTS at beginning
of period 824,805 2,160,564
CASH and CASH EQUIVALENTS at end of
period $ 814,353 $ 829,792
See Notes to Financial Statements.
AAA NET REALTY FUND X, LTD
( A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AAA Net Realty Fund X, Ltd. ("the Partnership"), is a
limited partnership formed April 15, 1992, under the laws of the
State of Nebraska. American Asset Advisers Management
Corporation X (a Nebraska corporation) is the managing general
partner and H. Kerr Taylor is the individual general partner.
The offering period for subscriptions terminated September 1,
1994 with a total of 11,453.61 units having been subscribed at an
offering price of $1,000 per unit.
The Partnership was formed to acquire commercial properties
for cash. The Partnership will own, lease, operate, manage and
eventually sell the properties. The selection, acquisition, and
supervision of the operations of the properties is managed by
American Asset Advisers Realty Corporation ("AAA"), a related
party.
The financial records of the Partnership are maintained on
the accrual basis of accounting whereby revenues are recognized
when earned and expenses are reflected when incurred. Rental
income is recorded ratably over the life of the lease.
For purposes of the statement of cash flows the Partnership
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. There
has been no cash paid for income taxes or interest during 1996 or
1995.
Real estate is leased to others on a net lease basis
whereby all operating expenses related to the properties
including property taxes, insurance and common area maintenance
are the responsibility of the tenant. The leases are accounted
for under the operating method or the direct financing method.
Under the operating method, the properties are recorded at
cost. Rental income is recognized ratably over the life of the
lease and depreciation is charged as incurred.
Under the direct financing method, the properties are
recorded at their net investment. Unearned income is deferred
and amortized to income over the life of the lease so as to
produce a constant periodic rate of return.
The Partnership's interests in joint venture investments
are accounted for under the equity method whereby the
Partnership's investment is increased or decreased by its share
of earnings or losses in the joint venture and also decreased by
any distributions.
Organization costs are amortized on a straight line basis
over five years.
Syndication costs are reflected as a reduction of
partnership equity.
All income and expense items flow through to the partners
for tax purposes. Consequently, no provision for federal or
state income taxes is provided in the accompanying financial
statements.
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-Q and do
not include all of the disclosures required by generally
accepted accounting principles. The financial statements reflect
all normal and recurring adjustments which are, in the opinion of
management, necessary to present a fair statement of results for
the three month periods ended March 31, 1996 and 1995.
The financial statements of AAA Net Realty Fund X, Ltd.
contained herein should be read in conjunction with the financial
statements included in the Partnership's annual report on Form
10-K for the year ended December 31, 1995.
2. PARTNERSHIP EQUITY
The managing general partner, American Asset Advisers
Management Corporation X, and the individual general partner, H.
Kerr Taylor, have made capital contributions in the amounts
of $990 and $10, respectively. The general partners shall not be
obligated to make any other contributions to the Partnership,
except that, in the event that the general partners have
negative balances in their capital accounts after dissolution and
winding up of, or withdrawal from, the Partnership, the general
partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital accounts
or 1.01% of the total capital contributions of the limited
partners' over the amount previously contributed by the general
partners.
3. RELATED PARTY TRANSACTIONS
The Partnership Agreement provides for the reimbursement
for administrative services necessary for the prudent operation
of the Partnership and its assets with the exception that no
reimbursement is permitted for rent, utilities, capital
equipment, salaries, fringe benefits or travel expenses allocated
to the individual general partner or to any controlling persons
of the managing general partner. In connection therewith, 16,179
and $11,205 were incurred and paid to AAA for the three months
ended March 31, 1996 and 1995, respectively.
On April 5, 1996, the Partnership entered into a joint
venture with American Asset Advisers Trust, Inc. and AAA Net
Realty Fund XI, Ltd., affiliates of the Partnership. The
Partnership's interest in the joint venture is 18.25%.
