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, 1997
Commission file number: 0-29274
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, 1997 were
$1,513,094.
As of February 28, 1998, there were 23,794.57 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 $23,794,570.
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. 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, 1997 from subscription proceeds,
the Partnership had purchased nine properties including partial
interests in six properties, at a total cost of $16,401,184. 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 may be granted options to purchase
properties after a specified portion of the lease term has
elapsed. The Partnership expects to sell some or all of its
properties prior to its final liquidation and to reinvest the
proceeds from such sales in additional properties. The
Partnership reserves the right, at the discretion of the General
Partners, to either distribute proceeds from the sale of
properties to the Partners or to reinvest such proceeds in
additional properties, provided that sufficient proceeds are
distributed to the Limited Partners to pay federal and state
income taxes related to any taxable gain recognized as a result
of the sale. It is anticipated that the Partnership will
commence liquidation through the sale of its remaining properties
twelve to fifteen years after its formation, although final
liquidation may be delayed by a number of circumstances,
including market conditions and seller financing of properties.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Leases
Although there are variations in the specific terms of the
leases, the following is a summary of the general terms of the
Partnership's leases. The properties are leased to various
tenants under triple net leases, which are classified as
operating leases. Under a triple net lease, the lessee is
responsible for all real estate taxes, insurance, maintenance,
repairs and operating expenses for the property. The initial
lease terms are for 18 to 20 years. The leases provide for base
annual rental payments, payable in monthly installments, and
contain rent clauses which entitle the Partnership to receive
additional rent in future years based on stated rent increases.
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 Fund '93 Limited
Partnership, 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 was 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 January31, 1997 after
which date the Partnership became responsible for its share of
expenses associated with the property until it is re-let or sold.
A specialist in commercial property leasing has been retained to
locate a new tenant for the property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of the
Partnership's interest in the Media Play was approximately
$748,000. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $580,200 was recognized, which is
the difference between the book value at December 31, 1997 of
$1,328,200 and the estimated market value of $748,000. The
charge was recorded against the cost of the land, building and
equipment.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
On March 28, 1996, the Partnership purchased a 40.75%
interest in a Garden Ridge retail 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 Champps 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.
On March 14, 1997, the Partnership purchased a parcel of
land in San Antonio, Texas for $1,032,299. The land is leased to
Champps Americana, Inc. (Champps) under a Lease Agreement with a
primary term of 20 years and annual rental payments of $83,451.
Effective September 9, 1997, the annual rent was increased to
$128,156. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement under
which the Partnership advanced funds to Champps for the
construction of a Champps Americana restaurant on the site.
Initially, the Partnership charged interest on the advances at a
rate of 7.0%. Effective September 9, 1997, the interest rate was
increased to 10.75%. On December 23, 1997, after the development
was completed, the Lease Agreement was amended to require annual
rental payments of $296,023. Total acquisition costs, including
the cost of the land, were $2,833,357.
On March 19, 1997, the Partnership purchased a Denny's
restaurant in Covington, Louisiana for $1,304,949. The property
is leased to Huntington Restaurants Group, Inc. under a Lease
Agreement with a primary term of 20 years and annual rental
payments of $141,243.
On April 21, 1997, the Partnership purchased a 49.6%
interest in a parcel of land in Schaumburg, Illinois for
$876,387. The land is leased to Champps under a Lease Agreement
with a primary term of 20 years and annual rental payments of
$66,906. Effective October 17, 1997, the annual rent was
increased to $102,749. Simultaneously with the purchase of the
land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to Champps
for the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7.0%. Effective October 17, 1997, the
interest rate was increased to 10.75%. On December 31, 1997,
after the development was completed, the Lease Agreement was
amended to require annual rental payments of $236,479. The
Partnership's share of the total acquisition costs, including the
cost of the land, was $2,256,462. The remaining interests in the
property are owned by AEI Net Lease Income & Growth Fund XX
Limited Partnership and Net Lease Income & Growth Fund 84-A
Limited Partnership, affiliates of the Partnership.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
On July 8, 1997, the Partnership purchased a parcel of
land in Livonia, Michigan for $1,074,384. The land is leased to
Champps under a Lease Agreement with a primary term of 20 years
and annual rental payments of $75,207. Effective January 3,
1998, the annual rent was increased to $115,496. Simultaneously
with the purchase of the land, the Partnership entered into a
Development Financing Agreement under which the Partnership will
advance funds to Champps for the construction of a Champps
Americana restaurant on the site. Through December 31, 1997, the
Partnership had advanced $1,078,108 for the construction of the
property and was charging interest on the advances at a rate of
7.0%. Effective January 3, 1998, the interest rate was increased
to 10.75%. The total purchase price, including the cost of the
land, will be approximately $3,970,000. After the construction
is complete, the Lease Agreement will be amended to require
annual rental payments of approximately $427,000.
On July 31, 1997, the Partnership purchased a 93.1%
interest in a Caribou Coffee store in Charlotte, North Carolina
for $1,310,598. The property is leased to Caribou Coffee
Company, Inc. under a Lease Agreement with a primary term of 18
years and annual rental payments of $146,438. The remaining
interest in the property is owned by AEI Institutional Net Lease
Fund '93 Limited Partnership, an affiliate of the Partnership.
During 1997, the Partnership sold 16.0799% of its interest
in the Champps Americana restaurant in Columbus, Ohio, in two
separate transactions to unrelated third parties. The
Partnership received total net sale proceeds of $520,790 which
resulted in a total net gain of $106,551. The total cost and
related accumulated depreciation of the interests sold was
$429,006 and $14,767, respectively.
Subsequent to December 31, 1997, the Partnership sold an
additional 12.0528% of its interest in the Champps Americana
restaurant in Columbus, Ohio in two separate transactions to
unrelated third parties. The Partnership received net sale
proceeds of approximately $407,000 which resulted in a net gain
of approximately $98,000.
Major Tenants
During 1997, three of the Partnership's lessees each
contributed more than ten percent of the Partnership's total
rental revenue. The major tenants in aggregate contributed 85%
of the Partnership's total rental revenue in 1997. It is
anticipated that, based on minimum rental payments required under
the leases, only Garden Ridge L.P. and the Champps Americana
Group will contribute more than ten percent of the Partnership's
rental income in 1998 and future years. Any failure of these
major tenants or business concepts could materially affect the
Partnership's net income and cash distributions.
Competition
The Partnership is a minor factor in the commercial real
estate business. There are numerous entities engaged in the
commercial real estate business which have greater financial
resources than the Partnership. At the time the Partnership
elects to dispose of its properties, the Partnership will be in
competition with other persons and entities to find buyers for
its properties.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Employees
The Partnership has no direct employees. Management
services are performed for the Partnership by AEI Fund
Management, Inc., an affiliate of AFM.
Year 2000
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. AEI is currently analyzing its
computer hardware and software systems to determine what, if any,
resources need to be dedicated regarding Year 2000 issues. The
Partnership does not anticipate any significant operational
impact or incurring material costs as a result of AEI becoming
Year 2000 compliant.
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 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.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 1997.
Total Property
Purchase Acquisition Annual Lease Annual 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. $ 80,164 $ 30.82
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
Champps
Americana Restaurant Americana
Columbus, OH Dining
(51.7201%) 8/29/96 $1,379,874 Corporation $145,898 $ 34.53
Huntington
Denny's Restaurant Restaurants
Covington, LA 3/19/97 $1,304,948 Group, Inc. $141,243 $ 28.94
Caribou Coffee Store
Charlotte, NC Caribou Coffee
(93.1%) 7/31/97 $1,310,598 Company, Inc. $146,438 $ 35.66
Champps Champps
Americana Restaurant Entertainment
San Antonio, TX 12/23/97 $2,833,357 of Texas, Inc. $296,023 $ 34.10
Champps
Americana Restaurant
Schaumburg, IL Champps
(49.6%) 12/31/97 $2,256,462 Americana, Inc. $236,479 $ 42.73
Champps
Americana Restaurant
Livonia, MI Champps
(land only)<F2> 7/8/97 $1,074,384 Americana, Inc. $ 75,207 $ .72
<F1> The property was vacated on January 31, 1997 and listed for
sale or lease.
<F2> Restaurant is under construction as of December 31, 1997.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
The properties listed above with a partial ownership
percentage are owned with affiliates of the Partnership and/or
unrelated third parties. The remaining interests in the Arby's
and Caribou Coffee store are owned by AEI Institutional Net Lease
Fund '93 Limited Partnership. 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 Champps Americana restaurant in Columbus, Ohio is
owned by AEI Real Estate Fund XVIII Limited Partnership and
unrelated third parties. The remaining interest in the Champps
Americana restaurant in Schaumburg, Illinois is owned by Net
Lease Income & Growth Fund 84-A Limited Partnership and AEI Net
Lease Income & Growth Fund XX Limited Partnership.
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated third
parties using the proportionate consolidation method. Each
tenant-in-common owns a separate, undivided interest in the
properties. Any tenant-in-common that holds more than a 50%
interest does not control decisions over the other tenant-in-
common interests. The financial statements reflect only this
Partnership's percentage share of the properties' land, building
and equipment, liabilities, revenues and expenses.
The initial Lease terms are 20 years except for the
Caribou Coffee store, which is 18 years. The Leases contain
renewal options which may extend the Lease term an additional 10
years for the Arby's and Caribou Coffee, an additional 15 years
for the Champps and Denny's, and an additional 25 years for the
Garden Ridge retail 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 except for properties
whose book value was reduced by a real estate impairment loss
pursuant to Financial Accounting Standards Board Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." The real estate impairment
loss, which was recorded against the book cost of the land and
depreciable property, was not recognized for tax purposes.
Through December 31, 1997, all properties were 100%
occupied by the lessees, except the Media Play retail store which
has been 100% vacant since January 31, 1997.
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, 1997, there were 1,313 holders of
record of the registrant's Limited Partnership Units. There is
no other class of security outstanding or authorized. The
registrant's Units are not a traded security in any market.
However, the Partnership may purchase Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the total number of Units
outstanding at the beginning of the year. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
During 1997, three Limited Partners redeemed a total of
171.1 Partnership Units for $154,021 in accordance with the
Partnership Agreement. The redemptions increase the remaining
Limited Partners' ownership interest in the Partnership.
Cash distributions of $17,788 and $14,044 were made to the
General Partners and $1,761,087 and $1,390,389 were made to the
Limited Partners in 1997 and 1996, 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.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $348,489 of proceeds from
property sales in 1997.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
For the years ended December 31, 1997 and 1996, the
Partnership recognized rental income of $1,005,113 and $847,484,
respectively. During the same periods, the Partnership also
earned $507,981 and $494,269, respectively, in investment income
from subscription proceeds which were invested in short-term
money market accounts, commercial paper, federal agency notes and
construction and development advances. This investment income
constituted 34% and 37%, respectively, of total income. The
percentage of total income represented by investment income
declines as subscription proceeds are invested in properties.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Musicland Group, Inc. (MGI), the lessee of the Media Play
retail store in Apple Valley, Minnesota experienced financial
difficulties and was aggressively restructuring its organization.
As part of the restructuring, the Partnership and MGI reached an
agreement in December, 1996 in which MGI would buy out and
terminate the Lease Agreement by making a payment of $800,000,
which is equal to approximately two years' rent. The
Partnership's share of such payment was $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. In 1997, the Partnership
received $127,955 less in base rent than in 1996 from Media Play.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of the
Partnership's interest in the Media Play was approximately
$748,000. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $580,200 was recognized, which is
the difference between the book value at December 31, 1997 of
$1,328,200 and the estimated market value of $748,000. The
charge was recorded against the cost of the land, building and
equipment.
During the years ended December 31, 1997 and 1996, the
Partnership paid Partnership administration expenses to
affiliated parties of $233,717 and $251,392, 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 $115,217 and $27,171, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, taxes, insurance and other property costs. The increase
in these expenses in 1997, when compared to 1996, is the result
of expenses incurred in 1997 related to the Media Play situation
discussed above.
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, 1997, 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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 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.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. AEI is currently analyzing its
computer hardware and software systems to determine what, if any,
resources need to be dedicated regarding Year 2000 issues. The
Partnership does not anticipate any significant operational
impact or incurring material costs as a result of AEI becoming
Year 2000 compliant.
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.
Until the offering of Units was completed, the
Partnership's primary source of cash flow was 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. 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
$3,277,000.
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.
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. This use of cash flow for
investing activities was partially offset by proceeds from the
sale of property.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On March 28, 1996, the Partnership purchased a 40.75%
interest in a Garden Ridge retail 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 Champps 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.
On March 14, 1997, the Partnership purchased a parcel of
land in San Antonio, Texas for $1,032,299. The land is leased to
Champps Americana, Inc. (Champps) under a Lease Agreement with a
primary term of 20 years and annual rental payments of $83,451.
Effective September 9, 1997, the annual rent was increased to
$128,156. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement under
which the Partnership advanced funds to Champps for the
construction of a Champps Americana restaurant on the site.
Initially, the Partnership charged interest on the advances at a
rate of 7.0%. Effective September 9, 1997, the interest rate was
increased to 10.75%. On December 23, 1997, after the development
was completed, the Lease Agreement was amended to require annual
rental payments of $296,023. Total acquisition costs, including
the cost of the land, were $2,833,357.
On March 19, 1997, the Partnership purchased a Denny's
restaurant in Covington, Louisiana for $1,304,949. The property
is leased to Huntington Restaurants Group, Inc. under a Lease
Agreement with a primary term of 20 years and annual rental
payments of $141,243.
On April 21, 1997, the Partnership purchased a 49.6%
interest in a parcel of land in Schaumburg, Illinois for
$876,387. The land is leased to Champps under a Lease Agreement
with a primary term of 20 years and annual rental payments of
$66,906. Effective October 17, 1997, the annual rent was
increased to $102,749. Simultaneously with the purchase of the
land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to Champps
for the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7.0%. Effective October 17, 1997, the
interest rate was increased to 10.75%. On December 31, 1997,
after the development was completed, the Lease Agreement was
amended to require annual rental payments of $236,479. The
Partnership's share of the total acquisition costs, including the
cost of the land, was $2,256,462. The remaining interests in the
property are owned by AEI Net Lease Income & Growth Fund XX
Limited Partnership and Net Lease Income & Growth Fund 84-A
Limited Partnership, affiliates of the Partnership.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On July 8, 1997, the Partnership purchased a parcel of
land in Livonia, Michigan for $1,074,384. The land is leased to
Champps under a Lease Agreement with a primary term of 20 years
and annual rental payments of $75,207. Effective January 3,
1998, the annual rent was increased to $115,496. Simultaneously
with the purchase of the land, the Partnership entered into a
Development Financing Agreement under which the Partnership will
advance funds to Champps for the construction of a Champps
Americana restaurant on the site. Through December 31, 1997, the
Partnership had advanced $1,078,108 for the construction of the
property and was charging interest on the advances at a rate of
7.0%. Effective January 3, 1998, the interest rate was increased
to 10.75%. The total purchase price, including the cost of the
land, will be approximately $3,970,000. After the construction
is complete, the Lease Agreement will be amended to require
annual rental payments of approximately $427,000.
On July 31, 1997, the Partnership purchased a 93.1%
interest in a Caribou Coffee store in Charlotte, North Carolina
for $1,310,598. The property is leased to Caribou Coffee
Company, Inc. under a Lease Agreement with a primary term of 18
years and annual rental payments of $146,438. The remaining
interest in the property is owned by AEI Institutional Net Lease
Fund '93 Limited Partnership, an affiliate of the Partnership.
During 1997, the Partnership sold 16.0799% of its interest
in the Champps Americana restaurant in Columbus, Ohio, in two
separate transactions to unrelated third parties. The
Partnership received total net sale proceeds of $520,790 which
resulted in a total net gain of $106,551. The total cost and
related accumulated depreciation of the interests sold was
$429,006 and $14,767, respectively.
Subsequent to December 31, 1997, the Partnership sold an
additional 12.0528% of its interest in the Champps Americana
restaurant in Columbus, Ohio in two separate transactions to
unrelated third parties. The Partnership received net sale
proceeds of approximately $407,000 which resulted in a net gain
of approximately $98,000.
During 1997, the Partnership distributed net sale proceeds
of $352,009 to the Limited and General Partners as part of their
regular quarterly distributions which represented a return of
capital of $14.57 per Limited Partnership Unit. The remaining
net sale proceeds will either be reinvested in additional
properties or distributed to the Partners in the future.
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. Redemption payments
are paid to redeeming Partners in the fourth quarter of each
year.
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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
During 1997, three Limited Partners redeemed a total of
171.1 Partnership Units for $154,021 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. The redemptions increase
the remaining Limited Partners' ownership interest in the
Partnership.
