UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 33-79766
AAA NET REALTY FUND XI, LTD.
TEXAS LIMITED PARTNERSHIP IRS IDENTIFICATION NO.
76-0451986
8 GREENWAY PLAZA, SUITE 824 HOUSTON, TX 77046
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
X Yes No
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
H (1) (a) AND (b) OF FORM 10-Q AND IS, THEREFORE, FILING THIS FORM WITH THE
REDUCED DISCLOSURE FORMAT.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AAA NET REALTY FUND XI, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
JUNE 30, DECEMBER 31,
1996 1995
(Unaudited)
ASSETS
CASH & CASH EQUIVALENTS $ 2,537,154 $ 1,642,729
ACCOUNTS RECEIVABLE 9,626 10,750
PROPERTY
Land 235,832 235,832
Building 550,275 550,275
786,107 786,107
Accumulated depreciation (7,642) (588)
778,465 785,519
INVESTMENT IN JOINT VENTURE 896,128 871,620
OTHER ASSETS:
Acquisition Costs 32,186 2,506
Accrued Rental Income 3,127 0
Organization Costs, net of accumulated amortization
of $40,490 and $20,890, respectively 180,833 151,643
TOTAL OTHER ASSETS 216,146 154,149
TOTAL ASSETS 4,437,519 3,464,767
LIABILITIES & PARTNERSHIP EQUITY
LIABILITIES
Accounts payable 37,353 21,926
TOTAL LIABILITIES 37,353 21,926
PARTNERSHIP EQUITY
General partners 2,602 1,773
Limited partners 4,397,564 3,441,068
TOTAL PARTNERSHIP EQUITY 4,400,166 3,442,841
TOTAL LIABILITIES & PARTNERSHIP EQUITY $ 4,437,519 $ 3,464,767
LIMITED PARTNERSHIP UNITS OUTSTANDING 4,927.9 3,828.5
See Notes to Financial Statements.
AAA NET REALTY FUND XI, LTD.
(A LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(Unaudited)
Quarter Year to Date
1996 1995 1996 1995
INCOME
Rental income $ 21,694 $ 0 $ 43,388 $ 0
Equity income from investment
in joint venture 20,356 0 40,712 0
Interest income 27,825 25,022 51,414 30,572
TOTAL INCOME 69,875 25,022 135,514 30,572
EXPENSES
Administrative expense 3,999 0 7,998 0
Accounting fees 600 950 6,000 950
Amortization 10,432 4,924 19,600 6,049
Bank charges 115 186 140 473
Depreciation 3,528 0 7,055 0
Filing fees 100 0 350 0
Legal and professional fees 2,206 44 6,512 44
Printing 1,821 0 4,073 0
Other 156 0 856 0
TOTAL EXPENSES 22,957 6,104 52,584 7,516
NET INCOME $ 46,918 $ 18,918 $ 82,930 $ 23,056
ALLOCATION OF NET INCOME
General partners $ 469 $ 189 $ 829 $ 230
Limited partners 46,449 18,729 82,101 22,826
$ 46,918 $ 18,918 $ 82,930 $ 23,056
NET INCOME PER UNIT $ 10.09 $ 8.64 $ 19.02 $ 11.49
WEIGHTED AVERAGE UNITS OUTSTANDING 4,648 2,189 4,361 2,006
See Notes to Financial Statements.
AAA NET REALTY FUND XI, LTD.
(A LIMITED PARTNERSHIP)
STATEMENT OF PARTNERSHIP EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
PARTNERSHIP EQUITY AT
DECEMBER 31, 1995 $ 1,773 $ 3,441,068 $ 3,442,841
CAPITAL CONTRIBUTIONS - NET 0 295,455 295,455
NET INCOME 360 35,652 36,012
DISTRIBUTIONS 0 (49,109) (49,109)
PARTNERSHIP EQUITY AT
MARCH 31, 1996 $ 2,133 $ 3,723,066 $ 3,725,199
CAPITAL CONTRIBUTIONS - NET 0 688,653 688,653
NET INCOME 469 46,449 46,918
DISTRIBUTIONS 0 (60,604) (60,604)
PARTNERSHIP EQUITY AT
JUNE 30, 1996 $ 2,602 $ 4,397,564 $ 4,400,166
See Notes to Financial Statements.
