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AEI Net Lease Income & Growth Fund XX Limited Partnership

Filed: 31 Mar 22, 4:32pm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
 
For the Fiscal Year Ended:  December 31, 2021
 
Commission file number:  000-23778
 
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
 
 State of Minnesota 41-1729121 
 
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
     
 
30 East 7th Street, Suite 1300
St. Paul, Minnesota 55101
 (651) 227-7333 
 (Address of principal executive offices) (Registrant’s telephone number) 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
None None None
 
 
Securities registered pursuant to Section 12(g) of the Act:
 Limited Partnership Units 
 (Title of class) 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.     ☐ Yes    ☒ No
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Exchange Act.     ☐ Yes    ☒ No
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes    ☐ No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     ☒ Yes    ☐ No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☐ Large accelerated filer☐ Accelerated filer
☒ Non-accelerated filer☒ Smaller reporting company
☐ Emerging growth company 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
☐ Yes    ☒ No
 
As of June 30, 2021, there were 18,291.53 Units of limited partnership interest outstanding and owned by nonaffiliates of the registrant, which Units had an aggregate market value (based solely on the price at which they were sold since there is no ready market for such Units) of $18,291,530.
 
DOCUMENTS INCORPORATED BY REFERENCE
The registrant has not incorporated any documents by reference into this report.
1

PART I
 
ITEM 1. BUSINESS.
 
AEI Net Lease Income & Growth Fund XX Limited Partnership (the "Partnership" or the "Registrant") is a limited partnership which was organized pursuant to the laws of the State of Minnesota on September 2, 1992. The registrant is comprised of AEI Fund Management XX, Inc. (“AFM”) as Managing General Partner, the Estate of Robert P. Johnson , as the Individual General Partner, and purchasers of partnership units as Limited Partners. The Partnership offered for sale up to $24,000,000 of limited partnership interests (the "Units") (24,000 Units at $1,000 per Unit) pursuant to a registration statement effective January 20, 1993. 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 Partnership's offering terminated when the maximum subscription limit of 24,000 Limited Partnership Units ($24,000,000) was reached.
 
The Partnership was organized to acquire existing and newly constructed commercial properties located in the United States, to lease such properties to tenants under net leases, to hold such properties and to eventually sell such properties. From subscription proceeds, the Partnership purchased fourteen properties, including partial interests in five properties, at a total cost of $20,174,391. The balance of the subscription proceeds was applied to organization and syndication costs, working capital reserves and distributions, which represented a return of capital. The properties are commercial, single tenant buildings leased under net leases.
 
The Partnership's properties were purchased without any indebtedness. The Partnership will not finance properties in the future to obtain proceeds for new property acquisitions. If it is required to do so, the Partnership may incur short-term indebtedness, which may be secured by a portion of the Partnership's properties, to finance day-to-day cash flow requirements (including cash flow necessary to repurchase Units). The amount of borrowings that may be secured by the properties is limited in the aggregate to 10% of the purchase price of all properties. The Partnership will not incur borrowings to pay distributions and will not incur borrowings while there is cash available for distributions.
 
The Partnership will hold its properties until the General Partners determine that the sale or other disposition of the properties is advantageous in view of the Partnership's investment objectives. In deciding whether to sell properties, the General Partners will consider factors such as potential appreciation, net cash flow and income tax considerations. The Partnership expects to sell some or all of its properties prior to its final liquidation and to reinvest the proceeds from such sales in additional properties. The Partnership reserves the right, at the discretion of the General Partners, to either distribute proceeds from the sale of properties to the Partners or to reinvest such proceeds in additional properties, provided that sufficient proceeds are distributed to the Limited Partners to pay federal and state income taxes related to any taxable gain recognized as a result of the sale.
 
In January 2021, the Managing General Partner mailed a Consent Statement (Proxy) seeking the consent of the Limited Partner, as required by Section 6.1 of the Limited Partnership Agreement, to initiate the final disposition, liquidation and distribution of all of the Partnership’s properties and assets within the next 12 to 24 months. On March 3, 2021, the proposal was approved with a majority of Units voting in favor of the proposal. As a result, the Managing General Partner is proceeding with the planned liquidation of the Partnership.
2

ITEM 1. BUSINESS. (Continued)
 
Leases
 
Although there are variations in the specific terms of the leases, the following is a summary of the general terms of the Partnership's leases. The properties are leased to 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 leases provide for base annual rental payments, payable in monthly installments, and contain rent clauses which entitle the Partnership to receive additional rent in future years based on stated rent increases.
 
Property Activity During the Last Three Years
 
As of December 31, 2018, the Partnership owned interests in six properties with a total cost of $12,764,125. During the years ended December 31, 2019 and 2021 the Partnership sold five properties and received net sale proceeds of $2,073,311 and $9,287,870 which resulted in net gains of, $1,074,040 and $853,999, respectively. During 2019, the Partnership expended $3,165,897 to purchase one additional property as it reinvested cash generated from property sales. As of December 31, 2021, the Partnership owned interests in two properties with a total cost of $3,400,005.
 
Major Tenants
 
During 2021, six tenants each contributed more than ten percent of the Partnership’s total rental income. The major tenants in aggregate contributed 100% of total rental income in 2021. It is anticipated that, based on the minimum rental payments required under the leases, the tenant Family Dollar store will continue to contribute more than ten percent of rental income in 2022. The tenants of the Staples Retail store, Fresenius Medical Center, Dollar Tree store and Basset Furniture store will not continue to be major tenants because the properties were sold in 2021. Any failure of this major tenant could materially affect the Partnership's net income and cash distributions.
 
Competition
 
The Partnership is a minor factor in the commercial real estate business. There are numerous entities engaged in the commercial real estate business which have greater financial resources than the Partnership. At the time the Partnership elects to dispose of its properties, the Partnership will be in competition with other persons and entities to find buyers for its properties.
3

ITEM 1. BUSINESS. (Continued)
 
Employees
 
The Partnership has no direct employees. Management services are performed for the Partnership by AEI Fund Management, Inc. (Management Company), an affiliate of AFM. For the past two fiscal years, despite the COVID-19 pandemic, the Management Company has not made any reductions to employee compensation plans or employee benefit plans. The Management Company has increased the number of employees from 36 on December 31, 2020 to 39 at December 31, 2021 to support AFM’s business operations.
 
The Management Company believes the people who work for the company are its most important resources and are critical to its continued success. The Management Company focuses significant attention toward attracting and retaining talented and experienced individuals to manage and support its operations. The Management Company’s people are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. All of the Management Company’s employees must adhere to a code of conduct that is outlined in AEI’s employee handbook which sets standards for appropriate behavior which includes preventing, identifying, reporting and stopping any type of discrimination.
 
Compensation and Benefits
 
The Management Company believes its compensation package and benefits are competitive with others in its industry. In addition to base pay, all eligible employees participate in the Management Company bonus program. The Management Company also offers employees a broad range of benefits, including medical, dental and ancillary health benefits and paid parental leave.
 
Workplace Safety and Wellness
 
The safety and well-being of the Management Company’s employees is its priority. During the COVID-19 pandemic, the Management Company implemented a COVID-19 Preparedness Plan which included safety protocols to assist in mitigating the risk of exposure to its employees and visitors. These protocols include complying with health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities. Many of the Management Company’s operational functions during this time have required modification, including most of its employees working remotely. The Management Company’s experienced teams of people adapted to the changes in the work environment and have managed business successfully during this challenging time.
 
ITEM 1A. RISK FACTORS.
 
Not required for a smaller reporting company.
 
ITEM 1B. UNRESOLVED STAFF COMMENTS.
 
Not required for a smaller reporting company.
 
ITEM 2. PROPERTIES.
4

 
Investment Objectives
 
The Partnership's investment objectives are to acquire existing or newly-developed commercial properties throughout the United States that offer the potential for (i) regular cash distributions of lease income; (ii) growth in lease income through rent escalation provisions; (iii) preservation of capital through all-cash transactions; (iv) capital growth through appreciation in the value of properties; and (v) stable property performance through long-term lease contracts. The Partnership does not have a policy, and there is no limitation, as to the amount or percentage of assets that may be invested in any one property. However, to the extent possible, the General Partners attempt to diversify the properties by tenant and geographic location.
 
