Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the Fiscal Year Ended: December 31, 2009
Commission file number: 000-23778
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
State of Minnesota 41-1729121
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 East 7th Street, Suite 1300, St. Paul, Minnesota 55101
(Address of principal executive offices)
(651) 227-7333
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes[ ] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
As of June 30, 2009, there were 22,017.042 Units of limited
partnership interest outstanding and owned by nonaffiliates of
the registrant, which Units had an aggregate market value (based
solely on the price at which they were sold since there is no
ready market for such Units) of $22,017,042.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant has not incorporated any documents by reference
into this report.
PART I
ITEM 1. BUSINESS.
AEI Net Lease Income & Growth Fund XX Limited Partnership
(the "Partnership" or the "Registrant") is a limited partnership
which was organized pursuant to the laws of the State of
Minnesota on September 2, 1992. The registrant is comprised of
AEI Fund Management XX, Inc. ("AFM") as Managing General Partner,
Robert P. Johnson, the President and sole director of AFM, as the
Individual General Partner, and purchasers of partnership units
as Limited Partners. The Partnership offered for sale up to
$24,000,000 of limited partnership interests (the "Units")
(24,000 Units at $1,000 per Unit) pursuant to a registration
statement effective January 20, 1993. The Partnership commenced
operations on June 30, 1993 when minimum subscriptions of 1,500
Limited Partnership Units ($1,500,000) were accepted. On January
19, 1995, the Partnership's offering terminated when the maximum
subscription limit of 24,000 Limited Partnership Units
($24,000,000) was reached.
The Partnership was organized to acquire existing and
newly constructed commercial properties located in the United
States, to lease such properties to tenants under triple net
leases, to hold such properties and to eventually sell such
properties. From subscription proceeds, the Partnership
purchased fourteen properties, including partial interests in
five properties, at a total cost of $20,174,391. The balance of
the subscription proceeds was applied to organization and
syndication costs, working capital reserves and distributions,
which represented a return of capital. The properties are
commercial, single tenant buildings leased under triple net
leases.
The Partnership's properties were purchased without any
indebtedness. The Partnership will not finance properties in the
future to obtain proceeds for new property acquisitions. If it
is required to do so, the Partnership may incur short-term
indebtedness, which may be secured by a portion of the
Partnership's properties, to finance day-to-day cash flow
requirements (including cash flow necessary to repurchase Units).
The amount of borrowings that may be secured by the properties is
limited in the aggregate to 10% of the purchase price of all
properties. The Partnership will not incur borrowings prior to
application of the proceeds from sale of the Units, will not
incur borrowings to pay distributions, and will not incur
borrowings while there is cash available for distributions.
The Partnership will hold its properties until the General
Partners determine that the sale or other disposition of the
properties is advantageous in view of the Partnership's
investment objectives. In deciding whether to sell properties,
the General Partners will consider factors such as potential
appreciation, net cash flow and income tax considerations. The
Partnership expects to sell some or all of its properties prior
to its final liquidation and to reinvest the proceeds from such
sales in additional properties. The Partnership reserves the
right, at the discretion of the General Partners, to either
distribute proceeds from the sale of properties to the Partners
or to reinvest such proceeds in additional properties, provided
that sufficient proceeds are distributed to the Limited Partners
to pay federal and state income taxes related to any taxable gain
recognized as a result of the sale.
ITEM 1. BUSINESS. (Continued)
In December 2008, the Managing General Partner solicited
by mail a proxy statement seeking the consent of the Limited
Partners to continue the Partnership for an additional 60 months
or to initiate the final disposition, liquidation and
distribution of all of the Partnership's properties and assets
within 24 months. On January 9, 2009, the proposal to continue
the Partnership was approved with a majority of Units voted in
favor of the continuation proposal. As a result, the Managing
General Partner will continue the operations of the Partnership
for an additional 60 months at which time it will again ask the
Limited Partners to vote on the same two proposals.
Leases
Although there are variations in the specific terms of the
leases, the following is a summary of the general terms of the
Partnership's leases. The properties are leased to 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 Staples store, which had a remaining
primary term of 9.4 years. The leases provide the tenants with
two to four five-year renewal options subject to the same terms
and conditions as the primary term. The leases provide for base
annual rental payments, payable in monthly installments, and
contain rent clauses which entitle the Partnership to receive
additional rent in future years based on stated rent increases.
Property Activity During the Last Three Years
As of December 31, 2006, the Partnership owned a
significant interest in twelve properties and a minor interest in
five properties with a total original cost of $18,448,832,
including acquisition expenses. During the years ended December
31, 2008 and 2009, the Partnership sold six property interests
and received net sale proceeds of $2,152,460 and $3,575,431,
which resulted in net gains of $682,938 and $588,386,
respectively. During 2009, the Partnership purchased one
additional property for $3,714,638 with property sales proceeds.
As of December 31, 2009, the Partnership owned a significant
interest in ten properties and a minor interest in two properties
with a total original cost of $16,760,398, including acquisition
expenses for properties acquired before 2009.
Major Tenants
During 2009, five tenants each contributed more than ten
percent of the Partnership's total rental revenue. The major
tenants, in aggregate, contributed 69% of total rental revenue in
2009. It is anticipated that, based on the minimum rental
payments required under the leases, each major tenant will
continue to contribute more than ten percent of rental income in
2010 and future years. However, the tenant of the Champps
Americana restaurant in Utica, Michigan will not be a major
tenant for the next three years due to a temporary reduction in
rent for the property. Any failure of these major tenants could
materially affect the Partnership's net income and cash
distributions.
ITEM 1. BUSINESS. (Continued)
Competition
The Partnership is a minor factor in the commercial real
estate business. There are numerous entities engaged in the
commercial real estate business which have greater financial
resources than the Partnership. At the time the Partnership
elects to dispose of its properties, the Partnership will be in
competition with other persons and entities to find buyers for
its properties.
Employees
The Partnership has no direct employees. Management
services are performed for the Partnership by AEI Fund
Management, Inc., an affiliate of AFM.
ITEM 1A. RISK FACTORS.
Not required for a smaller reporting company.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not required for a smaller reporting company.
ITEM 2. PROPERTIES.
Investment Objectives
The Partnership's investment objectives are to acquire
existing or newly-developed commercial properties throughout the
United States that offer the potential for (i) regular cash
distributions of lease income; (ii) growth in lease income
through rent escalation provisions; (iii) preservation of capital
through all-cash sale-leaseback transactions; (iv) capital growth
through appreciation in the value of properties; and (v) stable
property performance through long-term lease contracts. The
Partnership does not have a policy, and there is no limitation,
as to the amount or percentage of assets that may be invested in
any one property. However, to the extent possible, the General
Partners attempt to diversify the type and location of the
Partnership's properties.
Description of Properties
The Partnership's properties are commercial, single tenant
buildings. The properties were acquired on a debt-free basis and
are leased to various tenants under triple net leases, classified
as operating leases. The only exception is under the Lease for
the Staple store, the Partnership is responsible for repairs to
the structural components of the building and the parking lot.
The Partnership holds an undivided fee simple interest in the
properties.
ITEM 2. PROPERTIES. (Continued)
The Partnership's properties are subject to the general
competitive conditions incident to the ownership of single tenant
investment real estate. Since each property is leased under a
long-term lease, there is little competition until the
Partnership decides to sell the property. At this time, the
Partnership will be competing with other real estate owners, on
both a national and local level, in attempting to find buyers for
the properties. In the event of a tenant default, the
Partnership would be competing with other real estate owners, who
have property vacancies, to attract a new tenant to lease the
property. The Partnership's tenants operate in industries that
are very competitive and can be affected by factors such as
changes in regional or local economies, seasonality and changes
in consumer preference.
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 2009.
Annual Annual
Purchase Property Lease Rent Per
Property Date Cost Tenant Payment Sq. Ft.
