UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 0-25436
AAA NET REALTY FUND X, LTD.
(Name of small business issuer in its charter)
Nebraska 76-0381949
(State or other jurisdiction of I.R.S. Employer or Identification No.)
Incorporation or organization)
8 Greenway Plaza, Suite 824
Houston, Texas 77046
(Address of principle executive offices) (Zip Code)
Issuer's telephone number, including area code (713) 850-1400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Units of Limited Partnership Interest
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of the issuer'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
Issuer's revenues for its most recent fiscal year: $1,076,576
DOCUMENTS INCORPORATED BY REFERENCE
The Prospectus of Issuer dated September 17, 1992 (included in Registration
Statement No. 33-47638 of Issuer) and as supplemented October 8, 1992, October
29, 1992, November 5, 1992, January 28, 1993, June 15, 1993, September 15, 1993
and February 15, 1994 is incorporated by reference into Part III.
<PAGE>
PART I
Item 1. Business
AAA Net Realty Fund X, Ltd. (the "Issuer" or the "Partnership") was formed in
1992 and is engaged in the business of acquiring, operating and holding real
properties for investment. The Partnership was organized to acquire existing
real estate income-producing properties as well as land upon which such
income-producing properties are to be constructed ("the properties"), and to be
leased to corporations. The properties will not be leased to franchisees of such
corporations (unless a tenant corporation was to fail and in such event a
release may involve a franchisee lessee). American Asset Advisers Management
Corporation X (a Nebraska corporation) is the Managing General Partner and H.
Kerr Taylor is the Individual General Partner.
The Partnership acquired two properties in 1993, four properties in 1994, one
property in 1995 and one property in 1996. Six of the properties were purchased
directly and two through joint ventures at a total price of $9,951,546 including
acquisition fees and certain acquisition expenses. Generally, the Partnership
leases properties on a "net lease" basis to corporations having a net worth at
the time of acquisition in excess of $40 million.
A further description of the Partnership's business is included in Management's
Discussion and Analysis of Financial Condition and Results of Operations
included as Item 6 of this Form 10-KSB.
The Objectives of the Partnership are:
(1) to preserve and protect the limited partners' original capital
contributions by the free and clear "all cash" acquisition of
income-producing improved real estate properties;
(2) to produce long-term gains through appreciation of the Partnership's
properties;
(3) to provide the limited partners with quarterly cash distributions;
(4) to realize certain limited tax benefits, principally through depreciation
deductions so that taxable income of the partnership will be offset to
some extent by deductible items, with the result that investors may
receive distributions generated from the Partnership's operation with a
reduced income tax liability associated with the distribution of income.
There can be no assurance that such objectives can be attained. It is not an
objective of the Partnership to shelter taxable income of investors that is
derived from sources other than the Partnership.
Properties
As of December 31, 1998, the Partnership owned eight properties all in fee
simple. Four of these properties are located in Texas and one each in Arizona,
Georgia, Minnesota and Missouri.
Although the specific terms of each lease vary, a summary of the terms of the
leases are as follows:
The primary term of the leases ranges from ten to twenty years. Four of the
leases also provide for two to four five-year renewal options. The leases are
all "triple-net" leases whereby the tenants are responsible for the property
taxes, insurance and operating costs. Annual rental income ranges from $52,908
to $256,620. All of the leases provide for either percentage rents based on
sales in excess of certain amounts, periodic escalations in the annual rental
rates or both.
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During 1998, four of the Partnership's leases each contributed more than 15% of
the Partnership's total rental income. Summarized as follows are the significant
items pertaining to each of these leases:
<TABLE>
<CAPTION>
Golden Corral TGI Friday's Tandy One Care Health
Corporation Inc. Corporation Industries, Inc.
----------- ---- ----------- ----------------
<S> <C> <C> <C> <C>
Lease Term 15 Years 10 Years 15 Years 10 Years
Expiration Date of Primary Term March 2008 January 2003 August 2009 January 2005
Renewal Options N/A N/A N/A 2 terms of 5
years each
Square Footage of Improvements 11,414 8,500 15,000 14,760
Base Annual Rental $ 172,956 $ 180,500 $ 256,620 $ 161,154
All of the Partnership's leases specify a minimum amount of insurance coverage
required to be carried by each tenant. Management of the Partnership believes
that the insurance policies required to be carried by the tenants will
adequately cover the replacement cost of the properties and any personal
liability losses which the tenants may sustain.
Property Management
Prior to June 5, 1998, the supervision of the operations of the properties was
managed by American Asset Advisers Realty Corporation, ("AAA"), a related party.
Beginning June 5, 1998, the supervision of the operations of the properties is
managed by AmREIT Realty Investment Corporation, ("ARIC"), a related party. Such
management includes providing leasing services in connection with identifying
and qualifying prospective tenants, assisting in the negotiation of the leases,
providing quarterly financial statements, receiving and depositing monthly lease
payments, periodic verification of tenants' payments of real estate taxes and
insurance coverage, and periodic inspection of properties and tenants' sales
records where applicable. The Managing General Partner or such affiliates are
reimbursed for administrative services at cost. The tenants are responsible, at
their expense, for day-to-day on-site management and maintenance of the
properties.
Financing - Borrowing Policies - No Leverage
The General Partners expect that the Partnership will incur no indebtedness in
connection with the operation of the properties. However, in the exercise of
their fiduciary duties, the General Partners may elect to borrow funds on behalf
of the Partnership, but only if necessary in their judgment to avoid what would
otherwise be substantial adverse consequences to the Partnership. All properties
will be acquired on a debt-free basis. The Partnership will not issue any senior
securities nor will it invest in junior mortgages, junior deeds of trust or
similar obligations.
