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AEI Net Lease Income & Growth Fund XX Limited Partnership

Filed: 7 Jan 21, 5:22pm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
SCHEDULE 14A
 
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
 
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AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
(Name of Registrant as specified in its charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
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1

 
January 7, 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, in 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 opportunity to vote on four proposals, the first and second of which are alternatives to each other:
 
The enclosed Consent Form provides you with the opportunity to vote 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 in operation for an additional 60 months from January 2021. If this proposal is approved, you will continue to receive quarterly distributions from Fund XX operations, rather than capital distributions from the sale of its 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 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 allow Fund XX to sell joint venture interests that it currently owns in two of its properties to other AEI Affiliated Funds. The remaining interests in these joint ventures are currently owned by other AEI Funds. If any Fund XX joint venture interests are sold to affiliated Funds, the sales will be made 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 Statement carefully to understand what is being proposed and the risks presented by these proposals. If you have any questions about this communication, please call AEI Investor Services, toll free, at 800-328-3519.
 
Sincerely,
 
AEI Fund Management XX, Inc.
General Partner
 
2

 
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
1300 Wells Fargo Place
30 East Seventh Street
St. Paul, Minnesota 55101
 
CONSENT STATEMENT
 
We are providing this Consent Statement to all limited partners of AEI Net Lease Income & Growth Fund XX Limited Partnership who are unit owners of record as of January 1, 2021. Through the enclosed Consent Form, we are soliciting your consent to the four proposals below:
 
Proposal #1. To instruct Fund XX to begin liquidation by selling its properties and, thereafter, terminating its existence.
 
Proposal #2. As an alternative to Proposal #1, to amend Section 11.3 of the limited partnership agreement of Fund XX to authorize it to continue in operation for an additional 60 months from 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 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 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 allow Fund XX to sell joint venture interests that it currently owns in two of its properties to other AEI Affiliated Funds.
 
To vote, you must return a properly signed Consent 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 March 1, 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 encourage you to sign and return the enclosed Consent Form – your vote is important.
 
We mailed this Consent Statement to you because you are a limited partner of record as of January 1, 2021. 
 
3

TABLE OF CONTENTS
 
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS  AND THE CONSENT SOLICITATION6
SUMMARY OF PROPOSALS11
BACKGROUND OF THE FUND13
Fund XX13
Properties13
Summary Financial Information14
PROPOSAL #1 – LIQUIDATION15
Reasons for the Liquidation Proposal15
Effects of the Liquidation Proposal15
Material Federal Income Tax Considerations of Liquidation16
Risks of the Liquidation Proposal17
PROPOSAL #2 – CONTINUE OPERATIONS FOR 60 MONTHS18
Reasons for the Proposal to Continue Operations18
Effects of the Proposal to Continue Operations18
Amendment to the Limited Partnership Agreement18
Conflicts of Interest with the Proposal to Continue Operations19
Risks of the Proposal to Continue Operations19
PROPOSAL #3 –AMEND THE FUND’S UNIT REPURCHASE PLAN20
Reasons for the Proposed Amendment to the Unit Repurchase Plan20
Effects of the Proposed Amendment to the Unit Repurchase Plan20
Amendment to Limited Partnership Agreement21
Conflicts of Interest with the Proposed Amendment to the Unit Repurchase Plan21
Risks of the Proposed Amendment to the Unit Repurchase Plan21
PROPOSAL #4 – SALE OF JOINT VENTURE INTERESTS TO OTHER AEI AFFILIATED FUNDS22
Reasons for Proposal #422
Effects of Proposal #423
Amendment to the Operating Agreement23
Risks of Proposal #423
UNIT OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT24
CONSENT PROCEDURES24
Timing of the Consent Solicitation24
Record Date and Votes Required for Approval24
Procedures for Voting25
Costs of Solicitation25
Mailing25
EXHIBIT A  Amendment to Limited Partnership Agreement (Proposal #2)26
EXHIBIT B – Amendment to Limited Partnership Agreement (Proposal #3)27
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 201928
4

