-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TSXLbdcql+B5/O3YU306ZZ2TYISf+t2CFjmhW6G3GI3WDPJ9Sa+Z2TCUudXH4niu N/uwAdNqLvB+C6wyZekpDQ== 0000931755-97-000002.txt : 19970314 0000931755-97-000002.hdr.sgml : 19970314 ACCESSION NUMBER: 0000931755-97-000002 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970313 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEI INCOME & GROWTH FUND XXI LTD PARTNERSHIP CENTRAL INDEX KEY: 0000931755 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 411789725 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-85076 FILM NUMBER: 97556035 BUSINESS ADDRESS: STREET 1: 1300 MINNESOTA WORLD TRADE CENTER STREET 2: 30 EAST SEVENTH ST CITY: ST PAUL STATE: MN ZIP: 55101 BUSINESS PHONE: 6122277333 MAIL ADDRESS: STREET 1: 1300 MINNESOTA WORLD TRADE CENTER STREET 2: 30 EAST SEVENTH STREET CITY: ST PAUL STATE: MN ZIP: 55101 10KSB 1 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, 1996 Commission file number: 33-85076C 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, 1996 were $1,341,753. As of February 28, 1997, there were 24,000 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 $24,000,000. 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. Through December 31, 1996, the Partnership raised a total of $23,563,349 from the sale of 23,563.349 Units. 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, 1996, the Partnership had purchased partial interests in four properties at a total cost of $7,621,435. 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 have been granted options to purchase properties after a specified portion of the lease term has elapsed. It is anticipated that the Partnership will sell its properties twelve to fifteen years after acquisition. 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 noncancelable 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 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 Income Fund `93, 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 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. ITEM 1. DESCRIPTION OF BUSINESS. (Continued) 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 Champp's 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. In August, 1996, the Partnership entered into an agreement to purchase a Denny's restaurant in Covington, Louisiana. The purchase price will be approximately $1,111,000. The property will be leased to Huntington Restaurants Group, Inc. under a Lease Agreement with a primary term of 20 years and annual rental payments of approximately $125,000. Through December 31, 1996, the Partnership had advanced $977,875 for the construction of the property and was charging interest on the Note at the rate of 8.0%. In August, 1996, the Partnership entered into an agreement to purchase a 93.1% interest in a Caribou Coffee store in Charlotte, North Carolina. The purchase price will be approximately $1,274,000. The property will be leased to Caribou Coffee Company, Inc. under a Lease Agreement with a primary term of 18 years and annual rental payments of approximately $146,000. Through December 31, 1996, the Partnership had advanced $643,995 for the construction of the property and was charging interest on the Note at the rate of 7.0%. Major Tenants During 1996, two of the Partnership's lessees contributed more than ten percent of the Partnership's total rental revenue. The major tenants in aggregate contributed 83% of the Partnership's total rental revenue in 1996. Because the Partnership has not completed its acquisition of properties, it is not possible to determine which tenants will contribute more than ten percent of the Partnership's rental income in 1997 and future years. In the event that certain tenants contribute more than ten percent of the Partnership's rental income in future years, any failure of these major tenants 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. Employees The Partnership has no direct employees. Management services are performed for the Partnership by AEI Fund Management, Inc., an affiliate of AFM. 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 noncancelable 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. The following table is a summary of the properties that the Partnership acquired and owned as of December 31, 1996. Total Property Annual Annual Purchase Acquisition Lease 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. $ 78,980 $ 26.63 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 ITEM 2. DESCRIPTION OF PROPERTIES. (Continued) Total Property Annual Annual Purchase Acquisition Lease Rent Property Date Costs Lessee Payment Per Sq. Ft. Champp's Americana Restaurant Americana Columbus, OH Dining (67.8%) 8/29/96 $ 1,808,880 Corporation $ 191,259 $ 34.53 (F1) The property was vacated on January 31, 1997 and listed for sale or lease. The properties listed above with a partial ownership percentage are owned with affiliates of the Partnership. The remaining interest in the Arby's property is owned by AEI Institutional Net Lease Fund `93. 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 Champp's Americana property is owned by AEI Real Estate Fund XVIII Limited Partnership. Each Partnership owns a separate, undivided interest in the properties. No specific agreement or commitment exists between the Partnerships as to the management of their respective interests in the properties, and the Partnership that holds more than a 50% interest does not control decisions over the other Partnership's interest. The initial Lease terms are 20 years. The Leases contain renewal options which may extend the Lease term an additional 10 years for the Arby's, an additional 15 years for the Champp's, and an additional 25 years for the Garden Ridge 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. Through December 31, 1996, all properties were 100 percent occupied by the lessees. 