Description of Properties
 
The Partnership's properties are commercial, single tenant buildings. The properties were acquired on a debt-free basis and are leased to tenants under net leases, classified as operating leases. The Partnership holds an undivided fee simple interest in the properties.
 
The Partnership's properties are subject to the general competitive conditions incident to the ownership of single tenant investment real estate. Since each property is leased under a longterm lease, there is little competition until the Partnership decides to sell the property. At this time, the Partnership will be competing with other real estate owners, on both a national and local level, in attempting to find buyers for the properties. In the event of a tenant default, the Partnership would be competing with other real estate owners, who have property vacancies, to attract a new tenant to lease the property. The Partnership's tenants operate in industries that are competitive and can be affected by factors such as changes in regional or local economies, seasonality and changes in consumer preference.
 
The following table is a summary of the properties that the Partnership acquired and owned as of December 31, 2021.
          
Property
Purchase
Date
 
Original Property
Cost
 Tenant
Annual
Lease
Payment
Annual
Rent
Per Sq. Ft.
          
Jared Jewelry Store
   Hanover, MD
   (50%)
2/9/04$1,989,105 
Sterling
Jewelers Inc.
$224,341$77.24
          
Family Dollar Store
   Mobile, AL
7/23/12$1,410,900(1)
Family Dollar Stores
of Alabama, Inc.
$119,926$14.66
          
          
 
(1) Does not include acquisition costs that were expensed.
 
The property listed above with a partial ownership percentage is owned with the following affiliated entity:  Jared Jewelry store (AEI Income & Growth Fund XXI Limited Partnership).
 
5

ITEM 2. PROPERTIES. (Continued)
 
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.
 
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.
 
Pursuant to the lease agreements, the tenants are required to provide proof of adequate insurance coverage on the properties they occupy. The General Partners believe the properties are adequately covered by insurance and consider the properties to be well-maintained and sufficient for the Partnership's operations.
 
For tax purposes, the Partnership's properties are depreciated under the Modified Accelerated Cost Recovery System (MACRS). The largest depreciable component of a property is the building which is depreciated using the straight-line method over 39 or 40 years. The remaining depreciable component of a property is land improvements which are depreciated using an accelerated method over 15 years. Since the Partnership has tax-exempt Partners, the Partnership is subject to the rules of Section 168(h)(6) of the Internal Revenue Code which requires a percentage of the properties' depreciable components to be depreciated over longer lives using the straight-line method. In general, the federal tax basis of the properties for tax depreciation purposes equals the book depreciable cost of the properties plus the amortizable cost of the related intangible lease assets, except for properties purchased during 2009 through 2017. For those properties, acquisition expenses that were expensed for book purposes were capitalized and added to the basis of the property for tax depreciation purposes.
 
At December 31, 2021, all properties listed above were 100% occupied.
 
ITEM 3. LEGAL PROCEEDINGS.
 
None.
 
ITEM 4. MINE SAFETY DISCLOSURES.
 
Not applicable.
 
 
6

PART II
 
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCK-
                 HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
 
(a) As of December 31, 2021, there were 1,230 holders of record of the registrant's Limited Partnership Units. There is no other class of security outstanding or authorized. The registrant's Units are not a traded security in any market. During the period covered by this report, the Partnership did not sell any equity securities that are not registered under the Securities Act of 1933.
 
Distributions of $108,893 and $7,857 were declared to the General Partners and $10,780,411 and $777,794 were declared to the Limited Partners for 2021 and 2020, respectively. The distributions were made on a quarterly basis and represented Net Cash Flow, as defined, except as discussed below. These distributions should not be compared with dividends paid on capital stock by corporations.
 
As part of the Limited Partners’ distributions discussed above, the Partnership distributed net sale proceeds of $10,130,941 and $73,126 in 2021 and 2020, respectively.
 
(b) Not applicable.
 
(c) Pursuant to Section 7.7 of the Partnership Agreement, as amended, each Limited Partner has the right to present Units to the Partnership for purchase by submitting notice to the Managing General Partner during January or July of each year. The purchase price of the Units is equal to 90% of the net asset value per Unit, as of the first business day of January or July of each year, as determined by the Managing General Partner in accordance with the provisions of the Partnership Agreement. Units tendered to the Partnership during January and July may be repurchased on April 1st and October 1st, respectively, of each year subject to the following limitations. 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.
 
Small Business Issuer Purchases of Equity Securities
 
Period
Total Number
of Units
Purchased
Average
Price Paid
per Unit
Total Number of Units
Purchased as Part of
Publicly Announced
Plans or Programs
Maximum Number
of Units that May Yet
Be Purchased Under
the Plans or Programs
     
10/1/21 to 10/31/21
99.85$436.105,780.32(1)(2)
     
11/1/21 to 11/30/21
--------
     
12/1/21 to 12/31/21
--------
 
(1)
The Partnership's repurchase plan is mandated by the Partnership Agreement as included in the prospectus related to the original offering of the Units.
(2)
The Partnership Agreement contains annual limitations on repurchases described in the paragraph above and has no expiration date.
7

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCK-
                 HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
 
Other Information
 
Effective April 11, 2016, the Financial Industry Regulatory Authority (“FINRA”) implemented Rule 2310, a revised rule that requires securities broker-dealers to report on customer account statements the value of investment units of non-traded securities, such as REITs, LLCs and Limited Partnerships, provided that the per unit value is derived using methodology set forth by the rule.
 
At December 31, 2021, the estimated value of the Partnership's Units was $520 per Unit. The Managing General Partner is the party responsible for the estimated value per Unit. The estimated value was derived using methodology that conforms to standard industry practice and based upon material assistance and/or confirmation by third-party valuation expert(s), in accordance with the appraised value method set forth in FINRA Rule 2340(c)(1)(B).
 
In determining the estimated value of each property, the Managing General Partner relied on some or all of the following external information sources, as well as its own experience in the commercial, net leased property industry and knowledge of each property:
 
Opinions of value from real estate brokerage firms
Appraisal reports from independent commercial property appraisers
Industry market reports from real estate brokerage and appraisal firms
Market values from comparable properties listed for sale or recently sold
Interviews with real estate brokers and tenants
Tenant financial reports and other credit information, where available
 
The per Unit value was the aggregate estimated value of the Partnership's assets less the Partnership's liabilities, and less the value attributable to the interest of the General Partners, divided by the number of Units outstanding. The Partnership's cash, receivables and liabilities were valued at face value as of September 30, 2021. Each of the Partnership's properties were valued by dividing their annual rental income as of December 1, 2021 by a capitalization rate the Managing General Partner believed, based upon the aforementioned valuation process, to be representative of the retail market for the sale of each property. The resulting value for each property was reviewed to determine that it also reflected circumstances that may have been unique to each specific property. For recently acquired properties, an appraisal report received at or near the time of acquisition from an independent commercial property appraiser was used to determine the value of the property. The appraisal report is used to value the property for approximately one year after the date of acquisition. The valuations were estimates only, and were based on a number of assumptions which may not be accurate or complete. In addition, property values are subject to change and could decline after the date of the valuations. Accordingly, this estimated value should not be viewed as the amount at which a Limited Partner may be able to sell his units, or the fair market value of the Partnership properties, nor does it represent the amount of net proceeds Limited Partners would receive if the Partnership properties were sold and the proceeds distributed in a liquidation of the Partnership.
 