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS
AND THE CONSENT SOLICITATION
 
BACKGROUND
 
Q:
What are you asking me to do?
A:
We are asking you to vote by signing and returning the enclosed Consent Form:
(1) On 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 in operation for an additional 60 months from January  2021, at which time another vote on this matter will be presented to the limited partners;
 (3) On a proposal to amend the unit repurchase plan of the limited partnership to increase the price at which units may be repurchased by Fund XX to 95% 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 two of its properties to other 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 of 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 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 net leased real estate require ownership of an entire property, we believe that it would be difficult for Fund XX to sell these joint venture interests in the open real estate market. As a result, we are asking you to vote on a proposal to allow Fund XX to sell its interests in these properties to other AEI Affiliated Funds. Although we believe that Section 6.6 of the Fund XX partnership agreement expressly contemplates such a sale to current joint-venture owners, Section 6.5(vii) also prohibits Fund XX from selling properties to affiliated funds, therefore creating an ambiguity unless resolved. This vote would eliminate such ambiguity. In addition, this proposal would also allow Fund XX to sell joint venture interests to any AEI Affiliated Fund, not just AEI Affiliated Funds that are current joint-venture owners.  
5

Q:
May I vote “FOR” all proposals?
A:
No. Vote “FOR” only one of the first two proposals. Do not vote “FOR” Proposal #1 and “FOR” Proposal #2 at the same time. Proposal #1, if approved, will require the sale of the Fund’s properties and the Fund’s liquidation, while Proposal #2 will authorize the Fund to continue in operation. If none of the proposals are approved, Fund XX will continue in operation without a specific time frame to liquidate and the increased unit repurchase price described in Proposal #3 will not take effect.
 
PROPOSAL #1 LIQUIDATION
 
Q:
Why is Proposal #1 being presented?
A:
In July 2014, a majority of the limited partners voted to amend the limited partnership agreement of Fund XX to continue operations for five years, after which the Managing General Partner 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, we are required to obtain the consent of holders of a majority of the outstanding units to sell all or substantially all of the Fund’s assets.
 
Q:
What will happen if limited partners approve Proposal #1?
A:
The proposal, if approved, will authorize the General Partners of Fund XX to commence the orderly sale of the Fund’s six properties. We anticipate that all sales could be completed within 24 to 36 months. As sales are completed, Fund XX would distribute the proceeds to you and other limited partners, less expenses, less the General 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 Proposal #1 is approved, how much cash might I receive?
A:
We cannot know how much cash can be generated from the sale of the properties until the sales are actually completed. The value of the properties depends upon market conditions. Any amount that the Fund would be able to distribute would depend upon the terms of sale as well as expenses incurred to complete each sale. Based upon current market conditions and capitalization rates for similarly situated properties, and our own internal analysis without independent appraisal, we estimate that the “liquidation value” of the assets of Fund XX is approximately $16,090,000 or approximately $836 per unit as of June 30, 2020. In making this estimate, we are assuming that Fund properties are sold in the normal course of business without extraordinary expense, that the properties continue to generate rental income during the sales period, and that the General Partners’ interest is subtracted prior to calculating the liquidation value per unit. It is likely that the actual proceeds will vary from this estimate. Any variation could be material.
 
Q:
What are the tax consequences of 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 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 liquidation to you.
6

Q:
What if Proposal #1 is not approved?
A: 
If Proposal #1 to liquidate is not approved, then Fund XX will not liquidate and will continue in operation until the limited partners 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: 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 vote 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 repurchase plan;
  • Delay in final sale of the Fund’s properties and 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.
 
7

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 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 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.
8

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 approved.
 
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 sell the Fund’s properties to other Affiliated Funds is not approved, then Fund XX will attempt to sell the joint venture interests in the two properties in the open real estate market. If the interests cannot be sold in timely fashion, the final liquidation of the Fund may be delayed.
 
THE CONSENT SOLICITATION PROCESS
 
Q:
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 these proposals?
A: 
No. You are not required to vote. However, not voting would have the effect of a vote against the proposals. If Proposal #1 to liquidate is not approved by limited partners holding a majority of the outstanding units, then Fund XX will continue in operation until the limited partners vote to 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.
 
