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, 1996
Commission file number: 33-85076C
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
(Name of Small Business Issuer in its Charter)
State of Minnesota 41-1789725
(State or other Jurisdiction of (I.R.S. Employer)
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(612) 227-7333
(Issuer's telephone number)
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, 1996 were
$1,341,753.
As of February 28, 1997, there were 24,000 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 $24,000,000.
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 Income & Growth Fund XXI Limited Partnership (the
"Partnership" or the "Registrant") is a limited partnership which
was organized pursuant to the laws of the State of Minnesota on
August 31, 1994. The registrant is comprised of AEI Fund
Management XXI, 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 $24,000,000 of limited partnership interests (the
"Units") (24,000 Units at $1,000 per Unit) pursuant to a
registration statement effective February 1, 1995. The
Partnership commenced operations on April 14, 1995 when minimum
subscriptions of 1,500 Limited Partnership Units ($1,500,000)
were accepted. Through December 31, 1996, the Partnership raised
a total of $23,563,349 from the sale of 23,563.349 Units. On
January 31, 1997, the Partnership offering terminated when the
maximum subscription limit of 24,000 Limited Partnership Units
($24,000,000) was reached.
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. As of December 31, 1996, the Partnership had
purchased partial interests in four properties at a total cost of
$7,621,435. The properties are commercial, single tenant
buildings leased under triple net leases. The Partnership is
continuing to review various properties for acquisition until
available subscription proceeds are fully committed.
The Partnership's properties will be 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 10% 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 have been granted options to purchase
properties after a specified portion of the lease term has
elapsed. It is anticipated that the Partnership will sell its
properties twelve to fifteen years after acquisition.
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 noncancelable 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 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.
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.
On May 31, 1995, the Partnership purchased an 87.7193%
interest in an Arby's restaurant in Montgomery, Alabama for
$754,104. The property is leased to RTM Gulf Coast, Inc. under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $77,813. The remaining interest in the property was
purchased by AEI Institutional Net Lease Income Fund `93, an
affiliate of the Partnership.
On December 21, 1995, the Partnership purchased a 34.0%
interest in a Media Play retail store in Apple Valley, Minnesota
for $1,414,060. 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 $139,587. The remaining
interest in the property was purchased by AEI Net Lease Income &
Growth Fund XIX Limited Partnership and AEI Net Lease Income &
Growth Fund XX Limited Partnership, affiliates of the
Partnership.
In December, 1996, the Partnership and MGI reached an
agreement in which MGI would buy out and terminate the Lease
Agreement by making a payment of $800,000, which is equal to
approximately two years' rent. The Partnership's share of such
payment was $272,000. Under the Agreement, MGI remained in
possession of the property and performed all of its obligations
under the net lease agreement through January 31, 1997 at which
time it vacated the property and made it available for re-let to
another tenant. MGI was responsible for all maintenance and
management costs of the property through January 31, 1997 after
which date the Partnership became responsible for its share of
expenses associated with the property until it is re-let or sold.
A specialist in commercial property leasing has been retained to
locate a new tenant for the property.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
On March 28, 1996, the Partnership purchased a 40.75%
interest in a Garden Ridge store in Pineville, North Carolina for
$3,644,391. 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 XIX Limited
Partnership and AEI Net Lease Income & Growth Fund XX Limited
Partnership, affiliates of the Partnership.
On August 29, 1996, the Partnership purchased a 67.8%
interest in a Champp's Americana restaurant in Columbus, Ohio for
$1,808,880. The property is leased to Americana Dining
Corporation under a Lease Agreement with a primary term of 20
years and annual rental payments of $191,259. The remaining
interest in the property was purchased by AEI Real Estate Fund
XVIII Limited Partnership, an affiliate of the Partnership.
In August, 1996, the Partnership entered into an agreement
to purchase a Denny's restaurant in Covington, Louisiana. The
purchase price will be approximately $1,111,000. The property
will be leased to Huntington Restaurants Group, Inc. under a
Lease Agreement with a primary term of 20 years and annual rental
payments of approximately $125,000. Through December 31, 1996,
the Partnership had advanced $977,875 for the construction of the
property and was charging interest on the Note at the rate of
8.0%.
In August, 1996, the Partnership entered into an agreement
to purchase a 93.1% interest in a Caribou Coffee store in
Charlotte, North Carolina. The purchase price will be
approximately $1,274,000. The property will be leased to Caribou
Coffee Company, Inc. under a Lease Agreement with a primary term
of 18 years and annual rental payments of approximately $146,000.
Through December 31, 1996, the Partnership had advanced $643,995
for the construction of the property and was charging interest on
the Note at the rate of 7.0%.
Major Tenants
During 1996, two of the Partnership's lessees contributed
more than ten percent of the Partnership's total rental revenue.
The major tenants in aggregate contributed 83% of the
Partnership's total rental revenue in 1996. Because the
Partnership has not completed its acquisition of properties, it
is not possible to determine which tenants will contribute more
than ten percent of the Partnership's rental income in 1997 and
future years. In the event that certain tenants contribute more
than ten percent of the Partnership's rental income in future
years, any failure of these major tenants 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.
ITEM 2. DESCRIPTION OF PROPERTIES.
Investment Objectives
The Partnership's investment objectives are to acquire
existing or newly-developed commercial properties throughout the
United States that offer the potential for (i) regular cash
distributions of lease income; (ii) growth in lease income
through rent escalation provisions; (iii) preservation of capital
through all-cash sale-leaseback transactions; (iv) capital growth
through appreciation in the value of properties; and (v) stable
property performance through long-term lease contracts. 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 commercial, single tenant
buildings. The properties were acquired on a debt-free basis and
are leased to various tenants under noncancelable 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, 1996.
Total Property Annual Annual
Purchase Acquisition Lease Rent
Property Date Costs Lessee Payment Per Sq. Ft.
Arby's Restaurant
Montgomery, AL RTM Gulf
(87.7193%) 5/31/95 $ 754,104 Coast, Inc. $ 78,980 $ 26.63
Media Play Retail Store
Apple Valley, MN
(34.0%) 12/21/95 $ 1,414,060 (F1)
Garden Ridge Retail Store
Pineville, NC Garden
(40.75%) 3/28/96 $ 3,644,391 Ridge, L.P. $ 383,973 $ 6.67
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
Total Property Annual Annual
Purchase Acquisition Lease Rent
Property Date Costs Lessee Payment Per Sq. Ft.
Champp's
Americana Restaurant Americana
Columbus, OH Dining
(67.8%) 8/29/96 $ 1,808,880 Corporation $ 191,259 $ 34.53
(F1) The property was vacated on January 31, 1997 and listed for
sale or lease.