Sale of Properties
The General Partners expect that most of the properties will be sold six to
twelve years after acquisition. The determination of whether a particular
property should be sold or otherwise disposed of will be made after
consideration of performance of the property and market conditions and will
depend, in part, on the economic benefits of continued ownership. In deciding
whether to sell properties, the General Partners will consider factors such as
potential capital appreciation, cash flow and federal income tax consequences.
The General Partners or their affiliates may perform various substantial real
estate brokerage functions in connection with the sale of properties by the
Partnership.
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Competitive Conditions
The properties owned by the Partnership are leased to fast-food and family-style
restaurants, retail businesses and a medical facility. These businesses face
competition from similar establishments within the surrounding areas.
At the time a property is sold or otherwise disposed of, the Partnership will be
in competition with others who are also seeking buyers for their properties.
Employees
The overall management decisions of the Partnership are made by the Managing
General Partner, American Asset Advisers Management Corporation X, which
delegates certain day to day functions to the officers of ARIC, consultants and
employees of ARIC. The Partnership itself has no employees.
Item 2. Properties
As of March 31, 1999, the Partnership owned eight properties in fee simple, six
directly and two through joint ventures with affiliated entities. The properties
are located in Texas, Arizona, Georgia, Minnesota and Missouri. They are
operated as retail stores, as restaurants and as a medical facility.
Land - The Partnership's Property sites range from approximately 34,000 to
125,000 square feet depending upon building size and local demographic factors.
Sites purchased by the Partnership are in high traffic corridors and have been
reviewed for traffic and demographic pattern and history.
Buildings - The buildings are all single tenant and are generally rectangular.
They are positioned for good exposure to traffic flows and are constructed from
various combinations of stucco, steel, wood, brick and tile. Buildings range
from approximately 2,300 to 15,000 square feet. Buildings are suitable for
possible conversion to other uses, although modifications may be required prior
to use for other operations. There are no plans for renovation or improvements.
Leases - Tenants are companies whose net worth exceeds a minimum of $40 million.
Tenants are diversified by business type and are represented by the following
types of business: automotive, consumer electronics, consumer entertainment,
consumer retail, full service restaurants, fast food restaurants and medical
facilities.
Geographic Location - The properties are located within major metropolitan areas
with populations that exceed 250,000.
A total of $9,980,107 has been invested in properties as of December 31, 1998,
for the Partnership. This includes land, building and acquisition costs. A
further description of the Partnership properties is included in Item 1 and in
Schedule III-Real Estate Owned and Accumulated Depreciation of this Form 10-KSB.
Item 3. Legal Proceedings
The Partnership does not have any material legal proceedings pending.
Item 4. Submission of Matters to a Vote of Security Holders
During the fiscal year ended December 31, 1998, no matter was submitted to a
vote of security holders through the solicitation of proxies or otherwise.
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PART II
Item 5. Market for the Issuer's Common Equity and Related Stockholder Matters
As of March 31, 1999, 720 limited partners had subscribed for 11,453.61 Units.
No established public trading market currently exists for the Units.
For the years ended December 31, 1998 and 1997 the Partnership paid cash
distributions to the Limited Partners (LPs) in the amount of $927,972 and
$923,254, respectively. The General Partners (GPs) received distributions of
$5,400 and $4,450, respectively. The distributions were paid entirely from the
operating profits of the Partnership.
A summary of the distributions by quarter is as follows:
1998 1997
Quarter ---- ----
Ended GPs LPs GPs LPs
----- --- --- --- ---
March 31 $ 1,750 $ 231,592 $ 900 $ 230,218
June 30 $ 1,050 $ 231,821 $ 1,450 $ 230,561
September 30 $ 1,550 $ 232,165 $ 1,050 $ 230,997
December 31 $ 1,050 $ 232,394 $ 1,050 $ 231,478
The Partnership intends to continue the payment of quarterly distributions.
There are currently no material legal restrictions that would limit the
Partnership's ability to pay distributions.
Item 6. Management's Discussion and Analysis of the Partnerships Financial
Condition and Results of Operations.
The Partnership was organized on April 15, 1992, to acquire, on a debt-free
basis, existing and newly constructed commercial properties located in the
continental United States and particularly in the Southwest, to lease these
properties to tenants under generally "triple net" leases, to hold the
properties with the expectation of equity appreciation and eventually to resell
the properties.
The Partnership's overall investment objectives are to acquire properties that
offer investors the potential for (i) preservation and protection of the
Partnership's capital; (ii) partially tax-deferred cash distributions from
operations; and (iii) long-term capital gains through appreciation in value of
the Partnership's properties realized upon sale.
LIQUIDITY AND CAPITAL RESOURCES
On September 17, 1992, the Partnership commenced an offering to the public of up
to $20,000,000 (20,000 Units) of limited partnership units. The proceeds of the
offering, rental income from the Partnership's properties and interest income
are the Partnership's source of capital. The Partnership closed its offering on
September 1, 1994 having raised $11,453,610. Limited partners are not required
to make any additional capital contributions.
The Partnership's investment strategy of acquiring properties for all cash and
leasing them under net leases to corporations minimizes the Partnership's
operating expenses. The General Partners believe that net rental income from the
leases will generate cash flow in excess of Partnership operating expenses.
Since the leases generally have remaining terms of 4 to 20 years and provide for
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specified rental increases in excess of the initial base rent, it is anticipated
that Partnership income will increase over time. The Partnership intends to
distribute a significant portion of its cash available for distribution unless
it becomes necessary to maintain additional reserves.
As of December 31, 1998, the Partnership had acquired eight properties and had
invested $9,980,107, including certain acquisition expenses related to the
Partnership's investment in these properties. These expenditures resulted in a
corresponding decrease in the Partnership's liquidity.
The Partnership made cash distributions from operations to the limited partners
during each quarter of 1998 and 1997, distributing a total of $927,972 and
$923,254 respectively to the limited partners.