8

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCK-
                 HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
 
The following table provides a breakdown of each major asset type, liabilities and the number of Units that were used to calculate the estimated value per Unit, using the methodology described above, as of December 31, 2021 and 2020:
 
  
December 31,
2021
 
December 31,
2020
Properties
$4,311,000$13,183,000
Cash
 9,546,000 2,959,000
Current liabilities
 (4,292,000) (249,000)
Value attributable to the interest of the General Partners
 (95,000) (159,000)
Value attributable to the interest of the Limited Partners
$9,470,000$15,734,000
Limited Partnership Units outstanding
 18,220 19,051
     
 
ITEM 6. (Reserved)
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
 
This section contains "forward-looking statements" which represent management's expectations or beliefs concerning future events, including statements regarding anticipated application of cash, expected returns from rental income, growth in revenue, the sufficiency of cash to meet operating expenses, rates of distribution, and other matters. These, and other forward-looking statements, should be evaluated in the context of a number of factors that may affect the Partnership's financial condition and results of operations, including the following:
 
Market and economic conditions which affect the value of the properties the Partnership owns and the cash from rental income such properties generate;
the federal income tax consequences of rental income, deductions, gain on sales and other items and the effects of these consequences for the Partners;
resolution by the General Partners of conflicts with which they may be confronted;
the success of the General Partners of locating properties with favorable risk return characteristics;
the effect of tenant defaults; and
the condition of the industries in which the tenants of properties owned by the Partnership operate.
 
9

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
 
Application of Critical Accounting Policies
 
The Partnership’s financial statements have been prepared in accordance with US GAAP. Preparing the financial statements requires management to use judgment in the application of these accounting policies, including making estimates and assumptions. These judgments will affect the reported amounts of the Partnership’s assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and will affect the reported amounts of revenue and expenses during the reporting periods. It is possible that the carrying amount of the Partnership’s assets and liabilities, or the results of reported operations, will be affected if management’s estimates or assumptions prove inaccurate.
 
Management of the Partnership evaluates the following accounting estimates on an ongoing basis, and has discussed the development and selection of these estimates and the management discussion and analysis disclosures regarding them with the managing partner of the Partnership.
 
Allocation of Purchase Price of Acquired Properties
 
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 relative 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.
 
10

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (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 determination of the relative fair values of the assets and liabilities acquired will require the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount and capitalization rates, interest rates and other variables. If management’s estimates or assumptions prove inaccurate, the result would be an inaccurate allocation of purchase price, which could impact the amount of reported net income.
 
Carrying Value of Properties
 
Properties are carried at original cost, less accumulated depreciation and amortization. The Partnership tests long-lived assets 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, management determines whether impairment has occurred by comparing the property’s probability-weighted future undiscounted cash flows to its current carrying value. For properties held for sale, management 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. Changes in these assumptions or analysis may cause material changes in the carrying value of the properties.
 
Allocation of Expenses
 
AEI Fund Management, Inc. allocates expenses to each of the funds they manage primarily on the basis of the number of hours devoted by their employees to each fund’s affairs. They also allocate expenses at the end of each month that are not directly related to a fund’s operations based upon the number of investors in the fund and the fund’s capitalization relative to other funds they manage. The Partnership reimburses these expenses subject to detailed limitations contained in the Partnership Agreement.
 
11

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
 
Factors Which May Influence Results of Operations
 
The Partnership is not aware of any material trends or uncertainties, other than national economic conditions affecting real estate generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues and investment property value. However, due to the outbreak of the coronavirus (COVID-19) in the U.S. and globally, our tenants and operating partners may be impacted. See Note 8 on COVID-19 effect on our operations. The impact of COVID-19 on our future results could still be significant and will largely depend on continuing developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, the success of actions taken to contain or treat COVID-19, and reactions by consumers, companies, governmental entities and capital markets.
 
Results of Operations
 
For the years ended December 31, 2021 and 2020, the Partnership recognized rental income of $711,238 and $1,060,101, respectively. In 2021, rental income decreased due to the sale of four properties. Based on the scheduled rent for the properties owned as of February 28, 2022, the Partnership expects to recognize rental income of approximately $46,000 in 2022.
 
For the years ended December 31, 2021 and 2020, the Partnership incurred Partnership administration expenses from affiliated parties of $122,692 and $156,960, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and communicating with the Limited Partners. During the same periods, the Partnership incurred Partnership administration and property management expenses from unrelated parties of $71,996 and $61,482, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit costs, taxes, insurance and other property costs.
 
In May 2021, the Partnership entered into an agreement to sell 2.36 acres of land in Fredericksburg, Virginia to an unrelated third party. Based on its long-lived asset valuation analysis, the Partnership determined the land was impaired. As a result, in the second quarter of 2021, the Partnership recognized real estate impairment of $133,134 to decrease the carrying value to the estimated fair value of $3,022,000. The charge was recorded against the cost of the land. On July 23, 2021, the sale closed with the Partnership receiving net proceeds of $3,010,150, which resulted in a net loss of $11,850. At the time of sale, the cost and related accumulated amortization was $3,032,763 and $10,763, respectively.
 
12

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
 
In July 2021, the Partnership entered into an agreement to sell its 70% interest in the Staples retail store in Vernon Hills, Illinois to an unrelated third party. Based on its long-lived asset valuation analysis, the Partnership determined the Staples store was impaired. As a result, in the second quarter of 2021, the Partnership recognized real estate impairment of $413,789 to decrease the carrying value to the estimated fair value of $2,156,000. The charge was recorded against the cost of the land and building. On September 10, 2021, the sale closed with the Partnership receiving net proceeds of $2,108,832, which resulted in a net loss of $47,168. At the time of the sale, the cost and related accumulated depreciation and amortization was $3,300,849 and $1,144,849, respectively.
 
For the years ended December 31, 2021 and 2020, the Partnership recognized interest income of $4,712 and $7,522, respectively. In 2021 interest income decreased due to the Partnership’s liquidating distributions made throughout 2021.
 
Management believes inflation has not significantly affected income from operations. Leases may contain rent increases, based on the increase in the Consumer Price Index over a specified period, which will result in an increase in rental income over the term of the leases. Inflation also may cause the real estate to appreciate in value. However, inflation and changing prices may have an adverse impact on the operating margins of the properties' tenants, which could impair their ability to pay rent and subsequently reduce the Net Cash Flow available for distributions.
 
Liquidity and Capital Resources
 
During the year ended December 31, 2021, the Partnership's cash balance increased $2,425,582 as a result of cash generated from the sale of properties, which was partially offset by distributions paid to the Partners and cash used to repurchase Units in excess of cash generated from operating activities. During the year ended December 31, 2020 the Partnership's cash balances decreased $118,549 as a result of distributions paid to the Partners in excess of cash generated from operating activities.
 
Net cash provided by operating activities decreased from $746,500 in 2020 to $574,338 in 2021 as a result of a decrease in total rental and interest income, net timing differences in the collection of payments from the tenants and the payment of expenses in 2021 which was partially offset by a decrease in Partnership administration expenses in 2021.
 
The major components of the Partnership's cash flow from investing activities are investments in real estate and proceeds from the sale of real estate. During the year ended December 31, 2021, the Partnership generated cash flow from the sale of real estate of $9,287,870.
 
In March 2021, the Partnership entered into an agreement to sell the Dollar Tree store in Indianapolis, Indiana to an unrelated third party. On April 20, 2021, the sale closed with the Partnership receiving net proceeds of $1,608,689, which resulted in a net gain of $187,451. At the time of sale, the cost and related accumulated depreciation and amortization was $1,739,074 and $317,836, respectively.
 
13

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
 
In May 2021, the Partnership entered into an agreement to sell the Fresenius Medical Center in Green, Ohio to an unrelated third party. On June 29, 2021, the sale closed with the Partnership receiving net proceeds of $2,560,199, which resulted in a net gain of $725,566. At the time of sale, the cost and related accumulated depreciation and amortization was $2,360,000 and $525,367, respectively.
 
In July 2021, the Partnership entered into an agreement with the tenant of the Jared Jewelry store in Hanover, Maryland to extend the lease term seven years to end on January 21, 2029. As part of the agreement, the annual rent will decrease from $224,340 to $167,500 effective February 1, 2022.
 
In December 2021, the Partnership entered into an agreement to sell its 50% interest in the Jared Jewelry store in Hanover, Maryland to an unrelated third party. On February 14, 2022, the sale closed with the Partnership receiving net proceeds of approximately $2,464,000, which resulted in a net gain of approximately $1,147,000. At the time of sale, the cost and related accumulated depreciation was $1,989,105 and $672,124, respectively.
 
