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: 33-79766
AAA NET REALTY FUND XI, LTD.
TEXAS LIMITED PARTNERSHIP IRS IDENTIFICATION NO.
76-0451986
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 XI, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
MARCH 31, DECEMBER 31,
1996 1995
(Unaudited)
ASSETS
CASH & CASH EQUIVALENTS $ 1,913,901 $ 1,642,729
ACCOUNTS RECEIVABLE 7,676 10,750
PROPERTY
Land 235,832 235,832
Building 550,275 550,275
786,107 786,107
Accumulated depreciation (4,115) (588)
781,992 785,519
INVESTMENT IN JOINT VENTURE 868,949 871,620
OTHER ASSETS:
Acquisition Costs 15,297 2,506
Accrued Rental Income 1,563 0
Organization Costs, net of accumulated
amortization of $30,058 and $20,890,
respectively 157,325 151,643
TOTAL OTHER ASSETS 174,185 154,149
TOTAL ASSETS 3,746,703 3,464,767
LIABILITIES & PARTNERSHIP EQUITY
LIABILITIES
Accounts payable 21,504 21,926
TOTAL LIABILITIES 21,504 21,926
PARTNERSHIP EQUITY
General partners 2,133 1,773
Limited partners 3,723,066 3,441,068
TOTAL PARTNERSHIP EQUITY 3,725,199 3,442,841
TOTAL LIABILITIES & PARTNERSHIP EQUITY $ 3,746,703 $ 3,464,767
LIMITED PARTNERSHIP UNITS OUTSTANDING 4158.5 3828.5
See Notes to Financial Statements.
AAA NET REALTY FUND XI, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(Unaudited)
1996 1995
INCOME
Rental income $ 21,694 $ 0
Equity income from investment
in joint venture 20,356 0
Interest income 23,589 5,550
TOTAL INCOME 65,639 5,550
EXPENSES
Administrative expense 3,999 0
Accounting fees 5,400 0
Amortization 9,168 1,125
Bank charges 25 287
Depreciation 3,527 0
Filing fees 250 0
Legal and professional fees 4,306 0
Printing 2,252 0
Other 700 0
TOTAL EXPENSES 29,627 1,412
NET INCOME $ 36,012 $ 4,138
ALLOCATION OF NET INCOME
General partners $ 360 $ 41
Limited partners 35,652 4,097
$ 36,012 $ 4,138
NET INCOME PER UNIT $ 8.84 $ 8.18
WEIGHTED AVERAGE UNITS OUTSTANDING 4,075 506
See Notes to Financial Statements.
AAA NET REALTY FUND XI, 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 $ 1,773 $ 3,441,068 $ 3,442,841
CAPITAL CONTRIBUTIONS - NET 0 295,455 295,455
NET INCOME 360 35,652 36,012
DISTRIBUTIONS 0 (49,109) (49,109)
PARTNERSHIP EQUITY AT
MARCH 31, 1996 $ 2,133 $ 3,723,066 $ 3,725,199
See Notes to Financial Statements.
AAA NET REALTY FUND XI, 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 $ 36,012 $ 4,138
Adjustments to reconcile net income to
net cash from operating activities:
Amortization 9,168 1,125
Depreciation 3,527 0
Decrease in accounts receivable 3,074 0
Increase (decrease) in accounts payable (422) 26,127
Investment in joint venture:
Equity income (20,356) 0
Distributions received 20,356 0
Increase in accrued rental income (1,563) 0
Increase in organization costs (14,850) (67,487)
NET CASH FLOWS FROM OPERATING ACTIVITIES 34,946 (36,097)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions - limited partners, net of
syndication costs 295,455 1,342,232
Distributions (49,109) 0
NET CASH FLOWS FROM FINANCING ACTIVITIES 246,346 1,342,232
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition costs (12,791) (30,544)
Joint venture distributions in excess of income 2,671 0
NET CASH FLOWS FROM INVESTING ACTIVITIES (10,120) (30,544)
NET INCREASE IN CASH
and CASH EQUIVALENTS 271,172 1,275,591
CASH and CASH EQUIVALENTS at beginning of period 1,642,729 1,000
CASH and CASH EQUIVALENTS at end of period $ 1,913,901 $ 1,276,591
See Notes to Financial Statements.
AAA NET REALTY FUND XI, 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 XI, Ltd. ("the Partnership"), is a limited
partnership formed under the laws of the State of Texas.
American Asset Advisers Management Corporation XI (a Texas
corporation) is the managing general partner and H. Kerr
Taylor is the individual general partner. On March 3, 1995,
the general partners distributed the proceeds from the escrow
account and funded the Partnership. As of March 31, 1996,
contributions had been received from 4,158.5 units. There
shall be available for subscription by prospective limited
partners an aggregate of 20,000 limited partnership units at
$1,000 maximum offering price 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.
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 lease is accounted for
under the operating method whereby the property is recorded at
cost, rental income is recognized ratably over the life of the
lease and depreciation is charged as incurred.
