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 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
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 X, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
JUNE 30, DECEMBER 31,
1996 1995
(Unaudited)
ASSETS
CASH & CASH EQUIVALENTS $ 803,874 $ 824,805
ACCOUNTS RECEIVABLE 2,915 14,780
PROPERTY:
Escrow deposit 18,250 0
Land 2,566,250 2,566,250
Building 5,370,984 5,370,984
7,955,484 7,937,234
Accumulated depreciation (328,939) (255,950)
TOTAL PROPERTY 7,626,545 7,681,284
NET INVESTMENT IN DIRECT FINANCING LEASE 613,898 615,410
INVESTMENT IN JOINT VENTURE 720,018 724,549
OTHER ASSETS:
Acquisition costs 23,974 23,231
Organization costs, net of accumulated
amortization of $182,245 and $152,245
respectively 117,755 147,755
Accrued rental income 53,168 37,230
TOTAL OTHER ASSETS 194,897 208,216
TOTAL ASSETS 9,962,147 10,069,044
LIABILITIES & PARTNERSHIP EQUITY
LIABILITIES:
Accounts payable 5,647 8,445
Security deposits 12,000 12,000
TOTAL LIABILITIES 17,647 20,445
PARTNERSHIP EQUITY:
General partners 9,091 7,333
Limited partners 9,935,409 10,041,266
TOTAL PARTNERSHIP EQUITY 9,944,500 10,048,599
TOTAL LIABILITIES & PARTNERSHIP EQUITY $ 9,962,147 $ 10,069,044
See Notes to Financial Statements.
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS 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
REVENUES
Rental income from operating
leases $ 215,504 $ 215,467 $ 431,008 $ 419,164
Earned income from direct
financing lease 14,721 14,796 29,460 29,608
Interest income 8,563 11,859 17,798 27,052
Equity income from investment
in joint venture 16,986 15,953 33,971 31,907
TOTAL REVENUES 255,774 258,075 512,237 507,731
EXPENSES
Accounting 2,562 5,263 9,336 9,180
Administrative expenses 16,179 13,214 32,358 24,419
Amortization 15,000 15,000 30,000 30,000
Bank charges 25 37 50 37
Depreciation 36,495 35,714 72,989 70,743
Filing fees 0 0 265 265
Legal & professional fees 5,028 8,627 10,109 10,696
Printing 0 1,048 140 1,949
Other 1,053 59 1,145 194
TOTAL EXPENSES 76,342 78,962 156,392 147,483
NET INCOME $ 179,432 $ 179,113 $ 355,845 $ 360,248
ALLOCATION OF NET INCOME
General partners $ 1,794 $ 1,791 $ 3,558 $ 3,602
Limited partners 177,638 177,322 352,287 356,646
$ 179,432 $ 179,113 $ 355,845 $ 360,248
NET INCOME PER UNIT $ 15.67 $ 15.64 $ 31.07 $ 31.45
UNITS OUTSTANDING 11,454 11,454 11,454 11,454
See Notes to Financial Statements.
AAA NET REALTY FUND X, 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 $ 7,333 $ 10,041,266 $ 10,048,599
NET INCOME 1,764 174,649 176,413
DISTRIBUTIONS (1,200) (229,072) (230,272)
PARTNERSHIP EQUITY AT MARCH 31, 1996 $ 7,897 $ 9,986,843 $ 9,994,740
NET INCOME 1,794 177,638 179,432
DISTRIBUTIONS (600) (229,072) (229,672)
PARTNERSHIP EQUITY AT JUNE 30, 1996 $ 9,091 $ 9,935,409 $ 9,944,500
See Notes to Financial Statements.
AAA NET REALTY FUND X, 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 $ 179,432 $ 179,113 $ 355,845 $ 360,248
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 36,495 35,714 72,989 70,743
Amortization 15,000 15,000 30,000 30,000
(Increase) decrease in accounts receivable 25,958 (61) 11,865 1,546
Increase (decrease) in accounts payable (13,812) 186 (2,798) (2,984)
Increase in security deposits 0 0 0 12,000
(Increase) decrease in escrow deposits (18,250) 0 (18,250) 50,000
Cash received from direct financing lease
in excess of income recognized 765 690 1,512 1,364
Investment in joint venture:
Equity income (16,986) (15,953) (33,971) (31,907)
Distributions received 16,986 15,953 33,971 31,907
Increase in accrued rental income (7,969) (7,933) (15,938) (10,688)
NET CASH FLOWS FROM OPERATING
ACTIVITIES 217,619 222,709 435,225 512,229
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate:
Accounted for under the equity method 0 0 0 (1,477,390)
Investment in joint venture 0 (14,250) 0 (14,250)
(Increase) decrease in acquisition costs (690) 0 (743) 60,864
Joint venture distributions in excess
of income 2,264 3,299 4,531 6,598
NET CASH FLOWS FROM INVESTING
ACTIVITIES 1,574 (10,951) 3,788 (1,424,178)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (229,672) (221,383) (459,944) (428,448)
NET CASH FLOWS FROM FINANCING
ACTIVITIES (229,672) (221,383) (459,944) (428,448)
NET DECREASE IN CASH
AND CASH EQUIVALENTS (10,479) (9,625) (20,931) (1,340,397)
CASH and CASH EQUIVALENTS at beginning
of period 814,353 829,792 824,805 2,160,564
CASH and CASH EQUIVALENTS at end of
period $ 803,874 $ 820,167 $ 803,874 $ 820,167
See Notes to Financial Statements.
AAA NET REALTY FUND X, LTD
( A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(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 offering period for subscriptions terminated September 1, 1994
with a total of 11,453.61 units having been subscribed at an offering price
of $1,000 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. Rental income is recorded ratably over the life
of the lease.