The properties listed above with a partial ownership
percentage are owned with affiliates of the Partnership. The
remaining interest in the Arby's property is owned by AEI
Institutional Net Lease Fund `93. The remaining interests in the
Media Play and Garden Ridge retail stores are owned by AEI Net
Lease Income & Growth Fund XIX Limited Partnership and AEI Net
Lease Income & Growth Fund XX Limited Partnership. The remaining
interest in the Champp's Americana property is owned by AEI Real
Estate Fund XVIII Limited Partnership.
Each Partnership owns a separate, undivided interest in
the properties. No specific agreement or commitment exists
between the Partnerships as to the management of their respective
interests in the properties, and the Partnership that holds more
than a 50% interest does not control decisions over the other
Partnership's interest.
The initial Lease terms are 20 years. The Leases contain
renewal options which may extend the Lease term an additional 10
years for the Arby's, an additional 15 years for the Champp's,
and an additional 25 years for the Garden Ridge store.
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.
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 40 years. 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.
Through December 31, 1996, all properties were 100 percent
occupied by the lessees.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS.
As of December 31, 1996, there were 1,295 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. As of
December 31, 1996, the Partnership has not acquired any Units
from Limited Partners.
Cash distributions of $14,044 and $3,932 were made to the
General Partners and $1,390,389 and $389,320 were made to the
Limited Partners in 1996 and 1995, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined, and a partial return of contributed
capital. These distributions should not be compared with
dividends paid on capital stock by corporations.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
For the years ended December 31, 1996 and 1995, the
Partnership recognized rental income of $847,484 and $49,727,
respectively. During the same periods, the Partnership also
earned $494,269 and $213,672, respectively, in investment income
from subscription proceeds which were invested in short-term
money market accounts, commercial paper and federal agency notes.
This investment income constituted 37% and 81%, respectively, of
total income. The percentage of total income represented by
investment income declines as subscription proceeds are invested
in properties.
Musicland Group, Inc. (MGI), the lessee of the Media Play
retail store in Apple Valley, Minnesota has recently experienced
financial difficulties and has aggressively been restructuring
its organization. As part of the restructuring, the Partnership
and MGI reached an agreement in December, 1996 in which MGI would
buy out and terminate the Lease Agreement by making a payment of
$800,000, which is equal to approximately two years' rent. The
Partnership's share of such payment was $272,000. Under the
Agreement, MGI remained in possession of the property and
performed all of its obligations under the net lease agreement
through January 31, 1997 at which time it vacated the property
and made it available for re-let to another tenant. MGI was
responsible for all maintenance and management costs of the
property through January 31, 1997 after which date the
Partnership became responsible for its share of expenses
associated with the property until it is re-let or sold. A
specialist in commercial property leasing has been retained to
locate a new tenant for the property.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
During the years ended December 31, 1996 and 1995, the
Partnership paid Partnership administration expenses to
affiliated parties of $251,392 and $137,271, respectively. These
administration expenses include initial start-up costs and
expenses associated with processing distributions, reporting
requirements and correspondence to the Limited Partners. The
administrative expenses decrease after completion of the offering
and acquisition phases of the Partnership's operations. During
the same periods, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $27,171 and $6,909, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, insurance and other property costs.
The Partnership distributes all of its net income during
the offering and acquisition phases, and if net income after
deductions for depreciation is not sufficient to fund the
distributions, the Partnership may distribute other available
cash that constitutes capital for accounting purposes.
As of December 31, 1996, the Partnership's cash
distribution rate was 8.0% on an annualized basis. Distributions
of Net Cash Flow to the General Partners were 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.
Since the Partnership has only recently purchased its real
estate, inflation has had a minimal effect on income from
operations. The Leases contain cost of living increases to rent
which will result in an increase in rental income over the term
of the Leases. Inflation also may cause the Partnership's real
estate to appreciate in value. However, inflation and changing
prices may also have an adverse impact on the operating margins
of the properties' tenants which could impair their ability to
pay rent and subsequently reduce the Partnership's Net Cash Flow
available for distributions.
Liquidity and Capital Resources
The Partnership's primary sources of cash are from
proceeds from the sale of Units, investment income, rental income
and proceeds from the sale of property. Its primary uses of cash
are investment in real properties, payment of expenses involved
in the sale of units, the organization of the Partnership, the
acquisition of properties, the management of properties, the
administration of the Partnership, and the payment of
distributions.
The Limited Partnership Agreement of the Partnership
requires that no more than 15% of the proceeds from the sale of
Units be applied to expenses involved in the sale of Units
(including Commissions) and that such expenses, together with
acquisition expenses, not exceed 20% of the proceeds from the
sale of Units. As set forth under the caption "Estimated Use of
Proceeds" of the Prospectus, the General Partners anticipate that
14% of such proceeds will be applied to cover such expenses if
the maximum proceeds are obtained. To the extent organization
and offering expenses actually incurred exceed 15% of proceeds,
they are borne by the General Partners.
The Partnership Agreement requires that all proceeds from
the sale of Units be invested or committed to investment in
properties by the later of two years after the date of the
Prospectus or six months after termination of the offer and sale
of Units. While the Partnership is purchasing properties, cash
flow from investing activities (investment in real property) will
remain negative and will constitute the principal use of the
Partnership's available cash flow.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Before the acquisition of properties, cash flow from
operating activities is not significant. Net income, after
adjustment for depreciation, is lower during the first few years
of operations as administrative expenses remain high and a large
amount of the Partnership's assets remain invested on a short-
term basis in lower-yielding cash equivalents. Net income will
become the largest component of cash flow from operating
activities and the largest component of cash flow after the
completion of the acquisition phase.
During the offering of Units, the Partnership's primary
source of cash flow will be from the sale of Limited Partnership
Units. The Partnership offered for sale up to $24,000,000 of
limited partnership interests (the "Units") (24,000 Units at
$1,000 per Unit) pursuant to a registration statement effective
February 1, 1995. From February 1, 1995 to April 14, 1995, the
minimum number of Limited Partnership Units (1,500) needed to
form the Partnership were sold and on April 14, 1995, a total of
2,937.444 Units ($2,937,444) were transferred into the
Partnership. Through December 31, 1996, the Partnership raised a
total of $23,563,349 from the sale of 23,563.349 Units. On
January 31, 1997, the Partnership offering terminated when the
maximum subscription limit of 24,000 Limited Partnership Units
($24,000,000) was reached. From subscription proceeds, the
Partnership paid organization and syndication costs (which
constitute a reduction of capital) of $3,248,990.