The Partnership's investment in a joint venture is accounted
for under the equity method whereby its initial investment in
a joint venture is recorded at its cost which is then
increased or decreased by its share of earnings or losses in
the joint venture.
Organization costs are amortized on a straight line basis over
five years.
Syndication costs are reflected as a reduction of the capital
contributions of the limited partners.
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 March 31, 1995.
The financial statements of AAA Net Realty Fund XI, 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 XI, 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 deficit balances in their
capital account.
3. RELATED PARTY TRANSACTIONS
Certain costs have been incurred by the General Partners and
affiliates in connection with the organization and syndication
of the Partnership. Reimbursement of these costs become
obligations of the Partnership in accordance with the terms of
the offering. The costs incurred to organize the Partnership
have been capitalized as Organization Costs. For the three
months ended March 31, 1996, $10,269 was paid to AAA for costs
incurred during the period. In addition, $12,500 of costs,
reflected as Syndication Costs and netted against Partnership
Equity were incurred by AAA for the issuance and marketing of
partnership units during the first three months of 1996. No
reimbursements were paid in the first three months of 1995 for
Organization or Syndication Costs.
Acquisition expenses, including real estate commissions,
finders fees, consulting fees and any other non-recurring fees
incurred in connection with locating, evaluating and selecting
properties and structuring and negotiating the acquisition of
properties are included in the basis of the properties.
$10,000 of such fees were incurred and paid to AAA for the
three months ended March 31, 1996. No acquisition fees were
incurred in the first three months of 1995.
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, $3,999 was incurred and paid to AAA for
the three months ended March 31, 1996. No administrative fees
were incurred in the first three months of 1995.
On September 12, 1995, the Partnership acquired a 49% interest
in a joint venture with American Asset Advisers Trust, Inc.,
an affiliated entity. The joint venture was formed for the
purpose of acquiring a property which is being operated as a
Blockbuster Music Store (Wichita, Kansas). The Partnership's
share of costs for this property totaled $873,711.
On April 5, 1996, the Partnership entered into a joint venture
with American Asset Advisers Trust, Inc. and AAA Net Realty
Fund X, Ltd., affiliates, for the purpose of acquiring a
property which will be operated as a Just For Feet retail
store upon completion of construction. The Partnership's
interest in the joint venture is 29.85%.
4. MAJOR LESSEE
The Partnership's operations are all related to the
acquisition and leasing of commercial real estate properties.
Total rental income of $21,694 was received from Blockbuster
Videos, Inc. (Oklahoma City, Oklahoma) for the three months
ended March 31, 1996. The Partnership did not receive any
rental income for the three months ended March 31, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
AAA Net Realty Fund XI, Ltd., a Texas limited partnership, was
formed May 26, 1994 to acquire on a debt-free basis, existing and
newly constructed commercial properties to be held for investment,
lease and subsequent disposal. The leases will provide for a base
minimum annual rent and periodic increases in rent. In addition,
the major operating costs of the Partnership's properties will
either be paid for by the tenant or the lease will limit the extent
of the Partnership's obligation for such expenses. The Offering
for 20,000 limited partnership units was effective October 27,
1994. As of March 31, 1996, contributions had been received for
4,158.5 units. The offering period for subscriptions will
terminate on October 26, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership acquired its first two properties in September and
December 1995, one directly and one through a joint venture with an
affiliate. 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 29.85% and the
Partnership's share of the acquisition costs for the property will
approximate $986,198 plus $30,758 in acquisition fees to
affiliates. The property is under construction with an estimated
completion date of September 1996.
The acquisitions of the above-mentioned properties result in a
decrease in the Partnership's liquidity. This is in keeping with
the Partnership's policy of acquiring commercial properties for
investment, lease and subsequent disposal. The Partnership's
short-term liquidity needs will be met through the raising of
partnership capital, a significant portion of which is applied
toward property acquisitions. As funds are invested in commercial
properties, the Partnership's more long-term liquidity needs will
be met through the rental income received from these properties.
RESULTS OF OPERATIONS
For the three months ended March 31, 1996, revenues totaled
$65,639, which included $42,050 from real estate operations and
$23,589 of interest income. Revenues for the first quarter of 1996
increased $60,089 from those of the first quarter of 1995 when the
Partnership has just begun operations and had not yet acquired any
real estate properties. The increase in the Partnership's activity
also contributed to an increase in expenses from $1,412 in the
first quarter of 1995 to $29,627 in the first quarter of 1996. The
Partnership recorded net income of $36,012 in the first quarter of
1996 compared to $4,138 in the first quarter of 1995.
No significant operations commenced during the first quarter of
1995. On March 3, 1995, the general partners distributed the
proceeds from the escrow account and funded the Partnership. For
the three months ended March 31, 1995, revenues were comprised
entirely of $5,550 of interest income and the Partnership's net
income totaled $4,138.
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 XI, 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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