SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: September 30, 1997
Commission file number: 0-29274
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified 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)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
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 preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes [X] No
Transitional Small Business Disclosure Format:
Yes No [X]
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of September 30, 1997 and December 31, 1996
Statements for the Periods ended September 30, 1997 and 1996:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(Unaudited)
ASSETS
1997 1996
CURRENT ASSETS:
Cash and Cash Equivalents $ 4,726,867 $ 10,729,033
Receivables 125,589 41,672
------------ ------------
Total Current Assets 4,852,456 10,770,705
------------ ------------
INVESTMENTS IN REAL ESTATE:
Land 6,674,998 2,541,511
Buildings and Equipment 6,304,833 5,079,924
Construction in Progress 1,986,803 0
Construction Advances 0 1,621,870
Property Acquisition Costs 292,562 245,726
Accumulated Depreciation (338,122) (162,645)
------------ ------------
Net Investments in Real Estate 14,921,074 9,326,386
------------ ------------
Total Assets $ 19,773,530 $ 20,097,091
============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 71,084 $ 132,900
Distributions Payable 481,275 429,668
Unearned Rent 55,971 0
------------ ------------
Total Current Liabilities 608,330 562,568
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partners (17,235) (9,754)
Limited Partners, $1,000 Unit Value;
24,000 Units authorized; 24,000 and 23,563
Units issued and outstanding in 1997 and
1996, respectively 19,182,435 19,544,277
------------ ------------
Total Partners' Capital 19,165,200 19,534,523
------------ -----------
Total Liabilities and Partners' Capital $ 19,773,530 $ 20,097,091
============ ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
Three Months Ended Nine Months Ended
9/30/97 9/30/96 9/30/97 9/30/96
INCOME:
Rent $ 282,333 $ 168,116 $ 698,606 $ 377,035
Investment Income 100,539 126,602 399,667 348,538
---------- ---------- ---------- ----------
Total Income 382,872 294,718 1,098,273 725,573
---------- ---------- ---------- ----------
EXPENSES:
Partnership Administration -
Affiliates 58,760 80,814 173,033 187,609
Partnership Administration
and Property Management -
Unrelated Parties 30,073 2,664 82,729 19,651
Depreciation 65,756 43,360 181,593 97,070
---------- ---------- ---------- ----------
Total Expenses 154,589 126,838 437,355 304,330
---------- ---------- ---------- ----------
OPERATING INCOME 228,283 167,880 660,918 421,243
GAIN ON SALE OF REAL ESTATE 42,582 0 42,582 0
---------- ---------- ---------- ----------
NET INCOME $ 270,865 $ 167,880 $ 703,500 $ 421,243
========== ========== ========== ==========
NET INCOME ALLOCATED:
General Partners $ 2,709 $ 1,678 $ 7,035 $ 4,212
Limited Partners 268,156 166,202 696,465 417,031
---------- ---------- ---------- ----------
$ 270,865 $ 167,880 $ 703,500 $ 421,243
========== ========== ========== ==========
NET INCOME PER
LIMITED PARTNERSHIP UNIT
(24,000, 18,870, 23,952 and
16,084 weighted average Units
outstanding for the periods,
respectively) $ 11.17 $ 8.81 $ 29.08 $ 25.93
========== ========== ========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 703,500 $ 421,243
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 181,593 97,070
Gain on Sale of Real Estate (42,582) 0
Increase in Receivables (83,917) (24,758)
Increase (Decrease) in Payable to
AEI Fund Management, Inc. (61,816) 67,452
Increase in Unearned Rent 55,971 31,998
----------- -----------
Total Adjustments 49,249 171,762
----------- -----------
Net Cash Provided By
Operating Activities 752,749 593,005
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (5,959,321) (6,694,293)
Proceeds from Sale of Real Estate 225,622 0
----------- -----------
Net Cash Used For
Investing Activities (5,733,699) (6,694,293)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions from Limited Partners 436,651 8,202,697
Organization and Syndication Costs (57,869) (1,115,818)
Increase in Distributions Payable 51,607 178,171
Distributions to Partners (1,451,605) (971,458)
----------- -----------
Net Cash Provided By (Used For)
Financing Activities (1,021,216) 6,293,592
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (6,002,166) 192,304
CASH AND CASH EQUIVALENTS, beginning of period 10,729,033 8,367,460
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 4,726,867 $ 8,559,764
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
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 8,202,697 8,202,697 8,202.69
Organization and
Syndication Costs 0 (1,115,818) (1,115,818)
Distributions (9,714) (961,744) (971,458)
Net Income 4,212 417,031 421,243
--------- ----------- ----------- ---------
BALANCE, September 30, 1996 $ (10,334) $16,833,517 $16,823,183 20,492.50
========= =========== =========== =========
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 and
Syndication Costs 0 (57,869) (57,869)
Distributions (14,516) (1,437,089) (1,451,605)
Net Income 7,035 696,465 703,500
--------- ----------- ----------- ---------
BALANCE, September 30, 1997 $ (17,235) $19,182,435 $19,165,200 24,000.00
========= =========== =========== =========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
(1) The condensed statements included herein have been prepared
by the Partnership, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of
operations for the interim period, on a basis consistent with
the annual audited statements. The adjustments made to these
condensed statements consist only of normal recurring
adjustments. Certain information, accounting policies, and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Partnership
believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction
with the financial statements and the summary of significant
accounting policies and notes thereto included in the
Partnership's latest annual report on Form 10-KSB.
