UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
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☐ Soliciting Material Pursuantpursuant to 240.14a-12
§240.14a-12
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
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December 3, 2008
January __, 2021
Dear AEI Fund XX Limited Partner:
This letter and the enclosed consent documents are provided to request your vote on operational matters concerning AEI Net Lease Income & Growth Fund XX, Limited Partner:
This letter, andin which you have invested as a limited partner. We refer to this partnership as “Fund XX” or “the Fund” throughout these documents. The enclosed Consent Form provides you with the enclosed attachments, are being
providedopportunity to request your vote on an important matter concerningfour proposals, the operationfirst and second of your Fund XX. Throughwhich are alternatives to each other:
The enclosed Consent Form provides you with the consent form attached
to the enclosed consent statement, we are asking youopportunity to vote for
one of two courses of action:
PROPOSAL #1.on four proposals:
Proposal #1. To instruct Fund XX to begin liquidation. That means that it will begin selling its properties and its existence will be terminated once all property sales are completed. If this proposal is approved, you will begin receiving capital distributions as the property sales occur and your quarterly distributions from rental income will decline over time to zero when the last property is sold.
Proposal #2. As an alternative to Proposal #1, to authorize Fund XX to continue Fund XX's operationsin operation for an additional 60 months for the reasons explained herein.from January 2021. If Fund XX continues in operation,this proposal is approved, you will continue to receive quarterly distributions but will not receive
thefrom Fund XX operations, rather than capital distributions from the liquidationsale of Fund XXits properties.
Proposal #3. To amend Section 7.7 of the Fund’s operating agreement to increase the price at which units may be repurchased under the Fund’s unit repurchase plan from 90% of the estimated net asset value per unit to 95% of the estimated net asset value per unit. Under both the current operating agreement and its
properties, if that were to occur at this time.
PROPOSAL #2.the proposed amendment, the repurchase price is reduced by any distributions paid for the units for the quarter immediately preceding the date the units are repurchased.
Proposal #4. To causeallow Fund XX to begin sellingsell joint venture interests that it currently owns in two of its properties and liquidate. to other AEI Affiliated Funds. The remaining interests in these joint ventures are currently owned by other AEI Funds. If any Fund XX begins the
liquidation process, you will begin to receive
liquidating capital as the Fund's propertiesjoint venture interests are sold but your quarterly distributions from rents will
diminish because thereto affiliated Funds, the sales will be fewer properties
generating rent for distribution.
WE RECOMMEND A "YES" VOTE FOR PROPOSAL #1 - THE ALTERNATIVE
TO CONTINUE THE OPERATIONS OF FUND XX FOR AN ADDITIONAL 60
MONTHS. Youmade on an “as is, where is” basis and the price of each property will be based upon the property’s fair market value as determined by an independent, third-party, commercial property appraiser.
Prior to voting, you should read the consent statementConsent Statement carefully to understand what is being proposed as well asand the risks presented by the two alternatives outlined above.these proposals. If you have any questions about this communication, or
information, please call AEI ClientInvestor Services, toll free, at 800-
328-3519.
800-328-3519.
Sincerely,
AEI FUND MANAGEMENTFund Management XX, INC.
Inc.
General Partner
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
1300 Wells Fargo Place
30 East 7thSeventh Street
St. Paul, Minnesota 55101
CONSENT STATEMENT
We are sendingproviding this consent statementConsent Statement to all limited partners of AEI Net Lease Income & Growth Fund XX L.P. ("Fund
XX")Limited Partnership who are unit owners of record on Novemberas of January 1, 2008. We2021. Through the enclosed Consent Form, we are soliciting your consent throughto the enclosed consent form,four proposals below:
Proposal #1. To instruct Fund XX to twobegin liquidation by selling its properties and, thereafter, terminating its existence.
Proposal #2. As an alternative proposals for Fund XX:
PROPOSAL #1. Amendments to Proposal #1, to amend Section 11.3 of the limited partnership agreement of Fund XX to allowauthorize it to continue in operation for an additional 60 months andfrom January 2021, at which time another vote on this matter will be presented to the limited partners..
Proposal #3. To amend Section 7.7 of the operating agreement to increase the price at which units may be repurchased under itsthe Fund’s unit repurchase plan; or
PROPOSAL #2. Inplan from 90% of the alternativeestimated net asset value per unit to 95% of the estimated net asset value per unit. Under both the current operating agreement and the proposed amendment, the repurchase price is reduced by any distributions paid for the units for the quarter immediately preceding the date the units are repurchased.
Proposal #1, a
proposal to commence the sale of#4. To allow Fund XX to sell joint venture interests that it currently owns in two of its properties followed by its liquidation.
to other AEI Affiliated Funds.
To vote, for ONE of these alternatives, you must return a properly signed consent formConsent Form that is received by AEI Fund Management XX, Inc. at 1300 Wells Fargo Place, 303 0 East 7th Street, St. Paul, Minnesota 55101, on or before 5:00 P.M., Central Time, on Janury 8, 2009. PLEASE DO NOTE VOTE FOR BOTH
ALTERNATIVES: THEY ARE MUTUALLY EXCLUSIVE AND CANNOT BE PURSUED
SIMULTANEOUSLY. WE ENCOURAGE YOU TO SIGN AND RETURN THE ENCLOSED
CONSENT FORM - YOUR VOTE IS IMPORTANT.
February 28, 2021. Please vote “FOR” only one of the first two proposals. Do not vote “FOR” both Proposal #1 and Proposal #2 at the same time: they are mutually exclusive and cannot be implemented simultaneously.
We are mailingencourage you to sign and return the enclosed Consent Form – your vote is important.
We mailed this Consent Statement to you asbecause you are a limited partner of Fund XX, on or about December record as of January 1, 2021.
TABLE OF CONTENTS
Page
| | | |
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND THE CONSENT SOLICITATION | 3 |
| 8 |
| 10 |
| | 10 |
| | 10 |
| Summary Financial Information | 11 |
PROPOSAL #1 – LIQUIDATION | 12 |
| Reasons for the Liquidation Proposal | 12 |
| Effects of the Liquidation Proposal | 12 |
| Material Federal Income Tax Considerations of Liquidation | 13 |
| Risks of the Liquidation Proposal | 14 |
PROPOSAL #2 – CONTINUE OPERATIONS FOR 60 MONTHS | 15 |
| Reasons for the Proposal to Continue Operations | 15 |
| Effects of the Proposal to Continue Operations | 15 |
| Amendment to the Limited Partnership Agreement | 16 |
| Conflicts of Interest with the Proposal to Continue Operations | 16 |
| Risks of the Proposal to Continue Operations | 16 |
PROPOSAL #3 – AMEND THE FUND’S UNIT REPURCHASE PLAN | 17 |
| Reasons for the Proposed Amendment to the Unit Repurchase Plan | 17 |
| Effects of the Proposed Amendment to the Unit Repurchase Plan | 17 |
| Amendment to Limited Partnership Agreement | 18 |
| Conflicts of Interest with the Proposed Amendment to the Unit Repurchase Plan | 18 |
| Risks of the Proposed Amendment to the Unit Repurchase Plan | 18 |
UNIT OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT | 19 |
| 19 |
| Timing of the Consent Solicitation | 19 |
| Record Date and Votes Required for Approval | 19 |
| | 20 |
| | 20 |
| | 20 |
| |
| Exhibit A – | Amendment to Limited Partnership Agreement (Proposal #2) | 24 |
| Exhibit B – | Amendment to Limited Partnership Agreement (Proposal #3) | 25 |
| | |
| Exhibit C – | Financial Statements at and for the years ended December 31, 2019 and 2018 and for the nine months ended September 30, 2020 and 2019 | 26 |
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND THE CONSENT 3
SOLICITATION
SUMMARY OF PROPOSALS 8
INTRODUCTION AND BACKGROUND 9
Fund XX 9
Properties 9
Summary Financial Information 11
Background of the Proposals 11
PROPOSAL #1 - TO CONTINUE OPERATIONS 12
Amendments to the Limited Partnership Agreement 12
Reasons for the Proposal to Continue Operations 13
Effects of the Proposal to Continue Operations 13
Conflicts of Interest With the Proposal to Continue 14
Operations
Risks of the Proposal to Continue Operations 14
PROPOSAL #2 - LIQUIDATION 16
Reasons for the Liquidation Proposal 16
Effects of the Liquidation Proposal 16
Material Federal Income Tax Consequences 17
Risks of the Liquidation Proposal 18
UNIT OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT 19
CONSENT PROCEDURES 19
Exhibit A-Amendment to Limited Partnership Agreement 21
(Continuation Proposal)
Exhibit B-Financial Statements at and for the years ended 23
December 31, 2007 and 2006 and at and for the nine months
ended September 30, 2008 and 2007.
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS
AND THE CONSENT SOLICITATION BACKGROUND
Q: WHAT ARE YOU ASKING?
What are you asking me to do?
A:
We are asking you to either:
vote by signing and returning the enclosed Consent Form:
(1) voteOn a proposal to authorize Fund XX to begin its liquidation by selling its properties and terminating its existence;
(2) on an alternative proposal to amend Section 11.3 of the partnership agreement of Fund XX to authorize it to continue thein operation of Fund XX for an additional 60 months; or
(2)months from January 2021, at which time another vote on this matter will be presented to begin selling Fund XX's properties andthe limited partners;
(3) On a proposal to liquidate Fund XX.
DO NOT VOTE FOR BOTH PROPOSALS: THEY ARE MUTUALLY EXCLUSIVE.
Q: WHY ARE YOU ASKING FOR MY VOTE AT THIS TIME?
A: When we formedamend the unit repurchase plan of the limited partnership to increase the price at which units may be repurchased by Fund XX in 1993, we stated that we expected
to liquidate95% of the estimated net asset value per unit, less any distributions paid for the units for the quarter immediately preceding the date the units are repurchased; and
(4) on a proposal to allow Fund XX to sell joint venture interests that it currently owns in 12two of its properties to 15 years. To liquidate Fund
XX, orother AEI Affiliated Funds.
Do not vote “FOR” both Proposal #1 and Proposal #2 at the same time: they are mutually exclusive and cannot be implemented simultaneously.
Q:
Why are you asking for my vote?
A:
We are asking for your vote on the first proposal because, in July 2014, a majority of the limited partners voted to amend the limited partnership agreement to haveof Fund XX to continue operations for five years, after which the General Partner would ask the limited partners to again vote on a proposal to liquidate the Fund or continue its operations.
We are asking for your vote on the second proposal because Fund XX provides cash distributions from operations to its limited partners that are, we believe, favorable when compared to the income they might receive from other investments, and we believe many of the Fund’s limited partners may prefer to see a continuation of those cash distributions as opposed to a termination of the Fund.
We are asking for your vote on the third proposal to provide limited partners the opportunity to increase the price at which units may be repurchased under the Fund’s unit repurchase plan from 90% of the estimated net asset value per unit to 95% of the estimated net asset value per unit. This will result in business, requires a repurchase price that more closely approximates what the General Partner believes is the unit fair market value.
We are asking for your vote on the fourth proposal because Fund XX owns joint venture interests in two properties with other AEI Affiliated Funds. Because most buyers of limited
partners.
Q: WHY AM I BEING PRESENTED WITH TWO ALTERNATIVE PROPOSALS?
A: Your General Partnersnet leased real estate require ownership of an entire property, we believe that it is notwould be difficult for Fund XX to sell these joint venture interests in the bestopen real estate market in whichmarket. As a result, we are asking you to begin liquidation and, considering
the low yields available from other investments, somevote on a proposal to allow Fund XX investors may wish to havesell its interests in these properties to other AEI Affiliated Funds. Although we believe that Section 6.6 of the Fund continue in business
with the expectation of continuingXX partnership agreement expressly contemplates such a sale to receive on-going
quarterly distributions.
Your General Partners do not recommend liquidation at this
time. We do not believe that sale of properties and
liquidation ofcurrent joint-venture owners, Section 6.5(vii) also prohibits Fund XX is in the best interest of most of
our limited partners. Consequently, we wantfrom selling properties to provideaffiliated funds, therefore creating an alternative to those limited partners whoambiguity unless resolved. This vote would prefer thateliminate such ambiguity. In addition, this proposal would also allow Fund XX continues to operate. We believe that:sell joint venture interests to any AEI Affiliated Fund, XX is currently generating cash flow from its
propertiesnot just AEI Affiliated Funds that is as favorable as, or better than,are current joint-venture owners.
Q:
May I vote “FOR” all proposals?
A:
No. Vote “FOR” only one of the yields
from other investments. We believe that Fund XX remains an
attractive business as an on-going concern.
The current environment for sale of commercial properties isfirst two proposals. Do not as favorable as it may be when the current credit situation
is behind us.
Continuation of Fund XX's operations may allow additional
capital gains to be generated from the sale of some propertiesvote “FOR” Proposal #1 and the reinvestment of proceeds in replacement properties prior
to the final liquidation of Fund XX.
Continuation of Fund XX's operations will allow limited
partners to maintain their investment in income producing, net
leased commercial properties without incurring brokerage or other
up-front fees they could expect to incur if Fund XX is liquidated
and they elect to re-invest their capital in similar investments.
We cannot guarantee that these will be the consequences of
voting to continue the operation of Fund XX. The continued
operation of Fund XX will be subject to“FOR” Proposal #2 at the same risks under
which it has been operating, including cyclical changes in
the real estate and credit markets, economic risks of
tenants who lease Fund XX properties, and conflicts of
interest faced by the General Partners in receiving fees and
reimbursements.
Q: MAY I VOTE FOR BOTH PROPOSALS?
A: NO, you should not vote for both proposals.time. Proposal #1, if approved, will allow Fund XX to continue its
operations,require the sale of the Fund’s properties and the Fund’s liquidation, while Proposal #2 will requireauthorize the saleFund to continue in operation. If none of its
properties and its liquidation. If neither proposal isthe proposals are approved, Fund XX will continue in operation without a specific time frame to liquidate and the enhancedincreased unit repurchase plan containedprice described in Proposal #1#3 will not go intotake effect.
PROPOSAL #1 - TO CONTINUE OPERATIONS
– LIQUIDATION
Q: WHAT WILL HAPPEN IF LIMITED PARTNERS APPROVE THE FIRST
PROPOSAL: TO AMEND THE LIMITED PARTNERSHIP AGREEMENT TO
CONTINUE THE OPERATION OF FUND XX?
Why is Proposal #1 being presented?
A: If
In July 2014, a majority of the limited partners approve the proposalvoted to amend the limited partnership agreement then:
Theof Fund XX to continue operations for five years, after which the Managing General Partners will not commencePartner would ask the sale of all
properties and liquidation of the Fund.
The Fund will continue in operation for at least an
additional 60 months;
After 60 months, the General Partners will, again, solicit
the vote of limited partners to continue oragain vote on a proposal to liquidate the Fund;
The Fund willor continue to operate as it has operated prior
to the vote - owning commercial properties occupied by corporate
tenants under net leases, distributing rental income generated by
those properties, and periodically selling some properties to
generate capital gains for distribution while reinvesting the
remaining proceeds in replacement properties;
The Fund will offer an enhanced repurchase plan under which
(i) the repurchase price for units tendered will be equal to 90%
of the net asset value per unit (rather than the current
repurchase pricing formula which equates to approximately 42% of
the net asset value per unit), and (ii) the opportunity to tender
units for repurchase will be offered twice a year rather than
once a year.
Q: ARE THERE RISKS ASSOCIATED WITH THE PROPOSAL TO CONTINUE OPERATIONS?
A: If neither Proposal #1 nor #2 is approved, there will be no
definite date on which the partnership will liquidate and
the repurchase plan will remain at the current price level.
Although we believe that Proposal #1 reduces some of the
risks an indefinite continuation of Fund XX might present,
if Proposal #1 is approved, distributions of cash from final
sale of properties would be delayed until a subsequent
liquidation proposal is approved. Further, if Proposal #1 is
approved, the operations of Fund XX will continue to be
subject to the risks of an investment holding real estate,
including the following:
Market and economic conditions may adversely affect the
value of properties which Fund XX owns, or may purchase;
Any defaults by tenants may reduce rental income or delay
sale of Fund properties;
There will continue to be no public market for your limited
partnership units, and although Proposal #1 (to continue
operations) includes changes to Fund XX's repurchase plan, you
may not be able to dispose of your units through this plan, or
otherwise, at the time you wish;
If limited partners vote to continue the operation of Fund
XX after 60 months, your ability to receive proceeds from the
final sale of the Fund's properties may be further delayed;
The General Partners receive reimbursements of expenses
based on the capital value of the Fund and may not have the same
interest as limited partners in approving Proposal #1.
You should read the risk factors presented later in this
consent statement to fully understand the risks involved.
Q: DO THE GENERAL PARTNERS RECOMMEND THAT I VOTE FOR PROPOSAL #1?
A: YES. AEI FUND MANAGEMENT XX, INC., THE MANAGING GENERAL
PARTNER OF FUND XX, AND ROBERT P. JOHNSON, THE INDIVIDUAL
GENERAL PARTNER OF FUND XX, BOTH RECOMMEND A VOTE IN FAVOR
OF PROPOSAL #1.
Nevertheless, the General Partners believe that a decision
to vote for, or against, Proposal #1 depends upon the
financial objectives of each limited partner. If a limited
partner believes that he or she can generate a more
favorable return from other investments of similar risk, or
has an immediate need for cash, that limited partner may
wish to vote for Proposal #2. For most limited partners,
however, the General Partners believe that continued
ownership of income-producing commercial, net leased real
estate with leases that generate rental payments at the
level generated by Fund XX remains a favorable investment
that will be difficult to replace if the Fund is liquidated.
Q: WHY DOES PROPOSAL #1 INCLUDE AN AMENDMENT TO THE LIMITED
PARTNERSHIP AGREEMENT TO CHANGE THE REPURCHASE PLAN?
A: The change in the repurchase plan is intended to address
potential liquidity constraints that may be concerns of some
partners. Under the existing repurchase plan, as mandated by
the limited partnership agreement, repurchases are made at a
price equal to the adjusted capital contribution of a
limited partner, reduced by all prior distributions of net
cash flow. At September 30, 2008, this value was
approximately $459 per unit, while we estimate the net asset
value per unit on that date was approximately $1,097. We
represented when Fund XX first sold units that we expected
to commence liquidation of the Fund in 12 to 15 years. We
believe that, if limited partners approve a change in this
timetable, it is appropriate to provide a liquidity option
through the repurchase plan that more closely approximates
net asset value per unit. Accordingly, if Proposal #1 is
approved, Fund XX will price the repurchase of units at 90%
of the net asset value per unit at the time.
Q: DO THE GENERAL PARTNERS, OR MANAGEMENT OF THE GENERAL
PARTNERS, HAVE ANY INTEREST IN SEEING THESE AMENDMENTS
APPROVED?
A: Yes, the General Partners are reimbursed for the expenses
incurred in operating Fund XX, including expenses of
administering the Fund properties. If the Fund is
liquidated, these reimbursements would terminate. Although
the reimbursements are at cost, they are calculated on the
fully-loaded costs of the General Partners in providing the
services and, therefore, include a portion of the salaries
and other compensation expenses of the General Partners.
Although the General Partners also share in distributions
from Fund XX, we believe those distributions cannot exceed
1% of cash flow and 1% of sales proceeds. THEREFORE, WE
BELIEVE THAT THE GENERAL PARTNERS ARE IN THE SAME POSITION
AS LIMITED PARTNERS WITH RESPECT TO THESE DISTRIBUTIONS IN
MAKING A DECISION TO CONTINUE OR LIQUIDATE FUND XX.
Q: WILL THE PROPOSAL TO CONTINUE OPERATIONS HAVE ANY TAX
CONSEQUENCES FOR ME?
A: We do not believe there should be any tax consequences
resulting from the adoption of Proposal #1.
PROPOSAL #2 - LIQUIDATION
Q: IF THE GENERAL PARTNERS BELIEVE THAT CONTINUATION OF FUND XX
IS IN MY BEST INTERESTS, WHY IS THE LIQUIDATION PROPOSAL
ALSO BEING PRESENTED?
A: When we formed Fund XX in 1993, the offering documents
indicated that it was our intention to sell the properties
in 12 to 15 years, or when market conditions were most
advantageous.its operations. Under Section 6.1 of the limited partnership agreement, of Fund XX, we are required to obtain yourthe consent as limited partners,of holders of a majority of the outstanding units to the sale ofsell all or substantially all of Fund XX'sthe Fund’s assets. Although we do not
believe that current market conditions are particularly
favorable, it is 15 years since the first admission of
limited partners to Fund XX. Accordingly, we have determined
to present our limited partners with the two proposals.
Q: WHAT WILL HAPPEN IF LIMITED PARTNERS APPROVE THE SECOND
PROPOSAL: TO HAVE FUND XX LIQUIDATED?
A: If
What will happen if limited partners approve theProposal #1?
A:
The proposal, to sell its
properties and liquidate Fund XX,if approved, will authorize the General Partners willof Fund XX to commence the orderly liquidation and sale of Fund XX's 15
real estate properties to independent buyers.the Fund’s six properties. We anticipate that all sales could be completed within 24 months following
approval of the proposal. If Proposal #2 is approved, as theto 36 months. As sales are completed, Fund XX would distribute the proceeds to you and other limited partners, less expenses, less the General Partners'Partners’ interest in the proceeds, and less a reasonable operating reserve. Reserve funds would be distributed as part of the final dissolution of the Fund.
Q: IF THE LIQUIDATION PROPOSAL IS APPROVED, HOW MUCH WILL
If Proposal #1 is approved, how much cash might I RECEIVE?
receive?
A:
We will notcannot know how much cash willcan be generated from the sale of the properties until the sales are completed-theactually completed. The value of the properties depends upon market conditions, and
theconditions. Any amount that we willthe Fund would be able to distribute dependswould depend upon the terms of sale as well as expenses incurred to complete theeach sale. Based upon current market conditions and capitalization rates for similarly situated properties, and on theirour own internal analysis without independent appraisal, the General Partnerswe estimate that the "liquidation value"“liquidation value” of the assets of Fund XX is approximately $24,430,000$16,090,000 or approximately $1,097$836 per unit.