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, 1996, there were 1,295 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. As of December 31, 1996, the Partnership has not acquired any Units from Limited Partners. Cash distributions of $14,044 and $3,932 were made to the General Partners and $1,390,389 and $389,320 were made to the Limited Partners in 1996 and 1995, 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. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. Results of Operations For the years ended December 31, 1996 and 1995, the Partnership recognized rental income of $847,484 and $49,727, respectively. During the same periods, the Partnership also earned $494,269 and $213,672, respectively, in investment income from subscription proceeds which were invested in short-term money market accounts, commercial paper and federal agency notes. This investment income constituted 37% and 81%, respectively, of total income. 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. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) During the years ended December 31, 1996 and 1995, the Partnership paid Partnership administration expenses to affiliated parties of $251,392 and $137,271, 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 $27,171 and $6,909, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit and accounting costs, insurance and other property costs. 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, 1996, 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. 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 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. The Limited Partnership Agreement of the Partnership 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 such 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. 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. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) 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. 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 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. Through December 31, 1996, the Partnership raised a total of $23,563,349 from the sale of 23,563.349 Units. 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 $3,248,990. 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 Income Fund `93, 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. 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. 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 Champp's 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. In August, 1996, the Partnership entered into an agreement to purchase a Denny's restaurant in Covington, Louisiana. The purchase price will be approximately $1,111,000. The property will be leased to Huntington Restaurants Group, Inc. under a Lease Agreement with a primary term of 20 years and annual rental payments of approximately $125,000. Through December 31, 1996, the Partnership had advanced $977,875 for the construction of the property and was charging interest on the Note at the rate of 8.0%. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) In August, 1996, the Partnership entered into an agreement to purchase a 93.1% interest in a Caribou Coffee store in Charlotte, North Carolina. The purchase price will be approximately $1,274,000. The property will be leased to Caribou Coffee Company, Inc. under a Lease Agreement with a primary term of 18 years and annual rental payments of approximately $146,000. Through December 31, 1996, the Partnership had advanced $643,995 for the construction of the property and was charging interest on the Note at the rate of 7.0%. 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. 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. As of December 31, 1996, the Partnership has not acquired any Units from Limited Partners. Until capital is invested in properties, the Partnership will remain extremely liquid. At December 31, 1996, $10,770,705 or 54% 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. ITEM 7. FINANCIAL STATEMENTS. See accompanying index to financial statements. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP INDEX TO FINANCIAL STATEMENTS Independent Auditor's Report Balance Sheet as of December 31, 1996 and 1995 Statements for the Years Ended December 31, 1996 and 1995: Operations Cash Flows Changes in Partners' Capital Notes to Financial Statements INDEPENDENT AUDITOR'S REPORT 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, 1996 and 1995 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, 1996 and 1995, and the results of its income and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Minneapolis, Minnesota January 31, 1997 /s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P. Certified Public Accountants AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP BALANCE SHEET DECEMBER 31 ASSETS 1996 1995 CURRENT ASSETS: Cash and Cash Equivalents $ 10,729,033 $ 8,367,460 Receivables 41,672 15,311 ----------- ----------- Total Current Assets 10,770,705 8,382,771 ----------- ----------- INVESTMENTS IN REAL ESTATE: Land 2,541,511 751,086 Buildings and Equipment 5,079,924 1,417,078 Construction Advances 1,621,870 0 Property Acquisition Costs 245,726 17,905 Accumulated Depreciation (162,645) (11,687) ----------- ----------- Net Investments in Real Estate 9,326,386 2,174,382 ----------- ----------- Total Assets $ 20,097,091 $ 10,557,153 =========== =========== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Payable to AEI Fund Management, Inc. $ 132,900 $ 70,805 Distributions Payable 429,668 199,829 ----------- ----------- Total Current Liabilities 562,568 270,634 ----------- ----------- PARTNERS' CAPITAL (DEFICIT): General Partners (9,754) (4,832) Limited Partners, $1,000 Unit Value; 24,000 Units authorized; 23,563 and 12,290 Units issued and outstanding in 1996 and 1995, respectively 19,544,277 10,291,351 ----------- ----------- Total Partners' Capital 19,534,523 10,286,519 ----------- ----------- Total Liabilities and Partners' Capital $ 20,097,091 $ 10,557,153 =========== =========== 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 YEARS ENDED DECEMBER 31 1996 1995 INCOME: Rent $ 847,484 $ 49,727 Investment Income 494,269 213,672 ----------- ----------- Total Income 1,341,753 263,399 ----------- ----------- EXPENSES: Partnership Administration - Affiliates 251,392 137,271 Partnership Administration and Property Management - Unrelated Parties 27,171 6,909 Depreciation 150,958 11,687 ----------- ----------- Total Expenses 429,521 155,867 ----------- ----------- NET INCOME $ 912,232 $ 107,532 =========== =========== NET INCOME ALLOCATED: General Partners $ 9,122 $ 1,075 Limited Partners 903,110 106,457 ----------- ----------- $ 912,232 $ 107,532 =========== =========== NET INCOME PER LIMITED PARTNERSHIP UNIT (17,439 and 6,896 weighted average Units outstanding in 1996 and 1995, respectively) $ 51.79 $ 15.44 =========== =========== 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 YEARS ENDED DECEMBER 31 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 912,232 $ 107,532 Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities: Depreciation 150,958 11,687 Increase in Receivables (26,361) (15,311) Increase in Payable to AEI Fund Management, Inc. 62,095 67,904 ----------- ----------- Total Adjustments 186,692 64,280 ----------- ----------- Net Cash Provided By Operating Activities 1,098,924 171,812 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in Real Estate (7,302,962) (2,186,069) ----------- ----------- Net Cash Used For Investing Activities (7,302,962) (2,186,069) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital Contributions from Limited Partners 11,273,543 12,289,806 Organization and Syndication Costs (1,533,338) (1,715,652) Increase in Distributions Payable 229,839 199,829 Distributions to Partners (1,404,433) (393,252) ----------- ----------- Net Cash Provided By Financing Activities 8,565,611 10,380,731 ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 2,361,573 8,366,474 CASH AND CASH EQUIVALENTS, beginning of period 8,367,460 986 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 10,729,033 $ 8,367,460 =========== =========== 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 YEARS ENDED DECEMBER 31 Limited Partnership General Limited Units Partners Partners Total Outstanding BALANCE, December 31, 1994 $ (1,915) $ 0 $ (1,915) 0 Capital Contributions 0 12,289,806 12,289,806 12,289.81 Organization & Syndication Costs (60) (1,715,592) (1,715,652) Distributions (3,932) (389,320) (393,252) Net Income 1,075 106,457 107,532 --------- ----------- ----------- ---------- 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 ========= =========== =========== ========== The accompanying notes to financial statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (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. Under the terms of the Restated Limited Partnership Agreement, 24,000 Limited Partnership Units are available for subscription which, if fully subscribed, will result in contributed Limited Partners' capital of $24,000,000. The Partnership commenced operations on April 14, 1995 when minimum subscriptions of 1,500 Limited Partnership Units ($1,500,000) were accepted. Through December 31, 1996, the Partnership raised a total of $23,563,349 from the sale of 23,563.349 Units. 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 General Partners have contributed capital of $1,000. 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, 1996 AND 1995 (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 - 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. 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. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (2) Summary of Significant Accounting Policies - (Continued) 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 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 or will be leased under long-term 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 rental increases based on 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, 1996 AND 1995 (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 is 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. Adoption of this Statement did not have a material effect on the Partnership's financial statements. The Partnership has capitalized as Investments in Real Estate certain costs incurred in the review and acquisition of the properties. The costs will be 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. (3) Related Party Transactions - On May 31, 1995, the Partnership acquired a 87.7193% interest in an Applebee's restaurant in Montgomery, Alabama. The remaining interest in the property is owned by AEI Institutional Net Lease Fund '93, an affiliate of the Partnership. On December 21, 1995, the Partnership acquired a 34.0% interest in a Media Play retail store in Apple Valley, Minnesota. On March 28, 1996, the Partnership acquired a 40.75% interest in a Garden Ridge retail store in Pineville, North Carolina. The remaining interests in the Media Play and Garden Ridge stores 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. On August 29, 1996, the Partnership acquired a 67.8% interest in a Champp's Americana restaurant in Columbus, Ohio. The remaining interest in the property is owned by AEI Real Estate Fund XVIII Limited Partnership, an affiliate of the Partnership. Each Partnership owns a separate, undivided interest in the property. No specific agreement or commitment exists between the Partnerships as to the management of their respective interests in the property, and the Partnership that holds more than a 50% interest does not control decisions over the other Partnership's interest. The financial statements reflect only this Partnership's percentage share of the properties' land, building and equipment, liabilities, revenues and expenses. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (3) Related Party Transactions - (Continued) AFM, AEI and AEI Incorporated (AEI Inc.) received the following compensation and reimbursements for costs and expenses from the Partnership: Total Incurred by the Partnership for the Years Ended December 31 1996 1995 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. $ 251,392 $ 137,271 =========== =========== 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, insurance and other property costs. $ 27,171 $ 6,909 =========== =========== 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 $144,315 and $85,298 for 1996 and 1995, respectively. $ 355,817 $ 26,514 =========== =========== d.AEI Inc. was the underwriter of the Partnership offering. Robert P. Johnson is the sole stockholder of AEI Inc., which is a member of the National Association of Securities Dealers, Inc. AEI Inc. 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). AEI Inc. 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. $ 1,127,354 $ 1,228,981 =========== =========== AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (3) Related Party Transactions - (Continued) Total Incurred by the Partnership for the Years Ended December 31 1996 1995 e.AEI is reimbursed for all costs incurred in connection with managing the Partnership's offering and organization. $ 211,471 $ 139,300 =========== =========== 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. $ 194,513 $ 347,371 =========== =========== 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. (4) 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 for the Media Play store discussed below. The Leases contain renewal options which may extend the Lease term an additional 10 years for the Arby's, an additional 15 years for the Champp's restaurant and 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. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (4) Investments in Real Estate - (Continued) The Partnership's properties are commercial, single-tenant buildings and were constructed and acquired in 1995 and 1996. There have been no costs capitalized as improvements subsequent to the acquisitions. The cost of the property and related accumulated depreciation at December 31, 1996 are as follows: Buildings and Accumulated Property Land Equipment Total Depreciation Arby's Montgomery, AL $ 328,310 $ 425,794 $ 754,104 $ 26,967 Media Play Apple Valley, MN 422,776 991,284 1,414,060 43,787 Garden Ridge Pineville, NC 1,181,253 2,463,138 3,644,391 73,894 Champp's Columbus, OH 609,172 1,199,708 1,808,880 17,997 ----------- ----------- ----------- ----------- $ 2,541,511 $ 5,079,924 $ 7,621,435 $ 162,645 =========== =========== =========== =========== 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 Income Fund `93, 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. under a Lease Agreement with a primary term of 18 years and annual rental payments of $139,587. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (4) Investments in Real Estate - (Continued) 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 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. 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. On August 29, 1996, the Partnership purchased a 67.8% interest in a Champp's 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. In August, 1996, the Partnership entered into an agreement to purchase a Denny's restaurant in Covington, Louisiana. The purchase price will be approximately $1,111,000. The property will be leased to Huntington Restaurants Group, Inc. under a Lease Agreement with a primary term of 20 years and annual rental payments of approximately $125,000. Through December 31, 1996, the Partnership had advanced $977,875 for the construction of the property and was charging interest on the Note at the rate of 8.0%. