SCHEDULE 14A INFORMATION
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OF THE SECURITIES EXCHANGE ACT OF 1934
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AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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December 3, 2008
Dear AEI Net Lease Income & Growth Fund XX Limited Partner:
This letter, and the enclosed attachments, are being
provided to request your vote on an important matter concerning
the operation of your Fund XX. Through the consent form attached
to the enclosed consent statement, we are asking you to vote for
one of two courses of action:
PROPOSAL #1. To continue Fund XX's operations for an
additional 60 months, for the reasons explained herein.
If Fund XX continues in operation, you will continue to
receive quarterly distributions, but will not receive
the capital from the liquidation of Fund XX and its
properties, if that were to occur at this time.
PROPOSAL #2. To cause Fund XX to begin selling its
properties and liquidate. If Fund XX begins the
liquidation process, you will begin to receive
liquidating capital as the Fund's properties are sold,
but your quarterly distributions from rents will
diminish because there will be fewer properties
generating rent for distribution.
WE RECOMMEND A "YES" VOTE FOR PROPOSAL #1 - THE ALTERNATIVE
TO CONTINUE THE OPERATIONS OF FUND XX FOR AN ADDITIONAL 60
MONTHS. You should read the consent statement carefully to
understand what is being proposed, as well as the risks presented
by the two alternatives outlined above.
If you have any questions about this communication or
information, please call AEI Client Services, toll free at 800-
328-3519.
Sincerely,
AEI FUND MANAGEMENT XX, INC.
AEI NET LEASE INCOME & GROWTH FUND XX
1300 Wells Fargo Place
30 East 7th Street
St. Paul, Minnesota 55101
CONSENT STATEMENT
We are sending this consent statement to all limited
partners of AEI Net Lease Income & Growth Fund XX L.P. ("Fund
XX") of record on November 1, 2008. We are soliciting your
consent, through the enclosed consent form, to two alternative
proposals for Fund XX:
PROPOSAL #1. Amendments to the limited partnership
agreement of Fund XX to allow it to continue in operation
for an additional 60 months and to increase the price at
which units may be repurchased under its unit repurchase
plan; or
PROPOSAL #2. In the alternative to Proposal #1, a
proposal to commence the sale of Fund XX properties,
followed by its liquidation.
To vote for ONE of these alternatives, you must return a
properly signed consent form that is received by AEI Fund
Management XX, Inc. at 1300 Wells Fargo Place, 30 East 7th
Street, St. Paul, Minnesota 55101, on or before 5:00 P.M.,
Central Time, on Janury 8, 2009. PLEASE DO NOTE VOTE FOR BOTH
ALTERNATIVES: THEY ARE MUTUALLY EXCLUSIVE AND CANNOT BE PURSUED
SIMULTANEOUSLY. WE ENCOURAGE YOU TO SIGN AND RETURN THE ENCLOSED
CONSENT FORM - YOUR VOTE IS IMPORTANT.
We are mailing this Consent Statement to you, as a limited
partner of Fund XX, on or about December 3, 2008.
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND THE CONSENT 3
SOLICITATION
SUMMARY OF PROPOSALS 8
INTRODUCTION AND BACKGROUND 9
Fund XX 9
Properties 9
Summary Financial Information 11
Background of the Proposals 11
PROPOSAL #1 - TO CONTINUE OPERATIONS 12
Amendments to the Limited Partnership Agreement 12
Reasons for the Proposal to Continue Operations 13
Effects of the Proposal to Continue Operations 13
Conflicts of Interest With the Proposal to Continue 14
Operations
Risks of the Proposal to Continue Operations 14
PROPOSAL #2 - LIQUIDATION 16
Reasons for the Liquidation Proposal 16
Effects of the Liquidation Proposal 16
Material Federal Income Tax Consequences 17
Risks of the Liquidation Proposal 18
UNIT OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT 19
CONSENT PROCEDURES 19
Exhibit A-Amendment to Limited Partnership Agreement 21
(Continuation Proposal)
Exhibit B-Financial Statements at and for the years ended 23
December 31, 2007 and 2006 and at and for the nine months
ended September 30, 2008 and 2007.
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND THE CONSENT
SOLICITATION
BACKGROUND
Q: WHAT ARE YOU ASKING?
A: We are asking you to either:
(1) vote to continue the operation of Fund XX for an
additional 60 months; or
(2) vote to begin selling Fund XX's properties and to
liquidate Fund XX.
DO NOT VOTE FOR BOTH PROPOSALS: THEY ARE MUTUALLY EXCLUSIVE.
Q: WHY ARE YOU ASKING FOR MY VOTE AT THIS TIME?
A: When we formed Fund XX in 1993, we stated that we expected
to liquidate Fund XX in 12 to 15 years. To liquidate Fund
XX, or to amend the limited partnership agreement to have
Fund XX continue in business, requires a vote of limited
partners.
Q: WHY AM I BEING PRESENTED WITH TWO ALTERNATIVE PROPOSALS?
A: Your General Partners believe that it is not the best real
estate market in which to begin liquidation and, considering
the low yields available from other investments, some Fund
XX investors may wish to have the Fund continue in business
with the expectation of continuing to receive on-going
quarterly distributions.
Your General Partners do not recommend liquidation at this
time. We do not believe that sale of properties and
liquidation of Fund XX is in the best interest of most of
our limited partners. Consequently, we want to provide an
alternative to those limited partners who would prefer that
Fund XX continues to operate. We believe that:
Fund XX is currently generating cash flow from its
properties that is as favorable as, or better than, the yields
from other investments. We believe that Fund XX remains an
attractive business as an on-going concern.
The current environment for sale of commercial properties is
not as favorable as it may be when the current credit situation
is behind us.
Continuation of Fund XX's operations may allow additional
capital gains to be generated from the sale of some properties
and the reinvestment of proceeds in replacement properties prior
to the final liquidation of Fund XX.
Continuation of Fund XX's operations will allow limited
partners to maintain their investment in income producing, net
leased commercial properties without incurring brokerage or other
up-front fees they could expect to incur if Fund XX is liquidated
and they elect to re-invest their capital in similar investments.
We cannot guarantee that these will be the consequences of
voting to continue the operation of Fund XX. The continued
operation of Fund XX will be subject to the same risks under
which it has been operating, including cyclical changes in
the real estate and credit markets, economic risks of
tenants who lease Fund XX properties, and conflicts of
interest faced by the General Partners in receiving fees and
reimbursements.
Q: MAY I VOTE FOR BOTH PROPOSALS?
A: NO, you should not vote for both proposals.
Proposal #1, if approved, will allow Fund XX to continue its
operations, while Proposal #2 will require the sale of its
properties and its liquidation. If neither proposal is
approved, Fund XX will continue in operation without a
specific time frame to liquidate and the enhanced repurchase
plan contained in Proposal #1 will not go into effect.
PROPOSAL #1 - TO CONTINUE OPERATIONS
Q: WHAT WILL HAPPEN IF LIMITED PARTNERS APPROVE THE FIRST
PROPOSAL: TO AMEND THE LIMITED PARTNERSHIP AGREEMENT TO
CONTINUE THE OPERATION OF FUND XX?
A: If a majority of the limited partners approve the proposal
to amend the limited partnership agreement, then:
The General Partners will not commence the sale of all
properties and liquidation of the Fund.
The Fund will continue in operation for at least an
additional 60 months;
After 60 months, the General Partners will, again, solicit
the vote of limited partners to continue or liquidate the Fund;
The Fund will continue to operate as it has operated prior
to the vote - owning commercial properties occupied by corporate
tenants under net leases, distributing rental income generated by
those properties, and periodically selling some properties to
generate capital gains for distribution while reinvesting the
remaining proceeds in replacement properties;
The Fund will offer an enhanced repurchase plan under which
(i) the repurchase price for units tendered will be equal to 90%
of the net asset value per unit (rather than the current
repurchase pricing formula which equates to approximately 42% of
the net asset value per unit), and (ii) the opportunity to tender
units for repurchase will be offered twice a year rather than
once a year.
Q: ARE THERE RISKS ASSOCIATED WITH THE PROPOSAL TO CONTINUE OPERATIONS?
A: If neither Proposal #1 nor #2 is approved, there will be no
definite date on which the partnership will liquidate and
the repurchase plan will remain at the current price level.
Although we believe that Proposal #1 reduces some of the
risks an indefinite continuation of Fund XX might present,
if Proposal #1 is approved, distributions of cash from final
sale of properties would be delayed until a subsequent
liquidation proposal is approved. Further, if Proposal #1 is
approved, the operations of Fund XX will continue to be
subject to the risks of an investment holding real estate,
including the following:
Market and economic conditions may adversely affect the
value of properties which Fund XX owns, or may purchase;
Any defaults by tenants may reduce rental income or delay
sale of Fund properties;
There will continue to be no public market for your limited
partnership units, and although Proposal #1 (to continue
operations) includes changes to Fund XX's repurchase plan, you
may not be able to dispose of your units through this plan, or
otherwise, at the time you wish;
If limited partners vote to continue the operation of Fund
XX after 60 months, your ability to receive proceeds from the
final sale of the Fund's properties may be further delayed;
The General Partners receive reimbursements of expenses
based on the capital value of the Fund and may not have the same
interest as limited partners in approving Proposal #1.
You should read the risk factors presented later in this
consent statement to fully understand the risks involved.
Q: DO THE GENERAL PARTNERS RECOMMEND THAT I VOTE FOR PROPOSAL #1?
A: YES. AEI FUND MANAGEMENT XX, INC., THE MANAGING GENERAL
PARTNER OF FUND XX, AND ROBERT P. JOHNSON, THE INDIVIDUAL
GENERAL PARTNER OF FUND XX, BOTH RECOMMEND A VOTE IN FAVOR
OF PROPOSAL #1.
Nevertheless, the General Partners believe that a decision
to vote for, or against, Proposal #1 depends upon the
financial objectives of each limited partner. If a limited
partner believes that he or she can generate a more
favorable return from other investments of similar risk, or
has an immediate need for cash, that limited partner may
wish to vote for Proposal #2. For most limited partners,
however, the General Partners believe that continued
ownership of income-producing commercial, net leased real
estate with leases that generate rental payments at the
level generated by Fund XX remains a favorable investment
that will be difficult to replace if the Fund is liquidated.
Q: WHY DOES PROPOSAL #1 INCLUDE AN AMENDMENT TO THE LIMITED
PARTNERSHIP AGREEMENT TO CHANGE THE REPURCHASE PLAN?
A: The change in the repurchase plan is intended to address
potential liquidity constraints that may be concerns of some
partners. Under the existing repurchase plan, as mandated by
the limited partnership agreement, repurchases are made at a
price equal to the adjusted capital contribution of a
limited partner, reduced by all prior distributions of net
cash flow. At September 30, 2008, this value was
approximately $459 per unit, while we estimate the net asset
value per unit on that date was approximately $1,097. We
represented when Fund XX first sold units that we expected
to commence liquidation of the Fund in 12 to 15 years. We
believe that, if limited partners approve a change in this
timetable, it is appropriate to provide a liquidity option
through the repurchase plan that more closely approximates
net asset value per unit. Accordingly, if Proposal #1 is
approved, Fund XX will price the repurchase of units at 90%
of the net asset value per unit at the time.
Q: DO THE GENERAL PARTNERS, OR MANAGEMENT OF THE GENERAL
PARTNERS, HAVE ANY INTEREST IN SEEING THESE AMENDMENTS
APPROVED?