(2) 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., 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.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
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.
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
PartnersO capital contributions.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate -
The Partnership leases its properties to various tenants
through non-cancelable triple net leases, which are
classified as operating leases. Under a triple net lease,
the lessee is responsible for all real estate taxes,
insurance, maintenance, repairs and operating expenses of
the property. The initial Lease terms are 20 years, except
Caribou Coffee, 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
restaurants, an additional 15 years for the Champps
Americana and Denny's restaurants, and an additional 25
years for the Garden Ridge store. The Leases contain rent
clauses which entitle the Partnership to receive additional
rent in future years based on stated rent increases.
Certain lessees have been granted options to purchase the
property. Depending on the lease, the purchase price is
either determined by a formula, or is the greater of the
fair market value of the property or the amount determined
by a formula. In all cases, if the option were to be
exercised by the lessee, the purchase price would be greater
than the original cost of the property.
The Partnership's properties are all commercial, single-
tenant buildings. The cost of the property and related
accumulated depreciation at September 30, 1997 are as
follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Arby's
Montgomery, AL $ 328,310 $ 425,794 $ 754,104 $ 39,741
Media Play
Apple Valley, MN 422,776 991,284 1,414,060 75,313
Garden Ridge
Pineville, NC 1,181,253 2,463,138 3,644,391 147,788
Champps Americana
Columbus, OH 545,470 1,074,254 1,619,724 52,374
Denny's
Covington, LA 522,264 756,775 1,279,039 18,656
Caribou Coffee
Charlotte, NC 691,855 593,588 1,285,443 4,250
Champps Americana
San Antonio, TX 1,032,299 0 1,032,299 0
Champps Americana
Schaumburg, IL 876,387 0 876,387 0
Champps Americana
Livonia, MI 1,074,384 0 1,074,384 0
----------- ----------- ----------- -----------
$ 6,674,998 $ 6,304,833 $12,979,831 $ 338,122
=========== =========== =========== ===========
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) 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. The remaining interest in the property was
purchased by AEI Net Lease Income & Growth Fund XIX Limited
Partnership and AEI Net Lease Income & Growth Fund XX
Limited Partnership, affiliates of the Partnership.
In December, 1996, the Partnership and MGI reached an
agreement in which MGI would buy out and terminate the Lease
Agreement by making a payment of $800,000, which is equal to
approximately two years' rent. The Partnership's share of
such payment was $272,000. Under the Agreement, MGI
remained in possession of the property and performed all of
its obligations under the net lease agreement through
January 31, 1997 at which time it vacated the property and
made it available for re-let to another tenant. MGI was
responsible for all maintenance and management costs of the
property through 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.
On March 28, 1996, the Partnership purchased a 40.75%
interest in a Garden Ridge store in Pineville, North
Carolina for $3,644,391. The property is leased to Garden
Ridge, L.P. under a Lease Agreement with a primary term of
20 years and annual rental payments of $383,973. The
remaining interest in the property was purchased by AEI Net
Lease Income & Growth Fund XIX Limited Partnership and AEI
Net Lease Income & Growth Fund XX Limited Partnership,
affiliates of the Partnership.
On August 29, 1996, the Partnership purchased a 67.8%
interest in a 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. The Partnership also
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 September 30, 1997, the Partnership had advanced
$1,172,890 for the construction of the property and was
charging interest on the advances at a rate of 7.0%.