The Partnership's primary use of cash flow, other than investment in real estate, is distribution payments to Partners and cash used to repurchase Units. The Partnership declares its regular quarterly distributions before the end of each quarter and pays the distribution in the first week after the end of each quarter. The Partnership attempts to maintain a stable distribution rate from quarter to quarter. The Partnership may repurchase tendered Units on April 1st and October 1st of each year subject to limitations.
 
For the year ended December 31, 2021 and 2020, the Partnership declared distributions of $10,889,304 and $785,651, respectively, which were distributed 99% to the Limited Partners and 1% to the General Partners. The Limited Partners were allocated distributions of $10,780,411 and $777,794 and the General Partners were allocated distributions of $108,893 and $7,857 for the periods, respectively. The Partnership temporarily reduced distribution rates for the three month periods ended June 30 and September 30, 2020 due to rent deferral agreements entered with tenants and concerns regarding the ongoing COVID-19 situation.
 
As part of the distributions discussed above, the Partnership distributed net sale proceeds of $10,233,274 and $73,865 in 2021 and 2020, respectively. The Limited Partners were allocated distributions of $10,130,941 and $73,126 and the General Partners were allocated distributions of $102,333 and $739 for the periods, respectively. The Limited Partners’ distributions represented $554.25 and $3.84 per Unit for the periods, 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.
14

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
 
During 2021, the Partnership repurchased a total of 831.43 Units for $579,858 from 39 Limited Partners in accordance with the Partnership Agreement. The Partnership acquired these Units using net sales proceeds. During 2020, the Partnership did not repurchase any Units from the Limited Partners. In prior years, the Partnership repurchased a total of 4,948.89 Units for $3,926,476 from 358 Limited Partners. 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 $5,857 in 2021.
 
The continuing rent payments from the properties, together with cash generated from property sales, should be adequate to fund continuing distributions and meet other Partnership obligations on both a short-term and long-term basis.
 
Off-Balance Sheet Arrangements
 
As of December 31, 2021 and 2020, the Partnership had no material off-balance sheet arrangements that had or are reasonably likely to have current or future effects on its financial condition, results of operations, liquidity or capital resources
 
ITEM 7A. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
Not required for a smaller reporting company.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
See accompanying index to financial statements.
 
15

 
 
 
 
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
 
INDEX TO FINANCIAL STATEMENTS
 
 
 
 
 Page
  
Report of Independent Registered Public Accounting Firm
17
  
Balance Sheets as of December 31, 2021 and 2020
19
  
Statements for the Years Ended December 31, 2021 and 2020:
 
  
 
Income
20
   
 
Cash Flows
21
   
 
Changes in Partners’ Capital
22
  
Notes to Financial Statements
23 – 36
 
 
16

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) (the “Partnership”) as of December 31, 2021 and 2020, and the related statements of income, changes in partners' capital, and cash flows for each of the years in the two-year period ended December 31, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, 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.
 
Critical Audit Matters
 
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion of the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.  
 
 
 
 
17

Impairment of Real Estate Investments
 
Description of the matter
 
As described in Note 2 to the financial statements, the Partnership tests investments in real estate for recoverability when events or changes in circumstances indicate that the carrying value may not be recoverable.  Management determines whether impairment has occurred by comparing the property’s probability-weighted future undiscounted cash flows to its carrying value.  The Partnership’s undiscounted future cash flows analysis requires management to make significant estimates and assumptions related to future rental rates, occupancy levels, costs to obtain a tenant, holding expenses while vacant, and estimated sale proceeds.  If the expected future are less than the carrying value of the property, the Partnership recognizes an impairment loss equal to the amount by which the carrying value of the property exceeds the fair value of the property.  Fair value is determined based on independent appraisals, selling prices of comparable properties, sale agreements under negotiation, and/or final selling pricing.  
We identified the impairment of real estate investments as a critical audit matter because of the significant estimates and assumptions management makes to evaluate the recoverability of real estate investments.  Given these factors, the related audit effort in evaluating management’s assumptions in determining recoverability of real estate assets was extensive and required a high degree of auditor judgement.  
 
How We Addressed the Matter in Our Audit
 
Our audit procedures related to the Partnership’s real estate recoverability analysis included the following, among others:
 
We obtained an understanding and evaluated the design of controls over management’s evaluation of recoverability of real estate property assets, including managements process for determining the key inputs utilized in estimating the undiscounted future cash flows.
 
We evaluated the undiscounted cash flow analysis, including management’s estimates of tenant occupancy, future rental income and estimated sales proceeds, for each real estate asset with possible impairment indicators by evaluating the adequacy and reasonableness of the source information and assumptions used by management and testing mathematical accuracy of the analysis.  
 
We made inquires of management regarding the current status of potential transitions and about management’s judgements to understand the probability of future events that could affect the cash flow assumptions for the properties.  For the property sold in 2022, we compared net selling proceeds to its carrying value.
 
  
/s/ Boulay PLLP
Boulay PLLP
 
  
We have served as the Partnership’s auditor since 1992.
PCAOB ID 542
 
Minneapolis, Minnesota
 
March 30, 2022
 
18

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
BALANCE SHEETS
 
ASSETS
 
  December 31, December 31,
  2021 2020
Current Assets:    
Cash$5,307,993$2,882,411
Rent Receivable 2,833 84,778
Total Current Assets 5,310,826 2,967,189
     
Real Estate Investments:    
Land 300,000 5,964,702
Buildings 635,489 7,400,945
Acquired Intangible Lease Assets 475,411 1,458,807
Real Estate Held for Investment, at cost 1,410,900 14,824,454
Accumulated Depreciation and Amortization (651,801) (3,188,152)
Real Estate Held for Investment, Net 759,099 11,636,302
Real Estate Held for Sale 1,316,981 0
Total Real Estate Investments 2,076,080 11,636,302
Long-Term Rent Receivable 0 2,833
Total Assets$7,386,906$14,606,324
 
LIABILITIES AND PARTNERS' CAPITAL
 
Current Liabilities:    
Payable to AEI Fund Management, Inc.$7,599$32,474
Distributions Payable 4,236,774 198,381
Unearned Rent 0 17,873
Total Current Liabilities 4,244,373 248,728
     
Long-term Liabilities:    
Acquired Below-Market Lease Intangibles, Net 0 374,228
     
Partners’ Capital:    
General Partners 7,700 38,384
Limited Partners – 24,000 Units authorized;
    18,220 and 19,051 Units issued and outstanding
   as of December 31, 2021 and 2020, respectively
 3,134,833 13,944,984
Total Partners' Capital 3,142,533 13,983,368
Total Liabilities and Partners' Capital$7,386,906$14,606,324
The accompanying Notes to Financial Statements are an integral part of these statements.
19

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENTS OF INCOME
 
 
  Years Ended December 31
  2021 2020
     
Rental Income$711,238$1,060,101
     
Expenses:    
Partnership Administration – Affiliates 122,692 156,960
Partnership Administration and Property
   Management – Unrelated Parties
 71,996 61,482
Depreciation and Amortization 194,154 362,336
Real Estate Impairment 546,923 0
Total Expenses 935,765 580,778
     
Operating Income (224,527) 479,323
     
Other Income:    
Gain on Sale of Real Estate 853,999 0
Interest Income 4,712 7,522
Total Other Income 858,711 7,522
     
Net Income$634,184$486,845
     
Net Income Allocated:    
General Partners$84,066$4,868
Limited Partners 550,118 481,977
Total$634,184$486,845
     
Net Income per Limited Partnership Unit$29.77$25.30
     
Weighted Average Units Outstanding –
      Basic and Diluted
 18,477 19,051
     
 
 
 
 
 
 
 
 
The accompanying Notes to Financial Statements are an integral part of these statements.
20

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
 
 
     
  Years Ended December 31
  2021 2020
     
Cash Flows from Operating Activities:    
Net Income$634,184$486,845
     
Adjustments to Reconcile Net Income
To Net Cash Provided by Operating Activities:
    
Depreciation and Amortization 205,200 348,664
Real Estate Impairment 546,923 0
Gain on Sale of Real Estate (853,999) 0
(Increase) Decrease in Receivables 84,778 (87,611)
Increase (Decrease) in Payable to
   AEI Fund Management, Inc.
 (24,875) (1,398)
Increase (Decrease) in Unearned Rent (17,873) 0
Total Adjustments (59,846) 259,655
Net Cash Provided By (Used For)
   Operating Activities
 574,338 746,500
     
