UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: March 31, 2003
Commission file number: 0-29274
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)
___State of Minnesota____ __41-1789725__
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
_____________(651) 227-7333_____________
(Issuer's telephone number)
______________Not Applicable____________
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes __X__ No _____
Transitional Small Business Disclosure Format:
Yes _____ No __X__
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
INDEX
Page
PART I. Financial Information
Item 1. Balance Sheet as of March 31, 2003
and December 31,2002 3
Statements for the Periods ended
March 31, 2003 and 2002:
Income 4
Cash Flows 5
Changes in Partners' Capital 6
Notes to Financial Statements 7 - 10
Item 2. Management's Discussion and Analysis 10 - 14
Item 3. Controls and Procedures 14
PART II. Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a
Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Certifications 17-18
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
BALANCE SHEET
MARCH 31, 2003 AND DECEMBER 31, 2002
(Unaudited)
ASSETS
2003 2002
CURRENT ASSETS:
Cash and Cash Equivalents $3,156,729 $4,653,629
Receivables 44,020 15,194
-------- --------
Total Current Assets 3,200,749 4,668,823
-------- --------
INVESTMENTS IN REAL ESTATE:
Land 5,368,124 5,367,113
Buildings and Equipment 10,035,149 10,035,149
Construction in Progress 1,297,234 44,281
Accumulated Depreciation (1,501,240) (1,399,695)
-------- --------
Net Investments in Real Estate 15,199,267 14,046,848
-------- --------
Total Assets $18,400,016 $18,715,671
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 79,989 $ 28,714
Distributions Payable 405,694 648,117
Unearned Rent 35,846 0
-------- --------
Total Current Liabilities 521,529 676,831
-------- --------
PARTNERS' CAPITAL:
General Partners 16,350 17,954
Limited Partners, $1,000 Unit Value;
24,000 Units authorized and issued;
23,025 Units outstanding 17,862,137 18,020,886
-------- --------
Total Partners' Capital 17,878,487 18,038,840
-------- --------
Total Liabilities and
Partners' Capital $18,400,016 $18,715,671
========= =========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
2003 2002
INCOME:
Rent $ 406,720 $ 383,592
Investment Income 24,722 18,105
-------- --------
Total Income 431,442 401,697
-------- --------
EXPENSES:
Partnership Administration - Affiliates 67,308 80,397
Partnership Administration and Property
Management - Unrelated Parties 13,848 15,240
Depreciation 101,545 98,821
-------- --------
Total Expenses 182,701 194,458
-------- --------
OPERATING INCOME 248,741 207,239
GAIN ON SALE OF REAL ESTATE 0 322,906
-------- --------
NET INCOME $ 248,741 $ 530,145
======== ========
NET INCOME ALLOCATED:
General Partners $ 2,487 $ 5,301
Limited Partners 246,254 524,844
-------- --------
$ 248,741 $ 530,145
======== ========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(23,025 and 23,235 weighted average Units
outstanding in 2003 and
2002, respectively) $ 10.70 $ 22.59
======== ========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 248,741 $ 530,145
Adjustments to Reconcile Net
Income to Net Cash
Provided by Operating Activities:
Depreciation 101,545 98,821
Gain on Sale of Real Estate 0 (322,906)
(Increase) Decrease in Receivables (28,826) 9,567
Increase in Payable to
AEI Fund Management, Inc. 51,275 3,265
Increase in Unearned Rent 35,846 57,973
-------- --------
Total Adjustments 159,840 (153,280)
-------- --------
Net Cash Provided By
Operating Activities 408,581 376,865
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (1,253,964) 0
Proceeds from Sale of Real Estate 0 1,796,330
-------- --------
Net Cash Provided By (Used For)
Investing Activities (1,253,964) 1,796,330
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in Distributions Payable (242,423) 0
Distributions to Partners (409,094) (409,087)
-------- --------
Net Cash Used For
Financing Activities (651,517) (409,087)
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,496,900) 1,764,108
CASH AND CASH EQUIVALENTS,
beginning of period 4,653,629 4,460,840
-------- --------
CASH AND CASH EQUIVALENTS, end of period $3,156,729 $6,224,948
======== ========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 2001 $13,932 $17,592,673 $17,606,605 23,235.35
Distributions (4,090) (404,997) (409,087)
Net Income 5,301 524,844 530,145
------- -------- --------- ---------
BALANCE, March 31, 2002 $15,143 $17,712,520 $17,727,663 23,235.35
======== ======== ========= =========
BALANCE, December 31, 2002 $17,954 $18,020,886 $18,038,840 23,025.33
Distributions (4,091) (405,003) (409,094)
Net Income 2,487 246,254 248,741
------- -------- --------- ---------
BALANCE, March 31, 2003 $16,350 $17,862,137 $17,878,487 23,025.33
======== ========= ========= =========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
(1)The condensed statements included herein have been prepared
by the Partnership, 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 Partnership
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
Partnership's latest annual report on Form 10-KSB.