9

VOTING PROCEDURES
 
Q:
How do I vote?
A: 
Mark your vote, sign and date the enclosed Consent Form and return it in the enclosed postage prepaid envelope. Your Consent Form must be received by 5:00 p.m., Central Time, on March 1, 2021 (unless this date and time is extended).
 
Q:
May I revoke my consent?
A: 
Yes. You may withdraw or revoke your consent at any time prior to 5:00 p.m. Central Time, on March 1, 2021. To be effective, a written or facsimile revocation or withdrawal of the Consent 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 55101. A notice of revocation or withdrawal must specify the limited partner’s name and the number of units being withdrawn.
 
Q:
Do limited partners have appraisal rights?
A: 
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 any of the proposals.
 
SUMMARY OF PROPOSALS
 
The following summarizes the proposals being presented to the limited partners of Fund XX. You should read this entire Consent Statement to fully understand the proposals.
 
 Proposal #1 – Liquidation:
 
Effect:
 
If liquidation is authorized, the General Partners will commence the orderly sale of the Fund’s properties and the winding up of its affairs, including distribution of proceeds to partners in accordance with the limited partnership agreement. Authorization to liquidate 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 the Fund.
Vote Required:
Approval of the liquidation 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).
 
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.
Vote Required:
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).
 
10

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 Statement was prepared by, and consents are being solicited by and
on behalf of, AEI Fund Management XX, Inc., the Managing General Partner of Fund XX.
 
Interest of General
The General Partners have interests in the liquidation proposal and the proposal to
Partners:
continue operations that are different from the interests of limited partners because:
 
  • The General Partners and their affiliates receive reimbursements of the costs they incur and services they provide to Fund XX, including the compensation expense of their employees based upon the hours they spent for the services they performed. These reimbursements will terminate if the liquidation proposal is approved and Fund XX is dissolved.
  • The General Partners are entitled to indemnification in instances defined in the limited partnership agreement.
  • If the Fund is liquidated, the General Partners will receive a share of the liquidation proceeds.
 
 
11

BACKGROUND OF THE FUND
 
Fund XX
 
AEI Net Lease Income & Growth Fund XX Limited Partnership is a Minnesota limited partnership organized in 1993. It raised $24 million through a public offering of its units. These proceeds were used to purchase, for cash, commercial real estate occupied by tenants under net leases. Fund XX initially purchased 14 properties with the net proceeds from the offering, including partial interests in five of these properties. The prospectus by which the units were originally offered indicated that properties would be sold from time to time and the cash proceeds invested in similar net leased properties.
 
Although Fund XX has not commenced the sale of properties in final liquidation, the Fund has sold properties and reinvested the majority of the proceeds in similar net leased properties. In all cases, the Fund has distributed enough cash for limited partners to pay the taxes generated by any income or gain recognized by them on sale of such properties.
 
Properties
 
As of September 30, 2020, Fund XX held interests in six net leased properties. It also held cash from recent property sales totaling $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. The tenants in these properties are current with their rental payments and the properties are fully occupied.
 
The following table sets forth the properties held by Fund XX as of September, 2020, the date each property was acquired, the ownership interest in the property, the acquisition cost, the date the initial lease term expires, the annual rental amount, and the Managing General Partner’s estimate of the current value of the property:
 
 
Property
Date Acquired
Ownership Interest (%)
Acquisition CostLease ExpirationAnnual Rent
Estimated Value (1)
Jared Jewelry
Hanover, MD
2/9/0450.001,989,1051/31/22203,9462,147,000
Staples
Vernon Hills, IL
5/22/0970.003,803,26810/31/23214,4802,523,000
Family Dollar
Mobile, AL
7/23/12100.001,439,7376/30/22119,9261,599,000
Fresenius
Green, OH
12/3/14100.002,443,4282/28/25175,8182,425,000
Dollar Tree
Indianapolis, IN
1/8/16100.001,786,9769/30/25117,3871,619,000
Bassett Furniture
Fredericksburg, VA
04/30/19100.003,165,89710/31/29215,2403,075,000
Total Estimated Value$13,388,000
 