Inflation has had very little effect on income from operations. Management
expects that increases in store sales volumes due to inflation as well as
increases in the Consumer Price Index (C.P.I.) may contribute to capital
appreciation of the Partnership properties. These factors, however, also may
have an adverse impact on the operating margins of the tenants of the
properties.
RESULTS OF OPERATIONS
Years Ended December 31, 1998 and 1997:
Rental income and equity income from investment in joint ventures increased
slightly from $926,344 and $142,054, respectively, in 1997 to $927,857 and
$142,195, respectively, in 1998. Interest income increased from $3,151 in 1997
to $6,524 in 1998 as a result of an increase in average invested capital. The
Partnership's operating expenses decreased by $19,324 primarily due to a
decrease in amortization partially offset by an increase in legal and
professional fees. Net income increased to $802,970 from $778,619.
This information contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the Partnership believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, the Partnership's actual results could differ materially from those
set forth in the forward-looking statements. Certain factors that might cause
such a difference include the following: changes in general economic conditions,
changes in real estate market conditions, the ability of the Partnership to
locate suitable tenants for its properties and the ability of tenants to make
payments under their respective leases.
YEAR 2000 COMPLIANCE
The operations of the Partnership are relatively simple and is managed by ARIC,
a subsidiary of AmREIT, Inc. (the "Company"). The following disclosures have
been made in the Form 10-KSB of the Company:
The Year 2000 problem ("Y2K") concerns the inability of information and
non-information technology systems to properly recognize and process
date-sensitive information beyond January 1, 2000. The Company's information
technology system consists of a network of personal computers and servers built
using hardware and software from mainstream suppliers. The Company has no
internally generated programmed software coding to correct, as all of the
software utilized by the Company is purchased or licensed from external
providers.
In 1998, the Company formed a Year 2000 committee (the "Y2K Team") for the
purpose of identifying, understanding and addressing the various issues
associated with the Year 2000 problems. The Y2K Team consists of members from
the Company, including representatives from senior management, accounting and
computer consultants. The Y2K Team's initial step in assessing the Company's Y2K
readiness consists of identifying any systems that are date-sensitive and,
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accordingly, could have potential Y2K problems. The Y2K Team is in the process
of conducting inspections, interviews and tests to identify which of the
Company's systems could have a potential Y2K problem.
The Company's information system is comprised of hardware and software
applications from mainstream suppliers; accordingly, the Y2K Team is in the
process of contacting the respective vendors and manufacturers to verify the Y2K
compliance of their products. In addition, the Y2K Team has also requested and
is evaluating documentation from other companies with which the Company has a
material third party relationship, including the Company's tenants, major
vendors, financial institutions and the Company's transfer agent. The Company
depends on its tenants for rents and cash flows, its financial institutions for
availability of cash and financing and its transfer agent to maintain and track
investor information. Although the Company continues to receive positive
responses from its third party relationships regarding their Y2K compliance, the
Company cannot be assured that the tenants, financial institutions, transfer
agent and other vendors have adequately considered the impact of the Year 2000.
The Company does not expect the Y2K impact of third parties to have a materially
adverse effect on its results of operation or financial position.
The Company has identified and has implemented upgrades for certain hardware
equipment. In addition, the Company has identified certain software applications
which will require upgrades to become Year 2000 compliant. The Company expects
all of these upgrades as well as any other necessary remedial measures on the
information technology systems used in the business activities and operations of
the Company to be completed by September 30, 1999. The Company does not expect
the aggregate cost of the Year 2000 remedial measures to exceed $10,000.
Based upon the progress the Company has made in addressing its Year 2000 issues,
the Company does not foresee significant risks associated with its Year 2000
compliance at this time. The Company plans to address its significant Year 2000
issues prior to being affected by them; therefore, it has not developed a
comprehensive contingency plan. However, if the Company identifies significant
risks related to its Year 2000 compliance, the Company will develop contingency
plans as deemed necessary at that time.
Item 7. Financial Statements and Supplementary Data.
The response to this item is submitted in Item 13(a) of this report and is
incorporated herein by reference.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
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PART III
Item 9. Directors and Executive Officers of the Issuer.
The Issuer has no officers or directors. The Individual and Managing General
Partners are as follows:
H. Kerr Taylor, age 48, is the Individual General Partner of the Partnership.
Mr. Taylor is a graduate of Trinity University. Mr. Taylor also received a
Masters of Business Degree from Southern Methodist University and a Doctor of
Jurisprudence from South Texas College of Law. Mr. Taylor has over twenty years
experience and has participated in over 300 real estate transactions. Mr. Taylor
has served on a board and governing bodies of a bank, numerous private and
public corporations and charitable institutions.
Mr. Taylor is currently a general partner or principal of a general partner of
eleven affiliated limited partnerships. Mr. Taylor is a member of the National
Board of Realtors, Texas Association of Realtors, and Texas Bar Association.
American Asset Advisers Management Corporation X is a Nebraska corporation
which was organized for the sole purpose of acting as the Managing General
Partner of the Partnership. The Managing General Partner has a nominal net
worth. The two initial voting shareholders of American Asset Advisers Management
Corporation X are Mr. Taylor and Realty Assets, Inc., a Nebraska corporation.
Mr. Taylor's ownership interest is 80% of the stock of the Managing General
Partner; Realty Assets, Inc. owns the remaining 20%. Realty Assets, Inc.
received its 20% interest as consideration for agreeing to assume the risks
associated with advancing a portion of the organizational and offering costs
relating to this offering.
The President and Treasurer of the Managing General Partner is Mr. Taylor who
is also a Director. Stephen K. Wild, a resident of Omaha, Nebraska, has been
named Vice President, Secretary and a Director of the Managing General Partner.
Messrs. Taylor and Wild are the two Directors of the Managing General Partner.