Until capital is invested in properties, the Partnership
will remain liquid. At December 31, 1997, $2,537,636 or 13% 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.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
contains various "forward looking statements" within the meaning
of federal securities laws which represent management's
expectations or beliefs concerning future events, including
statements regarding anticipated application of cash, expected
returns from rental income, growth in revenue, taxation levels,
the sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements made by the Partnership, must be evaluated in
the context of a number of factors that may affect the
Partnership's financial condition and results of operations,
including the following:
<bullet> Market and economic conditions which affect the value
of the properties the Partnership owns and the cash
from rental income such properties generate;
<bullet> the federal income tax consequences of rental income,
deductions, gain on sales and other items and the
affects of these consequences for investors;
<bullet> resolution by the General Partners of conflicts with
which they may be confronted;
<bullet> the success of the General Partners of locating
properties with favorable risk return characteristics;
<bullet> the effect of tenant defaults; and
<bullet> the condition of the industries in which the tenants of
properties owned by the Partnership operate.
These and other risks to which the Partnership may be subject are
discussed in more detail in Exhibit 99 to this Form 10-KSB.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying index to financial statements.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet as of December 31, 1997 and 1996
Statements for the Years Ended December 31, 1997 and 1996:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
REPORT OF INDEPENDENT AUDITORS
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, 1997 and 1996 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, 1997 and 1996, and the results of its income and its
cash flows for the years then ended, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota
February 4, 1998 Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Certified Public Accountants
<PAGE>
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1997 1996
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,506,790 $10,729,033
Receivables 162,677 41,672
----------- -----------
Total Current Assets 2,669,467 10,770,705
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 6,612,866 2,541,511
Buildings and Equipment 8,779,112 5,079,924
Construction in Progress 1,078,108 1,621,870
Property Acquisition Costs 88,696 245,726
Accumulated Depreciation (399,150) (162,645)
----------- -----------
Net Investments in Real Estate 16,159,632 9,326,386
----------- -----------
Total Assets $18,829,099 $20,097,091
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 56,307 $ 132,900
Distributions Payable 324,841 429,668
----------- -----------
Total Current Liabilities 381,148 562,568
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (24,706) (9,754)
Limited Partners, $1,000 Unit Value;
24,000 Units authorized and issued;
23,829 and 23,563 Units outstanding
in 1997 and 1996, respectively 18,472,657 19,544,277
----------- -----------
Total Partners' Capital 18,447,951 19,534,523
----------- -----------
Total Liabilities and Partners' Capital $18,829,099 $20,097,091
=========== ===========
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
1997 1996
INCOME:
Rent $ 1,005,113 $ 847,484
Investment Income 507,981 494,269
----------- -----------
Total Income 1,513,094 1,341,753
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 233,717 251,392
Partnership Administration and Property
Management - Unrelated Parties 115,217 27,171
Depreciation 251,272 150,958
Real Estate Impairment 580,200 0
----------- -----------
Total Expenses 1,180,406 429,521
----------- -----------
OPERATING INCOME 332,688 912,232
GAIN ON SALE OF REAL ESTATE 106,551 0
----------- -----------
NET INCOME $ 439,239 $ 912,232
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 4,392 $ 9,122
Limited Partners 434,847 903,110
----------- -----------
$ 439,239 $ 912,232
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(23,921 and 17,439 weighted average Units
outstanding in 1997 and 1996, respectively) $ 18.18 $ 51.79
=========== ===========
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
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 439,239 $ 912,232
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 251,272 150,958
Real Estate Impairment 580,200 0
Gain on Sale of Real Estate (106,551) 0
Increase in Receivables (121,005) (26,361)
(Decrease) Increase in Payable to
AEI Fund Management, Inc. (76,593) 62,095
----------- -----------
Total Adjustments 527,323 186,692
----------- -----------
Net Cash Provided By
Operating Activities 966,562 1,098,924
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (8,078,957) (7,302,962)
Proceeds from Sale of Real Estate 520,790 0
----------- -----------
Net Cash Used For
Investing Activities (7,558,167) (7,302,962)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions from Limited Partners 436,651 11,273,543
Organization and Syndication Costs (28,010) (1,533,338)
Increase (Decrease) in Distributions Payable (104,827) 229,839
Distributions to Partners (1,778,875) (1,404,433)
Redemption Payments (155,577) 0
----------- -----------
Net Cash Provided By (Used For)
Financing Activities (1,630,638) 8,565,611
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (8,222,243) 2,361,573
CASH AND CASH EQUIVALENTS, beginning of period 10,729,033 8,367,460
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,506,790 $10,729,033
=========== ===========
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, 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
Capital Contributions 0 436,651 436,651 436.65
Organization & Syndication
Costs 0 (28,010) (28,010)
Distributions (17,788) (1,761,087) (1,778,875)
Redemption Payments (1,556) (154,021) (155,577) (171.13)
Net Income 4,392 434,847 439,239
--------- ----------- ----------- -----------
BALANCE, December 31, 1997 $ (24,706) $18,472,657 $18,447,951 23,828.87
========= =========== =========== ===========
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, 1997 AND 1996
(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. The Partnership
commenced operations on April 14, 1995 when minimum
subscriptions of 1,500 Limited Partnership Units
($1,500,000) were accepted. On January 31, 1997, the
Partnership offering terminated when the maximum
subscription limit of 24,000 Limited Partnership Units
($24,000,000) was reached.
Under the terms of the Limited Partnership Agreement, the
Limited Partners and General Partners contributed funds of
$24,000,000 and $1,000, respectively. During the operation
of the Partnership, any Net Cash Flow, as defined, which the
General Partners determine to distribute will be distributed
90% to the Limited Partners and 10% to the General Partners;
provided, however, that such distributions to the General
Partners will be subordinated to the Limited Partners first
receiving an annual, noncumulative distribution of Net Cash
Flow equal to 10% of their Adjusted Capital Contribution, as
defined, and, provided further, that in no event will the
General Partners receive less than 1% of such Net Cash Flow
per annum. Distributions to Limited Partners will be made
pro rata by Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of the Partnership's properties which the General
Partners determine to distribute will, after provisions for
debts and reserves, be paid in the following manner: (i)
first, 99% to the Limited Partners and 1% to the General
Partners until the Limited Partners receive an amount equal
to: (a) their Adjusted Capital Contribution plus (b) an
amount equal to 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, 1997 AND 1996
(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 -
Newly Issued Accounting Standards
In June, 1997, Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" was
approved for issuance for fiscal years beginning after
December 15, 1997. The Partnership adopted this
Statement in the fourth quarter of 1997. The effect of
this Statement has been determined that net income/loss
for financial statements and comprehensive income/loss is
primarily the same in all material respects.
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.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(2) Summary of Significant Accounting Policies - (Continued)
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested
in money market accounts, certificates of deposit,
federal agency notes and commercial paper with a term of
three months or less.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
Partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under triple net
leases classified as operating leases. The Partnership
recognizes rental revenue on the accrual basis according
to the terms of the individual leases. For leases which
contain cost of living increases, the increases are
recognized in the year in which they are effective.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(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 was 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.
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings and equipment.
The buildings and equipment of the Partnership are
depreciated using the straight-line method for financial
reporting purposes based on estimated useful lives of 25
years and 5 years, respectively.
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated
third parties using the proportionate consolidation
method. Each tenant-in-common owns a separate, undivided
interest in the properties. Any tenant-in-common that
holds more than a 50% interest does not control decisions
over the other tenant-in-common interests. The financial
statements reflect only this Partnership's percentage
share of the properties' land, building and equipment,
liabilities, revenues and expenses.
(3) Related Party Transactions -
The Partnership owns a 87.7193% interest in an Arby's
restaurant and a 93.1% interest in a Caribou Coffee store.
The remaining interests in these properties are owned by AEI
Institutional Net Lease Fund '93 Limited Partnership, an
affiliate of the Partnership. The Partnership owns a 34.0%
interest in a Media Play retail store and a 40.75% interest
in a Garden Ridge retail store. The remaining interests in
these properties are owned by AEI Net Lease Income & Growth
Fund XIX Limited Partnership and AEI Net Lease Income &
Growth Fund XX Limited Partnership, affiliates of the
Partnership. As of December 31, 1997, the Partnership owns
a 51.7201% interest in a Champps Americana restaurant in
Columbus, Ohio. The remaining interests in this property
are owned by AEI Real Estate Fund XVIII Limited Partnership,
an affiliate of the Partnership, and unrelated third
parties. The Partnership owns a 49.6% interest in a Champps
Americana restaurant in Schaumburg, Illinois. The remaining
interests in this property are owned by Net Lease Income &
Growth Fund 84-A Limited Partnership and AEI Net Lease
Income & Growth Fund XX Limited Partnership, affiliates of
the Partnership.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(3) Related Party Transactions - (Continued)
AEI, AFM and AEI Securities, Inc. (ASI) (formerly AEI
Incorporated) received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 31
1997 1996
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. $ 233,717 $ 251,392
======== ========
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, taxes, insurance and
other property costs. $ 115,217 $ 27,171
======== ========
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 $112,388 and
$144,315 for 1997 and 1996, respectively. $ 65,970 $ 355,817
======== ========
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(3) Related Party Transactions - (Continued)
Total Incurred by the Partnership
for the Years Ended December 31
1997 1996
d.ASI was the underwriter of the Partnership offering.
Robert P. Johnson is the sole stockholder of ASI,
which is a member of the National Association of
Securities Dealers, Inc. ASI 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). ASI 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. $ 43,665 $1,127,354
======== =========
e.AEI is reimbursed for all costs incurred in
connection with managing the Partnership's
offering and organization. $ 9,104 $ 211,471
======== =========
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. $ (24,759) $ 194,513
========= =========
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.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through triple net leases, which are classified as operating
leases. Under a triple net lease, the lessee is responsible
for all real estate taxes, insurance, maintenance, repairs
and operating expenses of the property. The initial Lease
terms are 20 years except for the Caribou Coffee , which is
18 years, and the Media Play retail store discussed below.
The Leases contain renewal options which may extend the
Lease term an additional 10 years for the Arby's and Caribou
Coffee store, an additional 15 years for the Denny's and
Champps Americana restaurants and 25 years for the Garden
Ridge retail 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.
The Partnership's properties are commercial, single-tenant
buildings and were constructed and acquired in 1995, 1996
and 1997. There have been no costs capitalized as
improvements subsequent to the acquisitions.
The cost of the property and related accumulated
depreciation at December 31, 1997 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Arby's, Montgomery, AL $ 328,310 $ 425,794 $ 754,104 $ 43,999
Media Play, Apple Valley, MN 239,690 594,170 833,860 85,821
Garden Ridge, Pineville, NC 1,181,253 2,463,138 3,644,391 172,420
Champps Americana,
Columbus, OH 464,697 915,177 1,379,874 54,915
Denny's, Covington, LA 532,844 772,104 1,304,948 27,819
Caribou Coffee, Charlotte, NC 705,394 605,204 1,310,598 10,832
Champps Americana,
San Antonio, TX 1,127,016 1,706,341 2,833,357 3,344
Champps Americana,
Schaumburg, IL 959,278 1,297,184 2,256,462 0
Champps Americana,
Livonia, MI 1,074,384 0 1,074,384 0
----------- ----------- ----------- ---------
$ 6,612,866 $ 8,779,112 $15,391,978 $ 399,150
=========== =========== =========== =========
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(4) Investments in Real Estate - (Continued)
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.
In December, 1996, the Partnership and MGI reached an
agreement in which MGI would buy out and terminate the Lease
Agreement by making a payment of $800,000, which was equal
to approximately two years' rent. The Partnership's share
of such payment was $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 January31, 1997 after which date the
Partnership became responsible for its share of expenses
associated with the property until it is re-let or sold. A
specialist in commercial property leasing has been retained
to locate a new tenant for the property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of
the Partnership's interest in the Media Play was
approximately $748,000. In the fourth quarter of 1997, a
charge to operations for real estate impairment of $580,200
was recognized, which is the difference between the book
value at December 31, 1997 of $1,328,200 and the estimated
market value of $748,000. The charge was recorded against
the cost of the land, building and equipment.
On March 28, 1996, the Partnership purchased a 40.75%
interest in a Garden Ridge retail 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 Champps 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.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(4) Investments in Real Estate - (Continued)
On March 14, 1997, the Partnership purchased a parcel of
land in San Antonio, Texas for $1,032,299. The land is
leased to Champps Americana, Inc. (Champps) under a Lease
Agreement with a primary term of 20 years and annual rental
payments of $83,451. Effective September 9, 1997, the
annual rent was increased to $128,156. Simultaneously with
the purchase of the land, the Partnership entered into a
Development Financing Agreement under which the Partnership
advanced funds to Champps for the construction of a Champps
Americana restaurant on the site. Initially, the
Partnership charged interest on the advances at a rate of
7.0%. Effective September 9, 1997, the interest rate was
increased to 10.75%. On December 23, 1997, after the
development was completed, the Lease Agreement was amended
to require annual rental payments of $296,023. Total
acquisition costs, including the cost of the land, were
$2,833,357.
On March 19, 1997, the Partnership purchased a Denny's
restaurant in Covington, Louisiana for $1,304,949. The
property is leased to Huntington Restaurants Group, Inc.
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $141,243.
On April 21, 1997, the Partnership purchased a 49.6%
interest in a parcel of land in Schaumburg, Illinois for
$876,387. The land is leased to Champps under a Lease
Agreement with a primary term of 20 years and annual rental
payments of $66,906. Effective October 17, 1997, the annual
rent was increased to $102,749. Simultaneously with the
purchase of the land, the Partnership entered into a
Development Financing Agreement under which the Partnership
advanced funds to Champps for the construction of a Champps
Americana restaurant on the site. Initially, the
Partnership charged interest on the advances at a rate of
7.0%. Effective October 17, 1997, the interest rate was
increased to 10.75%. On December 31, 1997, after the
development was completed, the Lease Agreement was amended
to require annual rental payments of $236,479. The
Partnership's share of the total acquisition costs,
including the cost of the land, was $2,256,462.
On July 8, 1997, the Partnership purchased a parcel of land
in Livonia, Michigan for $1,074,384. The land is leased to
Champps under a Lease Agreement with a primary term of 20
years and annual rental payments of $75,207. Effective
January 3, 1998, the annual rent was increased to $115,496.
Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement
under which the Partnership will advance funds to Champps
for the construction of a Champps Americana restaurant on
the site. Through December 31, 1997, the Partnership had
advanced $1,078,108 for the construction of the property and
was charging interest on the advances at a rate of 7.0%.
Effective January 3, 1998, the interest rate was increased
to 10.75%. The total purchase price, including the cost of
the land, will be approximately $3,970,000. After the
construction is complete, the Lease Agreement will be
amended to require annual rental payments of approximately
$427,000.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(4) Investments in Real Estate - (Continued)
On July 31, 1997, the Partnership purchased a 93.1% interest
in a Caribou Coffee store in Charlotte, North Carolina for
$1,310,598. The property is leased to Caribou Coffee
Company, Inc. under a Lease Agreement with a primary term of
18 years and annual rental payments of $146,438.
During 1997, the Partnership sold 16.0799% of the interest
in the Champps Americana restaurant in Columbus, Ohio, in
two separate transactions to unrelated third parties. The
Partnership received total net sale proceeds of $520,790
which resulted in a total net gain of $106,551. The total
cost and related accumulated depreciation of the interests
sold was $429,006 and $14,767, respectively.
Subsequent to December 31, 1997, the Partnership sold an
additional 12.0528% of its interest in the Champps Americana
restaurant in Columbus, Ohio in two separate transactions to
unrelated third parties. The Partnership received net sale
proceeds of approximately $407,000 which resulted in a net
gain of approximately $98,000.
During 1997, the Partnership distributed net sale proceeds
of $352,009 to the Limited and General Partners as part of
their regular quarterly distributions which represented a
return of capital of $14.57 per Limited Partnership Unit.
The remaining net sale proceeds will either be reinvested in
additional properties or distributed to the Partners in the
future.
The Partnership has incurred net costs of $448,301 relating
to the review of potential property acquisitions. Of these
costs, $359,605 have been capitalized and allocated to land,
building and equipment. The remaining costs of $88,696 have
been capitalized and will be allocated to properties
acquired subsequent to December 31, 1997.
The minimum future rentals on the Leases for years
subsequent to December 31, 1997 are as follows:
1998 $ 1,508,165
1999 1,512,136
2000 1,516,178
2001 1,520,293
2002 1,524,482
Thereafter 22,514,670
-----------
$30,095,924
===========
There were no contingent rents recognized in 1997 or 1996.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(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:
1997 1996
Tenants Industry
Garden Ridge, L.P. Retail $ 383,973 $ 292,109
Champps Americana Group Restaurant 357,559 N/A
Huntington Restaurants
Group, Inc. Restaurant 110,868 N/A
The Musicland Group, Inc. Retail N/A 411,587
--------- ---------
Aggregate rent revenue of major tenants $ 852,400 $ 703,696
========= =========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 85% 83%
========= =========
(6) Partners' Capital -
Cash distributions of $17,788 and $14,044 were made to the
General Partners and $1,761,087 and $1,390,389 were made to
the Limited Partners for the years ended December 31, 1997
and 1996, respectively. The Limited Partners' distributions
represent $73.62 and $79.73 per Limited Partnership Unit
outstanding using 23,921 and 17,439 weighted average Units
in 1997 and 1996, respectively. The distributions represent
$11.59 and $51.79 per Unit of Net Income and $62.03 and
$27.94 per Unit of return of contributed capital in 1997 and
1996, respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $348,489 of proceeds from
property sales in 1997.