AAA NET REALTY FUND XI, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(Unaudited)
Quarter Year to Date
1996 1995 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 46,918 $ 18,918 $ 82,930 $ 23,056
Adjustments to reconcile net income to
net cash from operating activities:
Amortization 10,432 4,924 19,600 6,049
Depreciation 3,528 0 7,055 0
(Increase) decrease in accounts receivable (1,950) 0 1,124 0
Increase (decrease) in accounts payable 15,849 (26,035) 15,427 92
Investment in joint venture:
Equity income (20,356) 0 (40,712) 0
Distributions received 20,356 0 40,712 0
Increase in accrued rental income (1,564) 0 (3,127) 0
Increase in organization costs (33,940) (45,440) (48,790) (112,927)
NET CASH FLOWS FROM OPERATING ACTIVITIES 39,273 (47,633) 74,219 (83,730)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions - limited partners, net of
syndication costs 688,653 900,280 984,108 2,242,512
Distributions (60,604) 0 (109,713) 0
NET CASH FLOWS FROM FINANCING ACTIVITIES 628,049 900,280 874,395 2,242,512
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition costs (16,889) (19,468) (29,680) (50,012)
Investment in joint venture (29,850) (10,750) (29,850) (10,750)
Joint venture distributions in excess of income 2,670 0 5,341 0
NET CASH FLOWS FROM INVESTING ACTIVITIES (44,069) (30,218) (54,189) (60,762)
NET INCREASE IN CASH
and CASH EQUIVALENTS 623,253 822,429 894,425 2,098,020
CASH and CASH EQUIVALENTS at beginning of period 1,913,901 1,276,591 1,642,729 1,000
CASH and CASH EQUIVALENTS at end of period $ 2,537,154 $ 2,099,020 $ 2,537,154 $ 2,099,020
See Notes to Financial Statements.
AAA NET REALTY FUND XI, LTD.
( A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AAA Net Realty Fund XI, Ltd. ("the Partnership"), is a
limited partnership formed under the laws of the State of Texas.
American Asset Advisers Management Corporation XI (a Texas
corporation) is the managing general partner and H. Kerr Taylor
is the individual general partner. On March 3, 1995, the general
partners distributed the proceeds from the escrow account and
funded the Partnership. As of June 30, 1996, contributions had
been received from 4,927.9 units. There shall be available for
subscription by prospective limited partners an aggregate of
20,000 limited partnership units at $1,000 maximum offering
price per unit.
The Partnership was formed to acquire commercial properties for
cash. The Partnership will own, lease, operate, manage and
eventually sell the properties. The selection, acquisition, and
supervision of the operations of the properties is managed by
American Asset Advisers Realty Corporation ("AAA"), a related
party.
The financial records of the Partnership are maintained on the
accrual basis of accounting whereby revenues are recognized when
earned and expenses are reflected when incurred.
For purposes of the statement of cash flows the Partnership
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. There
has been no cash paid for income taxes or interest during 1996 or
1995.
Real estate is leased to others on a net lease basis whereby all
operating expenses related to the properties including property
taxes, insurance and common area maintenance are the
responsibility of the tenant. The lease is accounted for under
the operating method whereby the property is recorded at cost,
rental income is recognized ratably over the life of the
lease and depreciation is charged as incurred.
The Partnership's investment in a joint venture is accounted for
under the equity method whereby its initial investment in a joint
venture is recorded at its cost which is then increased or
decreased by its share of earnings or losses in the joint venture
and also decreased by any distributions.
Organization costs are amortized on a straight line basis over
five years.
Syndication costs are reflected as a reduction of the capital
contributions of the limited partners.
All income and expense items flow through to the partners for tax
purposes. Consequently, no provision for federal or state income
taxes is provided in the accompanying financial statements.
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-Q and do
not include all of the disclosures required by generally
accepted accounting principles. The financial statements reflect
all normal and recurring adjustments which are, in the opinion of
management, necessary to present a fair statement of results for
the three and six month periods ended June 30, 1996 and June 30,
1995.
The financial statements of AAA Net Realty Fund XI, Ltd.
contained herein should be read in conjunction with the financial
statements included in the Partnership's annual report on Form
10-K for the year ended December 31, 1995.
2. PARTNERSHIP EQUITY
The managing general partner, American Asset Advisers Management
Corporation XI, and the individual general partner, H. Kerr
Taylor, have made capital contributions in the amounts of $990
and $10, respectively. The general partners shall not be
obligated to make any other contributions to the Partnership,
except that, in the event that the general partners have
negative balances in their capital accounts after dissolution and
winding up of, or withdrawal from, the Partnership, the general
partners will contribute to the Partnership an amount equal
to the deficit balances in their capital account.
3. RELATED PARTY TRANSACTIONS
Certain costs have been incurred by the General Partners and
affiliates in connection with the organization and syndication of
the Partnership. Reimbursement of these costs become
obligations of the Partnership in accordance with the terms of
the offering. The costs incurred to organize the Partnership
have been capitalized as Organization Costs. In connection
therewith, $4,000 and $14,269 were paid to AAA for costs incurred
for the three and six months ended June 30, 1996, respectively
and $47,693 and $63,725 were paid to AAA for the three and six
months ended June 30, 1995, respectively. In addition, $19,529
and $32,029 of costs, reflected as Syndication Costs and netted
against Partnership Equity, were incurred by AAA for the issuance
and marketing of partnership units during the first three and
six months of 1996, respectively and $25,932 and $50,071 were
paid to AAA for the three and six months ended June 30, 1995,
respectively.
Acquisition expenses, including real estate commissions, finders
fees, consulting fees and any other non-recurring fees incurred
in connection with locating, evaluating and selecting
properties and structuring and negotiating the acquisition of
properties are included in the basis of the properties. $15,703
and $25,703 of such fees were incurred and paid to AAA for the
three and six months ended June 30, 1996, respectively. $19,468
and $50,012 of such fees were incurred and paid to AAA for the
three and six months ended June 30, 1995, respectively.