  1. Estimated value at June 30, 2020. Fund XX has not obtained appraisals of these properties. The Managing General Partner 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.
  2. 12

Summary Financial Information
 
The following table provides operational data about Fund XX for the nine months ended September 30, 2020 and 2019 and for the years ended December 31, 2019 and 2018, on the basis of Fund XX continuing as a going concern:
 
 
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
166,032192,199241,265242,236
Depreciation271,752255,908346,492318,480
  Total Expenses437,784448,107587,757565,644
Operating Income357,200265,507389,092774,025
Other Income – Interest6,81451,76759,69318,824
Miscellaneous Income00050,689
Gain on Sale of Real Estate01,074,0401,074,0404,344,394
Net Income364,0141,391,3141,522,8255,187,932
Net Income Allocated to Limited Partners360,3741,377,4011,507,5975,112,380
Net Income Per LP Unit18.9270.7577.86256.92
Distributions Per LP Unit30.5242.3856.81116.14
 
The following table provides data on the financial condition of Fund XX on a historical cost basis at September 30, 2020 and 2019, and December 31, 2019 and 2018:
 
 September 30December 31
   2020  2019  2019  2018
Cash$2,882,273$3,288,026    $3,000,960$6,216,113
Receivables87,6110050,689
Investments in Real Estate, net11,734,06012,112,93612,027,3349,791,056
  Total Assets14,703,94415,400,96215,028,29416,057,858
Payable to Affiliate43,95258,37533,87266,190
Distributions Payable198,381277,778277,7791,494,952
Unearned Rent17,873017,87331,347
Acquired Below-Market Lease Intangible384,820427,188416,5960
  Total Liabilities645,026763,341746,1201,592,489
General Partners’ Capital39,14044,92841,37343,205
Limited Partners’ Capital14,019,77814,592,69314,240,80114,422,164
 
13

PROPOSAL #1 – LIQUIDATION
 
Reasons for the Liquidation Proposal
 
In July 2014, a majority of the limited partners voted to amend the limited partnership agreement of Fund XX to continue operations for five years, after which the Managing General Partner 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, we are required to obtain the consent of holders of a majority of the outstanding units to sell all or substantially all of the Fund’s assets.
 
Effects of the Liquidation Proposal
 
Operations. If limited partners holding a majority of the outstanding units vote in favor of the liquidation proposal, the Managing General Partner will take action to commence the sale of Fund XX’s properties and the liquidation of the Fund. The Managing General Partner will, from time to time, distribute the proceeds from the sale of properties to the extent it believes, in its sole discretion, that such proceeds are not required for operations during liquidation, not required to pay Fund obligations, or required to deal with contingent obligations. Once all of the Fund’s properties are sold, the Managing General Partner would wind up the affairs of the Fund and distribute any net sales proceeds and remaining reserves to the limited partners and the General Partners. The Fund would then be dissolved and cease operations. Under Section 12.1 of the limited partnership agreement, this dissolution does not require, and the Fund will not ask you for, any additional vote.
 
Distributions. As set forth under the caption “Background of the Fund – Properties”, the Managing General Partner estimates the current value of Fund XX’s properties at approximately $13,388,000, not including cash from recent property sales of approximately $2,234,000. Neither the Managing General Partner nor Fund XX has obtained any independent appraisal or opinion regarding the value of the Fund’s properties. This valuation is based upon the rental rates generated by each property and the capitalization rates that the Managing General Partner believes are applicable in the markets in which the properties are located.
 
It is not possible for the Managing General Partner 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 affect 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 Partner, and (d) there are no other extraordinary partnership expenses, the Managing General Partner estimates that approximately $16,090,000 of proceeds will be available for distribution from sale of properties and cash reserves. Of that amount, approximately $15,929,000 or $836 per unit would be available for distribution to limited partners. Because some of these assumptions will inevitably be inaccurate, and the Managing General Partner’s estimates of value cannot be precise, the actual amounts available for distribution to partners will vary from these estimates and the variation may be material.
 