Distributions of Net Cash Flow to the General Partners
during 1997 and 1996 were subordinated to the Limited
Partners as required in the Partnership Agreement. As a
result, 99% of distributions and income were allocated to
the Limited Partners and 1% to the General Partners.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(6) Partners' Capital - (Continued)
The Partnership may acquire Units from Limited Partners who
have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated
to purchase in any year more than 5% of the number of Units
outstanding at the beginning of the year. In no event shall
the Partnership be obligated to purchase Units if, in the
sole discretion of the Managing General Partner, such
purchase would impair the capital or operation of the
Partnership.
During 1997, three Limited Partners redeemed a total of
171.1 Partnership Units for $154,021 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. The redemptions
increase the remaining Limited Partners' ownership interest
in the Partnership.
After the effect of redemptions, the Adjusted Capital
Contribution, as defined in the Partnership Agreement, is
$1,007.18 per original $1,000 invested.
(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:
1997 1996
Net Income for Financial
Reporting Purposes $ 439,239 $ 912,232
Depreciation for Tax Purposes
Under Depreciation for Financial
Reporting Purposes 74,859 44,454
Capitalized Start-Up Costs
Under Section 195 0 190,838
Amortization of Start-Up and
Organization Costs (50,373) (12,232)
Real Estate Impairment Loss
Not Recognized for Tax Purposes 580,200 0
Gain on Sale of Real Estate
for Tax Purposes Under Gain
for Financial Reporting Purposes (3,952) 0
---------- ----------
Taxable Income to Partners $1,039,973 $1,135,292
========== ==========
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(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:
1997 1996
Partners' Capital for
Financial Reporting Purposes $18,447,951 $19,534,523
Adjusted Tax Basis of Investments
in Real Estate Over Net Investments
in Real Estate for Financial
Reporting Purposes 698,524 47,417
Capitalized Start-Up Costs
Under Section 195 329,865 329,865
Amortization of Start-Up and
Organization Costs (63,631) (13,258)
Organization and Syndication Costs
Treated as Reduction of Capital
for Financial Reporting Purposes 3,214,043 3,186,033
----------- -----------
Partners' Capital for
Tax Reporting Purposes $22,626,752 $23,084,580
=========== ===========
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(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:
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 188 $ 188 $ 544 $ 544
Money Market Funds 267,421 267,421 5,750,781 5,750,781
Commercial Paper
(held to maturity) 2,239,181 2,239,181 4,977,708 4,977,708
--------- --------- --------- ----------
Total Cash and
Cash Equivalents $2,506,790 $2,506,790 $10,729,033 $10,729,033
========= ========= ========== ==========
The amortized cost basis of the commercial paper 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 53, 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, 1998. From 1970 to the
present, he had been employed exclusively in the investment
industry, specializing in tax-advantaged limited partnership
investments. In that capacity, he has been involved in the
development, analysis, marketing and management of public and
private investment programs investing in net lease properties as
well as public and private investment programs investing in
energy development. Since 1971, Mr. Johnson has been the
president, a director and a registered principal of AEI
Securities, Inc. (formerly AEI Incorporated), which is registered
with the Securities and Exchange Commission as a securities
broker-dealer, is a member of the National Association of
Securities Dealers, Inc. (NASD) and is a member of the Security
Investors Protection Corporation (SIPC). Mr. Johnson has been
president, a director and the principal shareholder of AEI Fund
Management, Inc., a real estate management company founded by
him, since 1978. Mr. Johnson is currently a general partner or
principal of the general partner in sixteen other limited
partnerships.
Mark E. Larson, age 45, 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,
1998. Mr. Larson has been employed by AEI Fund Management, Inc.
and affiliated entities since 1985. From 1979 to 1985, Mr.
Larson was with Apache Corporation as manager of Program
Accounting responsible for the accounting and reports for
approximately 46 public partnerships. Mr. Larson is responsible
for supervising the accounting functions of AFM and the
registrant.
ITEM 10. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative and management services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information pertaining to
the ownership of the Units by each person known by the
Partnership to beneficially own 5% or more of the Units, by each
General Partner, and by each officer or director of the Managing
General Partner as of February 28, 1998:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
AEI Fund Management XXI, Inc. 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
AEI Fund Management, Inc. ** 6.3 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Robert P. Johnson 28 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Mark E. Larson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
* Less than 1%
**A corporation controlled by Mr. Johnson that provides
administrative services to the Partnership.
The persons set forth in the preceding table hold sole voting
power and power of disposition with respect to all of the Units
set forth opposite their names. The General Partners know of no
holders of more than 5% of the outstanding Units.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The registrant, AFM and its affiliates have common
management and utilize the same facilities. As a result, certain
administrative expenses are allocated among these related
entities. All of such activities and any other transactions
involving the affiliates of the General Partner of the registrant
are governed by, and are conducted in conformity with, the
limitations set forth in the Limited Partnership Agreement of the
registrant.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Continued)
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, 1997.
Person or Entity Amount Incurred From
Receiving Form and Method Inception (August 31, 1994)
Compensation of Compensation To December 31, 1997
AEI Securities, Inc. Selling Commissions equal to 8% of $2,400,000
proceeds plus a 2% nonaccountable
expense allowance, most of which
was reallowed to Participating
Dealers.
General Partners and Reimbursement at Cost for other $ 877,000
Affiliates Organization and Offering Costs.
General Partners and Reimbursement at Cost for all $ 448,301
Affiliates Acquisition Expenses
General Partners 1% of Net Cash Flow in any fiscal $ 33,800
year until the Limited Partners have
received annual, non-cumulative
distributions of Net Cash Flow equal
to 10% of their Adjusted Capital
Contributions and 10% of any
remaining Net Cash Flow in such
fiscal year.
General Partners and Reimbursement at Cost for all $ 625,158
Affiliates Adrministrative Expenses attributable
to the Fund, including all expenses
related to management and disposition
of the Fund's properties and all other
transfer agency, reporting, partner
relations and other administrative
functions.
General Partners 1% of distributions of Net Proceeds of $ 3,520
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.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Continued)
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, 1997, 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 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).
10.2 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).
10.3 First Amendment to Lease
Agreement dated March1, 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).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A.
(Continued)
A. Exhibits -
Description
10.4 Assignment and Assumption of
Lease dated March28, 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
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).
10.5 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).
10.6 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).
10.7 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).
10.8 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).
10.9 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).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A.
(Continued)
A. Exhibits -
Description
10.10 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).
10.11 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).
10.12 Surrender and
Termination of Lease Agreement dated
November22, 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 (incorporated by
reference to Exhibit 10.19 of Form 10-KSB
filed with the Commission on March 6,
1997).
10.13 Development Financing
Agreement dated March 14, 1997 between the
Partnership and Champps Entertainment of
Texas, Inc. relating to the property at
11440 Interstate Highway 10, San Antonio,
Texas (incorporated by reference to Exhibit
10.1 of Form 8-K filed with the Commission
March 25, 1997).
10.14 Net Lease Agreement
dated March 14, 1997 between the
Partnership and Champps Entertainment of
Texas, Inc. relating to the property at
11440 Interstate Highway 10, San Antonio,
Texas (incorporated by reference to Exhibit
10.2 of Form 8-K filed with the Commission
March 25, 1997).
10.15 Net Lease Agreement
dated March 19, 1997 between the
Partnership and Huntington Restaurants
Group, Inc. relating to the property at 720
North Highway 190, Covington, Louisiana
(incorporated by reference to Exhibit 10.6
of Form 8-K filed with the Commission March
25, 1997).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A.
(Continued)
A. Exhibits -
Description
10.16 Development Financing
Agreement dated April 21, 1997 between the
Partnership, AEI Net Lease Income & Growth
Fund XX Limited Partnership, Net Lease
Income & Growth Fund 84-A Limited
Partnership and Champps Americana, Inc.
relating to the property at 955 Golf Road,
Schaumburg, Illinois (incorporated by
reference to Exhibit 10.1 of Form 10-QSB
filed with the Commission on May 13, 1997).
10.17 Net Lease Agreement dated April
21, 1997 between the Partnership, AEI Net
Lease Income & Growth Fund XX Limited
Partnership, Net Lease Income & Growth Fund
84-A Limited Partnership and Champps
Americana, Inc. relating to the property at
955 Golf Road, Schaumburg, Illinois
(incorporated by reference to Exhibit 10.2
of Form 10-QSB filed with the Commission on
May 13, 1997).
10.18 Development Financing
Agreement dated July 8, 1997 between the
Partnership and Champps Americana, Inc.
relating to the property at 19470 Haggerty
Road, Livonia, Michigan (incorporated by
reference to Exhibit 10.1 of Form 10-QSB
filed with the Commission on August 5,
1997).
10.19 Net Lease Agreement
dated July 8, 1997 between the Partnership
and Champps Americana, Inc. relating to the
property at 19470 Haggerty Road, Livonia,
Michigan (incorporated by reference to
Exhibit 10.2 of Form 10-QSB filed with the
Commission on August 5, 1997).
10.20 Net Lease Agreement
dated July 31, 1997 between the Partnership
and Caribou Coffee Company, Inc. relating
to the property at East Boulevard and
Garden Terrace, Charlotte, North Carolina
(incorporated by reference to Exhibit 10.3
of Form 10-QSB filed with the Commission on
August 5, 1997).
10.21 Purchase Agreement
dated September 12, 1997 between the
Partnership and the Ainslie Living Trust
relating to the property at 161 E. Campus
View Boulevard, Columbus, Ohio.
10.22 Purchase Agreement
dated September 16, 1997 between the
Partnership and Richard J. Abbott and
Marjory T. Abbott relating to the property
at 161 E. Campus View Boulevard, Columbus,
Ohio (incorporated by reference to Exhibit
10.1 of Form 10-QSB filed with the
Commission on November 4, 1997).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A.
(Continued)
A. Exhibits -
Description
10.23 Purchase Agreement
dated December 15, 1997 between the
Partnership and James Edward Amend relating
to the property at 161 E. Campus View
Boulevard, Columbus, Ohio.
10.24 First Amendment to Net
Lease Agreement dated December 23, 1997
between the Partnership and Champps
Entertainment of Texas, Inc. relating to
the property at 11440 Interstate Highway
10, San Antonio, Texas (incorporated by
reference to Exhibit 10.2 of Form 8-K filed
with the Commission on January 5, 1998).
10.25 First Amendment to Net
Lease Agreement dated December 31, 1997
between the Partnership, AEI Net Lease
Income & Growth Fund XX Limited
Partnership, Net Lease Income & Growth Fund
84-A, and Champps Americana, Inc. relating
to the property at 955 Golf Road,
Schaumburg, Illinois (incorporated by
reference to Exhibit 10.2 of Form 8-K filed
with the Commission on January 5, 1998).
10.26 Purchase Agreement
dated February 13, 1998 between the
Partnership and Edward C. and Virginia L.
Thulin relating to the property at 161 E.
Campus View Boulevard, Columbus, Ohio.
27 Financial Data Schedule for
year ended December 31, 1997.
99 Forward Looking Statements -
Cautionary Statement
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 16, 1998 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 16, 1998
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 16, 1998
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
PURCHASE AGREEMENT
Champps Restaurant - Columbus, OH
This AGREEMENT, entered into effective as of the 12 of Sept, 1997.
l. Parties. Seller is AEI Income & Growth Fund XXI Limited
Partnership which owns an undivided 67.80% interest in the fee
title to that certain real property legally described in the
attached Exhibit "A" (the "Entire Property") Buyer is Ernest E.
Ainslie and Marion B. Ainslie, Trustees of the Ainslie Living
Trust dated December 24, 1996, ("Buyer"). Seller wishes to sell
and Buyer wishes to buy a portion as Tenant in Common of Seller's
interest in the Entire Property.
2. Property. The Property to be sold to Buyer in this transaction
consists of an undivided 8.9900 percentage interest (hereinafter,
simply the "Property") as Tenant in Common in the Entire
Property.
3. Purchase Price . The purchase price for this percentage
interest in the Entire Property is $317,000 all cash.
4. Terms. The purchase price for the Property will be paid by
Buyer as follows:
(a) When this agreement is executed, Buyer will pay $5,000
to Seller (which shall be deposited into escrow according to
the terms hereof) (the "First Payment"). The First Payment
will be credited against the purchase price when and if
escrow closes and the sale is completed.
(b) Buyer will deposit the balance of the purchase price,
$312,000 (the "Second Payment") into escrow in sufficient
time to allow escrow to close on the closing date.
5. Closing Date. Escrow shall close on or before October 6, 1997.
6. Due Diligence. Buyer will have until the expiration of the
fifth business day (The "Review Period") after delivery of each
of following items, to be supplied by Seller, to conduct all of
its inspections and due diligence and satisfy itself regarding
each item, the Property, and this transaction. Buyer agrees to
indemnify and hold Seller harmless for any loss or damage to the
Entire Property or persons caused by Buyer or its agents arising
out of such physical inspections of the Entire Property.
(a) The original and one copy of a title insurance
commitment for an Owner's Title insurance policy (see
paragraph 8 below).
(b) Copies of a Certificate of Occupancy or other such
document certifying completion and granting permission to
permanently occupy the improvements on the Entire Property
as are in Seller's possession.
(c) Copies of an "as built" survey of the Entire Property
done concurrent with Seller's acquisition of the Property.
(d) Lease (as further set forth in paragraph 11(a) below) of
the Entire Property showing occupancy date, lease expiration
date, rent, and Guarantys, if any, accompanied by such
tenant financial statements as may have been provided most
recently to Seller by the Tenant and/or Guarantors.
Buyer Initial: /s/ EEA
Purchase Agreement for Champps - Columbus, OH
It is a contingency upon Seller's obligations hereunder that
two (2) copies of Co-Tenancy Agreement in the form attached
hereto duly executed by Buyer and Seller and dated on escrow
closing date be delivered to the Seller on the closing date.
Buyer may cancel this agreement for ANY REASON in its sole
discretion by delivering a cancellation notice, return receipt
requested, to Seller and escrow holder before the expiration of
the Review Period. Such notice shall be deemed effective only
upon receipt by Seller. If this Agreement is not cancelled as
set forth above, the First Payment shall be non-refundable unless
Seller shall default hereunder.
If Buyer cancels this Agreement as permitted under this
Section, except for any escrow cancellation fees and any
liabilities under sections 15(a) of this agreement (which will
survive), Buyer (after execution of such documents reasonably
requested by Seller to evidence the termination hereof) shall be
returned its First Payment, and Buyer will have absolutely no
rights, claims or interest of any type in connection with the
Property or this transaction, regardless of any alleged conduct
by Seller or anyone else.
Unless this Agreement is canceled by Buyer pursuant to the
terms hereof, if Buyer fails to make the Second Payment, Seller
shall be entitled to retain the First Payment and Buyer
irrevocably will be deemed to be in default under this Agreement.
Seller may, at its option, retain the First Payment and declare
this Agreement null and void, in which event Buyer will be deemed
to have canceled this Agreement and relinquish all rights in and
to the Property or Seller may exercise its rights under Section
14 hereof. If this Agreement is not canceled and the Second
Payment is made when required, all of Buyer's conditions and
contingencies will be deemed satisfied.
7. Escrow. Escrow shall be opened by Seller and funds deposited
in escrow upon acceptance of this agreement by both parties. The
escrow holder will be a nationally-recognized escrow company
selected by Seller. A copy of this Agreement will be delivered to
the escrow holder and will serve as escrow instructions together
with the escrow holder's standard instructions and any additional
instructions required by the escrow holder to clarify its rights
and duties (and the parties agree to sign these additional
instructions). If there is any conflict between these other
instructions and this Agreement, this Agreement will control.
8. Title. Closing will be conditioned on the agreement of a
title company selected by Seller to issue an Owner's policy of
title insurance, dated as of the close of escrow, in an amount
equal to the purchase price, insuring that Buyer will own
insurable title to the Property subject only to: the title
company's standard exceptions; current real property taxes and
assessments; survey exceptions; the rights of parties in
possession pursuant to the lease definded in paragraph 11 below;
and other items of record disclosed to Buyer during the Review
Period.
Buyer shall be allowed five (5) days after receipt of said
commitment for examination and the making of any objections to
marketability thereto, said objections to be made in writing or
deemed waived. If any objections are so made, the Seller shall
be allowed eighty (80) days to make such title marketable or in
the alternative to obtain a commitment for insurable title
insuring over Buyer's objections. If Seller shall decide to make
no efforts to make title marketable, or is unable to make title
marketable or obtain insurable title, (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof) Buyer's First Payment shall be returned and
this Agreement shall be null and void and of no further force and
effect.
Pending correction of title, the payments hereunder required
shall be postponed, but upon correction of title and within ten
(10) days after written notice of correction to the Buyer, the
parties shall perform this Agreement according to its terms.
Buyer Initial: /s/ MBA
Purchase Agreement for Champps - Columbus, OH
9. Closing Costs. Seller will pay one-half of escrow fees,
the cost of the title commitment and any brokerage commissions
payable. The Buyer will pay the cost of issuing a Standard
Owners Title Insurance Policy in the full amount of the purchase
price, if Buyer shall decide to purchase the same. Buyer will
pay all recording fees, one-half of the escrow fees, and the cost
of an update to the Survey in Sellers possession (if an update is
required by Buyer.) Each party will pay its own attorney's fees
and costs to document and close this transaction.