Cash Flows from Investing Activities:    
Proceeds from Sale of Real Estate 9,287,870 0
Net Cash Provided By (Used For)
   Investing Activities
 9,287,870 0
     
Cash Flows from Financing Activities:    
Distributions Paid to Partners (6,850,911) (865,049)
Repurchase of Partnership Units (585,715) 0
Net Cash Provided By (Used For)
   Financing Activities
 (7,436,626) (865,049)
     
Net Increase (Decrease) in Cash 2,425,582 (118,549)
     
Cash, beginning of year 2,882,411 3,000,960
     
Cash, end of year$5,307,993$2,882,411
     
 
The accompanying Notes to Financial Statements are an integral part of these statements.
21

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
 
 
  General Partners Limited Partners Total Limited Partnership Units Outstanding
         
         
Balance, December 31, 2019$41,373$14,240,801$14,282,174 19,051.11
         
Distributions Declared (7,857) (777,794) (785,651)  
         
Net Income 4,868 481,977 486,845  
         
Balance, December 31, 2020 38,384 13,944,984 13,983,368 19,051.11
         
Distributions Declared (108,893) (10,780,411) (10,889,304)  
         
Repurchase of Partnership Units (5,857) 
(579,858)
 (585,715) (831.43)
         
Net Income 84,066 550,118 634,184  
         
Balance, December 31, 2021$7,700$3,134,833$3,142,533 18,219.68
         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying Notes to Financial Statements are an integral part of these statements.
22

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(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. The Estate of Robert P. Johnson serves as the Individual General Partner. AFM is a wholly owned subsidiary of AEI Capital Corporation of which the Robert P. Johnson Trust and Patricia Johnson, 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.
23

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(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 January 2021, 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 March 3, 2021, the proposal was approved with a majority of Units voting in favor of the proposal. As a result, the Managing General Partner is proceeding with the planned liquidation of the Partnership.
 
(2)  Summary of Significant Accounting Policies –
 
Financial Statement Presentation
 
The accounts of the Partnership are maintained on the accrual basis of accounting for both federal income tax purposes and financial reporting purposes.
 
Accounting Estimates
 
Management uses estimates and assumptions in preparing these financial statements in accordance with 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 the allocation of purchase price of real estate assets and intangible assets.
 
24

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(2)  Summary of Significant Accounting Policies – (Continued)
 
The Partnership regularly assesses whether market events and conditions indicate that it is reasonably possible to recover the carrying amounts of its investments in real estate from future operations and sales. A change in those market events and conditions could have a material effect on the carrying amount of its real estate.
 
Cash Concentrations of Credit Risk
 
The Partnership's cash is deposited in one financial institution and at times during the year it may exceed FDIC insurance limits.
 
Rent 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.
 
Rent 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.
 
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 2018, and with few exceptions, is no longer subject to state tax examinations for tax years before 2018.
 
25

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(2)  Summary of Significant Accounting Policies – (Continued)
 
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 deferred rents due to COVID-19, the Partnership recognizes the deferred rent related to the month it applies and records a rental receivable. 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 Investments
 
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 relative 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.
26

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(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 equal to 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, intangible assets, liabilities, revenues and expenses.
 
 
27

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(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, 2021 and 2020.
 
Fair Value Measurements
 
Fair value, as defined by US GAAP, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. US GAAP establishes a hierarchy in determining the fair value of an asset or liability. The fair value hierarchy has three levels of inputs, both observable and unobservable. US GAAP requires the utilization of the lowest possible level of input to determine fair value. Level 1 inputs include quoted market prices in an active market for identical assets or liabilities. Level 2 inputs are market data, other than Level 1 inputs, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data.
 
As of December 31, 2021 and 2020, the Partnership had no assets or liabilities measured at fair value on a recurring basis or nonrecurring basis. The Partnership had the following nonfinancial assets measured on a nonrecurring basis that were recorded at fair value during 2021.
 
The Bassett Furniture store in Fredricksburg, Virginia with a carrying amount of $3,155,134 at June 30, 2021, was written down to its estimated fair value of $3,022,000 after completing our long-lived asset valuation analysis. The resulting impairment charge of $133,134 was included in earnings for the second quarter of 2021. The fair value of the property was based upon a signed purchase agreement, which is considered a Level 2 input in the valuation hierarchy.
 
The Staples retail store in Vernon Hills, Illinois with a carrying amount of $2,569,789 at June 30, 2021, was written down to its estimated fair value of $2,156,000 after completing our long-lived asset valuation analysis. The resulting impairment charge of $413,789 was included in earnings for the second quarter of 2021. The fair value of the property was based upon a signed purchase agreement, which is considered a Level 2 input in the valuation hierarchy.
 
28

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(2)  Summary of Significant Accounting Policies – (Continued)
 
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, 2021 and 2020.
 
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 April 2020, the Financial Accounting Standards Board (FASB) issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under existing lease guidance, the Partnership would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant or if a lease concession was under the enforceable rights and obligations within the existing lease agreement. The Lease Modification Q&A clarifies that entities may elect to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under current lease guidance. Instead, an entity that elects not to evaluate whether a concession directly related to COVID-19 is a modification can then elect whether to apply the modification guidance.
 
During the year ended December 31, 2020, the Partnership provided lease concessions to certain tenants in response to the impact of COVID-19, in the form of rent deferrals. The Partnership has made an election to account for such lease concessions consistent with how those concessions would be accounted for under lease guidance if enforceable rights and obligations for those concessions had already existed in the leases. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights as lessor, including concessions that result in the total payments required by the modified lease being substantially the same as or less than total payments required by the original lease.
 
Substantially all of the Partnership’s concessions to date provide for a deferral of payments with no substantive changes to the consideration in the original lease. These deferrals affect the timing, but not the amount, of the lease payments. The Partnership is accounting for these deferrals as if no changes to the lease were made. Under this accounting, the Partnership increases its rent receivables as tenant payments accrue and continues to recognize rental income. During the year ended December 31, 2020, the Partnership has entered into lease modifications that deferred $87,611, which was recognized as rental income for those deferred months in 2020. The rent receivable related to these rental deferrals is $2,833 as of December 31, 2021.
29

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(2)  Summary of Significant Accounting Policies – (Continued)
 
Other accounting standards that have been issued or proposed by the FASB are currently not applicable to the Partnership or are not expected to have a significant impact on the Partnership’s financial position, results of operations and cash flows.
 
(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). The Partnership owned a 70% interest in a Staples store; AEI Income and Growth Fund 27 LLC, an affiliate of the Partnership, owned a 30% interest in the property until the property was sold to an unrelated third party in 2021.
 
AEI received the following reimbursements for costs and expenses from the Partnership for the years ended December 31:
   2021 2020
      
 
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.
$122,692$156,960
      
 
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.
$71,996$61,482
      
 
AEI is reimbursed for costs incurred in providing services and direct expenses related to the acquisition of property on behalf of the Partnership.
$0$0
      
 
AEI is reimbursed for costs incurred in providing services related to the sale of property on behalf of the Partnership.
$53,454$0
      
 
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.
 
30

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(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 Partnership's properties are commercial, single-tenant buildings. The Jared Jewelry store was constructed in 2001 and acquired in 2004. The Family Dollar store was constructed and acquired in 2012. There have been no costs capitalized as improvements subsequent to the acquisitions.
 
The cost of the property not held for sale and related accumulated depreciation at December 31, 2021 is as follows:
PropertyLandBuildingsTotal
Accumulated
Depreciation
         
Family Dollar, Mobile, AL
 $300,000 $635,489 $935,489 $200,362
         
 
For the years ended December 31, 2021 and 2020, the Partnership recognized depreciation expense of $138,906 and $246,696, respectively.
 