Mr. Wild, age 50, is the former Chairman of Securities America, Inc.,
a registered broker/dealer, which was also the dealer/manager of the
Partnership during the offering period. Mr. Wild served as the Chairman
of the Board of Securities America, Inc. from 1984 to 1998 and also as its
President from February 1991 to September 1997. Mr. Wild also served as the
Chairman of Financial Dynamics, Inc., the holding company for Securities
America, Inc. and certain other financial service companies from September
1985 until October of 1998. Realty Assets, Inc. which owns 20 percent of the
common stock of the Managing General Partner, is an affiliate of the
Dealer/Manager.
The affairs of the Partnership are conducted by ARIC. In addition to Mr. Taylor
as president, other officers of ARIC include:
Tim Kelley, age 51, serves as Vice President of Capital Markets of ARIC. Mr.
Kelley's career spans over twenty years of debt and equity industry experience.
Mr. Kelley has held senior management, compliance and sales responsibilities in
Broker/Dealers and in investment banking firms including Lehman Brothers Kuhn
Loeb, Oppenheimer and Co., Inc., and McKenna and Company. Mr. Kelley holds the
series 24, 27, 7, 3, 15, and 63 NASD licenses. He received his B.S. degree from
Kent State University.
Randal Garbs, age 45, serves as Vice President of Capital Markets of ARIC.
Mr. Garbs is responsible for capital formation as well as marketing services
to its tenants and developers. Mr. Garbs has over twenty years experience in
marketing including acting as COO of a Houston based service company.
Mr. Garbs has earned the series 7 and 63 NASD licenses, the Texas Real Estate
license and the CCIM designation. Mr. Garbs received his B.S. and M.B.A. from
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Houston Baptist University and is active in various community organizations and
charitable foundations.
L. Larry Mangum, age 34, serves as Chief Financial Officer of ARIC. Mr. Mangum
is responsible for the financial accounting and reporting relating to the
ARIC-sponsored partnerships and their properties. He has over eleven years of
accounting experience, including four years with a public accounting firm. He
previously worked for American General Corporation, a national insurance
company, from 1991-1996 as part of a team responsible for supervising their
reporting activities. Mr. Mangum received a B.B.A. degree in accounting from
Stephen F. Austin State University and subsequently earned the CPA designation.
Other individuals who are specialists in their respective fields are
periodically employed by ARIC and are engaged on an as-needed basis to perform
services on behalf of the Partnership or the Managing General Partner or both.
These individuals are not employees of the Partnership or the Managing General
Partner nor are they employees of other ARIC-sponsored partnerships, although
they do perform various services and activities for those partnerships.
These individuals are:
Don Grieb, age 47, is the Director of Development and Acquisitions of ARIC.
Mr. Grieb has over twenty years experience within the real estate industry
including development, investment analysis and administration. Mr. Grieb has
served within management of such real estate firms as Hines Interests and AEW.
Mr. Grieb received his B.S. and M.B.A. from the University of Illinois and is
a registered architect.
Jane Costello, age 42, is a certified public accountant and is responsible for
the tax accounting related to the ARIC-sponsored partnerships and their
properties. She has over nineteen years experience as an accountant including
over 4 years with a national public accounting firm and the last nine years with
her own accounting practice. Ms. Costello received a B.B.A. degree in accounting
from the University of Texas.
Item 10. Executive Compensation
Other than as discussed in Item 12, neither the Individual General Partner nor
any of the directors and officers of the Managing General Partner received any
remuneration from the Issuer. The Individual General Partner and his affiliates
received fees and reimbursements of expenses from the Partnership as discussed
in Note 9 to the accompanying financial statements.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1998, no person was known by the Issuer to be the beneficial
owner of more than 5% of the Units of the Issuer. Neither General Partner owns
any Units nor does any director or officer of the Managing General Partner own
any Units.
Item 12. Certain Relationships and Related Transactions
The Individual General Partner and the Managing General Partner received cash
distributions from operations during, or with respect to, the fiscal year ended
December 31, 1998 and 1997 of $5,400 and $4,450, respectively. For a description
of the share of cash distributions from operations, if any, and fees to which
the General Partners are entitled, reference is made to the material contained
in the Prospectus under the headings CASH DISTRIBUTIONS AND TAX ALLOCATIONS.
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Prior to June 5, 1998, the supervision of the operations of the properties was
managed by AAA, a related party. Beginning June 5, 1998, the supervision of the
operations of the properties is managed by ARIC, a related party. The Issuer has
entered into arrangements with ARIC pursuant to which ARIC has assumed direct
responsibility for day-to-day management of the Partnership's properties. This
service includes the supervision of leasing, rent collection, maintenance,
budgeting, employment of personnel, payment of operating expenses, etc. ARIC is
reimbursed for its actual costs associated with performing the foregoing
services but does not receive a property management fee. In connection with
administrative services rendered to the Partnership, $74,734 and $68,932 was
incurred and paid to ARIC and AAA in 1998 and 1997, respectively. See Note 9 of
the accompanying financial statements.
Mr. Taylor, President of ARIC, receives compensation from ARIC for services
performed for ARIC, which may include services rendered in connection with the
Issuer. However, the Managing General Partner believes that any compensation
relating to services is not material.
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PART IV
Item 13. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) (1) Financial Statements
Independent Auditors' Report
Balance Sheet, December 31, 1998
Statements of Income for the Years Ended December 31, 1998 and
1997 Statements of Partnership Equity for the Years Ended
December 31, 1998 and 1997 Statements of Cash Flows for the
Years Ended December 31, 1998 and 1997 Notes to Financial
Statements for the Years Ended December 31, 1998 and 1997
(2) Financial Statement Schedules: See (d) below
(3) Exhibits: See (c) below
(b) Reports on Form 8-K filed after September 30, 1998:
None
(c) Exhibits
3 See Exhibit 4(a)
4 (a) Amended and Restated Certificate and Agreement
of Limited Partnership (included as Exhibit A to
the prospectus of Issuer dated September 17, 1992
contained in Registration Statement No. 33-47638
of Issuer (the "Prospectus") and incorporated
herein by reference).