10. Real Estate Taxes, Special Assessments and Prorations.
(a) Because the Entire Property (of which the Property is a
part) is subject to a triple net lease (as further set forth
in paragraph 11(a)(i), the parties acknowledge that there
shall be no need for a real estate tax proration. However,
Seller represents that to the best of its knowledge, all
real estate taxes and installments of special assessments
due and payable in all years prior to the year of Closing
have been paid in full. Unpaid real estate taxes and unpaid
levied and pending special assessments existing on the date
of Closing shall be the responsibility of Buyer and Seller
in proportion to their respective Tenant in Common
interests, pro-rated, however, to the date of closing for
the period prior to closing, which shall be the
responsibility of Seller if Tenant shall not pay the same.
Seller and Buyer shall likewise pay all taxes due and
payable in the year after Closing and any unpaid
installments of special assessments payable therewith and
thereafter, if such unpaid levied and pending special
assessments and real estate taxes are not paid by any tenant
of the Entire Property.
(b) All income and all operating expenses from the Entire
Property shall be prorated between the parties and adjusted
by them as of the date of Closing. Seller shall be entitled
to all income earned and shall be responsible for all
expenses incurred prior to the date of Closing, and Buyer
shall be entitled to its proportionate share of all income
earned and shall be responsible for its proportionate share
of all operating expenses of the Entire Property incurred on
and after the date of closing.
11. Seller's Representation and Agreements.
(a) Seller represents and warrants as of this date that:
(i) Except for the lease in existence between AEI Income &
Growth Fund XXI Limited Partnership and AEI Real Estate Fund
XVIII Limited Partnership and Americana Dining Corporation,
dated August 29, 1996, Seller is not aware of any leases of
the Property. The above referenced lease agreement also has
a first right of refusal in favor of the Tenant as set forth
in Article 34 of said lease agreement, which right shall
apply to any attempted disposition of the Property by Buyer
after this transaction.
(ii) It is not aware of any pending litigation or
condemnation proceedings against the Property or Seller's
interest in the Property.
(iii) Except as previously disclosed to Buyer and as set
forth in paragraph (b) below, Seller is not aware of any
contracts Seller has executed that would be binding on Buyer
after the closing date.
(b) Provided that Buyer performs its obligations when
required, Seller agrees that it will not enter into any new
contracts that would materially affect the Property and be
binding on Buyer after the Closing Date without Buyer's
prior consent, which will not be unreasonably withheld.
However, Buyer acknowledges that Seller retains the right
both prior to and after the Closing Date to freely transfer
all or a portion of Seller's remaining undivided interest in
the Entire Property, provided such sale shall not encumber
the Property being purchased by
Buyer Initial: /s/ MBA /s/ EEA
Purchase Agreement for Champps - Columbus, OH
Buyer in violation of the terms hereof or the contemplated
Co-Tenancy Agreement.
12. Disclosures.
(a) To the best of Seller's knowledge: there are now, and
at the Closing there will be, no material, physical or
mechanical defects of the Property, including, without
limitation, the plumbing, heating, air conditioning,
ventilating, electrical systems, and all such items are in
good operating condition and repair and in compliance with
all applicable governmental , zoning and land use laws,
ordinances, regulations and requirements.
(b) To the best of Seller's knowledge: the use and
operation of the Property now is, and at the time of Closing
will be, in full compliance with applicable building codes,
safety, fire, zoning, and land use laws, and other
applicable local, state and federal laws, ordinances,
regulations and requirements.
(c) Seller knows of no facts nor has Seller failed to
disclose to Buyer any fact known to Seller which would
prevent Buyer from using and operating the Property after
the Closing in the manner in which the Property has been
used and operated prior to the date of this Agreement.
(d) To the best of Seller's knowledge: the Property is not,
and as of the Closing will not be, in violation of any
federal, state or local law, ordinance or regulations
relating to industrial hygiene or to the environmental
conditions on, under, or about the Property including, but
not limited to, soil and groundwater conditions. To the
best of Seller's knowledge: there is no proceeding or
inquiry by any governmental authority with respect to the
presence of Hazardous Materials on the Property or the
migration of Hazardous Materials from or to other property.
Buyer agrees that Seller will have no liability of any type
to Buyer or Buyer's successors, assigns, or affiliates in
connection with any Hazardous Materials on or in connection
with the Property either before or after the Closing Date,
except such Hazardous Materials on or in connection with the
Property arising out of Seller's gross negligence or
intentional misconduct.
(e) Buyer agrees that it shall be purchasing the Property
in its then present condition, as is, where is, and Seller
has no obligations to construct or repair any improvements
thereon or to perform any other act regarding the Property,
except as expressly provided herein.
(f) Buyer acknowledges that, having been given the
opportunity to inspect the Property and such financial
information on the Lessee and Guarantors of the Lease as
Buyer or its advisors shall request, Buyer is relying solely
on its own investigation of the Property and not on any
information provided by Seller or to be provided except as
set forth herein. Buyer further acknowledges that the
information provided and to be provided by Seller with
respect to the Property and to the Lessee and Guarantors of
Lease was obtained from a variety of sources and Seller
neither (a) has made independent investigation or
verification of such information, or (b) makes any
representations as to the accuracy or completeness of such
information. The sale of the Property as provided for
herein is made on an "AS IS" basis, and Buyer expressly
acknowledges that, in consideration of the agreements of
Seller herein, except as otherwise specified herein, Seller
makes no Warranty or representation, Express or Implied, or
arising by operation of law, including, but not limited to,
any warranty or condition, habitability, tenantability,
suitability for commercial purposes, merchantability, or
fitness for a particular purpose, in respect of the
Property.
The provisions (d) - (f) above shall survive closing.
Buyer Initial: /s/ MBA /s/ EEA
Purchase Agreement for Champps - Columbus, OH
13. Closing.
(a) Before the closing date, Seller will deposit into
escrow an executed limited warranty deed conveying insurable
title of the Property to Buyer, subject to the encumbrances
contained in paragraph 8 above.
(b) On or before the closing date, Buyer will deposit into
escrow: the balance of the purchase price when required
under Section 4; any additional funds required of Buyer,
(pursuant to this agreement or any other agreement executed
by Buyer) to close escrow. Both parties will sign and
deliver to the escrow holder any other documents reasonably
required by the escrow holder to close escrow.
(c) On the closing date, if escrow is in a position to
close, the escrow holder will: record the deed in the
official records of the county where the Property is
located; cause the title company to commit to issue the
title policy; immediately deliver to Seller the portion of
the purchase price deposited into escrow by cashier's check
or wire transfer (less debits and prorations, if any);
deliver to Seller and Buyer a signed counterpart of the
escrow holder's certified closing statement and take all
other actions necessary to close escrow.
14. Defaults. If Buyer defaults, Buyer will forfeit all rights
and claims and Seller will be relieved of all obligations and
will be entitled to retain all monies heretofore paid by the
Buyer. In addition, Seller shall retain all remedies available
to Seller at law or in equity.
If Seller shall default, Buyer irrevocably waives any rights
to file a lis pendens, a specific performance action or any other
claim, action or proceeding of any type in connection with the
Property or this or any other transaction involving the Property,
and will not do anything to affect title to the Property or
hinder, delay or prevent any other sale, lease or other
transaction involving the Property (any and all of which will be
null and void), unless: it has paid the First Payment, deposited
the balance of the Second Payment for the purchase price into
escrow, performed all of its other obligations and satisfied all
conditions under this Agreement, and unconditionally notified
Seller that it stands ready to tender full performance, purchase
the Property and close escrow as per this Agreement, regardless
of any alleged default or misconduct by Seller. Provided,
however, that in no event shall Seller be liable for any actual,
punitive, consequential or speculative damages arising out of any
default by Seller hereunder.
15. Buyer's Representations and Warranties.
a. Buyer represents and warrants to Seller as follows:
(i) In addition to the acts and deeds recited herein and
contemplated to be performed, executed, and delivered by
Buyer, Buyer shall perform, execute and deliver or cause to
be performed, executed, and delivered at the Closing or
after the Closing, any and all further acts, deeds and
assurances as Seller or the Title Company may require and be
reasonable in order to consummate the transactions
contemplated herein.
(ii) Buyer has all requisite power and authority to
consummate the transaction contemplated by this Agreement
and has by proper proceedings duly authorized the execution
and delivery of this Agreement and the consummation of the
transaction contemplated hereby.
(iii) To Buyer's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the
transaction contemplated hereby will violate or be in
conflict with (a) any applicable provisions of law, (b) any
order of any court or other agency of government having
Buyer Initial: /s/ MBA /s/ EEA
Purchase Agreement for Champps - Columbus, OH
jurisdiction hereof, or (c) any agreement or instrument to
which Buyer is a party or by which Buyer is bound.
16. Damages, Destruction and Eminent Domain.
(a) If, prior to closing, the Property or any part thereof
should be destroyed or further damaged by fire, the
elements, or any cause, due to events occurring subsequent
to the date of this Agreement to the extent that the cost of
repair exceeds $10,000.00, this Agreement shall become null
and void, at Buyer's option exercised, if at all, by written
notice to Seller within ten (10) days after Buyer has
received written notice from Seller of said destruction or
damage. Seller, however, shall have the right to adjust or
settle any insured loss until (i) all contingencies set
forth in Paragraph 6 hereof have been satisfied, or waived;
and (ii) any ten-day period provided for above in this
Subparagraph 16a for Buyer to elect to terminate this
Agreement has expired or Buyer has, by written notice to
Seller, waived Buyer's right to terminate this Agreement.
If Buyer elects to proceed and to consummate the purchase
despite said damage or destruction, there shall be no
reduction in or abatement of the purchase price, and Seller
shall assign to Buyer the Seller's right, title, and
interest in and to all insurance proceeds (pro-rata in
relation to the Entire Property) resulting from said damage
or destruction to the extent that the same are payable with
respect to damage to the Property, subject to rights of any
Tenant of the Entire Property.
If the cost of repair is less than $10,000.00, Buyer shall
be obligated to otherwise perform hereinunder with no
adjustment to the Purchase Price, reduction or abatement,
and Seller shall assign Seller's right, title and interest
in and to all insurance proceeds pro-rata in relation to the
Entire Property, subject to rights of any Tenant of the
Entire Property.
(b) If, prior to closing, the Property, or any part
thereof, is taken by eminent domain, this Agreement shall
become null and void, at Buyer's option. If Buyer elects to
proceed and to consummate the purchase despite said taking,
there shall be no reduction in, or abatement of, the
purchase price, and Seller shall assign to Buyer the
Seller's right, title, and interest in and to any award
made, or to be made, in the condemnation proceeding pro-rata
in relation to the Entire Property, subject to rights of any
Tenant of the Entire Property.
In the event that this Agreement is terminated by Buyer as
provided above in Subparagraph 16a or 16b, the First Payment
shall be immediately returned to Buyer (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof).
17. Buyer's 1031 Tax Free Exchange.
While Seller acknowledges that Buyer is purchasing the
Property as "replacement property" to accomplish a tax free
exchange, Buyer acknowledges that Seller has made no
representations, warranties, or agreements to Buyer or Buyer's
agents that the transaction contemplated by the Agreement will
qualify for such tax treatment, nor has there been any reliance
thereon by Buyer respecting the legal or tax implications of the
transactions contemplated hereby. Buyer further represents that
it has sought and obtained such third party advice and counsel as
it deems necessary in regards to the tax implications of this
transaction.
Buyer wishes to novate/assign the ownership rights and
interest of this Purchase Agreement to National 1031 Exchange
Corporation who will act as Accommodator to perfect the 1031
exchange by preparing an agreement of exchange of Real Property
whereby National 1031 Exchange Corporationwill be an independent
third party purchasing the ownership interest in subject property
from Seller and selling the ownership interest in subject
property to Buyer under the same terms and conditions as
documented in this Purchase Agreement. Buyer asks the Seller,
and Seller agrees to cooperate in the perfection of such an
exchange if at no additional cost or expense to Seller or delay
in
Buyer Initial: /s/ MBA /s/ EEA
Purchase Agreement for Champps - Columbus, OH
time. Buyer hereby indemnifies and holds Seller harmless from
any claims and/or actions resulting from said exchange. Pursuant
to the direction of National 1031 Exchange Corporation, Seller
will deed the property to Buyer.
18. Cancellation
If any party elects to cancel this Contract because of any
breach by another party or because escrow fails to close by
the agreed date, the party electing to cancel shall deliver
to escrow agent a notice containing the address of the party
in breach and stating that this Contract shall be cancelled
unless the breach is cured within 13 days following the
delivery of the notice to the escrow agent. Within three
days after receipt of such notice, the escrow agent shall
send it by United States Mail to the party in breach at the
address contained in the Notice and no further notice shall
be required. If the breach is not cured within the 13 days
following the delivery of the notice to the escrow agent,
this Contract shall be cancelled.
19. Miscellaneous.
(a) This Agreement may be amended only by written agreement
signed by both Seller and Buyer, and all waivers must be in
writing and signed by the waiving party. Time is of the
essence. This Agreement will not be construed for or
against a party whether or not that party has drafted this
Agreement. If there is any action or proceeding between the
parties relating to this Agreement the prevailing party will
be entitled to recover attorney's fees and costs. This is
an integrated agreement containing all agreements of the
parties about the Property and the other matters described,
and it supersedes any other agreements or understandings.
Exhibits attached to this Agreement are incorporated into
this Agreement.
(b) If this escrow has not closed by October 6, 1997,
through no fault of Seller, Seller may either, at its
election, extend the closing date or exercise any remedy
available to it by law, including terminating this
Agreement.
(c) Funds to be deposited or paid by Buyer must be good and
clear funds in the form of cash, cashier's checks or wire
transfers.
(d) All notices from either of the parties hereto to the
other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified
mail, return receipt requested, postage prepaid, or by a
nationally recognized courier service guaranteeing overnight
delivery to the party at his or its address set forth below,
or to such other address as such party may hereafter
designate by written notice to the other party.
If to Seller:
Attention: Robert P. Johnson
AEI Real Estate Fund XVIII Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
Buyer Initial: /s/ MBA /s/ EEA
Purchase Agreement for Champps - Columbus, OH
If to Buyer:
Ernest E. and Marion B. Ainslie, Trustees
When accepted, this offer will be a binding agreement for
valid and sufficient consideration which will bind and benefit
Buyer, Seller and their respective successors and assigns. Buyer
is submitting this offer by signing a copy of this offer and
delivering it to Seller. Seller has five (5) business days from
receipt within which to accept this offer.
IN WITNESS WHEREOF, the Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
BUYER: THE AINSLIE LIVING TRUST /s/ EEA /s/ RPJ
By: /s/ Ernest E Ainslie, Turstee
Ernest E. Ainslie, Trustee
WITNESS:
/s/ Susan Parks
Susan Parks
(Print Name)
WITNESS:
/s/ Rachelle Santos
Rachelle Santos
(Print Name)
By:/s/ Marion B Ainslie, Trustee
Marion B. Ainslie, Trustee
WITNESS:
/s/ Susan Parks
Susan Parks
(Print Name)
WITNESS:
/s/ Rachelle Santos
Rachelle Santos
(Print Name)
Buyer Initial: /s/ MBA /s/ EEA
Purchase Agreement for Champps - Columbus, OH
SELLER: AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP a
Minnesota limited partnership
By: AEI Fund Management XXI Inc., its corporate
general partner
By: /s/ Robert P Johnson
Robert P. Johnson, President
WITNESS:
/s/ Dawn E Campbell
Dawn E Campbell
(Print Name)
WITNESS:
/s/ Jennifer Seck
Jennifer Seck
(Print Name)
Buyer Initial: /s/ MBA /s/ EEA
Purchase Agreement for Champps - Columbus, OH
LEGAL DESCRIPTION
Situated in the State of Ohio, County of Franklin, City of
Columbus, being located in Section 2, Township 2, Range 18,
United States Military Lands, and being part of a 43. 161
acre tract of land (Parcel No. 610-146452) conveyed to Forty-
One Corporation (the Grantor), by deed of record in Official
Record 15500 A-G, all references being to records in the
Recorder's Office, Franklin County Ohio, and being more
particularly described as follows:
Beginning for reference at the intersection of North High
Street (US 23) and East Campus View Boulevard (80.00 feet in
width) as shown in Plat Book 60, Page 26:
thence S 86 49' 53" E, along the centerline of said East
Campus View Boulevard, a distance of 900.00 feet to a point
of curvature,
thence along the centerline of said East Campus View
Boulevard, with a curve tot he left having a radius of
1350.00 feet, a chord bearing of N 89 27' 50" E, and a chord
distance of 174.45 feet to the intersection with centerline
of High Cross Boulevard (80.00 feet in width);
thence S 1 53'32" E, along the centerline of said High cross
Boulevard a distance of 74.72 feet to a point;
thence N 88 06'28" E, a distance of 40.00 feet to an iron
pin set in the easterly right of way line of said High Cross
Boulevard, said point being the True Point of Beginning of
herein described tract;
thence along the easterly right of way line of said High
Cross Boulevard, with a curve to the right, having a radius
of 40.00 feet, a chord bearing of N 40 23'34" E, and a chord
distance of 53.83 feet to an iron pin set in the southerly
right of way line of said East Campus View Boulevard;
thence along the southerly right of way line of said East
Campus View Boulevard and the northerly line of herein
described tract, with a curve to the left, having a radius
of 1390.00 feet, a chord bearing of N 82 25'24" E, and a
chord distance of 12.36 feet to an iron pin set;
thence N 82 10' 07" E, along the southerly right of way line
of said East Campus View boulevard and the northerly line of
herein described tract, a distance of 209.28 feet to an iron
pin set at the northeasterly corner of herein described
tract;
thence s 7 49' 49" E, along the easterly line of herein
described tract, a distance of 312.60 feet to an iron pin
set at the southeasterly corner of herein described tract;
thence S 82 10'11" W, along the southerly line of herein
described tract, a distance of 318.01 feet to an iron pin
set in the easterly right of way line of said High Cross
Boulevard at the southwesterly corner of herein described
tract;
thence along the easterly right of way line of said High
Cross Boulevard and the westerly line of herein described
tract, with a curve to the right, having a radius of 2960.00
feet, a chord bearing of N 9 21' 59" E, and a chord distance
of 10/.64 feet to an iron pin set;
thence N 9 28'10" E, along the easterly right of way line of
said High Cross Boulevard and the westerly line of herein
described tract a distance of 89.24 feet to an iron pin set;
thence along the easterly right of way line of said High
Cross Boulevard and the westerly line of herein described
tract, with a curve to the left, having a radius of 390.00
feet, a chord bearing at N 3 47' 19" E, and a chord distance
of 77.21 feet to an iron pin set;
thence N 53' 32" W, along the easterly right of way line of
said High Cross Boulevard and the westerly line of herein
described tract a distance of 106/36 feet to the True Point
of Beginning containing 2,005 acres, more or less, and
subject to any rights of way, easements, and restrictions of
record.