We are assuming inunit as of June 30, 2020. In making this estimate, we are assuming that theFund properties are sold in the normal course of business and without extraordinary expense, (such as might be incurred if a tenant
filed for protection under bankruptcy laws), that the properties continue to generate rental income during the sales period, and that the General Partners' interests arePartners’ interest is subtracted prior to calculating the liquidation value per unit. It is likely that the actual proceeds will vary from this estimate and that anyestimate. Any variation maycould be material.
Q: ARE THERE ANY NEGATIVE FACTORS THAT LIMITED PARTNERS SHOULD
CONSIDER IN CONNECTION WITH THE LIQUIDATION PROPOSAL?
A: The General Partners believe that:
This is not
What are the most opportune time to sell properties: the
commercial real estate market is beginning to feel the effectstax consequences of the economy and sales have become more difficult to complete; and
It may be difficult for limited partners to redeploy sales
proceeds-to locate other investments that generate a return on
invested capital as high as the return being generated by Fund
XX.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE LIQUIDATION?
liquidation?
A:
The sale of the properties and distribution of the liquidation proceeds may generate both ordinary income and capital gain or loss to the limited partners for United States federal income tax purposes. Tax matters are very
complicated. Your tax consequences may depend on your financial situation and whether you purchased your units in the original offering or the secondary market. Please consult your tax advisor to determine the tax consequences of the liquidation.
Q: WHAT IF THE LIQUIDATION IS NOT APPROVED?
A: If the liquidation proposalto you.
Q:
What if Proposal #1 is not approved by a majority of
units held by?
A:
If Proposal #1 to liquidate is not approved, then Fund XX will not liquidate and will continue in operation until the limited partners then vote to authorize the sale of all of the Fund’s properties or December 31, 2043, as stated in the limited partnership agreement. However, in approximately five years, we would expect to again submit the question to liquidate to a vote by the Fund’s limited partners.
PROPOSAL #2 – CONTINUE OPERATIONS FOR 60 MONTHS
Q:
Why is Proposal #2 being presented?
A:
The General Partners believe that:
- Fund XX continues to be an attractive business as a going concern and is currently generating cash distributions from its properties that may be higher than distributions investors could realize from other income-generating investments with similar risk profiles.
- Continuation of Fund XX’s operations may allow capital gains to be generated from the sale of properties prior to the final liquidation of the Fund.
- Continuation of Fund XX’s operations will allow limited partners to maintain their investment in income-producing, net leased, commercial properties without incurring the costs that they could expect to incur if Fund XX were to liquidate and they re-invested their proceeds in other similar investments.
We cannot assure you that Fund XX will achieve these objectives if you vote for the proposal to continue operations.
Q:
What will happen if limited partners approve Proposal #2?
A:
If Proposal #2 is approved, then:
- Fund XX will not commence liquidation at this time.
- Fund XX will continue to
operate asoperate: owning net leased, commercial properties occupied by national and regional corporate tenants, distributing rental income generated by those properties, and periodically selling properties to generate capital gains for distribution while reinvesting the remaining proceeds into similar properties. - After 60 months, Fund XX will again solicit a
legal entityvote to continue in operation or liquidate.
Q:
Are there risks associated with continuing operations?
A:
Fund XX will continue to be subject to the risks of investment in real estate, including the following:
- Changing market and economic conditions may adversely affect the value of properties which Fund XX owns, or may purchase;
- Any default by tenants may reduce rental income or delay sale of Fund properties;
- The absence of a public market for the limited partnership units, and the limited capacity of Fund XX to repurchase units under its
assetsrepurchase plan; - Delay in final sale of the Fund’s properties and
liabilities.receipt of proceeds from sales; - Conflicts of interest with respect to the General Partners and their affiliates receiving reimbursements of expenses based upon the capital value of the Fund that may cause them to have a different interest than limited partners for approving Proposal #2.
You should read the risk factors presented later in this Consent Statement to fully understand the risks involved.
Q:
Do the General Partners, or management of the General Partners, have any interest in seeing Proposal #2 approved?
A:
Potentially, yes. The General Partners and their affiliates are reimbursed for the expenses incurred in operating Fund XX, including expenses of administering the Fund’s properties. If neitherthe Fund is liquidated, these reimbursements would terminate. Although the reimbursements are at cost, they are calculated on the fully-loaded costs of the General Partners and their affiliates in providing the services and, therefore, include a portion of the salaries and other compensation expenses of the General Partners and their affiliates. On the other hand, if the Fund is liquidated, the General Partners will receive a share of the liquidation proceeds.
Q:
Will Proposal #2 have any tax consequences for me?
A:
We do not believe there should be any tax consequences resulting from the approval of Proposal #2.
PROPOSAL #3 – AMEND THE FUND’S UNIT REPURCHASE PLAN
Q:
At what price does Fund XX currently repurchase units?
A:
Section 7.7 of the limited partnership agreement of Fund XX, as amended in January 2009, currently provides that repurchases by Fund XX are made at a price equal to 90% of the estimated net asset value per unit. At June 30, 2020, we estimate the net asset value per unit was approximately $836.
Q:
Why do you want to increase the repurchase price?
A:
We believe that it is appropriate to provide the limited partners the opportunity to increase the price at which units are repurchased to a price that more closely approximates what we believe is the unit fair market value of the Fund’s units.
Q:
Isn’t a lower repurchase price under the unit repurchase plan favorable to the limited partners who do not wish to sell their units?
A:
Yes. A lower repurchase price, if accepted by a tendering limited partner, would be more favorable to limited partners who remain in the Fund, than a higher price. However, at some point, a limited partner may need liquidity and the higher price would result in that limited partner receiving a price that the General Partners believe is closer to the unit fair market value of the Fund’s units.
Q:
Are there risks related to repurchases?
A:
In addition to the possibility that repurchases may not be available, limited partners should consider the following risks in connection with the Fund’s unit repurchase plan:
- The calculation of net asset value per unit is based upon estimates and assumptions and the knowledge and expertise of the General Partners and Fund XX may, eventually, realize values per unit that are more or less than the Fund’s stated repurchase price;
- Units will be repurchased at a discount from the estimated net asset value per unit;
- Limited partners whose units are repurchased may incur a tax liability;
- Repurchases by the Fund may utilize cash that would otherwise be available for distribution to limited partners whose units are not repurchased, thereby decreasing their current distributions.
Q:
Do the General Partners, or management of the General Partners, have any interest in seeing Proposal #3 approved?
A:
We believe that the General Partners and limited partners, who wish to continue to participate in Fund XX, have the same interest in seeing this proposal norapproved.
Q:
Will Proposal #3 have any tax consequences for me?
A:
We do not believe there should be any tax consequences resulting from the approval of Proposal #3. However, a limited partner who presents units for repurchase by the Fund should consult with his or her personal tax advisor about the possible tax effects of the transaction.
PROPOSAL #4 – SALE OF JOINT VENTURE INTERESTS TO OTHER AEI AFFILIATED FUNDS
Q:
What will happen if limited partners approve Proposal #4?
A:
The proposal, if approved, will allow Fund XX to sell the joint venture interests it owns in two properties to other AEI Affiliated Funds. The sales price for properties sold in this manner will be based upon an independent, third-party, commercial property appraisal.
Q:
If Proposal #4 is approved, what is the benefit to Fund XX?
A:
A sale of a joint venture interest in a property on the open real estate market could take many months, if not years. The sale to other Affiliated Funds could, however, can be completed in a relatively short time, resulting in the Fund receiving sale proceeds sooner. Furthermore, real estate brokerage commissions typically represent a seller-related expense and have historically ranged from 3% to 6% of a property’s gross sale price. A sale to other Affiliated Funds will eliminate the expense of brokerage commissions, thereby potentially resulting in higher net sales proceeds to the Fund.
Q:
What if Proposal #4 is not approved?
A:
If the proposal to continue operationssell the Fund’s properties to other Affiliated Funds is not approved, then Fund XX will attempt to sell the repurchase
plan will remain atjoint venture interests in the current, lower, valuation per unit
level andtwo properties in the termopen real estate market. If the interests cannot be sold in timely fashion, the final liquidation of the partnershipFund may continue until
2043.
be delayed.
THE CONSENT SOLICITATION PROCESS
Q: AM
What vote is required to approve the proposals?
A:
The affirmative vote of a majority of the units of limited partner interest in Fund XX is required to approve a proposal.
Q:
Am I REQUIRED TO VOTE ON EITHER PROPOSAL?
required to vote on these proposals?
A:
No. You are not required to vote. However, we cannot
completenot voting would have the liquidation, or amendeffect of a vote against the limited partnership
to accommodate the enhanced repurchase plan that is a
feature ofproposals. If Proposal #1 (to continue operations), without the
approval of holders of at leastto liquidate is not approved by limited partners holding a majority of the outstanding units, entitledthen Fund XX will continue in operation until the limited partners vote to vote.
authorize the sale of all of the Fund’s properties or December 31, 2043. If Proposal #3 is not approved by a majority of the units held by limited partners, Fund XX will continue to offer a unit repurchase price equal to 90% of the estimated net asset value per unit, less any distributions paid for the units for the quarter immediately preceding the date the units are repurchased. If Proposal #4 is not approved by limited partners holding a majority of the outstanding units, Fund XX will not sell any joint venture interests in properties to other AEI Affiliated Funds.
VOTING PROCEDURES
A: Please mark
Mark your VOTE, SIGN AND RETURN THE CONSENT FORM
usingvote, sign and date the enclosed Consent Form and return it in the enclosed postage paid envelope.prepaid envelope. Your consent formConsent Form must be received by 5:00 p.m., Central Time, on January 8,
2009February 28, 2021 (unless this date and time is extended by Fund XX)extended).
Q: MAY
May I REVOKE MY CONSENT?
revoke my consent?
A:
Yes. Limited partnersYou may withdraw or revoke theiryour consent at any time prior to the earlier of 5:00 p.m., Central Time, on January 8, 2009.February 28, 2021. To be effective, a written or facsimile revocation or withdrawal of the consent formConsent Form must be received prior to such time and addressed to AEI Fund Management XX, Inc. at 1300 Wells Fargo Place, 30 East 7th Street, St. Paul, Minnesota 5510155101. A notice of revocation or withdrawal must specify the limited partner'spartner’s name and the number of units being withdrawn.
Q: DO LIMITED PARTNERS HAVE APPRAISAL RIGHTS?
Do limited partners have appraisal rights?
A: Under Minnesota law,
With respect to this vote, limited partners are not entitled to appraisal rights with respect to the value of their units. There will not be any procedure by which a limited partner can seek an alternative valuation of his or her units, regardless of whether the limited partner does or does not consent to either proposal.
any of the proposals. SUMMARY OF PROPOSALS
The following summarizes the proposals being presented tothe limited partners of Fund XX. You should read this entire Consent Statement to fully understand the proposals.
PROPOSAL #1-TO CONTINUE OPERATIONS:
Proposal #1 – Liquidation: Effect:
If liquidation is authorized, the proposalGeneral Partners will commence the orderly sale of the Fund’s properties and the winding up of its affairs, including distribution of proceeds to continue operations is approved,partners in accordance with the limited partnership agreement of Fund XX will be amendedagreement. Authorization to (a) set the year in which limited partners
would again vote on continuing or liquidating Fund
XX at 2013; (b) increase the repurchase price
contained in the repurchase provisions to 90% of
the net asset value per unit and cause the
opportunity to tender units for repurchase to be
offered twice, rather than once, per year. If the
proposal to continue operations is approved, you
will be asked to vote on these same two proposals
again in 2013.
Vote Required: Approval of the proposal to
continue operations requires the affirmative vote
of holders of a majority, by interest, of the
limited partners (excluding any units held by the
General Partners for their own account).
PROPOSAL #2-LIQUIDATION:
Effect: Approval of the
liquidation proposalliquidate is required in accordance with Section 6.1 of the limited partnership agreement prior to the sale of all or substantially all of the assets of Fund XX. If the liquidation proposal is
approved, the General Partners will commence the
orderly sale of Fund XX's properties and winding
up of its affairs, including distribution of
proceeds to partners in accordance with the
limited partnership agreement.
Fund.
Vote Required:
Approval of the liquidation proposal requires the affirmative vote of the
Individual General Partner and holders of a majority by interest, of the limited partnersoutstanding units (excluding any units held by the General Partners for their own account).
SOLICITATION AND Proposal #2 – Continue Operations For 60 Months:
Effect:
If the proposal to continue operations is approved, the Fund’s limited partnership agreement will be amended to set the year of 2026 as the date at which limited partners would again vote on continuing operations or liquidating.
Approval of the proposal to continue operations requires the affirmative vote of holders of a majority of the outstanding units (excluding any units held by the General Partners for their own account).
Proposal #3 – Amend the Fund’s Unit Repurchase Plan
Effect:
If the proposal to amend the repurchase plan is approved, Fund XX will be allowed to repurchase units at 95% of the estimated net asset value per unit, reduced by distributions made to limited partners after the repurchase price is calculated and prior to the repurchase date.
Vote Required:
Approval of the proposal to amend the unit repurchase plan requires the affirmative vote of holders of a majority of the outstanding units (excluding any units held by the General Partners for their own account). Proposal #4 – Sale of Joint Venture Interests to Other AEI Affiliated Funds:
Effect:
If the proposal to sell joint venture interests to other AEI affiliated funds is approved, Fund XX will be allowed to sell its joint venture interest in a property to an AEI Affiliated Fund at a sale price based upon an independent, third-party, commercial property appraisal.
Vote Required:
Approval of the sale of joint venture interests to other AEI affiliated funds proposal requires the affirmative vote of holders of a majority of the outstanding units (excluding any units held by the General Partners for their own account).
Solicitation:
This consent statementConsent Statement was prepared by, and
RECOMMENDATION: consents are being solicited by and
on behalf of, AEI Fund Management XX, Inc., the Managing General Partner of Fund XX. THE
GENERAL PARTNERS RECOMMEND A VOTE FOR PROPOSAL #1.
INTEREST OF GENERAL
Interest of General
The General Partners have interests in the PARTNERS:liquidation proposal to continue operations and the liquidation proposal to
Partners:
continue operations that are different from the interests of limited partners because:
- The General Partners and their affiliates receive reimbursements
forof the costs they incur and services they provide to Fund XX, including the compensation expense of their employees based onupon the hours ofthey spent for the services they performed. These reimbursements will terminate if the liquidation proposal is adoptedapproved and Fund XX is dissolved. - The General Partners are entitled to indemnification in instances defined in the limited partnership
agreement
APPRAISAL RIGHTS: agreement. - If
you disagree with either proposal, youthe Fund is liquidated, the General Partners will not have appraisal rights, or any right to
demand paymentreceive a share of the fair market value of your
units of limited partnership interest in liquidation proceeds.
BACKGROUND OF THE FUND
Fund XX.
INTRODUCTION AND BACKGROUND
FUND XX AEI Net Lease Income & Growth Fund XX Limited Partnership is a Minnesota limited partnership formedorganized in 1993. It raised $24 million through a public offering of its units. These proceeds were used to purchase, for cash, commercial real estate leasedoccupied by tenants under net leases. Fund XX initially purchased 14 properties with the net proceeds from the offering, including partial interests in somefive of these properties. The prospectus underby which the units were originally offered indicated that properties would be sold from time to time and the cash proceeds invested in additionalsimilar net leased properties.
Although we haveFund XX has not commenced the sale of properties in final liquidation, we have, during the operation of Fund XX,has sold
several properties and reinvested the majority of the proceeds in replacementsimilar net leased properties. In all cases, we havethe Fund has distributed enough cash for limited partners to pay the taxes generated by any income or gain recognized by them on sale of thesuch properties.
PROPERTIES
As of September 30, 2008,2020, Fund XX held interests in 15six net leased properties. It also held cash from two recent property sales totaling $2,152,460.$2,234,000. All tenants of the properties are subject to net leases under which the tenant pays substantially all of the property operating costs of the property.costs. The tenants for all of thein these properties are current with their rental payments and all of the properties are fully occupied. The lease for one of property
expires on November 30, 2008 and the tenant has advised us that
they do not intend to renew it. Fund XX has retained a real
estate broker to market the property for sale or lease.
The following table sets forth the properties held by Fund XX as of September, 30, 2008,2020, the date each property was acquired, the ownership interest in the property, the acquisition cost, the date the baseinitial lease term expires, the annual rental amount, and the Managing General Partners'Partner’s estimate of the current value of the property:
Date Ownership Acquisition Lease Annual
| | | | | | | |
Property | Date Acquired | Ownership Interest (%) | Acquisition Cost | Lease Expiration | Annual Rent | Estimated Value (1) |
Jared Jewelry Hanover, MD | 2/9/04 | 50.00 | 1,989,105 | 1/31/22 | 203,946 | 2,147,000 |
Staples Vernon Hills, IL | 5/22/09 | 70.00 | 3,803,268 | 10/31/23 | 214,480 | 2,523,000 |
Family Dollar Mobile, AL | 7/23/12 | 100.00 | 1,439,737 | 6/30/22 | 119,926 | 1,599,000 |
Fresenius Green, OH | 12/3/14 | 100.00 | 2,443,428 | 2/28/25 | 175,818 | 2,425,000 |
Dollar Tree Indianapolis, IN | 1/8/16 | 100.00 | 1,786,976 | 9/30/25 | 117,387 | 1,619,000 |
Bassett Furniture Fredericksburg, VA | 04/30/19 | 100.00 | 3,165,897 | 10/31/29 | 215,240 | 3,075,000 |
| Total Estimated Value | $13,388,000 |
- Estimated
Property Acquired Interest% Cost Expiration Rent Value(1)
HomeTown Buffet
Albuquerque, NM 9/30/93 40.14 $ 531,331 1/31/11 $48,162 $ 481,600
Red Robin
Colorado
Springs, CO 2/24/94 100.00 2,229,190 12/31/17 325,000 4,391,900
Red Robin
Colorado
Springs, CO 2/24/94 100.00 1,755,441 11/30/08 156,060 1,116,000
Applebee's
McAllen, TX 12/8/94 100.00 1,320,104 12/31/14 224,994 2,647,000
Champps Americana
Utica, MI 2/12/02 44.00 1,511,134 2/28/22 190,780 1,837,300
KinderCare
Mayfield
Heights, OH 6/14/02 100.00 1,407,058 6/30/17 146,985 2,070,200
Biaggi's
Ristorante
Italiano
Ft. Wayne, IN 7/3/03 50.00 1,379,346 7/31/16 130,540 1,695,300
Johnny Carino's
Alexandria, LA 11/13/03 100.00 2,144,748 11/30/20 206,950 2,463,700
Jared Jewelry
Hanover, MD 2/9/04 50.00 1,989,105 1/31/22 168,551 2,478,700
Applebee's
Sandusky, OH 4/30/04 45.00 1,276,943 10/31/23 97,254 1,430,200
Tractor Supply
Company
Mesquite, TX 3/10/06 50.00 1,231,624 8/14/13 100,344 1,356,000
Four micellaneous
fractional
property Less 33,818 Various 4,522 44,800
interests Various than 2%
(1)value at June 30, 2020. Fund XX has not obtained appraisals of these properties. The Managing General Partners havePartner has valued the properties based upon rental rates and prevailing capitalization rates which they believe are applicable. If a property is vacant, the marketability of the property is analyzed to determine a fair value. We cannot assure you that we could sell the properties at the estimated values set forth in the table.
SUMMARY FINANCIAL INFORMATION
Summary Financial Information The following table provides operational data about Fund XX for the nine months ended September 30, 20082020 and 20072019 and for the years ended December 31, 20072019 and 2006,2018, on the basis of Fund XX continuing as a going concern:
Nine Months Ended Year Ended
September 30 December 31
2008 2007 2007 2006
Rental income $1,222,720 $1,256,170 $1,689,206 $1,620,066
Partnership 212,576 196,117 255,832 258,511
Administration &
Property Management
Expenses
Depreciation 252,781 252,786 338,525 332,241
Total Expenses 465,357 448,903 594,357 590,752
Operating Income 757,363 807,267 1,094,849 1,029,314
Other Income -
Interest 38,650 34,841 45,129 46,415
Income from Continuing
Operations 796,013 842,108 1.139,978 1,075,729
Income from Discontinued
Operations 829,788 194,971 252,179 363,653
Net Income 1,625,801 1,037,079 1,392,157 1,439,382
Net Income Allocated
to Limited Partners 1,609,543 1,026,708 1,378,235 1,424,988
Net Income Per LP Unit 73.01 46.52 62.47 64.40
Distributions Per
LP Unit 69.22 59.68 78.73 86.18
| | | | |
| | Nine Months Ended September 30 | Year Ended
December 31 |
| | 2020 | 2019 | 2019 | 2018 |
| Rental income | $794,984 | $713,614 | $976,849 | $1,334,741 |
Partnership Administration & Property Management Expenses | 166,032 | 192,199 | 241,265 | 242,236 |
| Depreciation | 271,752 | 255,908 | 346,492 | 318,480 |
| Total Expenses | 437,784 | 448,107 | 587,757 | 565,644 |
| Operating Income | 357,200 | 265,507 | 389,092 | 774,025 |
| Other Income – Interest | 6,814 | 51,767 | 59,693 | 18,824 |
| Miscellaneous Income | 0 | 0 | 0 | 50,689 |
| Gain on Sale of Real Estate | 0 | 1,074,040 | 1,074,040 | 4,344,394 |
| Net Income | 364,014 | 1,391,314 | 1,522,825 | 5,187,932 |
| Net Income Allocated to Limited Partners | 360,374 | 1,377,401 | 1,507,597 | 5,112,380 |
| Net Income Per LP Unit | 18.92 | 70.75 | 77.86 | 256.92 |
| Distributions Per LP Unit | 30.52 | 42.38 | 56.81 | 116.14 |
The following table provides data on the financial condition of Fund XX on a historical cost basis at September 30, 20082020 and 2007,2019, and December 31, 20072019 and 2006:
September 30 December 31
2008 2007 2007 2006
Cash and Cash
Equivalents $ 2,874,062 $ 1,098,409 $ 1,102,753 $ 1,083,159
Investments in Real
Estate, net 13,822,186 15,647,512 15,545,103 15,954,727
Total Assets 16,696,248 16,745,921 16,647,856 17,037,886
Payable2018:
| | | | |
| | September 30 | December 31 |
| | 2020 | 2019 | 2019 | 2018 |
| Cash | $2,882,273 | $3,288,026 | $3,000,960 | $6,216,113 |
| Receivables | 87,611 | 0 | 0 | 50,689 |
| Investments in Real Estate, net | 11,734,060 | 12,112,936 | 12,027,334 | 9,791,056 |
| Total Assets | 14,703,944 | 15,400,962 | 15,028,294 | 16,057,858 |
| Payable to Affiliate | 43,952 | 58,375 | 33,872 | 66,190 |
| Distributions Payable | 198,381 | 277,778 | 277,779 | 1,494,952 |
| Unearned Rent | 17,873 | 0 | 17,873 | 31,347 |
| Acquired Below-Market Lease Intangible | 384,820 | 427,188 | 416,596 | 0 |
| Total Liabilities | 645,026 | 763,341 | 746,120 | 1,592,489 |
| General Partners’ Capital | 39,140 | 44,928 | 41,373 | 43,205 |
| Limited Partners’ Capital | 14,019,778 | 14,592,693 | 14,240,801 | 14,422,164 |
PROPOSAL #1 – LIQUIDATION Reasons for the Liquidation Proposal In July 2014, a majority of the limited partners voted to Affiliate 40,022 41,966 67,148 84,418
Distributions Payable 404,901 413,773 413,767 413,582
Total Liabilities 457,172 510,385 493,164 509,135amend the limited partnership agreement of Fund XX to continue operations for five years, after which the Managing General Partners'
Capital 13,172 13,136 12,328 16,068
Limited Partners'
Capital 16,225,904 16,222,400 16,142,364 16,512,683
BACKGROUND OF THE PROPOSALSPartner would ask the limited partners to again vote on a proposal to liquidate the Fund or continue its operations. Under Section 6.1 of the limited partnership agreement, of
Fund XX, we are required to obtain your consent, as limited
partners, to the sale of all or substantially all of Fund XX's
assets. Although the limited partnership agreement does not
specify a date, prior to 2043, at which Fund XX must terminate,
the prospectus under which units were initially sold indicated
that it was our intention to sell the properties in 12 to 15
years, or when market conditions were most advantageous.