A: Yes, the General Partners are reimbursed for the expenses
incurred in operating Fund XX, including expenses of
administering the Fund properties. If the Fund is
liquidated, these reimbursements would terminate. Although
the reimbursements are at cost, they are calculated on the
fully-loaded costs of the General Partners in providing the
services and, therefore, include a portion of the salaries
and other compensation expenses of the General Partners.
Although the General Partners also share in distributions
from Fund XX, we believe those distributions cannot exceed
1% of cash flow and 1% of sales proceeds. THEREFORE, WE
BELIEVE THAT THE GENERAL PARTNERS ARE IN THE SAME POSITION
AS LIMITED PARTNERS WITH RESPECT TO THESE DISTRIBUTIONS IN
MAKING A DECISION TO CONTINUE OR LIQUIDATE FUND XX.
Q: WILL THE PROPOSAL TO CONTINUE OPERATIONS HAVE ANY TAX
CONSEQUENCES FOR ME?
A: We do not believe there should be any tax consequences
resulting from the adoption of Proposal #1.
PROPOSAL #2 - LIQUIDATION
Q: IF THE GENERAL PARTNERS BELIEVE THAT CONTINUATION OF FUND XX
IS IN MY BEST INTERESTS, WHY IS THE LIQUIDATION PROPOSAL
ALSO BEING PRESENTED?
A: When we formed Fund XX in 1993, the offering documents
indicated that it was our intention to sell the properties
in 12 to 15 years, or when market conditions were most
advantageous. Under Section 6.1 of the limited partnership
agreement of Fund XX, we are required to obtain your
consent, as limited partners, to the sale of all or
substantially all of Fund XX's assets. Although we do not
believe that current market conditions are particularly
favorable, it is 15 years since the first admission of
limited partners to Fund XX. Accordingly, we have determined
to present our limited partners with the two proposals.
Q: WHAT WILL HAPPEN IF LIMITED PARTNERS APPROVE THE SECOND
PROPOSAL: TO HAVE FUND XX LIQUIDATED?
A: If limited partners approve the proposal to sell its
properties and liquidate Fund XX, the General Partners will
commence the orderly liquidation and sale of Fund XX's 15
real estate properties to independent buyers. We anticipate
that all sales could be completed within 24 months following
approval of the proposal. If Proposal #2 is approved, as the
sales are completed, Fund XX would distribute the proceeds
to you and other limited partners, less expenses, less the
General Partners' interest in the proceeds, and less a
reasonable reserve.
Q: IF THE LIQUIDATION PROPOSAL IS APPROVED, HOW MUCH WILL I
RECEIVE?
A: We will not know how much cash will be generated from the
sale of the properties until the sales are completed-the
value of the properties depends upon market conditions, and
the amount that we will be able to distribute depends upon
the terms of sale as well as expenses incurred to complete
the sale. Based upon current market conditions and
capitalization rates for similarly situated properties, and
on their own internal analysis without independent
appraisal, the General Partners estimate that the
"liquidation value" of the assets of Fund XX is
approximately $24,430,000 or approximately $1,097 per unit.
We are assuming in making this estimate that the properties
are sold in the normal course of business and without
extraordinary expense (such as might be incurred if a tenant
filed for protection under bankruptcy laws), that the
properties continue to generate rental income during the
sales period, and that the General Partners' interests are
subtracted prior to calculating the liquidation value per
unit. It is likely that the actual proceeds will vary from
this estimate and that any variation may be material.
Q: ARE THERE ANY NEGATIVE FACTORS THAT LIMITED PARTNERS SHOULD
CONSIDER IN CONNECTION WITH THE LIQUIDATION PROPOSAL?
A: The General Partners believe that:
This is not the most opportune time to sell properties: the
commercial real estate market is beginning to feel the effects of
the economy and sales have become more difficult to complete; and
It may be difficult for limited partners to redeploy sales
proceeds-to locate other investments that generate a return on
invested capital as high as the return being generated by Fund
XX.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE LIQUIDATION?
A: The sale of the properties and distribution of the
liquidation proceeds may generate both ordinary income and
capital gain or loss to the limited partners for United
States federal income tax purposes. Tax matters are very
complicated. Your tax consequences may depend on your
financial situation and whether you purchased your units in
the original offering or the secondary market. Please
consult your tax advisor to determine the tax consequences
of the liquidation.
Q: WHAT IF THE LIQUIDATION IS NOT APPROVED?
A: If the liquidation proposal is not approved by a majority of
units held by limited partners, then Fund XX will continue
to operate as a legal entity with its assets and
liabilities. If neither the liquidation proposal nor the
proposal to continue operations is approved, the repurchase
plan will remain at the current, lower, valuation per unit
level and the term of the partnership may continue until
2043.
THE CONSENT SOLICITATION PROCESS
Q: AM I REQUIRED TO VOTE ON EITHER PROPOSAL?
A: No. You are not required to vote. However, we cannot
complete the liquidation, or amend the limited partnership
to accommodate the enhanced repurchase plan that is a
feature of Proposal #1 (to continue operations), without the
approval of holders of at least a majority of the
outstanding units entitled to vote.
Q: How do I vote?
A: Please mark your VOTE, SIGN AND RETURN THE CONSENT FORM
using the enclosed postage paid envelope. Your consent form
must be received by 5:00 p.m., Central Time, on January 8,
2009 (unless this date and time is extended by Fund XX).
Q: MAY I REVOKE MY CONSENT?
A: Yes. Limited partners may withdraw or revoke their consent
at any time prior to the earlier of 5:00 p.m., Central Time,
on January 8, 2009. To be effective, a written or
facsimile revocation or withdrawal of the consent form must
be received prior to such time and addressed to AEI Fund
Management XX, Inc. at 1300 Wells Fargo Place, 30 East 7th
Street, St. Paul, Minnesota 55101 A notice of revocation or
withdrawal must specify the limited partner's name and the
number of units being withdrawn.
Q: DO LIMITED PARTNERS HAVE APPRAISAL RIGHTS?
A: Under Minnesota law, limited partners are not entitled to
appraisal rights with respect to the value of their units.
There will not be any procedure by which a limited partner
can seek an alternative valuation of his or her units,
regardless of whether the limited partner does or does not
consent to either proposal.
SUMMARY OF PROPOSALS
The following summarizes the proposals being presented to
limited partners of Fund XX. You should read this entire Consent
Statement to fully understand the proposals.
PROPOSAL #1-TO CONTINUE OPERATIONS:
Effect: If the proposal to
continue operations is approved, the limited
partnership agreement of Fund XX will be amended
to (a) set the year in which limited partners
would again vote on continuing or liquidating Fund
XX at 2013; (b) increase the repurchase price
contained in the repurchase provisions to 90% of
the net asset value per unit and cause the
opportunity to tender units for repurchase to be
offered twice, rather than once, per year. If the
proposal to continue operations is approved, you
will be asked to vote on these same two proposals
again in 2013.
Vote Required: Approval of the proposal to
continue operations requires the affirmative vote
of holders of a majority, by interest, of the
limited partners (excluding any units held by the
General Partners for their own account).
PROPOSAL #2-LIQUIDATION:
Effect: Approval of the
liquidation proposal is required in accordance
with Section 6.1 of the limited partnership
agreement prior to the sale of all of the assets
of Fund XX. If the liquidation proposal is
approved, the General Partners will commence the
orderly sale of Fund XX's properties and winding
up of its affairs, including distribution of
proceeds to partners in accordance with the
limited partnership agreement.
Vote Required: Approval of the liquidation
proposal requires the affirmative vote of the
Individual General Partner and holders of a
majority, by interest, of the limited partners
(excluding any units held by the General Partners
for their own account).
SOLICITATION AND This consent statement was prepared by, and
RECOMMENDATION: consents are being solicited by and
on behalf of, AEI Fund Management XX, Inc.,
the Managing General Partner of Fund XX. THE
GENERAL PARTNERS RECOMMEND A VOTE FOR PROPOSAL #1.
INTEREST OF GENERAL The General Partners have interests in the
PARTNERS: proposal to continue operations and
the liquidation proposal that are different from
the interests of limited partners because:
The General Partners receive reimbursements for the costs
they incur and services they provide to Fund XX, including
the compensation expense of their employees based on the
hours of services performed. These reimbursements will
terminate if the liquidation proposal is adopted and
Fund XX is dissolved.
The General Partners are entitled to indemnification in
instances defined in the limited partnership agreement
APPRAISAL RIGHTS: If you disagree with either proposal, you
will not have appraisal rights, or any right to
demand payment of the fair market value of your
units of limited partnership interest in Fund XX.
INTRODUCTION AND BACKGROUND
FUND XX
AEI Net Lease Income & Growth Fund XX Limited Partnership is
a Minnesota limited partnership formed in 1993. It raised $24
million through a public offering of its units. These proceeds
were used to purchase, for cash, commercial real estate leased
under net leases. Fund XX initially purchased 14 properties with
the net proceeds from the offering, including partial interests
in some of these properties. The prospectus under which the units
were originally offered indicated that properties would be sold
from time to time and the cash proceeds invested in additional
net leased properties.
Although we have not commenced the sale of properties in
final liquidation, we have, during the operation of Fund XX, sold
several properties and reinvested the majority of the proceeds in
replacement net leased properties. In all cases, we have
distributed enough cash for limited partners to pay the taxes
generated by any income or gain recognized by them on sale of the
properties.
PROPERTIES
As of September 30, 2008, Fund XX held interests in 15 net
leased properties. It, also, held cash from two recent property
sales totaling $2,152,460. All of the properties are subject to
net leases, under which the tenant pays substantially all of the
operating costs of the property. The tenants for all of the
properties are current with their rental payments and all of the
properties are fully occupied. The lease for one of property
expires on November 30, 2008 and the tenant has advised us that
they do not intend to renew it. Fund XX has retained a real
estate broker to market the property for sale or lease.
The following table sets forth the properties held by Fund
XX as of September 30, 2008, the date each property was acquired,
the ownership interest in the property, the acquisition cost, the
date the base lease term expires, the annual rental amount, and
the General Partners' estimate of the current value of the
property:
Date Ownership Acquisition Lease Annual Estimated
Property Acquired Interest% Cost Expiration Rent Value(1)
HomeTown Buffet
Albuquerque, NM 9/30/93 40.14 $ 531,331 1/31/11 $48,162 $ 481,600
Red Robin
Colorado
Springs, CO 2/24/94 100.00 2,229,190 12/31/17 325,000 4,391,900
Red Robin
Colorado
Springs, CO 2/24/94 100.00 1,755,441 11/30/08 156,060 1,116,000
Applebee's
McAllen, TX 12/8/94 100.00 1,320,104 12/31/14 224,994 2,647,000
Champps Americana
Utica, MI 2/12/02 44.00 1,511,134 2/28/22 190,780 1,837,300
KinderCare
Mayfield
Heights, OH 6/14/02 100.00 1,407,058 6/30/17 146,985 2,070,200
Biaggi's
Ristorante
Italiano
Ft. Wayne, IN 7/3/03 50.00 1,379,346 7/31/16 130,540 1,695,300
Johnny Carino's
Alexandria, LA 11/13/03 100.00 2,144,748 11/30/20 206,950 2,463,700
Jared Jewelry
Hanover, MD 2/9/04 50.00 1,989,105 1/31/22 168,551 2,478,700
Applebee's
Sandusky, OH 4/30/04 45.00 1,276,943 10/31/23 97,254 1,430,200
Tractor Supply
Company
Mesquite, TX 3/10/06 50.00 1,231,624 8/14/13 100,344 1,356,000
Four micellaneous
fractional
property Less 33,818 Various 4,522 44,800
interests Various than 2%
(1) Fund XX has not obtained appraisals of these properties. The
General Partners have valued the properties based upon rental
rates and prevailing capitalization rates which they believe are
applicable. We cannot assure you that we could sell the
properties at the estimated values set forth in the table.