The Basis of Bearing in this description is the centerline
of East Campus View Boulevard, being S 86 49' 53" E, as
shown in Plat Book 61, Page 79, Recorder's Office, Franklin
County, Ohio.
PURCHASE AGREEMENT
Champps Restaurant - Columbus, OH
This AGREEMENT, entered into effective as of the 15th of
December, 1997 .
l. Parties. Seller is AEI Income & Growth Fund XXI Limited
Partnership which owns an undivided 51.7201% interest in the fee
title to that certain real property legally described in the
attached Exhibit "A" (the "Entire Property") Buyer is James
Edward Amend, ("Buyer"). Seller wishes to sell and Buyer wishes
to buy a portion as Tenant in Common of Seller's interest in the
Entire Property.
2. Property. The Property to be sold to Buyer in this transaction
consists of an undivided 7.0899 percentage interest (hereinafter,
simply the "Property") as Tenant in Common in the Entire
Property.
3. Purchase Price . The purchase price for this percentage
interest in the Entire Property is $250,000 all cash.
4. Terms. The purchase price for the Property will be paid by
Buyer as follows:
(a) When this agreement is executed, Buyer will pay $5,000
to Seller (which shall be deposited into escrow according to
the terms hereof) (the "First Payment"). The First Payment
will be credited against the purchase price when and if
escrow closes and the sale is completed.
(b) Buyer will deposit the balance of the purchase price,
$245,000 (the "Second Payment") into escrow in sufficient
time to allow escrow to close on the closing date.
5. Closing Date. Escrow shall close on or before January 9, 1998.
6. Due Diligence. Buyer will have until the expiration of the
fifth business day (The "Review Period") after delivery of each
of following items, to be supplied by Seller, to conduct all of
its inspections and due diligence and satisfy itself regarding
each item, the Property, and this transaction. Buyer agrees to
indemnify and hold Seller harmless for any loss or damage to the
Entire Property or persons caused by Buyer or its agents arising
out of such physical inspections of the Entire Property.
(a) The original and one copy of a title insurance
commitment for an Owner's Title insurance policy (see
paragraph 8 below).
(b) Copies of a Certificate of Occupancy or other such
document certifying completion and granting permission to
permanently occupy the improvements on the Entire Property
as are in Seller's possession.
(c) Copies of an "as built" survey of the Entire Property
done concurrent with Seller's acquisition of the Property.
(d) Lease (as further set forth in paragraph 11(a) below) of
the Entire Property showing occupancy date, lease expiration
date, rent, and Guarantys, if any, accompanied by such
tenant financial statements as may have been provided most
recently to Seller by the Tenant and/or Guarantors.
Buyer Initial: /s/ JEA
Purchase Agreement for Champps - Columbus, OH
It is a contingency upon Seller's obligations hereunder that
two (2) copies of Co-Tenancy Agreement in the form attached
hereto duly executed by Buyer and Seller and dated on escrow
closing date be delivered to the Seller on the closing date.
Buyer may cancel this agreement for ANY REASON in its sole
discretion by delivering a cancellation notice, return receipt
requested, to Seller and escrow holder before the expiration of
the Review Period. Such notice shall be deemed effective only
upon receipt by Seller. If this Agreement is not cancelled as
set forth above, the First Payment shall be non-refundable unless
Seller shall default hereunder.
If Buyer cancels this Agreement as permitted under this
Section, except for any escrow cancellation fees and any
liabilities under sections 15(a) of this agreement (which will
survive), Buyer (after execution of such documents reasonably
requested by Seller to evidence the termination hereof) shall be
returned its First Payment, and Buyer will have absolutely no
rights, claims or interest of any type in connection with the
Property or this transaction, regardless of any alleged conduct
by Seller or anyone else.
Unless this Agreement is canceled by Buyer pursuant to the
terms hereof, if Buyer fails to make the Second Payment, Seller
shall be entitled to retain the First Payment and Buyer
irrevocably will be deemed to be in default under this Agreement.
Seller may, at its option, retain the First Payment and declare
this Agreement null and void, in which event Buyer will be deemed
to have canceled this Agreement and relinquish all rights in and
to the Property or Seller may exercise its rights under Section
14 hereof. If this Agreement is not canceled and the Second
Payment is made when required, all of Buyer's conditions and
contingencies will be deemed satisfied.
7. Escrow. Escrow shall be opened by Seller and funds deposited
in escrow upon acceptance of this agreement by both parties. The
escrow holder will be a nationally-recognized escrow company
selected by Seller. A copy of this Agreement will be delivered to
the escrow holder and will serve as escrow instructions together
with the escrow holder's standard instructions and any additional
instructions required by the escrow holder to clarify its rights
and duties (and the parties agree to sign these additional
instructions). If there is any conflict between these other
instructions and this Agreement, this Agreement will control.
8. Title. Closing will be conditioned on the agreement of a
title company selected by Seller to issue an Owner's policy of
title insurance, dated as of the close of escrow, in an amount
equal to the purchase price, insuring that Buyer will own
insurable title to the Property subject only to: the title
company's standard exceptions; current real property taxes and
assessments; survey exceptions; the rights of parties in
possession pursuant to the lease defined in paragraph 11 below;
and other items of record disclosed to Buyer during the Review
Period.
Buyer shall be allowed five (5) days after receipt of said
commitment for examination and the making of any objections to
marketability thereto, said objections to be made in writing or
deemed waived. If any objections are so made, the Seller shall
be allowed eighty (80) days to make such title marketable or in
the alternative to obtain a commitment for insurable title
insuring over Buyer's objections. If Seller shall decide to make
no efforts to make title marketable, or is unable to make title
marketable or obtain insurable title, (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof) Buyer's First Payment shall be returned and
this Agreement shall be null and void and of no further force and
effect.
Pending correction of title, the payments hereunder required
shall be postponed, but upon correction of title and within ten
(10) days after written notice of correction to the Buyer, the
parties shall perform this Agreement according to its terms.
Buyer Initial: /s/ JEA
Purchase Agreement for Champps - Columbus, OH
9. Closing Costs. Seller will pay one-half of escrow fees,
the cost of the title commitment and any brokerage commissions
payable. The Buyer will pay the cost of issuing a Standard
Owners Title Insurance Policy in the full amount of the purchase
price, if Buyer shall decide to purchase the same. Buyer will
pay all recording fees, one-half of the escrow fees, and the cost
of an update to the Survey in Sellers possession (if an update is
required by Buyer.) Each party will pay its own attorney's fees
and costs to document and close this transaction.
10. Real Estate Taxes, Special Assessments and Prorations.
(a) Because the Entire Property (of which the Property is a
part) is subject to a triple net lease (as further set forth
in paragraph 11(a)(i), the parties acknowledge that there
shall be no need for a real estate tax proration. However,
Seller represents that to the best of its knowledge, all
real estate taxes and installments of special assessments
due and payable in all years prior to the year of Closing
have been paid in full. Unpaid real estate taxes and unpaid
levied and pending special assessments existing on the date
of Closing shall be the responsibility of Buyer and Seller
in proportion to their respective Tenant in Common
interests, pro-rated, however, to the date of closing for
the period prior to closing, which shall be the
responsibility of Seller if Tenant shall not pay the same.
Seller and Buyer shall likewise pay all taxes due and
payable in the year after Closing and any unpaid
installments of special assessments payable therewith and
thereafter, if such unpaid levied and pending special
assessments and real estate taxes are not paid by any tenant
of the Entire Property.
(b) All income and all operating expenses from the Entire
Property shall be prorated between the parties and adjusted
by them as of the date of Closing. Seller shall be entitled
to all income earned and shall be responsible for all
expenses incurred prior to the date of Closing, and Buyer
shall be entitled to its proportionate share of all income
earned and shall be responsible for its proportionate share
of all operating expenses of the Entire Property incurred on
and after the date of closing.
11. Seller's Representation and Agreements.
(a) Seller represents and warrants as of this date that:
(i) Except for the lease in existence between AEI Income &
Growth Fund XXI Limited Partnership and AEI Real Estate Fund
XVIII Limited Partnership and Americana Dining Corporation,
dated August 29, 1996, Seller is not aware of any leases of
the Property. The above referenced lease agreement also has
a first right of refusal in favor of the Tenant as set forth
in Article 34 of said lease agreement, which right shall
apply to any attempted disposition of the Property by Buyer
after this transaction.
(ii) It is not aware of any pending litigation or
condemnation proceedings against the Property or Seller's
interest in the Property.
(iii) Except as previously disclosed to Buyer and as set
forth in paragraph (b) below, Seller is not aware of any
contracts Seller has executed that would be binding on Buyer
after the closing date.
(b) Provided that Buyer performs its obligations when
required, Seller agrees that it will not enter into any new
contracts that would materially affect the Property and be
binding on Buyer after the Closing Date without Buyer's
prior consent, which will not be unreasonably withheld.
However, Buyer acknowledges that Seller retains the right
both prior to and after the Closing Date to freely transfer
all or a portion of Seller's remaining undivided interest in
the Entire Property, provided such sale shall not encumber
the Property being purchased by
Buyer Initial: /s/ JEA
Purchase Agreement for Champps - Columbus, OH
Buyer in violation of the terms hereof or the contemplated
Co-Tenancy Agreement.
12. Disclosures.
(a) To the best of Seller's knowledge: there are now, and
at the Closing there will be, no material, physical or
mechanical defects of the Property, including, without
limitation, the plumbing, heating, air conditioning,
ventilating, electrical systems, and all such items are in
good operating condition and repair and in compliance with
all applicable governmental , zoning and land use laws,
ordinances, regulations and requirements.
(b) To the best of Seller's knowledge: the use and
operation of the Property now is, and at the time of Closing
will be, in full compliance with applicable building codes,
safety, fire, zoning, and land use laws, and other
applicable local, state and federal laws, ordinances,
regulations and requirements.
(c) Seller knows of no facts nor has Seller failed to
disclose to Buyer any fact known to Seller which would
prevent Buyer from using and operating the Property after
the Closing in the manner in which the Property has been
used and operated prior to the date of this Agreement.
(d) To the best of Seller's knowledge: the Property is not,
and as of the Closing will not be, in violation of any
federal, state or local law, ordinance or regulations
relating to industrial hygiene or to the environmental
conditions on, under, or about the Property including, but
not limited to, soil and groundwater conditions. To the
best of Seller's knowledge: there is no proceeding or
inquiry by any governmental authority with respect to the
presence of Hazardous Materials on the Property or the
migration of Hazardous Materials from or to other property.
Buyer agrees that Seller will have no liability of any type
to Buyer or Buyer's successors, assigns, or affiliates in
connection with any Hazardous Materials on or in connection
with the Property either before or after the Closing Date,
except such Hazardous Materials on or in connection with the
Property arising out of Seller's gross negligence or
intentional misconduct.
(e) Buyer agrees that it shall be purchasing the Property
in its then present condition, as is, where is, and Seller
has no obligations to construct or repair any improvements
thereon or to perform any other act regarding the Property,
except as expressly provided herein.
(f) Buyer acknowledges that, having been given the
opportunity to inspect the Property and such financial
information on the Lessee and Guarantors of the Lease as
Buyer or its advisors shall request, Buyer is relying solely
on its own investigation of the Property and not on any
information provided by Seller or to be provided except as
set forth herein. Buyer further acknowledges that the
information provided and to be provided by Seller with
respect to the Property and to the Lessee and Guarantors of
Lease was obtained from a variety of sources and Seller
neither (a) has made independent investigation or
verification of such information, or (b) makes any
representations as to the accuracy or completeness of such
information. The sale of the Property as provided for
herein is made on an "AS IS" basis, and Buyer expressly
acknowledges that, in consideration of the agreements of
Seller herein, except as otherwise specified herein, Seller
makes no Warranty or representation, Express or Implied, or
arising by operation of law, including, but not limited to,
any warranty or condition, habitability, tenantability,
suitability for commercial purposes, merchantability, or
fitness for a particular purpose, in respect of the
Property.
The provisions (d) - (f) above shall survive closing.
Buyer Initial: /s/ JEA
Purchase Agreement for Champps - Columbus, OH
13. Closing.
(a) Before the closing date, Seller will deposit into
escrow an executed limited warranty deed conveying insurable
title of the Property to Buyer, subject to the encumbrances
contained in paragraph 8 above.
(b) On or before the closing date, Buyer will deposit into
escrow: the balance of the purchase price when required
under Section 4; any additional funds required of Buyer,
(pursuant to this agreement or any other agreement executed
by Buyer) to close escrow. Both parties will sign and
deliver to the escrow holder any other documents reasonably
required by the escrow holder to close escrow.
(c) On the closing date, if escrow is in a position to
close, the escrow holder will: record the deed in the
official records of the county where the Property is
located; cause the title company to commit to issue the
title policy; immediately deliver to Seller the portion of
the purchase price deposited into escrow by cashier's check
or wire transfer (less debits and prorations, if any);
deliver to Seller and Buyer a signed counterpart of the
escrow holder's certified closing statement and take all
other actions necessary to close escrow.
14. Defaults. If Buyer defaults, Buyer will forfeit all rights
and claims and Seller will be relieved of all obligations and
will be entitled to retain all monies heretofore paid by the
Buyer. In addition, Seller shall retain all remedies available
to Seller at law or in equity.
If Seller shall default, Buyer irrevocably waives any rights
to file a lis pendens, a specific performance action or any other
claim, action or proceeding of any type in connection with the
Property or this or any other transaction involving the Property,
and will not do anything to affect title to the Property or
hinder, delay or prevent any other sale, lease or other
transaction involving the Property (any and all of which will be
null and void), unless: it has paid the First Payment, deposited
the balance of the Second Payment for the purchase price into
escrow, performed all of its other obligations and satisfied all
conditions under this Agreement, and unconditionally notified
Seller that it stands ready to tender full performance, purchase
the Property and close escrow as per this Agreement, regardless
of any alleged default or misconduct by Seller. Provided,
however, that in no event shall Seller be liable for any actual,
punitive, consequential or speculative damages arising out of any
default by Seller hereunder.
15. Buyer's Representations and Warranties.
a. Buyer represents and warrants to Seller as follows:
(i) In addition to the acts and deeds recited herein and
contemplated to be performed, executed, and delivered by
Buyer, Buyer shall perform, execute and deliver or cause to
be performed, executed, and delivered at the Closing or
after the Closing, any and all further acts, deeds and
assurances as Seller or the Title Company may require and be
reasonable in order to consummate the transactions
contemplated herein.
(ii) Buyer has all requisite power and authority to
consummate the transaction contemplated by this Agreement
and has by proper proceedings duly authorized the execution
and delivery of this Agreement and the consummation of the
transaction contemplated hereby.
(iii) To Buyer's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the
transaction contemplated hereby will violate or be in
conflict with (a) any applicable provisions of law, (b) any
order of any court or other agency of government having
Buyer Initial: /s/ JEA
Purchase Agreement for Champps - Columbus, OH
jurisdiction hereof, or (c) any agreement or instrument to
which Buyer is a party or by which Buyer is bound.
