UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the transition period from ---------- to ----------
Commission File Number: 0-25436
AAA NET REALTY FUND X, LTD.
NEBRASKA LIMITED PARTNERSHIP IRS IDENTIFICATION NO.
76-0381949
8 GREENWAY PLAZA, SUITE 824 HOUSTON, TX 77046
(713) 850-1400
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. X Yes No
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEET
JUNE 30, 2000
(Unaudited)
ASSETS
Cash and cash equivalents $ 333,505
Accounts receivable 55,201
Property:
Land 2,566,251
Buildings 5,370,983
------------
7,937,234
Accumulated depreciation (906,051)
------------
Total property, net 7,031,183
------------
Net investment in direct financing leases 616,911
Investment in joint ventures 1,354,995
Other assets:
Accrued rental income 164,913
Deferred lease costs, net of accumulated
amortization of $4,704 27,061
------------
Total other assets 191,974
------------
TOTAL ASSETS $ 9,583,769
============
LIABILITIES AND PARTNERSHIP EQUITY
Liabilities:
Accounts payable $ 31,765
Property costs payable 17,223
Security deposit 12,000
------------
TOTAL LIABILITIES 60,988
------------
Partnership equity:
General partners 22,407
Limited partners 9,500,374
------------
TOTAL PARTNERSHIP EQUITY 9,522,781
------------
TOTAL LIABILITIES AND PARTNERSHIP EQUITY $ 9,583,769
============
See Notes to Financial Statements.
2
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
Quarter Year To Date
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Rental income from operating leases $ 217,618 $ 217,281 $ 437,489 $ 434,564
Earned income from direct financing
leases 17,595 17,668 35,194 35,336
Interest income and other income 3,329 638 5,686 1,550
Equity income from investment in
joint ventures 35,630 35,582 71,244 71,156
---------- ---------- ---------- ----------
Total revenues 274,172 271,169 549,613 542,606
---------- ---------- ---------- ----------
Expenses:
Advisory fees to related party 28,635 19,716 57,270 39,432
Amortization 784 784 1,568 1,568
Depreciation 36,118 36,116 72,234 72,233
Professional fees 6,815 4,708 17,384 10,920
---------- ---------- ---------- ----------
Total expenses 72,352 61,324 148,456 124,153
---------- ---------- ---------- ----------
Net income $ 201,820 $ 209,845 $ 401,157 $ 418,453
=========== ========== ========== ==========
Allocation of net income:
General partners $ 2,018 $ 2,099 $ 4,012 $ 4,185
Limited partners 199,802 207,746 397,145 414,268
---------- ---------- ---------- ----------
$ 201,820 $ 209,845 $ 401,157 $ 418,453
========== ========== ========== ==========
Net income per unit $ 17.62 $ 18.32 $ 35.02 $ 36.53
========== ========== ========== ==========
Weighted average units outstanding 11,454 11,454 11,454 11,454
========== ========== ========== ==========
See Notes to Financial Statements.
3
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
Quarter Year To Date
2000 1999 2000 1999
---- ---- ---- ----
Cash flows from operating activities:
Net income $ 201,820 $ 209,845 $ 401,157 $ 418,453
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization 784 784 1,568 1,568
Depreciation 36,118 36,116 72,234 72,233
Decrease in accounts receivable 1,238 27,181 14,027 390
(Decrease) increase in accounts payable (1,257) (823) (30,692) 31,052
Increase in property costs payable 12,917 - 17,223 -
Cash received from direct financing leases
greater (less) than income recognized 876 (891) 1,753 (1,782)
Investment in joint ventures:
Equity income (35,630) (35,582) (71,244) (71,156)
Distributions received 35,630 35,582 71,244 71,156
Increase in accrued rental income (7,119) (7,511) (14,232) (15,311)
Increase in deferred lease costs - - - (31,765)
---------- ---------- ---------- ----------
Net cash provided by operating
activities 245,377 264,701 463,038 474,838
---------- ---------- ---------- ----------
Cash flows from investing activities:
Joint venture distributions in excess
of income 2,940 2,338 5,885 3,398
---------- ---------- ---------- ----------
Net cash provided by investing activities 2,940 2,338 5,885 3,398
---------- ---------- ---------- ----------
Cash flows from financing activities:
Distributions paid to partners (185,981) (234,016) (367,286) (468,603)
---------- ---------- ---------- ----------
Net cash used in financing activities (185,981) (234,016) (367,286) (468,603)
---------- ---------- ---------- ----------
Net increase in cash and cash equivalents 62,336 33,023 101,637 9,633
Cash and cash equivalents at beginning
of period 271,169 218,246 231,868 241,636
---------- ---------- ---------- ----------
Cash and cash equivalents at end of period $ 333,505 $ 251,269 $ 333,505 $ 251,269
========== ========== ========== ==========
See Notes to Financial Statements.