Although we do not believe that current market conditions
are particularly favorable, it is 15 years since the first
admission of limited partners to Fund XX. Accordingly, we have
determined to present to our limited partners two proposals: (1)
a proposal to continue operating Fund XX for an additional 60
months, after which we will again solicit the consent of the
limited partners with respect to liquidation, and (2) a proposal
to cause Fund XX to begin selling its properties and liquidate.
THE GENERAL PARTNERS RECOMMEND A VOTE "FOR" THE PROPOSAL TO
CONTINUE THE OPERATIONS OF FUND XX FOR AN ADDITIONAL 60 MONTHS.
PROPOSAL #1-TO CONTINUE OPERATIONS
AMENDMENTS TO THE LIMITED PARTNERSHIP AGREEMENT
The proposal to continue the operations of Fund XX will be
implemented, if approved by limited partners, through several
amendments to the limited partnership agreement that are set
forth in Exhibit A to this consent statement. These amendments
will:
1. Amend Article XI of the limited partnership
agreement to add a new Section 11.3 that requires the
General Partners to prepare a new consent or proxy statement
before December 31, 2013, to solicit another vote of limited
partners to either liquidate Fund XX, or extend its
operation for an additional period of years;
2. Amend Section 7.7 of the limited partnership
agreement to provide that (1) the repurchase price for units
purchased in the repurchase plan of Fund XX will be
increased to 90% of the net asset value per unit, and (2)
the Fund will offer to repurchase twice, rather than once,
per year.
Although we indicated in the prospectus under which the
units were initially sold that we intended to liquidate Fund XX
12 to 15 years after it was formed, there currently is no
contractual requirement in the limited partnership agreement of
Fund XX to terminate its existence, or sell its properties and
liquidate, prior to 2043. The addition of new Section 11.3 is
intended to create an obligation to solicit the interest of
limited partners in liquidating Fund XX at a definite point in
time. This is intended both to eliminate conflicts that could
cause the General Partners to delay liquidation of Fund XX and to
give limited partners a time horizon for final liquidation. The
amendment does not, however, require liquidation and if limited
partners were to again vote to continue its operations, the
operation of Fund XX, and the time at which limited partners
would receive a final distribution of the value of its assets,
would be further extended.
We are also proposing amendment to the repurchase provisions
of the limited partnership agreement contained in Section 7.7 so
that limited partners who so desire to do so may present their
units for repurchase at a price that more closely approximates
what we believe is the unit fair value. Currently, Section 7.7
provides that units repurchased under Fund XX's repurchase plan
will be repurchased at a price equal to the adjusted capital
contributions of units, less 50% of all distributions of cash
flow previously made. Adjusted capital contributions are equal to
the initial capital contributions of limited partners as reduced
for capital distributions to the extent not required to produce a
12% cumulative return. After reduction for such capital
distributions, and for cash distributions, the repurchase price
at September 30, 2008, the last repurchase date, was
approximately $459 per unit. Nevertheless, the General Partners'
estimate of the net asset value per unit, which the General
Partners have computed without independent appraisal based upon
the cash flow from rentals on the properties divided by a
capitalization rate that they believe represents a market
comparable capitalization rate for each property, was
approximately $1,097 at September 30, 2008.
As amended, Section 7.7 will provide that repurchases will
be conducted at a price equal to 90% of the net asset value per
unit. Net asset value per unit will be computed solely by the
General Partners using valuation methods that they consider
appropriate for such purposes. These valuation methods will, in
most cases, consist of determining the rental capitalization
rates that, based on their own research, the General Partners
believe represent the capitalization rates being applied to the
sale of properties in the same industry and markets. From this
valuation for each property, the General Partners deduct
estimated disposition costs and the General Partners'
participation in proceeds from sale, and divide the result by the
number of units outstanding.
To further increase the utility of the repurchase plan in
providing liquidity to limited partners, the amendments, if
approved, will allow repurchases to occur twice each year.
Although Section 7.7 currently provides that repurchase will
occur on December 1 of each year for units tendered during the
month of September, the amendments would provide that repurchases
will occur as of March 31, and September 30 of each year for
units tendered during January and July, respectively.
REASONS FOR THE PROPOSAL TO CONTINUE OPERATIONS
The proposal to continue operations is being presented
because:
Fund XX is currently generating cash flow from rentals that
the General Partners believe is more favorable to investors than
available from other investments of a similar risk profile and
remains an attractive business as an ongoing concern;
The General Partners do not believe that the current
environment for sale of commercial properties is the most
favorable to the Fund;
The continuation of Fund XX may allow additional capital
gains to be generated from the sale of some properties and the
reinvestment of proceeds in replacement properties prior to the
final liquidation of Fund XX; and
Continuation of Fund XX's operations will allow limited
partners to continue to have their funds invested in income
producing properties without the brokerage or other up-front fees
that they would likely need to expend if their funds are
redeployed in new investments of a similar nature.
The current upheaval in residential real estate and credit
markets, as well as the economy, has begun to effect the market
for commercial real estate. The General Partners believe that
timing sales to more closely match cyclical highs in these
markets will generate higher overall gains and that forcing a
liquidation of properties is not advantageous in times like
these.
EFFECTS OF THE PROPOSAL TO CONTINUE OPERATIONS
The proposal to continue operations will allow Fund XX to
continue to operate for an additional 60 months in the same
manner in which it has historically operated. Our operations
will continue to be reported to you, and to regulatory
authorities, in a manner consistent with historical financial
results. Subject to the normal risks of operating Fund XX as
summarized below, we anticipate that Fund XX will continue to
make quarterly distributions of cash flow from rental income.
If the proposal to continue operations is approved, we
expect to actively engage in a search for replacement real
properties in which Fund XX would invest the $2,152,460 of cash
generated from the recent sale of two properties.
The proposal to continue operations, if approved, will also
move into the future the date that limited partners will receive
proceeds from final sale of properties and liquidation of Fund
XX. Further, because repurchases of units under the repurchase
provisions of the limited partnership agreement are funded with
cash flow that might otherwise be available for distribution,
increase of the price for repurchases, and expansion of the time
periods for repurchases, may decrease the amount of cash
available for distribution. HOWEVER, THE REPURCHASE OF UNITS
DECREASES THE NUMBER OF UNITS OUTSTANDING AND INCREASES THE
OWNERSHIP INTEREST OF EACH LIMITED PARTNER WHO REMAINS IN THE
FUND.
If the proposal to continue in operation is not approved,
and the liquidation proposal is approved, Fund XX will commence
the process of disposing of its properties. If neither Proposal
#1 nor Proposal #2 is approved, we will continue to operate in
the ordinary course of business.
CONFLICTS OF INTEREST WITH THE PROPOSAL TO CONTINUE OPERATIONS
The General Partners are reimbursed for their expenses,
including the salaries and compensation expense of employees,
based upon the time those employees spend on the affairs of the
programs they manage. To the extent the General Partners and
their affiliates have more programs and more operations under
management, the aggregate amount of such reimbursements is
larger, and the salaries that are justifiable for their
management may be higher. Accordingly the General Partners have
an incentive to maintain funds and properties under management.
Note, however, that reimbursements for operations is at cost and
does not represent a profit center for the General Partners or
their affiliates.
RISKS OF THE PROPOSAL TO CONTINUE OPERATIONS
If the proposal to continue operations is approved, the
business of Fund XX will continue to be subject to the risks
associated with ownership of real property, and the illiquidity
of investment in a limited partnership, including the following:
LIMITED PARTNERS WILL HAVE NO RIGHT TO LIQUIDATION PROCEEDS
UNTIL FUND XX IS LIQUIDATED, WHICH WILL BE DELAYED FOR AT LEAST
FIVE YEARS. If the proposal to continue operation is approved,
and although the ability to present units for repurchase will be
enhanced, limited partners will not have a right to receive the
proceeds from the final disposition of properties and
liquidation of Fund XX for at least an additional five years.
THERE WILL CONTINUE TO BE NO PUBLIC MARKET FOR THE UNITS
AND SUBSTANTIAL RESTRICTIONS ON SALE OR DISPOSITION OF THE
UNITS. To avoid being classified as a publicly traded limited
partnership for tax purposes, the limited partnership agreement
of Fund XX continues to place substantial restrictions on sale
or transfer of units. There is no trading market for the units
and the restrictions in the limited partnership agreement are
designed to ensure that no public trading market develops.
Accordingly, it will continue to be difficult to dispose of
units if the proposal to continue operations is approved, or to
receive full value for units when they are sold.
IF LIMITED PARTNERS APPROVE THE PROPOSAL TO CONTINUE
OPERATIONS, THE ABILITY OF LIMITED PARTNERS TO RECEIVE ALL OF
THE VALUE OF THEIR INVESTMENT IN CASH MAY BE FURTHER DELAYED.
The proposal requires that the General Partners again seek the
consent of the limited partners to commence the liquidation of
the fund in five years. The General Partners may again determine
to solicit the consent of limited partners to continue Fund XX's
operations at that time and, if continuation is again approved,
further delay the final distribution of cash from sale of all of
Fund XX's properties.
ALTHOUGH THE PROPOSAL TO CONTINUE FUND XX'S OPERATION
INCLUDES AN AMENDMENT TO THE LIMITED PARTNERSHIP AGREEMENT TO
INCREASE THE REPURCHASE PRICE AND THE AVAILABILITY OF THE PLAN,
SUCH REPURCHASES WILL REDUCE THE AMOUNT OF CASH THEN AVAILABLE
FOR DISTRIBUTIONS. Unit repurchases are funded with cash
otherwise available for distribution to limited partners and to
the extent the repurchase price is increased and more units are
repurchased, cash available for distribution to remaining
partners will be reduced. Although remaining partners will have
a proportionately larger interest in Fund XX after such
repurchases, if the General Partners over estimate the net asset
value per unit for purposes of repurchases, or properties
decline in value after repurchases, remaining limited partners
may not obtain the benefit of such larger interest.
THE OPERATIONS OF FUND XX WILL CONTINUE TO BE SUBJECT TO
THE RISKS OF REAL ESTATE INVESTMENT. If the proposal to continue
operations is approved, the properties of Fund XX will be retained
for investment and the principal proceeds from any sale of Fund XX's
properties may not be distributed to partners during the following
five years except to the extent necessary to pay income tax related
to the taxable gain allocated to limited partners (assuming the highest
marginal rates for federal income tax purposes). The net leased
commercial properties of Fund XX will be subject to the same
risks of performance as the properties originally acquired by
Fund XX. The value of real estate is subject to a number of
factors beyond the control of Fund XX, including national
economic conditions, changes in interest rates, governmental
rules and regulations and competition from other forms of
financing. There has been a downturn in some real estate markets
during the past 18 months that is beginning to effect the prices
for commercial real estate. It is possible that this downturn
will continue or deepen, depressing the value of the properties
Fund XX holds. In addition, the value of the properties is
effected by the financial condition of the tenants. To the
extent there is a general economic downturn, the restaurant
industry or retail industry in which most of Fund XX's tenants
operate, may be adversely effected, causing increased rates of
default in rental payments or renegotiation of lease terms. To
the extent Fund XX's lease rates decline in the future, or if
there is an increased level of default, the value of real estate
held by the Fund may decline.
LIMITED PARTNERS WILL CONTINUE TO BE DEPENDENT UPON THE
GENERAL PARTNERS FOR ALL DECISIONS RELATING TO OPERATION OF FUND
XX. If the proposal to continue operations is approved, limited
partners will continue to be required to rely almost exclusively
on the General Partners of Fund XX for successful operations.
The General Partners have complete authority to make decisions
regarding our day-to-day operations and the acquisition or
disposition of properties, and there are no limitations that
limited partners may enforce regarding the types of commercial,
net leased properties that may be acquired. The General Partners
may take actions with which limited partners disagree. Limited
partners do not have any right to object to most management
decisions unless the General Partners breach their duties.
Limited partners are able to remove the General Partners only by
majority vote of investors or in other limited instances.
THE GENERAL PARTNERS MAY BENEFIT FROM THE PROPOSAL TO
CONTINUE OPERATIONS IN WAYS THAT CREATE CONFLICTS OF INTEREST.
The interests of the General Partners in proposing the proposal
to continue operations may be different from your interests
because the General Partners will continue to receive
reimbursements from Fund XX if the proposal to continue
operations is approved. The General Partners are reimbursed at
cost, which includes a portion of the salaries of the General
Partners' personnel and other overhead, for services the General
Partners provide to Fund XX and the proposal to continue
operations, if adopted, will allow those reimbursements to
continue.
LIMITED PARTNERS WILL NOT HAVE APPRAISAL RIGHTS IN
CONNECTION WITH THE PROPOSAL TO CONTINUE OPERATIONS. You will
not have appraisal or dissenters rights as a result of the
proposal to continue operations. Accordingly, if you disagree
with the proposal to continue operations you will not have the
right to require Fund XX to pay out the value of your units.
Instead, the proposal to continue operations will be effective
with respect to you if approved by holders of a majority of the
units. If you disagree, you will be required to find a different
method of disposing of your units, such as through Fund XX's
repurchase plan, or to hold your units until liquidation of Fund
XX.
PROPOSAL #2-LIQUIDATION
REASONS FOR THE LIQUIDATION PROPOSAL
If the liquidation proposal is approved, we will commence
the final sale and liquidation of Fund XX's properties in
accordance with the limited partnership agreement. Section 6.1 of
the limited partnership agreement requires that we obtain the
prior consent of holders of a majority of the outstanding units prior to liquidationsell all or sale of substantially all of Fund XX'sthe Fund’s assets. Further,
Effects of the prospectus under whichLiquidation Proposal Operations. If limited partners holding a majority of the outstanding units vote in favor of limited
partnership interest were initially sold indicated that it was
our intent to commence the sale of properties and liquidation of
Fund XX 12 to 15 years after its formation. The liquidation
proposal is consistent with this timeframe.
EFFECTS OF THE LIQUIDATION PROPOSAL
OPERATIONS. If partners approve the liquidation proposal, the Managing General PartnersPartner will take action to commence the orderly
dispositionsale of Fund XX's properties. XX’s properties and the liquidation of the Fund.The Managing General PartnersPartner will, from time to time, distribute the proceeds from the sale of properties to the extent they believe,it believes, in theirits sole discretion, that such proceeds are not required to Fund XX'sfor operations during liquidation, not required to pay itsFund obligations, or required to deal with contingent obligations. Once all of the Fund’s properties are sold, the Managing General Partners intend toPartner would wind up the affairs of the Fund XX and distribute any net sales proceeds and remaining reserves to the limited partners and the General Partners. The Fund XX willwould then dissolvebe dissolved and all of its
operations will cease.cease operations. Under Section 12.1 of the limited partnership agreement, of Fund XX, this dissolution does not require, and wethe Fund will not ask you for, any additional vote.
DISTRIBUTIONS.
Distributions. As set forth under the caption "Introduction
and Background-Properties"“Background of the Fund – Properties”, the Managing General Partners' estimatePartner estimates the current value of Fund XX'sXX’s properties at approximately $22,012,700.$13,388,000, not including cash from recent property sales of approximately $2,234,000. Neither the Managing General PartnersPartner nor Fund XX havehas obtained any independent appraisal or opinion regarding the value of the Fund’s properties. TheThis valuation described above is based onupon the rental rates generated by each property and the capitalization rates that the Managing General Partners believePartner believes are appliedapplicable in the markets wherein which the properties are located.
It is not possible for the Managing General PartnersPartner to predict the timing of the sale of the Fund’s properties. Assuming that (a) the sale of properties can be completed over the next 24 to 36 months, (b) there are no adverse events, such as tenant defaults or bankruptcies, that adversely effect Fund XX'saffect the Fund’s ability to sell its properties or the market value that can be obtained in such sales, (c) there are no increases or decreases in the market value of the properties and they can be sold at the amounts estimated by the Managing General Partners,Partner, and (d) there are no other extraordinary partnership expenses, the Managing General Partners estimatePartner estimates that approximately $24,430,000$16,090,000 of proceeds will be available for distribution from sale of properties and cash reserves in accordance with the liquidation
proposal, $24,185,700reserves. Of that amount, approximately $15,929,000 or $1,097$836 per unit of which would be available for distribution to limited partners. Because some of these assumptions will inevitably be inaccurate, and the Managing General Partners'Partner’s estimates of value are notcannot be precise, the actual amounts available for distribution amountsto partners will vary from these estimates and the variation is likely tomay be material.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS.
Assuming the Fund was liquidated as of December 31, 2020 and that the estimated liquidation proceeds from the sale of properties were realized, and factoring in prior cash distributions received, an original investment in the Fund of $1,000, on July 1, 1993, would have received $2,570 in total distributions over the life of the investment.
Material Federal Income Tax Considerations of Liquidation The federal income tax discussion set forth below addresses the material federal income tax consequences of the liquidation of a partnership, butpartnership. It does not purport to deal with all aspects of federal income taxation that may be relevant to a particular limited partner in the light ofwith respect to such a limited partner'spartner’s personal circumstances. The discussion is directed solely to limited partners who hold the units as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"), and have acquired suchthe units for investment and not as a dealer or for resale. This discussion may not be applicable to certain classes of taxpayers, including insurance companies, securities dealers, non-resident alien individuals, foreign entities, foreign trusts and estates and beneficiaries, thereof, financial institutions, real estate investment trusts, regulated investment companies, tax exempt organizations, trusts or persons who acquired Partnership interests as compensation. This discussion is based upon the Code, Department of Treasury regulations, court decisions, published rulings of the Internal Revenue Service (the "IRS") and other applicable authorities, all as in effect on the date hereof and all of which are subject to change or differing interpretation (possibly on a retroactive basis). Limited partners are urged to consult their own tax advisors as to the specific tax consequences to them of the liquidation of Fund XX, including the applicability and effect of federal, state, local and other tax laws.
IN GENERAL.
General. Fund XX, as a partnership for federal income tax purposes, is not subject to federal income tax; rather,instead, each partner is required to take into account itssuch partner’s distributive share of the Fund XX'sFund’s income, gains, losses, deductions, credits and tax preference items in computing such limited partner'sthe partner’s federal income tax liability for any taxable year, without regard to whether the limited partner has received any distribution from Fund XX.
the Fund.
For federal income tax purposes, the liquidation proposalprocess consists of two separate components: (1) the sale by Fund XX of its assets;properties; and (2) the distribution of cash to each limited partner in liquidation (a "liquidating distribution") of such
limitedthe partner's interest in Fund XX. Each of these is separately discussed below
SALE OF FUND XX'S ASSETS.
Sale of Fund XX's properties. For federal income tax purposes, each limited partner will be required to include in its income itssuch partner’s allocable share of the gain or loss realized by Fund XX upon the sale of Fund XX's assets
pursuant to the liquidation proposal.Fund’s properties. Gain will result primarily from the sale of a property, including both the real property and any improvements. Gain whichthat falls within the definition of "depreciation recapture" will be treated as ordinary income for tax purposes. Other gain, as well as other items of partnership gain or loss, will be capital or ordinary gain or loss, depending upon the nature of the asset insold.
Distribution to the hands of Fund XX.
DISTRIBUTION TO THE LIMITED PARTNERS.limited partners. A limited partner will recognize capital gain to the extent the amount of the liquidating distribution received by the limited partner exceeds the limited partner's tax basis for its units. Any
such gain will be capital gain. Because a limited partner's
tax basis for its units will be increased by both the limited partner's allocable share ofpartner’s units, as such basis is adjusted to reflect any gain or loss realized by Fund XX on the sale of Fund XX's assets, and by the amount of the
limited partner's allocable share of income from normal
partnership operations for the year of the liquidation, a
limited partner will not realize any gain by reason of the
distribution of such gain and operating income pursuant to
the liquidation. Nevertheless, a limited partner's allocable
share of Fund XX cash may exceed its basis for its units,
and thereby cause the limited partner to recognize gain.assets. A limited partner will recognize a capital loss to the extent that the amount of the liquidating distribution received by the limited partner is less than the limited partner's tax basis for its units, as such basis is adjusted to
reflect any gain or loss realized by Fund XX on the sale of
its assets.