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.
14

 
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. It does not purport to deal with all aspects of federal income taxation that may be relevant to a particular limited partner with respect to such limited partner’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 the 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, 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.
 
General. Fund XX, as a partnership for federal income tax purposes, is not subject to federal income tax; instead, each partner is required to take into account such partner’s distributive share of the Fund’s income, gains, losses, deductions, credits and tax preference items in computing the partner’s federal income tax liability for any taxable year, without regard to whether the partner has received any distribution from the Fund.
 
For federal income tax purposes, the liquidation process consists of two separate components: (1) the sale by Fund XX of its properties; and (2) the distribution of cash to each limited partner in liquidation (a "liquidating distribution") of the partner's interest in Fund XX. Each of these is separately discussed below
 
Sale of Fund XX's properties. For federal income tax purposes, each limited partner will be required to include in its income such partner’s allocable share of the gain or loss realized by Fund XX upon the sale of the Fund’s properties. Gain will result primarily from the sale of a property, including both the real property and any improvements. Gain that 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 sold.
 
Distribution to the 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 the limited partner’s units, as such basis is adjusted to reflect any gain or loss realized by Fund XX on the sale of its 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 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 properties 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 carried forward indefinitely and allowed in subsequent years as an offset against passive activity income. However, upon final liquidation of the Fund, any suspended passive activity losses of a limited partner with respect to its investment in Fund XX may be used to reduce other income of the limited partner.
15

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 based upon rental rates and market capitalization rates. The rate at which such rents are capitalized is 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 occupying the properties owned by Fund XX. A general economic downturn may affect the financial strength of the tenants. If tenants occupying the Fund’s properties are adversely affected, the Fund may experience an increased level of default in rental 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 may cause Fund XX to fail to realize the full value of its properties.
 
If the proposal to liquidate Fund XX is approved, the Managing General Partner will attempt to dispose of Fund XX’s properties during the next 24 to 36 months. The disposition of properties could generate less value to Fund XX and its limited partners than estimated, particularly if sales must be completed rapidly.
 
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 defaults on its lease obligations, or abandons a property, prior to its sale by Fund XX, the value of the property would likely be adversely affected, the Fund 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 may be delayed in its disposition of the property and final liquidation of the Fund.
 
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.
16

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.
17

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.
18

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 FUND’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 Section 7.7 so 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 for 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. 
19

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.
20

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 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.
21

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.
22

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’s Managing General Partner), by Robert P. Johnson (Fund XX’s Individual General Partner) and by each officer or director of the Managing General Partner as of September 30, 2020:
 
Name and Address
of Beneficial Owner
Number of
Units Held
Percent
of Class
   
AEI Fund Management XX, Inc.00.00%
Robert P. Johnson280.13%
Marni J. Nygard00.00%
Keith E. Petersen00.00%
   
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 5% or more of the units.
 
CONSENT PROCEDURES
 
Your vote is important. Each limited partner is urged to initial, date and sign the enclosed Consent Form and return it in the enclosed postage prepaid envelope. If you require assistance completing the Consent Form, please call AEI Investor Relations, toll free at 800-328-3519.
 
Timing of the Consent Solicitation
 
We have fixed the close of business on January 1, 2021 as the record date for the determination of the limited partners entitled to vote on the proposals; the close of business on March 1, 2021 as the date by which Consent Forms must be received by us in order to be counted; and March 5, 2021 as the date by which the consents will be counted. You may revoke your consent at any time prior to March 1, 2021, provided we receive written revocation prior to that date.
 
To vote for one of these proposals, you must return a properly signed Consent Form that is received by AEI Fund Management XX, Inc. at 1300 Wells Fargo Place, 30 East 7th Street, St. Paul, Minnesota 55101.
 