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 leases
are accounted for under the operating method or the direct financing method.
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.
Organization costs are amortized on a straight line basis over five years.
Syndication costs are reflected as a reduction of partnership equity.
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 1995.
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-K for the year ended
December 31, 1995.
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 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, $16,179 and
$32,358 were incurred and paid to AAA for the three and six months ended
June 30, 1996, respectively, and $13,214 and $24,419 were paid for the
three and six months ended June 30, 1995, respectively.
On April 5, 1996, the Partnership entered into a joint venture with American
Asset Advisers Trust, Inc. and AAA Net Realty Fund XI, Ltd., affiliates of
the Partnership. The Partnership's interest in the joint venture is 18.25%.
4. MAJOR LESSEES
The following schedule summarizes total rental income by lessee for the
three and six months ended June 30, 1996 and June 30, 1995 under both
operating and direct financing leases:
Quarter Year to Date
1996 1995 1996 1995
Golden Corral Corporation $43,241 $43,241 $86,482 $86,482
TGI Friday's, Inc. $45,126 $45,125 $90,252 $90,250
Goodyear Tire & Rubber Company $13,227 $13,227 $26,454 $26,454
Tandy Corporation $64,155 $64,155 $128,310 $128,310
America's Favorite Chicken Company $24,346 $23,277 $48,710 $46,570
One Care Health Industries, Inc. $40,130 $41,238 $80,260 $70,706
5. CONTINGENCY
The Partnership had determined that, beginning on December 1, 1993, it
inadvertently failed to update its then outstanding prospectus with current
information as required by Section 10(a)(3) of the Securities Act of 1933
as amended (the "33 Act") and by the standard undertakings made by the
Partnership in its amended registration statement filed pursuant to the
33 Act. However, the Partnership did publicly disclose such information in
its Form 8-K and 10-Q filings with the Securities and Exchange Commission.
As a result of the above information, the Partnership has been advised that
it has a contingent liability to investors for recession rights or damages
which, at a maximum, would not exceed approximately $5.5 million.
Management anticipates that recissions, if any, will not be material.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
AAA Net Realty Fund X, Ltd., a Nebraska limited partnership, was formed
April 15, 1992. The offering for 20,000 units was effective September 17,
1992. The offering period for subscriptions terminated September 1, 1994
with a total of 11,453.61 units having been subscribed at $1,000 per unit.
In addition, the general partners had previously made contributions of
$1,000.
LIQUIDITY AND CAPITAL RESOURCES
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 18.25% and the Partnership's share of the acquisition
costs for the property will approximate $642,296 plus $23,231 in acquisition
fees paid to affiliates. This property is under construction with an
estimated completion date of September 1996. This is the final property to
be acquired by the Partnership from the funds raised through the offering.
The resulting use of Partnership funds will result in an increase in the
Partnership's rental income and a decrease in interest income once the
property has been acquired.
The Partnership had determined that, beginning on December 1, 1993, it
inadvertently failed to update its then outstanding prospectus with
current information as required by Section 10(a)(3) of the Securities Act
of 1933 as amended (the "33 Act") and by the standard undertakings made
by the Partnership in its amended registration statement filed pursuant
to the 33 Act. However, the Partnership did publicly disclose such
information in its Form 8-K and 10-Q filings with the Securities and
Exchange Commission.
As a result of the above information, the Partnership has been advised
that it has a contingent liability to investors for recession rights or
damages which, at a maximum, would not exceed approximately $5.5 million.
Management anticipates that recissions, if any, will not be material.
RESULTS OF OPERATIONS
For the three months ended June 30, 1996, revenues totaled $255,774 which
included $247,211 from real estate operations and $8,563 of interest income.
Revenues for the second quarter decreased $2,301 from those of the second
quarter of 1995 primarily from decreased interest income as a result of the
decline in interest rates over those of the second quarter of 1995. Expenses
decreased in the second quarter of 1996 to $76,342 compared to $78,962 for
the second quarter of 1995 primarily from decreased professional fees and
accounting fees, partially offset by increased administrative fees. The
Partnership recorded $179,432 of net income for the second quarter of 1996.
For the six months ended June 30, 1996, revenues totaled $512,237 which
included $494,439 from real estate operations and $17,798 of interest
income. Revenues for the first six months of 1996 increased $4,506 from
those of the first six months of 1995 which was attributable to a $13,760
increase in rental income offset by a $9,254 decline in interest income.
The Partnership owned seven properties for the entire first six months
of 1996 while six properties were owned for the entire first six months
of 1995 and the seventh property was acquired during the first quarter of
1995. Expenses increased in the first six months of 1996 to $156,392
compared to $147,483 for the first six months of 1995 primarily from increased
administrative fees. The Partnership recorded $355,845 of net income for
the first six months of 1996.
For the three months ended June 30, 1995, revenues totaled $258,075 which
included $246,216 from real estate operations and $11,859 of interest
income. Revenues for the second quarter of 1995 increased $117,909 from
those of the second quarter of 1994 primarily from an increase in real
estate income. Real estate income was earned from seven properties
which were owned during the second quarter of 1995 compared to the second
quarter of 1994 when the Partnership owned three properties. The
Partnership's net income also increased from $98,793 to $179,113 for
the same reason.
For the six months ended June 30, 1995, revenues totaled $507,731 which
included $480,679 from real estate operations and $27,052 of interest
income. Revenues for the first six months of 1995 increased $259,164
from those of the first six months of 1994 primarily from an increase
in real estate income. Real estate income was earned from six properties
which were owned at the beginning of 1995 and a seventh property which
was acquired in January 1995 compared to the six months of 1994 when the
Partnership owned three properties. The Partnership's net income also
increased from $167,099 to $360,248 for the same reason.
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 X, 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