On May 31, 1995, the Partnership purchased an 87.7193%
interest in an Arby's restaurant in Montgomery, Alabama for
$754,104. The property is leased to RTM Gulf Coast, Inc. under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $77,813. The remaining interest in the property was
purchased by AEI Institutional Net Lease Income Fund `93, an
affiliate of the Partnership.
On December 21, 1995, the Partnership purchased a 34.0%
interest in a Media Play retail store in Apple Valley, Minnesota
for $1,414,060. The property was leased to The Musicland Group,
Inc. under a Lease Agreement with a primary term of 18 years and
annual rental payments of $139,587. The remaining interest in
the property was purchased by AEI Net Lease Income & Growth Fund
XIX Limited Partnership and AEI Net Lease Income & Growth Fund XX
Limited Partnership, affiliates of the Partnership.
On March 28, 1996, the Partnership purchased a 40.75%
interest in a Garden Ridge store in Pineville, North Carolina for
$3,644,391. 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 XIX Limited
Partnership and AEI Net Lease Income & Growth Fund XX Limited
Partnership, affiliates of the Partnership.
On August 29, 1996, the Partnership purchased a 67.8%
interest in a Champp's Americana restaurant in Columbus, Ohio for
$1,808,880. The property is leased to Americana Dining
Corporation under a Lease Agreement with a primary term of 20
years and annual rental payments of $191,259. The remaining
interest in the property was purchased by AEI Real Estate Fund
XVIII Limited Partnership, an affiliate of the Partnership.
In August, 1996, the Partnership entered into an agreement
to purchase a Denny's restaurant in Covington, Louisiana. The
purchase price will be approximately $1,111,000. The property
will be leased to Huntington Restaurants Group, Inc. under a
Lease Agreement with a primary term of 20 years and annual rental
payments of approximately $125,000. Through December 31, 1996,
the Partnership had advanced $977,875 for the construction of the
property and was charging interest on the Note at the rate of
8.0%.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
In August, 1996, the Partnership entered into an agreement
to purchase a 93.1% interest in a Caribou Coffee store in
Charlotte, North Carolina. The purchase price will be
approximately $1,274,000. The property will be leased to Caribou
Coffee Company, Inc. under a Lease Agreement with a primary term
of 18 years and annual rental payments of approximately $146,000.
Through December 31, 1996, the Partnership had advanced $643,995
for the construction of the property and was charging interest on
the Note at the rate of 7.0%.
After completion of the acquisition phase, 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.
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. As of
December 31, 1996, the Partnership has not acquired any Units
from Limited Partners.
Until capital is invested in properties, the Partnership
will remain extremely liquid. At December 31, 1996, $10,770,705
or 54% of the Partnership's assets were in cash or cash
equivalents (including accrued interest receivable). After
completion of property acquisitions, the Partnership will attempt
to maintain a cash reserve of only approximately 1% of
subscription proceeds. Because properties are purchased for cash
and leased under triple-net leases, this is considered adequate
to satisfy most contingencies.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying index to financial statements.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report
Balance Sheet as of December 31, 1996 and 1995
Statements for the Years Ended December 31, 1996 and 1995:
Operations
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
INDEPENDENT AUDITOR'S REPORT
To the Partners:
AEI Income & Growth Fund XXI Limited Partnership
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI INCOME
& GROWTH FUND XXI LIMITED PARTNERSHIP (a Minnesota limited
partnership) as of December 31, 1996 and 1995 and the related
statements of income, 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 Income & Growth Fund XXI Limited Partnership as of
December 31, 1996 and 1995, and the results of its income and its
cash flows for the years then ended, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota
January 31, 1997 /s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Certified Public Accountants
<PAGE>
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1996 1995
CURRENT ASSETS:
Cash and Cash Equivalents $ 10,729,033 $ 8,367,460
Receivables 41,672 15,311
----------- -----------
Total Current Assets 10,770,705 8,382,771
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 2,541,511 751,086
Buildings and Equipment 5,079,924 1,417,078
Construction Advances 1,621,870 0
Property Acquisition Costs 245,726 17,905
Accumulated Depreciation (162,645) (11,687)
----------- -----------
Net Investments in Real Estate 9,326,386 2,174,382
----------- -----------
Total Assets $ 20,097,091 $ 10,557,153
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 132,900 $ 70,805
Distributions Payable 429,668 199,829
----------- -----------
Total Current Liabilities 562,568 270,634
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (9,754) (4,832)
Limited Partners, $1,000 Unit Value;
24,000 Units authorized; 23,563 and 12,290
Units issued and outstanding in 1996 and
1995, respectively 19,544,277 10,291,351
----------- -----------
Total Partners' Capital 19,534,523 10,286,519
----------- -----------
Total Liabilities and Partners' Capital $ 20,097,091 $ 10,557,153
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31
1996 1995
INCOME:
Rent $ 847,484 $ 49,727
Investment Income 494,269 213,672
----------- -----------
Total Income 1,341,753 263,399
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 251,392 137,271
Partnership Administration and Property
Management - Unrelated Parties 27,171 6,909
Depreciation 150,958 11,687
----------- -----------
Total Expenses 429,521 155,867
----------- -----------
NET INCOME $ 912,232 $ 107,532
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 9,122 $ 1,075
Limited Partners 903,110 106,457
----------- -----------
$ 912,232 $ 107,532
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(17,439 and 6,896 weighted average Units
outstanding in 1996 and 1995, respectively) $ 51.79 $ 15.44
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 912,232 $ 107,532
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 150,958 11,687
Increase in Receivables (26,361) (15,311)
Increase in Payable to AEI
Fund Management, Inc. 62,095 67,904
----------- -----------
Total Adjustments 186,692 64,280
----------- -----------
Net Cash Provided By
Operating Activities 1,098,924 171,812
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (7,302,962) (2,186,069)
----------- -----------
Net Cash Used For
Investing Activities (7,302,962) (2,186,069)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions from Limited Partners 11,273,543 12,289,806
Organization and Syndication Costs (1,533,338) (1,715,652)
Increase in Distributions Payable 229,839 199,829
Distributions to Partners (1,404,433) (393,252)
----------- -----------
Net Cash Provided By
Financing Activities 8,565,611 10,380,731
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,361,573 8,366,474
CASH AND CASH EQUIVALENTS,
beginning of period 8,367,460 986
----------- -----------
CASH AND CASH EQUIVALENTS,
end of period $ 10,729,033 $ 8,367,460
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND XXI 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, 1994 $ (1,915) $ 0 $ (1,915) 0
Capital Contributions 0 12,289,806 12,289,806 12,289.81
Organization &
Syndication Costs (60) (1,715,592) (1,715,652)
Distributions (3,932) (389,320) (393,252)
Net Income 1,075 106,457 107,532
--------- ----------- ----------- ----------
BALANCE, December 31, 1995 (4,832) 10,291,351 10,286,519 12,289.81
Capital Contributions 0 11,273,543 11,273,543 11,273.54
Organization &
Syndication Costs 0 (1,533,338) (1,533,338)
Distributions (14,044) (1,390,389) (1,404,433)
Net Income 9,122 903,110 912,232
--------- ----------- ----------- ----------
BALANCE, December 31, 1996 $ (9,754) $19,544,277 $19,534,523 23,563.35
========= =========== =========== ==========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(1) Organization -
AEI Income & Growth Fund XXI Limited Partnership
(Partnership) was formed to acquire and lease commercial
properties to operating tenants. The Partnership's
operations are managed by AEI Fund Management XXI, 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. Under the terms of the
Restated Limited Partnership Agreement, 24,000 Limited
Partnership Units are available for subscription which, if
fully subscribed, will result in contributed Limited
Partners' capital of $24,000,000. The Partnership commenced
operations on April 14, 1995 when minimum subscriptions of
1,500 Limited Partnership Units ($1,500,000) were accepted.