4 (b) Subscription Agreement and Signature Page
(included as Exhibit D to the Prospectus and
incorporated herein by reference).
10 (a) (1) Joint Venture Agreement between Issuer and AAA
Net Realty Fund IX, Ltd. dated March 15, 1993
(Incorporated by reference to the exhibit filed
with the Issuer's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994)
10 (a) (2) Agreement of Purchase and Sale between Golden
Corral Corporation and AAA Realty IX and X Joint
Venture dated March 11, 1993 (Incorporated by
reference to the exhibit filed with the Issuer's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1994)
10 (a) (3) Lease Agreement between Golden Corral Corporation
and AAA Realty IX and X Joint Venture dated March
11, 1993 (Incorporated by reference to the exhibit
filed with the Issuer's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994)
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10 (a) (4) Contract for Purchase and Sale of Real Estate
between Richard Motycka Trustee and Issuer dated
November 18, 1993 (Incorporated by reference to
the exhibit filed with the Issuer's Annual Report
on Form 10-K for the fiscal year ended December
31, 1994)
10 (a) (5) Assignment and Assumption of Lease between Issuer
and Southpoint Shopping Center L.C. dated December
22, 1993 (Incorporated by reference to the exhibit
filed with the Issuer's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994)
10 (a) (6) Earnest Money Contract between Issuer and Jefco
Development Corporation (Incorporated by reference
to the exhibit filed with the Issuer's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (7) Assignment of Lease Agreement between Issuer and
Jefco Development Corporation dated March 30, 1994
(Incorporated by reference to the exhibit filed
with the Issuer's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994)
10 (a) (8) Real Estate Sales Agreement between Issuer and
America's Favorite Chicken Company dated June
13, 1994 (Incorporated by reference to the exhibit
filed with the Issuer's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994)
10 (a) (9) Lease Agreement between Issuer and America's
Favorite Chicken Company dated July 19, 1994
(Incorporated by reference to the exhibit filed
with the Issuer's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994)
10 (a) (10) Contract for Purchase and Sale of Real Estate
between Issuer and Beechwood Acquisitions, Inc.
dated January 13, 1994 (Incorporated by reference
to the exhibit filed with the Issuer's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (11) Assignment and Assumption of Lease between
Roseville Partnership No. 20 and Issuer dated
August 25, 1994 (Incorporated by reference to the
exhibit filed with the Issuer's Annual Report on
Form 10-K for the fiscal year ended December
31, 1994)
10 (a) (12) Joint Venture Agreement between Issuer and
American Asset Advisers Trust, Inc. dated October
27, 1994 (Incorporated by reference to the exhibit
filed with the Issuer's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994)
10 (a) (13) Agreement for Purchase and Sale of Real Estate
between Issuer and KCBB, Inc. dated October 11,
1994 (Incorporated by reference to the exhibit
filed with the Issuer's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994)
10 (a) (14) Assignment and Assumption of Lease between KCBB,
Inc. and AAA Joint Venture 94-1 dated November 11,
1994 (Incorporated by reference to the exhibit
filed with the Issuer's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994)
10 (a) (15) Agreement for Purchase and Sale of Real Estate
between Issuer and TA/ Colony Medical, Ltd. dated
October 27, 1994 (Incorporated by reference to the
exhibit filed with the Issuer's Annual Report on
Form 10-K for the fiscal year ended December
31, 1994)
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10 (a) (16) Assignment and Assumption of Lease between
TA/Colony Medical, Ltd. and Issuer dated January
17, 1995 (Incorporated by reference to the exhibit
filed with the Issuer's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994)
10 (a) (17) Joint Venture Agreement between American Asset
Advisers Trust, Inc. and AAA Net Realty Fund X,
Ltd. and AAA Net Realty Fund XI, Ltd., dated
April 5, 1996. (Incorporated by reference to the
exhibit filed with the Issuer's Annual Report on
Form 10-K for the fiscal year ended December 31,
1996)
27 Financial Data Schedule.
(d) Financial Statements Schedules
Schedule III - Real Estate Owned and Accumulated Depreciation
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Issuer has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
AAA Net Realty Fund X, Ltd.
/s/ H. Kerr Taylor
March 31, 1999 ------------------
Date H. Kerr Taylor, Individual General Partner
American Asset Advisers Management
Corporation X, Managing General Partner
By: /s/ H. Kerr Taylor
March 31, 1999 ----------------------
Date H. Kerr Taylor
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the Issuer Registrant
and in the capacities and on the dates indicated .
/s/ H. Kerr Taylor
March 31, 1999 ------------------
Date H. Kerr Taylor
President (Principal Executive Officer)
and Director
/s/ Stephen K. Wild
March 31, 1999 -------------------
Date Stephen K. Wild, Director
/s/ L. Larry Mangum
March 31, 1999 -------------------
Date L. Larry Mangum, Chief Financial Officer
(Principal Accounting Officer)
14
<PAGE>
ANNUAL REPORT ON FORM 10-KSB ITEMS 7, 13 (a) (1) AND
(2) AND 13 (d)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FINANCIAL STATEMENT SCHEDULE
FOR THE YEAR ENDED DECEMBER 31, 1998
AAA NET REALTY FUND X, LTD.
F-1
<PAGE>
AAA NET REALTY FUND X, LTD.