PASSIVE ACTIVITY RULES.adjusted.
Passive Activity Rules. Limited partners that are individuals, trusts, estates, closely held corporations or personal service corporations are subject to the passive activity loss limitations rules of Section 469 of the Code. A limited partner's allocable share of partnership income, gain or loss from the sale of Fund XX's assetsproperties is generally treated as derived from a passive activity. Limited partners may generally deduct losses from passive activities only to the extent of their income from passive activities. Passive activity losses that are not allowed in any taxable year are suspended and may be used only tocarried forward indefinitely and allowed in subsequent years as an offset loss,
income or gain from a limited partner's otheragainst passive activity investments.income. However, because the liquidating distribution is a
fully taxable transaction, Section 469upon final liquidation of the Code generally
allowsFund, any suspended passive activity losses of thea limited partner with respect to its investment in the partnership toFund XX may be used to reduce other income of the limited partner.
RISKS OF THE LIQUIDATION PROPOSAL
THE GENERAL PARTNERS MAY NOT BE ABLE TO DISPOSE OF
PROPERTIES AT THE VALUES THEY HAVE ESTIMATED.
Risks of the Liquidation Proposal The Managing General Partner may not be able to dispose of properties at the estimated market values.
The Managing General Partner has estimated the market value of the properties has been estimated by the General Partners based onupon rental rates and market capitalization rates. The rate at which such rental isrents are capitalized is largely dependent upon prevailing interest rates in the markets where the properties are located. To the extent prevailing interest rates increase, the value of the properties calculated using these methods would decline. Further, the market value of properties is dependent upon the financial
strength of the tenants. The current economic downturn has
effected the value of real properties, and may effect the financial strength of the tenants occupying the properties owned by Fund XX. Recently, several national restaurant chains have
filed for protection under federal bankruptcy laws becauseA general economic downturn may affect the economy has caused a general decline infinancial strength of the restaurant business.tenants. If these trends effecttenants occupying the Fund’s properties are adversely affected, the Fund XX's tenants, Fund XX may experience an increased level of defaultsdefault in rental payment,payments, or a general decrease in the willingness of purchasers to acquire its properties because of the increased risk involved.
THE RAPID DISPOSITION OF PROPERTIES IN A DECLINING ECONOMY
MAY CAUSE FUND
The rapid disposition of properties may cause Fund XX TO FAIL TO REALIZE THE FULL VALUE OF ITS
PROPERTIES. to fail to realize the full value of its properties.
If the liquidation proposal to liquidate Fund XX is approved, the Managing General PartnersPartner will attempt to dispose of Fund XX'sXX’s properties during the next two years. Currently the economy, and the market for the
goods and services of Fund XX's tenants, is depressed and may
become further depressed during this period.24 to 36 months. The disposition of properties during such periods is likely tocould generate less value to Fund XX and its limited partners than estimated, particularly if sales must be conductedcompleted rapidly.
IF TENANTS DEFAULT ON RENTAL PAYMENTS, OR FILE FOR
PROTECTION UNDER BANKRUPTCY LAWS, THE VALUE OF PROPERTIES WILL BE
FURTHER DEPRESSED, AND THE FINAL DISPOSITION OF THOSE PROPERTIES
MAY BE DELAYED.
If tenants default on their lease obligations, or file for protection under bankruptcy laws, the value of properties may be depressed, and the final disposition of those properties may be delayed.
If a tenant were to default in payingdefaults on its rentallease obligations, or abandonabandons a property, prior to its sale by Fund XX, the value of the property would likely be adversely effected andaffected, the Fund XX might have difficulty selling the property, and the sale might be delayed until an alternative tenant can be located. If a tenant filed for protection under applicable bankruptcy laws, the tenant (if a debtor in possession) or the bankruptcy trustee would have a period of time to assume or reject the lease and the Fund XX may be delayed in its disposition of the property and therefore final liquidation of the partnership.
LIMITED PARTNERS WILL BE REQUIRED TO PAY TAX ONFund.
Limited partners will be required to pay tax on any capital gain that Fund XX realizes on the sale of its properties and a portion of the gain may be taxed at higher tax rates.
Sales of properties will generate an income and gain recognition event for federal income tax purposes with respect to the value of the properties and proceeds received, while continued operation of properties would generate income for tax purposes primarily related to rental income received. For properties that Fund XX has held and depreciated for tax purposes for a significant period of time, a significant portion of the sales price could represent depreciation recapture taxable to limited partners at higher tax rates.
PROPOSAL #2 – CONTINUE OPERATIONS FOR 60 MONTHS
Reasons for the Proposal to Continue Operations The proposal to continue operations is being presented because the General Partners believe:
- Fund XX continues to be an attractive business as a going concern and is currently generating cash distributions from its properties that may be higher than distributions investors could realize from other income-generating investments with similar risk profiles.
- Continuation of Fund XX’s operations may allow Fund properties to appreciate and produce capital gains from the sale of properties prior to the final liquidation of the Fund.
- Continuation of Fund XX’s operations will allow limited partners to maintain their investment in income-producing, net leased, commercial properties without incurring the costs that they could expect to incur if Fund XX were to liquidate and they reinvested their proceeds in other similar investments.
We cannot assure you that Fund XX will achieve these objectives if you vote for the proposal to continue operations.
Effects of the Proposal to Continue Operations The proposal to continue operations for an additional 60 months from January 2021 will allow Fund XX to continue to operate in the same manner in which it has operated historically. The Fund’s operations will continue to be reported to you in a manner consistent with historical financial results. Subject to the normal risks of operating as summarized below, we anticipate that the Fund will continue to make quarterly distributions of cash flow from rental income. The continuation of operations will move into the future the date that limited partners could receive proceeds from the final sale of properties and liquidation of Fund XX. After 60 months, Fund XX will again solicit a vote of the limited partners to continue in operation or liquidate.
As of September 30, 2020, Fund XX held cash totaling approximately $2,234,000 from recent property sales. If the proposal to continue operations is approved, we expect to invest this cash in additional net leased properties, less a reserve to pay for any anticipated unit repurchase requests that may be received in 2020 and 2021.
If the proposal to continue operations is not approved, and the liquidation proposal is approved, Fund XX will commence the process of disposing of its properties. If neither Proposal #1 nor Proposal #2 is approved, the Fund will continue to operate in the ordinary course of business.
Amendment to the Limited Partnership Agreement The proposal to continue the operations of Fund XX will be implemented, if approved by limited partners, through the amendment to Section 11.3 of the limited partnership agreement that is set forth in Exhibit A to this Consent Statement. This amendment will require the Managing General Partner to prepare a new consent statement before January 31, 2026 to solicit another vote of limited partners to either liquidate Fund XX or extend its operation for an additional period of years.
There is no contractual requirement in the limited partnership agreement of Fund XX to terminate its existence, or sell its properties and liquidate, prior to 2043.In July 2014, the limited partners voted to amend Section 11.3 of the limited partnership agreement, which was intended to create an obligation to solicit the vote of limited partners in liquidating Fund XX at a definite point in time. This was intended both to eliminate conflicts that could cause the General Partners to delay liquidation of Fund XX and to give limited partners a time horizon for final liquidation. Section 11.3 does not, however, require liquidation and if limited partners were to again vote to continue its operations in 60 months, the operation of Fund XX, and the time at which limited partners would receive a final distribution of cash from the sale of its assets, would be moved to a future date.
Conflicts of Interest with the Proposal to Continue Operations
The General Partners and their affiliates are reimbursed for their expenses, including the salaries and compensation expense of employees, based upon the time those employees spend on the affairs of the investment funds they manage. To the extent the General Partners and their affiliates have more investment funds under management, the aggregate amount of such reimbursements is larger and the salaries that are justifiable for their management may be higher. Accordingly, the General Partners have an incentive to maintain funds and properties under management. On the other hand, reimbursements to the General Partners and their affiliates for operations are at cost and do not represent a profit center for the General Partners or their affiliates. Further, if the Fund does not liquidate, the General Partners will not receive cash distributions representing their share of liquidation proceeds.
Risks of the Proposal to Continue Operations If the proposal to continue operations is approved, the business of Fund XX will continue to be subject to the risks associated with the ownership of real property and the illiquidity of investment in a limited partnership, including the following:
Limited partners will have no right to liquidation proceeds until Fund XX is liquidated.
If the proposal to continue operations is approved, limited partners will likely not have a right to receive the proceeds from the final disposition of properties and liquidation of Fund XX for at least an additional five years.
There will continue to be no public market for the units and substantial restrictions on sale or disposition of the units.
To avoid being classified as a publicly traded limited partnership for tax purposes, the limited partnership agreement of Fund XX continues to place substantial restrictions on sale or transfer of units. There is no trading market for the units and the restrictions in the limited partnership agreement are designed to ensure that no public trading market develops. Accordingly, it may be difficult to dispose of units or to receive full value for units when they are sold if the proposal to liquidate is not approved.
The operations of Fund XX will continue to be subject to the risks of real estate
investment.
If the proposal to continue operations is approved, the properties of Fund XX will continue to be held for investment and the proceeds from any sale of Fund properties may not be distributed to partners during the following five years, except to the extent necessary to pay income taxes resulting from any taxable gain on sale that is allocated to limited partners. The value of real estate is subject to a number of factors beyond the control of the Fund, including national economic conditions, changes in interest rates, governmental rules and regulations and competition from other forms of financing. In addition, the value of the properties is affected by the financial condition of the tenants. To the extent there is a general economic downturn, the industries in which the Fund’s tenants operate may be adversely affected, causing defaults or renegotiation of lease terms. To the extent the Fund’s lease rates decline in the future, or if there are tenant defaults, the value of real estate held by the Fund may decline.
Limited partners will continue to be dependent upon the General Partners for all decisions relating to the operation of Fund XX.
If Fund XX continues to operate, limited partners will continue to rely almost exclusively on the General Partners of the Fund for its operations. The General Partners have complete authority to make decisions regarding the Fund’s day-to-day operations and the acquisition or disposition of properties. There are no limitations that limited partners may enforce regarding the types of net leased, commercial properties that may be acquired. The General Partners may take actions with which limited partners disagree. Limited partners do not have any right to object to most management decisions unless the General Partners breach their duties. Limited partners are able to remove the General Partners only by a majority vote of limited partners or in other limited instances.
The General Partners may benefit from continuing operations in ways that create conflicts of interest.
The interests of the General Partners in continuing operations may be different from those of the limited partners’ interests because the General Partners and their affiliates will continue to receive reimbursements from Fund XX. The General Partners and their affiliates are reimbursed at cost, which includes a portion of salaries of personnel and other overhead, for services they provide to the Fund and the proposal to continue operations, if adopted, will allow those reimbursements to continue.
Limited partners will not have appraisal rights in connection with continuing operations.
You will not have appraisal or dissenters’ rights as a result of continuing operations. Accordingly, if you disagree with the proposal to continue operations you will not have the right to require Fund XX to pay out the value of your units. If you disagree, and wish to sell your units, you will be required to find a different method of doing so, such as utilizing the Fund’s unit repurchase plan or holding your units until the Fund is liquidated.
PROPOSAL #3 –AMEND THE GAIN
FUNDFUND’S UNIT REPURCHASE PLAN Reasons for the Proposed Amendment to the Unit Repurchase Plan We are proposing an amendment to the unit repurchase provisions of the limited partnership agreement contained in Section7.7so that limited partners may present their units to the Fund for repurchase at a price that more closely approximates what we believe is the unit fair market value.
Effects of the Proposed Amendment to the Unit Repurchase Plan
If this proposal is approved, limited partners will be able to present their units to Fund XX REALIZES ONfor repurchase at a price equal to 95% of the estimated net asset value per unit, instead of 90% of the estimated net asset value per unit. In both cases, the repurchase price is reduced by any distributions to the tendering limited partner after the date for which the estimated net asset value per unit is calculated and prior to the repurchase date (a period of one quarter).
Fund XX will repurchase units with cash that might otherwise be available for distribution to limited partners. Because of this, increasing the price for repurchases may increase the number of repurchases and correspondingly decrease the amount of cash available for distribution. Repurchase of units will, however, result in the remaining limited partners owning a proportionately larger interest in the Fund, which should, under normal conditions, produce larger distributions per unit in the future.
The Fund cannot assure limited partners that revenues or cash reserves will be available for repurchases and that it will be able to repurchase any or all of the units tendered. Repurchase of units may result in certain adverse tax consequences to the tendering limited partner. Repurchase of units will likely result in smaller distributions to remaining limited partners in the year of repurchase yet will not result in a reduction of taxable income allocated to such limited partners.
Amendment to Limited Partnership Agreement The proposal to increase the purchase price under Fund XX’s unit repurchase plan will be implemented, if approved by limited partners, through the amendment to Section 7.7 of the limited partnership agreement that is set forth in Exhibit B to this Consent Statement. The amendment will provide that the repurchase price for units purchased under the unit repurchase plan will be increased to 95% of the estimated net asset value per unit. As currently stated in the partnership agreement, the repurchase price is reduced by any distributions paid for the units after the date for which the estimated net asset value per unit is calculated and prior to the repurchase date (a period of one quarter).
Conflicts of Interest with the Proposed Amendment to the Unit Repurchase Plan
The General Partners believe that their interests in amending the repurchase plan are aligned with those limited partners who wish to continue to participate in Fund XX.
Risks of the Proposed Amendment to the Unit Repurchase Plan If the proposal to amend the repurchase plan is approved, the ability to repurchase units, and the consequences of repurchase, will present additional risks, including the following:
Repurchases may reduce the amount of cash then available for distributions.
Unit repurchases are funded with cash otherwise available for distribution to limited partners and, to the extent units are repurchased, cash available for distribution to remaining partners will be reduced. Although remaining partners will have a proportionately larger interest in Fund XX after such repurchases, if the Managing General Partner overestimates the net asset value per unit for purposes of repurchases, or properties decline in value after repurchases, remaining limited partners may not obtain the benefit of such larger ownership interest.
Regardless of the amendment, because of limitations under the unit repurchase plan, limited partners may find it difficult to have their units repurchased.
The amount of units Fund XX will repurchase in any year will be limited even if the amendment to the repurchase plan is approved. Among other things:
- During any year, Fund XX will not repurchase more than 5% of the units that were outstanding at the end of the previous year;
- Fund XX will not repurchase units to the extent it does not have cash available for such repurchases; and
- Fund XX will not repurchase units if the Managing General Partner believes repurchases would negatively impact the Fund’s operations or cash flow.
Accordingly, there may be periods during which Fund XX does not repurchase all units, or any units, that are tendered for repurchase. If more units are tendered than can be repurchased, repurchases will be considered in the order tendered.
PROPOSAL #4 – SALE OF PROPERTIES AND A PORTION OF THE GAIN
MAY BE TAXED AS ORDINARY INCOME.
JOINT VENTURE INTERESTS TO OTHER AEI AFFILIATED FUNDS
Reasons for Proposal #4
Fund XX owns joint venture interests in two properties that were purchased consistent with authority in the operating agreement to purchase joint venture interests with AEI Affiliated Funds. In particular, Fund XX owns a 50.0% interest in a Jared Jewelry store in Hanover, Maryland, and a 70% interest in a Staples store in Vernon Hills, Illinois. Because most investors in net leased real estate require ownership of an entire property, we believe that it would be difficult for Fund XX to sell these interests in the open real estate market.
The operations of Fund XX are governed by its operating agreement. Section 6.6 of the operating agreement permits joint ventures with other AEI Affiliated Funds, subject to certain conditions, including that each Fund has a right of first refusal to purchase the other party’s interest in the event of an attempted sale of an interest in a property. This right of first refusal was included in the agreements under which Fund XX acquired its joint venture interests in the two properties. The General Partners of Fund XX believe that this implicitly allows, or requires, sale of an interest to an affiliate. Nevertheless, Section 6.5(vii) of the operating agreement prohibits a sale of a “property” by Fund XX to an affiliate. Although the General Partners believe this was intended to prohibit only sale of a whole property rather than a joint-venture interest such as the interests held by Fund XX in the two properties, the General Partners believe it is unwise to proceed with a sale to an affiliate absent a confirming vote of limited partners.
In addition, although the General Partners believe the same provisions of the operating agreement that authorized the purchase with AEI Affiliated Funds also provides a basis to sell to AEI Affiliated Funds, the provisions are not unambiguous. As a result, we are asking you to vote on a proposal to make clear that Fund XX may sell its joint venture interests in these properties to other AEI Affiliated Funds. The sales price for properties sold in this manner will be based upon an independent, third-party, commercial property appraisal.
The General Partners believe that sale of a joint venture interest in the open market is difficult, takes considerable time, likely would result in higher sales costs such as commissions, and could generate a lower price to Fund XX. Unless otherwise provided by contract, minority interests in properties do not allow the holder to control management of the properties or the timing of the disposition of properties, and the partnership/operating agreements of AEI Funds effectively require that AEI Funds have such control. Because a buyer would likely negatively view this lack of liquidity, lack of management control and control over disposition, the General Partners believe these interests are more difficult to sell than the entire fee simple interest in a property, and take considerable time to sell in the open market. Further, to complete such a sale, Fund XX would likely need to retain a broker, and pay brokerage commissions of 3% to 6% on any such sale. For all of these reasons, the General Partners believe it is in the best interests of the Fund and its limited partners to allow Fund XX to complete the sale of these properties to AEI Affiliated Funds.
Effects of Proposal #4
If limited partners holding a majority of the outstanding units vote in favor of the proposal, Fund XX will be allowed to sell its joint venture interest in a property to an AEI Affiliated Fund. At the time Fund XX is ready to sell a joint venture interest in a property, the Fund will determine if the Affiliated Fund(s) that owns the remaining interest(s) in the property is ready to sell also. If an Affiliated Fund is not ready to sell its interest in the property, Fund XX will take action to sell its interest to an Affiliated Fund. To determine the price of each property interest, the Fund will obtain an appraisal from an independent, third-party, commercial property appraiser. Fund XX will pay the cost of the appraisals and the customary closing costs that a seller incurs in the state where the property is located. However, the Fund will not pay a brokerage commission, which typically ranges from 3% to 6% of the property’s gross sale price. The sales will be made on an “as is, where is” basis.
If the Affiliated Fund(s) that owns the remaining interest(s) in a property is ready to sell, then Fund XX and the Affiliated Fund(s) will jointly take action to sell 100% of the property on the open real estate market. The sales proceeds and expenses of the sale would be allocated pro rata based on the ownership percentage of the property.
Amendment to the Operating Agreement
The proposal to allow Fund XX to sell joint venture interests in two of its properties to other AEI Affiliated Funds will be implemented, if approved by limited partners, through the amendment to Section 6.5 of the operating agreement that is set forth in Exhibit C to this Consent Statement.
Risks of Proposal #4
The appraised value of a property interest may be less than the value that could be obtained by offering the property interest in the open real estate market.
If the proposal is approved, each property interest that is sold to an AEI Affiliated Fund will be sold at a price as determined by an independent, third-party, commercial property appraiser. The appraiser will research each property by reviewing market data and other information to form an opinion as to the value of the property. It is possible that a higher price could be realized if the property was listed in the open real estate market where the interaction of many buyers and sellers determine the value of the property. However, listing the property in the real estate market could also result in a lower price.
If the proposal is not approved, sale of the joint venture interests will be delayed, and this may delay final liquidation of Fund XX and distribution of proceeds to you.
Because of the ambiguity of the language in the operating agreement of Fund XX, the General Partners do not intend to proceed with sale of joint venture interests to AEI Affiliated Funds unless they receive the affirmative vote of holders of a majority of the outstanding units of Fund XX on the proposal. The General Partners believe it is very difficult to sell joint venture interests in the open market, and expects that a failure to approve the proposal will result in considerable delay in the sale of these interests, the final liquidation of Fund XX, and the distribution of liquidation proceeds. Such a delay can also be expected to increase ongoing administrative costs and reduce the amount of proceeds eventually distributed.
UNIT OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth information about the number of limited partnership units owned by each person known to us to beneficially own 5% or more of the units, by AEI Fund Management XX, Inc. (Fund XX'sXX’s Managing General Partner), by Robert P. Johnson (Fund XX'sXX’s Individual General Partner) and by each officer or director of the Managing General Partner as of September 30, 2008:
NAME AND ADDRESS NUMBER OF PERCENT
OF BENEFICIAL OWNER UNITS HELD OF CLASS
AEI Fund Management XX, Inc. 0 0%
1300 Wells Fargo Place
30 East 7th Street
St. Paul, MN 55101
Robert P.Johnson 28 *
1300 Wells Fargo Place
30 East 7th Street
St. Paul, MN 55101
Patrick W. Keene 0 0%
1300 Wells Fargo Place
30 East 7th Street
St. Paul, MN 55101
*Less than 1%
The persons set forth in the preceding table hold sole
voting power and power of disposition with respect to all of the
limited partnership units set forth opposite their names. 2020:
Name and Address of Beneficial Owner | Number of Units Held | Percent of Class |
| | | |
| AEI Fund Management XX, Inc. | 0 | 0.00% |
| Robert P. Johnson | 28 | 0.13% |
| Marni J. Nygard | 0 | 0.00% |
| Keith E. Petersen | 0 | 0.00% |
| | | |
| Address for all: | | |
1300 Wells Fargo Place 30 East 7th Street, St. Paul, Minnesota 55101 | | |
To the best of our knowledge, there is no beneficial owner holding five
percent5% or more of the units.
Your vote is important. Each limited partner is urged to mark,initial, date and sign the enclosed consent formConsent Form and return it in the enclosed postage prepaid envelope. If you require assistance completing the consent form,Consent Form, please call AEI Client Services,Investor Relations, toll free at 800-328-3519.