HomeTown Buffet
Restaurant
Albuquerque, NM Summit Family
(40.1354%) 9/30/93 $ 531,331 Restaurants, Inc.$ 48,162 $12.50
Red Robin Restaurant Red Robin
Colorado Springs, CO 2/24/94 $2,229,190 West, Inc. $325,000 $45.00
Red Robin Restaurant
Colorado Springs, CO 2/24/94 $1,755,441 (1)
Arby's/Mrs. Winner's
Restaurant
Smyrna, GA RTM
(1.1177%) 5/16/94 $ 13,866 Georgia, Inc. $ 2,064 $45.73
Concord
Applebee's Restaurant Neighborhood
McAllen, TX 12/8/94 $1,320,104 Corporation $224,994 $41.76
Champps
Americana Restaurant Champps
Columbus, OH Operating
(.2706%) 4/16/99 $ 9,330 Corporation $ 1,170 $39.44
Champps
Americana Restaurant Champps
Utica, MI Operating
(44%) 2/12/02 $1,511,134 Corporation $108,033 $28.60
KinderCare KinderCare
Daycare Center Learning
Mayfield Heights, OH 6/14/02 $1,407,058 Centers, Inc. $146,985 $17.26
ITEM 2. PROPERTIES. (Continued)
Annual Annual
Purchase Property Lease Rent Per
Property Date Cost Tenant Payment Sq. Ft.
Biaggi's Restaurant Biaggi's
Ft. Wayne, IN Ristorante
(50%) 7/3/03 $1,379,346 Italiano, LLC $130,540 $27.62
Jared Jewelry Store
Hanover, MD Sterling
(50%) 2/9/04 $1,989,105 Jewelers Inc. $168,551 $58.04
Applebee's Restaurant
Sandusky, OH
(45%) 4/30/04 $1,276,943 Apple Ohio LLC $104,549 $46.53
Staples Store Staples the
Vernon Hills, IL Office Superstore
(70%) 5/22/09 $3,714,638(2) East, Inc. $308,315 $23.00
(1) The property is vacant and listed for sale.
(2) Does not include acquisition costs that were expensed.
The properties listed above with a partial ownership
percentage are owned with affiliates of the Partnership and/or
unrelated third parties. The remaining interests in the Champps
Americana restaurant in Utica, Michigan are owned by AEI Net
Lease Income & Growth Fund XIX Limited Partnership and unrelated
third parties. The remaining interest in the Biaggi's restaurant
is owned by AEI Net Lease Income & Growth Fund XIX Limited
Partnership. The remaining interest in the Jared Jewelry store
is owned by AEI Income & Growth Fund XXI Limited Partnership.
The remaining interest in the Applebee's restaurant in Sandusky,
Ohio is owned by AEI Income & Growth Fund 24 LLC. The remaining
interest in the Staples store is owned by AEI Income & Growth
Fund 27 LLC. The remaining interests in the Champps Americana
restaurant in Columbus, Ohio, the HomeTown Buffet and Arby's/Mrs.
Winner's restaurants are owned by unrelated third parties.
The Partnership accounts for properties owned as tenants-
in-common with affiliated entities and/or unrelated third parties
using the proportionate consolidation method. Each tenant-in-
common owns a separate, undivided interest in the properties.
Any tenant-in-common that holds more than a 50% interest does not
control decisions over the other tenant-in-common interests. The
financial statements reflect only this Partnership's percentage
share of the properties' land, building and equipment,
liabilities, revenues and expenses.
At the time the properties were acquired, the remaining
primary lease terms varied from 13 to 20 years, except for the
Staples store, which had a remaining primary term of 9.4 years.
The Lease for the Red Robin restaurant in continuing operations
was extended to expire on December 31, 2017. 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.
ITEM 2. PROPERTIES. (Continued)
Pursuant to the lease agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they occupy. The General Partners believe the properties are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.
For tax purposes, the Partnership's properties are
depreciated under the Modified Accelerated Cost Recovery System
(MACRS). The largest depreciable component of a property is the
building which is depreciated, using the straight-line method,
over 39 or 40 years. The remaining depreciable components of a
property are personal property and land improvements which are
depreciated, using an accelerated method, over 5 and 15 years,
respectively. Since the Partnership has tax-exempt Partners, the
Partnership is subject to the rules of Section 168(h)(6) of the
Internal Revenue Code which requires a percentage of the
properties' depreciable components to be depreciated over longer
lives using the straight-line method. In general, the federal
tax basis of the properties for tax depreciation purposes is the
same as the basis for book depreciation purposes except for
properties whose carrying value was reduced by a real estate
impairment loss. The real estate impairment loss, which was
recorded against the book cost of the land and depreciable
property, was not recognized for tax purposes.
At December 31, 2009, all properties listed above were
100% occupied. The only exception is the Red Robin restaurant in
Colorado Springs, Colorado that became vacant on November 30,
2008 when the lease term expired.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCK-
HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a) As of December 31, 2009, there were 1,531 holders of
record of the registrant's Limited Partnership Units. There is
no other class of security outstanding or authorized. The
registrant's Units are not a traded security in any market.
During the period covered by this report, the Partnership did not
sell any equity securities that are not registered under the
Securities Act of 1933.
Cash distributions of $14,303 and $19,566 were made to the
General Partners and $1,416,000 and $1,937,005 were made to the
Limited Partners for 2009 and 2008, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined, except as discussed below. These
distributions should not be compared with dividends paid on
capital stock by corporations.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCK-
HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
As part of the Limited Partner distributions discussed
above, the Partnership distributed net sale proceeds of $166,044
and $343,718 in 2009 and 2008, respectively.
(b) Not applicable.
(c) Pursuant to Section 7.7 of the Partnership Agreement,
as amended, each Limited Partner has the right to present Units
to the Partnership for purchase by submitting notice to the
Managing General Partner during January or July of each year.
The purchase price of the Units is equal to 90% of the net asset
value per Unit, as of the first business day of January or July
of each year, as determined by the Managing General Partner in
accordance with the provisions of the Partnership Agreement.
Units tendered to the Partnership during January and July are
redeemed on April 1st and October 1st, respectively, of each year
subject to the following limitations. The Partnership will not
be obligated to purchase in any year any number of Units that,
when aggregated with all other transfers of Units that have
occurred since the beginning of the same calendar year (excluding
Permitted Transfers as defined in the Partnership Agreement),
would exceed 5% of the total number of Units outstanding on
January 1 of such year. In no event shall the Partnership be
obligated to purchase Units if, in the sole discretion of the
Managing General Partner, such purchase would impair the capital
or operation of the Partnership.
Small Business Issuer Purchases of Equity Securities
Maximum Number
of Units that
Total Number of Units May Yet Be
Total Number Average Purchased as Part of Purchased Under
of Units Price Paid Publicly Announced the Plans or
Period Purchased per Unit Plans or Programs Programs
10/1/09 to 10/31/09 15.00 $941.20 1,969.96(1) (2)
11/1/09 to 11/30/09 -- -- -- --
12/1/09 to 12/31/09 -- -- -- --
(1)The Partnership's repurchase plan is mandated by the
Partnership Agreement as included in the prospectus related to
the original offering of the Units.
(2) The Partnership Agreement contains annual limitations on
repurchases described in the paragraph above and has no
expiration date.
ITEM 6. SELECTED FINANCIAL DATA.
Not required for a smaller reporting company.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
This section contains "forward-looking statements" which
represent management's expectations or beliefs concerning future
events, including statements regarding anticipated application of
cash, expected returns from rental income, growth in revenue, the
sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward-
looking statements, should be evaluated in the context of a
number of factors that may affect the Partnership's financial
condition and results of operations, including the following:
Market and economic conditions which affect the value
of the properties the Partnership owns and the cash
from rental income such properties generate;
the federal income tax consequences of rental income,
deductions, gain on sales and other items and the
effects of these consequences for the Partners;
resolution by the General Partners of conflicts with
which they may be confronted;
the success of the General Partners of locating
properties with favorable risk return characteristics;
the effect of tenant defaults; and
the condition of the industries in which the tenants of
properties owned by the Partnership operate.
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.