4
AAA NET REALTY FUND X, LTD
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AAA Net Realty Fund X, Ltd. ("the Partnership"), is a limited partnership
formed April 15, 1992, under the laws of the State of Nebraska. American
Asset Advisers Management Corporation X (a Nebraska corporation) is the
managing general partner and H. Kerr Taylor is the individual general
partner.
The Partnership was formed to acquire commercial properties for cash, own,
lease, operate, manage and eventually sell the properties. Prior to June 5,
1998, the selection, acquisition, and supervision of the operations of the
properties was managed by American Asset Advisers Realty Corporation
("AAA"), a related party. Beginning June 5, 1998, the supervision of the
operations of the properties is managed by AmREIT Realty Investment
Corporation, ("ARIC"), a related party.
The financial records of the Partnership are maintained on the accrual
basis of accounting whereby revenues are recognized when earned and
expenses are reflected when incurred.
For purposes of the statement of cash flows, the Partnership considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents. There has been no cash paid for income taxes
or interest during 2000 or 1999.
Real estate is leased to others on a net lease basis whereby all operating
expenses related to the properties including property taxes, insurance and
common area maintenance are the responsibility of the tenant. The leases
are accounted for under the operating method or the direct financing
method.
Properties are leased on a triple-net basis. Revenue is recognized on a
straight-line basis over the terms of the individual leases. Percentage
rents are recognized when received.
Under the operating method, the properties are recorded at cost. Rental
income is recognized ratably over the life of the lease and depreciation is
charged as incurred.
Under the direct financing method, the properties are recorded at their net
investment. Unearned income is deferred and amortized to income over the
life of the lease so as to produce a constant periodic rate of return.
The Partnership's interests in joint venture investments are accounted for
under the equity method whereby the Partnership's investment is increased
or decreased by its share of earnings or losses in the joint venture and
also decreased by any distributions. The Partnership owns a minority
interest and does not exercise control over the management of the joint
ventures.
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All income and expense items flow through to the partners for tax purposes.
Consequently, no provision for federal or state income taxes is provided in
the accompanying financial statements.
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and include all of the
disclosures required by generally accepted accounting principles. The
financial statements reflect all normal and recurring adjustments which
are, in the opinion of management, necessary to present a fair statement of
results for the three and six month periods ended June 30, 2000 and 1999.
The financial statements of AAA Net Realty Fund X, Ltd. contained herein
should be read in conjunction with the financial statements included in the
Partnership's annual report on Form 10-KSB for the year ended December 31,
1999.
2. PARTNERSHIP EQUITY
The managing general partner, American Asset Advisers Management
Corporation X, and the individual general partner, H. Kerr Taylor, have
made capital contributions in the amounts of $990 and $10, respectively.
The general partners shall not be obligated to make any other contributions
to the Partnership, except that, in the event that the general partners
have negative balances in their capital accounts after dissolution and
winding up of, or withdrawal from, the Partnership, the general partners
will contribute to the Partnership an amount equal to the lesser of the
deficit balances in their capital accounts or 1.01% of the total capital
contributions of the limited partners' over the amount previously
contributed by the general partners.
3. RELATED PARTY TRANSACTIONS
The Partnership Agreement provides for the payment for services necessary
for the prudent operation of the Partnership and its assets with the
exception that no reimbursement is permitted for rent, utilities, capital
equipment, salaries, fringe benefits or travel expenses allocated to the
individual general partner or to any controlling persons of the managing
general partner. In connection therewith, $28,635 and $57,270 were incurred
and expensed for the three and six months ended June 30, 2000, respectively
and $19,716 and $39,432 for the three and six months ended June 30, 1999,
respectively.