TIMING OF THE CONSENT SOLICITATION
Timing of the Consent Solicitation
We have fixed the close of business on NovemberJanuary 1, 20082021 as the record date for the determination of the limited partners entitled to vote on the proposal to continue operations or the
liquidation proposal;proposals; the close of business on January 8, 2009February 28, 2021 as the date by which Consent Forms must be received by us in order to be counted; and Janaury 9, 2009March 5, 2021 as the date onby which the consents will be counted. You may revoke your consent at any time prior to Janaury 9, 2009,February 28, 2021, provided we receive written revocation prior to that date.
To vote for one of these proposals, you must return a properly signed consent formConsent Form that is received by AEI Fund Management XX, Inc. at 1300 Wells Fargo Place, 30 East 7th Street, St. Paul, Minnesota 55101, on or before 5:00 P.M.,
Central Time, on January 8, 2009. The votes will be tabulated
by the General Partners.
RECORD DATE AND VOTES REQUIRED FOR APPROVAL
55101.
Record Date and Votes Required for Approval Only holders of record of units of limited partnership interest as of NovemberJanuary 1, 2008,2021, the record date, will be entitled to vote on the proposal to continue operations or
liquidation proposal.proposals. Voting by the limited partners on the
proposal to continue operations and the liquidation proposal is based upon the number of units held. As of NovemberJanuary 1, 2008,2021, there were 22,04519,051.107 units outstanding, 28 of which were held by the
General Partners.outstanding. Each unit is entitled to one vote. Fractions of units will be included in the total.
Pursuant to the limited partnership agreement of Fund XX, in order for any of the proposal to continue operations or the liquidation
proposalfour proposals to be approved, a majority of the outstanding units (excluding any units held by the General Partners) must be voted in favor of the proposal. Accordingly, 11,008.69,525.554 units must be voted FOR“FOR” the liquidation proposal, “FOR” the proposal to continue operations, or “FOR” the liquidation proposal to amend the unit repurchase plan for the respective proposal to be approved. Because an abstention would not be counted as a vote for a proposal, it would have the effect of a vote against thea proposal. WE RECOMMEND A VOTE "FOR"
THE PROPOSAL TO CONTINUE OPERATIONS.
PROCEDURES FOR VOTING
Accompanying this Consent Statement is a Consent Form for each limited partner. By checkinginitialing the appropriate box ON THE
CONSENT FORM,line on the Consent Form, you can indicate whether you vote FOR“FOR” or AGAINST“AGAINST” or ABSTAIN“ABSTAIN” as to the proposalproposals. Please do not vote “FOR” both Proposal #1 and Proposal #2: they are mutually exclusive and cannot be implemented simultaneously. If you return your Consent Form signed without marking any line, you will be deemed to have voted “AGAINST” Proposal #1 – to commence liquidation, “FOR” Proposal #2 – to continue operations, or“FOR” Proposal #3 – to amend the liquidation proposal. PLEASE DO NOTE VOTE FOR BOTH ALTERNATIVES
AT THE SAME TIME: THEY ARE INCONSISTENT AND CANNOT BE PURSUED
SIMULTANEOUSLY. IF YOU RETURN YOUR CONSENT FORM SIGNED WITHOUT
CHECKING ANY BOX, YOU WILL BE DEEMED TO HAVE VOTED FOR THE
PROPOSAL TO CONTINUE OPERATIONS AND AGAINST THE LIQUIDATION
PROPOSAL.
unit repurchase plan, and “FOR” Proposal #4 – to allow the sale of joint venture interests to other AEI Affiliated Funds.
Limited partners who vote against, or abstain,“FOR” Proposal #1 – to commence liquidation, do not have appraisal or similar rights under Minnesota law.
COSTS OF SOLICITATION
Costs of Solicitation
The cost of solicitation of consents of the limited partners will be borne by Fund XX. The solicitations will be made by the
mails..mail. Our staff will be available by telephone at 800-328-3519 to answer any questions concerning this Consent.
MAILING
Mailing
This Consent Statement was first mailed to limited partners on or about December 3, 2008.
BY ORDER OF THE BOARD OF DIRECTORS
OF January 5, 2021.
AEI FUND MANAGEMENTFund Management XX, INC.
Robert P. Johnson,Inc.
General Partner
Marni J. Nygard, President
EXHIBIT A
AMENDMENT TO LIMITED PARTNERSHIP AGREEMENT
(CONTINUATION PROPOSAL)
(PROPOSAL #2)
We are proposing the following amendments to amend and restate Section 11.3 of the Limited Partnership Agreement of AEI Net Lease Income & Growth Fund XX Limited Partnership as heretofore amended (the "Agreement"):
1. Article XI of the Agreement shall be amended to add an
additional Section 11.3 which shall read in its entirety as follows:
11.3 LIQUIDATION PROPOSAL.
Liquidity Event.
(a) The Managing General Partner shall, on or before DecemberJanuary 31, 2013,2026, prepare and if required file with the
Securities and Exchange Commission, a proxy or consent statement pursuant to which it shall solicit the consent of Limited Partners to vote with respect to a proposal to commence the sale of all of the Properties and the dissolution and liquidation of the Partnership in accordance with Article XXII.XII. The Managing General Partner shall distribute and commence the solicitation of such consents or proxies promptly after the same may be conducted in accordance with applicable laws. (b) Notwithstanding Section 11.3(a), the Managing General Partner shall not be required to recommend such sale, dissolution and liquidation, and may present in addition to such proposal and as an alternative to the same, a proposal to extend the time period during which the Partnership shall continue to operate, provided that the Managing General Partner commits to again submit a proposal consistent with Section 11.3(a) by approximately the end of the calendar year in which the fifth anniversary of the date onupon which the vote onupon such proposal occurs.
2.
EXHIBIT B
AMENDMENT TO LIMITED PARTNERSHIP AGREEMENT
(PROPOSAL #3)
We are proposing to amend and restate Section 7.7 of the Limited Partnership Agreement is hereby amendedof AEI Net Lease Income & Growth Fund XX Limited Partnership to read in its entirety as set forth
(and shown with corrections) below:
follows:
7.7 RIGHT TO PRESENT UNITS FOR PURCHASE.
Right to Present Units for Repurchase.
(a) (Beginning in calendar year 1994,) Each Limited Partner shall have the right, subject to the provisions of this Section 7.7, to present his OR HERor her Units to the Partnership for purchaserepurchase by submitting a proper written request to the Managing General Partner notice on a form supplied
by the Partnership specifying the number of Units he OR
SHEor she wishes repurchased. Such notice must be postmarked after (September )January 1 but before (October)
February 1, OR AFTER JULY 1 BUT BEFORE AUGUST 1in January or July of each year (THE "PRESENTMENT PERIODS"(a “Presentment Period”). On (December 1) MARCHMarch 31 AND SEPTEMBERst and September 30th of each year (HEREAFTER, A
"REPURCHASE DATE"(a “Repurchase Date”), and subject to the limitations set forth in Section 7.7(c), the Managing General Partner shall cause the Partnership to purchaserepurchase the Units of Limited Partners who have properly tendered their Units to the Partnership. The purchaserepurchase price per Unit shall be equal to 90% OF
THE NET VALUE PER UNIT (AS DEFINED IN SECTION 7.7(D)) AS
OF THE PRECEDING DECEMBER 31 (IN THE CASE OF REPURCHASES
AS OF MARCH 31) OR JUNE 30 (IN THE CASE OF REPURCHASES
AS OF SEPTEMBER 30) (SUCH DATES BEING HEREAFTER REFERRED
TO AS A "DETERMINATION DATE"). THE REPURCHASE PRICE
SHALL, HOWEVER, BE ADJUSTED TO SUBTRACT ANY
DISTRIBUTIONS TO THE TENDERING LIMITED PARTNER AFTER THE
DETERMINATION DATE AND PRIOR TO THE REPURCHASE DATE. THE
MANAGING GENERAL PARTNER SHALL PUBLISH THE REPURCHASE
PRICE OFFERED FOR UNITS BASED ON ITS DETERMINATION OF
THE NET VALUE PER UNIT AS SOON AS POSSIBLE AFTER EACH
DETERMINATION DATE. (the tendering Limited Partner's
Adjusted Capital Contribution on October 1 of the year
of purchase multiplied by seventy-fiveninety-five percent (75%) for
purchases in calendar year 1994 and ninety percent (90%)
for purchases in calendar year 1995. For purchases in
1996 and in each year thereafter, the purchase price
shall be equal to one hundred percent (100%(95%) of the Net Asset Value Per Unit as of the preceding December 31st (in the case of repurchases as of March 31st) or June 30th (in the case of repurchases as of September 30th) (such dates being hereafter referred to as a “Determination Date”). The repurchase price shall, however, be adjusted to subtract any distributions to the tendering Limited Partner's Adjusted Capital
ContributionPartner after the Determination Date and prior to the Repurchase Date. The Managing General Partner shall calculate the repurchase price offered for Units based on October 1, less fifty percent (50%) of
all Net Cash Flow previously distributed to such Limited
Partner throughout the termits determination of the Partnership.)
Net Asset Value Per Unit as soon as possible after each Determination Date.
(b) Net Asset Value Per Unit shall mean the aggregate value of the Partnership’s assets less the Partnership’s liabilities, and less the interest of the General Partners, divided by the number of Units outstanding. Such aggregate value shall be determined by the Managing General Partner, after taking into account (i) the present value of future net cash flow from rental income on the Partnership’s Properties, (ii) the price at which Units of the Partnership have last been repurchased, and (ii) such other factors as the Managing General Partners deems relevant.
(c) The Partnership will not be obligated to purchaserepurchase in any year any number of Units such that such Units, when
aggregated with all other transfers of Units that have
occurred since the beginning of the same calendar year
(excluding Permitted Transfers) would exceedmore than five percent (5%) of the total number of Units outstanding on January 1 of such year. In the event requests for purchaserepurchase of Units received in any given year exceed the five percent (5%) limitation, the Partnership shall accept the Units to be purchased will be determinedrepurchased based onupon the postmark date of the written notice of Limited Partners tendering such Units. Any Units tendered but not selected for purchaserepurchase in any given yearPresentment Period will be considered for purchaserepurchase in subsequent yearsthe next Presentment Period only if the Limited Partner retendersre-tenders his or her Units. In no event shall the Partnership be obligated to purchaserepurchase Units if, in the sole discretion of the Managing General Partner, such purchaserepurchase would impair the capital or operation of the Partnership nor shall the Partnership purchaserepurchase any Units in violation of applicable legal requirements.
(c)
(d) For purposes of all calculations pursuant to Article V of this agreement,Agreement, any Net Cash Flow or Net Proceeds of Sale used to repurchase Units or to repay borrowings that were used to repurchase Units shall be deemed distributed to the remaining Limited Partners pro rata based on the ratio of the number of Units owned to all Units outstanding after such repurchase.
FOR PURPOSES OF THIS SECTION 7.7, "NET VALUE PER UNIT
SHALL MEAN THE AGGREGATE VALUE OF THE PARTNERSHIP'S
ASSETS LESS THE PARTNERSHIP'S LIABILITIES, AND LESS THE
VALUE ATTRIBUTABLE TO THE INTEREST OF THE GENERAL
PARTNERS, DIVIDED BY THE NUMBER OF UNITS OUTSTANDING.
SUCH AGGREGATE VALUE SHALL BE AS DETERMINED BY THE
MANAGING GENERAL PARTNER, AFTER TAKING INTO ACCOUNT (I)
THE VALUE OF THE PARTNERSHIP'S PROPERTIES BASED ON THE
APPLICATION OF RENTAL CAPITALIZATION RATES FOR SIMILARLY
SITUATED PROPERTIES, BASED ON PENDING OR PROPOSED
TRANSACTIONS RELATING TO THE PROPERTIES, OR BASED ON
SUCH OTHER METHODS AS THE MANAGING GENERAL PARTNER DEEMS
REASONABLE, (II) THE PRICE AT WHICH UNITS OF THE COMPANY
HAVE LAST BEEN PURCHASED, AND (III) SUCH OTHER FACTORS
AS THE MANAGING GENERAL PARTNER DEEMS RELEVANT.
EXHIBIT B
C
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm 24
Balance Sheet as of December 31, 2007 and 2006 25
Statements for the Years Ended December 31, 2007 and 2006:
Income 26
Cash Flows
| | |
| Page |
| |
Report of Independent Registered Public Accounting Firm | 27 |
| |
Balance Sheets as of December 31, 2019 and 2018 | 28 |
| |
Statements for the Years Ended December 31, 2019 and 2018: | |
| |
| Income | 29 |
| | |
| Cash Flows | 30 |
| | |
| Changes in Partners’ Capital (Deficit) | 31 |
| |
Notes to Financial Statements | 32 – 45 |
27
Changes in Partners' Capital 28
Notes to Financial Statements at December 31, 2007 29-39
Balance Sheet as of September 30, 2008 and December 31, 2007 40
Statements for the for the Periods ended September 30, 2008 and
2007:
Income 41
Cash Flows 42
Changes in Partners' Capital 43
Notes to Financial Statements at September 30, 2008 44-46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners:
AEI Net Lease Income & Growth Fund XX Limited Partnership
St. Paul, Minnesota
Opinion on the Financial Statements
We have audited the accompanying balance sheetsheets of AEI Net Lease Income & Growth Fund XX Limited Partnership (a Minnesota limited partnership) as of December 31, 20072019 and 2006,2018, and the related statements of income, cash flows and changes in partners' capital (deficit), and cash flows for each of the years then ended. in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Partnership'sPartnership’s management. Our responsibility is to express an opinion on thesethe Partnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud. The companyPartnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
considerationAs part of our audits, we are required to obtain an understanding of internal control over financial reporting, as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company'sPartnership’s internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
supportingregarding the amounts and disclosures in the financial
statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial
statement presentation.statements. 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 Net Lease Income & Growth Fund XX Limited Partnership as
of December 31, 2007 and 2006, and the results of its operations
and its cash flows for the years then ended, in conformity with
U.S. generally accepted accounting principles.
BOULAY, HEUTMAKER, ZIBELL & CO. P.L.L.P.
BOULAY, HEUTMAKER, ZIBELL & CO. P.L.L.P.
Certified Public Accountants
Minneapolis, Minnesota
March 24, 2008
| |
Boulay PLLP | |
| |
We have served as the Partnership’s auditor since 1992 |
| |
Minneapolis, Minnesota | |
March 30, 2020 | |
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
SHEETS
ASSETS
2007 2006
CURRENT ASSETS:
Cash and Cash Equivalents $ 1,102,753 $ 1,083,159
INVESTMENTS IN REAL ESTATE:
Land 5,130,957 6,367,762
Buildings and Equipment 9,992,550 12,081,070
Accumulated Depreciation (2,280,410) (2,494,105)
----------- -----------
12,843,097 15,954,727
Real Estate Held for Sale 2,702,006 0
----------- -----------
Net Investments in Real Estate 15,545,103 15,954,727
----------- -----------
Total Assets $16,647,856 $17,037,886
=========== ===========
| | | December 31, | | December 31, |
| | | 2019 | | 2018 |
| Current Assets: | | | | |
| Cash | $ | 3,000,960 | $ | 6,216,113 |
| Receivables | | 0 | | 50,689 |
| Total Current Assets | | 3,000,960 | | 6,266,802 |
| | | | | |
| Real Estate Investments: | | | | |
| Land | | 5,964,702 | | 2,853,052 |
| Buildings | | 7,400,945 | | 7,400,945 |
| Acquired Intangible Lease Assets | | 1,458,807 | | 959,720 |
| Real Estate Held for Investment, at cost | | 14,824,454 | | 11,213,717 |
| Accumulated Depreciation and Amortization | | (2,797,120) | | (2,421,932) |
| Real Estate Held for Investment, Net | | 12,027,334 | | 8,791,785 |
| Real Estate Held for Sale | | 0 | | 999,271 |
Total Real Estate Investments | | 12,027,334 | | 9,791,056 |
| Total Assets | $ | 15,028,294 | $ | 16,057,858 |
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 67,148 $ 84,418
Distributions Payable 413,767 413,582
Unearned Rent 12,249 11,135
----------- -----------
Total Current Liabilities 493,164 509,135
----------- -----------
PARTNERS' CAPITAL:
General Partners 12,328 16,068
Limited Partners, $1,000 per Unit;
24,000 Units authorized and issued;
22,045 and 22,068 Units outstanding in
2007 and 2006, respectively 16,142,364 16,512,683
----------- -----------
Total Partners' Capital 16,154,692 16,528,751
----------- -----------
Total Liabilities and Partners' Capital $16,647,856 $17,037,886
=========== ===========
| Current Liabilities: | | | | |
| Payable to AEI Fund Management, Inc. | $ | 33,872 | $ | 66,190 |
| Distributions Payable | | 277,779 | | 1,494,952 |
| Unearned Rent | | 17,873 | | 31,347 |
| Total Current Liabilities | | 329,524 | | 1,592,489 |
| | | | | |
| Long-term Liabilities: | | | | |
| Acquired Below-Market Lease Intangibles, Net | | 416,596 | | 0 |
| | | | | |
| Partners’ Capital: | | | | |
| General Partners | | 41,373 | | 43,205 |
Limited Partners – 24,000 Units authorized; 19,051 and 19,765 Units issued and outstanding as of December 31, 2019 and 2018, respectively | | 14,240,801 | | 14,422,164 |
| Total Partners' Capital | | 14,282,174 | | 14,465,369 |
| Total Liabilities and Partners' Capital | $ | 15,028,294 | $ | 16,057,858 |
The accompanying Notes to Financial Statements are an integral part of
this statement.
these statements.AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31
2007 2006
RENTAL INCOME $ 1,689,206 $ 1,620,066
EXPENSES:
Partnership Administration - Affiliates 219,885 229,040
Partnership Administration and Property
Management - Unrelated Parties 35,947 29,471
Depreciation 338,525 332,241
----------- -----------
Total Expenses 594,357 590,752
----------- -----------
OPERATING INCOME 1,094,849 1,029,314
OTHER INCOME:
Interest Income 45,129 46,415
----------- -----------
INCOME FROM CONTINUING OPERATIONS 1,139,978 1,075,729
Income from Discontinued Operations 252,179 363,653
----------- -----------
NET INCOME $ 1,392,157 $ 1,439,382
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 13,922 $ 14,394
Limited Partners 1,378,235 1,424,988
----------- -----------
$ 1,392,157 $ 1,439,382
=========== ===========
INCOME PER LIMITED PARTNERSHIP UNIT:
Continuing Operations $ 51.15 $ 48.13
Discontinued Operations 11.32 16.27
----------- -----------
Total $ 62.47 $ 64.40
=========== ===========
Weighted Average Units Outstanding 22,062 22,128
=========== ===========
| | | | |
| | | Years Ended December 31 |
| | | 2019 | | 2018 |
| | | | | |
| Rental Income | $ | 976,849 | $ | 1,334,741 |
| | | | | |
| Expenses: | | | | |
Partnership Administration – Affiliates | | 174,389 | | 165,156 |
Partnership Administration and Property Management – Unrelated Parties | | 66,876 | | 77,080 |
Depreciation and Amortization | | 346,492 | | 318,480 |
Total Expenses | | 587,757 | | 560,716 |
| | | | | |
| Operating Income | | 389,092 | | 774,025 |
| | | | | |
| Other Income: | | | | |
Gain on Sale of Real Estate | | 1,074,040 | | 4,344,394 |
Miscellaneous Income | | 0 | | 50,689 |
Interest Income | | 59,693 | | 18,824 |
Total Other Income | | 1,133,733 | | 4,413,907 |
| | | | | |
| Net Income | $ | 1,522,825 | $ | 5,187,932 |
| | | | | |
| Net Income Allocated: | | | | |
General Partners | $ | 15,228 | $ | 75,552 |
Limited Partners | | 1,507,597 | | 5,112,380 |
Total | $ | 1,522,825 | $ | 5,187,932 |
| | | | | |
| Net Income per Limited Partnership Unit | $ | 77.86 | $ | 256.92 |
| | | | | |
Weighted Average Units Outstanding – Basic and Diluted | | 19,364 | | 19,899 |
| | | | | |
The accompanying Notes to Financial Statements are an integral part of
this statement.
these statements.AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,392,157 $ 1,439,382
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 409,624 403,340
Gain on Sale of Real Estate 0 (109,143)
Increase (Decrease) in Payable to
AEI Fund Management, Inc. (17,270) 15,010
Increase (Decrease) in Unearned Rent 1,114 (16,378)
----------- -----------
Total Adjustments 393,468 292,829
----------- -----------
Net Cash Provided By
Operating Activities 1,785,625 1,732,211
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate 0 (1,231,624)
Proceeds From Sale of Real Estate 0 578,025
----------- -----------
Net Cash Used For
Investing Activities 0 (653,599)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable 185 (41)
Distributions to Partners (1,754,537) (1,926,253)
Redemption Payments (11,679) (44,677)
----------- -----------
Net Cash Used For
Financing Activities (1,766,031) (1,970,971)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 19,594 (892,359)
CASH AND CASH EQUIVALENTS, beginning of period 1,083,159 1,975,518
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,102,753 $ 1,083,159
=========== ===========
| | | | |
| | | Years Ended December 31 |
| | | 2019 | | 2018 |
| | | | | |
| Cash Flows from Operating Activities: | | | | |
Net Income | $ | 1,522,825 | $ | 5,187,932 |
| | | | | |
Adjustments to Reconcile Net Income To Net Cash Provided by Operating Activities: | | | | |
Depreciation and Amortization | | 346,944 | | 347,176 |
Gain on Sale of Real Estate | | (1,074,040) | | (4,344,394) |
(Increase) Decrease in Receivables | | 50,689 | | (50,689) |
Increase (Decrease) in Payable to AEI Fund Management, Inc. | | (32,318) | | (52,693) |
Increase (Decrease) in Unearned Rent | | (13,474) | | 17,873 |
Total Adjustments | | (722,199) | | (4,082,727) |
Net Cash Provided By (Used For) Operating Activities | | 800,626 | | 1,105,205 |
| | | | | |
| Cash Flows from Investing Activities: | | | | |
Investments in Real Estate | | (3,165,897) | | (100,000) |
Proceeds from Sale of Real Estate | | 2,073,311 | | 5,516,851 |
Net Cash Provided By (Used For) Investing Activities | | (1,092,586) | | 5,416,851 |
| | | | | |
| Cash Flows from Financing Activities: | | | | |
Distributions Paid to Partners | | (2,328,287) | | (1,119,199) |
Repurchase of Partnership Units | | (594,906) | | (218,548) |
Net Cash Provided By (Used For) Financing Activities | | (2,923,193) | | (1,337,747) |
| | | | | |
| Net Increase (Decrease) in Cash | | (3,215,153) | | 5,184,309 |
| | | | | |
| Cash, beginning of year | | 6,216,113 | | 1,031,804 |
| | | | | |
| Cash, end of year | $ | 3,000,960 | $ | 6,216,113 |
| | | | | |
The accompanying Notes to Financial Statements are an integral part of
this statement.