INDEX TO FINANCIAL STATEMENTS
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report F-3
Balance Sheet, December 31,1998 F-4
Statements of Income for the Years Ended
December 31, 1998 and 1997 F-5
Statements of Partnership Equity for the Years
Ended December 31, 1998 and 1997 F-6
Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997 F-7
Notes to Financial Statements for the Years Ended
December 31, 1998 and 1997 F-8 to F-12
FINANCIAL STATEMENT SCHEDULE:
Schedule III Real Estate Owned and Accumulated
Depreciation for the Year Ended December 31, 1998 F-13
All other financial statement schedules are omitted as the required information
is either inapplicable or is included in the financial statements or related
notes.
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
AAA Net Realty Fund X, Ltd.
We have audited the accompanying balance sheet of AAA Net Realty Fund X, Ltd. as
of December 31, 1998 and the related statements of income, partnership equity
and cash flows for each of the two years in the period ended December 31, 1998.
Our audits also included the financial statement schedule listed in the Index.
These financial statements and financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedule 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, such financial statements present fairly, in all material
respects, the financial position of AAA Net Realty Fund X, Ltd. as of December
31, 1998 and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Houston, Texas
March 12, 1999
F-3
<PAGE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Cash and cash equivalents $ 241,636
Accounts receivable 1,170
Property:
Land 2,566,250
Buildings 5,370,984
----------------
7,937,234
Accumulated depreciation (689,350)
----------------
Total property 7,247,884
----------------
Net investment in direct financing leases 618,232
Investment in joint ventures 1,370,213
Accrued rental income 120,342
----------------
TOTAL ASSETS $ 9,599,477
================
LIABILITIES AND PARTNERSHIP EQUITY
Liabilities:
Accounts payable $ 1,614
Security deposit 12,000
----------------
TOTAL LIABILITIES 13,614
----------------
Partnership equity:
General partners 17,071
Limited partners 9,568,792
----------------
TOTAL PARTNERSHIP EQUITY 9,585,863
----------------
TOTAL LIABILITIES AND PARTNERSHIP EQUITY $ 9,599,477
================
See Notes to Financial Statements.
F-4
<PAGE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
For the Years Ended December 31,
1998 1997
---- ----
Revenues:
Rental income from operating leases $ 857,483 $ 856,318
Earned income from direct financing leases 70,374 70,026
Interest income 6,524 3,151
Equity income from investment in joint ventures 142,195 142,054
------- -------
Total revenues 1,076,576 1,071,549
--------- ---------
Expenses:
Advisory fees to related party 74,734 68,932
Amortization 27,755 60,000
Depreciation 144,466 144,466
Professional fees 26,651 19,532
------ ------
Total expenses 273,606 292,930
------- -------
Net income $ 802,970 $ 778,619
=========== ===========
Allocation of net income:
General partners $ 8,030 $ 7,786
Limited partners 794,940 770,833
------- -------
$ 802,970 $ 778,619
=========== ===========
Net income per unit $ 70.10 $ 67.98
=========== ===========
Weighted average units outstanding 11,454 11,454
====== ======
See Notes to Financial Statements.
F-5
<PAGE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERSHIP EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
General Limited
Partners Partners Total
-------- -------- -----
Balance at December 31, 1996 $ 11,105 $ 9,854,245 $ 9,865,350
Net income 7,786 770,833 778,619
Distributions ($80.61 per Limited
Partnership Unit) (4,450) (923,254) (927,704)
------ -------- --------
Balance at December 31, 1997 14,441 9,701,824 9,716,265
Net income 8,030 794,940 802,970
Distributions ($81.02 per Limited
Partnership Unit) (5,400) (927,972) (933,372)
------ -------- --------
Balance at December 31, 1998 $ 17,071 $ 9,568,792 $ 9,585,863
========== ============ ============
See Notes to Financial Statements.
F-6
<PAGE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1998 1997
---- ----
Cash flows from operating activities:
Net income $ 802,970 $ 778,619
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization 27,755 60,000
Depreciation 144,466 144,466
Decrease (increase) in accounts
receivable 13,229 (14,204)
(Decrease) increase in accounts
payable (17,353) 17,558
Cash received from direct financing
leases less than income recognized (3,274) (2,922)
Investment in joint ventures:
Equity income (142,195) (142,054)
Distributions received 142,195 142,054
Increase in accrued rental income (19,548) (31,342)
------- -------
Net cash provided by operating
activities 948,245 952,175
------- -------
Cash flows from investing activities:
Joint venture distributions in excess
of income 4,344 4,482
----- -----
Net cash provided by investing activities 4,344 4,482
----- -----
Cash flows from financing activities:
Distributions paid to partners (933,372) (927,704)
-------- --------
Net cash used in financing activities (933,372) (927,704)
-------- --------
Net increase in cash and cash equivalents 19,217 28,953
Cash and cash equivalents at beginning of year 222,419 193,466
------- -------
Cash and cash equivalents at end of year $ 241,636 $ 222,419
=========== ===========
See Notes to Financial Statements.
F-7
<PAGE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
AAA Net Realty Fund X, Ltd. ("the Partnership") is a limited partnership
formed April 15, 1992, under the laws of the State of Nebraska. The
Partnership commenced operations as of September 17, 1992. American Asset
Advisers Management Corporation X (a Nebraska corporation) is the Managing
General Partner and H. Kerr Taylor is the Individual General Partner.
The Partnership was formed to acquire commercial properties for cash, own,
lease, operate, manage and eventually sell the properties. Prior to June
5, 1998, the supervision of the operations of the properties was managed
by American Asset Advisers Realty Corporation, ("AAA"), a related party.
Beginning June 5, 1998, the supervision of the operations of the
properties is managed by AmREIT Realty Investment Corporation, ("ARIC"), a
related party.
BASIS OF ACCOUNTING
The financial records of the Partnership are maintained on the accrual
basis of accounting whereby revenues are recognized when earned and
expenses are recorded when incurred.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Partnership considers all
highly liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents. Cash and cash equivalents
consist of demand deposits at commercial banks and money market funds.