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (4) Investments in Real Estate - (Continued) In August, 1996, the Partnership entered into an agreement to purchase a 93.1% interest in a Caribou Coffee store in Charlotte, North Carolina. The purchase price will be approximately $1,274,000. The property will be leased to Caribou Coffee Company, Inc. under a Lease Agreement with a primary term of 18 years and annual rental payments of approximately $146,000. Through December 31, 1996, the Partnership had advanced $643,995 for the construction of the property and was charging interest on the Note at the rate of 7.0%. The Partnership has incurred net costs of $382,331 relating to the review of potential property acquisitions. Of these costs, $136,605 have been capitalized and allocated to land, building and equipment. The remaining costs of $245,726 have been capitalized and will be allocated to properties acquired subsequent to December 31, 1996. The minimum future rentals on the non-cancelable Leases for years subsequent to December 31, 1996 are as follows: 1997 $ 666,534 1998 656,097 1999 657,310 2000 658,541 2001 659,791 Thereafter 9,509,668 ----------- $12,807,941 =========== There were no contingent rents recognized in 1996 or 1995. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (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: 1996 1995 Tenants Industry RTM Gulf Coast, Inc. Restaurant $ N/A $ 45,600 The Musicland Group, Inc. Retail 411,587 N/A Garden Ridge, L.P. Retail 292,109 N/A --------- ---------- Aggregate rent revenue of major tenants $ 703,696 $ 45,600 ========= ========== Aggregate rent revenue of major tenants as a percentage of total rent revenue 83% 92% ========== ========== (6) Partners' Capital - Cash distributions of $14,044 and $3,932 were made to the General Partners and $1,390,389 and $389,320 were made to the Limited Partners for the years ended December 31, 1996 and 1995, respectively. The Limited Partners' distributions represent $79.73 and $56.46 per Limited Partnership Unit outstanding using 17,439 and 6,896 weighted average Units in 1996 and 1995, respectively. The distributions represent $51.79 and $15.44 per Unit of Net Income and $27.94 and $41.02 per Unit of return of contributed capital in 1996 and 1995, respectively. Distributions of Net Cash Flow to the General Partners during 1996 and 1995 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. 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. As of December 31, 1996, the Partnership has not acquired any Units from Limited Partners. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (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: 1996 1995 Net Income for Financial Reporting Purposes $ 912,232 $ 107,532 Depreciation for Tax Purposes Under Depreciation for Financial Reporting Purposes 44,454 2,963 Capitalized Start-Up Costs Under Section 195 190,838 136,112 Amortization of Start-Up and Organization Costs (12,232) (1,026) ----------- ----------- Taxable Income to Partners $ 1,135,292 $ 245,581 =========== =========== AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (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: 1996 1995 Partners' Capital for Financial Reporting Purposes $ 19,534,523 $ 10,286,519 Depreciation for Tax Purposes Under Depreciation for Financial Reporting Purposes 47,417 2,963 Capitalized Start-Up Costs Under Section 195 329,865 139,027 Amortization of Start-Up and Organization Costs (13,258) (1,026) Organization and Syndication Costs Treated as Reduction of Capital for Financial Reporting Purposes 3,186,033 1,653,174 ----------- ----------- Partners' Capital for Tax Reporting Purposes $ 23,084,580 $ 12,080,657 =========== =========== AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (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: 1996 1995 Carrying Fair Carrying Fair Amount Value Amount Value Cash $ 544 $ 544 $ 501 $ 501 Money Market Funds 5,750,781 5,750,781 4,391,699 4,391,699 Commercial Paper (held to maturity) 4,977,708 4,977,708 1,989,796 1,989,796 Federal Agency Notes (held to maturity) 0 0 1,985,464 1,985,464 ----------- ----------- ----------- ----------- Total Cash and Cash Equivalents $10,729,033 $10,729,033 $ 8,367,460 $ 8,367,460 =========== =========== =========== =========== The amortized cost basis of the commercial paper and federal agency notes, 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 52, 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, 1997. 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 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 fifteen other limited partnerships. Mark E. Larson, age 44, 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, 1997. 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. AFM, the Managing General Partner of the registrant, and Robert P. Johnson, its Individual General Partner, contributed $1,000 in total for their interest in the registrant. See Item 1 for a discussion of their share of the registrant's profits and losses. Neither the General Partners nor their affiliates have purchased Limited Partnership 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. 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, 1996. Person or Entity Amount Incurred From Receiving Form and Method Inception (August 31, 1994) Compensation of Compensation To December 31, 1996 AEI Incorporated Selling Commissions equal to $ 2,356,335 8% of proceeds plus a 2% nonaccountable expense allowance, most of which was reallowed to Participating Dealers. General Partners Reimbursement at Cost for other $ 892,655 and Affiliates Organization and Offering Costs. General Partners Reimbursement at Cost for all $ 382,331 and Affiliates Acquisition Expenses General Partners 1% of Net Cash Flow in any fiscal $ 17,976 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 Reimbursement at Cost for all $ 391,441 and Affiliates Administrative 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. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. (Continued) Person or Entity Amount Incurred From Receiving Form and Method Inception (August 31, 1994) Compensation of Compensation To December 31, 1996 General Partners 1% of distributions of Net $ 0 Proceeds of 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. 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, 1996, 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 Form of Impoundment Agreement with Fidelity Bank (incorporated by reference to Exhibit 10.1 of the registrant's Registration Statement on Form SB-2 filed with the Commission on October 10, 1994 [File No. 33-85076C]). ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued) A. Exhibits - Description 10.2 Sale and Leaseback Financing Commitment dated April 6, 1995, between the Partnership and RTM Gulf Coast, Inc., relating to the property at 2719 Zelda Road, Montgomery, Alabama (incorporated by reference to Exhibit 10.1 of Post-Effective Amendment No. 1 to Form SB-2 filed with the Commission on May 12, 1995). 10.3 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). 10.4 Net Lease Agreement dated December 21, 1995 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 A of Form 8-K filed with the Commission on January 4, 1996). 10.5 Sale and Leaseback Financing Commitment dated September 5, 1995 between AEI Fund Management, Inc. and Americana Dining Corporation relating to the property at 161 E. Campus View Boulevard, Columbus, Ohio (incorporated by reference to Exhibit 10.4 of Post-Effective Amendment No. 4 to Form SB-2 filed with the Commission on January 16, 1996). 10.6 Amendment to Sale and Leaseback Financing Commitment dated November 30, 1995 between AEI Fund Management, Inc., Americana Dining Corporation, AEI Real Estate Fund XVIII Limited Partnership, and the Partnership relating to the property at 161 E. Campus View Boulevard, Columbus, Ohio (incorporated by reference to Exhibit 10.5 of Post-Effective Amendment No. 4 to Form SB-2 filed with the Commission on January 16, 1996). 10.7 Purchase and Sale Agreement dated January 10, 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 Garden Ridge store in Pineville, North Carolina (incorporated by reference to Exhibit 10.6 of Post-Effective Amendment No. 4 to Form SB-2 filed with the Commission on January 16, 1996). ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued) A. Exhibits - Description 10.8 Purchase and Sale/Leaseback Agreement dated November 16, 1995 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 10.8 of Form 10-KSB filed with the Commission on March 15, 1996). 10.9 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). 10.10 First Amendment to Lease Agreement dated March 1, 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). 10.11 Assignment and Assumption of Lease dated March 28, 1996 between the Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership, AEI Net Lease Income & Growth Fund XX Limited Partnership, and TKC X, 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). 10.12 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). 10.13 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). ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued) A. Exhibits - Description 10.14 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). 10.15 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). 10.16 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). 10.17 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). 10.18 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). ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued) A. Exhibits - Description 10.19 Surrender and Termination of Lease Agreement dated November 22, 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. 27 Financial Data Schedule for year ended December 31, 1996. 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 6, 1997 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 6, 1997 Robert P. Johnson and Sole Director of Managing General Partner /s/ Mark E. Larson Executive Vice President, Treasurer March 6, 1997 Mark E. Larson and Chief Financial Officer (Principal Accounting Officer) EX-10.19 2 SURRENDER AND TERMINATION OF LEASE AGREEMENT (#8228) THIS AGREEMENT made this 22nd day of November, 1996, by and between AEI NET LEASE INCOME AND GROWTH FUND XIX LIMITED PARTNERSHIP, a Minnesota limited partnership, AEI NET LEASE INCOME AND & GROWTH FUND XX LIMITED PARTNERSHIP, a Minnesota limited partnership, and AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP, a Minnesota limited partnership, each having its principal place of business at 1300 Minnesota World Trade Center, 30 East 7th Street, St. Paul, MN 55101 (hereinafter collectively called "Landlord") and the Musicland Group, Inc., a Delaware corporation and Media Play, Inc., a Delaware corporation, each having an office 10400 Yellow Circle Drive, Minnetonka, Minnesota 55343 (hereinafter collectively called "Tenant"). WITNESSETH: WHEREAS, Landlord and The Musicland Group, Inc. entered into that certain written Lease Agreement dated December 21, 1995 (hereinafter referred to as the "Lease") demising certain premises containing approximately 48,944 square feet located in the City of Apple Valley and State of Minnesota (hereinafter referred to as the "Premises") and more particularly described in said Lease; and WHEREAS, The Musicland Group, Inc. assigned its interest in the Lease to Media Play, Inc. pursuant to that certain Assignment and Assumption of Lease Agreement dated December 21, 1995; and WHEREAS, Landlord and Tenant hereby mutually desire and intend to terminate, cancel, and surrender said Lease and any and all Agreements with respect to the Premises, conditioned upon the faithful observation of the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the above premises which by this reference are incorporated herein, the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: 1. (a) The Lease shall be terminated on January 31, 1997 (the "Termination Date"). Tenant shall cease doing business in the Premises and vacate the Premises on or before the Termination Date and as of the Termination Date, Tenant shall surrender the possession of the Premises to Landlord and relinquish any claim of a right of possession of said Premises as if the Termination Date were originally set forth in the Lease as the termination of the term therein and the parties hereto agree that the Lease shall be terminated and canceled as of the Termination Date. Tenant, as of the Termination Date, relinquishes and waives any right of redemption, statutory or otherwise, including but not limited to such rights of redemption as set forth in MSA Sec. 504.02. All rental obligations pursuant to the Lease (including but not limited to accrued but unpaid year end adjustments to additional rent charges) shall cease as of the Termination Date. Within five (5) business days after Tenant receives a fully-executed copy of this Agreement, to make the foregoing binding upon the Landlord, Tenant shall deliver to Landlord's offices (by messenger, overnight mail or wire transfer) good funds in the amount of Eight Hundred Thousand and No/100 Dollars ($800,000.00) as a Termination Fee which shall thereafter release Tenant from all liabilities arising under the Lease, subject to Tenant's obligations hereunder. (b) Tenant shall make all payments of rent and other charges due under the Lease for the months of December 1996 and January 1997 on December 1, 1996 and January 1, 1997 respectively. (c) Tenant represents and warrants to Landlord that all real estate taxes due and owing for the calendar year 1996 have been paid in full. Together with the January 1, 1997 rent payment, Tenant shall pay an amount equal to $16,130.00 as a good faith estimate of its prorate share of real estate taxes for 1997. There shall be no adjustments in the event that the actual real estate taxes for 1997 are different than currently anticipated. 2. Tenant agrees to vacate the Premises no later than the Termination Date. Tenant shall leave the Premises in broom clean condition and in the same condition as the Premises were accepted in at commencement of the Lease, subject to ordinary wear and tear. Landlord may conduct an inspection of the Premises on January 31, 1997 and may, by written notice to Tenant delivered no later than 5:00 P.M. on February 7, 1997, reserve any claim that Landlord may have for Tenant's violation of the foregoing sentence. Failure of Landlord to deliver said reservation of claim in writing to Tenant by said date shall be deemed conclusive evidence that no such claims have been reserved. Subject to the foregoing, on the Termination Date. Landlord shall accept delivery and surrender of the Premises in "as-is" condition and agrees that Tenant's obligations under said Lease are thereafter terminated. 3. Subject to Paragraph 11 below, said Lease is hereby terminated and canceled as of the Termination Date and Landlord and Tenant shall be mutually released from any and all further and past liability and obligations thereunder. Further, Landlord and Tenant covenant that all obligations of the part of the other party, including but not limited to past and/or future rent, all other sums due or accrued under the Lease have been satisfied as of the date of this Agreement neither party has any further liability to the other party as a result of said Lease Agreement except pursuant to the terms of this Surrender and Termination Agreement. 4. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective successors and assigns. 5. Subject to Paragraph 11 below, Landlord and Tenant do hereby mutually release and discharge each of the other and its employees, officers and directors (both past and present), agents, heirs, successors, assigns, and personal representatives from all claims, demands, and causes of action of every kind, nature and character whatsoever, whether known or unknown, suspected or unsuspected, which each of them may have now or hereafter have, or claim to have against the other, by reason of any act, thing or matter up to the date of this Agreement. 6. The parties hereby warrant and represent to each other that there are no other parties who have any interest in the Lease, the rent nor any other charges payable thereunder, nor any interest in the Premises or the building in which the Demised Premises are located, including any interest therein as mortgagee, which interest could otherwise nullify the purpose and intent of this Agreement, and all such parties with any such interest are either parties to the Surrender and Termination Agreement, or their consent to the Surrender and Termination Agreement is not required under any instrument. 