Record Date and Votes Required for Approval
 
Only holders of record of units of limited partnership interest as of January 1, 2021, the record date, will be entitled to vote on the proposals. Voting by the limited partners is based upon the number of units held. As of January 1, 2021, there were 19,051.107 units 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 four 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, 9,525.554 units must be voted “FOR” the liquidation proposal, “FOR” the proposal to continue operations, or “FOR” the 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 a proposal.
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Procedures for Voting
 
Accompanying this Consent Statement is a Consent Form for each limited partner. By initialing the appropriate line on the Consent Form, you can indicate whether you vote “FOR” or “AGAINST” or “ABSTAIN” as to the proposals. 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, “FOR” Proposal #3 – to amend the unit repurchase plan, and “FOR” Proposal #4 – to allow the sale of joint venture interests to other AEI Affiliated Funds.
 
Limited partners who vote “FOR” Proposal #1 – to commence liquidation, do not have appraisal or similar rights under Minnesota law.
 
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 mail. Our staff will be available by telephone at 800-328-3519 to answer any questions concerning this Consent.
 
Mailing
 
This Consent Statement was first mailed to limited partners on or about January 7, 2021.
 
AEI Fund Management XX, Inc.
General Partner
 
/s/ Marni J. Nygard, President
24

EXHIBIT A
 
AMENDMENT TO LIMITED PARTNERSHIP AGREEMENT
(PROPOSAL #2)
 
We are proposing to amend and restate Section 11.3 of the Limited Partnership Agreement of AEI Net Lease Income & Growth Fund XX Limited Partnership to read in its entirety as follows:
 
11.3
Liquidity Event. 
 
(a) The Managing General Partner shall, on or before January 31, 2026, prepare 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 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 upon which the vote upon such proposal occurs.
25

EXHIBIT B
 
AMENDMENT TO LIMITED PARTNERSHIP AGREEMENT
(PROPOSAL #3)
 
We are proposing to amend and restate Section 7.7 of the Limited Partnership Agreement of AEI Net Lease Income & Growth Fund XX Limited Partnership to read in its entirety as follows:
 
7.7
Right to Present Units for Repurchase.
 
(a) Each Limited Partner shall have the right, subject to the provisions of this Section 7.7, to present his or her Units to the Partnership for repurchase by submitting a proper written request to the Managing General Partner specifying the number of Units he or she wishes repurchased. Such notice must be postmarked in January or July of each year (a “Presentment Period”). On March 31st and September 30th of each year (a “Repurchase Date”), and subject to the limitations set forth in Section 7.7(c), the Managing General Partner shall cause the Partnership to repurchase the Units of Limited Partners who have properly tendered their Units to the Partnership. The repurchase price per Unit shall be equal to ninety-five percent (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 after the Determination Date and prior to the Repurchase Date. The Managing General Partner shall calculate the repurchase price offered for Units based on its determination of the 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 repurchase in any year more than five percent (5%) of the total number of Units outstanding on January 1 of such year. In the event requests for repurchase of Units received in any given year exceed the five percent (5%) limitation, the Partnership shall accept the Units to be repurchased based upon the postmark date of the written notice of Limited Partners tendering such Units. Any Units tendered but not selected for repurchase in any given Presentment Period will be considered for repurchase in the next Presentment Period only if the Limited Partner re-tenders his or her Units. In no event shall the Partnership be obligated to repurchase Units if, in the sole discretion of the Managing General Partner, such repurchase would impair the capital or operation of the Partnership nor shall the Partnership repurchase any Units in violation of applicable legal requirements.
 
(d) For purposes of all calculations pursuant to Article V of this 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.
 
26

EXHIBIT C
 
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
 
INDEX TO FINANCIAL STATEMENTS
 
 
 
 
 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

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 sheets of AEI Net Lease Income & Growth Fund XX Limited Partnership (a Minnesota limited partnership) as of December 31, 2019 and 2018, and the related statements of income, changes in partners' capital (deficit), and cash flows for each of the years 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’s management. Our responsibility is to express an opinion on the 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 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, whether due to error or fraud. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.
 
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 regarding the amounts and disclosures in the financial statements. 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 statements. We believe that our audits provide a reasonable basis for our opinion.
  