these statements.AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 2005 $ 21,383 $17,038,916 $17,060,299 22,147.74
Distributions (19,262) (1,906,991) (1,926,253)
Redemption Payments (447) (44,230) (44,677) (80.00)
Net Income 14,394 1,424,988 1,439,382
-------- ----------- ----------- ----------
BALANCE, December 31, 2006 16,068 16,512,683 16,528,751 22,067.74
Distributions (17,545) (1,736,992) (1,754,537)
Redemption Payments (117) (11,562) (11,679) (22.70)
Net Income 13,922 1,378,235 1,392,157
-------- ----------- ----------- ----------
BALANCE, December 31, 2007 $ 12,328 $16,142,364 $16,154,692 22,045.04
======== =========== =========== ==========
(DEFICIT)
| | | General Partners | | Limited Partners | | Total | | Limited Partnership Units Outstanding |
| | | | | | | | | |
| | | | | | | | | |
| Balance, December 31, 2017 | $ | (6,818) | $ | 11,837,153 | $ | 11,830,335 | | 20,015.30 |
| | | | | | | | | |
Distributions Declared | | (23,344) | | (2,311,006) | | (2,334,350) | | |
| | | | | | | | | |
Repurchase of Partnership Units | | (2,185) | | (216,363) | | (218,548) | | (250.16) |
| | | | | | | | | |
Net Income | | 75,552 | | 5,112,380 | | 5,187,932 | | |
| | | | | | | | | |
| Balance, December 31, 2018 | | 43,205 | | 14,422,164 | | 14,465,369 | | 19,765.14 |
| | | | | | | | | |
Distributions Declared | | (11,111) | | (1,100,003) | | (1,111,114) | | |
| | | | | | | | | |
Repurchase of Partnership Units | | (5,949) | | (588,957) | | (594,906) | | (714.03) |
| | | | | | | | | |
Net Income | | 15,228 | | 1,507,597 | | 1,522,825 | | |
| | | | | | | | | |
| Balance, December 31, 2019 | $ | 41,373 | $ | 14,240,801 | $ | 14,282,174 | | 19,051.11 |
| | | | | | | | | |
The accompanying Notes to Financial Statements are an integral part of this statement.
these statements.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 20072019 AND 2006
2018
(1) ORGANIZATION -
Organization –
AEI Net Lease Income & Growth Fund XX Limited Partnership (Partnership)(“Partnership”) was formed to acquire and lease commercial properties to operating tenants. The Partnership's operations are managed by AEI Fund Management XX, Inc. (AFM)(“AFM”), the Managing General Partner. Robert P. Johnson, the PresidentChief Executive Officer and sole director of AFM, serves as the Individual General Partner. AFM is a wholly owned subsidiary of AEI Capital Corporation of which Mr. Johnson is theand his wife own a majority shareholder.interest. AEI Fund Management, Inc. (AEI)(“AEI”), an affiliate of AFM, performs the administrative and operating functions for the Partnership. The terms of the Partnership offering called for a subscription price of $1,000 per Limited Partnership Unit, payable on acceptance of the offer. The Partnership commenced operations on June 30, 1993 when minimum subscriptions of 1,500 Limited Partnership Units ($1,500,000) were accepted. On January 19, 1995, the offering terminated when the maximum subscription limit of 24,000 Limited Partnership Units was reached. Under the terms of the Limited Partnership Agreement, the Limited Partners and General Partners contributed funds of $24,000,000 and $1,000, respectively.
During operations, 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 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 12% of their Adjusted Capital Contribution per annum, cumulative but not compounded, to the extent not previously distributed from Net Cash Flow; (ii) any remaining balance will be distributed 90% to the Limited Partners and 10% to the General Partners. Distributions to the Limited Partners will be made pro rata by Units.
For tax purposes, profits from operations, other than profits attributable to the sale, exchange, financing, refinancing or other disposition of 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.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 20072019 AND 2006
2018
(1) ORGANIZATION -Organization – (Continued)
For tax purposes, profits arising from the sale, financing, or other disposition of 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 12% 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.
In June 2014, the Managing General Partner mailed a Consent Statement (Proxy) seeking the consent of the Limited Partners to continue the Partnership for an additional 60 months or to initiate the final disposition, liquidation and distribution of all of the Partnership’s properties and assets within 24 to 36 months. Approval of either proposal required the affirmative vote of holders of a majority of the outstanding units. On July 23, 2014, the votes were counted and neither proposal received the required majority vote. As a result, the Partnership will not liquidate and will continue in operation until the Limited Partners vote to authorize the sale of all of the Partnership's properties or December 31, 2043, as stated in the Limited Partnership Agreement. In consideration of the adverse impact COVID-19 is having on the World and U.S. economy, the General Partner believes it is in the best interest of the Partnership to continue operations. The General Partner will re-evaluate the situation in 12 to 24 months and may again submit the option to liquidate to a vote by the Limited Partners at that time. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
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.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
(2) Summary of Significant Accounting Policies – (Continued)
Accounting Estimates
Management uses estimates and assumptions in preparing these financial statements in accordance with generally
accepted accounting principles.United States Generally Accepted Accounting Principles (US GAAP). 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.
estimates, and the difference could be material. Significant items, subject to such estimates and assumptions, include the carrying value of real estate held for investment, real estate held for sale and related intangible assets.
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
The Partnership's cash is deposited primarily in one financial institution and at times during the year it may exceed FDIC insurance limits.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may 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.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Receivables
Credit terms are extended to tenants in the normal course of business. The Partnership performs ongoing credit evaluations of its customers'customers’ financial condition and, generally, requires no collateral.
Receivables are recorded at their estimated net realizable value. The Partnership follows a policy of providing an allowance for doubtful accounts; however, based on historical experience, and its evaluation of the current status of receivables, the Partnership is of the belief that such accounts, if any, will be collectible in all material respects and thus an allowance is not necessary. Accounts are considered past due if payment is not made on a timely basis in accordance with the Partnership'sPartnership’s credit terms. Receivables considered uncollectible are written off.
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. In general, no recognition has been given to income taxes in the accompanying financial statements.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
(2) Summary of Significant Accounting Policies – (Continued)
The tax return 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 to distributable Partnership income or loss, the taxable income of the partners would be adjusted accordingly. Real Estate
Primarily due to its tax status as a partnership, the Partnership has no significant tax uncertainties that require recognition or disclosure. The Partnership is no longer subject to U.S. federal income tax examinations for tax years before 2016, and with few exceptions, is no longer subject to state tax examinations for tax years before 2016.
Revenue Recognition
The Partnership's real estate is leased under triple net leases, classified as operating leases. The leases provide for base annual rental payments payable in monthly installments. The Partnership recognizes rental revenueincome according to the terms of the individual leases. For leases whichthat contain stated rental increases, the increases are recognized in the year in which they are effective. Contingent rental payments are recognized when the contingencies on which the payments are based are satisfied and the rental payments become due under the terms of the leases.
The
Real Estate
Upon acquisition of real properties, the Partnership purchases properties and records them in the financial statements at cost. The purchase price is allocated to tangible assets, consisting of land and building, and to identified intangible assets and liabilities, which may include the value of above market and below market leases and the value of in-place leases. The allocation of the purchase price is based upon the fair value of each component of the property. Although independent appraisals may be used to assist in the determination of fair value, in many cases these values will be based upon management’s assessment of each property, the selling prices of comparable properties and the discounted value of cash flows from the asset.
The fair values of above market and below market in-place leases will be recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) an estimate of fair market lease rates for the corresponding in-place leases measured over a period equal to the non-cancelable term of the lease including any bargain renewal periods. The above market and below market lease values will be capitalized as intangible lease assets or liabilities. Above market lease values will be amortized as an adjustment of rental income over the remaining term of the respective leases. Below market lease values will be amortized as an adjustment of rental income over the remaining term of the respective leases, including any bargain renewal periods. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market and below market in-place lease values relating to that lease would be recorded as an adjustment to rental income.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
(2) Summary of Significant Accounting Policies – (Continued)
The fair values of in-place leases will include estimated direct costs associated with obtaining a new tenant, and opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease. Direct costs associated with obtaining a new tenant may include commissions, tenant improvements, and other direct costs and are estimated, in part, by management’s consideration of current market costs to execute a similar lease. These direct costs will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. The value of opportunity costs will be calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. These intangibles will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.
The Partnership tests real estate for recoverability when events or changes in circumstances indicate that the carrying value may not be recoverable. For properties the Partnership will hold and operate, it compares the carrying amount of its
propertiesthe property to the estimated probability-weighted future undiscounted 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 Partnership recognizes an impairment loss by the amount by which the carrying amount of the property exceeds the fair value of the property. TheFor properties held for sale, the Partnership determines whether impairment has capitalized as Investments in Real
Estate certain costs incurred inoccurred by comparing the review and
acquisitionproperty’s estimated fair value less cost to sell to its current carrying value. If the carrying value is greater than the net realizable value, an impairment loss is recorded to reduce the carrying value of the properties. The costs were allocatedproperty to its net realizable value.
For financial reporting purposes, the land, buildings and equipment.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
The buildings and equipment ofowned by the Partnership are depreciated using the straight-line method over an estimated useful life of 30 years. Intangible lease assets are amortized using the straight-line method for financial reporting purposes based on estimated useful livesthe remaining life of 30
years and 10 years, respectively.
In accordance with Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, upon complete disposallease.
The disposition of a property or classification of a property as Real Estate Held for Sale by the Partnership includesdoes not represent a strategic shift that will have a major effect on the Partnership’s operations and financial results. Therefore, the results from operating results and sale ofselling the property are included in discontinuedcontinuing operations. In addition, the Partnership reclassifies the
prior periods' operating results of the property to
discontinued operations.
The Partnership accounts for properties owned as tenants-
in-commontenants-in-common with affiliated Partnershipsentities and/or unrelated third parties using the proportionate consolidation method. Each tenant-in-common owns a separate, undivided interest in the properties. Any tenant-in-common that holds more than a 50% interest does not control decisions over the other tenant-in-common interests. The financial statements reflect only this Partnership's percentage share of the properties' land, building, and equipment,
liabilities, revenues and expenses.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
(2) Summary of Significant Accounting Policies – (Continued)
The Partnership's properties are subject to environmental laws and regulations adopted by various governmental entities in the jurisdiction in which the properties are located. These laws could require the Partnership to investigate and remediate the effects of the release or disposal of hazardous materials at these locations if found. For each property, an environmental assessment is completed prior to acquisition. In addition, the lease agreements typically strictly prohibit the production, handling, or storage of hazardous materials (except where incidental to the tenant'stenant’s business such as use of cleaning supplies) in violation of applicable law to restrict environmental and other damage. Environmental liabilities are recorded when it is determined the liability is probable and the costs can reasonably be estimated. There were no environmental issues noted or liabilities recorded at December 31, 20072019 and 2006.
Reclassification
Certain items related2018.
Fair Value Measurements
As of December 31, 2019 and 2018, the Partnership had no assets or liabilities measured at fair value on a recurring basis or nonrecurring basis.
Income Per Unit
Income per Limited Partnership Unit is calculated based on the weighted average number of Limited Partnership Units outstanding during each period presented. Diluted income per Limited Partnership Unit considers the effect of any potentially dilutive Unit equivalents, of which the Partnership had none for each of the years ended December 31, 2019 and 2018.
Reportable Segments
The Partnership invests in single tenant commercial properties throughout the United States that are net leased to discontinued operationstenants in various industries. Because these net leased properties have similar economic characteristics, the Partnership evaluates operating performance on an overall portfolio basis. Therefore, the Partnership’s properties are classified as one reportable segment.
Recently Adopted Accounting Pronouncements
In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements for the analysis of partners’ capital for interim financial statements. Under the amendments, an analysis of changes in each caption of partners’ capital presented in the prior year's financial statements have been reclassifiedbalance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to conformthe ending balance of each period for which a statement of income is required to 2007 presentation. These reclassifications
had no effect on Partners'be filed. The Partnership’s first presentation of year-to-date quarterly changes in partners’ capital net income or cash
flows.
Recently Issued Accounting Pronouncements
Management has reviewed recently issued, but not yet
effective, accounting pronouncements and does not expectwas included in its Form 10‑Q for the implementation of these pronouncements to have a
significant effect on the Partnership's financial
statements.
quarter ended March 31, 2019.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 20072019 AND 2006
2018
(2) Summary of Significant Accounting Policies – (Continued)
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets, initially measured at the present value of the lease payments. The accounting guidance for lessors is largely unchanged. The ASU is effective for annual and interim periods beginning after December 15, 2018. It is to be adopted using a modified retrospective approach. The Partnership has adopted the accounting pronouncement effective January 1, 2019 and the adoption of the standard did not have a material impact on the Partnership’s financial statements.
(3) RELATED PARTY TRANSACTIONS -
Related Party Transactions –
The Partnership owns a 44%the percentage interest shown below in a Champps Americana
restaurant in Utica, Michigan. The remaining interests in
this property are owned by AEI Net Lease Income & Growth
Fund XIX Limited Partnership, an affiliate of the Partnership, and unrelated third parties. The Partnership
owns a 50% interest in a Biaggi's restaurant and a 50%
interest in a Tractor Supply Company store. The remaining
interests in thesefollowing properties are owned by AEI Net Lease
Income & Growth Fund XIX Limited Partnership. At December
31, 2007,as tenants-in-common with the Partnership owned a 50% interest in a Champps
Americana restaurant in West Chester, Ohio. The remaining
interest in this property was owned by AEI Income & Growth
Fund XXII Limited Partnership, an affiliate of the
Partnership. The Partnership owns a 50% interest in aaffiliated entities listed: Jared Jewelry store. The remaining interest in this property is
owned bystore (50% – AEI Income & Growth Fund XXI Limited Partnership,
an affiliate of the Partnership. The Partnership owns a 45%
interest in an Applebee's restaurant in Sandusky, Ohio. The
remaining interest in this property is owned byPartnership) and Staples store (70% – AEI Income & Growth Fund 24 LLC, an affiliate of the Partnership.
27 LLC).
AEI and AFM received the following compensation and reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership for the Years Endedyears ended December 31
2007 2006
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. $ 219,885 $ 229,040
======== ========
b.AEI and AFM are reimbursed for all direct
expenses they have paid on the Partnership's
behalf to third parties relating to Partnership
administration and property management. These
expenses included printing costs, legal and
filing fees, direct administrative costs,
outside audit costs, taxes, insurance and
other property costs. $ 36,704 $ 33,940
======== ========
c.AEI is reimbursed for all costs and direct
expenses incurred by it in acquiring
properties on behalf of the Partnership. $ 0 $ 16,824
======== ========
d.AEI is reimbursed for all costs incurred
in connection with the sale of property. $ 0 $ 22,890
======== ========
31:
| | | | 2019 | | 2018 |
| | | | | | |
a. | AEI is reimbursed for costs incurred in providing services related to managing the Partnership's operations and properties, maintaining the Partnership's books, and communicating with the Limited Partners. | $ | 174,389 | $ | 165,156 |
| | | | | | |
b. | AEI is reimbursed for all direct expenses it paid on the Partnership's behalf to third parties related to Partnership administration and property management. These expenses included printing costs, legal and filing fees, direct administrative costs, outside audit costs, taxes, insurance and other property costs. | $ | 66,876 | $ | 77,080 |
| | | | | | |
c. | AEI is reimbursed for costs incurred in providing services and direct expenses related to the acquisition of property on behalf of the Partnership. | $ | 90,897 | $ | 0 |
| | | | | | |
d. | AEI is reimbursed for costs incurred in providing services related to the sale of property on behalf of the Partnership. | $ | 9,131 | $ | 28,329 |
| | | | | | |
The payable to AEI Fund Management, Inc. represents the balance due for the services described in 3a, b, c and d. This balance is non-interest bearing and unsecured and is to be paid in the normal course of business.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 20072019 AND 2006
2018
(4) INVESTMENTS IN REAL ESTATE -
Real Estate Investments –
The Partnership leases its properties to various tenants under triple net leases, classified as operating leases. Under a triple net lease, the tenant is responsible for all real estate taxes, insurance, maintenance, repairs and operating expenses for the property. For some leases, the Partnership is responsible for repairs to the structural components of the building, the roof, and the parking lot. At the time the properties were acquired, the remaining primary lease terms varied from 1310 to 20 years, except for the Tractor Supply
Company store, which had a remaining primary term of 7.418 years. The Lease for the Red Robin restaurant in continuing
operations was extended to expire on December 31, 2017. The
Lease for the Red Robin restaurant in discontinued
operations expires on November 30, 2008. Most of the leases provide the tenanttenants with two to foursix five-year renewal options subject to the same terms and conditions as the primary term. The leases contain rent clauses which entitlelease for the PartnershipStaples retail store was extended to receive additional rent in future years
basedend on stated rent increases.
October 31, 2023.
The Partnership's properties are commercial, single-tenant buildings. The HomeTown Buffet restaurant was constructed
and acquired in 1993. The Red Robin restaurants, which were
constructed in 1984 and 1987, were acquired in 1994. The
Champps Americana restaurant in Lyndhurst, Ohio was
constructed and acquired in 1996. The Champps Americana
restaurant in Schaumburg, Illinois was constructed and
acquired in 1997. The land for the Champps Americana
restaurant in Columbus, Ohio was acquired in 1998 and
construction of the restaurant was completed in 1999. The
land for the Champps Americana restaurant in Utica, Michigan
was acquired in 2001 and construction of the restaurant was
completed in 2002. The KinderCare daycare center was
constructed in 1999 and acquired in 2002. The land for the
Champps Americana restaurant in West Chester, Ohio was
acquired in 2002 and construction of the restaurant was
completed in 2004. The Biaggi's restaurant was constructed
in 2001 and acquired in 2003. The Johnny Carino's restaurant
was constructed and acquired in 2003. The Jared Jewelry store was constructed in 2001 and acquired in 2004. The Applebee's restaurant in Sandusky, Ohio was constructed in
1995 and acquired in 2004. The Tractor Supply CompanyStaples store was constructed in 19982008 and acquired in 2006.2009. The remaining
properties wereFamily Dollar store was constructed and acquired in 1994.2012. The Fresenius Medical Center was constructed in 2012 and acquired in 2014. The Dollar Tree store was constructed in 2015 and acquired in 2016. There have been no costs capitalized as improvements subsequent to the acquisitions.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(4) INVESTMENTS IN REAL ESTATE - (Continued)
The cost of the properties not held for sale and related accumulated depreciation at December 31, 20072019 are as follows:
Buildings
| | | | | | | | |
| Property | Land | Buildings | Total | Accumulated Depreciation |
| | | | | | | | | |
Jared Jewelry, Hanover, MD | $ | 861,052 | $ | 1,128,053 | $ | 1,989,105 | $ | 596,924 |
Staples, Vernon Hills, IL | | 882,000 | | 2,832,638 | | 3,714,638 | | 1,003,219 |
Family Dollar, Mobile, AL | | 300,000 | | 635,489 | | 935,489 | | 157,994 |
Fresenius Medical Center, Green, OH | | 400,000 | | 1,717,051 | | 2,117,051 | | 290,949 |
Dollar Tree, Indianapolis, IN | | 410,000 | | 1,087,714 | | 1,497,714 | | 143,514 |
Bassett Home Furn., Fredericksburg, VA | | 3,111,650 | | 0 | | 3,111,650 | | 0 |
| | $ | 5,964,702 | $ | 7,400,945 | $ | 13,365,647 | $ | 2,192,600 |
| | | | | | | | | |
For the years ended December 31, 2019 and Accumulated
Property Land Equipment Total Depreciation
HomeTown Buffet,
Albuquerque, NM $ 241,960 $ 289,371 $ 531,331 $ 137,453
Red Robin,
Colorado Springs, CO 905,980 1,323,210 2,229,190 611,985
Arby's/Mrs. Winner's,
Smyrna, GA 5,775 8,091 13,866 3,738
Applebee's, Middletown, OH 20,844 48,262 69,106 23,888
Applebee's, McAllen, TX 463,553 856,551 1,320,104 411,772
Champps Americana,
Lyndhurst, OH 1,024 2,477 3,501 984
Champps Americana,
Schaumburg, IL 3,026 4,095 7,121 1,443
Champps Americana,
Columbus, OH 2,924 6,406 9,330 1,931
Champps Americana,
Utica, MI 543,318 967,816 1,511,134 198,023
KinderCare,
Mayfield Heights, OH 289,266 1,117,792 1,407,058 206,482
Biaggi's, Ft. Wayne, IN 503,204 876,142 1,379,346 131,422
Johnny Carino's,
Alexandria, LA 549,668 1,595,080 2,144,748 245,887
Jared Jewelry, Hanover, MD 861,052 1,128,053 1,989,105 145,708
Applebee's, Sandusky, OH 412,396 864,547 1,276,943 105,666
Tractor Supply,
Mesquite, TX 326,967 904,657 1,231,624 54,028
---------- ---------- ----------- ----------
$5,130,957 $9,992,550 $15,123,507 $2,280,410
========== ========== =========== ==========
On March 10, 2006,2018, the Partnership purchased a 50% interest
in a Tractor Supply Company store in Mesquite, Texas for
$1,231,624. The property is leased to Tractor Supply Company
under a Lease Agreement with a remaining primary termrecognized depreciation expense of 7.4
years$246,696 and initial annual rent of $87,258.
The Partnership owns a 40.1354% interest in a HomeTown
Buffet restaurant, a 1.1177% interest in an Arby's/Mrs.