Effective September 9, 1997, the Partnership began charging
interest on the Note at the rate of 10.75%. The total
purchase price, including the cost of the land, will be
approximately $2,804,000. After the construction is
complete, the Lease Agreement will be amended to require
annual rental payments of approximately $300,000.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
On March 19, 1997, the Partnership purchased a Denny's
restaurant in Covington, Louisiana for $1,279,039. 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. The Partnership also 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 September
30, 1997, the Partnership had advanced $212,034 for the
construction of the property and was charging interest on
the advances at a rate of 7.0%. The Partnership's share of
the total purchase price, including the cost of the land,
will be approximately $2,128,000. After the construction is
complete, the Lease Agreement will be amended to require
annual rental payments of approximately $229,000. The
remaining interests in the property are owned by AEI Income
& Growth Fund XX Limited Partnership and Net Lease Income &
Growth Fund 84-A Limited Partnership, affiliates of the
Partnership.
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. The
Partnership also 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 September 30, 1997, the
Partnership had advanced $362,611 for the construction of
the property and was charging interest on the advances at a
rate of 7.0%. 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
$1,285,443. 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, an affiliate of the
Partnership.
The Partnership has incurred net costs of $464,785 relating
to the review of potential property acquisitions. Of these
costs, $172,223 have been capitalized and allocated to land,
building and equipment. The remaining costs of $292,562
have been capitalized and will be allocated to property
acquisitions in future periods.
On September 30, 1997, the Partnership sold a 7.0899%
interest in the Champps Americana restaurant in Columbus,
Ohio to an unrelated third party. The Partnership received
net sale proceeds of $225,622 which resulted in a net gain
of $42,582. The total cost and related accumulated
depreciation of the interest sold was $189,156 and $6,116,
respectively.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
During the first nine months of 1997, the Partnership
distributed net sale proceeds of $190,810 to the Limited and
General Partners as part of their regular quarterly
distributions which represented a return of capital of $7.87
per Limited Partnership Unit. The remaining net sale
proceeds will either be reinvested in additional properties
or distributed to the Partners in the future.
(4) Payable to AEI Fund Management, Inc. -
AEI Fund Management, Inc. performs the administrative and
operating functions for the Partnership. The payable to AEI
Fund Management represents the balance due for those
services. This balance is non-interest bearing and
unsecured and is to be paid in the normal course of
business.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the nine months ended September 30, 1997 and 1996, the
Partnership recognized rental income of $698,606 and $377,035,
respectively. During the same periods, the Partnership earned
$399,667 and $348,538, respectively, in investment income from
subscriptions proceeds which were invested in short-term money
market accounts, commercial paper and federal agency notes. This
investment income constituted 36% and 48%, respectively, of total
income for the periods. The percentage of total income
represented by investment income declines as subscription
proceeds are invested in properties.
Musicland Group, Inc. (MGI), the lessee of the Media Play
retail store in Apple Valley, Minnesota has recently experienced
financial difficulties and has aggressively been restructuring
its organization. As part of the restructuring, the Partnership
and MGI reached an agreement in December, 1996 in which MGI would
buy out and terminate the Lease Agreement by making a payment of
$800,000, which is equal to approximately two years' rent. The
Partnership's share of such payment was $272,000. Under the
Agreement, MGI remained in possession of the property and
performed all of its obligations under the net lease agreement
through January 31, 1997 at which time it vacated the property
and made it available for re-let to another tenant. MGI was
responsible for all maintenance and management costs of the
property through January 31, 1997 after which date the
Partnership became responsible for its share of expenses
associated with the property until it is re-let or sold. A
specialist in commercial property leasing has been retained to
locate a new tenant for the property. In 1997, the Partnership
received $93,058 less in rent than in 1996 from Media Play.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
During the nine months ended September 30, 1997 and 1996,
the Partnership paid Partnership administration expenses to
affiliated parties of $173,033 and $187,609, 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 $82,729 and $19,651, 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 September 30, 1997, the Partnership's cash
distribution rate was 8.0% on an annualized basis. Distributions
of Net Cash Flow to the General Partners are subordinated to the
Limited Partners as required in the Partnership Agreement. As a
result, 99% of distributions were allocated to Limited Partners
and 1% to the General Partners.