(2) ORGANIZATION -
AEI Income & Growth Fund XXI Limited Partnership
(Partnership) was formed to acquire and lease commercial
properties to operating tenants. The Partnership's
operations are managed by AEI Fund Management XXI, Inc.
(AFM), the Managing General Partner. Robert P. Johnson, the
President and sole shareholder of AFM, serves as the
Individual General Partner and an affiliate of AFM, AEI Fund
Management, Inc. (AEI), performs the administrative and
operating functions for the Partnership.
The terms of the Partnership offering call for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. The Partnership
commenced operations on April 14, 1995 when minimum
subscriptions of 1,500 Limited Partnership Units
($1,500,000) were accepted. On January 31, 1997, 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 INCOME & GROWTH FUND XXI 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
10% of their Adjusted Capital Contribution per annum,
cumulative but not compounded, to the extent not previously
distributed from Net Cash Flow; (ii) any remaining balance
will be distributed 90% to the Limited Partners and 10% to
the General Partners. Distributions to the Limited Partners
will be made pro rata by Units.
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 10% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, the balance of any
remaining gain will then be allocated 90% to the Limited
Partners and 10% to the General Partners. Losses will be
allocated 98% to the Limited Partners and 2% to the General
Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(3) INVESTMENTS IN REAL ESTATE -
Through December 31, 2002, the Partnership sold its interest
in the Champps Americana restaurant in Schaumburg, Illinois,
in thirteen separate transactions, to unrelated third
parties. The Partnership received total net sale proceeds
of $2,892,414, which resulted in a net gain of $838,268.
The total cost and related accumulated depreciation of the
interests sold was $2,256,461 and $202,315, respectively.
For the three months ended March 31, 2002, the net gain was
$16,738.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) INVESTMENTS IN REAL ESTATE - (Continued)
Through December 31, 2002, the Partnership sold 99.8466% of
the Champps Americana restaurant in Livonia, Michigan, in
twenty-one separate transactions, to unrelated third
parties. The Partnership received total net sale proceeds
of $5,490,789, which resulted in a net gain of $1,888,226.
The total cost and related accumulated depreciation of the
interests sold was $4,143,694 and $541,131, respectively.
For the three months ended March 31, 2002, the net gain was
$336,150.
During 2002, the Partnership sold 23.8161% of the Johnny
Carino's restaurant in Austin, Texas, in three separate
transactions, to unrelated third parties. The Partnership
received total net sale proceeds of $603,681, which resulted
in a net gain of $68,672. The total cost and related
accumulated depreciation of the interests sold was $544,819
and $9,810, respectively. For the three months ended March
31, 2002, the net gain was $-0-.
During the first three months of 2003 and 2002, the
Partnership distributed $58,809 and $103,028 of net sale
proceeds to the Limited and General Partners as part of
their quarterly distributions which represented a return of
capital of $2.53 and $4.39 per Limited Partnership Unit,
respectively. The remaining net sale proceeds will either
be reinvested in additional property or distributed to the
Partners in the future.
On June 14, 2002, the Partnership purchased three Children's
World daycare centers located in Andover, Minnesota,
Ballwin, Missouri and Kimberly, Wisconsin. The properties
were purchased for $1,264,207, $1,517,778 and $1,358,239,
respectively. The properties are leased to ARAMARK
Educational Resources, Inc. under Lease Agreements with
primary terms of 15 years and annual rental payments of
$120,204, $144,113 and $129,087, respectively.