7. Other than the Memorandum of Lease dated March 18, 1996 and filed April 18, 1996, Tenant hereby warrants and represents to Landlord that Tenant has not done or suffered anything to be done nor will tenant in the future do anything whereby the Premises or the title thereto have been or will be encumbered in any way whatsoever, nor has Tenant caused, permitted, or suffered any such lien or encumbrance to accrue. 8. The parties have read this Agreement and the mutual release contained therein, and upon the advice of counsel, they have freely and voluntarily entered into the Agreement. If either party commences an action against the other party arising out of or in connection with this Agreement, the prevailing party shall be entitled to recover from the losing party all reasonable attorney's fees and costs of suit. 9. This Agreement sets forth all terms, conditions, and understandings between the parties, and there are no terms, conditions or understandings, either oral or written, between said parities other than as set forth herein. No alteration, amendment, change or addition to this Agreement shall be binding unless reduced to writing and signed by each of the parties hereto. 10. In the event this document has not been executed by both Landlord and Tenant (such that each party is in receipt of at least one (1) original fully-executed counterpart) on or before November 22, 1996, this Agreement shall be null and void. 11. Notwithstanding anything to the contrary contained in this Agreement Landlord expressly reserves any rights it may have in connection with: (i) obligations of Tenant under this Agreement, including but not limited to the obligation to make payments of rent due on December 1, 1996 and rent and 1/12th of the estimated real estate taxes for 1997 on January 1, 1997 and obligations to deliver the Premises in accordance with the provisions of Paragraph 2 above; (ii) obligations of Tenant regarding hazardous materials in the Lease; (iii) obligations of Tenant in connection with its representations and warranties contained in Paragraphs 1(c) and 7 hereof; (iv) obligations of Tenant under the Lease to keep the Premises free and clear of all liens and encumbrances; (v) obligations of Tenant under the Lease to indemnify and hold Landlord harmless from any and all loss, damage, costs, or expenses arising out of claims of third parties alleging damage to persons or property for acts occurring on or prior to the Termination Date; (vi) obligation of Tenant to maintain the insurance required in the Lease through the Termination Date and rights of Landlord to the application of insurance proceeds and condemnation proceeds under the Lease. In this regard, Tenant agrees that any insurance proceeds payable in the event of damage or destruction to the Leased Premises and Improvements owned by Landlord on or prior to the Termination Date (even if such proceeds shall be paid after the Termination Date) shall belong solely to Landlord, and Tenant agrees to cooperate with Landlord to obtain such proceeds from Tenant's insurers in the event of a claim therefore; and (vii) any third party warranties and the enforcement thereof by or through Tenant respecting roof, HVAC, electrical, and structure of the Improvements on the Leased Premises constructed on behalf of Tenant. In this regard, Tenant agrees to provide an assignment of any such warranties known to Tenant, and to cooperate with Landlord in the assertion of any claim under such warranties (all at no cost and expense to Tenant). (viii)obligations of Tenant under the Lease to comply or be in compliance, at or prior to the Termination Date, with applicable laws, rules, or regulations of governmental authorities, which failure to so comply results in loss, damage, cost or expense to Landlord, provided that Tenant had actual knowledge of any such failure to comply prior to the termination date [changed to conform to the facts /s/ GAR], and further provided that any claims of Landlord under this subsection (viii) must be made prior to March 31, 1997. 12. Within five (5) business days after Tenant receives a fully-executed copy of this Agreement, Tenant shall executed and deliver to Landlord's attorney, Michael B. Daugherty, at 1300 Minnesota World Trade Center, 30 East Seventh Street, Saint Paul, Minnesota 55101, a Quit Claim Deed in recordable form, which shall be held in escrow until the Termination Date. IN WITNESS WHEREOF, the parties have signed, sealed and delivered the instrument on the date first written above. AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP By: AEI FUND MANAGEMENT XIX, INC. By: /s/ Robert P Johnson Robert P. Johnson, President AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP By: AEI FUND MANAGEMENT XX, INC. By: /s/ Robert P Johnson Robert P. Johnson, President AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP By: AEI FUND MANAGEMENT XXI, INC. By: /s/ Robert P Johnson Robert P. Johnson, President MEDIA PLAY, INC. ("Tenant") By: /s/ Gary A. Ross Gary A. Ross President, Superstores Division THE MUSICLAND GROUP, INC. (Tenant") By: /s/ Reid Johnson Reid Johnson Executive Vice President And CFO EX-27 3
5 0000931755 AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP 12-MOS DEC-31-1996 DEC-31-1996 10,729,033 0 41,672 0 0 10,770,705 9,489,031 (162,645) 20,097,091 562,568 0 0 0 0 19,534,523 20,097,091 0 1,341,753 0 429,521 0 0 0 912,232 0 912,232 0 0 0 912,232 51.79 51.79
-----END PRIVACY-ENHANCED MESSAGE-----