Prior to January 1, 2009, the Partnership purchased
properties and recorded them in the financial statements at cost
(including capitalized acquisition expenses). For acquisitions
completed on or after January 1, 2009, acquisition-related
transaction costs will be expensed as incurred as a result of the
Partnership adopting new guidance on business combinations that
expands the scope of acquisition accounting. The Partnership
tests long-lived assets for recoverability when events or changes
in circumstances indicate that the carrying value may not be
recoverable. For properties the Partnership will hold and
operate, management determines whether impairment has occurred by
comparing the property's probability-weighted future undiscounted
cash flows to its current carrying value. For properties held
for sale, management determines whether impairment has occurred
by comparing the property's estimated fair value less cost to
sell to its current carrying value. If the carrying value is
greater than the realizable value, an impairment loss is recorded
to reduce the carrying value of the property to its realizable
value. Changes in these assumptions or analysis may cause
material changes in the carrying value of the properties.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
AEI Fund Management, Inc. allocates expenses to each of
the funds they manage primarily on the basis of the number of
hours devoted by their employees to each fund's affairs. They
also allocate expenses at the end of each month that are not
directly related to a fund's operations based upon the number of
investors in the fund and the fund's capitalization relative to
other funds they manage. The Partnership reimburses these
expenses subject to detailed limitations contained in the
Partnership Agreement.
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 years ended December 31, 2009 and 2008, the
Partnership recognized rental income from continuing operations
of $1,530,884 and $1,334,395 respectively. In 2009, rental
income increased due to additional rent received from one
property acquisition in 2009 and rent increases on two
properties.
For the years ended December 31, 2009 and 2008, the
Partnership incurred Partnership administration expenses from
affiliated parties of $251,659 and $269,900, respectively. These
administration expenses include costs associated with the
management of the properties, processing distributions, reporting
requirements and communicating with the Limited Partners. During
the same periods, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $32,394 and $57,994, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit costs, taxes,
insurance and other property costs. These expenses were lower in
2009, when compared to 2008, mainly due to legal and postage
expenses related to the proxy statement that was mailed to
Limited Partners in December 2008.
For the year ended December 31, 2009, the Partnership
incurred property acquisition expenses of $88,630. These costs
were expensed as incurred as the result of the adoption of new
guidance on business combinations that became effective January
1, 2009.
In September 2009, Champps Operating Corporation, the
tenant of the Champps Americana restaurant in Utica, Michigan,
approached the Partnership with a request to adjust the rent on
the property to a market rental rate based on the restaurant's
performance and the current conditions in the market. In
December 2009, after reviewing the financial statements for the
restaurant and Champps, the Partnership agreed to amend the Lease
to reduce the annual rent for the property by 45% to $108,033 for
the next three years. On January 1, 2013, the rent will revert
to the original amount due under the Lease. During the three-
year period, the amendment provides for additional rental
payments if the restaurant's sales exceed certain stated amounts
For the years ended December 31, 2009 and 2008, the
Partnership recognized interest income of $31,946 and $48,873,
respectively. In 2009, interest income decreased due to the
Partnership having less money invested in a money market account
due to property acquisitions and lower money market rates in
2009.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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. For the year ended December 31, 2009, the
Partnership recognized income from discontinued operations of
$362,824, representing rental income of $55,507 and a gain on
disposal of real estate of $588,386, which were partially offset
by property management expenses and depreciation of $65,069 and a
real estate impairment loss of $216,000. For the year ended
December 31, 2008, the Partnership recognized income from
discontinued operations of $900,181, representing rental income
less property management expenses and depreciation of $378,331
and gain on disposal of real estate of $682,938, which were
partially offset by a real estate impairment loss of $161,088.
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.
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.
On November 30, 2008, the Lease term expired for the Red
Robin restaurant on Citadel Drive in Colorado Springs, Colorado.
The tenant reviewed their operations at the property and decided
not to enter into an agreement to extend the term of the Lease.
The Partnership has listed the property for sale with a real
estate broker in the Colorado Springs area. While the property
is vacant, the Partnership is responsible for real estate taxes
and other costs associated with maintaining the property. The
loss of rent and increased expenses related to this property will
decrease the Partnership's cash flow in the future.
Consequently, beginning with the first quarter of 2009, the
Partnership is reducing its regular distribution rate until the
property can be sold and the proceeds reinvested in additional
property.
Based on an analysis of market conditions in the area, the
Partnership determined the Red Robin restaurant was impaired. As
a result, in the fourth quarter of 2008, a charge to discontinued
operations for real estate impairment of $161,088 was recognized,
which was the difference between the carrying value at December
31, 2008 of $1,277,088 and the estimated fair value of
$1,116,000. Based on marketing efforts to date and a recent
analysis of market conditions in the area, the Partnership
recognized an additional real estate impairment of $216,000 to
decrease the carrying value to the estimated fair value of
$900,000 as of September 30, 2009. The charges were recorded
against the cost of the land and building. At December 31, 2009
and 2008, the property was classified as Real Estate Held for
Sale.
On January 9, 2009, the Partnership sold the Johnny
Carino's restaurant in Alexandria, Louisiana to an unrelated
third party. The Partnership received net sale proceeds of
$2,231,614, which resulted in a net gain of $392,362. At the
time of sale, the cost and related accumulated depreciation was
$2,144,748 and $305,496, respectively. At December 31, 2008, the
property was classified as Real Estate Held for Sale with a
carrying value of $1,839,252.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On May 28, 2009, the Partnership sold its remaining
interests in the Champp's Americana restaurants in Lyndhurst,
Ohio and Schaumburg, Illinois to an unrelated third party. The
Partnership received net sale proceeds of $11,692, which resulted
in a net gain of $3,801. The cost and related accumulated
depreciation of the interests sold was $10,622 and $2,731,
respectively.
In May 2009, the Partnership entered into an agreement to
sell the Tractor Supply Company retail store in Mesquite, Texas
to an unrelated third party. On July 2, 2009, the sale closed
with the Partnership receiving net proceeds of $1,332,125, which
resulted in a net gain of $192,223. At the time of sale, the
cost and related accumulated depreciation was $1,231,624 and
$91,722, respectively.
Management believes inflation has not significantly
affected income from operations. Leases may contain rent
increases, based on the increase in the Consumer Price Index over
a specified period, which will result in an increase in rental
income over the term of the leases. Inflation also may cause the
real estate to appreciate in value. However, inflation and
changing prices may have an adverse impact on the operating
margins of the properties' tenants, which could impair their
ability to pay rent and subsequently reduce the Net Cash Flow
available for distributions.
Liquidity and Capital Resources
During the year ended December 31, 2009, the Partnership's
cash balances decreased $436,901 as a result of cash used to
purchase property and distributions paid to the Partners in
excess of cash generated from operating activities, which were
partially offset by cash generated from the sale of property.
During the year ended December 31, 2008, the Partnership's cash
balances increased $1,739,281 as a result of cash generated from
the sale of property, which was partially offset by distributions
paid to the Partners in excess of cash generated from operating
activities.
Net cash provided by operating activities decreased from
$1,551,637 in 2008 to $1,194,818 in 2009 as a result of a
decrease in total rental and interest income in 2009, an increase
in Partnership administration and property management expenses in
2009 and net timing differences in the collection of payments
from the tenants and the payment of expenses. During 2009, cash
from operations was also reduced by $88,630 of acquisition
expenses related to the purchase of real estate. Pursuant to new
accounting guidance, these expenses were reflected as operating
cash outflows. However, pursuant to the Partnership Agreement,
acquisition expenses were funded with proceeds from property
sales.
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 years ended December
31, 2009 and 2008, the Partnership generated cash flow from the
sale of real estate of $3,575,431 and $2,152,460, respectively.
During the year ended December 31, 2009, the Partnership expended
$3,714,638 to invest in real properties as the Partnership
reinvested cash generated from property sales.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On May 22, 2009, the Partnership purchased a 70% interest
in a Staples store in Vernon Hills, Illinois for $3,714,638. The
Partnership incurred $88,630 of acquisition expenses related to
the purchase. The property is leased to Staples the Office
Superstore East, Inc. under a Lease Agreement with a remaining
primary term of 9.4 years and initial annual rent of $308,315 for
the interest purchased. The remaining interest in the property
was purchased by AEI Income & Growth Fund 27 LLC, an affiliate of
the Partnership.