16. Damages, Destruction and Eminent Domain.
(a) If, prior to closing, the Property or any part thereof
should be destroyed or further damaged by fire, the
elements, or any cause, due to events occurring subsequent
to the date of this Agreement to the extent that the cost of
repair exceeds $10,000.00, this Agreement shall become null
and void, at Buyer's option exercised, if at all, by written
notice to Seller within ten (10) days after Buyer has
received written notice from Seller of said destruction or
damage. Seller, however, shall have the right to adjust or
settle any insured loss until (i) all contingencies set
forth in Paragraph 6 hereof have been satisfied, or waived;
and (ii) any ten-day period provided for above in this
Subparagraph 16a for Buyer to elect to terminate this
Agreement has expired or Buyer has, by written notice to
Seller, waived Buyer's right to terminate this Agreement.
If Buyer elects to proceed and to consummate the purchase
despite said damage or destruction, there shall be no
reduction in or abatement of the purchase price, and Seller
shall assign to Buyer the Seller's right, title, and
interest in and to all insurance proceeds (pro-rata in
relation to the Entire Property) resulting from said damage
or destruction to the extent that the same are payable with
respect to damage to the Property, subject to rights of any
Tenant of the Entire Property.
If the cost of repair is less than $10,000.00, Buyer shall
be obligated to otherwise perform hereinunder with no
adjustment to the Purchase Price, reduction or abatement,
and Seller shall assign Seller's right, title and interest
in and to all insurance proceeds pro-rata in relation to the
Entire Property, subject to rights of any Tenant of the
Entire Property.
(b) If, prior to closing, the Property, or any part
thereof, is taken by eminent domain, this Agreement shall
become null and void, at Buyer's option. If Buyer elects to
proceed and to consummate the purchase despite said taking,
there shall be no reduction in, or abatement of, the
purchase price, and Seller shall assign to Buyer the
Seller's right, title, and interest in and to any award
made, or to be made, in the condemnation proceeding pro-rata
in relation to the Entire Property, subject to rights of any
Tenant of the Entire Property.
In the event that this Agreement is terminated by Buyer as
provided above in Subparagraph 16a or 16b, the First Payment
shall be immediately returned to Buyer (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof).
17. Buyer's 1031 Tax Free Exchange.
While Seller acknowledges that Buyer is purchasing the
Property as "replacement property" to accomplish a tax free
exchange, Buyer acknowledges that Seller has made no
representations, warranties, or agreements to Buyer or Buyer's
agents that the transaction contemplated by the Agreement will
qualify for such tax treatment, nor has there been any reliance
thereon by Buyer respecting the legal or tax implications of the
transactions contemplated hereby. Buyer further represents that
it has sought and obtained such third party advice and counsel as
it deems necessary in regards to the tax implications of this
transaction.
Buyer wishes to novate/assign the ownership rights and
interest of this Purchase Agreement to Boatman's Bank who will
act as Accommodator to perfect the 1031 exchange by preparing an
agreement of exchange of Real Property whereby Boatman's Bank
will be an independent third party purchasing the ownership
interest in subject property from Seller and selling the
ownership interest in subject property to Buyer under the same
terms and conditions as documented in this Purchase Agreement.
Buyer asks the Seller, and Seller agrees to cooperate in the
perfection of such an exchange if at no additional cost or
expense to Seller or delay in time. Buyer hereby indemnifies and
Buyer Initial: /s/ JEA
Purchase Agreement for Champps - Columbus, OH
holds Seller harmless from any claims and/or actions resulting
from said exchange. Pursuant to the direction of Boatman's Bank,
Seller will deed the property to Buyer.
18. Cancellation
If any party elects to cancel this Contract because of any
breach by another party or because escrow fails to close by
the agreed date, the party electing to cancel shall deliver
to escrow agent a notice containing the address of the party
in breach and stating that this Contract shall be cancelled
unless the breach is cured within 13 days following the
delivery of the notice to the escrow agent. Within three
days after receipt of such notice, the escrow agent shall
send it by United States Mail to the party in breach at the
address contained in the Notice and no further notice shall
be required. If the breach is not cured within the 13 days
following the delivery of the notice to the escrow agent,
this Contract shall be cancelled.
19. Miscellaneous.
(a) This Agreement may be amended only by written agreement
signed by both Seller and Buyer, and all waivers must be in
writing and signed by the waiving party. Time is of the
essence. This Agreement will not be construed for or
against a party whether or not that party has drafted this
Agreement. If there is any action or proceeding between the
parties relating to this Agreement the prevailing party will
be entitled to recover attorney's fees and costs. This is
an integrated agreement containing all agreements of the
parties about the Property and the other matters described,
and it supersedes any other agreements or understandings.
Exhibits attached to this Agreement are incorporated into
this Agreement.
(b) If this escrow has not closed by January 9, 1998,
through no fault of Seller, Seller may either, at its
election, extend the closing date or exercise any remedy
available to it by law, including terminating this
Agreement.
(c) Funds to be deposited or paid by Buyer must be good and
clear funds in the form of cash, cashier's checks or wire
transfers.
(d) All notices from either of the parties hereto to the
other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified
mail, return receipt requested, postage prepaid, or by a
nationally recognized courier service guaranteeing overnight
delivery to the party at his or its address set forth below,
or to such other address as such party may hereafter
designate by written notice to the other party.
If to Seller:
Attention: Robert P. Johnson
AEI Real Estate Fund XVIII Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
Buyer Initial: /s/ JEA
Purchase Agreement for Champps - Columbus, OH
If to Buyer:
James Edward Amend
PO Box 261
Amarillo, TX 79105
When accepted, this offer will be a binding agreement for
valid and sufficient consideration which will bind and benefit
Buyer, Seller and their respective successors and assigns. Buyer
is submitting this offer by signing a copy of this offer and
delivering it to Seller. Seller has five (5) business days from
receipt within which to accept this offer.
IN WITNESS WHEREOF, the Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
BUYER: JAMES EDWARD AMEND
By: /s/ James Edward Amend
James Edward Amend
WITNESS:
/s/ Sherrie L Slayton
Sherrie L Slayton
(Print Name)
WITNESS:
/s/ Letha Anderson
Letha Anderson
(Print Name)
Buyer Initial: /s/ JEA
Purchase Agreement for Champps - Columbus, OH
SELLER: AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP a
Minnesota limited partnership
By: AEI Fund Management XXI Inc., its corporate
general partner
By: /s/ Robert P Johnson
Robert P. Johnson, President
WITNESS:
/s/ Laura M Steidl
Laura M Steidl
(Print Name)
WITNESS:
/s/ Laurie J Fredregill
Laurie J Fredregill
(Print Name)
Buyer Initial: /s/ JEA
Purchase Agreement for Champps - Columbus, OH
LEGAL DESCRIPTION
Situated in the State of Ohio, County of Franklin, City of
Columbus, being located in Section 2, Township 2, Range 18,
United States Military Lands, and being part of a 43. 161
acre tract of land (Parcel No. 610-146452) conveyed to Forty-
One Corporation (the Grantor), by deed of record in Official
Record 15500 A-G, all references being to records in the
Recorder's Office, Franklin County Ohio, and being more
particularly described as follows:
Beginning for reference at the intersection of North High
Street (US 23) and East Campus View Boulevard (80.00 feet in
width) as shown in Plat Book 60, Page 26:
thence S 86 49' 53" E, along the centerline of said East
Campus View Boulevard, a distance of 900.00 feet to a point
of curvature,
thence along the centerline of said East Campus View
Boulevard, with a curve tot he left having a radius of
1350.00 feet, a chord bearing of N 89 27' 50" E, and a chord
distance of 174.45 feet to the intersection with centerline
of High Cross Boulevard (80.00 feet in width);
thence S 1 53'32" E, along the centerline of said High cross
Boulevard a distance of 74.72 feet to a point;
thence N 88 06'28" E, a distance of 40.00 feet to an iron
pin set in the easterly right of way line of said High Cross
Boulevard, said point being the True Point of Beginning of
herein described tract;
thence along the easterly right of way line of said High
Cross Boulevard, with a curve to the right, having a radius
of 40.00 feet, a chord bearing of N 40 23'34" E, and a chord
distance of 53.83 feet to an iron pin set in the southerly
right of way line of said East Campus View Boulevard;
thence along the southerly right of way line of said East
Campus View Boulevard and the northerly line of herein
described tract, with a curve to the left, having a radius
of 1390.00 feet, a chord bearing of N 82 25'24" E, and a
chord distance of 12.36 feet to an iron pin set;
thence N 82 10' 07" E, along the southerly right of way line
of said East Campus View boulevard and the northerly line of
herein described tract, a distance of 209.28 feet to an iron
pin set at the northeasterly corner of herein described
tract;
thence s 7 49' 49" E, along the easterly line of herein
described tract, a distance of 312.60 feet to an iron pin
set at the southeasterly corner of herein described tract;
thence S 82 10'11" W, along the southerly line of herein
described tract, a distance of 318.01 feet to an iron pin
set in the easterly right of way line of said High Cross
Boulevard at the southwesterly corner of herein described
tract;
thence along the easterly right of way line of said High
Cross Boulevard and the westerly line of herein described
tract, with a curve to the right, having a radius of 2960.00
feet, a chord bearing of N 9 21' 59" E, and a chord distance
of 10/.64 feet to an iron pin set;
thence N 9 28'10" E, along the easterly right of way line of
said High Cross Boulevard and the westerly line of herein
described tract a distance of 89.24 feet to an iron pin set;
thence along the easterly right of way line of said High
Cross Boulevard and the westerly line of herein described
tract, with a curve to the left, having a radius of 390.00
feet, a chord bearing at N 3 47' 19" E, and a chord distance
of 77.21 feet to an iron pin set;
thence N 53' 32" W, along the easterly right of way line of
said High Cross Boulevard and the westerly line of herein
described tract a distance of 106/36 feet to the True Point
of Beginning containing 2,005 acres, more or less, and
subject to any rights of way, easements, and restrictions of
record.
The Basis of Bearing in this description is the centerline
of East Campus View Boulevard, being S 86 49' 53" E, as
shown in Plat Book 61, Page 79, Recorder's Office, Franklin
County, Ohio.
PURCHASE AGREEMENT
Champps Restaurant - Columbus, OH
This AGREEMENT, entered into effective as of the 2-13 of Feb, 1998.
l. Parties. Seller is AEI Income & Growth Fund XXI Limited
Partnership which owns an undivided 44.6302% interest in the fee
title to that certain real property legally described in the
attached Exhibit "A" (the "Entire Property") Buyer is Edward C.
& Virginia L. Thulin, married as tenants in common, ("Buyer").
Seller wishes to sell and Buyer wishes to buy a portion as Tenant
in Common of Seller's interest in the Entire Property.
2. Property. The Property to be sold to Buyer in this transaction
consists of an undivided 4.9629 percentage interest (hereinafter,
simply the "Property") as Tenant in Common in the Entire
Property.
3. Purchase Price . The purchase price for this percentage
interest in the Entire Property is $200,000 all cash.
4. Terms. The purchase price for the Property will be paid by
Buyer as follows:
(a) When this agreement is executed, Buyer will pay $5,000
to Seller (which shall be deposited into escrow according to
the terms hereof) (the "First Payment"). The First Payment
will be credited against the purchase price when and if
escrow closes and the sale is completed.
(b) Buyer will deposit the balance of the purchase price,
$195,000 (the "Second Payment") into escrow in sufficient
time to allow escrow to close on the closing date.
5. Closing Date. Escrow shall close on or before February 20, 1998./s/VLT/ECT
/s/ RPJ
6. Due Diligence. Buyer will have until the expiration of the
tenth business day (The "Review Period") after delivery of each
of following items, to be supplied by Seller, to conduct all of
its inspections and due diligence and satisfy itself regarding
each item, the Property, and this transaction. Buyer agrees to
indemnify and hold Seller harmless for any loss or damage to the
Entire Property or persons caused by Buyer or its agents arising
out of such physical inspections of the Entire Property.
(a) The original and one copy of a title insurance
commitment for an Owner's Title insurance policy (see
paragraph 8 below).
(b) Copies of a Certificate of Occupancy or other such
document certifying completion and granting permission to
permanently occupy the improvements on the Entire Property
as are in Seller's possession.
(c) Copies of an "as built" survey of the Entire Property
done concurrent with Seller's acquisition of the Property.
(d) Lease (as further set forth in paragraph 11(a) below) of
the Entire Property showing occupancy date, lease expiration
date, rent, and Guarantys, if any, accompanied by such
tenant financial statements as may have been provided most
recently to Seller by the Tenant and/or Guarantors.
Buyer Initial: /s/ ECT /s/ VLT
Purchase Agreement for Champps - Columbus, OH
It is a contingency upon Seller's obligations hereunder that
two (2) copies of Co-Tenancy Agreement in the form attached
hereto duly executed by Buyer and Seller and dated on escrow
closing date be delivered to the Seller on the closing date.
Buyer may cancel this agreement for ANY REASON in its sole
discretion by delivering a cancellation notice, via first class
mail, return receipt requested, to Seller and escrow holder
before the expiration of the Review Period. Such notice shall be
deemed effective only upon receipt by Seller. If this Agreement
is not cancelled as set forth above, the First Payment shall be
non-refundable unless Seller shall default hereunder.
If Buyer cancels this Agreement as permitted under this
Section, except for any escrow cancellation fees and any
liabilities under sections 15(a) of this agreement (which will
survive), Buyer (after execution of such documents reasonably
requested by Seller to evidence the termination hereof) shall be
returned its First Payment, and Buyer will have absolutely no
rights, claims or interest of any type in connection with the
Property or this transaction, regardless of any alleged conduct
by Seller or anyone else.
Unless this Agreement is canceled by Buyer pursuant to the
terms hereof, if Buyer fails to make the Second Payment, Seller
shall be entitled to retain the First Payment and Buyer
irrevocably will be deemed to be in default under this Agreement.
Seller may, at its option, retain the First Payment and declare
this Agreement null and void, in which event Buyer will be deemed
to have canceled this Agreement and relinquish all rights in and
to the Property or Seller may exercise its rights under Section
14 hereof. If this Agreement is not canceled and the Second
Payment is made when required, all of Buyer's conditions and
contingencies will be deemed satisfied.
7. Escrow. Escrow shall be opened by Seller and funds deposited
in escrow upon acceptance of this agreement by both parties. The
escrow holder will be a nationally-recognized escrow company
selected by Seller. A copy of this Agreement will be delivered to
the escrow holder and will serve as escrow instructions together
with the escrow holder's standard instructions and any additional
instructions required by the escrow holder to clarify its rights
and duties (and the parties agree to sign these additional
instructions). If there is any conflict between these other
instructions and this Agreement, this Agreement will control.
8. Title. Closing will be conditioned on the commitment of a
title company selected by Seller to issue an Owner's policy of
title insurance, dated as of the close of escrow, in an amount
equal to the purchase price, insuring that Buyer will own
insurable title to the Property subject only to: the title
company's standard exceptions; current real property taxes and
assessments; survey exceptions; the rights of parties in
possession pursuant to the lease defined in paragraph 11 below;
and other items of record disclosed to Buyer during the Review
Period.
Buyer shall be allowed ten (10) days after receipt of said
commitment for examination and the making of any objections to
marketability thereto, said objections to be made in writing or
deemed waived. If any objections are so made, the Seller shall
be allowed eighty (80) days to make such title marketable or in
the alternative to obtain a commitment for insurable title
insuring over Buyer's objections. If Seller shall decide to make
no efforts to make title marketable, or is unable to make title
marketable or obtain insurable title, (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof) Buyer's First Payment shall be returned and
this Agreement shall be null and void and of no further force and
effect.
Pending correction of title, the payments hereunder required
shall be postponed, but upon correction of title and within ten
(10) days after written notice of correction to the Buyer, the
parties shall perform this Agreement according to its terms.
Buyer Initial: /s/ ECT /s/ VLT
Purchase Agreement for Champps - Columbus, OH
9. Closing Costs. Seller will pay one-half of escrow fees,
the cost of the title commitment and any brokerage commissions
payable. The Buyer will pay the cost of issuing a Standard
Owners Title Insurance Policy in the full amount of the purchase
price, if Buyer shall decide to purchase the same. Buyer will
pay all recording fees, one-half of the escrow fees, and the cost
of an update to the Survey in Sellers possession (if an update is
required by Buyer.) Each party will pay its own attorney's fees
and costs to document and close this transaction.
10. Real Estate Taxes, Special Assessments and Prorations.
(a) Because the Entire Property (of which the Property is a
part) is subject to a triple net lease (as further set forth
in paragraph 11(a)(i), the parties acknowledge that there
shall be no need for a real estate tax proration. However,
Seller represents that to the best of its knowledge, all
real estate taxes and installments of special assessments
due and payable in all years prior to the year of Closing
have been paid in full. Unpaid real estate taxes and unpaid
levied and pending special assessments existing on the date
of Closing shall be the responsibility of Buyer and Seller
in proportion to their respective Tenant in Common
interests, pro-rated, however, to the date of closing for
the period prior to closing, which shall be the
responsibility of Seller if Tenant shall not pay the same.
Seller and Buyer shall likewise pay all taxes due and
payable in the year after Closing and any unpaid
installments of special assessments payable therewith and
thereafter, if such unpaid levied and pending special
assessments and real estate taxes are not paid by any tenant
of the Entire Property.