SUMMARY FINANCIAL INFORMATION
The following table provides operational data about Fund XX
for the nine months ended September 30, 2008 and 2007 and for the
years ended December 31, 2007 and 2006, on the basis of Fund XX
continuing as a going concern:
Nine Months Ended Year Ended
September 30 December 31
2008 2007 2007 2006
Rental income $1,222,720 $1,256,170 $1,689,206 $1,620,066
Partnership 212,576 196,117 255,832 258,511
Administration &
Property Management
Expenses
Depreciation 252,781 252,786 338,525 332,241
Total Expenses 465,357 448,903 594,357 590,752
Operating Income 757,363 807,267 1,094,849 1,029,314
Other Income -
Interest 38,650 34,841 45,129 46,415
Income from Continuing
Operations 796,013 842,108 1.139,978 1,075,729
Income from Discontinued
Operations 829,788 194,971 252,179 363,653
Net Income 1,625,801 1,037,079 1,392,157 1,439,382
Net Income Allocated
to Limited Partners 1,609,543 1,026,708 1,378,235 1,424,988
Net Income Per LP Unit 73.01 46.52 62.47 64.40
Distributions Per
LP Unit 69.22 59.68 78.73 86.18
The following table provides data on the financial condition
of Fund XX at September 30, 2008 and 2007, and December 31, 2007
and 2006:
September 30 December 31
2008 2007 2007 2006
Cash and Cash
Equivalents $ 2,874,062 $ 1,098,409 $ 1,102,753 $ 1,083,159
Investments in Real
Estate, net 13,822,186 15,647,512 15,545,103 15,954,727
Total Assets 16,696,248 16,745,921 16,647,856 17,037,886
Payable to Affiliate 40,022 41,966 67,148 84,418
Distributions Payable 404,901 413,773 413,767 413,582
Total Liabilities 457,172 510,385 493,164 509,135
General Partners'
Capital 13,172 13,136 12,328 16,068
Limited Partners'
Capital 16,225,904 16,222,400 16,142,364 16,512,683
BACKGROUND OF THE PROPOSALS
Under Section 6.1 of the limited partnership agreement of
Fund XX, we are required to obtain your consent, as limited
partners, to the sale of all or substantially all of Fund XX's
assets. Although the limited partnership agreement does not
specify a date, prior to 2043, at which Fund XX must terminate,
the prospectus under which units were initially sold indicated
that it was our intention to sell the properties in 12 to 15
years, or when market conditions were most advantageous.
Although we do not believe that current market conditions
are particularly favorable, it is 15 years since the first
admission of limited partners to Fund XX. Accordingly, we have
determined to present to our limited partners two proposals: (1)
a proposal to continue operating Fund XX for an additional 60
months, after which we will again solicit the consent of the
limited partners with respect to liquidation, and (2) a proposal
to cause Fund XX to begin selling its properties and liquidate.
THE GENERAL PARTNERS RECOMMEND A VOTE "FOR" THE PROPOSAL TO
CONTINUE THE OPERATIONS OF FUND XX FOR AN ADDITIONAL 60 MONTHS.
PROPOSAL #1-TO CONTINUE OPERATIONS
AMENDMENTS TO THE LIMITED PARTNERSHIP AGREEMENT
The proposal to continue the operations of Fund XX will be
implemented, if approved by limited partners, through several
amendments to the limited partnership agreement that are set
forth in Exhibit A to this consent statement. These amendments
will:
1. Amend Article XI of the limited partnership
agreement to add a new Section 11.3 that requires the
General Partners to prepare a new consent or proxy statement
before December 31, 2013, to solicit another vote of limited
partners to either liquidate Fund XX, or extend its
operation for an additional period of years;
2. Amend Section 7.7 of the limited partnership
agreement to provide that (1) the repurchase price for units
purchased in the repurchase plan of Fund XX will be
increased to 90% of the net asset value per unit, and (2)
the Fund will offer to repurchase twice, rather than once,
per year.
Although we indicated in the prospectus under which the
units were initially sold that we intended to liquidate Fund XX
12 to 15 years after it was formed, there currently is no
contractual requirement in the limited partnership agreement of
Fund XX to terminate its existence, or sell its properties and
liquidate, prior to 2043. The addition of new Section 11.3 is
intended to create an obligation to solicit the interest of
limited partners in liquidating Fund XX at a definite point in
time. This is intended both to eliminate conflicts that could
cause the General Partners to delay liquidation of Fund XX and to
give limited partners a time horizon for final liquidation. The
amendment does not, however, require liquidation and if limited
partners were to again vote to continue its operations, the
operation of Fund XX, and the time at which limited partners
would receive a final distribution of the value of its assets,
would be further extended.
We are also proposing amendment to the repurchase provisions
of the limited partnership agreement contained in Section 7.7 so
that limited partners who so desire to do so may present their
units for repurchase at a price that more closely approximates
what we believe is the unit fair value. Currently, Section 7.7
provides that units repurchased under Fund XX's repurchase plan
will be repurchased at a price equal to the adjusted capital
contributions of units, less 50% of all distributions of cash
flow previously made. Adjusted capital contributions are equal to
the initial capital contributions of limited partners as reduced
for capital distributions to the extent not required to produce a
12% cumulative return. After reduction for such capital
distributions, and for cash distributions, the repurchase price
at September 30, 2008, the last repurchase date, was
approximately $459 per unit. Nevertheless, the General Partners'
estimate of the net asset value per unit, which the General
Partners have computed without independent appraisal based upon
the cash flow from rentals on the properties divided by a
capitalization rate that they believe represents a market
comparable capitalization rate for each property, was
approximately $1,097 at September 30, 2008.
As amended, Section 7.7 will provide that repurchases will
be conducted at a price equal to 90% of the net asset value per
unit. Net asset value per unit will be computed solely by the
General Partners using valuation methods that they consider
appropriate for such purposes. These valuation methods will, in
most cases, consist of determining the rental capitalization
rates that, based on their own research, the General Partners
believe represent the capitalization rates being applied to the
sale of properties in the same industry and markets. From this
valuation for each property, the General Partners deduct
estimated disposition costs and the General Partners'
participation in proceeds from sale, and divide the result by the
number of units outstanding.
To further increase the utility of the repurchase plan in
providing liquidity to limited partners, the amendments, if
approved, will allow repurchases to occur twice each year.
Although Section 7.7 currently provides that repurchase will
occur on December 1 of each year for units tendered during the
month of September, the amendments would provide that repurchases
will occur as of March 31, and September 30 of each year for
units tendered during January and July, respectively.
REASONS FOR THE PROPOSAL TO CONTINUE OPERATIONS
The proposal to continue operations is being presented
because:
Fund XX is currently generating cash flow from rentals that
the General Partners believe is more favorable to investors than
available from other investments of a similar risk profile and
remains an attractive business as an ongoing concern;
The General Partners do not believe that the current
environment for sale of commercial properties is the most
favorable to the Fund;
The continuation of Fund XX may allow additional capital
gains to be generated from the sale of some properties and the
reinvestment of proceeds in replacement properties prior to the
final liquidation of Fund XX; and
Continuation of Fund XX's operations will allow limited
partners to continue to have their funds invested in income
producing properties without the brokerage or other up-front fees
that they would likely need to expend if their funds are
redeployed in new investments of a similar nature.
The current upheaval in residential real estate and credit
markets, as well as the economy, has begun to effect the market
for commercial real estate. The General Partners believe that
timing sales to more closely match cyclical highs in these
markets will generate higher overall gains and that forcing a
liquidation of properties is not advantageous in times like
these.
EFFECTS OF THE PROPOSAL TO CONTINUE OPERATIONS
The proposal to continue operations will allow Fund XX to
continue to operate for an additional 60 months in the same
manner in which it has historically operated. Our operations
will continue to be reported to you, and to regulatory
authorities, in a manner consistent with historical financial
results. Subject to the normal risks of operating Fund XX as
summarized below, we anticipate that Fund XX will continue to
make quarterly distributions of cash flow from rental income.
If the proposal to continue operations is approved, we
expect to actively engage in a search for replacement real
properties in which Fund XX would invest the $2,152,460 of cash
generated from the recent sale of two properties.
The proposal to continue operations, if approved, will also
move into the future the date that limited partners will receive
proceeds from final sale of properties and liquidation of Fund
XX. Further, because repurchases of units under the repurchase
provisions of the limited partnership agreement are funded with
cash flow that might otherwise be available for distribution,
increase of the price for repurchases, and expansion of the time
periods for repurchases, may decrease the amount of cash
available for distribution. HOWEVER, THE REPURCHASE OF UNITS
DECREASES THE NUMBER OF UNITS OUTSTANDING AND INCREASES THE
OWNERSHIP INTEREST OF EACH LIMITED PARTNER WHO REMAINS IN THE
FUND.
If the proposal to continue in operation is not approved,
and the liquidation proposal is approved, Fund XX will commence
the process of disposing of its properties. If neither Proposal
#1 nor Proposal #2 is approved, we will continue to operate in
the ordinary course of business.
CONFLICTS OF INTEREST WITH THE PROPOSAL TO CONTINUE OPERATIONS
The General Partners are reimbursed for their expenses,
including the salaries and compensation expense of employees,
based upon the time those employees spend on the affairs of the
programs they manage. To the extent the General Partners and
their affiliates have more programs and more operations under
management, the aggregate amount of such reimbursements is
larger, and the salaries that are justifiable for their
management may be higher. Accordingly the General Partners have
an incentive to maintain funds and properties under management.
Note, however, that reimbursements for operations is at cost and
does not represent a profit center for the General Partners or
their affiliates.
RISKS OF THE PROPOSAL TO CONTINUE OPERATIONS
If the proposal to continue operations is approved, the
business of Fund XX will continue to be subject to the risks
associated with ownership of real property, and the illiquidity
of investment in a limited partnership, including the following:
LIMITED PARTNERS WILL HAVE NO RIGHT TO LIQUIDATION PROCEEDS
UNTIL FUND XX IS LIQUIDATED, WHICH WILL BE DELAYED FOR AT LEAST
FIVE YEARS. If the proposal to continue operation is approved,
and although the ability to present units for repurchase will be
enhanced, limited partners will not have a right to receive the
proceeds from the final disposition of properties and
liquidation of Fund XX for at least an additional five years.
THERE WILL CONTINUE TO BE NO PUBLIC MARKET FOR THE UNITS
AND SUBSTANTIAL RESTRICTIONS ON SALE OR DISPOSITION OF THE
UNITS. To avoid being classified as a publicly traded limited
partnership for tax purposes, the limited partnership agreement
of Fund XX continues to place substantial restrictions on sale
or transfer of units. There is no trading market for the units
and the restrictions in the limited partnership agreement are
designed to ensure that no public trading market develops.