The Partnership's primary use of cash flow, other than
investment in real estate, 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 week 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 on a semi-annual basis.
For the years ended December 31, 2009 and 2008, the
Partnership declared distributions of $1,430,303 and $1,956,571,
respectively, which were distributed 99% to the Limited Partners
and 1% to the General Partners. The Limited Partners received
distributions of $1,416,000 and $1,937,005 and the General
Partners received distributions of $14,303 and $19,566 for the
periods, respectively. In March and June 2008, the Partnership
declared special distributions of net sale proceeds of $115,152
and $171,717, respectively. In 2009, distributions were lower
due to a decrease in the distribution rate per Unit, effective
January 1, 2009, and the special distributions in 2008.
During 2009 and 2008, the Partnership distributed net sale
proceeds of $167,721 and $347,190 to the Limited and General
Partners as part of their quarterly distributions, which
represented a return of capital of $7.53 and $15.59 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 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 2009, one Limited Partner redeemed a total of 15
Partnership Units for $14,118 in accordance with the Partnership
Agreement. The Partnership acquired these Units using Net Cash
Flow from operations. During 2008, the Partnership did not
redeem any Units from the Limited Partners. In prior years, a
total of 124 Limited Partners redeemed 1,954.96 Partnership Units
for $1,500,713. 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 $142 in
2009.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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.
The Economy and Market Conditions
The impact of conditions in the current economy, including
the turmoil in the credit markets, has adversely affected many
real estate companies. However, the absence of mortgage
financing on the Partnership's properties eliminates the risks of
foreclosure and debt-refinancing that can negatively impact the
value and distributions of leveraged real estate companies.
Nevertheless, a prolonged economic downturn may adversely affect
the operations of the Partnership's tenants and their cash flows.
If a tenant were to default on its lease obligations, the
Partnership's income would decrease, its distributions would
likely be reduced and the value of its properties might decline.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for a smaller reporting company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See accompanying index to financial statements.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Balance Sheet as of December 31, 2009 and 2008
Statements for the Years Ended December 31, 2009 and 2008:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
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, 2009 and 2008, and the
related statements of income, cash flows and changes in partners'
capital for the years then ended. The Partnership's management
is responsible for these financial statements. 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, 2009 and 2008, and the results of its operations
and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of
America.
/s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Certified Public Accountants
Minneapolis, Minnesota
March 29, 2010
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
2009 2008
CURRENT ASSETS:
Cash $ 2,405,133 $ 2,842,034
Receivables 950 0
----------- -----------
Total Current Assets 2,406,083 2,842,034
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 5,111,428 4,560,445
Buildings and Equipment 10,270,617 8,349,208
Accumulated Depreciation (2,507,304) (2,288,065)
----------- -----------
12,874,741 10,621,588
Real Estate Held for Sale 900,000 2,955,252
----------- -----------
Net Investments in Real Estate 13,774,741 13,576,840
----------- -----------
Total Assets $16,180,824 $16,418,874
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 93,330 $ 98,024
Distributions Payable 357,573 405,522
Unearned Rent 20,961 8,712
----------- -----------
Total Current Liabilities 471,864 512,258
----------- -----------
PARTNERS' CAPITAL:
General Partners 5,883 9,847
Limited Partners, $1,000 per Unit;
24,000 Units authorized and issued;
22,030 and 22,045 Units outstanding in
2009 and 2008, respectively 15,703,077 15,896,769
----------- -----------
Total Partners' Capital 15,708,960 15,906,616
----------- -----------
Total Liabilities and Partners' Capital $16,180,824 $16,418,874
=========== ===========
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
2009 2008
RENTAL INCOME $ 1,530,884 $ 1,334,395
EXPENSES:
Partnership Administration - Affiliates 251,659 269,900
Partnership Administration and Property
Management - Unrelated Parties 32,394 57,994
Property Acquisitions 88,630 0
Depreciation 306,064 247,060
----------- -----------
Total Expenses 678,747 574,954
----------- -----------
OPERATING INCOME 852,137 759,441
OTHER INCOME:
Interest Income 31,946 48,873
----------- -----------
INCOME FROM CONTINUING OPERATIONS 884,083 808,314
Income from Discontinued Operations 362,824 900,181
----------- -----------
NET INCOME $ 1,246,907 $ 1,708,495
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 10,481 $ 17,085
Limited Partners 1,236,426 1,691,410
----------- -----------
$ 1,246,907 $ 1,708,495
=========== ===========
INCOME PER LIMITED PARTNERSHIP UNIT:
Continuing Operations $ 39.71 $ 36.30
Discontinued Operations 16.39 40.43
----------- -----------
Total $ 56.10 $ 76.73
=========== ===========
Weighted Average Units Outstanding -
Basic and Diluted 22,041 22,045
=========== ===========
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
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,246,907 $ 1,708,495
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 313,692 337,653
Real Estate Impairment 216,000 161,088
Gain on Sale of Real Estate (588,386) (682,938)
Increase in Receivable (950) 0
Increase (Decrease) in Payable to
AEI Fund Management, Inc. (4,694) 30,876
Increase (Decrease) in Unearned Rent 12,249 (3,537)
----------- -----------
Total Adjustments (52,089) (156,858)
----------- -----------
Net Cash Provided By
Operating Activities 1,194,818 1,551,637
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (3,714,638) 0
Proceeds From Sale of Real Estate 3,575,431 2,152,460
----------- -----------
Net Cash Provided By (Used For)
Investing Activities (139,207) 2,152,460
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions Paid to Partners (1,478,252) (1,964,816)
Redemption Payments (14,260) 0
----------- -----------
Net Cash Used For
Financing Activities (1,492,512) (1,964,816)
----------- -----------
NET INCREASE (DECREASE) IN CASH (436,901) 1,739,281
CASH, beginning of year 2,842,034 1,102,753
----------- -----------
CASH, end of year $ 2,405,133 $ 2,842,034
=========== ===========
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, 2007 $ 12,328 $16,142,364 $16,154,692 22,045.04
Distributions Declared (19,566) (1,937,005) (1,956,571)
Net Income 17,085 1,691,410 1,708,495
------- ---------- ---------- ---------
BALANCE, December 31, 2008 9,847 15,896,769 15,906,616 22,045.04
Distributions Declared (14,303) (1,416,000) (1,430,303)
Redemption Payments (142) (14,118) (14,260) (15.00)
Net Income 10,481 1,236,426 1,246,907
------- ---------- ---------- ---------
BALANCE, December 31, 2009 $ 5,883 $15,703,077 $15,708,960 22,030.04
======= ========== ========== =========
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, 2009 AND 2008
(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, 2009 AND 2008
(1) Organization - (Continued)
For tax purposes, profits arising from the sale, financing,
or other disposition of property will be allocated in
accordance with the Partnership Agreement as follows: (i)
first, to those partners with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Partners
and 1% to the General Partners until the aggregate balance
in the Limited Partners' capital accounts equals the sum of
the Limited Partners' Adjusted Capital Contributions plus an
amount equal to 12% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, the balance of any
remaining gain will then be allocated 90% to the Limited
Partners and 10% to the General Partners. Losses will be
allocated 98% to the Limited Partners and 2% to the General
Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
In December 2008, the Managing General Partner solicited by
mail a proxy statement seeking the consent of the Limited
Partners to continue the Partnership for an additional 60
months or to initiate the final disposition, liquidation and
distribution of all of the Partnership's properties and
assets within 24 months. On January 9, 2009, the proposal
to continue the Partnership was approved with a majority of
Units voted in favor of the continuation proposal. As a
result, the Managing General Partner will continue the
operations of the Partnership for an additional 60 months at
which time it will again ask the Limited Partners to vote on
the same two proposals.
(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.