On October 31, 2002, the Partnership purchased a parcel of
land in Farmington, New Mexico for $791,238, including
acquisition expenses. The land is leased to SFG Farmington
I Limited Partnership (SFG) under a Lease Agreement with a
primary term of 20 years and annual rental payments of
$85,050. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement
under which the Partnership will advance funds to SFG for
the construction of a Johnny Carino's restaurant on the
site. Through March 31, 2003, the Partnership had advanced
$1,297,234 for the construction of the property and was
charging interest on the advances at a rate of 10.5%. The
total purchase price, including the cost of the land, will
be approximately $2,290,000. After the construction is
complete, the Lease Agreement will be amended to require
annual rental payments of approximately $240,450.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) INVESTMENTS IN REAL ESTATE - (Continued)
In May 2001, Huntington Restaurants Group, Inc. (HRG), the
lessee of the Denny's Restaurant in Covington, Louisiana
notified the Partnership that it was experiencing financial
problems and would not make the lease payments while they
worked out a plan which would enable them to continue
operations without seeking bankruptcy protection. In
October, 2001, the Partnership received an offer to buy the
restaurant for $900,000 from an unrelated third party.
Effective December 10, 2001, the Partnership terminated the
Lease to accommodate the sale. Through this date, HRG owed
$80,316 of rent, which will not be collected and was not
accrued for financial reporting purposes. In the third
quarter of 2001, a charge to operations for real estate
impairment of $295,354 was recognized, which was the
difference between the book value at September 30, 2001 of
$1,145,354 and the estimated net sales proceeds of $850,000.
The charge was recorded against the cost of the building and
equipment. On February 19, 2002, the sale closed with the
Partnership receiving net sale proceeds of $816,143 which
resulted in a net loss of $29,982.
(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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The Management's Discussion and Analysis contains various
"forward looking statements" within the meaning of federal
securities laws which represent management's expectations or
beliefs concerning future events, including statements regarding
anticipated application of cash, expected returns from rental
income, growth in revenue, taxation levels, the sufficiency of
cash to meet operating expenses, rates of distribution, and other
matters. These, and other forward looking statements made by the
Partnership, must be evaluated in the context of a number of
factors that may affect the Partnership's financial condition and
results of operations, including the following:
- Market and economic conditions which affect the value
of the properties the Partnership owns and the cash
from rental income such properties generate;
- the federal income tax consequences of rental income,
deductions, gain on sales and other items and the
affects of these consequences for the Partners;
- resolution by the General Partners of conflicts with
which they may be confronted;
- the success of the General Partners of locating
properties with favorable risk return characteristics;
- the effect of tenant defaults; and
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
- the condition of the industries in which the tenants of
properties owned by the Partnership operate.
The Application of Critical Accounting Policies
The preparation of the Partnership's financial statements
requires management to make estimates and assumptions that may
affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities. Management evaluates these estimates on an ongoing
basis, including those related to the carrying value of real
estate and the allocation by AEI Fund Management, Inc. of
expenses to the Partnership as opposed to other funds they
manage.
The Partnership purchases properties and records them in
the financial statements at the lower of cost or estimated
realizable value. The Partnership initially records the
properties at cost (including capitalized acquisition expenses).
The Partnership is required to periodically evaluate the carrying
value of properties to determine whether their realizable value
has declined. For properties the Partnership will hold and
operate, management determines whether impairment has occurred by
comparing the property's probability-weighted cash flows to its
current carrying value. For properties held for sale, management
determines whether impairment has occurred by comparing the
property's estimated fair value less cost to sell to its current
carrying value. If the carrying value is greater than the
realizable value, an impairment loss is recorded to reduce the
carrying value of the property to its realizable value. A change
in these assumptions or analysis could cause material changes in
the carrying value of the properties.
AEI Fund Management Inc. allocates expenses to each of the
funds they manage primarily on the basis of the number of hours
devoted by their employees to each fund's affairs. They also
allocate some expenses at the end of each month that are not
directly related to a fund's operations based upon the number of
investors in the fund and the fund's capitalization relative to
other funds they manage. The Partnership reimburses these
expenses subject to detailed limitations contained in the
Partnership Agreement.
Management of the Partnership has discussed the
development and selection of the above accounting estimates and
the management discussion and analysis disclosures regarding them
with the managing partner of the Partnership.