Through December 31, 1996, the Partnership raised a total of
$23,563,349 from the sale of 23,563.349 Units. On January
31, 1997, the Partnership offering terminated when the
maximum subscription limit of 24,000 Limited Partnership
Units ($24,000,000) was reached. The General Partners have
contributed capital of $1,000.
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 10% 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.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(1) Organization - (Continued)
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 99% to the Limited Partners and 1% to the General
Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of the Partnership's property will be
allocated in accordance with the Partnership Agreement as
follows: (i) first, to those partners with deficit balances
in their capital accounts in an amount equal to the sum of
such deficit balances; (ii) second, 99% to the Limited
Partners and 1% to the General Partners until the aggregate
balance in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital Contributions
plus an amount equal to 10% 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.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(2) Summary of Significant Accounting Policies - (Continued)
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.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents 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 or will be leased under
long-term 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 rental increases based
on cost of living increases, the increases are recognized
in the year in which they are effective.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(2) Summary of Significant Accounting Policies - (Continued)
Real estate is recorded at the lower of cost or estimated
net realizable value. The Financial Accounting Standards
Board issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" which is effective for the
Partnership's fiscal year ended December 31, 1996. This
standard requires the Partnership to compare 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 Statement requires the Partnership to
recognize an impairment loss by the amount by which the
carrying amount of the property exceeds the fair value of
the property. Adoption of this Statement did not have a
material effect on the Partnership's financial
statements.
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs will be
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 25
years and 5 years, respectively.
(3) Related Party Transactions -
On May 31, 1995, the Partnership acquired a 87.7193%
interest in an Applebee's restaurant in Montgomery, Alabama.
The remaining interest in the property is owned by AEI
Institutional Net Lease Fund '93, an affiliate of the
Partnership. On December 21, 1995, the Partnership acquired
a 34.0% interest in a Media Play retail store in Apple
Valley, Minnesota. On March 28, 1996, the Partnership
acquired a 40.75% interest in a Garden Ridge retail store in
Pineville, North Carolina. The remaining interests in the
Media Play and Garden Ridge stores are owned by AEI Net
Lease Income & Growth Fund XIX Limited Partnership and AEI
Net Lease Income & Growth Fund XX Limited Partnership,
affiliates of the Partnership. On August 29, 1996, the
Partnership acquired a 67.8% interest in a Champp's
Americana restaurant in Columbus, Ohio. The remaining
interest in the property is owned by AEI Real Estate Fund
XVIII Limited Partnership, an affiliate of the Partnership.
Each Partnership owns a separate, undivided interest in the
property. No specific agreement or commitment exists
between the Partnerships as to the management of their
respective interests in the property, and the Partnership
that holds more than a 50% interest does not control
decisions over the other Partnership's interest. The
financial statements reflect only this Partnership's
percentage share of the properties' land, building and
equipment, liabilities, revenues and expenses.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(3) Related Party Transactions - (Continued)
AFM, AEI and AEI Incorporated (AEI Inc.) received the
following compensation and reimbursements for costs and
expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 31
1996 1995
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. $ 251,392 $ 137,271
=========== ===========
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, outside audit and accounting
costs, insurance and other property costs. $ 27,171 $ 6,909
=========== ===========
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 $144,315 and $85,298
for 1996 and 1995, respectively. $ 355,817 $ 26,514
=========== ===========
d.AEI Inc. was the underwriter of the Partnership
offering. Robert P. Johnson is the sole stockholder
of AEI Inc., which is a member of the National
Association of Securities Dealers, Inc. AEI Inc.
received, as underwriting commissions 8% for sale
of certain subscription Units ($80 per unit sold, of
which it re-allowed up to $80 per unit to other
participating broker/dealers). AEI Inc. also received
a 2% non-accountable expense allowance for all Units
it sold through broker/dealers. These costs are
treated as a reduction of partners' capital. $ 1,127,354 $ 1,228,981
=========== ===========
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(3) Related Party Transactions - (Continued)
Total Incurred by the Partnership
for the Years Ended December 31
1996 1995
e.AEI is reimbursed for all costs incurred in
connection with managing the Partnership's
offering and organization. $ 211,471 $ 139,300
=========== ===========
f.AEI is reimbursed for all expenses it has paid
on the Partnership's behalf relating to the
offering and organization of the Partnership.
These expenses included printing costs, legal
and filing fees, direct administrative costs,
underwriting costs and due diligence fees. $ 194,513 $ 347,371
=========== ===========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a, b, c, e and f.
This balance is non-interest bearing and unsecured and is to
be paid in the normal course of business.
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through non-cancelable 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 20 years except
for the Media Play store discussed below. The Leases
contain renewal options which may extend the Lease term an
additional 10 years for the Arby's, an additional 15 years
for the Champp's restaurant and 25 years for the Garden
Ridge store. The Leases contain rent clauses which entitle
the Partnership to receive additional rent in future years
based on stated rent increases. 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.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(4) Investments in Real Estate - (Continued)
The Partnership's properties are commercial, single-tenant
buildings and were constructed and acquired in 1995 and
1996. There have been no costs capitalized as improvements
subsequent to the acquisitions.