(b) All income and all operating expenses from the Entire
Property shall be prorated between the parties and adjusted
by them as of the date of Closing. Seller shall be entitled
to all income earned and shall be responsible for all
expenses incurred prior to the date of Closing, and Buyer
shall be entitled to its proportionate share of all income
earned and shall be responsible for its proportionate share
of all operating expenses of the Entire Property incurred on
and after the date of closing.
11. Seller's Representation and Agreements.
(a) Seller represents and warrants as of this date that:
(i) Except for the lease in existence between AEI Income &
Growth Fund XXI Limited Partnership and AEI Real Estate Fund
XVIII Limited Partnership and Americana Dining Corporation,
dated August 29, 1996, Seller is not aware of any leases of
the Property. The above referenced lease agreement also has
a first right of refusal in favor of the Tenant as set forth
in Article 34 of said lease agreement, which right shall
apply to any attempted disposition of the Property by Buyer
after this transaction.
(ii) It is not aware of any pending litigation or
condemnation proceedings against the Property or Seller's
interest in the Property.
(iii) Except as previously disclosed to Buyer and as set
forth in paragraph (b) below, Seller is not aware of any
contracts Seller has executed that would be binding on Buyer
after the closing date.
(b) Provided that Buyer performs its obligations when
required, Seller agrees that it will not enter into any new
contracts that would materially affect the Property and be
binding on Buyer after the Closing Date without Buyer's
prior consent, which will not be unreasonably withheld.
However, Buyer acknowledges that Seller retains the right
both prior to and after the Closing Date to freely transfer
all or a portion of Seller's remaining undivided interest in
the Entire Property, provided such sale shall not encumber
the Property being purchased by
Buyer Initial: /s/ ECT /s/ VLT
Purchase Agreement for Champps - Columbus, OH
Buyer in violation of the terms hereof or the contemplated
Co-Tenancy Agreement.
12. Disclosures.
(a) To the best of Seller's knowledge: there are now, and
at the Closing there will be, no material, physical or
mechanical defects of the Property, including, without
limitation, the plumbing, heating, air conditioning,
ventilating, electrical systems, and all such items are in
good operating condition and repair and in compliance with
all applicable governmental , zoning and land use laws,
ordinances, regulations and requirements.
(b) To the best of Seller's knowledge: the use and
operation of the Property now is, and at the time of Closing
will be, in full compliance with applicable building codes,
safety, fire, zoning, and land use laws, and other
applicable local, state and federal laws, ordinances,
regulations and requirements.
(c) Seller knows of no facts nor has Seller failed to
disclose to Buyer any fact known to Seller which would
prevent Buyer from using and operating the Property after
the Closing in the manner in which the Property has been
used and operated prior to the date of this Agreement.
(d) To the best of Seller's knowledge: the Property is not,
and as of the Closing will not be, in violation of any
federal, state or local law, ordinance or regulations
relating to industrial hygiene or to the environmental
conditions on, under, or about the Property including, but
not limited to, soil and groundwater conditions. To the
best of Seller's knowledge: there is no proceeding or
inquiry by any governmental authority with respect to the
presence of Hazardous Materials on the Property or the
migration of Hazardous Materials from or to other property.
Buyer agrees that Seller will have no liability of any type
to Buyer or Buyer's successors, assigns, or affiliates in
connection with any Hazardous Materials on or in connection
with the Property either before or after the Closing Date,
except such Hazardous Materials on or in connection with the
Property arising out of Seller's gross negligence or
intentional misconduct.
(e) Buyer agrees that it shall be purchasing the Property
in its then present condition, as is, where is, and Seller
has no obligations to construct or repair any improvements
thereon or to perform any other act regarding the Property,
except as expressly provided herein.
(f) Buyer acknowledges that, having been given the
opportunity to inspect the Property and such financial
information on the Lessee and Guarantors of the Lease as
Buyer or its advisors shall request, Buyer is relying solely
on its own investigation of the Property and not on any
information provided by Seller or to be provided except as
set forth herein. Buyer further acknowledges that the
information provided and to be provided by Seller with
respect to the Property and to the Lessee and Guarantors of
Lease was obtained from a variety of sources and Seller
neither (a) has made independent investigation or
verification of such information, or (b) makes any
representations as to the accuracy or completeness of such
information. The sale of the Property as provided for
herein is made on an "AS IS" basis, and Buyer expressly
acknowledges that, in consideration of the agreements of
Seller herein, except as otherwise specified herein, Seller
makes no Warranty or representation, Express or Implied, or
arising by operation of law, including, but not limited to,
any warranty or condition, habitability, tenantability,
suitability for commercial purposes, merchantability, or
fitness for a particular purpose, in respect of the
Property.
The provisions (d) - (f) above shall survive closing.
Buyer Initial: /s/ ECT /s/ VLT
Purchase Agreement for Champps - Columbus, OH
13. Closing.
(a) Before the closing date, Seller will deposit into
escrow an executed limited warranty deed conveying insurable
title of the Property to Buyer, subject to the encumbrances
contained in paragraph 8 above.
(b) On or before the closing date, Buyer will deposit into
escrow: the balance of the purchase price when required
under Section 4; any additional funds required of Buyer,
(pursuant to this agreement or any other agreement executed
by Buyer) to close escrow. Both parties will sign and
deliver to the escrow holder any other documents reasonably
required by the escrow holder to close escrow.
(c) On the closing date, if escrow is in a position to
close, the escrow holder will: record the deed in the
official records of the county where the Property is
located; cause the title company to commit to issue the
title policy; immediately deliver to Seller the portion of
the purchase price deposited into escrow by cashier's check
or wire transfer (less debits and prorations, if any);
deliver to Seller and Buyer a signed counterpart of the
escrow holder's certified closing statement and take all
other actions necessary to close escrow.
14. Defaults. If Buyer defaults, Buyer will forfeit all rights
and claims and Seller will be relieved of all obligations and
will be entitled to retain all monies heretofore paid by the
Buyer. In addition, Seller shall retain all remedies available
to Seller at law or in equity.
If Seller shall default, Buyer irrevocably waives any rights
to file a lis pendens, a specific performance action or any other
claim, action or proceeding of any type in connection with the
Property or this or any other transaction involving the Property,
and will not do anything to affect title to the Property or
hinder, delay or prevent any other sale, lease or other
transaction involving the Property (any and all of which will be
null and void), unless: it has paid the First Payment, deposited
the balance of the Second Payment for the purchase price into
escrow, performed all of its other obligations and satisfied all
conditions under this Agreement, and unconditionally notified
Seller that it stands ready to tender full performance, purchase
the Property and close escrow as per this Agreement, regardless
of any alleged default or misconduct by Seller. Provided,
however, that in no event shall Seller be liable for any actual,
punitive, consequential or speculative damages arising out of any
default by Seller hereunder.
15. Buyer's Representations and Warranties.
a. Buyer represents and warrants to Seller as follows:
(i) In addition to the acts and deeds recited herein and
contemplated to be performed, executed, and delivered by
Buyer, Buyer shall perform, execute and deliver or cause to
be performed, executed, and delivered at the Closing or
after the Closing, any and all further acts, deeds and
assurances as Seller or the Title Company may require and be
reasonable in order to consummate the transactions
contemplated herein.
(ii) Buyer has all requisite power and authority to
consummate the transaction contemplated by this Agreement
and has by proper proceedings duly authorized the execution
and delivery of this Agreement and the consummation of the
transaction contemplated hereby.
(iii) To Buyer's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the
transaction contemplated hereby will violate or be in
conflict with (a) any applicable provisions of law, (b) any
order of any court or other agency of government having
Buyer Initial: /s/ ECT /s/ VLT
Purchase Agreement for Champps - Columbus, OH
jurisdiction hereof, or (c) any agreement or instrument to
which Buyer is a party or by which Buyer is bound.
16. Damages, Destruction and Eminent Domain.
(a) If, prior to closing, the Property or any part thereof
should be destroyed or further damaged by fire, the
elements, or any cause, due to events occurring subsequent
to the date of this Agreement to the extent that the cost of
repair exceeds $10,000.00, this Agreement shall become null
and void, at Buyer's option exercised, if at all, by written
notice to Seller within ten (10) days after Buyer has
received written notice from Seller of said destruction or
damage. Seller, however, shall have the right to adjust or
settle any insured loss until (i) all contingencies set
forth in Paragraph 6 hereof have been satisfied, or waived;
and (ii) any ten-day period provided for above in this
Subparagraph 16a for Buyer to elect to terminate this
Agreement has expired or Buyer has, by written notice to
Seller, waived Buyer's right to terminate this Agreement.
If Buyer elects to proceed and to consummate the purchase
despite said damage or destruction, there shall be no
reduction in or abatement of the purchase price, and Seller
shall assign to Buyer the Seller's right, title, and
interest in and to all insurance proceeds (pro-rata in
relation to the Entire Property) resulting from said damage
or destruction to the extent that the same are payable with
respect to damage to the Property, subject to rights of any
Tenant of the Entire Property.
If the cost of repair is less than $10,000.00, Buyer shall
be obligated to otherwise perform hereinunder with no
adjustment to the Purchase Price, reduction or abatement,
and Seller shall assign Seller's right, title and interest
in and to all insurance proceeds pro-rata in relation to the
Entire Property, subject to rights of any Tenant of the
Entire Property.
(b) If, prior to closing, the Property, or any part
thereof, is taken by eminent domain, this Agreement shall
become null and void, at Buyer's option. If Buyer elects to
proceed and to consummate the purchase despite said taking,
there shall be no reduction in, or abatement of, the
purchase price, and Seller shall assign to Buyer the
Seller's right, title, and interest in and to any award
made, or to be made, in the condemnation proceeding pro-rata
in relation to the Entire Property, subject to rights of any
Tenant of the Entire Property.
In the event that this Agreement is terminated by Buyer as
provided above in Subparagraph 16a or 16b, the First Payment
shall be immediately returned to Buyer (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof).
17. Buyer's 1031 Tax Free Exchange.
While Seller acknowledges that Buyer is purchasing the
Property as "replacement property" to accomplish a tax free
exchange, Buyer acknowledges that Seller has made no
representations, warranties, or agreements to Buyer or Buyer's
agents that the transaction contemplated by the Agreement will
qualify for such tax treatment, nor has there been any reliance
thereon by Buyer respecting the legal or tax implications of the
transactions contemplated hereby. Buyer further represents that
it has sought and obtained such third party advice and counsel as
it deems necessary in regards to the tax implications of this
transaction.
Buyer wishes to novate/assign the ownership rights and
interest of this Purchase Agreement to Gary J. Manny, Attorney at
Law, P.C. who will act as Accommodator to perfect the 1031
exchange by preparing an agreement of exchange of Real Property
whereby Gary J. Manny, Attorney at Law, P.C. will be an
independent third party purchasing the ownership interest in
subject property from Seller and selling the ownership interest
in subject property to Buyer under the same terms and conditions
as documented in this Purchase Agreement. Buyer asks the Seller,
and Seller agrees to cooperate in the perfection of such an
exchange if at no additional cost or expense to Seller
Buyer Initial: /s/ ECT /s/ VLT
Purchase Agreement for Champps - Columbus, OH
or delay in time. Buyer hereby indemnifies and holds Seller
harmless from any claims and/or actions resulting from said
exchange. Pursuant to the direction of Gary J. Manny, Attorney
at Law, P.C., Seller will deed the property to Buyer.
18. Cancellation
If any party elects to cancel this Contract because of any
breach by another party or because escrow fails to close by
the agreed date, the party electing to cancel shall deliver
to escrow agent a notice containing the address of the party
in breach and stating that this Contract shall be cancelled
unless the breach is cured within 13 days following the
delivery of the notice to the escrow agent. Within three
days after receipt of such notice, the escrow agent shall
send it by United States Mail to the party in breach at the
address contained in the Notice and no further notice shall
be required. If the breach is not cured within the 13 days
following the delivery of the notice to the escrow agent,
this Contract shall be cancelled.
19. Miscellaneous.
(a) This Agreement may be amended only by written agreement
signed by both Seller and Buyer, and all waivers must be in
writing and signed by the waiving party. Time is of the
essence. This Agreement will not be construed for or
against a party whether or not that party has drafted this
Agreement. If there is any action or proceeding between the
parties relating to this Agreement the prevailing party will
be entitled to recover attorney's fees and costs. This is
an integrated agreement containing all agreements of the
parties about the Property and the other matters described,
and it supersedes any other agreements or understandings.
Exhibits attached to this Agreement are incorporated into
this Agreement.
(b) If this escrow has not closed by February 18, 1998,
through no fault of Seller, Seller may either, at its
election, extend the closing date or exercise any remedy
available to it by law, including terminating this
Agreement.
(c) Funds to be deposited or paid by Buyer must be good and
clear funds in the form of cash, cashier's checks or wire
transfers.
(d) All notices from either of the parties hereto to the
other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified
mail, return receipt requested, postage prepaid, or by a
nationally recognized courier service guaranteeing overnight
delivery to the party at his or its address set forth below,
or to such other address as such party may hereafter
designate by written notice to the other party.
If to Seller:
Attention: Robert P. Johnson
AEI Real Estate Fund XVIII Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
Buyer Initial: /s/ ECT /s/ VLT
Purchase Agreement for Champps - Columbus, OH
If to Buyer:
Edward C. and Virginia L. Thulin
3309 Hollow Creek Road
Arlington, TX 76001
When accepted, this offer will be a binding agreement for
valid and sufficient consideration which will bind and benefit
Buyer, Seller and their respective successors and assigns. Buyer
is submitting this offer by signing a copy of this offer and
delivering it to Seller. Seller has five (5) business days from
receipt within which to accept this offer.
IN WITNESS WHEREOF, the Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
BUYER: EDWARD C. AND VIRGINIA L. THULIN, MARRIED AS TENANTS IN COMMON
By: /s/ Edward C Thulin
Edward C. Thulin
By: /s/ Virginia L Thulin
Virginia L. Thulin
WITNESS:
(as to both signers)
/s/ C.R. Elhoff Jr.
C. R. Elhoff Jr.
(Print Name)
WITNESS:
/s/ Carol Pevsner
Carol Pevsner
(Print Name)
Buyer Initial: /s/ ECT /s/ VLT
Purchase Agreement for Champps - Columbus, OH
SELLER: AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP a
Minnesota limited partnership
By: AEI Fund Management XXI Inc., its corporate general partner
By: /s/ Robert P Johnson
Robert P. Johnson, President
WITNESS:
/s/ Laura Steidl
Laura Steidl
(Print Name)
WITNESS:
/s/ Dawn E Campbell
Dawn E Campbell
(Print Name)
Buyer Initial: /s/ ECT /s/ VLT
Purchase Agreement for Champps - Columbus, OH
LEGAL DESCRIPTION
Situated in the State of Ohio, County of Franklin, City of
Columbus, being located in Section 2, Township 2, Range 18,
United States Military Lands, and being part of a 43. 161
acre tract of land (Parcel No. 610-146452) conveyed to Forty-
One Corporation (the Grantor), by deed of record in Official
Record 15500 A-G, all references being to records in the
Recorder's Office, Franklin County Ohio, and being more
particularly described as follows:
Beginning for reference at the intersection of North High
Street (US 23) and East Campus View Boulevard (80.00 feet in
width) as shown in Plat Book 60, Page 26:
thence S 86 49' 53" E, along the centerline of said East
Campus View Boulevard, a distance of 900.00 feet to a point
of curvature,
thence along the centerline of said East Campus View
Boulevard, with a curve tot he left having a radius of
1350.00 feet, a chord bearing of N 89 27' 50" E, and a chord
distance of 174.45 feet to the intersection with centerline
of High Cross Boulevard (80.00 feet in width);
thence S 1 53'32" E, along the centerline of said High cross
Boulevard a distance of 74.72 feet to a point;
thence N 88 06'28" E, a distance of 40.00 feet to an iron
pin set in the easterly right of way line of said High Cross
Boulevard, said point being the True Point of Beginning of
herein described tract;
thence along the easterly right of way line of said High
Cross Boulevard, with a curve to the right, having a radius
of 40.00 feet, a chord bearing of N 40 23'34" E, and a chord
distance of 53.83 feet to an iron pin set in the southerly
right of way line of said East Campus View Boulevard;
thence along the southerly right of way line of said East
Campus View Boulevard and the northerly line of herein
described tract, with a curve to the left, having a radius
of 1390.00 feet, a chord bearing of N 82 25'24" E, and a
chord distance of 12.36 feet to an iron pin set;
thence N 82 10' 07" E, along the southerly right of way line
of said East Campus View boulevard and the northerly line of
herein described tract, a distance of 209.28 feet to an iron
pin set at the northeasterly corner of herein described
tract;
thence s 7 49' 49" E, along the easterly line of herein
described tract, a distance of 312.60 feet to an iron pin
set at the southeasterly corner of herein described tract;
thence S 82 10'11" W, along the southerly line of herein
described tract, a distance of 318.01 feet to an iron pin
set in the easterly right of way line of said High Cross
Boulevard at the southwesterly corner of herein described
tract;
thence along the easterly right of way line of said High
Cross Boulevard and the westerly line of herein described
tract, with a curve to the right, having a radius of 2960.00
feet, a chord bearing of N 9 21' 59" E, and a chord distance
of 10/.64 feet to an iron pin set;
thence N 9 28'10" E, along the easterly right of way line of
said High Cross Boulevard and the westerly line of herein
described tract a distance of 89.24 feet to an iron pin set;
thence along the easterly right of way line of said High
Cross Boulevard and the westerly line of herein described
tract, with a curve to the left, having a radius of 390.00
feet, a chord bearing at N 3 47' 19" E, and a chord distance
of 77.21 feet to an iron pin set;
thence N 53' 32" W, along the easterly right of way line of
said High Cross Boulevard and the westerly line of herein
described tract a distance of 106/36 feet to the True Point
of Beginning containing 2,005 acres, more or less, and
subject to any rights of way, easements, and restrictions of
record.