Accordingly, it will continue to be difficult to dispose of
units if the proposal to continue operations is approved, or to
receive full value for units when they are sold.
IF LIMITED PARTNERS APPROVE THE PROPOSAL TO CONTINUE
OPERATIONS, THE ABILITY OF LIMITED PARTNERS TO RECEIVE ALL OF
THE VALUE OF THEIR INVESTMENT IN CASH MAY BE FURTHER DELAYED.
The proposal requires that the General Partners again seek the
consent of the limited partners to commence the liquidation of
the fund in five years. The General Partners may again determine
to solicit the consent of limited partners to continue Fund XX's
operations at that time and, if continuation is again approved,
further delay the final distribution of cash from sale of all of
Fund XX's properties.
ALTHOUGH THE PROPOSAL TO CONTINUE FUND XX'S OPERATION
INCLUDES AN AMENDMENT TO THE LIMITED PARTNERSHIP AGREEMENT TO
INCREASE THE REPURCHASE PRICE AND THE AVAILABILITY OF THE PLAN,
SUCH REPURCHASES WILL REDUCE THE AMOUNT OF CASH THEN AVAILABLE
FOR DISTRIBUTIONS. Unit repurchases are funded with cash
otherwise available for distribution to limited partners and to
the extent the repurchase price is increased and more units are
repurchased, cash available for distribution to remaining
partners will be reduced. Although remaining partners will have
a proportionately larger interest in Fund XX after such
repurchases, if the General Partners over estimate the net asset
value per unit for purposes of repurchases, or properties
decline in value after repurchases, remaining limited partners
may not obtain the benefit of such larger interest.
THE OPERATIONS OF FUND XX WILL CONTINUE TO BE SUBJECT TO
THE RISKS OF REAL ESTATE INVESTMENT. If the proposal to continue
operations is approved, the properties of Fund XX will be retained
for investment and the principal proceeds from any sale of Fund XX's
properties may not be distributed to partners during the following
five years except to the extent necessary to pay income tax related
to the taxable gain allocated to limited partners (assuming the highest
marginal rates for federal income tax purposes). The net leased
commercial properties of Fund XX will be subject to the same
risks of performance as the properties originally acquired by
Fund XX. The value of real estate is subject to a number of
factors beyond the control of Fund XX, including national
economic conditions, changes in interest rates, governmental
rules and regulations and competition from other forms of
financing. There has been a downturn in some real estate markets
during the past 18 months that is beginning to effect the prices
for commercial real estate. It is possible that this downturn
will continue or deepen, depressing the value of the properties
Fund XX holds. In addition, the value of the properties is
effected by the financial condition of the tenants. To the
extent there is a general economic downturn, the restaurant
industry or retail industry in which most of Fund XX's tenants
operate, may be adversely effected, causing increased rates of
default in rental payments or renegotiation of lease terms. To
the extent Fund XX's lease rates decline in the future, or if
there is an increased level of default, the value of real estate
held by the Fund may decline.
LIMITED PARTNERS WILL CONTINUE TO BE DEPENDENT UPON THE
GENERAL PARTNERS FOR ALL DECISIONS RELATING TO OPERATION OF FUND
XX. If the proposal to continue operations is approved, limited
partners will continue to be required to rely almost exclusively
on the General Partners of Fund XX for successful operations.
The General Partners have complete authority to make decisions
regarding our day-to-day operations and the acquisition or
disposition of properties, and there are no limitations that
limited partners may enforce regarding the types of commercial,
net leased properties that may be acquired. The General Partners
may take actions with which limited partners disagree. Limited
partners do not have any right to object to most management
decisions unless the General Partners breach their duties.
Limited partners are able to remove the General Partners only by
majority vote of investors or in other limited instances.
THE GENERAL PARTNERS MAY BENEFIT FROM THE PROPOSAL TO
CONTINUE OPERATIONS IN WAYS THAT CREATE CONFLICTS OF INTEREST.
The interests of the General Partners in proposing the proposal
to continue operations may be different from your interests
because the General Partners will continue to receive
reimbursements from Fund XX if the proposal to continue
operations is approved. The General Partners are reimbursed at
cost, which includes a portion of the salaries of the General
Partners' personnel and other overhead, for services the General
Partners provide to Fund XX and the proposal to continue
operations, if adopted, will allow those reimbursements to
continue.
LIMITED PARTNERS WILL NOT HAVE APPRAISAL RIGHTS IN
CONNECTION WITH THE PROPOSAL TO CONTINUE OPERATIONS. You will
not have appraisal or dissenters rights as a result of the
proposal to continue operations. Accordingly, if you disagree
with the proposal to continue operations you will not have the
right to require Fund XX to pay out the value of your units.
Instead, the proposal to continue operations will be effective
with respect to you if approved by holders of a majority of the
units. If you disagree, you will be required to find a different
method of disposing of your units, such as through Fund XX's
repurchase plan, or to hold your units until liquidation of Fund
XX.
PROPOSAL #2-LIQUIDATION
REASONS FOR THE LIQUIDATION PROPOSAL
If the liquidation proposal is approved, we will commence
the final sale and liquidation of Fund XX's properties in
accordance with the limited partnership agreement. Section 6.1 of
the limited partnership agreement requires that we obtain the
prior consent of holders of a majority of the outstanding units
prior to liquidation or sale of substantially all of Fund XX's
assets. Further, the prospectus under which units of limited
partnership interest were initially sold indicated that it was
our intent to commence the sale of properties and liquidation of
Fund XX 12 to 15 years after its formation. The liquidation
proposal is consistent with this timeframe.
EFFECTS OF THE LIQUIDATION PROPOSAL
OPERATIONS. If partners approve the liquidation proposal,
the General Partners will take action to commence the orderly
disposition of Fund XX's properties. The General Partners will,
from time to time, distribute the proceeds from sale of
properties to the extent they believe, in their sole discretion,
that such proceeds are not required to Fund XX's operations
during liquidation, to pay its obligations, or to deal with
contingent obligations. Once the properties are sold, the General
Partners intend to wind up the affairs of Fund XX and distribute
any net sales proceeds and remaining reserves to the limited and
General Partners. Fund XX will then dissolve and all of its
operations will cease. Under Section 12.1 of the limited
partnership agreement of Fund XX, this dissolution does not
require, and we will not ask you for, any additional vote.
DISTRIBUTIONS. As set forth under the caption "Introduction
and Background-Properties", the General Partners' estimate the
current value of Fund XX's properties at approximately
$22,012,700. Neither the General Partners nor Fund XX have
obtained any independent appraisal or opinion regarding the value
of the properties. The valuation described above is based on the
rental rates generated by each property and the capitalization
rates that the General Partners believe are applied in the
markets where the properties are located.
It is not possible for the General Partners to predict the
timing of the sale of the properties. Assuming that (a) sale of
properties can be completed over the next 24 months, (b) there
are no adverse events, such as tenant defaults or bankruptcies,
that adversely effect Fund XX's ability to sell properties or the
value that can be obtained in such sales, (c) there are no
increases or decreases in the value of the properties and they
can be sold at the amounts estimated by the General Partners, and
(d) there are no other extraordinary partnership expenses, the
General Partners estimate that approximately $24,430,000 of
proceeds will be available for distribution from sale of
properties and cash reserves in accordance with the liquidation
proposal, $24,185,700 or $1,097 per unit of which would be
available for distribution to limited partners. Because some of
these assumptions will inevitably be inaccurate and the General
Partners' estimates of value are not precise, the actual
distribution amounts will vary from these estimates and the
variation is likely to be material.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS.
The federal income tax discussion set forth below addresses
the material federal income tax consequences of the liquidation
of a partnership, but does not purport to deal with all aspects
of federal income taxation that may be relevant to a particular
limited partner in the light of such a limited partner's personal
circumstances. The discussion is directed solely to limited
partners who hold the units as capital assets within the meaning
of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"), and have acquired such units for investment and not
as a dealer or for resale. This discussion may not be applicable
to certain classes of taxpayers, including insurance companies,
securities dealers, non-resident alien individuals, foreign
entities, foreign trusts and estates and beneficiaries thereof,
financial institutions, real estate investment trusts, regulated
investment companies, tax exempt organizations, trusts or persons
who acquired Partnership interests as compensation. This
discussion is based upon the Code, Department of Treasury
regulations, court decisions, published rulings of the Internal
Revenue Service (the "IRS") and other applicable authorities, all
as in effect on the date hereof and all of which are subject to
change or differing interpretation (possibly on a retroactive
basis). Limited partners are urged to consult their own tax
advisors as to the specific tax consequences to them of the
liquidation of Fund XX, including the applicability and effect of
federal, state, local and other tax laws.
IN GENERAL. Fund XX, as a partnership for federal income tax
purposes, is not subject to federal income tax; rather, each
partner is required to take into account its distributive share
of the Fund XX's income, gains, losses, deductions, credits and
tax preference items in computing such limited partner's federal
income tax liability for any taxable year, without regard to
whether the limited partner has received any distribution from
Fund XX.
For federal income tax purposes, the liquidation proposal
consists of two separate components: (1) the sale by Fund XX of
its assets; and (2) the distribution of cash to each limited
partner in liquidation (a "liquidating distribution") of such
limited partner's interest in Fund XX. Each of these is
separately discussed below
SALE OF FUND XX'S ASSETS. For federal income tax
purposes, each limited partner will be required to include
in its income its allocable share of the gain or loss
realized by Fund XX upon the sale of Fund XX's assets
pursuant to the liquidation proposal. Gain will result
primarily from the sale of a property, including both the
real property and any improvements. Gain which falls within
the definition of "depreciation recapture" will be treated
as ordinary income for tax purposes. Other gain, as well as
other items of partnership gain or loss, will be capital or
ordinary gain or loss, depending upon the nature of the
asset in the hands of Fund XX.
DISTRIBUTION TO THE LIMITED PARTNERS. A limited partner
will recognize gain to the extent the amount of the
liquidating distribution received by the limited partner
exceeds the limited partner's tax basis for its units. Any
such gain will be capital gain. Because a limited partner's
tax basis for its units will be increased by both the
limited partner's allocable share of any gain realized on
the sale of Fund XX's assets, and by the amount of the
limited partner's allocable share of income from normal
partnership operations for the year of the liquidation, a
limited partner will not realize any gain by reason of the
distribution of such gain and operating income pursuant to
the liquidation. Nevertheless, a limited partner's allocable
share of Fund XX cash may exceed its basis for its units,
and thereby cause the limited partner to recognize gain.
A limited partner will recognize a capital loss to the
extent the amount of the liquidating distribution received
by the limited partner is less than the limited partner's
tax basis for its units, as such basis is adjusted to
reflect any gain or loss realized by Fund XX on the sale of
its assets.
PASSIVE ACTIVITY RULES. Limited partners that are
individuals, trusts, estates, closely held corporations or
personal service corporations are subject to the passive activity
loss limitations rules of Section 469 of the Code. A limited
partner's allocable share of partnership income, gain or loss
from the sale of Fund XX's assets is generally treated as derived
from a passive activity that may be used only to offset loss,
income or gain from a limited partner's other passive activity
investments. However, because the liquidating distribution is a
fully taxable transaction, Section 469 of the Code generally
allows any suspended passive activity losses of the limited
partner with respect to its investment in the partnership to be
used to reduce other income of the limited partner.