The cost of the property and related accumulated
depreciation at December 31, 1996 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Arby's
Montgomery, AL $ 328,310 $ 425,794 $ 754,104 $ 26,967
Media Play
Apple Valley, MN 422,776 991,284 1,414,060 43,787
Garden Ridge
Pineville, NC 1,181,253 2,463,138 3,644,391 73,894
Champp's
Columbus, OH 609,172 1,199,708 1,808,880 17,997
----------- ----------- ----------- -----------
$ 2,541,511 $ 5,079,924 $ 7,621,435 $ 162,645
=========== =========== =========== ===========
On May 31, 1995, the Partnership purchased an 87.7193%
interest in an Arby's restaurant in Montgomery, Alabama for
$754,104. The property is leased to RTM Gulf Coast, Inc.
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $77,813. The remaining interest
in the property was purchased by AEI Institutional Net Lease
Income Fund `93, an affiliate of the Partnership.
On December 21, 1995, the Partnership purchased a 34.0%
interest in a Media Play retail store in Apple Valley,
Minnesota for $1,414,060. The property was leased to The
Musicland Group, Inc. under a Lease Agreement with a primary
term of 18 years and annual rental payments of $139,587.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(4) Investments in Real Estate - (Continued)
In December, 1996, the Partnership and MGI reached an
agreement in which MGI would buy out and terminate the Lease
Agreement by making a payment of $800,000, which is equal to
approximately two years' rent. The Partnership's share of
such payment was $272,000. 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.
On March 28, 1996, the Partnership purchased a 40.75%
interest in a Garden Ridge store in Pineville, North
Carolina for $3,644,391. 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.
On August 29, 1996, the Partnership purchased a 67.8%
interest in a Champp's Americana restaurant in Columbus,
Ohio for $1,808,880. The property is leased to Americana
Dining Corporation under a Lease Agreement with a primary
term of 20 years and annual rental payments of $191,259.
In August, 1996, the Partnership entered into an agreement
to purchase a Denny's restaurant in Covington, Louisiana.
The purchase price will be approximately $1,111,000. The
property will be leased to Huntington Restaurants Group,
Inc. under a Lease Agreement with a primary term of 20 years
and annual rental payments of approximately $125,000.
Through December 31, 1996, the Partnership had advanced
$977,875 for the construction of the property and was
charging interest on the Note at the rate of 8.0%.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(4) Investments in Real Estate - (Continued)
In August, 1996, the Partnership entered into an agreement
to purchase a 93.1% interest in a Caribou Coffee store in
Charlotte, North Carolina. The purchase price will be
approximately $1,274,000. The property will be leased to
Caribou Coffee Company, Inc. under a Lease Agreement with a
primary term of 18 years and annual rental payments of
approximately $146,000. Through December 31, 1996, the
Partnership had advanced $643,995 for the construction of
the property and was charging interest on the Note at the
rate of 7.0%.
The Partnership has incurred net costs of $382,331 relating
to the review of potential property acquisitions. Of these
costs, $136,605 have been capitalized and allocated to land,
building and equipment. The remaining costs of $245,726
have been capitalized and will be allocated to properties
acquired subsequent to December 31, 1996.
The minimum future rentals on the non-cancelable Leases for
years subsequent to December 31, 1996 are as follows:
1997 $ 666,534
1998 656,097
1999 657,310
2000 658,541
2001 659,791
Thereafter 9,509,668
-----------
$12,807,941
===========
There were no contingent rents recognized in 1996 or 1995.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(5) 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:
1996 1995
Tenants Industry
RTM Gulf Coast, Inc. Restaurant $ N/A $ 45,600
The Musicland Group, Inc. Retail 411,587 N/A
Garden Ridge, L.P. Retail 292,109 N/A
--------- ----------
Aggregate rent revenue of major tenants $ 703,696 $ 45,600
========= ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 83% 92%
========== ==========
(6) Partners' Capital -
Cash distributions of $14,044 and $3,932 were made to the
General Partners and $1,390,389 and $389,320 were made to
the Limited Partners for the years ended December 31, 1996
and 1995, respectively. The Limited Partners' distributions
represent $79.73 and $56.46 per Limited Partnership Unit
outstanding using 17,439 and 6,896 weighted average Units in
1996 and 1995, respectively. The distributions represent
$51.79 and $15.44 per Unit of Net Income and $27.94 and
$41.02 per Unit of return of contributed capital in 1996 and
1995, respectively.
Distributions of Net Cash Flow to the General Partners
during 1996 and 1995 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.
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. As of December 31, 1996, the Partnership has
not acquired any Units from Limited Partners.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(7) 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:
1996 1995
Net Income for Financial
Reporting Purposes $ 912,232 $ 107,532
Depreciation for Tax Purposes
Under Depreciation for Financial
Reporting Purposes 44,454 2,963
Capitalized Start-Up Costs
Under Section 195 190,838 136,112
Amortization of Start-Up and
Organization Costs (12,232) (1,026)
----------- -----------
Taxable Income to Partners $ 1,135,292 $ 245,581
=========== ===========
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(7) 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:
1996 1995
Partners' Capital for
Financial Reporting Purposes $ 19,534,523 $ 10,286,519
Depreciation for Tax Purposes
Under Depreciation for Financial
Reporting Purposes 47,417 2,963
Capitalized Start-Up Costs
Under Section 195 329,865 139,027
Amortization of Start-Up and
Organization Costs (13,258) (1,026)
Organization and Syndication Costs
Treated as Reduction of Capital
for Financial Reporting Purposes 3,186,033 1,653,174
----------- -----------
Partners' Capital for
Tax Reporting Purposes $ 23,084,580 $ 12,080,657
=========== ===========
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(8) 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:
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 544 $ 544 $ 501 $ 501
Money Market Funds 5,750,781 5,750,781 4,391,699 4,391,699
Commercial Paper
(held to maturity) 4,977,708 4,977,708 1,989,796 1,989,796
Federal Agency Notes
(held to maturity) 0 0 1,985,464 1,985,464
----------- ----------- ----------- -----------
Total Cash and
Cash Equivalents $10,729,033 $10,729,033 $ 8,367,460 $ 8,367,460
=========== =========== =========== ===========
The amortized cost basis of the commercial paper and federal
agency notes, is not materially different from its carrying
amount or 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 52, is Chief Executive Officer,
President and Director and has held these positions since the
formation of AFM in August, 1994, and has been elected to
continue in these positions until August, 1997. 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
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 fifteen other limited partnerships.
Mark E. Larson, age 44, is Executive Vice President,
Secretary, Treasurer and Chief Financial Officer and has held
these positions since the formation of AFM in August, 1994, and
has been elected to continue in these positions until August,
1997. 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.