Results of Operations
For the three months ended March 31, 2003 and 2002, the
Partnership recognized rental income of $406,720 and $383,592,
respectively. During the same periods, the Partnership earned
investment income of $24,722 and $18,105, respectively. In 2003,
rental income increased as a result of rent received from four
property acquisitions in 2002, and rent increases on three
properties. These increases in rental income were partially
offset by a decrease in rent due to property sales. In 2003,
investment income increased due to the Partnership receiving
interest income from construction advances.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
In May 2001, Huntington Restaurants Group, Inc. (HRG), the
lessee of the Denny's Restaurant in Covington, Louisiana notified
the Partnership that it was experiencing financial problems and
would not make the lease payments while they worked out a plan
which would enable them to continue operations without seeking
bankruptcy protection. In October, 2001, the Partnership
received an offer to buy the restaurant for $900,000 from an
unrelated third party. Effective December 10, 2001, the
Partnership terminated the Lease to accommodate the sale. Through
this date, HRG owed $80,316 of rent, which will not be collected
and was not accrued for financial reporting purposes. In the
third quarter of 2001, a charge to operations for real estate
impairment of $295,354 was recognized, which was the difference
between the book value at September 30, 2001 of $1,145,354 and
the estimated net sales proceeds of $850,000. The charge was
recorded against the cost of the building and equipment. On
February 19, 2002, the sale closed with the Partnership receiving
net sale proceeds of $816,143 which resulted in a net loss of
$29,982.
During the three months ended March 31, 2003 and 2002, the
Partnership paid Partnership administration expenses to
affiliated parties of $67,308 and $80,397, respectively. These
administration expenses include costs associated with the
management of the properties, processing distributions, reporting
requirements and correspondence to the Limited Partners. During
the same periods, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $13,848 and $15,240, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, taxes, insurance and other property costs.
As of March 31, 2003, the Partnership's annualized regular
cash distribution rate was 6.75%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement. As a result, 99% of distributions
were allocated to Limited Partners and 1% to the General
Partners.
Inflation has had a minimal effect on income from
operations. Leases may contain rent increases, based on the
increase in the Consumer Price Index over a specified period,
which will result in an increase in rental income over the term
of the leases. In addition, leases may contain rent clauses
which entitle the Partnership to receive additional rent in
future years if gross receipts for the property exceed certain
specified amounts. Increases in sales volumes of the tenants,
due to inflation and real sales growth, may result in an increase
in rental income over the term of the leases. Inflation also may
cause the real estate to appreciate in value. However, inflation
and changing prices may have an adverse impact on the operating
margins of the properties' tenants, which could impair their
ability to pay rent and subsequently reduce the Net Cash Flow
available for distributions.
Liquidity and Capital Resources
During the three months ended March 31, 2003, the
Partnership's cash balances decreased $1,496,900 as a result of
cash used to purchase property and distributions paid to the
Partners in excess of cash generated from operating activities.
Net cash provided by operating activities increased from $376,865
in 2002 to $408,581 in 2003 as a result of an increase in income
and a decrease in Partnership administration expenses in 2003,
which were partially offset by net timing differences in the
collection of payments from the lessees and the payment of
expenses.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The major components of the Partnership's cash flow from
investing activities are investments in real estate and proceeds
from the sale of real estate. During the three months ended
March 31, 2002, the Partnership generated cash flow from the sale
of real estate of $1,796,330. During the three months ended
March 31, 2003, the Partnership expended $1,253,964 to invest in
real properties (inclusive of acquisition expenses) as the
Partnership reinvested cash generated from property sales.
Through December 31, 2002, the Partnership sold its
interest in the Champps Americana restaurant in Schaumburg,
Illinois, in thirteen separate transactions, to unrelated third
parties. The Partnership received total net sale proceeds of
$2,892,414, which resulted in a net gain of $838,268. The total
cost and related accumulated depreciation of the interests sold
was $2,256,461 and $202,315, respectively. For the three months
ended March 31, 2002, the net gain was $16,738.
Through December 31, 2002, the Partnership sold 99.8466%
of the Champps Americana restaurant in Livonia, Michigan, in
twenty-one separate transactions, to unrelated third parties.
The Partnership received total net sale proceeds of $5,490,789,
which resulted in a net gain of $1,888,226. The total cost and
related accumulated depreciation of the interests sold was
$4,143,694 and $541,131, respectively. For the three months
ended March 31, 2002, the net gain was $336,150.
During 2002, the Partnership sold 23.8161% of the Johnny
Carino's restaurant in Austin, Texas, in three separate
transactions, to unrelated third parties. The Partnership
received total net sale proceeds of $603,681, which resulted in a
net gain of $68,672. The total cost and related accumulated
depreciation of the interests sold was $544,819 and $9,810,
respectively. For the three months ended March 31, 2002, the net
gain was $-0-.
During the first three months of 2003 and 2002, the
Partnership distributed $58,809 and $103,028 of net sale proceeds
to the Limited and General Partners as part of their quarterly
distributions which represented a return of capital of $2.53 and
$4.39 per Limited Partnership Unit, respectively. The remaining
net sale proceeds will either be reinvested in additional
property or distributed to the Partners in the future.