The Partnership Agreement provides for the reimbursement for
administrative services necessary for the prudent operation of
the Partnership and its assets with the exception that no
reimbursement is permitted for rent, utilities, capital
equipment, salaries, fringe benefits or travel expenses allocated
to the individual general partner or to any controlling
persons of the managing general partner. In connection
therewith, $3,999 and $7,998 were incurred and paid to AAA for
the first three and six months of 1996, respectively. No
administrative fees were incurred in the first six months of
1995.
On September 12, 1995, the Partnership acquired a 49% interest in
a joint venture with American Asset Advisers Trust, Inc., an
affiliated entity. The joint venture was formed for the purpose
of acquiring a property which is being operated as a Blockbuster
Music Store (Wichita, Kansas). The Partnership's share of costs
for this property totaled $873,711.
On April 5, 1996, the Partnership entered into a joint venture
with American Asset Advisers Trust, Inc. and AAA Net Realty Fund
X, Ltd., affiliates, for the purpose of acquiring a property
which will be operated as a Just For Feet retail store upon
completion of construction. The Partnership's interest in the
joint venture is 29.85%.
4. MAJOR LESSEE
The Partnership's operations are all related to the acquisition
and leasing of commercial real estate properties. Total rental
income of $21,694 and $43,388 were received from Blockbuster
Videos, Inc. (Oklahoma City, Oklahoma) for the three and six
months ended June 30, 1996, respectively. The Partnership did
not receive any rental income for the three and six months
ended June 30, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
AAA Net Realty Fund XI, Ltd., a Texas limited partnership, was
formed May 26, 1994 to acquire on a debt-free basis, existing and
newly constructed commercial properties to be held for
investment, lease and subsequent disposal. The leases will
provide for a base minimum annual rent and periodic increases in
rent. In addition, the major operating costs of the
Partnership's properties will either be paid for by the tenant or
the lease will limit the extent of the Partnership's obligation
for such expenses. The Offering for 20,000 limited partnership
units was effective October 27, 1994. As of June 30, 1996,
contributions had been received for 4,927.9 units. The offering
period for subscriptions will terminate on October 26, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership acquired its first two properties in September
and December 1995, one directly and one through a joint venture
with an affiliate. On April 5, 1996, the Partnership entered
into a joint venture with two affiliated entities for the purpose
of acquiring a property which will be operated as a Just For Feet
retail store. The Partnership's interest in the joint venture is
29.85% and the Partnership's share of the acquisition costs for
the property will approximate $1,050,552 plus $30,758 in
acquisition fees to affiliates. The property is under
construction with an estimated completion date of September 1996.
The acquisitions of the above-mentioned properties result in a
decrease in the Partnership's liquidity. This is in keeping with
the Partnership's policy of acquiring commercial properties
for investment, lease and subsequent disposal. The Partnership's
short-term liquidity needs will be met through the raising of
partnership capital, a significant portion of which is applied
toward property acquisitions. As funds are invested in
commercial properties, the Partnership's more long-term liquidity
needs will be met through the rental income received
from these properties.
RESULTS OF OPERATIONS
For the three months ended June 30, 1996, revenues totaled
$69,875, which included $42,050 from real estate operations and
$27,825 of interest income. Revenues for the second quarter of
1996 increased $44,853 from those of the second quarter of 1995
when the Partnership had just begun operations and had not yet
acquired any real estate properties. The increase in the
Partnership's activity also contributed to an increase in
expenses from $6,104 in the second quarter of 1995 to
$22,957 in the second quarter of 1996. The Partnership recorded
net income of $46,918 in the second quarter of 1996 compared to
$18,918 in the second quarter of 1995.
For the six months ended June 30, 1996, revenues totaled
$135,514, which included $84,100 from real estate operations and
$51,414 of interest income. Revenues for the first six months of
1996 increased $104,942 from those of the first six months of
1995 when the Partnership had just begun operations and had not
yet acquired any real estate properties. The increase in the
Partnership's activity also contributed to an increase in
expenses from $7,516 in the first six months of 1995 to
$52,584 in the first six months of 1996. The Partnership
recorded net income of $82,930 in the first six months of 1996
compared to $23,056 in the first six months of 1995.
No significant operations commenced during the first six months
of 1995. On March 3, 1995, the general partners distributed the
proceeds from the escrow account and funded the Partnership.
For the six months ended June 30, 1995, revenues were comprised
entirely of $30,572 of interest income and the Partnership's net
income totaled $23,056. For the three months ended June 30,
1995, revenues were comprised entirely of $25,022 of interest
income and the Partnership's net income totaled $18,918.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
Form 8-K was filed on April 18, 1996 to report the acquisition of a
property through a joint venture with two affiliates which will be
operated as a Just For Feet retail store upon completion of construction
of the property.
Exhibit 27 - Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AAA Net Realty Fund XI, Ltd.
(Registrant)
August 14, 1996 H. Kerr Taylor
Date H. Kerr Taylor, President of General Partner
August 14, 1996 H. Kerr Taylor
Date H. Kerr Taylor, Chief Financial Officer of
General Partner