AFM, the Managing General Partner of the registrant, and
Robert P. Johnson, its Individual General Partner, contributed
$1,000 in total for their interest in the registrant. See Item 1
for a discussion of their share of the registrant's profits and
losses. Neither the General Partners nor their affiliates have
purchased Limited Partnership 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, 1996.
Person or Entity Amount Incurred From
Receiving Form and Method Inception (August 31, 1994)
Compensation of Compensation To December 31, 1996
AEI Incorporated Selling Commissions equal to $ 2,356,335
8% of proceeds plus a 2%
nonaccountable expense allowance,
most of which was reallowed to
Participating Dealers.
General Partners Reimbursement at Cost for other $ 892,655
and Affiliates Organization and Offering Costs.
General Partners Reimbursement at Cost for all $ 382,331
and Affiliates Acquisition Expenses
General Partners 1% of Net Cash Flow in any fiscal $ 17,976
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 Reimbursement at Cost for all $ 391,441
and 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.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Continued)
Person or Entity Amount Incurred From
Receiving Form and Method Inception (August 31, 1994)
Compensation of Compensation To December 31, 1996
General Partners 1% of distributions of Net $ 0
Proceeds 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 thereafter.
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, 1996, 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 SB-2 filed
with the Commission on October 10, 1994
[File No. 33-85076C]).
3.2 Restated Limited Partnership
Agreement to the Prospectus (incorporated
by reference to Exhibit A of Amendment No.
2 of the registrant's Registration
Statement on Form SB-2 filed with the
Commission on January 20, 1995 [File No. 33-
85076C]).
10.1 Form of Impoundment
Agreement with Fidelity Bank (incorporated
by reference to Exhibit 10.1 of the
registrant's Registration Statement on Form
SB-2 filed with the Commission on October
10, 1994 [File No. 33-85076C]).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.2 Sale and Leaseback Financing
Commitment dated April 6, 1995, between the
Partnership and RTM Gulf Coast, Inc.,
relating to the property at 2719 Zelda
Road, Montgomery, Alabama (incorporated by
reference to Exhibit 10.1 of Post-Effective
Amendment No. 1 to Form SB-2 filed with the
Commission on May 12, 1995).
10.3 Net Lease Agreement dated
May 31, 1995, between the Partnership and
RTM Gulf Coast, Inc., relating to the
property at 2719 Zelda Road, Montgomery,
Alabama (incorporated by reference to
Exhibit A of Form 8-K filed with the
Commission on June 14, 1995).
10.4 Net Lease Agreement dated
December 21, 1995 between the Partnership,
AEI Net Lease Income & Growth Fund XIX
Limited Partnership, AEI Net Lease Income &
Growth Fund XX Limited Partnership and The
Musicland Group, Inc., relating to the
property at 7370 W. 153rd Street, Apple
Valley, Minnesota (incorporated by
reference to Exhibit A of Form 8-K filed
with the Commission on January 4, 1996).
10.5 Sale and Leaseback Financing
Commitment dated September 5, 1995 between
AEI Fund Management, Inc. and Americana
Dining Corporation relating to the property
at 161 E. Campus View Boulevard, Columbus,
Ohio (incorporated by reference to Exhibit
10.4 of Post-Effective Amendment No. 4 to
Form SB-2 filed with the Commission on
January 16, 1996).
10.6 Amendment to Sale and
Leaseback Financing Commitment dated
November 30, 1995 between AEI Fund
Management, Inc., Americana Dining
Corporation, AEI Real Estate Fund XVIII
Limited Partnership, and the Partnership
relating to the property at 161 E. Campus
View Boulevard, Columbus, Ohio
(incorporated by reference to Exhibit 10.5
of Post-Effective Amendment No. 4 to Form
SB-2 filed with the Commission on January
16, 1996).
10.7 Purchase and Sale Agreement
dated January 10, 1996 between the
Partnership, AEI Net Lease Income & Growth
Fund XIX Limited Partnership, AEI Net Lease
Income & Growth Fund XX Limited
Partnership, and TKCX, LLC relating to the
Garden Ridge store in Pineville, North
Carolina (incorporated by reference to
Exhibit 10.6 of Post-Effective Amendment
No. 4 to Form SB-2 filed with the
Commission on January 16, 1996).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.8 Purchase and Sale/Leaseback
Agreement dated November 16, 1995 between
the Partnership, AEI Net Lease Income &
Growth Fund XIX Limited Partnership, AEI
Net Lease Income & Growth Fund XX Limited
Partnership and The Musicland Group, Inc.
relating to the property at 7370 W. 153rd
Street, Apple Valley, Minnesota
(incorporated by reference to Exhibit 10.8
of Form 10-KSB filed with the Commission on
March 15, 1996).
10.9 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).
10.10 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 10.2
of Form 8-K filed with the Commission on
April 10, 1996).
10.11 Assignment and
Assumption of Lease dated March 28, 1996
between the Partnership, AEI Net Lease
Income & Growth Fund XIX 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 10.3
of Form 8-K filed with the Commission on
April 10, 1996).
10.12 Net Lease Agreement
dated August 29, 1996 between the
Partnership, AEI Real Estate Fund XVIII
Limited Partnership and Americana Dining
Corporation relating to the property at 161
E. Campus View Boulevard, Columbus, Ohio
(incorporated by reference to Exhibit 10.3
of Form 8-K filed with the Commission on
September 12, 1996).
10.13 Construction Loan
Commitment dated March 29, 1996 between AEI
Fund Management, Inc. and Huntington
Restaurants Group, Inc. relating to the
construction of a Denny's restaurant in
Covington, Louisiana (incorporated by
reference to Exhibit 10.11 of Post-
Effective Amendment #8 to Form SB-2
Registration Statement filed with the
Commission on August 14, 1996).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.14 Purchase and Leaseback
Commitment dated March 29, 1996 between AEI
Fund Management, Inc. and Huntington
Restaurants Group, Inc. relating to the
sale and leaseback of a Denny's restaurant
in Covington, Louisiana (incorporated by
reference to Exhibit 10.12 of Post-
Effective Amendment #8 to Form SB-2
Registration Statement filed with the
Commission on August 14, 1996).
10.15 Assignment of
Construction Loan Commitment and Sale and
Leaseback Financing Commitment dated August
8, 1996, concerning those documents with
Huntington Restaurants Group, Inc. and AEI
Fund Management, Inc., to the Partnership,
relating to the sale and leaseback of a
Denny's restaurant in Covington, Louisiana
(incorporated by reference to Exhibit 10.13
of Post-Effective Amendment #8 to Form SB-2
Registration Statement filed with the
Commission on August 14, 1996).