4. MAJOR LESSEES
The following schedule summarizes total rental income by lessee for the
three and six months ended June 30, 2000 and 1999 under both operating and
direct financing leases:
Quarter Year to Date
2000 1999 2000 1999
---- ---- ---- ----
Golden Corral Corporation (Texas) $ 43,242 $ 43,241 $ 88,737 $ 86,482
TGI Friday's, Inc. (Texas) 45,125 45,126 90,250 90,252
Goodyear Tire & Rubber Company (Texas) 13,227 13,227 26,454 26,454
Tandy Corporation (Minnesota) 64,155 64,155 128,310 128,310
America's Favorite Chicken Company (Georgia) 25,928 25,664 51,860 51,330
One Care/Memorial Hermann Hospital (Texas) 43,536 43,536 87,072 87,072
--------- --------- --------- ---------
Total $ 235,213 $ 234,949 $ 472,683 $ 469,900
========= ========= ========= =========
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4. INVESTMENT IN JOINT VENTURES
On April 5, 1996, the Partnership formed a joint venture, AAA Joint Venture
96-1, with AAA Net Realty Fund XI, Ltd. and AmREIT, Inc., entities with
common management, for the purpose of acquiring a property, which is being
operated as a Just For Feet retail store in Tucson, Arizona. The property
was purchased on September 11, 1996 after construction was completed. The
Partnership's interest in the joint venture is 18.25%. On November 4, 1999,
Just For Feet, Inc. filed a petition of relief under Chapter 11 of the
Federal bankruptcy code. On January 27, 2000 Just For Feet, Inc. announced
that its previous efforts of reorganization were unsuccessful. As such,
the bankruptcy court in Delaware approved a liquidation auction of all of
Just For Feet, Inc.'s retail stores and inventory. On February 16, 2000
Just For Feet, Inc. entered into an agreement whereby Footstar, Inc. would
purchase the inventory of Just For Feet, Inc., and assume certain retail
operating leases. Included in the leases being assumed by Footstar, Inc.
is the Just For Feet located in Tucson, Arizona, which is owned by AAA
Joint Venture 96-1. Effective February 16, 2000, Footstar began operating
this store under the Just For Feet name. The bankruptcy court in Delaware
has ordered Just For Feet, Inc. to cure any deficiencies under the lease
prior to the assumption of the lease by Footstar, Inc. These deficiencies
represent a receivable for rent, property taxes and insurance at June 30,
2000 of approximately $16,837. Footstar is the second largest retailer of
athletic footwear and apparel. Footstar, Inc. is a publicly owned company,
whose common stock is traded on the New York Stock Exchange.
On October 27, 1994, the Partnership formed a joint venture, AAA Joint
Venture 94-1, with AmREIT, Inc., for the purpose of acquiring a property on
lease to BlockBuster Music Retail Inc. in Missouri. The Company's interest
in the joint venture is 45.16%.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The Partnership was organized on April 15, 1992, to acquire, on a debt-free
basis, existing and newly constructed commercial properties located in the
continental United States and particularly in the Southwest, to lease these
properties to tenants under generally "triple net" leases, to hold the
properties with the expectation of equity appreciation and eventually to resell
the properties.
The Partnership's overall investment objectives are to acquire properties that
offer investors the potential for (i) preservation and protection of the
Partnership's capital; (ii) partially tax-deferred cash distributions from
operations; and (iii) long-term capital gains through appreciation in value of
the Partnership's properties realized upon sale.
7
RESULTS OF OPERATIONS
For the three months ended June 30, 2000, revenues totaled $274,172, which
included $270,843 from real estate operations and $3,329 of interest and other
income. Revenues for the second quarter of 2000 increased slightly from those of
the second quarter of 1999, primarily due to better cash management and
overnight investing opportunities. Expenses increased from $61,324 in the second
quarter of 1999 to $72,352 in the second quarter of 2000, primarily from an
increase in professional fees (which includes legal, audit and transfer agent
fees) and advisory fees to related party. The Partnership recorded $201,820 of
net income for the second quarter of 2000 compared to $209,845 for the second
quarter of 1999.
For the six months ended June 30, 2000, revenues totals $549,613, which included
$543,927 from real estate operations and $5,686 of interest income and other
income. Revenues for the first six months of 2000 increased $7,007 from those of
the first six months in 1999, which was attributable to a $4,136 increase in
interest income and other income and a $2,871 increase in rental income, which
represents a percentage rent payment from Golden Corral. Expenses increased from
$124,153 in the first six months of 1999 to $148,456 in the first six months of
2000, primarily from an increase in professional fees (which includes legal,
audit and transfer agent fees) and advisory fees to related party. The
Partnership recorded $401,157 of net income for the first six months of 2000,
compared to $418,453 for the first six months of 1999.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AAA Net Realty Fund X, Ltd.
(Issuer)
August 12, 2000 /s/ H. Kerr Taylor
- --------------- ------------------
Date H. Kerr Taylor, President of General Partner
August 12, 2000 /s/ Chad C. Braun
- --------------- -------------------
Date Chad C. Braun (Principal Accounting Officer)
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