Since the Partnership has only recently purchased its real
estate, inflation has had a minimal effect on income from
operations. The Leases contain cost of living increases to rent
which will result in an increase in rental income over the term
of the Leases. Inflation also may cause the Partnership's real
estate to appreciate in value. However, inflation and changing
prices may also have an adverse impact on the operating margins
of the properties' tenants which could impair their ability to
pay rent and subsequently reduce the Partnership's Net Cash Flow
available for distributions.
Liquidity and Capital Resources
The Partnership's primary sources of cash are 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
management of properties, the administration of the Partnership,
and the payment of distributions.
The Partnership Agreement requires that no more than 15%
of the proceeds from the sale of Units be applied to expenses
involved in the sale of Units (including Commissions) and that
such expenses, together with acquisition expenses, not exceed 20%
of the proceeds from the sale of Units. As set forth under the
caption "Estimated Use of Proceeds" of the Prospectus, the
General Partners anticipate that 14% of such proceeds will be
applied to cover organization and offering expenses if the
maximum proceeds are obtained. To the extent organization and
offering expenses actually incurred exceed 15% of proceeds, they
are borne by the General Partners.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
During the offering of Units, the Partnership's primary
source of cash flow will be from the sale of Limited Partnership
Units. The Partnership offered for sale up to $24,000,000 of
limited partnership interests (the "Units") (24,000 Units at
$1,000 per Unit) pursuant to a registration statement effective
February 1, 1995. From February1, 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 $3,306,859.
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.
On March 28, 1996, the Partnership purchased a 40.75%
interest in a Garden Ridge store in Pineville, North Carolina for
$3,644,391. The property is leased to Garden Ridge, L.P. under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $383,973. The remaining interest in the property was
purchased by AEI Net Lease Income & Growth Fund XIX Limited
Partnership and AEI Net Lease Income & Growth Fund XX Limited
Partnership, affiliates of the Partnership.
On August 29, 1996, the Partnership purchased a 67.8%
interest in a 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. The Partnership also 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 September 30, 1997, the
Partnership had advanced $1,172,890 for the construction of the
property and was charging interest on the advances at a rate of
7.0%. Effective September 9, 1997, the Partnership began
charging interest on the Note at the rate of 10.75%. The total
purchase price, including the cost of the land, will be
approximately $2,804,000. After the construction is complete,
the Lease Agreement will be amended to require annual rental
payments of approximately $300,000.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
On March 19, 1997, the Partnership purchased a Denny's
restaurant in Covington, Louisiana for $1,279,039. 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. The Partnership also 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 September 30, 1997, the
Partnership had advanced $212,034 for the construction of the
property and was charging interest on the advances at a rate of
7.0%. The Partnership's share of the total purchase price,
including the cost of the land, will be approximately $2,128,000.
After the construction is complete, the Lease Agreement will be
amended to require annual rental payments of approximately
$229,000. The remaining interests in the property are owned by
AEI Income & Growth Fund XX Limited Partnership and Net Lease
Income & Growth Fund 84-A Limited Partnership, affiliates of the
Partnership.
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. The Partnership also
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 September
30, 1997, the Partnership had advanced $362,611 for the
construction of the property and was charging interest on the
advances at a rate of 7.0%. 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 $1,285,443. 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, an affiliate of the Partnership.
On September 30, 1997, the Partnership sold a 7.0899%
interest in the Champps Americana restaurant in Columbus, Ohio to
an unrelated third party. The Partnership received net sale
proceeds of $225,622 which resulted in a net gain of $42,582.
The total cost and related accumulated depreciation of the
interest sold was $189,156 and $6,116, respectively.
During the first nine months of 1997, the Partnership
distributed net sale proceeds of $190,810 to the Limited and
General Partners as part of their regular quarterly distributions
which represented a return of capital of $7.87 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.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (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.
On October 1, 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 extremely liquid. At September 30, 1997, $4,756,838
or 24% 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.
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the Partnership is a party or of which the Partnership's
property is subject.
ITEM 2.CHANGES IN SECURITIES
None.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5.OTHER INFORMATION
None.
PART II - OTHER INFORMATION
(Continued)
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
Description
10.1 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.
27 Financial Data Schedule for period
ended September 30, 1997.
b. Reports filed on Form 8-K -
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: November 4, 1997 AEI Income & Growth Fund XXI
Limited Partnership
By: AEI Fund Management XXI, Inc.
Its: Managing General Partner
By: /s/ Robert P Johnson
Robert P. Johnson
President
(Principal Executive Officer)
By: /s/ Mark E Larson
Mark E. Larson
Chief Financial Officer
(Principal Accounting Officer)