The Basis of Bearing in this description is the centerline
of East Campus View Boulevard, being S 86 49' 53" E, as
shown in Plat Book 61, Page 79, Recorder's Office, Franklin
County, Ohio.
<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-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,506,790
<SECURITIES> 0
<RECEIVABLES> 162,677
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,669,467
<PP&E> 16,558,782
<DEPRECIATION> (399,150)
<TOTAL-ASSETS> 18,829,099
<CURRENT-LIABILITIES> 381,148
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 18,447,951
<TOTAL-LIABILITY-AND-EQUITY> 18,829,099
<SALES> 0
<TOTAL-REVENUES> 1,513,094
<CGS> 0
<TOTAL-COSTS> 1,180,406
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 439,239
<INCOME-TAX> 0
<INCOME-CONTINUING> 439,239
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 439,239
<EPS-PRIMARY> 18.18
<EPS-DILUTED> 18.18
</TABLE>
EXHIBIT 99
FORWARD LOOKING STATEMENTS
CAUTIONARY STATEMENT
Statements regarding the future prospects of the Partnership
must be evaluated in the context of a number of factors that may
materially affect its financial condition and results of
operations. Disclosure of these factors is intended to permit
the Partnership to take advantage of the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Most of
these factors have been discussed in prior filings by the Company
with the Securities and Exchange Commission. Although the
Partnership has attempted to list the factors that it is
currently aware may have an impact on its operations, other
factors may in the future prove to be important and the following
list should not necessarily be considered comprehensive.
General
Purchase of Unspecified Properties. Cash available to the
Partnership will be used to acquire non-residential commercial
properties (including single-tenant properties in the restaurant
and retail industry) that are subject to long-term triple net
leases. Investors will not have an opportunity to evaluate the
relevant economic, financial and other factors regarding the
properties in which cash will be invested. Investors must rely
upon the ability of the General Partners with respect to the
investment of such cash and management of the properties. No
assurance can be given that the Partnership will be successful in
obtaining suitable investments or that the objectives of the
Partnership will be achieved.
Conflicts of Interest. The General Partners and their
Affiliates provide substantially all of the management services
to the Partnership and have an interest in the Partnership. In
addition, the General Partners manage a number of other
Partnerships engaged in investment in net leased real estate,
some of which may have purchased, or may purchase in the future,
joint interests in the properties the Partnership acquires. The
operation of the Partnership involves various conflicts of
interest for the General Partners.
Reliance On Management. Except for certain voting rights
afforded Limited Partners by the Limited Partnership Agreement,
the Limited Partners have no control over the management of the
Partnership or its properties, but must rely almost exclusively
upon the General Partners.
Financial Position of General Partners. AEI Fund Management
XXI, Inc. the Managing General Partner, was formed in 1994 to
serve as general partner of the Partnership with substantially
the same structure and investment objectives as the Partnership.
It also is the Managing General Partner of AEI Income & Growth
Fund XXII Limited Partnership, an affiliated Partnership. The
Managing General Partner does not have substantial net worth.
The Individual General Partner, Robert P. Johnson, who represents
that he has a net worth in excess of $2,400,000, has been
involved as a general partner in public and private net lease
real estate partnerships and energy partnerships for more than
twenty years. Mr. Johnson could become subject to claims of
creditors for liabilities unrelated to the Partnership's business
in an amount that could adversely affect the Partnership. A
substantial portion of the assets of the Individual General
Partner consist of illiquid investments that were valued using
valuation formulae established by, and which are believed
reasonable by, the Individual General Partner. There can be no
assurance that such assets could be sold at their estimated
value.
Death or Withdrawal of General Partners. In the event of
the death, removal, bankruptcy or withdrawal of both of the
General Partners, the Partnership will be dissolved. While the
Limited Partners may elect, under such circumstances, to continue
the Partnership and its business with a new general partner, the
Limited Partners may not be able to find, or agree upon, a person
willing to act as general partner. In such event, the
Partnership would be liquidated. Sale of properties under such
circumstances might not produce an advantageous price and the
investors might suffer adverse tax and economic consequences.
The Partnership will not have the benefit of insurance on the
life of the Individual General Partner.
Indemnification of General Partners. Under the Limited
Partnership Agreement, the General Partners are not liable to the
Partnership or to the Limited Partners for any act or omission
that they determine in good faith is in the best interest of the
Partnership, except for acts of negligence or misconduct, and
under certain circumstances the General Partners will be entitled
to indemnification from the Partnership for certain losses.
Not a Real Estate Investment Trust or Investment Company.
The Partnership is not a mutual fund or a real estate investment
trust and it will not operate in a manner as to be classified as
an "investment company" for purposes of the Investment Company
Act of 1940. The management and the investment practices and
policies of the Partnership are not supervised or regulated by
any federal or state authority.
Representation by Attorneys and Accountants. The
Partnership, its Limited Partners and the General Partners are
not represented by separate counsel. The legal counsel and
accountants for the Partnership have not been retained, and will
not be available, to provide legal counseling or tax advice to
investors. Therefore, investors should retain their own legal
and tax advisors.
No Market for Units/Restrictions on Transfer. There is no
public market for the Units. In addition, under section 9.1 of
the Partnership Agreement, Units may not be assigned without
notice to and approval by the Managing General Partner. Although
such approval is required when the assignment or transfer is not
in violation of the Partnership Agreement, the Partnership
Agreement places substantial restrictions on the form and number
of transfers that may be made in order to retain the treatment of
the Partnership as a partnership for income tax purposes under
Internal Revenue Service definitions of "Publicly Traded
Partnerships."
Limited Liability. Although investors are limited partners
in a limited partnership, certain events under the Uniform
Limited Partnership Act can result in general liability being
imposed upon them. For example, if a Limited Partner takes part
in control of the business of the Partnership, he or she may
become liable as a general partner. Also, it is possible that a
failure on the part of the Partnership to file certain documents
in some jurisdictions in which it operates may jeopardize their
limited liability. Under the Minnesota Revised Uniform Limited
Partnership Act, however, an investor generally will be liable to
a Partnership or its creditors only for any difference between
such investor's contributions to the capital of the Partnership
and the amount of such contribution the investor has committed in
writing to make, for amounts or property wrongfully distributed
to such investor by the Partnership, and for any return of such
investor's contributions to the capital of the Partnership, plus
interest, to the extent that a creditor extended credit or had a
claim against the Partnership prior to such return.
Repurchase of Units. The Partnership Agreement provides
that Partners may tender Units to the Partnership for repurchase
by it commencing in 1996. In 1996 and 1997, the repurchase price
was equal to 75% and 90% of the Limited Partner's Adjusted
Capital Contribution, respectively, and in each year thereafter
is equal to 100% of such Adjusted Capital Contribution less half
of the net cash flow distributed. The Partnership is not
required, however, to repurchase Units in excess of 5% percent of
the Units outstanding in any year and is not required to
repurchase Units if such repurchase would impair the
Partnership's ability to continue operations. The repurchase
price for any Units must be paid out of either (i) Partnership
revenues otherwise distributable to Limited Partners or (ii)
Partnership borrowings. Accordingly, to the extent that the
Partnership repurchases Units, distributions to remaining Limited
Partners may initially be reduced. Moreover, there may be
circumstances under which Partnership revenues and borrowings
will be insufficient to fully fund such repurchases.
Distributions of Capital. During the acquisition phase of
the Partnership's operations, the General Partners intend to
distribute all interest income earned on proceeds that are
temporarily invested. To the extent that net operating revenues
are not sufficient to fund all such distributions, they may
constitute a return of capital.
Temporarily Invested Proceeds. Pending investment in
properties, the offering proceeds will be invested in short-term
government securities or in insured deposits with a financial
institution and will earn interest at short-term deposit rates.
The amount invested in insured accounts may periodically exceed
insurance limits and there can be no assurance that the
Partnership would recover the full amount of the account if the
financial institution in which they are deposited were placed in
receivership.
Risks Involved in Real Estate Transactions
Risks of Real Estate Ownership. The Partnership's
investment in non-residential commercial properties will be
subject to the risks generally incident to the ownership of real
property, including risks related to national economic
conditions, changes in the investment climate for real estate,
changes in local market conditions, changes in interest rates,
changes in real estate tax rates, other operating expenses,
governmental rules and fiscal policies, uninsured losses, the
financial condition of tenants, and other factors beyond the
control of the General Partners. The Partnership's properties
are subject to the risk of the inability to retain tenants or of
the default by tenants (and the inability to lease properties to
new tenants thereafter), which could result from adverse changes
in local real estate markets or other factors. The General
Partners believe that because the Partnership will be investing
in triple net lease properties on an all-cash basis, some of the
general risks associated with investments in real property will
be reduced.
No Assurance of Property Appreciation or Partnership
Profits. There is no assurance that the properties to be
acquired by the Partnership will operate at a profit, will
appreciate in value, or will be sold at a profit. The
marketability and value of each property will depend upon many
factors beyond the control of the General Partners. Since
investments in real property are generally illiquid, there is no
assurance that there will be a market for any property.
Adequacy of Reserves. Because the Partnership's properties
will be subject to triple net leases, the General Partners will
retain only a small working capital reserve. There can be no
assurance that adequate reserves will be available.
Tenant Default. The financial failure of a tenant of the
Partnership may cause a reduction in the Net Cash Flow of the
Partnership and a decline in the value of the property leased to
such tenant. In the event of such default, there is no assurance
that the Partnership would be able to find a new tenant for the
property at the same rental, or to sell the property without
incurring a loss. Like most entities that invest in real estate,
prior Partnerships sponsored by Affiliates of the General
Partners have purchased properties that have been leased to
tenants who have defaulted on lease obligations. In the event of
the bankruptcy of a tenant, there can be no assurance that the
Partnership could rapidly recover leased property from a trustee
in bankruptcy proceedings or that the Partnership would receive
rent in such proceedings sufficient to cover its expenses, if
any, with respect to such property. Bankruptcies have caused
several months' interruption in rental payments from lessees of
properties in some prior partnerships.
Net Leases. Net leases frequently give the tenant greater
discretion in the use of the property than do ordinary property
leases (e.g., with respect to rights to sublease, to make
alterations in the leased premises and to terminate the lease in
certain circumstances). Although the value of such properties
might be adversely affected by the failure of tenants to renew
such leases, the General Partners will attempt to reduce this
risk by entering into long-term leases of 10 or more years.
Single Use Properties. The properties which the Partnership
purchases may be designed or built primarily for a particular
tenant such as a specific restaurant franchisee. If the
Partnership holds such a property upon termination of the lease
and the tenant elects not to renew its lease, or if such a tenant
otherwise defaults on its lease obligations, the property may not
be readily marketable to a new tenant without substantial capital
improvements or remodeling. Such improvements might require
expenditure of funds otherwise available for distribution or the
sale of the property at a lower price.
The Restaurant and Retail Industry. It is anticipated that
many of the properties acquired or to be acquired will be leased
to operators in the restaurant industry or in the retail
industry. Both of these industries are highly competitive and
can be affected by factors such as changes in regional or local
economies, seasonality and changes in consumer preference.
Although the General Partners will attempt to limit these risks
by emphasizing acquisition of properties for cash that are leased
to established national and regional companies, there can be no
assurance that a downturn affecting such industries would not
have an adverse effect on the Partnership.
Construction Lending. The Partnership may advance funds to
certain seller/lessees prior to acquisition to assist in
financing the construction of such properties. Although all of
such advances will be secured by the property and all
improvements thereon, and although none of the ten public funds
previously sponsored by the General Partners have ever
experienced a default on a construction loan, construction
lending is subject to a number of risks. Risks incurred by
owners during construction, including cost overruns,
nonperforming contractors, changes in construction codes and
changes in cost, can cause financial difficulty and increase the
likelihood of default on a construction loan. If a borrower
defaults on an advance during construction, the Partnership's
primary recourse is to foreclose on the property. Such
foreclosure is normally subject to a period of redemption,
depending upon the applicable laws of the jurisdiction in which
the property is located, of up to one year during which time the
Partnership would not be able to dispose of the property and
during which time the property would not produce income. In
addition, if the Partnership acquired title to a property through
foreclosure, there can be no assurance that the property could be
resold at a price equal to the principal amount of the loan. If,
as is likely, the property were only partially complete at the
time of foreclosure, the Partnership might be required to expend
capital to complete the property to enhance its sale. Although
in many cases it is anticipated that the Partnership may have
recourse against an individual guarantor in the event of a
default, there can be no assurances that the ability of the
guarantor to satisfy the default would not be impaired by the
same financial circumstances that caused the default.
Sale of Properties and Reinvestment of Proceeds. The
General Partners may, from time to time, sell properties and
reinvest the proceeds therefrom in additional net lease
properties. Limited Partners will not have the right to receive
cash upon sale of the properties other than cash representing a
majority of the gain, and must rely on the ability of the General
Partners to find appropriate properties in which to reinvest such
proceeds. Upon the final sale of all Partnership properties, if
the Partnership provides financing to purchasers, the liquidation
of the Partnership could be delayed until such financing is fully
collected.
Uninsured Losses. The General Partners will arrange for
comprehensive insurance coverage on the properties. However,
certain types of losses (generally of a catastrophic nature) may
be either uninsurable or not economically insurable. Should such
a disaster occur, the Partnership could suffer a complete loss of
capital invested in, and any profits expected from, the affected
properties.
Federal Income Tax Risks
Audits. A ruling from the Internal Revenue Service (the
"Service") has not been obtained with respect to any tax aspect
of an investment in the Partnership. Availability of certain tax
consequences intended to be realized by Limited Partners may be
challenged upon audit by the Service. Any adjustment resulting
from an audit by the Service also could result in adjustments to
the tax returns of the Limited Partners and may lead to an
examination of other items unrelated to the Partnership or an
examination of prior tax returns. Moreover, Limited Partners
could incur substantial legal and accounting costs in connection
with any challenge by the Service of the position taken by the
Partnership on its tax returns regardless of the outcome of such
a challenge.
Partnership Allocations. The Partnership Agreement
allocates to each Partner his or her distributive share of
Partnership tax items. Whether such allocations will be
respected for federal income tax purposes is governed by Section
704(b) of the Code and regulations promulgated thereunder.
Section704(b) generally requires that Partnership allocations
must have substantial economic effect. The allocations contained
in the Partnership Agreement appear to satisfy the requirements
of regulations under Section 704(b) as to allocations that do not
cause or increase a deficit balance in a Partner's capital
account. Counsel for the Partnership has concluded, therefore,
as of the date of this Prospectus, that it is more likely than
not that the allocations under the Partnership Agreement will be
recognized for federal income tax purposes under Section 704(b)
of the Code so long as such conditions are satisfied. Compliance
with the regulations depends, in certain cases, on the individual
tax situations of the Partners, and counsel's opinion does not
extend to such situations.
New Tax Legislation--Changes in Federal Tax Laws,
Regulations and Interpretations Thereof. Investors should not
rely unduly on the prospect that tax consequences provided by
existing law will continue to be afforded or that changes in the
interpretation of applicable income tax laws will not be made by
administrative or judicial action that will adversely affect the
tax consequences of an investment in the Partnership. Tax
benefits of an investment in the Partnership could be reduced or
tax liabilities could be incurred by reason of changes in the tax
law. Any legislative, administrative or judicial changes may or
may not be retroactive with respect to transactions entered into
prior to the effective date of such changes.
Partnership Income. For any year in which the Partnership
has taxable net income or any gain on sale of properties,
individual Partners will be required to report their allocable
share of such income or gain, whether or not net cash in a
corresponding amount is distributed to them, on their federal and
state tax returns and will be liable for the payment of taxes
thereon. Such taxes could be greater than cash distributions
received by a Partner from the Partnership for the year,
particularly in years in which the Partnership sells properties
and reinvests the proceeds therefrom or uses distributable Net
Cash Flow to repurchase Units. Partners participating in a
Distribution Reinvestment Plan will be required to report the net
income from the Partnership that might otherwise have been
covered by distributions that are reinvested even though they
will not receive any cash from such distributions.
Tax Liability Upon Sale or Disposition of Property or Units.
A sale or other disposition of a property or a disposition of
Units by a Limited Partner may result in substantial tax
liability to such Limited Partner. Furthermore, under certain
circumstances, the taxes payable by a Limited Partner resulting
from the sale of a property or from the disposition of Units by
such Limited Partner could exceed the cash available to such
Limited Partner from such sale or the proceeds from such
disposition of Units.