The following schedule presents the cost and related accumulated amortization of acquired lease intangibles not held for sale at December 31:
  2021 2020
  Cost Accumulated Amortization Cost Accumulated Amortization
In-Place Lease Intangibles
   (weighted average life of  6 and 70 months, respectively)
$190,845 181,218$1,174,241$507,331
         
Above-Market Lease Intangibles
   (weighted average life of  6 and 18 months, respectively)
 284,566 270,221 284,566 241,525
          Acquired Intangible Lease Assets
$475,411 451,439$1,458,807$748,856
         
Acquired Below-Market Lease Intangibles
   (weighted average life of 0 and 106 months, respectively)
$0 0$444,840$70,612
         
 
For the years ended December 31, 2021 and 2020, the value of in-place lease intangibles amortized to expense was $55,248 and $115,640, 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 $17,650 and $42,368, respectively.
31

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(4)  Real Estate Investments – (Continued)
 
For lease intangibles not held for sale at December 31, 2021, 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
          
2022 $9,627 $14,345 $0
2023  0  0  0
2024  0  0  0
2025  0  0  0
2026  0  0  0
  $9,627 $14,345 $0
          
 
In March 2021, the Partnership entered into an agreement to sell the Dollar Tree store in Indianapolis, Indiana to an unrelated third party. On April 20, 2021, the sale closed with the Partnership receiving net proceeds of $1,608,689, which resulted in a net gain of $187,451. At the time of sale, the cost and related accumulated depreciation and amortization was $1,739,074 and $317,836, respectively.
 
In May 2021, the Partnership entered into an agreement to sell the Fresenius Medical Center in Green, Ohio to an unrelated third party. On June 29, 2021, the sale closed with the Partnership receiving net proceeds of $2,560,199, which resulted in a net gain of $725,566. At the time of sale, the cost and related accumulated depreciation and amortization was $2,360,000 and $525,367, respectively.
 
In May 2021, the Partnership entered into an agreement to sell 2.36 acres of land in Fredericksburg, Virginia to an unrelated third party. Based on its long-lived asset valuation analysis, the Partnership determined the land was impaired. As a result, in the second quarter of 2021, the Partnership recognized real estate impairment of $133,134 to decrease the carrying value to the estimated fair value of $3,022,000. The charge was recorded against the cost of the land. On July 23, 2021, the sale closed with the Partnership receiving net proceeds of $3,010,150, which resulted in a net loss of $11,850. At the time of sale, the cost and related accumulated amortization was $3,032,763 and $10,763, respectively.
 
In July 2021, the Partnership entered into an agreement to sell its 70% interest in the Staples retail store in Vernon Hills, Illinois to an unrelated third party. Based on its long-lived asset valuation analysis, the Partnership determined the Staples store was impaired. As a result, in the second quarter of 2021, the Partnership recognized real estate impairment of $413,789 to decrease the carrying value to the estimated fair value of $2,156,000. The charge was recorded against the cost of the land and building. On September 10, 2021, the sale closed with the Partnership receiving net proceeds of $2,108,832, which resulted in a net loss of $47,168. At the time of the sale, the cost and related accumulated depreciation and amortization was $3,300,849 and $1,144,849, respectively.
32

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(4)  Real Estate Investments – (Continued)
 
In July 2021, the Partnership entered into an agreement with the tenant of the Jared Jewelry store in Hanover, Maryland to extend the lease term seven years to end on January 21, 2029. As part of the agreement, the annual rent will decrease from $224,340 to $167,500 effective February 1, 2022.
 
In December 2021, the Partnership entered into an agreement to sell its 50% interest in the Jared Jewelry store in Hanover, Maryland to an unrelated third party. On February 14, 2022, the sale closed with the Partnership receiving net proceeds of approximately $2,464,000, which resulted in a net gain of approximately $1,147,000. At the time of sale, the cost and related accumulated depreciation was $1,989,105 and $672,124, respectively.
 
For properties owned as of December 31, 2021, the minimum future rent payments required by the leases are as follows:
2022$232,200
2023 167,500
2024 167,500
2025 167,500
2026 167,500
Thereafter 348,959
 $1,251,159
   
 
There were no contingent rents recognized in 2021 and 2020.
 
(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   2021 2020
       
Bassett Direct NC, LLC
  $137,999$257,608
Staples the Office Superstore East, Inc.
   148,349 214,480
Dollar Tree / Family Dollar Group
   126,772 208,618
Sterling Jewelers Inc.
   210,461 203,946
Bio-Medical Applications of Ohio, Inc.
   87,657 175,449
Aggregate rental income of major tenants
  $711,238$1,060,101
Aggregate rental income of major tenants
as a percentage of total rental income
   100% 100%
       
 
33

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(6)  Partners’ Capital –
 
For the years ended December 31, 2021 and 2020, the Partnership declared distributions of $10,889,304 and $785,651, respectively. The Limited Partners were allocated distributions of $10,780,411 and $777,794 and the General Partners were allocated distributions of $108,893 and $7,857 for the years, respectively. The Limited Partners' distributions represented $583.45 and $40.83 per Limited Partnership Unit outstanding using 18,477 and 19,051 weighted average Units in 2021 and 2020, respectively. The distributions represented $29.77 and $25.30 per Unit of Net Income and $553.68 and $15.53 per Unit of return of capital in 2021 and 2020, respectively.
 
As part of the distributions discussed above, the Partnership distributed net sale proceeds of $10,233,274 and $73,865 in 2021 and 2020, respectively. The Limited Partners were allocated distributions of $10,130,914 and $73,126 and the General Partners were allocated distributions of $102,333 and $739 for the years, respectively. The Limited Partners’ distributions represented $554.25 and $3.84 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.
 
During 2021, the Partnership repurchased a total of 831.43 Units for $579,858 from 39 Limited Partners in accordance with the Partnership Agreement. The Partnership acquired these Units using net sale proceeds. During 2020, the Partnership did not repurchase any Units from the Limited Partners. 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 $5,857 in 2021.
 
34

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(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:
 
  2021 2020
     
Net Income for Financial Reporting Purposes
$634,184$486,845
     
Depreciation for Tax Purposes Under Depreciation
    and Amortization for Financial Reporting Purposes
 53,527 115,234
     
Income Accrued for Tax Purposes Over (Under)
    Income for Financial Reporting Purposes
 (17,873) 0
     
Gain on Sale of Real Estate for Tax Purposes
    Over (Under) Gain for Financial Reporting Purposes
 (646,730) 0
Taxable Income to Partners$23,108$602,079
     
 
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:
 
  2021 2020
     
Partners' Capital for Financial Reporting Purposes
$3,142,533$13,983,368
     
Adjusted Tax Basis of Investments in Real Estate
    Over Net Investments in Real Estate
    for Financial Reporting Purposes
 525,792 1,118,995
     
Income Accrued for Tax Purposes Over
    Income for Financial Reporting Purposes
 0 17,873
     
Syndication Costs Treated as Reduction
    of Capital For Financial Reporting Purposes
 3,271,273 3,271,273
Partners' Capital for Tax Reporting Purposes$6,939,598$18,391,509
     
 
35

AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
 
(8)  COVID-19 Outbreak –
 
During the first quarter of 2020, there was a global outbreak of 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 COVID-19. Nevertheless, COVID-19 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 were paid in the third quarter.
 
36

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                ACCOUNTING AND FINANCIAL DISCLOSURE.
 
None.
 
ITEM 9A. CONTROLS AND PROCEDURES.
 
(a)  Disclosure Controls and Procedures.
 
Under the supervision and with the participation of management, including its President and Chief Financial Officer, the Managing General Partner of the Partnership evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, the President and Chief Financial Officer of the Managing General Partner concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to management, including the President and Chief Financial Officer of the Managing General Partner, in a manner that allows timely decisions regarding required disclosure.
 
(b)  Internal Control Over Financial Reporting.
 
(i) Management’s Report on Internal Control Over Financial Reporting. The Managing General Partner, through its management, is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, and for performing an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP. Our system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of management of the Managing General Partner; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Partnership's assets that could have a material effect on the financial statements.
 
Management of the Managing General Partner performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021 based upon criteria in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment, management of the Managing General Partner determined that our internal control over financial reporting was effective as of December 31, 2021 based on the criteria in Internal Control-Integrated Framework (2013) issued by the COSO.
37

ITEM 9A. CONTROLS AND PROCEDURES. (Continued)
 
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
 
(ii)  Changes in Internal Control Over Financial Reporting. During the most recent period covered by this report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
ITEM 9B. OTHER INFORMATION.
 