10.16 Construction Loan
Commitment dated June 28, 1996 between AEI
Fund Management, Inc. and Caribou Coffee
Company, Inc. relating to the construction
of a Caribou Coffee store at East Boulevard
and Garden Terrace in Charlotte, North
Carolina (incorporated by reference to
Exhibit 10.14 of Post-Effective Amendment
#8 to Form SB-2 Registration Statement
filed with the Commission on August 14,
1996).
10.17 Sale and Leaseback
Financing Commitment dated June 28, 1996
between AEI Fund Management, Inc. and
Caribou Coffee Company, Inc. relating to
the sale and leaseback of a Caribou Coffee
store at East Boulevard and Garden Terrace
in Charlotte, North Carolina (incorporated
by reference to Exhibit 10.15 of Post-
Effective Amendment #8 to Form SB-2
Registration Statement filed with the
Commission on August 14, 1996).
10.18 Assignment of
Construction Loan Commitment and Sale and
Leaseback Financing Commitment dated August
8, 1996, concerning those documents with
Caribou Coffee store and AEI Fund
Management, Inc. to the Partnership,
relating to the sale and leaseback of a
Caribou Coffee store at East Boulevard and
Garden Terrace in Charlotte, North Carolina
(incorporated by reference to Exhibit 10.16
of Post-Effective Amendment #8 to Form SB-2
Registration Statement filed with the
Commission on August 14, 1996).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.19 Surrender and
Termination of Lease Agreement dated
November 22, 1996 between the Partnership,
AEI Net Lease Income & Growth Fund XIX
Limited Partnership, AEI Net Lease Income &
Growth Fund XX Limited Partnership and The
Musicland Group, Inc. relating to the
property at 7370 W. 153rd Street, Apple
Valley, Minnesota.
27 Financial Data Schedule for
year ended December 31, 1996.
B. Reports on Form 8-K - 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 INCOME & GROWTH FUND XXI
Limited Partnership
By: AEI Fund Management XXI, Inc.
Its Managing General Partner
March 6, 1997 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 6, 1997
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 6, 1997
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
SURRENDER AND TERMINATION OF LEASE AGREEMENT (#8228)
THIS AGREEMENT made this 22nd day of November, 1996, by and
between AEI NET LEASE INCOME AND GROWTH FUND XIX LIMITED
PARTNERSHIP, a Minnesota limited partnership, AEI NET LEASE
INCOME AND & GROWTH FUND XX LIMITED PARTNERSHIP, a Minnesota
limited partnership, and AEI INCOME & GROWTH FUND XXI
LIMITED PARTNERSHIP, a Minnesota limited partnership, each
having its principal place of business at 1300 Minnesota
World Trade Center, 30 East 7th Street, St. Paul, MN 55101
(hereinafter collectively called "Landlord") and the
Musicland Group, Inc., a Delaware corporation and Media
Play, Inc., a Delaware corporation, each having an office
10400 Yellow Circle Drive, Minnetonka, Minnesota 55343
(hereinafter collectively called "Tenant").
WITNESSETH:
WHEREAS, Landlord and The Musicland Group, Inc. entered
into that certain written Lease Agreement dated December 21,
1995 (hereinafter referred to as the "Lease") demising
certain premises containing approximately 48,944 square feet
located in the City of Apple Valley and State of Minnesota
(hereinafter referred to as the "Premises") and more
particularly described in said Lease; and
WHEREAS, The Musicland Group, Inc. assigned its
interest in the Lease to Media Play, Inc. pursuant to that
certain Assignment and Assumption of Lease Agreement dated
December 21, 1995; and
WHEREAS, Landlord and Tenant hereby mutually desire and
intend to terminate, cancel, and surrender said Lease and
any and all Agreements with respect to the Premises,
conditioned upon the faithful observation of the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the above premises
which by this reference are incorporated herein, the mutual
covenants and conditions contained herein and other good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Landlord and Tenant hereby agree as
follows:
1. (a) The Lease shall be terminated on January 31,
1997 (the "Termination Date"). Tenant shall cease doing
business in the Premises and vacate the Premises on or
before the Termination Date and as of the Termination Date,
Tenant shall surrender the possession of the Premises to
Landlord and relinquish any claim of a right of possession
of said Premises as if the Termination Date were originally
set forth in the Lease as the termination of the term
therein and the parties hereto agree that the Lease shall be
terminated and canceled as of the Termination Date. Tenant,
as of the Termination Date, relinquishes and waives any
right of redemption, statutory or otherwise, including but
not limited to such rights of redemption as set forth in MSA
Sec. 504.02. All rental obligations pursuant to the Lease
(including but not limited to accrued but unpaid year end
adjustments to additional rent charges) shall cease as of
the Termination Date. Within five (5) business days after
Tenant receives a fully-executed copy of this Agreement, to
make the foregoing binding upon the Landlord, Tenant shall
deliver to Landlord's offices (by messenger, overnight mail
or wire transfer) good funds in the amount of Eight Hundred
Thousand and No/100 Dollars ($800,000.00) as a Termination
Fee which shall thereafter release Tenant from all
liabilities arising under the Lease, subject to Tenant's
obligations hereunder.
(b) Tenant shall make all payments of rent and
other charges due under the Lease for the months of December
1996 and January 1997 on December 1, 1996 and January 1,
1997 respectively.
(c) Tenant represents and warrants to Landlord
that all real estate taxes due and owing for the calendar
year 1996 have been paid in full. Together with the January
1, 1997 rent payment, Tenant shall pay an amount equal to
$16,130.00 as a good faith estimate of its prorate share of
real estate taxes for 1997. There shall be no adjustments
in the event that the actual real estate taxes for 1997 are
different than currently anticipated.
2. Tenant agrees to vacate the Premises no later than
the Termination Date. Tenant shall leave the Premises in
broom clean condition and in the same condition as the
Premises were accepted in at commencement of the Lease,
subject to ordinary wear and tear. Landlord may conduct an
inspection of the Premises on January 31, 1997 and may, by
written notice to Tenant delivered no later than 5:00 P.M.
on February 7, 1997, reserve any claim that Landlord may
have for Tenant's violation of the foregoing sentence.
Failure of Landlord to deliver said reservation of claim in
writing to Tenant by said date shall be deemed conclusive
evidence that no such claims have been reserved. Subject to
the foregoing, on the Termination Date. Landlord shall
accept delivery and surrender of the Premises in "as-is"
condition and agrees that Tenant's obligations under said
Lease are thereafter terminated.