Significant items, subject to such estimates and
assumptions, include the carrying value of investments in
real estate and real estate held for sale.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate.
Cash Concentrations of Credit Risk
The Partnership's cash is deposited in one financial
institution and at times during the year it may exceed
FDIC insurance limits.
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.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(2) Summary of Significant Accounting Policies - (Continued)
Revenue Recognition
The Partnership's real estate is leased under triple net
leases, classified as operating leases. The leases
provide for base annual rental payments payable in
monthly installments. The Partnership recognizes rental
revenue according to the terms of the individual leases.
For leases that contain stated rental increases, the
increases are recognized in the year in which they are
effective. Contingent rental payments are recognized
when the contingencies on which the payments are based
are satisfied and the rental payments become due under
the terms of the leases.
Investments in Real Estate
The Partnership purchases properties and records them at
cost. The Partnership compares the carrying amount of
its properties to the estimated probability-weighted
future undiscounted cash flows expected to result from
the property and its eventual disposition. If the sum of
the expected future cash flows is less than the carrying
amount of the property, the Partnership recognizes an
impairment loss by the amount by which the carrying
amount of the property exceeds the fair value of the
property.
Prior to January 1, 2009, the Partnership 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. For
acquisitions completed on or after January 1, 2009,
acquisition-related transaction costs will be expensed as
incurred as a result of the Partnership adopting new
guidance on business combinations that expands the scope
of acquisition accounting.
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.
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 entities and/or unrelated third
parties using the proportionate consolidation method.
Each tenant-in-common owns a separate, undivided interest
in the properties. Any tenant-in-common that holds more
than a 50% interest does not control decisions over the
other tenant-in-common interests. The financial
statements reflect only this Partnership's percentage
share of the properties' land, building and equipment,
liabilities, revenues and expenses.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership's properties are subject to environmental
laws and regulations adopted by various governmental
entities in the jurisdiction in which the properties are
located. These laws could require the Partnership to
investigate and remediate the effects of the release or
disposal of hazardous materials at these locations if
found. For each property, an environmental assessment is
completed prior to acquisition. In addition, the lease
agreements typically strictly prohibit the production,
handling, or storage of hazardous materials (except where
incidental to the tenant's business such as use of
cleaning supplies) in violation of applicable law to
restrict environmental and other damage. Environmental
liabilities are recorded when it is determined the
liability is probable and the costs can reasonably be
estimated. There were no environmental issues noted or
liabilities recorded at December 31, 2009 and 2008.
Fair Value Measurements
Fair value, as defined by United States Generally
Accepted Accounting Principles ("US GAAP"), is the price
that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between
market participants at the measurement date in the
principal or most advantageous market. US GAAP
establishes a hierarchy in determining the fair value of
an asset or liability. The fair value hierarchy has
three levels of inputs, both observable and unobservable.
US GAAP requires the utilization of the lowest possible
level of input to determine fair value. Level 1 inputs
include quoted market prices in an active market for
identical assets or liabilities. Level 2 inputs are
market data, other than Level 1 inputs, that are
observable either directly or indirectly. Level 2 inputs
include quoted market prices for similar assets or
liabilities, quoted market prices in an inactive market,
and other observable information that can be corroborated
by market data. Level 3 inputs are unobservable and
corroborated by little or no market data.
The Partnership had no financial assets or liabilities
measured at fair value on a recurring basis or
nonrecurring basis that would require disclosure under
this pronouncement.
The Red Robin restaurant on Citadel Drive in Colorado
Springs, Colorado, with a carrying amount of $1,116,000
at September 30, 2009, was written down to its fair value
of $900,000 after completing our long-lived asset
valuation analysis. The fair value of the property was
based upon comparable sales of similar properties, which
are considered Level 2 inputs in the valuation hierarchy.
The resulting impairment charge in the third quarter of
$216,000 was included in earnings for the period.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(2) Summary of Significant Accounting Policies - (Continued)
Recently Adopted Pronouncements
In December 2007, the Financial Accounting Standards
Board issued updated guidance, which applies to all
transactions or events in which an entity obtains control
of one or more businesses. This guidance (i) establishes
the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities
assumed, (ii) requires expensing of most transaction
costs, and (iii) requires the acquirer to disclose to
investors and other users all of the information needed
to evaluate and understand the nature and financial
effect of the business combination. These provisions
were adopted by the Partnership on January 1, 2009. The
primary impact of adopting this guidance on the
Partnership's financial statements was the requirement to
expense transaction costs relating to its acquisition
activities in 2009.
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.
Reclassification
Certain items related to discontinued operations in the
prior year's financial statements have been reclassified
to conform to 2009 presentation. These reclassifications
had no effect on Partners' capital, net income or cash
flows.
(3) Related Party Transactions -
The Partnership owns the percentage interest shown below in
the following properties as tenants-in-common with the
affiliated entities listed: Champps Americana restaurant in
Utica, Michigan (44% - AEI Net Lease Income & Growth Fund
XIX Limited Partnership and unrelated third parties);
Biaggi's restaurant (50% - AEI Net Lease Income & Growth
Fund XIX Limited Partnership); Jared Jewelry store (50% -
AEI Income & Growth Fund XXI Limited Partnership);
Applebee's restaurant in Sandusky, Ohio (45% - AEI Income &
Growth Fund 24 LLC) and Staples store (70% - AEI Income &
Growth Fund 27 LLC).
The Partnership owned a 50% interest in a Champps Americana
restaurant in West Chester, Ohio. AEI Income & Growth Fund
XXII Limited Partnership, an affiliate of the Partnership,
owned a 50% interest in this property until the property was
sold to an unrelated third party in 2008. The Partnership
owned a 50% interest in a Tractor Supply Company store. AEI
Net Lease Income & Growth Fund XIX Limited Partnership owned
a 50% interest in this property until the property was sold
to an unrelated third party in 2009.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(3) Related Party Transactions - (Continued)
AEI received the following reimbursements for costs and
expenses from the Partnership for the years ended December
31:
2009 2008
a.AEI is reimbursed for costs incurred in providing services
related to managing the Partnership's operations and
properties, maintaining the Partnership's books, and
communicating with the Limited Partners. These
amounts included $5,718 and $0 of expenses related to
Discontinued Operations in 2009 and 2008, respectively. $257,377 $269,900
======= =======
b.AEI is reimbursed for all direct expenses it paid on the
Partnership's behalf to third parties related to Partnership
administration and property management. These
expenses included printing costs, legal and filing fees,
direct administrative costs, outside audit costs, taxes
insurance and other property costs. These amounts
included $51,723 and $6,313 of expenses related to
Discontinued Operations in 2009 and 2008, respectively. $ 84,117 $ 64,307
======= =======
c.AEI is reimbursed for costs incurred in providing
services and direct expenses related to the acquisition
of properties on behalf of the Partnership. $ 88,630 $ 0
======= =======
d.AEI is reimbursed for costs incurred in providing
services related to the sale of property. $ 99,516 $ 34,480
======= =======
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, 2009 AND 2008
(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. The only exception is
under the Lease for the Staple store, the Partnership is
responsible for repairs to the structural components of the
building and the parking lot. At the time the properties
were acquired, the remaining primary lease terms varied from
13 to 20 years, except for the Staples store, which had a
remaining primary term of 9.4 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 expired 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 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
Arby's/Mrs. Winner's and Applebee's restaurant in McAllen,
Texas were constructed and acquired in 1994. 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 Biaggi's restaurant was constructed
in 2001 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 Staples store was constructed in 2008
and acquired in 2009. There have been no costs capitalized
as improvements subsequent to the acquisitions.