None.
 
 
PART III
 
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
 
The registrant is a limited partnership and has no officers, directors, or direct employees. The General Partners manage and control the Partnership's affairs and have general responsibility and the ultimate authority in all matters affecting the Partnership's business. The General Partners are AEI Fund Management XX, Inc. (“AFM”), the Managing General Partner, and The Estate of Robert P. Johnson, the Individual General Partner. AFM is a wholly owned subsidiary of AEI Capital Corporation of the Robert P. Johnson Trust and Patricia Johnson own a majority interest. AFM has only one senior financial executive, its Chief Financial Officer. The Chief Financial Officer reports directly to Marni J. Nygard, President of AFM, and Kevin Steele, Chief Operating Officer of AFM, and is accountable for his actions to both. Although AFM requires that all of its personnel, including the Chief Financial Officer, engage in honest and ethical conduct, ensure full, fair, accurate, timely, and understandable disclosure, comply with all applicable governmental laws, rules and regulations, and report to Ms. Nygard and Mr. Steele any deviation from these principles, because the organization is composed of only approximately 40 individuals, because the management of a company by an entity that has different interests in distributions and income than investors involves numerous conflicts of interest that must be resolved on a daily basis, and because the ultimate decision makers in all instances is Ms. Nygard and Mr. Steele, AFM has not adopted a formal code of conduct. Instead, the materials pursuant to which investors purchase Units disclose these conflicts of interest in detail and Ms. Nygard, as the President of AFM,  and Mr. Steele, as Chief Operating Officer of AFM, resolve conflicts to the best of their ability, consistent with their fiduciary obligations to AFM and the fiduciary obligations of AFM to the Company. The director and officers of AFM are as follows:
 
38

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
                 (Continued)
 
Robert P. Johnson, deceased, was Chief Executive Officer and sole director and has held these positions since the formation of AFM in September 1992, and has been elected to continue in these positions until December 2021. He was President of AFM from September 1992 to July 2019. From 1970 to his date of death, he has been employed exclusively in the investment industry, specializing in limited partnership investments. In that capacity, he was involved in the development, analysis, marketing and management of public and private investment programs investing in net lease properties as well as public and private investment programs investing in energy development. Since 1971, Mr. Johnson was the president, a director and a registered principal of AEI Securities, Inc., which is registered with the SEC as a securities broker-dealer, is a member of the Financial Industry Regulatory Authority (FINRA) and is a member of the Security Investors Protection Corporation (SIPC). Mr. Johnson was Chief Executive Officer, a director and the principal shareholder of AEI Fund Management, Inc., a real estate management company founded by him, since 1978. Mr. Johnson was a general partner or principal of the general partner in eight limited partnerships up until his date of death.
 
Marni J. Nygard, Esq., age 47, is President of AFM and has held this position since July 11, 2019, when she assumed the role from Mr. Johnson. She has been elected to continue in this position until December 2022. Ms. Nygard continues as Chief Investment Officer for AEI and is a General Securities Principal of AEI Securities, Inc. She joined AEI in 2005 and is responsible for the implementation of AEI’s acquisition investment objectives and strategies. As President, she drives corporate initiatives for the development, analysis, marketing and management of AEI public and private Funds investing in net leased commercial properties. Prior to joining AEI, she was employed as an attorney at CI Title in St. Paul, Minnesota in the residential and commercial property departments.
 
Kevin S. Steele, age 58, is Chief Operations Officer and has held this position since August 1,  2020. He joined AEI in 2012 and is responsible for AEI’s net lease commercial property acquisition strategy and sourcing through the development of business relationships with preferred corporate developers, tenant corporations, and net lease property owners. Kevin is responsible for leading the execution of the organizational strategy established by the leadership team.  Kevin has more than 30 years of sales, marketing, and corporate business operations experience. Prior to joining AEI, he was employed with Sheraton Hotels and Stan Johnson Company as well as the owner operator of a Midwest grocery company.
 
Patrick W. Keene, CPA (inactive), age 62, was Chief Financial Officer, Treasurer and Secretary of AFM from January 22, 2003 to January 31, 2020, when he retired from AEI. Mr. Keene had been employed by AEI Fund Management, Inc. and affiliated entities since 1986. Prior to being elected to the positions above, he was Controller of the various entities. From 1982 to 1986, Mr. Keene was with KPMG, an international accounting and auditing firm, first as an auditor and later as a tax manager. Mr. Keene was responsible for all accounting functions of AFM and the registrant.
 
39

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
                 (Continued)
 
Keith E. Petersen, CPA (inactive), age 47, is Chief Financial Officer, Treasurer and Secretary of AFM and has held these positions since February 1, 2020, when he assumed these roles from Mr. Keene. He has been elected to continue in these positions until December 2022. Mr. Petersen has been employed by AEI Fund Management, Inc. and affiliated entities since November 2016. Prior to being elected to the positions above, he was Controller of the various entities. Prior to joining AEI, Keith was employed with Pine River Capital Management as the Vice President of Tax Compliance and with Deloitte, an international accounting and auditing firm, as a Senior Tax Manager.
 
All of the duties that might be assigned to an audit committee are assigned to Patricia Johnson, the wife of the deceased. Mrs. Johnson is not an audit committee financial expert, as defined.
 
Before the independent auditors are engaged, Mrs. Johnson, as the sole director of AFM, approves all audit-related fees, and all permissible nonaudit fees, for services of our auditors.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Under federal securities laws, the directors and officers of the General Partner of the Partnership, and any beneficial owner of more than 10% of a class of equity securities of the Partnership, are required to report their ownership of the Partnership's equity securities and any changes in such ownership to the Securities and Exchange Commission (the "Commission"). Specific due dates for these reports have been established by the Commission, and the Partnership is required to disclose in this Annual Report on 10-K any delinquent filing of such reports and any failure to file such reports during the fiscal year ended December 31, 2021. Based upon information provided by officers and directors of the General Partner, all officers, directors and 10% owners filed all reports on a timely basis in the 2021 fiscal year.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
The General Partner and affiliates are reimbursed at cost for all services performed on behalf of the registrant and for all third party expenses paid on behalf of the registrant. The cost for services performed on behalf of the registrant is based on actual time spent performing such services plus an overhead burden. These services include organizing the registrant and arranging for the offer and sale of Units, reviewing properties for acquisition and rendering administrative, property management and property sales services. The amount and nature of such payments are detailed in Item 13 of this annual report on Form 10-K.
 
40

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
 
The following table sets forth information pertaining to the ownership of the Units by each person known by the Partnership to beneficially own 5% or more of the Units, by each General Partner, and by each officer or director of the Managing General Partner as of February 28, 2022:
 
Name and Address
of Beneficial Owner
Number of
Units Held
Percent
of Class
   
AEI Fund Management XX, Inc.
00.00%
Robert P. Johnson Trust
280.15%
Marni J. Nygard
00.00%
Kevin S. Steele
00.00%
Keith E. Petersen
00.00%
   
Address for all:
  
1300 Wells Fargo Place
30 East 7th Street, St. Paul, Minnesota 55101
  
 
The persons set forth in the preceding table hold sole voting power and power of disposition with respect to all of the Units set forth opposite their names. The General Partners know of no holders of more than 5% of the outstanding Units.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
                  DIRECTOR INDEPENDENCE.
 
The registrant, AFM and its affiliates have common management and utilize the same facilities. As a result, certain administrative expenses are allocated among these related entities. All of such activities and any other transactions involving the affiliates of the General Partner of the registrant are governed by, and are conducted in conformity with, the limitations set forth in the Limited Partnership Agreement of the registrant. Reference is made to Note 3 of the Financial Statements, as presented, and is incorporated herein by reference, for details of related party transactions for the years ended December 31, 2021 and 2020.
 