Boulay PLLP
 
  
We have served as the Partnership’s auditor since 1992
  
Minneapolis, Minnesota
 
March 30, 2020
 
28

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
BALANCE SHEETS
 
ASSETS
 
  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.$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 these statements.
29

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENTS OF INCOME
 
 
  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 these statements.
30

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
 
 
  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 these statements.
31

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (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 these statements.
32

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
 
(1)  Organization –
 
AEI Net Lease Income & Growth Fund XX Limited 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”), the Managing General Partner.  Robert P. Johnson, the Chief 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 and his wife own a majority interest.  AEI Fund Management, Inc. (“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.
 
33

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
 
(1)  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 –
 
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.
 
34

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 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, 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 in one financial institution and at times during the year it may exceed FDIC insurance limits.
 
Receivables
 
Credit terms are extended to tenants in the normal course of business.  The Partnership performs ongoing credit evaluations of its 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’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.
 
35

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.  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 net leases, classified as operating leases.  The leases provide for base annual rental payments payable in monthly installments.  The Partnership recognizes rental income according to the terms of the individual leases.  For leases that 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.
 
Real Estate
 
Upon acquisition of real properties, the Partnership 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.
 
36

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 the 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.  For properties held for sale, the Partnership determines whether impairment has occurred by comparing the property’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 property to its net realizable value.
 
For financial reporting purposes, the buildings owned 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 the remaining life of the lease.
 
The disposition of a property or classification of a property as Real Estate Held for Sale by the Partnership does not represent a strategic shift that will have a major effect on the Partnership’s operations and financial results.  Therefore, the results from operating and selling the property are included in continuing operations.
 
The Partnership accounts for properties owned as tenants-in-common with affiliated entities 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, liabilities, revenues and expenses.
 
37

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’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, 2019 and 2018.
 
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 tenants 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 balance sheet must be provided in a note or separate statement.  The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of income is required to be filed.  The Partnership’s first presentation of year-to-date quarterly changes in partners’ capital was included in its Form 10‑Q for the quarter ended March 31, 2019.
38

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)
 
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 –
 
The Partnership owns the percentage interest shown below in the following properties as tenants-in-common with the affiliated entities listed:  Jared Jewelry store (50% – AEI Income & Growth Fund XXI Limited Partnership) and Staples store (70% – AEI Income & Growth Fund 27 LLC).
 
AEI received the following reimbursements for costs and expenses from the Partnership for the years ended December 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.
39

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
 
(4)  Real Estate Investments –
 
The Partnership leases its properties to tenants under net leases, classified as operating leases.  Under a net lease, the tenant is responsible for 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 10 to 18 years.  The leases provide the tenants with two to six five-year renewal options subject to the same terms and conditions as the primary term.  The lease for the Staples retail store was extended to end on October 31, 2023.  
 
The Partnership's properties are commercial, single-tenant buildings.  The Jared Jewelry store was constructed in 2001 and acquired in 2004.  The Staples store was constructed in 2008 and acquired in 2009.  The Family Dollar store was constructed and acquired in 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.
 
The cost of the properties not held for sale and related accumulated depreciation at December 31, 2019 are as follows:
PropertyLandBuildingsTotal
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 2018, the Partnership recognized depreciation expense of $246,696 and $250,372, respectively.
 
40

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
 
(4)  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
          
 
41

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.
 
42

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, 2019, the minimum future rent payments required by the leases are as follows:
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 2019 and 2018.
43

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
 
(5)  Major Tenants –
 
The following schedule presents rental income from individual tenants, or affiliated groups of tenants, who each contributed more than ten percent of the Partnership's total rental income for the years ended December 31:
 
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)  Partners’ Capital –
 
For the years ended December 31, 2019 and 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 represented $56.81 and $116.14 per Limited Partnership Unit outstanding using 19,364 and 19,899 weighted average Units in 2019 and 2018, respectively.  The distributions represented $56.81 and $116.14 per Unit of Net Income and $0 and $0 per Unit of return of capital in 2019 and 2018, respectively.
 