Winner's restaurant, a 5.925% interest in an Applebee's
restaurant in Middletown, Ohio, a .12905% interest in a
Champps Americana restaurant in Lyndhurst, Ohio, a .1572%
interest in a Champps Americana restaurant in Schaumburg,
Illinois and a .2706% interest in a Champps Americana
restaurant in Columbus, Ohio. The remaining interests in
these properties are owned by unrelated third parties, who
own the property with the Partnership as tenants-in-common.
$250,372, respectively.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 20072019 AND 2006
2018
(4) INVESTMENTS IN REAL ESTATE -Real Estate Investments – (Continued)
The following schedule presents the cost and related accumulated amortization of acquired lease intangibles not held for sale at December 31:
| | | | | | | | |
| | | 2019 | | 2018 |
| | | Cost | | Accumulated Amortization | | Cost | | Accumulated Amortization |
In-Place Lease Intangibles (weighted average life of 82 and 67 months, respectively) | $ | 1,174,241 | $ | 391,691 | $ | 675,154 | $ | 291,895 |
| | | | | | | | | |
Above-Market Lease Intangibles (weighted average life of 30 and 42 months, respectively) | | 284,566 | | 212,829 | | 284,566 | | 184,133 |
Acquired Intangible Lease Assets | $ | 1,458,807 | $ | 604,520 | $ | 959,720 | $ | 476,028 |
| | | | | | | | | |
Acquired Below-Market Lease Intangibles (weighted average life of 118 and 0 months, respectively) | $ | 444,840 | $ | 28,244 | $ | 0 | $ | 0 |
| | | | | | | | | |
For the years ended December 31, 2019 and 2018, the value of in-place lease intangibles amortized to expense was $99,796 and $68,108, the decrease to rental income for above-market leases was $28,696 and $28,696, and the increase to rental income for below-market leases was $28,244 and $0, respectively.
For lease intangibles not held for sale at December 31, 2019, the estimated amortization for the next five years is as follows:
| | | | | | | | | |
| | | Amortization Expense for In-Place Lease Intangibles | | Decrease to Rental Income for Above-Market Leases | | Increase to Rental Income for Below-Market Leases |
| | | | | | | | | | |
| 2020 | | $ | 115,640 | | $ | 28,696 | | $ | 42,368 |
| 2021 | | | 115,640 | | | 28,696 | | | 42,368 |
| 2022 | | | 106,023 | | | 14,345 | | | 42,368 |
| 2023 | | | 96,396 | | | 0 | | | 42,368 |
| 2024 | | | 96,396 | | | 0 | | | 42,368 |
| | | $ | 530,095 | | $ | 71,737 | | $ | 211,840 |
| | | | | | | | | | |
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
(4) Real Estate Investments – (Continued)
In March 2017, the Partnership entered into an agreement with the tenant of the KinderCare daycare center in Mayfield Heights, Ohio to extend the lease term five years to end on June 30, 2022. The annual rent was scheduled to remain the same throughout the remainder of the extended lease term. As part of the agreement, the Partnership paid a tenant improvement allowance of $43,350 that was capitalized. In addition, beginning on July 1, 2017, the tenant received free rent for three months that equaled $40,421. In the first quarter of 2017, the Partnership decided to sell the property. In October 2018, the Partnership entered into a second agreement with the tenant to extend the lease term 6.3 years to end on September 30, 2028. The annual rent remained the same with a 10% increase scheduled for October 1, 2023. In October 2018, as part of the agreement, the Partnership made a lease incentive payment to the tenant of $100,000 that was capitalized. The General Partner believes that the additional lease term increased the number of buyers interested in the property and increased the value of the property by more than the $100,000 paid to the tenant. At December 31, 2018, the property was classified as Real Estate Held for Sale with a carrying value of $999,271.
In December 2018, the Partnership entered into an agreement to sell the KinderCare daycare center to an unrelated third party. On January 25, 2019, the sale closed with the Partnership receiving net proceeds of $2,073,311, which resulted in a net gain of $1,074,040. At the time of sale, the cost and related accumulated depreciation was $1,550,408 and $551,137, respectively.
In January 2018, the Partnership decided to sell the Red Robin restaurant in Colorado Springs, Colorado. In August 2018, the Partnership entered into an agreement to sell the property to an unrelated third party. On October 30, 2018, the sale closed with the Partnership receiving net proceeds of $5,516,851, which resulted in a net gain of $4,344,394. At the time of sale, the cost and related accumulated depreciation was $2,229,190 and $1,056,733, respectively.
In August 2018, the Partnership entered into an agreement with the tenant of the Staples store in Vernon Hills, Illinois to extend the lease term five years to end on October 31, 2023. As part of the agreement, the annual rent decreased from $308,315 to $214,480 effective November 1, 2018. On April 30, 2019, the Partnership purchased 2.36 acres of land in Fredericksburg, Virginia for $3,165,897. The Partnership allocated $499,087 of the purchase price to Acquired Intangible Lease Assets, representing in-place lease intangibles, and allocated $444,840 to Acquired Below-Market Lease Intangibles. The land is leased to Bassett Direct NC, LLC, a subsidiary of Bassett Furniture Industries, Inc., under a lease agreement with a remaining primary term of 10.5 years (as of the date of purchase) and annual rent of $199,296. Bassett operates a Bassett Home Furnishings store on the site. Ownership of the building and improvements will transfer to the Partnership upon termination of the lease.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
(4) Real Estate Investments – (Continued)
The Partnership owned a 40.1354% interest in a HomeTown Buffet restaurant in Albuquerque, New Mexico. The remaining interests in this property were owned by unrelated third parties, who owned the property with the Partnership as tenants-in-common. On November 10, 2015, the Partnership sold the property to an unrelated third party. In December 2014, the Partnership and three of the other co-owners of the property (the “Plaintiffs”) commenced legal action against a fourth coowner (“Defendant”) for breach of contract related to a prior attempt to sell the property. In 2017, the Plaintiffs signed a settlement agreement with the Defendant and collected damages related to the breach of contract. On July 7, 2017, the judge in the case issued a ruling that set the amount of legal fees that the Plaintiffs could recover from the Defendant. The Partnership’s share of this amount was $50,689. After appealing the judge’s decision several times, the Defendant finally paid the amount awarded by the judge in January 2019. At December 31, 2018, the Partnership accrued its share of this amount as Miscellaneous Income.
For properties owned as of December 31, 2007,2019, the minimum future rent payments required by the leases are as follows:
2008 $ 1,995,237
2009 1,875,070
2010 1,893,617
2011 1,910,003
2012 1,940,070
Thereafter 11,950,658
-----------
$21,564,655
===========
| 2020 | $ | 1,046,428 |
| 2021 | | 1,055,148 |
| 2022 | | 805,648 |
| 2023 | | 694,109 |
| 2024 | | 519,981 |
| Thereafter | | 1,242,379 |
| | $ | 5,363,693 |
| | | |
There were no contingent rents recognized in 20072019 and 2006.
2018.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
(5) MAJOR TENANTS -
Major Tenants –
The following schedule presents rent revenuerental income from individual tenants, or affiliated groups of tenants, who each contributed more than ten percent of the Partnership's total rent revenuerental income for the years ended December 31:
Tenants Industry 2007 2006
Red Robin West, Inc. Restaurant $ 509,023 $ 475,152
Champps Operating
Corporation Restaurant 350,958 340,116
Concord Neighborhood
Corporation Restaurant 224,994 226,595
Kona Restaurant
Group, Inc. Restaurant 205,072 203,041
---------- ----------
Aggregate rent revenue of major tenants $1,290,047 $1,244,904
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 64% 64%
========== ==========
| Tenants | | Industry | | 2019 | | 2018 |
| | | | | | | |
Staples the Office Superstore East, Inc. | | Retail | $ | 214,480 | $ | 292,676 |
Dollar Tree / Family Dollar Group | | Retail | | 208,617 | | 208,618 |
Sterling Jewelers Inc. | | Retail | | 203,946 | | 203,946 |
Bio-Medical Applications of Ohio, Inc. | | Medical | | 173,256 | | 171,150 |
Bassett Direct NC, LLC | | Retail | | 164,319 | | N/A |
Red Robin West, Inc. | | Restaurant | | N/A | | 296,667 |
KinderCare Learning Centers LLC | | Retail | | N/A | | 161,684 |
Aggregate rental income of major tenants | | | $ | 964,618 | $ | 1,334,741 |
Aggregate rental income of major tenants as a percentage of total rental income | | | | 99% | | 100% |
| | | | | | | |
(6) DISCONTINUED OPERATIONS -
During the first nine months of 2006, the Partnership sold
its remaining 15.5376% interest in the Eckerd drug store in
Cicero, New York, in two separate transactions, to unrelated
third parties. The Partnership received total net sale
proceeds of $578,025, which resulted in a net gain of
$109,143. The cost and related accumulated depreciation of
the interests sold was $492,910 and $24,028, respectively.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(6) DISCONTINUED OPERATIONS - (Continued)
Subsequent to December 31, 2007, the Partnership sold its
50% interest in the Champps Americana restaurant in West
Chester, Ohio to an unrelated third party. The Partnership
received net sale proceeds of approximately $2,045,000,
which resulted in a net gain of approximately $620,100. At
the time of sale, the cost and related accumulated
depreciation was $1,569,884 and $144,966, respectively. At
December 31, 2007, the property was classified as Real
Estate Held for Sale with a book value of $1,424,918.
The Partnership is attempting to sell its Red Robin
restaurant on Citadel Drive in Colorado Springs, Colorado.
At December 31, 2007, the property was classified as Real
Estate Held for Sale with a book value of $1,277,088.
During 2007 and 2006, the Partnership distributed net sale
proceeds of $57,576 and $229,293 to the Limited and General
Partners as part of their quarterly distributions, which
represented a return of capital of $2.57 and $10.25 per
Limited Partnership Unit, respectively. The Partnership
anticipates the remaining net sale proceeds will either be
reinvested in additional property or distributed to the
Partners in the future.
The financial results for these properties are reflected as
Discontinued Operations in the accompanying financial
statements. The following are the results of discontinued
operations for the years ended December 31:
2007 2006
Rental Income $ 324,035 $ 330,078
Property Management Expenses (757) (4,469)
Depreciation (71,099) (71,099)
Gain on Disposal of Real Estate 0 109,143
---------- ----------
Income from Discontinued Operations $ 252,179 $ 363,653
========== ==========
(7) PARTNERS' CAPITAL -
Cash distributions of $17,545 and $19,262 were made to the
General Partners and $1,736,992 and $1,906,991 were made to
the Limited Partners forPartners’ Capital –
For the years ended December 31, 20072019 and 2006,2018, the Partnership declared distributions of $1,111,114 and $2,334,350, respectively. The Limited Partners received distributions of $1,100,003 and $2,311,006 and the General Partners received distributions of $11,111 and $23,344 for the years, respectively. The Limited Partners' distributions represent $78.73represented $56.81 and $86.18$116.14 per Limited Partnership Unit outstanding using 22,06219,364 and 22,12819,899 weighted average Units in 20072019 and 2006,2018, respectively. The distributions represent
$61.95represented $56.81 and $62.40$116.14 per Unit of Net Income and $16.78$0 and $23.78$0 per Unit of return of capital in 20072019 and 2006,2018, respectively.
As part of the Limited Partner distributions discussed above, the Partnership distributed net sale proceeds of $57,000$315,385 and $227,000$1,362,183 in 20072019 and 2006,2018, respectively. AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(7) PARTNERS' CAPITAL - (Continued)
The Limited Partners received distributions of $312,231 and $1,348,561 and the General Partners received distributions of $3,154 and $13,622 for the years, respectively. The Limited Partners’ distributions represented $16.09 and $68.21 per Unit for the years, respectively.
The Partnership may acquirerepurchase Units from Limited Partners who have tendered their Units to the Partnership. Such Units may be acquired at a discount. The Partnership will not be obligated to purchase in any year any number of Units that, when aggregated with all other transfers of Units that have occurred since the beginning of the same calendar year (excluding Permitted Transfers as defined in the Partnership Agreement), would exceed 5% of the total number of Units outstanding on January #11 of such 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.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
(6) Partners’ Capital – (Continued)
During 2007, two Limited Partners redeemed2019, the Partnership repurchased a total of 22.7
Partnership714.03 Units for $11,562$588,957 from 54 Limited Partners in accordance with the Partnership Agreement. The Partnership acquired these Units using net sale proceeds. During 2006, two Limited Partners
redeemed2018, the Partnership repurchased a total of 80 Partnership250.16 Units for $44,230.$216,363 from 15 Limited Partners. The Partnership acquired these Units using Net Cash Flow from operations. The redemptionsrepurchases increase the remaining Limited Partners' ownership interest in the Partnership. As a result of these redemption paymentsrepurchases and pursuant to the Partnership Agreement, the General Partners received distributions of $117$5,949 and $447$2,185 in 20072019 and 2006,2018, respectively.
After the effect of redemptions, the Adjusted Capital
Contribution, as defined in the Partnership Agreement, is
$1,088.68 per original $1,000 invested.
(8) INCOME TAXES -
(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:
2007 2006
Net Income for Financial Reporting Purposes $1,392,157 $1,439,382
Depreciation for Tax Purposes Under
Depreciation for Financial Reporting Purposes 72,151 59,183
Income Accrued for Tax Purposes Over (Under)
Income for Financial Reporting Purposes 1,114 (16,378)
Gain on Sale of Real Estate for Tax Purposes
Over Gain for Financial Reporting Purposes 0 1,427
---------- ----------
Taxable Income to Partners $1,465,422 $1,483,614
========== ==========
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(8) INCOME TAXES - (Continued)
| | | 2019 | | 2018 |
| | | | | |
Net Income for Financial Reporting Purposes | $ | 1,522,825 | $ | 5,187,932 |
| | | | | |
Depreciation for Tax Purposes Under Depreciation and Amortization for Financial Reporting Purposes | | 109,489 | | 58,386 |
| | | | | |
Income Accrued for Tax Purposes Over (Under) Income for Financial Reporting Purposes | | (13,474) | | 17,873 |
| | | | | |
Gain on Sale of Real Estate for Tax Purposes Over (Under) Gain for Financial Reporting Purposes | | 53,680 | | (240,752) |
Taxable Income to Partners | $ | 1,672,520 | $ | 5,023,439 |
| | | | | |
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:
2007 2006
Partners' Capital for Financial Reporting
Purposes $16,154,692 $16,528,751
Adjusted Tax Basis of Investments in Real Estate
Over Net Investments in Real Estate
for Financial Reporting Purposes 500,239 428,088
Income Accrued for Tax Purposes Over
Income for Financial Reporting Purposes 12,249 11,135
Syndication Costs Treated as Reduction
of Capital for Financial Reporting Purposes 3,271,273 3,271,273
----------- -----------
Partners' Capital for Tax Reporting Purposes $19,938,453 $20,239,247
=========== ===========
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, are as follows at
December 31:
2007 2006
Carrying Fair Carrying Fair
Amount Value Amount Value
Money Market Funds $1,102,753 $1,102,753 $1,083,159 $1,083,159
---------- ---------- ---------- ----------
Total Cash and
Cash Equivalents $1,102,753 $1,102,753 $1,083,159 $1,083,159
========== ========== ========== ==========
| | | 2019 | | 2018 |
| | | | | |
Partners' Capital for Financial Reporting Purposes | $ | 14,282,174 | $ | 14,465,369 |
| | | | | |
Adjusted Tax Basis of Investments in Real Estate Over Net Investments in Real Estate for Financial Reporting Purposes | | 1,003,761 | | 840,592 |
| | | | | |
Income Accrued for Tax Purposes Over Income for Financial Reporting Purposes | | 17,873 | | 31,347 |
| | | | | |
Syndication Costs Treated as Reduction of Capital For Financial Reporting Purposes | | 3,271,273 | | 3,271,273 |
Partners' Capital for Tax Reporting Purposes | $ | 18,575,081 | $ | 18,608,581 |
| | | | | |
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 2008 AND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
ASSETS
2008 2007
CURRENT ASSETS:
Cash2019 AND 2018
(8) Coronavirus Outbreak –
Subsequent to December 31, 2019, there was a global outbreak of a new strain of coronavirus, COVID-19 which continues to adversely impact global commercial activity and Cash Equivalents $ 2,874,062 $ 1,102,753
INVESTMENTS IN REAL ESTATE:
Land 5,110,113 5,130,957
Buildingshas contributed to significant volatility in financial markets. The global impact of the outbreak has been rapidly evolving, and Equipment 9,944,288 9,992,550
Accumulated Depreciation (2,509,303) (2,280,410)
----------- -----------
12,545,098 12,843,097
Real Estate Held for Sale 1,277,088 2,702,006
----------- -----------
Net Investmentsas cases of the virus have continued to be identified in Real Estate 13,822,186 15,545,103
----------- -----------
Total Assets $16,696,248 $16,647,856
=========== ===========
additional countries, many countries have reacted by instituting quarantines, placing restrictions on travel, and limiting hours of operations of non-essential offices and retail centers. Such actions are creating disruption in global supply chains, and adversely impacting a number of industries, such as retail, restaurants and transportation. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the coronavirus. Nevertheless, the coronavirus presents material uncertainty and risk with respect to the Partnership’s performance and financial results, such as the potential negative impact to the tenants of its properties, the potential closure of certain of its properties, increased costs of operations, decrease in values of its properties, changes in law and/or regulation, and uncertainty regarding government and regulatory policy. The Partnership is unable to estimate the impact the coronavirus will have on its financial results at this time.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
| | | September 30, | | December 31, |
| | | 2020 | | 2019 |
| | | (unaudited) | | |
| Current Assets: | | | | |
| Cash | $ | 2,882,273 | $ | 3,000,960 |
| Rent Receivable | | 70,323 | | 0 |
| Total Current Assets | | 2,952,596 | | 3,000,960 |
| | | | | |
| Real Estate Investments: | | | | |
| Land | | 5,964,702 | | 5,964,702 |
| Buildings | | 7,400,945 | | 7,400,945 |
| Acquired Intangible Lease Assets | | 1,458,807 | | 1,458,807 |
| Real Estate Held for Investment, at cost | | 14,824,454 | | 14,824,454 |
| Accumulated Depreciation and Amortization | | (3,090,394) | | (2,797,120) |
| Real Estate Held for Investment, Net | | 11,734,060 | | 12,027,334 |
| Long-Term Rent Receivable | | 17,288 | | 0 |
| Total Assets | $ | 14,703,944 | $ | 15,028,294 |
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 40,022 $ 67,148
Distributions Payable 404,901 413,767
Unearned Rent 12,249 12,249
----------- -----------
Total Current Liabilities 457,172 493,164
----------- -----------
PARTNERS' CAPITAL:
General Partners 13,172 12,328
Limited Partners, $1,000 per Unit;
24,000 Units authorized and issued;
22,045 Units outstanding 16,225,904 16,142,364
----------- -----------
Total Partners' Capital 16,239,076 16,154,692
----------- -----------
Total Liabilities and Partners' Capital $16,696,248 $16,647,856
=========== ===========
| Current Liabilities: | | | | |
| Payable to AEI Fund Management, Inc. | $ | 43,952 | $ | 33,872 |
| Distributions Payable | | 198,381 | | 277,779 |
| Unearned Rent | | 17,873 | | 17,873 |
| Total Current Liabilities | | 260,206 | | 329,524 |
| | | | | |
| Long-term Liabilities: | | | | |
| Acquired Below-Market Lease Intangibles, Net | | 384,820 | | 416,596 |
| | | | | |
| Partners’ Capital: | | | | |
| General Partners | | 39,140 | | 41,373 |
Limited Partners – 24,000 Units authorized; 19,051 Units issued and outstanding as of 9/30/2020 and 12/31/2019 | | 14,019,778 | | 14,240,801 |
| Total Partners' Capital | | 14,058,918 | | 14,282,174 |
| Total Liabilities and Partners' Capital | $ | 14,703,944 | $ | 15,028,294 |
The accompanying Notes to Financial Statements are an integral part of
this statement.
these statements.AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT
STATEMENTS OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30
Three Months Ended Nine Months Ended
9/30/08 9/30/07 9/30/08 9/30/07
RENTAL INCOME $ 409,437 $ 421,898 $1,222,720 $1,256,170
EXPENSES:
Partnership Administration -
Affiliates 57,202 57,591 172,586 167,898
Partnership Administration
and Property Management -
Unrelated Parties 12,331 6,548 39,990 28,219
Depreciation 84,262 84,262 252,781 252,786
---------- ---------- ---------- ----------
Total Expenses 153,795 148,401 465,357 448,903
---------- ---------- ---------- ----------
OPERATING INCOME 255,642 273,497 757,363 807,267
OTHER INCOME:
Interest Income 13,574 11,427 38,650 34,841
---------- ---------- ---------- ----------
INCOME FROM CONTINUING
OPERATIONS 269,216 284,924 796,013 842,108
Income from Discontinued
Operations 38,653 64,997 829,788 194,971
---------- ---------- ---------- ----------
NET INCOME $ 307,869 $ 349,921 $1,625,801 $1,037,079
========== ========== ========== ==========
NET INCOME ALLOCATED:
General Partners $ 3,079 $ 3,499 $ 16,258 $ 10,371
Limited Partners 304,790 346,422 1,609,543 1,026,708
---------- ---------- ---------- ----------
$ 307,869 $ 349,921 $1,625,801 $1,037,079
========== ========== ========== ==========
INCOME PER LIMITED PARTNERSHIP UNIT:
Continuing Operations $ 12.09 $ 12.77 $ 35.75 $ 37.77
Discontinued Operations 1.74 2.93 37.26 8.75
---------- ---------- ---------- ----------
Total $ 13.83 $ 15.70 $ 73.01 $ 46.52
========== ========== ========== ==========
Weighted Average Units
Outstanding 22,045 22,068 22,045 22,068
========== ========== ========== ==========
(unaudited)
| | | | | | | | |
| | | Three Months Ended September 30 | | Nine Months Ended September 30 |
| | | 2020 | | 2019 | | 2020 | | 2019 |
| | | | | | | | | |
| Rental Income | $ | 265,118 | $ | 260,578 | $ | 794,984 | $ | 713,614 |
| | | | | | | | | |
| Expenses: | | | | | | | | |
| Partnership Administration – Affiliates | | 46,508 | | 46,354 | | 120,055 | | 132,640 |
Partnership Administration and Property Management – Unrelated Parties | | 9,900 | | 6,699 | | 45,977 | | 59,559 |
| Depreciation and Amortization | | 90,584 | | 90,584 | | 271,752 | | 255,908 |
| Total Expenses | | 146,992 | | 143,637 | | 437,784 | | 448,107 |
| | | | | | | | | |
| Operating Income | | 118,126 | | 116,941 | | 357,200 | | 265,507 |
| | | | | | | | | |
| Other Income: | | | | | | | | |
| Gain on Sale of Real Estate | | 0 | | 0 | | 0 | | 1,074,040 |
| Interest Income | | 699 | | 12,011 | | 6,814 | | 51,767 |
| Total Other Income | | 699 | | 12,011 | | 6,814 | | 1,125,807 |
| | | | | | | | | |
| Net Income | $ | 118,825 | $ | 128,952 | $ | 364,014 | $ | 1,391,314 |
| | | | | | | | | |
| Net Income Allocated: | | | | | | | | |
| General Partners | $ | 1,188 | $ | 1,289 | $ | 3,640 | $ | 13,913 |
| Limited Partners | | 117,637 | | 127,663 | | 360,374 | | 1,377,401 |
| Total | $ | 118,825 | $ | 128,952 | $ | 364,014 | $ | 1,391,314 |
| | | | | | | | | |
| Net Income per Limited Partnership Unit | $ | 6.17 | $ | 6.61 | $ | 18.92 | $ | 70.75 |
| | | | | | | | | |
Weighted Average Units Outstanding – Basic and Diluted | | 19,051 | | 19,320 | | 19,051 | | 19,468 |
| | | | | | | | | |
The accompanying Notes to Financial Statements are an integral part of
this statement.