Neither the registrant, nor the Managing General Partner of the registrant, has a board of directors consisting of any members who are “independent.”  In 2020 through date of his death, the sole director of the Managing General Partner, Robert P. Johnson, was also the Individual General Partner of the registrant, and was the Chief Executive Officer, and indirectly the principal owner, of the Managing General Partner. Patricia Johnson now serves as the sole director of the Managing General Partner.  Accordingly, there is no disinterested board, or other functioning body, that reviews related party transactions, or the transactions between the registrant and the General Partners, except as performed in connection with the audit of its financial statements.
 
41

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
                  DIRECTOR INDEPENDENCE. (Continued)
 
The limitations included in the Partnership Agreement require that the cumulative reimbursements to the General Partners and their affiliates for administrative expenses not allowed under the NASAA Guidelines ("Guidelines") will not exceed the sum of (i) the front-end fees allowed by the Guidelines less the front-end fees paid by the Partnership, (ii) the cumulative property management fees allowed by the Guidelines but not paid, (iii) any real estate commission allowed by the Guidelines, and (iv) 10% of Net Cash Flow less the Net Cash Flow actually distributed to the General Partners. The administrative expenses not allowed under the Guidelines include a controlling person's salary and fringe benefits, rent and depreciation. As of December 31, 2021, the cumulative reimbursements to the General Partners and their affiliates did not exceed those amounts.
 
The following table sets forth the forms of compensation, distributions and cost reimbursements paid by the registrant to the General Partners or their Affiliates in connection with the operation of the Fund for the period from inception through December 31, 2021.
 
Person or Entity
Receiving
Compensation
Form and Method
of Compensation
Amount Incurred From
Inception (September 2, 1992)
To December 31, 2021
    
AEI Securities, Inc.
Selling Commissions equal to 8% of proceeds plus a 2% nonaccountable expense allowance, most of which was reallowed to Participating Dealers.
$2,398,039
    
General Partners and Affiliates
Reimbursement at Cost for other Organization and Offering Costs.
$884,013
    
General Partners and Affiliates
Reimbursement at Cost for all Acquisition Expenses.
$1,216,771
    
General Partners and Affiliates
Reimbursement at Cost for providing administrative services to the Fund, including all expenses related to management of the Fund's properties and all other transfer agency, reporting, partner relations and other administrative functions.
$6,506,458
    
General Partners and Affiliates
Reimbursement at Cost for providing services related to the disposition of the Fund's properties.
$1,119,407
    
General Partners
1% of Net Cash Flow in any fiscal year until the Limited Partners have received annual, non-cumulative distributions of Net Cash Flow equal to 10% of their Adjusted Capital Contributions and 10% of any remaining Net Cash Flow in such fiscal year.
$384,784
    
General Partners
1% of distributions of Net Proceeds of Sale until Limited Partners have received an amount equal to (a) their Adjusted Capital Contributions, plus (b) an amount equal to 12% of their Adjusted Capital Contributions per annum, cumulative but not compounded, to the extent not previously distributed. 10% of distributions of Net Proceeds of Sale thereafter.
$190,748
42

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
 
The following is a summary of the fees billed to the Partnership by Boulay PLLP for professional services rendered for the years ended December 31, 2021 and 2020:
 
Fee Category 2021 2020
     
Audit Fees
$21,710$20,830
Audit-Related Fees
 0 0
Tax Fees
 0 0
All Other Fees
 0 0
Total Fees$21,710$20,830
     
 
Audit Fees - Consists of fees billed for professional services rendered for the audit of the Partnership’s annual financial statements and review of the interim financial statements included in quarterly reports, and services that are normally provided by Boulay PLLP in connection with statutory and regulatory filings or engagements.
 
Audit-Related Fees - Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of financial statements and are not reported under "Audit Fees." These services include consultations concerning financial accounting and reporting standards.
 
Tax Fees - Consists of fees billed for professional services for federal and state tax compliance, tax advice and tax planning.
 
All Other Fees - Consists of fees for products and services other than the services reported above.
 
Policy for Preapproval of Audit and Permissible Non-Audit Services
 
Before the Independent Registered Public Accounting Firm is engaged by the Partnership to render audit or non-audit services, the engagement is approved by Mrs. Johnson acting as the Partnership’s audit committee.
 
 
43

PART IV
 
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
 
(a) (1) A list of the financial statements contained herein is set forth on page 16.
 
(a) (2) Schedules are omitted because of the absence of conditions under which they are required or because the required information is presented in the financial statements or related notes.
 
(a) (3) The Exhibits filed in response to Item 601 of Regulation S-K are listed below.
 
3.1
Certificate of Limited Partnership (incorporated by reference to Exhibit 3.1 of the registrant's Registration Statement on Form SB-2 filed November 9, 1992 [File No. 3354354-C]).
 
3.2
Limited Partnership Agreement (incorporated by reference to Exhibit 3.2 of the registrant's Registration Statement on Form SB-2 filed November 9, 1992 [File No. 3354354-C]).
 
10.1
Assignment and Assumption of Lease dated February 9, 2004 between the Partnership, AEI Income & Growth Fund XXI Limited Partnership and Transmills, LLC relating to the Property at 7684 Arundel Mills, Hanover, Maryland (incorporated by reference to Exhibit 10.2 of Form 8-K filed February 24, 2004).
 
10.2
Assignment and Assumption of Purchase and Sale Agreement dated May 6, 2009 between the Partnership, AEI Income & Growth Fund 27 LLC and AEI Fund Management, Inc. relating to the Property at 1600 North Milwaukee Avenue, Vernon Hills, Illinois (incorporated by reference to Exhibit 10.1 of Form 8-K filed May 29, 2009).
 
10.3
Assignment and Assumption of Lease dated May 22, 2009 between the Partnership, AEI Income & Growth Fund 27 LLC and Bradford Landing South LLC relating to the Property at 1600 North Milwaukee Avenue, Vernon Hills, Illinois (incorporated by reference to Exhibit 10.2 of Form 8-K filed May 29, 2009).
 
10.4
Assignment of Purchase Agreement dated December 1, 2014 between the Partnership and AEI Property Corporation relating to the Property at 1565 Corporate Woods Parkway, Green, Ohio (incorporated by reference to Exhibit 10.1 of Form 8-K filed December 8, 2014).
 
10.5
Assignment and Assumption of Lease dated December 3, 2014 between the Partnership and Professional Center Associates, Limited Partnership relating to the Property at 1565 Corporate Woods Parkway, Green, Ohio (incorporated by reference to Exhibit 10.2 of Form 8-K filed December 8, 2014).
 
10.6
Purchase and Sale Agreement dated August 31, 2018 between the Partnership and L.A.E. Properties, Inc. relating to the Property at 1410 Jamboree Drive, Colorado Springs, Colorado (incorporated by reference to Exhibit of Form 8-K filed November 5, 2018).
 
10.7
Assignment of Purchase Agreement dated April 26, 2019 between the Partnership and AEI Property Corporation relating to the property at 1551 Carl D. Silver Parkway, Fredericksburg, Virginia (incorporated by reference to Exhibit 10.1 of Form 8-K filed May 6, 2019).
 
10.8
Assignment and Assumption of Lease dated April 30, 2019 between the Partnership and Mach II MCB Silver Portfolio Owner One, LLC relating to the property at 1551 Carl D. Silver Parkway, Fredericksburg, Virginia (incorporated by reference to Exhibit 10.2 of Form 8-K filed May 6, 2019).
 
31.1
Certification of Chief Executive Officer of General Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002.
 
31.2
Certification of Chief Financial Officer of General Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002.
 
32
Certification of Chief Executive Officer and Chief Financial Officer of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
44

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
   
 
AEI NET LEASE INCOME & GROWTH FUND XX
 
Limited Partnership
 
By:
AEI Fund Management XX, Inc.
  
Its Managing General Partner
   
   
March 30, 2022
By:
 /s/ Marni J Nygard
  
Marni J. Nygard, President
  
(Principal Executive Officer)
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 
Name Title Date
     
     
 /s/ Marni J Nygard
 
President
 March 30, 2022
Marni J. Nygard
 
(Principal Executive Officer)
  
     
     
 /s/ Keith E Petersen 
Chief Financial Officer and Treasurer
 March 30, 2022
Keith E. Petersen 
(Principal Accounting Officer)
  
 
45

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