RISKS OF THE LIQUIDATION PROPOSAL
THE GENERAL PARTNERS MAY NOT BE ABLE TO DISPOSE OF
PROPERTIES AT THE VALUES THEY HAVE ESTIMATED. The value of the
properties has been estimated by the General Partners based on
rental rates and market capitalization rates. The rate at which
such rental is capitalized is largely dependent upon prevailing
interest rates in the markets where the properties are located.
To the extent prevailing interest rates increase, the value of
the properties calculated using these methods would decline.
Further, the value of properties is dependent upon the financial
strength of the tenants. The current economic downturn has
effected the value of real properties, and may effect the
financial strength of the tenants occupying the properties owned
by Fund XX. Recently, several national restaurant chains have
filed for protection under federal bankruptcy laws because the
economy has caused a general decline in the restaurant business.
If these trends effect Fund XX's tenants, Fund XX may experience
an increased level of defaults in rental payment, or a general
decrease in the willingness of purchasers to acquire its
properties because of the increased risk involved.
THE RAPID DISPOSITION OF PROPERTIES IN A DECLINING ECONOMY
MAY CAUSE FUND XX TO FAIL TO REALIZE THE FULL VALUE OF ITS
PROPERTIES. If the liquidation proposal is approved, the General
Partners will attempt to dispose of Fund XX's properties during
the next two years. Currently the economy, and the market for the
goods and services of Fund XX's tenants, is depressed and may
become further depressed during this period. The disposition of
properties during such periods is likely to generate less value
to Fund XX and its limited partners, particularly if sales must
be conducted rapidly.
IF TENANTS DEFAULT ON RENTAL PAYMENTS, OR FILE FOR
PROTECTION UNDER BANKRUPTCY LAWS, THE VALUE OF PROPERTIES WILL BE
FURTHER DEPRESSED, AND THE FINAL DISPOSITION OF THOSE PROPERTIES
MAY BE DELAYED. If a tenant were to default in paying its rental
obligations, or abandon a property, prior to its sale by Fund XX,
the value of the property would be adversely effected and Fund XX
might have difficulty selling the property, and the sale might be
delayed until an alternative tenant can be located. If a tenant
filed for protection under applicable bankruptcy laws, the tenant
(if a debtor in possession) or the bankruptcy trustee would have
a period of time to assume or reject the lease, and Fund XX may
be delayed in its disposition of the property and therefore final
liquidation of the partnership.
LIMITED PARTNERS WILL BE REQUIRED TO PAY TAX ON THE GAIN
FUND XX REALIZES ON SALE OF PROPERTIES AND A PORTION OF THE GAIN
MAY BE TAXED AS ORDINARY INCOME.
UNIT OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth information about the number
of limited partnership units owned by each person known to us to
beneficially own 5% or more of the units, by AEI Fund Management
XX, Inc. (Fund XX's Managing General Partner), by Robert P.
Johnson (Fund XX's Individual General Partner) and by each
officer or director of the Managing General Partner as of
September 30, 2008:
NAME AND ADDRESS NUMBER OF PERCENT
OF BENEFICIAL OWNER UNITS HELD OF CLASS
AEI Fund Management XX, Inc. 0 0%
1300 Wells Fargo Place
30 East 7th Street
St. Paul, MN 55101
Robert P.Johnson 28 *
1300 Wells Fargo Place
30 East 7th Street
St. Paul, MN 55101
Patrick W. Keene 0 0%
1300 Wells Fargo Place
30 East 7th Street
St. Paul, MN 55101
*Less than 1%
The persons set forth in the preceding table hold sole
voting power and power of disposition with respect to all of the
limited partnership units set forth opposite their names. To the
best of our knowledge, there is no beneficial owner holding five
percent or more of the units.
CONSENT PROCEDURES
Your vote is important. Each limited partner is urged to
mark, date and sign the enclosed consent form and return it in
the enclosed postage prepaid envelope. If you require assistance
completing the consent form, please call AEI Client Services,
toll free at 800-328-3519.
TIMING OF THE CONSENT SOLICITATION
We have fixed the close of business on November 1, 2008 as
the record date for the determination of the limited partners
entitled to vote on the proposal to continue operations or the
liquidation proposal; the close of business on January 8, 2009
as the date by which Consent Forms must be received by us in
order to be counted; and Janaury 9, 2009 as the date on which
the consents will be counted. You may revoke your consent at any
time prior to Janaury 9, 2009, provided we receive written
revocation prior to that date.
To vote for one of these proposals, you must return a
properly signed consent form that is received by AEI Fund
Management XX, Inc. at 1300 Wells Fargo Place, 30 East 7th
Street, St. Paul, Minnesota 55101, on or before 5:00 P.M.,
Central Time, on January 8, 2009. The votes will be tabulated
by the General Partners.
RECORD DATE AND VOTES REQUIRED FOR APPROVAL
Only holders of record of units of limited partnership
interest as of November 1, 2008, the record date, will be
entitled to vote on the proposal to continue operations or
liquidation proposal. Voting by the limited partners on the
proposal to continue operations and the liquidation proposal is
based upon the number of units held. As of November 1, 2008,
there were 22,045 units outstanding, 28 of which were held by the
General Partners. Each unit is entitled to one vote. Fractions of
units will be included in the total.
Pursuant to the limited partnership agreement of Fund XX, in
order for the proposal to continue operations or the liquidation
proposal to be approved, a majority of the units (excluding any
units held by the General Partners) must be voted in favor of the
proposal. Accordingly, 11,008.6 units must be voted FOR the
proposal to continue operations or the liquidation proposal for
the respective proposal to be approved. Because an abstention
would not be counted as a vote for a proposal, it would have the
effect of a vote against the proposal. WE RECOMMEND A VOTE "FOR"
THE PROPOSAL TO CONTINUE OPERATIONS.
PROCEDURES FOR VOTING
Accompanying this Consent Statement is a Consent Form for
each limited partner. By checking the appropriate box ON THE
CONSENT FORM, you can indicate whether you vote FOR or AGAINST or
ABSTAIN as to the proposal to continue operations or the
liquidation proposal. PLEASE DO NOTE VOTE FOR BOTH ALTERNATIVES
AT THE SAME TIME: THEY ARE INCONSISTENT AND CANNOT BE PURSUED
SIMULTANEOUSLY. IF YOU RETURN YOUR CONSENT FORM SIGNED WITHOUT
CHECKING ANY BOX, YOU WILL BE DEEMED TO HAVE VOTED FOR THE
PROPOSAL TO CONTINUE OPERATIONS AND AGAINST THE LIQUIDATION
PROPOSAL.
Limited partners who vote against, or abstain, do not have
appraisal or similar rights under Minnesota law.
COSTS OF SOLICITATION
The cost of solicitation of consents of the limited partners
will be borne by Fund XX. The solicitations will be made by the
mails.. Our staff will be available by telephone at 800-328-3519
to answer any questions concerning this Consent.
MAILING
This Consent Statement was first mailed to limited partners
on or about December 3, 2008.
BY ORDER OF THE BOARD OF DIRECTORS
OF AEI FUND MANAGEMENT XX, INC.
Robert P. Johnson, President
EXHIBIT A
AMENDMENT TO LIMITED PARTNERSHIP AGREEMENT
(CONTINUATION PROPOSAL)
We are proposing the following amendments to the Limited
Partnership Agreement of AEI Net Lease Income & Growth Fund XX
Limited Partnership as heretofore amended (the "Agreement"):
1. Article XI of the Agreement shall be amended to add an
additional Section 11.3 which shall read, in its entirety, as
follows:
11.3 LIQUIDATION PROPOSAL.
(a) The Managing General Partner shall, on or before
December 31, 2013, prepare, and if required file with the
Securities and Exchange Commission, a proxy or consent
statement pursuant to which it shall solicit the consent of
Limited Partners to vote with respect to a proposal to
commence the sale of all of the Properties and the
dissolution and liquidation of the Partnership in accordance
with Article XXII. The Managing General Partner shall
distribute and commence the solicitation of such consents or
proxies promptly after the same may be conducted in
accordance with applicable laws.
(b) Notwithstanding Section 11.3(a), the Managing
General Partner shall not be required to recommend such
sale, dissolution and liquidation, and may present in
addition to such proposal and as an alternative to the same,
a proposal to extend the time period during which the
Partnership shall continue to operate, provided that the
Managing General Partner commits to again submit a proposal
consistent with Section 11.3(a) by the end of the calendar
year in which the fifth anniversary of the date on which the
vote on such proposal occurs.
2. Section 7.7 of the Agreement is hereby amended as set forth
(and shown with corrections) below:
7.7 RIGHT TO PRESENT UNITS FOR PURCHASE.
(a) (Beginning in calendar year 1994,) Each
Limited Partner shall have the right, subject to the
provisions of this Section 7.7, to present his OR HER
Units to the Partnership for purchase by submitting to
the Managing General Partner notice on a form supplied
by the Partnership specifying the number of Units he OR
SHE wishes repurchased. Such notice must be postmarked
after (September )January 1 but before (October)
February 1, OR AFTER JULY 1 BUT BEFORE AUGUST 1 of each
year (THE "PRESENTMENT PERIODS"). On (December 1) MARCH
31 AND SEPTEMBER 30 of each year (HEREAFTER, A
"REPURCHASE DATE"), the Managing General Partner shall
cause the Partnership to purchase the Units of Limited
Partners who have tendered their Units to the
Partnership. The purchase price shall be equal to 90% OF
THE NET VALUE PER UNIT (AS DEFINED IN SECTION 7.7(D)) AS
OF THE PRECEDING DECEMBER 31 (IN THE CASE OF REPURCHASES
AS OF MARCH 31) OR JUNE 30 (IN THE CASE OF REPURCHASES
AS OF SEPTEMBER 30) (SUCH DATES BEING HEREAFTER REFERRED
TO AS A "DETERMINATION DATE"). THE REPURCHASE PRICE
SHALL, HOWEVER, BE ADJUSTED TO SUBTRACT ANY
DISTRIBUTIONS TO THE TENDERING LIMITED PARTNER AFTER THE
DETERMINATION DATE AND PRIOR TO THE REPURCHASE DATE. THE
MANAGING GENERAL PARTNER SHALL PUBLISH THE REPURCHASE
PRICE OFFERED FOR UNITS BASED ON ITS DETERMINATION OF
THE NET VALUE PER UNIT AS SOON AS POSSIBLE AFTER EACH
DETERMINATION DATE. (the tendering Limited Partner's
Adjusted Capital Contribution on October 1 of the year
of purchase multiplied by seventy-five percent (75%) for
purchases in calendar year 1994 and ninety percent (90%)
for purchases in calendar year 1995. For purchases in
1996 and in each year thereafter, the purchase price
shall be equal to one hundred percent (100%) of the
tendering Limited Partner's Adjusted Capital
Contribution on October 1, less fifty percent (50%) of
all Net Cash Flow previously distributed to such Limited
Partner throughout the term of the Partnership.)
(b) The Partnership will not be obligated to purchase
in any year any number of Units such that such Units, when
aggregated with all other transfers of Units that have
occurred since the beginning of the same calendar year
(excluding Permitted Transfers) would exceed five percent
(5%) of the total number of Units outstanding on January 1 of
such year. In the event requests for purchase of Units
received in any given year exceed the five percent (5%)
limitation, the Units to be purchased will be determined
based on the postmark date of the written notice of Limited
Partners tendering Units. Any Units tendered but not selected
for purchase in any given year will be considered for
purchase in subsequent years only if the Limited Partner
retenders his Units. 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 nor shall the
Partnership purchase any Units in violation of applicable
legal requirements.