PROPERTY
Property 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 lease method or the direct
financing lease method. Under the operating lease method, the properties
are recorded at cost. Rental income is recognized ratably over the life of
the lease and depreciation is charged based upon the estimated useful life
of the property. Under the direct financing lease method, the properties
are recorded at their net investment (see Note 5). 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 lease agreements do not provide for contingent rentals.
The Partnership obtains an appraisal on each property prior to a
property's acquisition and also performs an annual valuation update to
evaluate potential impairment for each property for which an appraisal is
older than twelve months. This valuation is based on capitalization of
income for each property, a review of current market conditions and any
significant events or factors which would indicate a potential impairment
to the value of a property.
F-8
<PAGE>
INVESTMENT IN JOINT VENTURES
The Partnership's interest in joint ventures 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 ventures and
also decreased by any distributions. The Partnership owns a minority
interest and does not exercise control over the management of the joint
ventures.
DEPRECIATION
Buildings are depreciated using the straight-line method over estimated
useful lives ranging from 31.5 to 39 years.
ORGANIZATION COSTS
Organization costs incurred in the formation of the Partnership are
amortized on a straight-line basis over five years.
SYNDICATION COSTS
Syndication costs incurred in the raising of capital through the sale of
units are treated as a reduction of partnership equity.
STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
No cash was paid for income taxes or interest during 1998 or 1997.
INCOME TAXES
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments, consisting of cash, cash
equivalents, accounts receivable and liabilities approximate their fair
value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. PARTNERSHIP EQUITY
The Managing General Partner, American Asset Advisers Management
F-9
<PAGE>
Corporation X, and the Individual General Partner, H. Kerr Taylor, have
made capital contributions in the amounts of $990 and $10, respectively.
All other contributions have been made by the limited partners. The
General Partners shall not be obligated to make any other contributions to
the capital of 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. ALLOCATIONS AND DISTRIBUTIONS
All income, profits, gains and losses of the Partnership for each fiscal
year, other than any gain or loss realized upon the sale, exchange or
other disposition of any of the Partnership's properties, shall be
allocated as follows: (a) net loss shall be allocated 99% to the limited
partners, .99% to the Managing General Partner and .01% to the Individual
General Partner; and (b) net income will be allocated first in the ratio,
and to the extent, net cash flow is distributed to the partners for such
year and any additional income for such year will be allocated 99% to the
limited partners, 1% to the General Partners.
For income tax purposes, the gain realized upon the sale, exchange or
other disposition of any property will be allocated as follows:
(a) first, to and among the partners in an amount equal to the negative
balances in their respective capital accounts (pro rata based on the
relative amounts of such negative balances).
(b) then, to each limited partner until the balance in such limited
partner's capital account equals the amount to be distributed to such
limited partner in the first tier of distributions of net proceeds of
sale.
(c) then, to the General Partners, until the balance in their capital
accounts equals the amounts to be distributed to the General Partners
in the second tier of distributions of net proceeds of sale.
(d) then 94% to the limited partners and 6% to the General Partners, and
(e) thereafter, the partners shall be allocated gain or loss in order to
meet Treasury Regulations regarding qualified income offset
requirements.
Any loss on the sale, exchange or other disposition of any property shall
be allocated 99% to the limited partners and 1% to the General Partners.
4. OPERATING LEASES
A summary of minimum future rentals, exclusive of any renewals, under
noncancellable operating leases in existence at December 31, 1998 are as
follows:
1999 $ 942,297
2000 $ 946,442
2001 $ 960,815
2002 $ 962,683
2003 $ 827,308
2004-2016 $ 3,475,867
F-10
<PAGE>
5. NET INVESTMENT IN DIRECT FINANCING LEASE
The Partnership's net investment in a direct financing lease at December
31, 1998 included:
Minimum lease payments receivable $ 1,261,854
Unguaranteed residual value 300,558
Less: Unearned income 944,180
------------
$ 618,232
============
A summary of minimum future rentals, exclusive of any renewals, under a
noncancellable direct financing lease in existence at December 31, 1998
are as follows:
1999 $ 70,237
2000 $ 73,892
2001 $ 73,892
2002 $ 73,892
2003 $ 73,892
2004-2016 $ 896,049
6. INVESTMENT IN JOINT VENTURES
On April 5, 1996, the Partnership formed a joint venture, AAA Joint
Venture 96-1, with AAA Net Realty Fund XI, Ltd. and AmREIT, Inc.,
(formerly American Asset Advisers Trust, Inc.), entities with common
management, for the purpose of acquiring a property which is being
operated as a Just For Feet retail store in Tucson, Arizona. The property
was purchased on September 11, 1996 after construction was completed. The
Partnership's interest in the joint venture is 18.25%.
On October 27, 1994, the Partnership formed a joint venture, AAA Joint
Venture 94-1, with AmREIT, Inc., for the purpose of acquiring a property
on lease to BlockBuster Music Retail Inc. in Missouri. The Company's
interest in the joint venture is 45.16%.
Summarized financial information for the joint ventures at December 31,
1998 and 1997, is as follows:
1998 1997
---- ----
Land & building,
net of accumulated depreciation $ 2,616,454 $ 2,645,823
Net investment in direct financing lease $ 2,586,324 $ 2,578,954
Accounts receivable $ 2,435 $ 2,435
Accrued rental income $ 78,055 $ 50,602
Partners' capital $ 5,283,268 $ 5,277,814
Rental income from operating lease $ 179,670 $ 179,670
Equity income from direct financing lease $ 406,648 $ 405,901
Net income $ 556,948 $ 556,201
The Partnership recognized equity income of $142,195 and $142,054 from the
joint ventures in 1998 and 1997, respectively.