The cost of the properties not held for sale and related
accumulated depreciation at December 31, 2009 are as
follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
HomeTown Buffet,
Albuquerque, NM $ 241,960 $ 289,371 $ 531,331 $ 156,745
Red Robin,
Colorado Springs, CO 905,980 1,323,210 2,229,190 700,199
Arby's/Mrs. Winner's,
Smyrna, GA 5,775 8,091 13,866 4,270
Applebee's, McAllen, TX 463,553 856,551 1,320,104 464,228
Champps Americana, Columbus, OH 2,924 6,406 9,330 2,366
Champps Americana, Utica, MI 543,318 967,816 1,511,134 265,435
KinderCare,
Mayfield Heights, OH 289,266 1,117,792 1,407,058 281,002
Biaggi's, Ft. Wayne, IN 503,204 876,142 1,379,346 189,832
Jared Jewelry, Hanover, MD 861,052 1,128,053 1,989,105 220,912
Applebee's, Sandusky, OH 412,396 864,547 1,276,943 163,302
Staples, Vernon Hills, IL 882,000 2,832,638 3,714,638 59,013
----------- ----------- ----------- -----------
$ 5,111,428 $10,270,617 $15,382,045 $ 2,507,304
=========== =========== =========== ===========
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(4) Investments in Real Estate - (Continued)
On May 22, 2009, the Partnership purchased a 70% interest in
a Staples store in Vernon Hills, Illinois for $3,714,638.
The Partnership incurred $88,630 of acquisition expenses
related to the purchase. These costs were expensed as
incurred as the Partnership adopted new guidance on business
combinations that became effective January 1, 2009. The
property is leased to Staples the Office Superstore East,
Inc. under a Lease Agreement with a remaining primary term
of 9.4 years and initial annual rent of $308,315 for the
interest purchased.
In September 2009, Champps Operating Corporation, the tenant
of the Champps Americana restaurant in Utica, Michigan,
approached the Partnership with a request to adjust the rent
on the property to a market rental rate based on the
restaurant's performance and the current conditions in the
market. In December 2009, after reviewing the financial
statements for the restaurant and Champps, the Partnership
agreed to amend the Lease to reduce the annual rent for the
property by 45% to $108,033 for the next three years. On
January 1, 2013, the rent will revert to the original amount
due under the Lease. During the three-year period, the
amendment provides for additional rental payments if the
restaurant's sales exceed certain stated amounts.
The Partnership owns a 40.1354% interest in a HomeTown
Buffet restaurant, a 1.1177% interest in an Arby's/Mrs.
Winner's restaurant 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.
For properties owned as of December 31, 2009, the minimum
future rent payments required by the leases are as follows:
2010 $ 1,584,320
2011 1,552,163
2012 1,568,951
2013 1,686,542
2014 1,691,800
Thereafter 6,633,808
-----------
$14,717,584
===========
There were no contingent rents recognized in 2009 and 2008.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(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 2009 2008
Red Robin West, Inc. Restaurant $ 325,000 $ 468,055
Concord Neighborhood Corporation Restaurant 224,994 224,994
Champps Operating Corporation Restaurant 192,521 218,285
Staples the Office
Superstore East, Inc. Retail 188,138 N/A
Sterling Jewelers, Inc. Retail 168,551 N/A
Kona Restaurant Group, Inc. Restaurant N/A 207,123
---------- ----------
Aggregate rent revenue of major tenants $1,099,204 $1,118,457
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 69% 62%
========== ==========
(6) 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.
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.
On November 30, 2008, the Lease term expired for the Red
Robin restaurant on Citadel Drive in Colorado Springs,
Colorado. The tenant reviewed their operations at the
property and decided not to enter into an agreement to
extend the term of the Lease. The Partnership has listed
the property for sale with a real estate broker in the
Colorado Springs area. While the property is vacant, the
Partnership is responsible for real estate taxes and other
costs associated with maintaining the property.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(6) Discontinued Operations - (Continued)
Based on an analysis of market conditions in the area, the
Partnership determined the Red Robin restaurant was
impaired. As a result, in the fourth quarter of 2008, a
charge to discontinued operations for real estate impairment
of $161,088 was recognized, which was the difference between
the carrying value at December 31, 2008 of $1,277,088 and
the estimated fair value of $1,116,000. Based on marketing
efforts to date and a recent analysis of market conditions
in the area, the Partnership recognized an additional real
estate impairment of $216,000 to decrease the carrying value
to the estimated fair value of $900,000 as of September 30,
2009. The charges were recorded against the cost of the
land and building. At December 31, 2009 and 2008, the
property was classified as Real Estate Held for Sale.
On January 9, 2009, the Partnership sold the Johnny Carino's
restaurant in Alexandria, Louisiana to an unrelated third
party. The Partnership received net sale proceeds of
$2,231,614, which resulted in a net gain of $392,362. At
the time of sale, the cost and related accumulated
depreciation was $2,144,748 and $305,496, respectively. At
December 31, 2008, the property was classified as Real
Estate Held for Sale with a carrying value of $1,839,252.
On May 28, 2009, the Partnership sold its remaining
interests in the Champp's Americana restaurants in
Lyndhurst, Ohio and Schaumburg, Illinois to an unrelated
third party. The Partnership received net sale proceeds of
$11,692, which resulted in a net gain of $3,801. The cost
and related accumulated depreciation of the interests sold
was $10,622 and $2,731, respectively.
In May 2009, the Partnership entered into an agreement to
sell the Tractor Supply Company retail store in Mesquite,
Texas to an unrelated third party. On July 2, 2009, the
sale closed with the Partnership receiving net proceeds of
$1,332,125, which resulted in a net gain of $192,223. At
the time of sale, the cost and related accumulated
depreciation was $1,231,624 and $91,722, respectively.
During 2009 and 2008, the Partnership distributed net sale
proceeds of $167,721 and $347,190 to the Limited and General
Partners as part of their quarterly distributions, which
represented a return of capital of $7.53 and $15.59 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.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(6) Discontinued Operations - (Continued)
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:
2009 2008
Rental Income $ 55,507 $ 475,237
Property Management Expenses (57,441) (6,313)
Depreciation (7,628) (90,593)
Real Estate Impairment (216,000) (161,088)
Gain on Disposal of Real Estate 588,386 682,938
--------- ---------
Income from Discontinued Operations $ 362,824 $ 900,181
========= =========
(7) Partners' Capital -
For the years ended December 31, 2009 and 2008, the
Partnership declared distributions of $1,430,303 and
$1,956,571, respectively. The Limited Partners received
distributions of $1,416,000 and $1,937,005 and the General
Partners received distributions of $14,303 and $19,566 for
the years, respectively. The Limited Partners'
distributions represent $64.24 and $87.87 per Limited
Partnership Unit outstanding using 22,041 and 22,045
weighted average Units in 2009 and 2008, respectively. The
distributions represent $55.46 and $76.73 per Unit of Net
Income and $8.78 and $11.14 per Unit of return of capital in
2009 and 2008, respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed net sale proceeds of
$166,044 and $343,718 in 2009 and 2008, respectively.
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.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(7) Partners' Capital - (Continued)
During 2009, one Limited Partner redeemed a total of 15
Partnership Units for $14,118 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. During 2008, the
Partnership did not redeem any Units from the Limited
Partners. 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 $142 in 2009.
After the effect of redemptions, the Adjusted Capital
Contribution, as defined in the Partnership Agreement, is
$1,089.42 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:
2009 2008
Net Income for Financial Reporting Purposes $1,246,907 $1,708,495
Depreciation for Tax Purposes Under
Depreciation for Financial Reporting Purposes 22,182 29,819
Income Accrued for Tax Purposes Over (Under)
Income for Financial Reporting Purposes 12,249 (3,537)
Acquisition Costs Expensed for Financial Reporting
Purposes, Capitalized for Tax Purposes 88,630 0
Real Estate Impairment Loss
Not Recognized for Tax Purposes 216,000 161,088
Gain on Sale of Real Estate for Tax Purposes
Under Gain for Financial Reporting Purposes 1,274 (14,233)
---------- ----------
Taxable Income to Partners $1,587,242 $1,881,632
========== ==========
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(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:
2009 2008
Partners'Capital for Financial Reporting Purposes $15,708,960 $15,906,616
Adjusted Tax Basis of Investments in Real Estate
Over Net Investments in Real Estate
for Financial Reporting Purposes 1,004,999 676,913
Income Accrued for Tax Purposes Over
Income for Financial Reporting Purposes 20,961 8,712
Syndication Costs Treated as Reduction
of Capital For Financial Reporting Purposes 3,271,273 3,271,273
---------- ----------
Partners' Capital for Tax Reporting Purposes $20,006,193 $19,863,514
========== ==========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9AT.CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures.