4. MAJOR LESSEES
The following schedule summarizes total rental income by lessee
for the three months ended March 31, 1996 under both operating
and direct financing leases:
Golden Corral Corporation $43,241
TGI Friday's, Inc. $45,126
Goodyear Tire & Rubber Company $13,227
Tandy Corporation $64,155
America's Favorite Chicken Company $24,364
One Care Health Industries, Inc. $40,130
5. CONTINGENCY
The Partnership had determined that, beginning on December 1,
1993, it inadvertantly failed to update its then outstanding
prospectus with current information as required by Section
10(a)(3) of the Securities Act of 1933 as amended (the "33 Act")
and by the standard undertakings made by the Partnership in its
amended registration statement filed pursuant to the 33 Act.
However, the Partnership did publicly disclose such information
in its Form 8-K and 10-Q filings with the Securities and Exchange
Commission.
As a result of the above information, the Partnership has been
advised that it has a contingent liability to investors for
recission rights or damages which, at a maximum, would not exceed
approximately $5.5 million. Management anticipates that
recissions, if any, will not be material.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
AAA Net Realty Fund X, Ltd., a Nebraska limited partnership, was
formed April 15, 1992. The offering for 20,000 units was
effective September 17, 1992. The offering period for
subscriptions terminated September 1, 1994 with a total of
11,453.61 units having been subscribed at $1,000 per unit. In
addition, the general partners had previously made contributions
of $1,000.
LIQUIDITY AND CAPITAL RESOURCES
On April 5, 1996, the Partnership entered into a joint venture
with two affiliated entities for the purpose of acquiring a
property which will be operated as a Just For Feet retail store.
The Partnership's interest in the joint venture is 18.25% and the
Partnership's share of the acquisition costs for the property
will approximate $602,950 plus $23,231 in acquisition fees paid to
affiliates. This property is under construction with an
estimated completion date of September 1996. This is the final
property to be acquired by the Partnership from the funds raised
through the offering. The resulting use of Partnership funds
will result in an increase in the Partnership's rental income and
a decrease in interest income once the property has been
acquired.
The Partnership had determined that, beginning on December 1,
1993, it inadvertantly failed to update its then outstanding
prospectus with current information as required by Section
10(a)(3) of the Securities Act of 1933 as amended (the "33 Act")
and by the standard undertakings made by the Partnership in its
amended registration statement filed pursuant to the 33 Act.
However, the Partnership did publicly disclose such information
in its Form 8-K and 10-Q filings with the Securities and Exchange
Commission.
As a result of the above information, the Partnership has been
advised that it has a contingent liability to investors for
recission rights or damages which, at a maximum, would not exceed
approximately $5.5 million. Management anticipates that
recissions, if any, will not be material.
RESULTS OF OPERATIONS
For the three months ended March 31, 1996, revenues totaled
$256,463 which included $247,228 from real estate operations and
$9,235 of interest income. Revenues for the first quarter
increased $6,807 from those of the first quarter of 1995 which
was attributable to a $12,765 increase in rental income offset by
a $5,958 decline in interest income. The Partnership owned seven
properties for the entire first quarter of 1996 while six
properties were owned for the entire first quarter of 1995 and
the seventh property was acquired during the first quarter of
1995. Expenses increased in the first quarter of 1996 to $80,050
compared to $68,521 for the first quarter of 1995 primarily from
increased professional fees and administrative fees. The
Partnership recorded $176,413 of net income for the first quarter
of 1996.
For the three months ended March 31, 1995, revenues totaled $249,
656 which included $234,463 from real estate operations and
$15,193 of interest income. Real estate income was earned from
six properties which were owned at the beginning of 1995 and a
seventh property which was acquired in January 1995. This
represented a 130% increase over the first quarter of 1994 when
the Partnership owned two properties. The Partnership's net
income also increased from $68,306 to $181,135 for the same
reasons.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
Form 8-K was filed on April 18, 1996 to report the acquisition of
a property through a joint venture with two affiliates which will
be operated as a Just For Feet retail store upon completion of
construction of the property.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AAA Net Realty Fund X, Ltd.
(Registrant)
May 15, 1996 H. Kerr Taylor
Date H. Kerr Taylor, President of
General Partner
May 15, 1996 H. Kerr Taylor
Date H. Kerr Taylor, Chief Financial
Officer of General Partner
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