3. Subject to Paragraph 11 below, said Lease is
hereby terminated and canceled as of the Termination Date
and Landlord and Tenant shall be mutually released from any
and all further and past liability and obligations
thereunder. Further, Landlord and Tenant covenant that all
obligations of the part of the other party, including but
not limited to past and/or future rent, all other sums due
or accrued under the Lease have been satisfied as of the
date of this Agreement neither party has any further
liability to the other party as a result of said Lease
Agreement except pursuant to the terms of this Surrender and
Termination Agreement.
4. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their respective
successors and assigns.
5. Subject to Paragraph 11 below, Landlord and Tenant
do hereby mutually release and discharge each of the other
and its employees, officers and directors (both past and
present), agents, heirs, successors, assigns, and personal
representatives from all claims, demands, and causes of
action of every kind, nature and character whatsoever,
whether known or unknown, suspected or unsuspected, which
each of them may have now or hereafter have, or claim to
have against the other, by reason of any act, thing or
matter up to the date of this Agreement.
6. The parties hereby warrant and represent to each
other that there are no other parties who have any interest
in the Lease, the rent nor any other charges payable
thereunder, nor any interest in the Premises or the building
in which the Demised Premises are located, including any
interest therein as mortgagee, which interest could
otherwise nullify the purpose and intent of this Agreement,
and all such parties with any such interest are either
parties to the Surrender and Termination Agreement, or their
consent to the Surrender and Termination Agreement is not
required under any instrument.
7. Other than the Memorandum of Lease dated March 18,
1996 and filed April 18, 1996, Tenant hereby warrants and
represents to Landlord that Tenant has not done or suffered
anything to be done nor will tenant in the future do
anything whereby the Premises or the title thereto have been
or will be encumbered in any way whatsoever, nor has Tenant
caused, permitted, or suffered any such lien or encumbrance
to accrue.
8. The parties have read this Agreement and the
mutual release contained therein, and upon the advice of
counsel, they have freely and voluntarily entered into the
Agreement. If either party commences an action against the
other party arising out of or in connection with this
Agreement, the prevailing party shall be entitled to recover
from the losing party all reasonable attorney's fees and
costs of suit.
9. This Agreement sets forth all terms, conditions,
and understandings between the parties, and there are no
terms, conditions or understandings, either oral or written,
between said parities other than as set forth herein. No
alteration, amendment, change or addition to this Agreement
shall be binding unless reduced to writing and signed by
each of the parties hereto.
10. In the event this document has not been executed
by both Landlord and Tenant (such that each party is in
receipt of at least one (1) original fully-executed
counterpart) on or before November 22, 1996, this Agreement
shall be null and void.
11. Notwithstanding anything to the contrary contained
in this Agreement Landlord expressly reserves any rights it
may have in connection with:
(i) obligations of Tenant under this Agreement,
including but not limited to the obligation to make payments
of rent due on December 1, 1996 and rent and 1/12th of the
estimated real estate taxes for 1997 on January 1, 1997 and
obligations to deliver the Premises in accordance with the
provisions of Paragraph 2 above;
(ii) obligations of Tenant regarding hazardous
materials in the Lease;
(iii) obligations of Tenant in connection with its
representations and warranties contained in Paragraphs 1(c)
and 7 hereof;
(iv) obligations of Tenant under the Lease to keep the
Premises free and clear of all liens and encumbrances;
(v) obligations of Tenant under the Lease to indemnify
and hold Landlord harmless from any and all loss, damage,
costs, or expenses arising out of claims of third parties
alleging damage to persons or property for acts occurring on
or prior to the Termination Date;
(vi) obligation of Tenant to maintain the insurance
required in the Lease through the Termination Date and
rights of Landlord to the application of insurance proceeds
and condemnation proceeds under the Lease. In this regard,
Tenant agrees that any insurance proceeds payable in the
event of damage or destruction to the Leased Premises and
Improvements owned by Landlord on or prior to the
Termination Date (even if such proceeds shall be paid after
the Termination Date) shall belong solely to Landlord, and
Tenant agrees to cooperate with Landlord to obtain such
proceeds from Tenant's insurers in the event of a claim
therefore; and
(vii) any third party warranties and the
enforcement thereof by or through Tenant respecting roof,
HVAC, electrical, and structure of the Improvements on the
Leased Premises constructed on behalf of Tenant. In this
regard, Tenant agrees to provide an assignment of any such
warranties known to Tenant, and to cooperate with Landlord
in the assertion of any claim under such warranties (all at
no cost and expense to Tenant).
(viii)obligations of Tenant under the Lease to comply
or be in compliance, at or prior to the Termination Date,
with applicable laws, rules, or regulations of governmental
authorities, which failure to so comply results in loss,
damage, cost or expense to Landlord, provided that Tenant
had actual knowledge of any such failure to comply prior to
the termination date [changed to conform to the facts /s/
GAR], and further provided that any claims of Landlord under
this subsection (viii) must be made prior to March 31, 1997.
12. Within five (5) business days after Tenant
receives a fully-executed copy of this Agreement, Tenant
shall executed and deliver to Landlord's attorney, Michael
B. Daugherty, at 1300 Minnesota World Trade Center, 30 East
Seventh Street, Saint Paul, Minnesota 55101, a Quit Claim
Deed in recordable form, which shall be held in escrow until
the Termination Date.
IN WITNESS WHEREOF, the parties have signed, sealed and
delivered the instrument on the date first written above.
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
By: AEI FUND MANAGEMENT XIX, INC.
By: /s/ Robert P Johnson
Robert P. Johnson, President
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
By: AEI FUND MANAGEMENT XX, INC.
By: /s/ Robert P Johnson
Robert P. Johnson, President
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
By: AEI FUND MANAGEMENT XXI, INC.
By: /s/ Robert P Johnson
Robert P. Johnson, President
MEDIA PLAY, INC.
("Tenant")
By: /s/ Gary A. Ross
Gary A. Ross
President, Superstores Division
THE MUSICLAND GROUP, INC.
(Tenant")
By: /s/ Reid Johnson
Reid Johnson
Executive Vice President
And CFO
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000931755
<NAME> AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 10,729,033
<SECURITIES> 0
<RECEIVABLES> 41,672
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,770,705
<PP&E> 9,489,031
<DEPRECIATION> (162,645)
<TOTAL-ASSETS> 20,097,091
<CURRENT-LIABILITIES> 562,568
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,534,523
<TOTAL-LIABILITY-AND-EQUITY> 20,097,091
<SALES> 0
<TOTAL-REVENUES> 1,341,753
<CGS> 0
<TOTAL-COSTS> 429,521
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 912,232
<INCOME-TAX> 0
<INCOME-CONTINUING> 912,232
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 912,232
<EPS-PRIMARY> 51.79
<EPS-DILUTED> 51.79
</TABLE>