Under the supervision and with the participation of
management, including its President and Chief Financial Officer,
the Managing General Partner of the Partnership evaluated the
effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based
upon that evaluation, the President and Chief Financial Officer
of the Managing General Partner concluded that, as of the end of
the period covered by this report, our disclosure controls and
procedures were effective in ensuring that information required
to be disclosed by us in the reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in applicable rules and forms
and that such information is accumulated and communicated to
management, including the President and Chief Financial Officer
of the Managing General Partner, in a manner that allows timely
decisions regarding required disclosure.
(b) Internal Control Over Financial Reporting.
(i) Management's Report on Internal Control Over Financial
Reporting. The Managing General Partner, through its management,
is responsible for establishing and maintaining adequate internal
control over our financial reporting, as defined in Rule 13a-
15(f) under the Exchange Act, and for performing an assessment of
the effectiveness of our internal control over financial
reporting as of December 31, 2009. Internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Our
system of internal control over financial reporting includes
those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
Partnership; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Partnership
are being made only in accordance with authorizations of
management of the Managing General Partner; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
Partnership's assets that could have a material effect on the
financial statements.
Management of the Managing General Partner performed an
assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2009 based upon criteria
in Internal Control-Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission ("COSO").
Based on our assessment, management of the Managing General
Partner determined that our internal control over financial
reporting was effective as of December 31, 2009 based on the
criteria in Internal Control-Integrated Framework issued by the
COSO.
ITEM 9AT.CONTROLS AND PROCEDURES. (Continued)
This annual report does not include an attestation report
of our registered public accounting firm regarding internal
control over financial reporting. Management's report was not
subject to attestation by our registered public accounting firm
pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in
this annual report.
(ii) Changes in Internal Control Over Financial
Reporting. During the most recent period covered by this report,
there has been no change in our internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act)
that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The registrant is a limited partnership and has no
officers, directors, or direct employees. The General Partners
manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters
affecting the Partnership's business. The General Partners are
AEI Fund Management XX, Inc. (AFM), the Managing General Partner,
and Robert P. Johnson, Chief Executive Officer, President and
sole director of AFM, the Individual General Partner. AFM is a
wholly owned subsidiary of AEI Capital Corporation of which Mr.
Johnson is the majority shareholder. AFM has only one senior
financial executive, its Chief Financial Officer. The Chief
Financial Officer reports directly to Mr. Johnson and is
accountable for his actions to Mr. Johnson. Although Mr. Johnson
and AFM require that all of their personnel, including the Chief
Financial Officer, engage in honest and ethical conduct, ensure
full, fair, accurate, timely, and understandable disclosure,
comply with all applicable governmental laws, rules and
regulations, and report to Mr. Johnson any deviation from these
principles, because the organization is composed of only
approximately 35 individuals, because the management of a
partnership by an entity that has different interests in
distributions and income than investors involves numerous
conflicts of interest that must be resolved on a daily basis, and
because the ultimate decision maker in all instances is Mr.
Johnson, AFM has not adopted a formal code of conduct. Instead,
the materials pursuant to which investors purchase Units disclose
these conflicts of interest in detail and Mr. Johnson, as the CEO
and sole director of AFM, resolves conflicts to the best of his
ability, consistent with his fiduciary obligations to AFM and the
fiduciary obligations of AFM to the Partnership. The director
and officers of AFM are as follows:
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
(Continued)
Robert P. Johnson, age 65, is Chief Executive Officer,
President and sole director and has held these positions since
the formation of AFM in September 1992, and has been elected to
continue in these positions until December 2010. From 1970 to
the present, he has been employed exclusively in the investment
industry, specializing in limited partnership investments. In
that capacity, he has been involved in the development, analysis,
marketing and management of public and private investment
programs investing in net lease properties as well as public and
private investment programs investing in energy development.
Since 1971, Mr. Johnson has been the president, a director and a
registered principal of AEI Securities, Inc., which is registered
with the SEC as a securities broker-dealer, is a member of the
Financial Industry Regulatory Authority (FINRA) and is a member
of the Security Investors Protection Corporation (SIPC). Mr.
Johnson has been president, a director and the principal
shareholder of AEI Fund Management, Inc., a real estate
management company founded by him, since 1978. Mr. Johnson is
currently a general partner or principal of the general partner
in ten limited partnerships and a managing member in five LLCs.
Patrick W. Keene, age 50, is Chief Financial Officer,
Treasurer and Secretary and has held these positions since
January 22, 2003 and has been elected to continue in these
positions until December 2010. Mr. Keene has been employed by
AEI Fund Management, Inc. and affiliated entities since 1986.
Prior to being elected to the positions above, he was Controller
of the various entities. From 1982 to 1986, Mr. Keene was with
KPMG Peat Marwick Certified Public Accountants, first as an
auditor and later as a tax manager. Mr. Keene is responsible for
all accounting functions of AFM and the registrant.
Since Mr. Johnson serves as the Individual General Partner
of the Partnership, as well as the sole director of AFM, all of
the duties that might be assigned to an audit committee are
assigned to Mr. Johnson. Mr. Johnson is not an audit committee
financial expert, as defined. As an officer and majority owner,
through a parent company, of AFM, and as the Individual General
Partner, Mr. Johnson is not a "disinterested director" and may be
subject to a number of conflicts of interests in his capacity as
sole director of AFM.
Before the independent auditors are engaged, Mr. Johnson,
as the sole director of AFM, approves all audit-related fees, and
all permissible nonaudit fees, for services of our auditors.
Section 16(a) Beneficial Ownership Reporting Compliance
Under federal securities laws, the directors and officers
of the General Partner of the Partnership, and any beneficial
owner of more than 10% of a class of equity securities of the
Partnership, are required to report their ownership of the
Partnership's equity securities and any changes in such ownership
to the Securities and Exchange Commission (the "Commission").
Specific due dates for these reports have been established by the
Commission, and the Partnership is required to disclose in this
Annual Report on 10-K any delinquent filing of such reports and
any failure to file such reports during the fiscal year ended
December 31, 2009. Based upon information provided by officers
and directors of the General Partner, all officers, directors and
10% owners filed all reports on a timely basis in the 2009 fiscal
year.
ITEM 11. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative, property management and
property sales services. The amount and nature of such payments
are detailed in Item 13 of this annual report on Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth information pertaining to
the ownership of the Units by each person known by the
Partnership to beneficially own 5% or more of the Units, by each
General Partner, and by each officer or director of the Managing
General Partner as of February 28, 2010:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
AEI Fund Management XX, Inc. 0 0.00%
Robert P. Johnson 28 0.13%
Patrick W. Keene 0 0.00%
Address for all:
1300 Wells Fargo Place
30 East 7th Street, St. Paul, Minnesota 55101
The persons set forth in the preceding table hold sole voting
power and power of disposition with respect to all of the Units
set forth opposite their names. The General Partners know of no
holders of more than 5% of the outstanding Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.
The registrant, AFM and its affiliates have common
management and utilize the same facilities. As a result, certain
administrative expenses are allocated among these related
entities. All of such activities and any other transactions
involving the affiliates of the General Partner of the registrant
are governed by, and are conducted in conformity with, the
limitations set forth in the Limited Partnership Agreement of the
registrant. Reference is made to Note 3 of the Financial
Statements, as presented, and is incorporated herein by
reference, for details of related party transactions for the
years ended December 31, 2009 and 2008.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE. (Continued)
Neither the registrant, nor the Managing General Partner
of the registrant, has a board of directors consisting of any
members who are "independent." The sole director of the Managing
General Partner, Robert P. Johnson, is also the Individual
General Partner of the registrant, and is the Chief Executive
Officer, and indirectly the principal owner, of the Managing
General Partner. Accordingly, there is no disinterested board,
or other functioning body, that reviews related party
transactions, or the transactions between the registrant and the
General Partners, except as performed in connection with the
audit of its financial statements.