On June 14, 2002, the Partnership purchased three
Children's World daycare centers located in Andover, Minnesota,
Ballwin, Missouri and Kimberly, Wisconsin. The properties were
purchased for $1,264,207, $1,517,778 and $1,358,239,
respectively. The properties are leased to ARAMARK Educational
Resources, Inc. under Lease Agreements with primary terms of 15
years and annual rental payments of $120,204, $144,113 and
$129,087, respectively.
On October 31, 2002, the Partnership purchased a parcel of
land in Farmington, New Mexico for $791,238, including
acquisition expenses. The land is leased to SFG Farmington I
Limited Partnership (SFG) under a Lease Agreement with a primary
term of 20 years and annual rental payments of $85,050.
Simultaneously with the purchase of the land, the Partnership
entered into a Development Financing Agreement under which the
Partnership will advance funds to SFG for the construction of a
Johnny Carino's restaurant on the site. Through March 31, 2003,
the Partnership had advanced $1,297,234 for the construction of
the property and was charging interest on the advances at a rate
of 10.5%. The total purchase price, including the cost of the
land, will be approximately $2,290,000. After the construction
is complete, the Lease Agreement will be amended to require
annual rental payments of approximately $240,450.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The Partnership's primary use of cash flow is distribution
and redemption payments to Partners. The Partnership declares
its regular quarterly distributions before the end of each
quarter and pays the distribution in the first ten days after the
end of each quarter. The Partnership attempts to maintain a
stable distribution rate from quarter to quarter. Redemption
payments are paid to redeeming Partners in the fourth quarter of
each year. In December 2002, the Partnership declared a bonus
distribution of $242,424 of net sale proceeds, which resulted in
a higher distribution payable at December 31, 2002.
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 2002, eight Limited Partners redeemed a total of
210.02 Partnership Units for $156,938 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, 33 Limited
Partners redeemed a total of 764.65 Partnership Units for
$647,929. The redemptions increase the remaining Limited
Partners' ownership interest in the Partnership.
The continuing rent payments from the properties, together
with cash generated from property sales, should be adequate to
fund continuing distributions and meet other Partnership
obligations on both a short-term and long-term basis.
ITEM 3. CONTROLS AND PROCEDURES.
(a) Evaluation of disclosure controls and procedures
Under the supervision and with the participation of
management, including its President and Chief Financial Officer,
the Managing General Partner of the Partnership evaluated the
effectiveness of the design and operation of its disclosure
controls and procedures (as defined in Rule [13a-14(c)/15d-14(c)]
under the Exchange Act) related to the Partnership as of a date
(the "Evaluation Date") within 90 days prior to the filing date
of this report. Based upon that evaluation, the President and
Chief Financial Officer of the Managing General Partner concluded
that, as of the Evaluation Date, the disclosure controls and
procedures are effective in timely alerting them to the material
information relating to the Partnership required to be included
in periodic SEC filings.
(b) Changes in internal controls
There were no significant changes made in the
Partnership's internal controls during the period covered by this
report or, to the Managing General Partner's knowledge, in other
factors that could significantly affect these controls subsequent
to the date of their evaluation.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the Partnership is a party or of which the Partnership's
property is subject.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
Description
99.1 Certification of Chief Executive Officer of General
Partner pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.2 Certification of Chief Financial Officer of General
Partner pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
b. Reports filed on Form 8-K - None.
SIGNATURES
In accordance with the requirements of the Exchange Act,
the Registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: May 12, 2003 AEI Income & Growth Fund XXI
Limited Partnership
By: AEI Fund Management XXI, Inc.
Its: Managing General Partner
By:/s/ Robert P. Johnson
Robert P. Johnson
President
(Principal Executive Officer)
By:/s/ Patrick W. Keene
Patrick W. Keene
Chief Financial Officer
(Principal Accounting Officer)
CERTIFICATIONS
I, Robert P. Johnson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of AEI
Income & Growth Fund XXI Limited Partnership;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge; the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have;
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Dated: May 12, 2003 /s/ Robert P. Johnson
Robert P. Johnson, President
AEI Fund Management XXI, Inc.
Managing General Partner
CERTIFICATIONS
I, Patrick W. Keene, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of AEI
Income & Growth Fund XXI Limited Partnership;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge; the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have;
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Dated: May 12, 2003 /s/ Patrick W. Keene
Patrick W. Keene, Chief Financial Officer
AEI Fund Management XXI, Inc.
Managing General Partner