As part of the distributions discussed above, the Partnership distributed net sale proceeds of $315,385 and $1,362,183 in 2019 and 2018, respectively.  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 repurchase 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 1 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.  
44

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
 
(6)  Partners’ Capital – (Continued)
 
During 2019, the Partnership repurchased a total of 714.03 Units for $588,957 from 54 Limited Partners in accordance with the Partnership Agreement.  The Partnership acquired these Units using net sale proceeds.  During 2018, the Partnership repurchased a total of 250.16 Units for $216,363 from 15 Limited Partners.  The Partnership acquired these Units using Net Cash Flow from operations.  The repurchases increase the remaining Limited Partners' ownership interest in the Partnership.  As a result of these repurchases and pursuant to the Partnership Agreement, the General Partners received distributions of $5,949 and $2,185 in 2019 and 2018, respectively.
 
(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:
 
  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:
 
  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
     
45

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 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 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.  The Partnership is unable to estimate the impact the coronavirus will have on its financial results at this time.
 
 
 
 
46

 
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.$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 these statements.
47

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENTS OF INCOME
(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 these statements.
48

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(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 these statements.
49

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(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 these statements.
50

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 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 United 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’s latest annual report on Form 10K.
 
(2)  Organization –
 
AEI Net Lease Income & Growth Fund XX Limited 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”), the Managing General Partner. Robert P. Johnson, the Chief 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 and his wife own a majority interest. AEI Fund Management, Inc. (“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.
 
51

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
 
(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.
 
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 6 to 18 months and may again submit the option to liquidate to a vote by the Limited Partners at that time.
52

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 a significant effect on 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 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.
 
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. –
 
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.
 
53

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
 
(6)  Partners’ Capital – (Continued)
 
For the nine months ended September 30, 2020, the Partnership 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 Partnership. As a result of these repurchases and pursuant to the Partnership Agreement, the General Partners received distributions of $3,857 in 2019.
 
(7)  Fair Value Measurements –
 
As of September 30, 2020 and December 31, 2019, the Partnership had no assets or liabilities measured at fair value on a recurring basis or nonrecurring basis.
 
(8)  Coronavirus Outbreak –
 
During the first quarter of 2020, there was a global outbreak of a new strain of coronavirus, COVID-19 which continues to adversely impact global commercial activity and 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 has entered into rent deferral agreements with two tenants of the 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 May 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 tenant. April, May and June rent have been paid in the third quarter.
 
 
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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.
 
 
.
 
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CONSENT FORM
 
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
CONSENT OF LIMITED PARTNERS
 
This consent is presented by
AEI Fund Management XX, Inc., Managing General Partner
 
The undersigned, a Limited Partner of AEI Net Lease Income & Growth Fund XX Limited Partnership (“Fund XX”), hereby consents (unless otherwise directed below) to the proposals identified below as indicated below. Indicate your vote by placing an “X” or check mark on the appropriate line. Failure to vote will have the effect of voting “AGAINST” each proposal.
 
Please vote “FOR” only one of the first 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 _____          AGAINST ______        ABSTAIN ______
 
Proposal #2 – to continue Fund XX’s operations for an additional 60 months:
 
FOR _____          AGAINST ______          ABSTAIN ______
 
Please Vote on Proposal #3 – to amend Fund XX’s unit repurchase plan:
 
FOR _____          AGAINST ______          ABSTAIN ______
 
Please vote on Proposal #4 – to sell certain properties to other AEI Affiliated Funds:
 
FOR _____        AGAINST ______        ABSTAIN ______
 
The units held by the signing Limited Partner will be voted as directed. They will be voted "FOR" the proposal if no box is checked.
 
Please sign exactly as your name appears below. All owners of record and trustees must sign. When units are held by joint tenants, both owners must 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.
 
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 March 1, 2021.
 
Dated: ________________________
 
 
_____________________________________
_____________________________________
Signatory #1
 
Signatory #2
 
 
_____________________________________
_____________________________________
Signatory #3
 
Signatory #4
 
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