(c) For purposes of all calculations pursuant to
Article V of this agreement, any Net Cash Flow or Net
Proceeds of Sale used to repurchase Units or to repay
borrowings that were used to repurchase Units shall be deemed
distributed to the remaining Limited Partners pro rata based
on the ratio of the number of Units owned to all Units
outstanding after such repurchase.
FOR PURPOSES OF THIS SECTION 7.7, "NET VALUE PER UNIT
SHALL MEAN THE AGGREGATE VALUE OF THE PARTNERSHIP'S
ASSETS LESS THE PARTNERSHIP'S LIABILITIES, AND LESS THE
VALUE ATTRIBUTABLE TO THE INTEREST OF THE GENERAL
PARTNERS, DIVIDED BY THE NUMBER OF UNITS OUTSTANDING.
SUCH AGGREGATE VALUE SHALL BE AS DETERMINED BY THE
MANAGING GENERAL PARTNER, AFTER TAKING INTO ACCOUNT (I)
THE VALUE OF THE PARTNERSHIP'S PROPERTIES BASED ON THE
APPLICATION OF RENTAL CAPITALIZATION RATES FOR SIMILARLY
SITUATED PROPERTIES, BASED ON PENDING OR PROPOSED
TRANSACTIONS RELATING TO THE PROPERTIES, OR BASED ON
SUCH OTHER METHODS AS THE MANAGING GENERAL PARTNER DEEMS
REASONABLE, (II) THE PRICE AT WHICH UNITS OF THE COMPANY
HAVE LAST BEEN PURCHASED, AND (III) SUCH OTHER FACTORS
AS THE MANAGING GENERAL PARTNER DEEMS RELEVANT.
EXHIBIT B
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm 24
Balance Sheet as of December 31, 2007 and 2006 25
Statements for the Years Ended December 31, 2007 and 2006:
Income 26
Cash Flows 27
Changes in Partners' Capital 28
Notes to Financial Statements at December 31, 2007 29-39
Balance Sheet as of September 30, 2008 and December 31, 2007 40
Statements for the for the Periods ended September 30, 2008 and
2007:
Income 41
Cash Flows 42
Changes in Partners' Capital 43
Notes to Financial Statements at September 30, 2008 44-46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners:
AEI Net Lease Income & Growth Fund XX Limited Partnership
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI Net
Lease Income & Growth Fund XX Limited Partnership (a Minnesota
limited partnership) as of December 31, 2007 and 2006, and the
related statements of income, cash flows and changes in partners'
capital for the years then ended. These financial statements are
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not
required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the company's internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of AEI Net Lease Income & Growth Fund XX Limited Partnership as
of December 31, 2007 and 2006, and the results of its operations
and its cash flows for the years then ended, in conformity with
U.S. generally accepted accounting principles.
BOULAY, HEUTMAKER, ZIBELL & CO. P.L.L.P.
BOULAY, HEUTMAKER, ZIBELL & CO. P.L.L.P.
Certified Public Accountants
Minneapolis, Minnesota
March 24, 2008
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
2007 2006
CURRENT ASSETS:
Cash and Cash Equivalents $ 1,102,753 $ 1,083,159
INVESTMENTS IN REAL ESTATE:
Land 5,130,957 6,367,762
Buildings and Equipment 9,992,550 12,081,070
Accumulated Depreciation (2,280,410) (2,494,105)
----------- -----------
12,843,097 15,954,727
Real Estate Held for Sale 2,702,006 0
----------- -----------
Net Investments in Real Estate 15,545,103 15,954,727
----------- -----------
Total Assets $16,647,856 $17,037,886
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 67,148 $ 84,418
Distributions Payable 413,767 413,582
Unearned Rent 12,249 11,135
----------- -----------
Total Current Liabilities 493,164 509,135
----------- -----------
PARTNERS' CAPITAL:
General Partners 12,328 16,068
Limited Partners, $1,000 per Unit;
24,000 Units authorized and issued;
22,045 and 22,068 Units outstanding in
2007 and 2006, respectively 16,142,364 16,512,683
----------- -----------
Total Partners' Capital 16,154,692 16,528,751
----------- -----------
Total Liabilities and Partners' Capital $16,647,856 $17,037,886
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31
2007 2006
RENTAL INCOME $ 1,689,206 $ 1,620,066
EXPENSES:
Partnership Administration - Affiliates 219,885 229,040
Partnership Administration and Property
Management - Unrelated Parties 35,947 29,471
Depreciation 338,525 332,241
----------- -----------
Total Expenses 594,357 590,752
----------- -----------
OPERATING INCOME 1,094,849 1,029,314
OTHER INCOME:
Interest Income 45,129 46,415
----------- -----------
INCOME FROM CONTINUING OPERATIONS 1,139,978 1,075,729
Income from Discontinued Operations 252,179 363,653
----------- -----------
NET INCOME $ 1,392,157 $ 1,439,382
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 13,922 $ 14,394
Limited Partners 1,378,235 1,424,988
----------- -----------
$ 1,392,157 $ 1,439,382
=========== ===========
INCOME PER LIMITED PARTNERSHIP UNIT:
Continuing Operations $ 51.15 $ 48.13
Discontinued Operations 11.32 16.27
----------- -----------
Total $ 62.47 $ 64.40
=========== ===========
Weighted Average Units Outstanding 22,062 22,128
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,392,157 $ 1,439,382
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 409,624 403,340
Gain on Sale of Real Estate 0 (109,143)
Increase (Decrease) in Payable to
AEI Fund Management, Inc. (17,270) 15,010
Increase (Decrease) in Unearned Rent 1,114 (16,378)
----------- -----------
Total Adjustments 393,468 292,829
----------- -----------
Net Cash Provided By
Operating Activities 1,785,625 1,732,211
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate 0 (1,231,624)
Proceeds From Sale of Real Estate 0 578,025
----------- -----------
Net Cash Used For
Investing Activities 0 (653,599)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable 185 (41)
Distributions to Partners (1,754,537) (1,926,253)
Redemption Payments (11,679) (44,677)
----------- -----------
Net Cash Used For
Financing Activities (1,766,031) (1,970,971)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 19,594 (892,359)
CASH AND CASH EQUIVALENTS, beginning of period 1,083,159 1,975,518
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,102,753 $ 1,083,159
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 2005 $ 21,383 $17,038,916 $17,060,299 22,147.74
Distributions (19,262) (1,906,991) (1,926,253)
Redemption Payments (447) (44,230) (44,677) (80.00)
Net Income 14,394 1,424,988 1,439,382
-------- ----------- ----------- ----------
BALANCE, December 31, 2006 16,068 16,512,683 16,528,751 22,067.74
Distributions (17,545) (1,736,992) (1,754,537)
Redemption Payments (117) (11,562) (11,679) (22.70)
Net Income 13,922 1,378,235 1,392,157
-------- ----------- ----------- ----------
BALANCE, December 31, 2007 $ 12,328 $16,142,364 $16,154,692 22,045.04
======== =========== =========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(1) ORGANIZATION -
AEI Net Lease Income & Growth Fund XX Limited Partnership
(Partnership) was formed to acquire and lease commercial
properties to operating tenants. The Partnership's
operations are managed by AEI Fund Management XX, Inc.
(AFM), the Managing General Partner. Robert P. Johnson, the
President and sole director of AFM, serves as the Individual
General Partner. AFM is a wholly owned subsidiary of AEI
Capital Corporation of which Mr. Johnson is the majority
shareholder. 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.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(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.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
Financial Statement Presentation
The accounts of the Partnership are maintained on the
accrual basis of accounting for both federal income tax
purposes and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate.
Cash Concentrations of Credit Risk
The Partnership's cash is deposited primarily in one
financial institution and at times during the year it may
exceed FDIC insurance limits.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested
in money market accounts, certificates of deposit,
federal agency notes and commercial paper with a term of
three months or less.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Receivables
Credit terms are extended to tenants in the normal course
of business. The Partnership performs ongoing credit
evaluations of its customers' financial condition and,
generally, requires no collateral.
Receivables are recorded at their estimated net
realizable value. The Partnership follows a policy of
providing an allowance for doubtful accounts; however,
based on historical experience, and its evaluation of the
current status of receivables, the Partnership is of the
belief that such accounts 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.
Real Estate
The Partnership's real estate is leased under triple net
leases, classified as operating leases. The leases
provide for base annual rental payments payable in
monthly installments. The Partnership recognizes rental
revenue according to the terms of the individual leases.
For leases which contain stated rental increases, the
increases are recognized in the year in which they are
effective. Contingent rental payments are recognized when
the contingencies on which the payments are based are
satisfied and the rental payments become due under the
terms of the leases.
The Partnership purchases properties and records them at
cost. The Partnership compares the carrying amount of its
properties to the estimated probability-weighted future
cash flows expected to result from the property and its
eventual disposition. If the sum of the expected future
cash flows is less than the carrying amount of the
property, the Partnership recognizes an impairment loss
by the amount by which the carrying amount of the
property exceeds the fair value of the property.
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings and equipment.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
The buildings and equipment of the Partnership are
depreciated using the straight-line method for financial
reporting purposes based on estimated useful lives of 30
years and 10 years, respectively.
In accordance with Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, upon complete disposal of
a property or classification of a property as Real Estate
Held for Sale, the Partnership includes the operating
results and sale of the property in discontinued
operations. In addition, the Partnership reclassifies the
prior periods' operating results of the property to
discontinued operations.
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated
third parties using the proportionate consolidation
method. Each tenant-in-common owns a separate, undivided
interest in the properties. Any tenant-in-common that
holds more than a 50% interest does not control decisions
over the other tenant-in-common interests. The financial
statements reflect only this Partnership's percentage
share of the properties' land, building and equipment,
liabilities, revenues and expenses.
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, 2007 and 2006.
Reclassification
Certain items related to discontinued operations in the
prior year's financial statements have been reclassified
to conform to 2007 presentation. These reclassifications
had no effect on Partners' capital, net income or cash
flows.
Recently Issued Accounting Pronouncements
Management has reviewed recently issued, but not yet
effective, accounting pronouncements and does not expect
the implementation of these pronouncements to have a
significant effect on the Partnership's financial
statements.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(3) RELATED PARTY TRANSACTIONS -
The Partnership owns a 44% interest in a Champps Americana
restaurant in Utica, Michigan. The remaining interests in
this property are owned by AEI Net Lease Income & Growth
Fund XIX Limited Partnership, an affiliate of the
Partnership, and unrelated third parties. The Partnership
owns a 50% interest in a Biaggi's restaurant and a 50%
interest in a Tractor Supply Company store. The remaining
interests in these properties are owned by AEI Net Lease
Income & Growth Fund XIX Limited Partnership. At December
31, 2007, the Partnership owned a 50% interest in a Champps
Americana restaurant in West Chester, Ohio. The remaining
interest in this property was owned by AEI Income & Growth
Fund XXII Limited Partnership, an affiliate of the
Partnership. The Partnership owns a 50% interest in a Jared
Jewelry store. The remaining interest in this property is
owned by AEI Income & Growth Fund XXI Limited Partnership,
an affiliate of the Partnership. The Partnership owns a 45%
interest in an Applebee's restaurant in Sandusky, Ohio. The
remaining interest in this property is owned by AEI Income &
Growth Fund 24 LLC, an affiliate of the Partnership.