F-11
<PAGE>
7. MAJOR TENANTS
The Partnership's operations are related to the acquisition and leasing of
commercial real estate properties. The following schedule summarizes
rental income by lessee for 1998 and 1997 under both operating lease and
direct financing lease methods of accounting:
1998 1997
---- ----
Golden Corral Corporation (Texas) $ 172,956 $ 172,956
TGI Friday's, Inc. (Texas) 180,500 180,500
Goodyear Tire & Rubber Company (Texas) 52,920 52,920
Tandy Corporation (Minnesota) 256,620 256,620
America's Favorite Chicken Company (Georgia) 103,707 102,830
One Care Health Industries, Inc. (Texas) 161,154 160,518
--------- ---------
Total $ 927,857 $ 926,344
========= =========
8. INCOME RECONCILIATION
A reconciliation of net income for financial reporting purposes to income
for federal income tax purposes is as follows for the year ended December
31:
1998 1997
---- ----
Net income for financial reporting purposes $ 802,970 $ 778,619
Direct financing lease recorded as operating
lease for tax reporting purposes (32,355) (31,869)
Accrued rental income (27,022) (38,815)
---------- ----------
Income for tax reporting purposes $ 743,593 $ 707,935
========== ==========
9. 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
with administrative services rendered to the Partnership, $74,734 and
$68,932 was incurred and paid to ARIC and AAA in 1998 and 1997,
respectively.
See Note 6 for joint venture agreements with entities with common
management.
F-12
<PAGE>
AAA NET REALTY FUND X, LTD.
SCHEDULE III - REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1998
</TABLE>
<TABLE>
<CAPTION>
LIFE ON
WHICH
DEPRE. IN
LATEST
INCOME
PROPERTY ENCUM- IMPROVE- COST AT CLOSE OF YEAR ACCUM. DATE OF DATE STMT. IS
DESCRIPTION BRANCES BUILDING LAND MENTS BUILDING LAND DEPRE. CONST. ACQUIRED COMPUTED
- - ----------- ------- -------- ---- ----- -------- ---- ------ ------ -------- --------
PROPERTIES INVESTED IN
UNDER OPERATING LEASES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Golden Corral Restaurant,
Texas $0 $1,105,426 $473,754 $0 $1,105,426 $473,754 $202,785 N/A 03-15-93 31.5 Years
TGI Friday's Restaurant,
Texas $0 $1,084,060 $464,597 $0 $1,084,060 $464,597 $138,982 N/A 12-23-93 39 Years
Goodyear Tire & Automotive
Store, Texas $0 $377,261 $161,684 $0 $377,261 $161,684 $45,948 N/A 03-31-94 39 Years
Popeye's Chicken Restaurant,
Georgia $0 $0 $264,400 $0 $0 $264,400 $0 N/A 07-19-94 N/A
Computer City Super Center,
Minnesota $0 $1,769,749 $758,464 $0 $1,769,749 $758,464 $196,639 N/A 03-21-94 39 Years
One Care Health Industries,
Inc., Texas $0 $1,034,488 $443,351 $0 $1,034,488 $443,351 $104,996 N/A 01-18-95 39 Years
-- ---------- -------- -- ---------- -------- --------
$0 $5,370,984 $2,566,250 $0 $5,370,984 $2,566,250 $689,350
== ========== ========== == ========== ========== ========
PROPERTY OF JOINT VENTURES
IN WHICH THE PARTNERSHIP HAS
AN INTEREST AND HAS INVESTED
IN UNDER AN OPERATING LEASE
AND A DIRECT FINANCING LEASE
Blockbuster Music Store,
Missouri $0 $531,236 $220,541 $0 $531,236 $220,541 $54,428 N/A 11-14-94 39 Years
Just For Feet, Arizona $0 $474,200 $198,664 $0 $474,200 $198,664 (2) N/A 09-11-96 N/A
-- -------- -------- -- -------- -------- -- -- -- --
$0 $1,005,436 $419,205 $0 $1,005,436 $419,205 $54,428
== ========== ======== == ========== ======== =======
PROPERTY INVESTED IN
UNDER DIRECT FINANCING LEASE
Popeye's Chicken Restaurant,
Georgia $0 $618,232 $0 $0 $618,232 $0 (2) N/A 07-19-94 N/A
== ======== == == ======== == ==
(1) Transactions in real estate and accumulated depreciation during 1998 and
1997 for operating lease properties are summarized as follows:
Accumulated
Cost Depreciation
---- ------------
Balance at December 31, 1996 $7,937,234 $400,416
Acquisitions $0 $0
Depreciation expense $0 $144,468
---------- --------
Balance at December 31, 1997 $7,937,234 $544,884
Acquisitions $0 $0
Depreciation expense $0 $144,466
---------- --------
Balance at December 31, 1998 $7,937,234 $689,350
========== ========
(2) The portion of the lease relating to the building of this property has been
recorded as a direct financing lease for financial reporting purposes.
Consequently, depreciation is not applicable.
(3) The aggregate cost of all properties for Federal Income Tax purposes is
$9,980,107 at December 31, 1998.
</TABLE>
F-13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 241,636
<SECURITIES> 0
<RECEIVABLES> 1,170
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 242,806
<PP&E> 7,937,234
<DEPRECIATION> 689,350
<TOTAL-ASSETS> 9,599,477
<CURRENT-LIABILITIES> 13,614
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,585,863
<TOTAL-LIABILITY-AND-EQUITY> 9,599,477
<SALES> 1,070,052
<TOTAL-REVENUES> 1,076,576
<CGS> 0
<TOTAL-COSTS> 273,606
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 802,970
<INCOME-TAX> 0
<INCOME-CONTINUING> 802,970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 802,970
<EPS-PRIMARY> 70.10
<EPS-DILUTED> 70.10
</TABLE>