these statements.AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,625,801 $ 1,037,079
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 253,395 307,215
Gain on Sale of Real Estate (682,938) 0
Decrease in Payable to
AEI Fund Management, Inc. (27,126) (42,452)
Increase in Unearned Rent 0 43,511
----------- -----------
Total Adjustments (456,669) 308,274
----------- -----------
Net Cash Provided By
Operating Activities 1,169,132 1,345,353
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate 2,152,460 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (8,866) 191
Distributions to Partners (1,541,417) (1,330,294)
----------- -----------
Net Cash Used For
Financing Activities (1,550,283) (1,330,103)
----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 1,771,309 15,250
CASH AND CASH EQUIVALENTS, beginning of period 1,102,753 1,083,159
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,874,062 $ 1,098,409
=========== ===========
(unaudited)
| | | | |
| | | Nine Months Ended September 30 |
| | | 2020 | | 2019 |
| Cash Flows from Operating Activities: | | | | |
| Net Income | $ | 364,014 | $ | 1,391,314 |
| | | | | |
Adjustments to Reconcile Net Income To Net Cash Provided by Operating Activities: | | | | |
Depreciation and Amortization | | 261,498 | | 259,778 |
| Gain on Sale of Real Estate | | 0 | | (1,074,040) |
| (Increase) Decrease in Rent Receivable | | (87,611) | | 50,689 |
Increase (Decrease) in Payable to AEI Fund Management, Inc. | | 10,080 | | (7,815) |
| Increase (Decrease) in Unearned Rent | | 0 | | (31,347) |
| Total Adjustments | | 183,967 | | (802,735) |
Net Cash Provided By (Used For) Operating Activities | | 547,981 | | 588,579 |
| | | | | |
| Cash Flows from Investing Activities: | | | | |
| Investments in Real Estate | | 0 | | (3,153,741) |
| Proceeds from Sale of Real Estate | | 0 | | 2,073,311 |
Net Cash Provided By (Used For) Investing Activities | | 0 | | (1,080,430) |
| | | | | |
| Cash Flows from Financing Activities: | | | | |
| Distributions Paid to Partners | | (666,668) | | (2,050,510) |
| Repurchase of Partnership Units | | 0 | | (385,726) |
Net Cash Provided By (Used For) Financing Activities | | (666,668) | | (2,436,236) |
| | | | | |
| Net Increase (Decrease) in Cash | | (118,687) | | (2,928,087) |
| | | | | |
| Cash, beginning of period | | 3,000,960 | | 6,216,113 |
| | | | | |
| Cash, end of period | $ | 2,882,273 | $ | 3,288,026 |
| | | | | |
The accompanying Notes to Financial Statements are an integral part of
this statement.
these statements.AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 2006 $ 16,068 $16,512,683 $16,528,751 22,067.74
Distributions (13,303) (1,316,991) (1,330,294)
Net Income 10,371 1,026,708 1,037,079
-------- ----------- ----------- ----------
BALANCE, September 30, 2007 $ 13,136 $16,222,400 $16,235,536 22,067.74
======== =========== =========== ==========
BALANCE, December 31, 2007 $ 12,328 $16,142,364 $16,154,692 22,045.04
Distributions (15,414) (1,526,003) (1,541,417)
Net Income 16,258 1,609,543 1,625,801
-------- ----------- ----------- ----------
BALANCE, September 30, 2008 $ 13,172 $16,225,904 $16,239,076 22,045.04
======== =========== =========== ==========
(unaudited)
| | General Partners | | Limited Partners | | Total | | Limited Partnership Units Outstanding |
| | | | | | | | | |
| Balance, December 31, 2018 | $ | 43,205 | $ | 14,422,164 | $ | 14,465,369 | | 19,765.14 |
| | | | | | | | | |
| Distributions Declared | | (2,778) | | (275,002) | | (277,780) | | |
| | | | | | | | | |
| Net Income | | 11,667 | | 1,155,024 | | 1,166,691 | | |
| | | | | | | | | |
| Balance, March 31, 2019 | | 52,094 | | 15,302,186 | | 15,354,280 | | 19,765.14 |
| | | | | | | | | |
| Distributions Declared | | (2,778) | | (275,000) | | (277,778) | | |
| | | | | | | | | |
| Repurchase of Partnership Units | | (3,857) | | (381,869) | | (385,726) | | (444.97) |
| | | | | | | | | |
| Net Income | | 957 | | 94,714 | | 95,671 | | |
| | | | | | | | | |
| Balance, June 30, 2019 | | 46,416 | | 14,740,031 | | 14,786,447 | | 19,320.17 |
| | | | | | | | | |
| Distributions Declared | | (2,777) | | (275,001) | | (277,778) | | |
| | | | | | | | | |
| Net Income | | 1,289 | | 127,663 | | 128,952 | | |
| | | | | | | | | |
| Balance, September 30, 2019 | $ | 44,928 | $ | 14,592,693 | $ | 14,637,621 | | 19,320.17 |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Balance, December 31, 2019 | $ | 41,373 | $ | 14,240,801 | $ | 14,282,174 | | 19,051.11 |
| | | | | | | | | |
| Distributions Declared | | (2,778) | | (275,000) | | (277,778) | | |
| | | | | | | | | |
| Net Income | | 1,167 | | 115,581 | | 116,748 | | |
| | | | | | | | | |
| Balance, March 31, 2020 | | 39,762 | | 14,081,382 | | 14,121,144 | | 19,051.11 |
| | | | | | | | | |
| Distributions Declared | | (1,111) | | (110,000) | | (111,111) | | |
| | | | | | | | | |
| Net Income | | 1,285 | | 127,156 | | 128,441 | | |
| | | | | | | | | |
| Balance, June 30, 2020 | | 39,936 | | 14,098,538 | | 14,138,474 | | 19,051.11 |
| | | | | | | | | |
| Distributions Declared | | (1,984) | | (196,397) | | (198,381) | | |
| | | | | | | | | |
| Net Income | | 1,188 | | 117,637 | | 118,825 | | |
| | | | | | | | | |
| Balance, September 30, 2020 | $ | 39,140 | $ | 14,019,778 | $ | 14,058,918 | | 19,051.11 |
| | | | | | | | | |
The accompanying Notes to Financial Statements are an integral part of
this statement.
these statements.AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
2020
(unaudited)
(1) The condensed statements included herein have been prepared by the registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results of operations for the interim period, on a basis consistent with the annual audited statements. The adjustments made to these condensed statements consist only of normal recurring adjustments. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with generally accepted
accounting principlesUnited States Generally Accepted Accounting Principles (US GAAP) have been condensed or omitted pursuant to such rules and regulations, although the registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in the registrant'sregistrant’s latest annual report on Form 10-KSB.
10K.
(2) ORGANIZATION -
Organization –
AEI Net Lease Income & Growth Fund XX Limited Partnership ("Partnership"(“Partnership”) was formed to acquire and lease commercial properties to operating tenants. The Partnership's operations are managed by AEI Fund Management XX, Inc. ("AFM"(“AFM”), the Managing General Partner. Robert P. Johnson, the PresidentChief Executive Officer and sole director of AFM, serves as the Individual General Partner. AFM is a wholly owned subsidiary of AEI Capital Corporation of which Mr. Johnson is theand his wife own a majority shareholder.interest. AEI Fund Management, Inc. ("AEI"(“AEI”), an affiliate of AFM, performs the administrative and operating functions for the Partnership.
The terms of the Partnership offering called for a subscription price of $1,000 per Limited Partnership Unit, payable on acceptance of the offer. The Partnership commenced operations on June 30, 1993 when minimum subscriptions of 1,500 Limited Partnership Units ($1,500,000) were accepted. On January 19, 1995, the offering terminated when the maximum subscription limit of 24,000 Limited Partnership Units was reached. Under the terms of the Limited Partnership Agreement, the Limited Partners and General Partners contributed funds of $24,000,000 and $1,000, respectively.
During operations, any Net Cash Flow, as defined, which the General Partners determine to distribute will be distributed 90% to the Limited Partners and 10% to the General Partners; provided, however, that such distributions to the General Partners will be subordinated to the Limited Partners first receiving an annual, noncumulative distribution of Net Cash Flow equal to 10% of their Adjusted Capital Contribution, as defined, and, provided further, that in no event will the General Partners receive less than 1% of such Net Cash Flow per annum. Distributions to Limited Partners will be made pro rata by Units.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(2) Organization – (Continued)
(2) ORGANIZATION - (Continued)
Any Net Proceeds of Sale, as defined, from the sale or financing of 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 12% of their Adjusted Capital Contribution per annum, cumulative but not compounded, to the extent not previously distributed from Net Cash Flow; (ii) any remaining balance will be distributed 90% to the Limited Partners and 10% to the General Partners. Distributions to the Limited Partners will be made pro rata by Units.
For tax purposes, profits from operations, other than profits attributable to the sale, exchange, financing, refinancing or other disposition of 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 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 12% 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.
(3) RECLASSIFICATION -
Certain items related
In June 2014, the Managing General Partner mailed a Consent Statement (Proxy) seeking the consent of the Limited Partners to discontinued operationscontinue the Partnership for an additional 60 months or to initiate the final disposition, liquidation and distribution of all of the Partnership’s properties and assets within 24 to 36 months. Approval of either proposal required the affirmative vote of holders of a majority of the outstanding units. On July 23, 2014, the votes were counted and neither proposal received the required majority vote. As a result, the Partnership will not liquidate and will continue in operation until the Limited Partners vote to authorize the sale of all of the Partnership's properties or December 31, 2043, as stated in the prior period's financial statementsLimited Partnership Agreement. In consideration of the adverse impact COVID-19 is having on the World and U.S. economy, the General Partner believes it is in the best interest of the Partnership to continue operations. The General Partner will re-evaluate the situation in 6 to 18 months and may again submit the option to liquidate to a vote by the Limited Partners at that time.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(3) Recently Issued Accounting Pronouncements – Management has reviewed recently issued, but not yet effective, accounting pronouncements and does not expect the implementation of these pronouncements to have been reclassified
to conform to 2008 presentation. These reclassifications
had noa significant effect on Partners' capital,the Partnership’s financial statements.
(4) Real Estate Investments –
In December 2018, the Partnership entered into an agreement to sell the KinderCare daycare center to an unrelated third party. On January 25, 2019, the sale closed with the Partnership receiving net income or cash
flows.
(4) PAYABLE TOproceeds of $2,073,311, which resulted in a net gain of $1,074,040. At the time of sale, the cost and related accumulated depreciation was $1,550,408 and $551,137, respectively.
On April 30, 2019, the Partnership purchased 2.36 acres of land in Fredericksburg, Virginia for $3,165,897. The Partnership allocated $499,087 of the purchase price to Acquired Intangible Lease Assets, representing in-place lease intangibles, and allocated $444,840 to Acquired Below-Market Lease Intangibles. The land is leased to Bassett Direct NC, LLC, a subsidiary of Bassett Furniture Industries, Inc., under a lease agreement with a remaining primary term of 10.5 years (as of the date of purchase) and annual rent of $199,296. Bassett operates a Bassett Home Furnishings store on the site. Ownership of the building and improvements will transfer to the Partnership upon termination of the lease.
(5) Payable to AEI FUND MANAGEMENT, INC. -
Fund Management, Inc. –
AEI Fund Management, Inc. performs the administrative and operating functions for the Partnership. The payable to AEI Fund Management represents the balance due for those services. This balance is non-interest bearing and unsecured and is to be paid in the normal course of business.
(6) Partners’ Capital –
For the nine months ended September 30, 2020 and 2019, the Partnership declared distributions of $587,270 and $833,336, respectively. The Limited Partners received distributions of $581,397 and $825,003 and the General Partners received distributions of $5,873 and $8,333 for the periods, respectively. The Limited Partners' distributions represented $30.52 and $42.38 per Limited Partnership Unit outstanding using 19,051 and 19,468 weighted average Units in 2020 and 2019, respectively. The distributions represented $18.92 and $42.38 per Unit of Net Income and $11.60 and $0.00 per Unit of return of capital in 2020 and 2019, respectively.
As part of the distributions discussed above, the Partnership distributed net sale proceeds of $73,865 and $256,284 in 2020 and 2019, respectively. The Limited Partners received distributions of $73,126 and $253,721 and the General Partners received distributions of $739 and $2,563 for the periods, respectively. The Limited Partners’ distributions represented $3.84 and $13.02 per Unit for the periods, respectively.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(6) Partners’ Capital – (Continued)
(5) DISCONTINUED OPERATIONS -
On February 27, 2008,
For the nine months ended September 30, 2020, the Partnership sold its 50%did not repurchase any Units from the Limited Partners. For the nine months ended September 30, 2019, the Partnership repurchased a total of 444.97 Units for $381,869 from 28 Limited Partners in accordance with the Partnership Agreement. The Partnership acquired these Units using Net Cash Flow from operations. The repurchases increase the remaining Limited Partners' ownership interest in the Champps Americana restaurant in West Chester, OhioPartnership. As a result of these repurchases and pursuant to
an unrelated third party. The Partnership received net sale
proceeds of $2,057,022, which resulted in a net gain of
$632,104. At the time of sale, the cost and related
accumulated depreciation was $1,569,884 and $144,966,
respectively. At December 31, 2007, the property was
classified as Real Estate Held for Sale with a book value of
$1,424,918.
On June 30, 2008, the Partnership sold its 5.9250% interestAgreement, the General Partners received distributions of $3,857 in the Applebee's restaurant in Middletown, Ohio to an
unrelated third party. The Partnership received net sale
proceeds2019.
(7) Fair Value Measurements –
As of $95,438, which resulted in a net gain of
$50,834. The cost and related accumulated depreciation of
the interest sold was $69,106 and $24,502, respectively.
The Partnership is attempting to sell its Red Robin
restaurant on Citadel Drive in Colorado Springs, Colorado.
At September 30, 20082020 and December 31, 2007,2019, the property
was classified as Real Estate Held for Sale withPartnership had no assets or liabilities measured at fair value on a book
value of $1,277,088.
recurring basis or nonrecurring basis.
(8) Coronavirus Outbreak –
During the first nine monthsquarter of 20082020, there was a global outbreak of a new strain of coronavirus, COVID-19 which continues to adversely impact global commercial activity and 2007,has contributed to significant volatility in financial markets. The global impact of the outbreak has been rapidly evolving, and as cases of the virus have continued to be identified in additional countries, many countries have reacted by instituting quarantines, placing restrictions on travel, and limiting hours of operations of non-essential offices and retail centers. Such actions are creating disruption in global supply chains, and adversely impacting a number of industries, such as retail, restaurants and transportation. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the coronavirus. Nevertheless, the coronavirus presents material uncertainty and risk with respect to the Partnership’s performance and financial results, such as the potential negative impact to the tenants of its properties, the potential closure of certain of its properties, increased costs of operations, decrease in values of its properties, changes in law and/or regulation, and uncertainty regarding government and regulatory policy. Up to the date of this filing, the Partnership distributed net sale proceedshas entered into rent deferral agreements with two tenants of $286,869the six properties owned by the Partnership. In June 2020, the Partnership entered into an agreement with the tenant of the Jared Jewelry store in Hanover, Maryland to defer base rent in April and $57,576May 2020. The tenant shall pay the deferred amounts in twelve equal monthly installments beginning on February 1, 2021. In April 2020, the Partnership entered into an agreement with the tenant of the Staples store in Vernon Hills, Illinois to defer base rent in May, April, and June 2020. The tenant shall pay the deferred amounts in nine equal installments beginning on February 1, 2021. The tenant of the Basset Furniture store in Fredericksburg, Virginia did not pay April, May, and June 2020 rental payments. A past due notice was sent on June 4, 2020 and a default notice was sent on June 16, 2020 to the Limitedtenant. April, May and General Partners as part of their
quarterly distributions, which represented a return of
capital of $12.88 and $2.58 per Limited Partnership Unit,
respectively. The Partnership anticipates the remaining net
sale proceeds will either be reinvested in additional
property or distributed to the PartnersJune rent have been paid in the future.
The financial results for these properties are reflected as
Discontinued Operations in the accompanying financial
statements. The following are the results of discontinued
operations for the periods ended September 30:
Three Months Ended Nine Months Ended
9/30/08 9/30/07 9/30/08 9/30/07
Rental Income $ 39,015 $ 83,754 $ 148,493 $ 250,281
Property Management Expenses (362) (614) (1,029) (881)
Depreciation 0 (18,143) (614) (54,429)
Gain on Disposal of Real Estate 0 0 682,938 0
--------- --------- --------- ---------
Income from Discontinued
Operations $ 38,653 $ 64,997 $ 829,788 $ 194,971
========= ========= ========= =========
(6) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -
In December 2007, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
141(R) ("SFAS 141(R)"), Business Combinations. SFAS 141(R)
requires, among other things, the expensing of acquisition-
related transaction costs. Management anticipates that SFAS
141(R) will be effective for property acquisitions completed
on or after January 1, 2009. Management is evaluating the
effect that the adoption of SFAS 141(R) will have on the
Partnership's results of operations, financial position, and
the related disclosures.
third quarter. AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(8) Coronavirus Outbreak – (Continued)
The Partnership has elected not to account for these deferrals of rent as a lease modification under COVID-19 guidance issued by the Financial Accounting Standards Board. Deferred rent of $35,747 was recognized as rental income during the three months ended September 30, 2020 and a corresponding rent receivable was recorded. During the nine months ended September 30, 2020 a total of $141,421 of deferred rent was recognized as rental income and a corresponding rent receivable was recorded. Of the $141,421 deferred rent, $53,810 has been collected reducing the rent receivable for the period ended September 30, 2020. The Partnership continues to work closely with tenants to determine the best course of action to meet the tenants short-term rental needs during these unprecedented times.
.
CONSENT FORM
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
CONSENT OF LIMITED PARTNERS
THIS CONSENT IS SOLICITED BY THE BOARD
OF DIRECTORS OF
This consent is presented by
AEI FUND MANAGEMENTFund Management XX, INC.Inc., THE MANAGING GENERAL PARTNER
Managing General Partner
The undersigned, a Limited Partner of AEI Net Lease Income & Growth Fund XX Limited Partnership ("(“Fund XX"XX”), hereby consents (unless otherwise directed below) to the proposals identified below as indicated below. PLEASE DO NOT VOTE FOR BOTH
PROPOSALS-THEY ARE MUTUALLY EXCLUSIVE.
Proposal #1. ApprovalIndicate your vote by placing an “X” or check mark on the appropriate line. Failure to vote will have the effect of continuation of Fund XX for 60
months by amendment to Sections 7.7 and 11.3voting “AGAINST” each proposal.
Please vote “FOR” only one of the Limited
Partnership Agreement (the General Partners recommend afirst two proposals. Do not vote “FOR” both Proposal #1 and Proposal #2: they are mutually exclusive and cannot be implemented simultaneously:
Proposal #1 – to liquidate:
FOR this proposal).
_____
AGAINST ______
ABSTAIN ______
Proposal #2 – to continue Fund XX’s operations for an additional 60 months:
FOR [ ] _____
AGAINST [ ] ______
ABSTAIN [ ]______
Please Vote on Proposal #2. Approval#3 – to begin sellingamend Fund XX'sXX’s unit repurchase plan:
FOR _____
AGAINST ______
ABSTAIN ______
Please vote on Proposal #4 – to sell certain properties and to liquidate Fund XX (THE GENERAL PARTNERS
RECOMMEND A VOTE other AEI Affiliated Funds:
FOR _____
AGAINST THIS PROPOSAL).
FOR [ ] AGAINST [ ] ______
ABSTAIN [ ]
Please date and sign this Consent below and return it in
the enclosed, postage paid envelope. To be counted, this Consent
must be received not later than the close of business on January 8,
2009.
______
The limited partnership units held by the signing Limited Partner will be voted as directed. They will be voted "FOR" Proposal #1 and against Proposal #2the proposal if no box is checked.
Please sign exactly as your name appears below. All owners of record and trustees must sign. When Unitsunits are held by joint tenants, both owners shouldmust sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS CONSENT.
After marking your vote and signing this Consent Form, please return it in the enclosed, postage paid envelope. To be counted, this Consent Form must be received not later than the close of business on February 28, 2021.
Dated: __________________________ ______________________________
Signature (if held jointly)
________________________