AEI and AFM received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 31
2007 2006
a.AEI and AFM are reimbursed for all costs
incurred in connection with managing the
Partnership's operations, maintaining the
Partnership's books and communicating
the results of operations to the Limited
Partners. $ 219,885 $ 229,040
======== ========
b.AEI and AFM are reimbursed for all direct
expenses they have paid on the Partnership's
behalf to third parties relating to Partnership
administration and property management. These
expenses included printing costs, legal and
filing fees, direct administrative costs,
outside audit costs, taxes, insurance and
other property costs. $ 36,704 $ 33,940
======== ========
c.AEI is reimbursed for all costs and direct
expenses incurred by it in acquiring
properties on behalf of the Partnership. $ 0 $ 16,824
======== ========
d.AEI is reimbursed for all costs incurred
in connection with the sale of property. $ 0 $ 22,890
======== ========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a, b, c and d.
This balance is non-interest bearing and unsecured and is to
be paid in the normal course of business.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(4) INVESTMENTS IN REAL ESTATE -
The Partnership leases its properties to various tenants
under triple net leases, classified as operating leases.
Under a triple net lease, the tenant is responsible for all
real estate taxes, insurance, maintenance, repairs and
operating expenses for the property. At the time the
properties were acquired, the remaining primary lease terms
varied from 13 to 20 years, except for the Tractor Supply
Company store, which had a remaining primary term of 7.4
years. The Lease for the Red Robin restaurant in continuing
operations was extended to expire on December 31, 2017. The
Lease for the Red Robin restaurant in discontinued
operations expires on November 30, 2008. Most of the leases
provide the tenant with two to four five-year renewal
options subject to the same terms and conditions as the
primary term. The leases contain rent clauses which entitle
the Partnership to receive additional rent in future years
based on stated rent increases.
The Partnership's properties are commercial, single-tenant
buildings. The HomeTown Buffet restaurant was constructed
and acquired in 1993. The Red Robin restaurants, which were
constructed in 1984 and 1987, were acquired in 1994. The
Champps Americana restaurant in Lyndhurst, Ohio was
constructed and acquired in 1996. The Champps Americana
restaurant in Schaumburg, Illinois was constructed and
acquired in 1997. The land for the Champps Americana
restaurant in Columbus, Ohio was acquired in 1998 and
construction of the restaurant was completed in 1999. The
land for the Champps Americana restaurant in Utica, Michigan
was acquired in 2001 and construction of the restaurant was
completed in 2002. The KinderCare daycare center was
constructed in 1999 and acquired in 2002. The land for the
Champps Americana restaurant in West Chester, Ohio was
acquired in 2002 and construction of the restaurant was
completed in 2004. The Biaggi's restaurant was constructed
in 2001 and acquired in 2003. The Johnny Carino's restaurant
was constructed and acquired in 2003. The Jared Jewelry
store was constructed in 2001 and acquired in 2004. The
Applebee's restaurant in Sandusky, Ohio was constructed in
1995 and acquired in 2004. The Tractor Supply Company store
was constructed in 1998 and acquired in 2006. The remaining
properties were constructed and acquired in 1994. There have
been no costs capitalized as improvements subsequent to the
acquisitions.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(4) INVESTMENTS IN REAL ESTATE - (Continued)
The cost of the properties not held for sale and related
accumulated depreciation at December 31, 2007 are as
follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
HomeTown Buffet,
Albuquerque, NM $ 241,960 $ 289,371 $ 531,331 $ 137,453
Red Robin,
Colorado Springs, CO 905,980 1,323,210 2,229,190 611,985
Arby's/Mrs. Winner's,
Smyrna, GA 5,775 8,091 13,866 3,738
Applebee's, Middletown, OH 20,844 48,262 69,106 23,888
Applebee's, McAllen, TX 463,553 856,551 1,320,104 411,772
Champps Americana,
Lyndhurst, OH 1,024 2,477 3,501 984
Champps Americana,
Schaumburg, IL 3,026 4,095 7,121 1,443
Champps Americana,
Columbus, OH 2,924 6,406 9,330 1,931
Champps Americana,
Utica, MI 543,318 967,816 1,511,134 198,023
KinderCare,
Mayfield Heights, OH 289,266 1,117,792 1,407,058 206,482
Biaggi's, Ft. Wayne, IN 503,204 876,142 1,379,346 131,422
Johnny Carino's,
Alexandria, LA 549,668 1,595,080 2,144,748 245,887
Jared Jewelry, Hanover, MD 861,052 1,128,053 1,989,105 145,708
Applebee's, Sandusky, OH 412,396 864,547 1,276,943 105,666
Tractor Supply,
Mesquite, TX 326,967 904,657 1,231,624 54,028
---------- ---------- ----------- ----------
$5,130,957 $9,992,550 $15,123,507 $2,280,410
========== ========== =========== ==========
On March 10, 2006, the Partnership purchased a 50% interest
in a Tractor Supply Company store in Mesquite, Texas for
$1,231,624. The property is leased to Tractor Supply Company
under a Lease Agreement with a remaining primary term of 7.4
years and initial annual rent of $87,258.
The Partnership owns a 40.1354% interest in a HomeTown
Buffet restaurant, a 1.1177% interest in an Arby's/Mrs.
Winner's restaurant, a 5.925% interest in an Applebee's
restaurant in Middletown, Ohio, a .12905% interest in a
Champps Americana restaurant in Lyndhurst, Ohio, a .1572%
interest in a Champps Americana restaurant in Schaumburg,
Illinois and a .2706% interest in a Champps Americana
restaurant in Columbus, Ohio. The remaining interests in
these properties are owned by unrelated third parties, who
own the property with the Partnership as tenants-in-common.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(4) INVESTMENTS IN REAL ESTATE - (Continued)
For properties owned as of December 31, 2007, the minimum
future rent payments required by the leases are as follows:
2008 $ 1,995,237
2009 1,875,070
2010 1,893,617
2011 1,910,003
2012 1,940,070
Thereafter 11,950,658
-----------
$21,564,655
===========
There were no contingent rents recognized in 2007 and 2006.
(5) MAJOR TENANTS -
The following schedule presents rent revenue from individual
tenants, or affiliated groups of tenants, who each
contributed more than ten percent of the Partnership's total
rent revenue for the years ended December 31:
Tenants Industry 2007 2006
Red Robin West, Inc. Restaurant $ 509,023 $ 475,152
Champps Operating
Corporation Restaurant 350,958 340,116
Concord Neighborhood
Corporation Restaurant 224,994 226,595
Kona Restaurant
Group, Inc. Restaurant 205,072 203,041
---------- ----------
Aggregate rent revenue of major tenants $1,290,047 $1,244,904
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 64% 64%
========== ==========
(6) DISCONTINUED OPERATIONS -
During the first nine months of 2006, the Partnership sold
its remaining 15.5376% interest in the Eckerd drug store in
Cicero, New York, in two separate transactions, to unrelated
third parties. The Partnership received total net sale
proceeds of $578,025, which resulted in a net gain of
$109,143. The cost and related accumulated depreciation of
the interests sold was $492,910 and $24,028, respectively.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(6) DISCONTINUED OPERATIONS - (Continued)
Subsequent to December 31, 2007, the Partnership sold its
50% interest in the Champps Americana restaurant in West
Chester, Ohio to an unrelated third party. The Partnership
received net sale proceeds of approximately $2,045,000,
which resulted in a net gain of approximately $620,100. At
the time of sale, the cost and related accumulated
depreciation was $1,569,884 and $144,966, respectively. At
December 31, 2007, the property was classified as Real
Estate Held for Sale with a book value of $1,424,918.
The Partnership is attempting to sell its Red Robin
restaurant on Citadel Drive in Colorado Springs, Colorado.
At December 31, 2007, the property was classified as Real
Estate Held for Sale with a book value of $1,277,088.
During 2007 and 2006, the Partnership distributed net sale
proceeds of $57,576 and $229,293 to the Limited and General
Partners as part of their quarterly distributions, which
represented a return of capital of $2.57 and $10.25 per
Limited Partnership Unit, respectively. The Partnership
anticipates the remaining net sale proceeds will either be
reinvested in additional property or distributed to the
Partners in the future.
The financial results for these properties are reflected as
Discontinued Operations in the accompanying financial
statements. The following are the results of discontinued
operations for the years ended December 31:
2007 2006
Rental Income $ 324,035 $ 330,078
Property Management Expenses (757) (4,469)
Depreciation (71,099) (71,099)
Gain on Disposal of Real Estate 0 109,143
---------- ----------
Income from Discontinued Operations $ 252,179 $ 363,653
========== ==========
(7) PARTNERS' CAPITAL -
Cash distributions of $17,545 and $19,262 were made to the
General Partners and $1,736,992 and $1,906,991 were made to
the Limited Partners for the years ended December 31, 2007
and 2006, respectively. The Limited Partners' distributions
represent $78.73 and $86.18 per Limited Partnership Unit
outstanding using 22,062 and 22,128 weighted average Units
in 2007 and 2006, respectively. The distributions represent
$61.95 and $62.40 per Unit of Net Income and $16.78 and
$23.78 per Unit of return of capital in 2007 and 2006,
respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed net sale proceeds of
$57,000 and $227,000 in 2007 and 2006, respectively.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(7) PARTNERS' CAPITAL - (Continued)
The Partnership may acquire Units from Limited Partners who
have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership 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 2007, two Limited Partners redeemed a total of 22.7
Partnership Units for $11,562 in accordance with the
Partnership Agreement. During 2006, two Limited Partners
redeemed a total of 80 Partnership Units for $44,230. The
Partnership acquired these Units using Net Cash Flow from
operations. The redemptions increase the remaining Limited
Partners' ownership interest in the Partnership. As a result
of these redemption payments and pursuant to the Partnership
Agreement, the General Partners received distributions of
$117 and $447 in 2007 and 2006, respectively.
After the effect of redemptions, the Adjusted Capital
Contribution, as defined in the Partnership Agreement, is
$1,088.68 per original $1,000 invested.
(8) INCOME TAXES -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the years ended December 31:
2007 2006
Net Income for Financial Reporting Purposes $1,392,157 $1,439,382
Depreciation for Tax Purposes Under
Depreciation for Financial Reporting Purposes 72,151 59,183
Income Accrued for Tax Purposes Over (Under)
Income for Financial Reporting Purposes 1,114 (16,378)
Gain on Sale of Real Estate for Tax Purposes
Over Gain for Financial Reporting Purposes 0 1,427
---------- ----------
Taxable Income to Partners $1,465,422 $1,483,614
========== ==========
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
(8) INCOME TAXES - (Continued)
The following is a reconciliation of Partners' capital for
financial reporting purposes to Partners' capital reported
for federal income tax purposes for the years ended
December 31:
2007 2006
Partners' Capital for Financial Reporting
Purposes $16,154,692 $16,528,751
Adjusted Tax Basis of Investments in Real Estate
Over Net Investments in Real Estate
for Financial Reporting Purposes 500,239 428,088
Income Accrued for Tax Purposes Over
Income for Financial Reporting Purposes 12,249 11,135
Syndication Costs Treated as Reduction
of Capital for Financial Reporting Purposes 3,271,273 3,271,273
----------- -----------
Partners' Capital for Tax Reporting Purposes $19,938,453 $20,239,247
=========== ===========
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, are as follows at
December 31:
2007 2006
Carrying Fair Carrying Fair
Amount Value Amount Value
Money Market Funds $1,102,753 $1,102,753 $1,083,159 $1,083,159
---------- ---------- ---------- ----------
Total Cash and
Cash Equivalents $1,102,753 $1,102,753 $1,083,159 $1,083,159
========== ========== ========== ==========
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 2008 AND DECEMBER 31, 2007
ASSETS
2008 2007
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,874,062 $ 1,102,753
INVESTMENTS IN REAL ESTATE:
Land 5,110,113 5,130,957
Buildings and Equipment 9,944,288 9,992,550
Accumulated Depreciation (2,509,303) (2,280,410)
----------- -----------
12,545,098 12,843,097
Real Estate Held for Sale 1,277,088 2,702,006
----------- -----------
Net Investments in Real Estate 13,822,186 15,545,103
----------- -----------
Total Assets $16,696,248 $16,647,856
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 40,022 $ 67,148
Distributions Payable 404,901 413,767
Unearned Rent 12,249 12,249
----------- -----------
Total Current Liabilities 457,172 493,164
----------- -----------
PARTNERS' CAPITAL:
General Partners 13,172 12,328
Limited Partners, $1,000 per Unit;
24,000 Units authorized and issued;
22,045 Units outstanding 16,225,904 16,142,364
----------- -----------
Total Partners' Capital 16,239,076 16,154,692
----------- -----------
Total Liabilities and Partners' Capital $16,696,248 $16,647,856
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30
Three Months Ended Nine Months Ended
9/30/08 9/30/07 9/30/08 9/30/07
RENTAL INCOME $ 409,437 $ 421,898 $1,222,720 $1,256,170
EXPENSES:
Partnership Administration -
Affiliates 57,202 57,591 172,586 167,898
Partnership Administration
and Property Management -
Unrelated Parties 12,331 6,548 39,990 28,219
Depreciation 84,262 84,262 252,781 252,786
---------- ---------- ---------- ----------
Total Expenses 153,795 148,401 465,357 448,903
---------- ---------- ---------- ----------
OPERATING INCOME 255,642 273,497 757,363 807,267
OTHER INCOME:
Interest Income 13,574 11,427 38,650 34,841
---------- ---------- ---------- ----------
INCOME FROM CONTINUING
OPERATIONS 269,216 284,924 796,013 842,108
Income from Discontinued
Operations 38,653 64,997 829,788 194,971
---------- ---------- ---------- ----------
NET INCOME $ 307,869 $ 349,921 $1,625,801 $1,037,079
========== ========== ========== ==========
NET INCOME ALLOCATED:
General Partners $ 3,079 $ 3,499 $ 16,258 $ 10,371
Limited Partners 304,790 346,422 1,609,543 1,026,708
---------- ---------- ---------- ----------
$ 307,869 $ 349,921 $1,625,801 $1,037,079
========== ========== ========== ==========
INCOME PER LIMITED PARTNERSHIP UNIT:
Continuing Operations $ 12.09 $ 12.77 $ 35.75 $ 37.77
Discontinued Operations 1.74 2.93 37.26 8.75
---------- ---------- ---------- ----------
Total $ 13.83 $ 15.70 $ 73.01 $ 46.52
========== ========== ========== ==========
Weighted Average Units
Outstanding 22,045 22,068 22,045 22,068
========== ========== ========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,625,801 $ 1,037,079
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 253,395 307,215
Gain on Sale of Real Estate (682,938) 0
Decrease in Payable to
AEI Fund Management, Inc. (27,126) (42,452)
Increase in Unearned Rent 0 43,511
----------- -----------
Total Adjustments (456,669) 308,274
----------- -----------
Net Cash Provided By
Operating Activities 1,169,132 1,345,353
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate 2,152,460 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (8,866) 191
Distributions to Partners (1,541,417) (1,330,294)
----------- -----------
Net Cash Used For
Financing Activities (1,550,283) (1,330,103)
----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 1,771,309 15,250
CASH AND CASH EQUIVALENTS, beginning of period 1,102,753 1,083,159
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,874,062 $ 1,098,409
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 2006 $ 16,068 $16,512,683 $16,528,751 22,067.74
Distributions (13,303) (1,316,991) (1,330,294)
Net Income 10,371 1,026,708 1,037,079
-------- ----------- ----------- ----------
BALANCE, September 30, 2007 $ 13,136 $16,222,400 $16,235,536 22,067.74
======== =========== =========== ==========
BALANCE, December 31, 2007 $ 12,328 $16,142,364 $16,154,692 22,045.04
Distributions (15,414) (1,526,003) (1,541,417)
Net Income 16,258 1,609,543 1,625,801
-------- ----------- ----------- ----------
BALANCE, September 30, 2008 $ 13,172 $16,225,904 $16,239,076 22,045.04
======== =========== =========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
(1) The condensed statements included herein have been prepared
by the registrant, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of
operations for the interim period, on a basis consistent with
the annual audited statements. The adjustments made to these
condensed statements consist only of normal recurring
adjustments. Certain information, accounting policies, and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the registrant
believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction
with the financial statements and the summary of significant
accounting policies and notes thereto included in the
registrant's latest annual report on Form 10-KSB.
(2) ORGANIZATION -
AEI Net Lease Income & Growth Fund XX Limited Partnership
("Partnership") was formed to acquire and lease commercial
properties to operating tenants. The Partnership's
operations are managed by AEI Fund Management XX, Inc.
("AFM"), the Managing General Partner. Robert P. Johnson,
the President and sole director of AFM, serves as the
Individual General Partner. AFM is a wholly owned
subsidiary of AEI Capital Corporation of which Mr. Johnson
is the majority shareholder. 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.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) ORGANIZATION - (Continued)
Any Net Proceeds of Sale, as defined, from the sale or
financing of properties which the General Partners determine
to distribute will, after provisions for debts and reserves,
be paid in the following manner: (i) first, 99% to the
Limited Partners and 1% to the General Partners until the
Limited Partners receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal to
12% of their Adjusted Capital Contribution per annum,
cumulative but not compounded, to the extent not previously
distributed from Net Cash Flow; (ii) any remaining balance
will be distributed 90% to the Limited Partners and 10% to
the General Partners. Distributions to the Limited Partners
will be made pro rata by Units.
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of property, will be
allocated first in the same ratio in which, and to the
extent, Net Cash Flow is distributed to the Partners for
such year. Any additional profits will be allocated in the
same ratio as the last dollar of Net Cash Flow is
distributed. Net losses from operations will be allocated
99% to the Limited Partners and 1% to the General Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of property will be allocated in
accordance with the Partnership Agreement as follows: (i)
first, to those partners with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Partners
and 1% to the General Partners until the aggregate balance
in the Limited Partners' capital accounts equals the sum of
the Limited Partners' Adjusted Capital Contributions plus an
amount equal to 12% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, the balance of any
remaining gain will then be allocated 90% to the Limited
Partners and 10% to the General Partners. Losses will be
allocated 98% to the Limited Partners and 2% to the General
Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(3) RECLASSIFICATION -
Certain items related to discontinued operations in the
prior period's financial statements have been reclassified
to conform to 2008 presentation. These reclassifications
had no effect on Partners' capital, net income or cash
flows.
(4) PAYABLE TO AEI FUND MANAGEMENT, INC. -
AEI Fund Management, Inc. performs the administrative and
operating functions for the Partnership. The payable to AEI
Fund Management represents the balance due for those
services. This balance is non-interest bearing and
unsecured and is to be paid in the normal course of
business.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) DISCONTINUED OPERATIONS -
On February 27, 2008, the Partnership sold its 50% interest
in the Champps Americana restaurant in West Chester, Ohio to
an unrelated third party. The Partnership received net sale
proceeds of $2,057,022, which resulted in a net gain of
$632,104. At the time of sale, the cost and related
accumulated depreciation was $1,569,884 and $144,966,
respectively. At December 31, 2007, the property was
classified as Real Estate Held for Sale with a book value of
$1,424,918.
On June 30, 2008, the Partnership sold its 5.9250% interest
in the Applebee's restaurant in Middletown, Ohio to an
unrelated third party. The Partnership received net sale
proceeds of $95,438, which resulted in a net gain of
$50,834. The cost and related accumulated depreciation of
the interest sold was $69,106 and $24,502, respectively.
The Partnership is attempting to sell its Red Robin
restaurant on Citadel Drive in Colorado Springs, Colorado.
At September 30, 2008 and December 31, 2007, the property
was classified as Real Estate Held for Sale with a book
value of $1,277,088.
During the first nine months of 2008 and 2007, the
Partnership distributed net sale proceeds of $286,869 and
$57,576 to the Limited and General Partners as part of their
quarterly distributions, which represented a return of
capital of $12.88 and $2.58 per Limited Partnership Unit,
respectively. The Partnership anticipates the remaining net
sale proceeds will either be reinvested in additional
property or distributed to the Partners in the future.
The financial results for these properties are reflected as
Discontinued Operations in the accompanying financial
statements. The following are the results of discontinued
operations for the periods ended September 30:
Three Months Ended Nine Months Ended
9/30/08 9/30/07 9/30/08 9/30/07
Rental Income $ 39,015 $ 83,754 $ 148,493 $ 250,281
Property Management Expenses (362) (614) (1,029) (881)
Depreciation 0 (18,143) (614) (54,429)
Gain on Disposal of Real Estate 0 0 682,938 0
--------- --------- --------- ---------
Income from Discontinued
Operations $ 38,653 $ 64,997 $ 829,788 $ 194,971
========= ========= ========= =========
(6) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -
In December 2007, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
141(R) ("SFAS 141(R)"), Business Combinations. SFAS 141(R)
requires, among other things, the expensing of acquisition-
related transaction costs. Management anticipates that SFAS
141(R) will be effective for property acquisitions completed
on or after January 1, 2009. Management is evaluating the
effect that the adoption of SFAS 141(R) will have on the
Partnership's results of operations, financial position, and
the related disclosures.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
CONSENT OF LIMITED PARTNERS
THIS CONSENT IS SOLICITED BY THE BOARD
OF DIRECTORS OF AEI FUND MANAGEMENT XX, INC.,
THE MANAGING GENERAL PARTNER
The undersigned, a Limited Partner of AEI Net Lease Income
& Growth Fund XX Limited Partnership ("Fund XX"), hereby consents
(unless otherwise directed below) to the proposals identified
below as indicated below. PLEASE DO NOT VOTE FOR BOTH
PROPOSALS-THEY ARE MUTUALLY EXCLUSIVE.
Proposal #1. Approval of continuation of Fund XX for 60
months by amendment to Sections 7.7 and 11.3 of the Limited
Partnership Agreement (the General Partners recommend a vote
FOR this proposal).
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposal #2. Approval to begin selling Fund XX's
properties and to liquidate Fund XX (THE GENERAL PARTNERS
RECOMMEND A VOTE AGAINST THIS PROPOSAL).
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Please date and sign this Consent below and return it in
the enclosed, postage paid envelope. To be counted, this Consent
must be received not later than the close of business on January 8,
2009.
The limited partnership units held by the signing Limited
Partner will be voted as directed. They will be voted "FOR"
Proposal #1 and against Proposal #2 if no box is checked.
Please sign exactly as your name appears below. When Units
are held by joint tenants, both owners should sign. When signing
as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS CONSENT.
Dated:
__________________________ ______________________________
Signature (if held jointly)