The limitations included in the Partnership Agreement
require that the cumulative reimbursements to the General
Partners and their affiliates for administrative expenses not
allowed under the NASAA Guidelines ("Guidelines") will not exceed
the sum of (i) the front-end fees allowed by the Guidelines less
the front-end fees paid by the Partnership, (ii) the cumulative
property management fees allowed by the Guidelines but not paid,
(iii) any real estate commission allowed by the Guidelines, and
(iv) 10% of Net Cash Flow less the Net Cash Flow actually
distributed to the General Partners. The administrative expenses
not allowed under the Guidelines include a controlling person's
salary and fringe benefits, rent and depreciation. As of
December 31, 2009, the cumulative reimbursements to the General
Partners and their affiliates did not exceed those amounts.
The following table sets forth the forms of compensation,
distributions and cost reimbursements paid by the registrant to
the General Partners or their Affiliates in connection with the
operation of the Fund and its properties for the period from
inception through December 31, 2009.
Person or Entity Amount Incurred From
Receiving Form and Method Inception (September 14, 1990)
Compensation of Compensation To December 31, 2009
AEI Securities, Inc. Selling Commissions equal to $2,398,039
8% of proceeds plus a 2%
nonaccountable expense allowance,
most of which was reallowed to
Participating Dealers.
General Partners and Reimbursement at Cost for other $ 884,013
Affiliates Organization and Offering Costs.
General Partners and Reimbursement at Cost for all $ 908,614
Affiliates Acquisition Expenses.
General Partners and Reimbursement at Cost for $4,101,600
Affiliates providing administrative services
to the Fund, including all expenses
related to management of the Fund's
properties and all other transfer
agency, reporting, partner
relations and other administrative
functions.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE. (Continued)
Person or Entity Amount Incurred From
Receiving Form and Method Inception (September 14, 1990)
Compensation of Compensation To December 31, 2009
General Partners and Reimbursement at Cost for $ 838,029
Affiliates providing services related to the
disposition of the Fund's
properties.
General Partners 1% of Net Cash Flow in any fiscal $ 261,347
year until the Limited Partners
have received annual, non-cumulative
distributions of Net Cash Flow equal
to 10% of their Adjusted Capital
Contributions and 10% of any
remaining Net Cash Flow in such
fiscal year.
General Partners 1% of distributions of Net $ 34,622
Proceeds of Sale until Limited
Partners have received an amount
equal to (a) their Adjusted Capital
Contributions, plus (b) an
amount equal to 12% of their
Adjusted Capital Contributions per
annum, cumulative but not
compounded, to the extent not
previously distributed. 10% of
distributions of Net Proceeds of Sale
thereafter.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The following is a summary of the fees billed to the
Partnership by Boulay, Heutmaker, Zibell & Co. P.L.L.P. for
professional services rendered for the years ended December 31,
2009 and 2008:
Fee Category 2009 2008
Audit Fees $ 16,325 $ 16,100
Audit-Related Fees 0 0
Tax Fees 0 0
All Other Fees 0 0
--------- --------
Total Fees $ 16,325 $ 16,100
========= ========
Audit Fees - Consists of fees billed for professional services
rendered for the audit of the Partnership's annual financial
statements and review of the interim financial statements
included in quarterly reports, and services that are normally
provided by Boulay, Heutmaker, Zibell & Co. P.L.L.P. in
connection with statutory and regulatory filings or engagements.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. (Continued)
Audit-Related Fees - Consists of fees billed for assurance and
related services that are reasonably related to the performance
of the audit or review of financial statements and are not
reported under "Audit Fees." These services include consultations
concerning financial accounting and reporting standards.
Tax Fees - Consists of fees billed for professional services for
federal and state tax compliance, tax advice and tax planning.
All Other Fees - Consists of fees for products and services other
than the services reported above.
Policy for Preapproval of Audit and Permissible Non-Audit
Services of Independent Auditors
Before the Independent Auditors are engaged by the
Partnership to render audit or non-audit services, the engagement
is approved by Mr. Johnson acting as the Partnership's audit
committee.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) (1) A list of the financial statements contained
herein is set forth on page 14.
(a) (2) Schedules are omitted because of the absence of
conditions under which they are required or because
the required information is presented in the
financial statements or related notes.
(a) (3) The Exhibits filed in response to Item 601 of
Regulation S-K are listed below.
3.1 Certificate of Limited Partnership (incorporated by
reference to Exhibit 3.1 of the registrant's Registration
Statement on Form SB-2 filed November 9, 1992 [File No.
3354354-C]).
3.2 Limited Partnership Agreement (incorporated by
reference to Exhibit 3.2 of the registrant's Registration
Statement on Form SB-2 filed November 9, 1992 [File No.
3354354-C]).
10.1 Net Lease Agreement dated September 30, 1993 between
the Partnership and HTB Restaurants, Inc. and JB's
Restaurants, Inc. relating to the Property at 1528 Eubank,
N.E., Albuquerque, New Mexico (incorporated by reference to
Exhibit A of Form 8-K filed October 8, 1993).
10.2 Assignment of Lease dated February 24, 1994 between the
Partnership and Retlen Corporation, Inc., and the Lease
Agreement dated May 11, 1987, relating to the Property at
1410 Jamboree Drive, Colorado Springs, Colorado
(incorporated by reference to Exhibit B of Form 8-K filed
March 8, 1994).
10.3 Net Lease Agreement dated November 30, 1994 between the
Partnership and Renaissant Development Corporation relating
to the Property at 4601 N. 10th Street, McAllen, Texas
(incorporated by reference to Exhibit 10.16 of Form 10-KSB
filed March 27, 1995).
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. (Continued)
10.4 Net Lease Agreement dated April 27, 2001 between the
Partnership, AEI Real Estate Fund XVII Limited Partnership,
AEI Net Lease Income & Growth Fund XIX Limited Partnership
and Champps Entertainment, Inc. relating to the Property at
12515 Hall Road, Utica, Michigan (incorporated by reference
to Exhibit 10.7 of Form 10-QSB filed May 15, 2001).
10.5 First Amendment to Net Lease Agreement dated February
12, 2002 between the Partnership, AEI Real Estate Fund XVII
Limited Partnership, AEI Net Lease Income & Growth Fund XIX
Limited Partnership and Champps Entertainment, Inc. relating
to the Property at 12515 Hall Road, Utica, Michigan
(incorporated by reference to Exhibit 10.59 of Form 10-KSB
filed March 29, 2002).
10.6 Net Lease Agreement dated June 14, 2002 between the
Partnership and ARAMARK Educational Resources, Inc. relating
to the Property at 200 Allen Bradley Drive, Mayfield
Heights, Ohio (incorporated by reference to Exhibit 10.2 of
Form 10-QSB filed August 14, 2002).
10.7 Assignment and Assumption of Lease dated July 3, 2003
between the Partnership, AEI Net Lease Income & Growth Fund
XIX Limited Partnership and NMA Fort Wayne, LLC relating to
the Property at 4010 Jefferson Boulevard, Fort Wayne,
Indiana (incorporated by reference to Exhibit 10.2 of Form
10-QSB filed August 14, 2003).
10.8 Assignment and Assumption of Lease dated February 9,
2004 between the Partnership, AEI Income & Growth Fund XXI
Limited Partnership and Transmills, LLC relating to the
Property at 7684 Arundel Mills, Hanover, Maryland
(incorporated by reference to Exhibit 10.2 of Form 8-K filed
February 24, 2004).
10.9 Assignment and Assumption of Lease dated April 30, 2004
between the Partnership, AEI Income & Growth Fund 24 LLC and
PRECO II CRIC LLC relating to the Property at 5503 Milan
Road, Sandusky, Ohio (incorporated by reference to Exhibit
10.2 of Form 10-QSB filed May 14, 2004).
10.10 Assignment and Assumption of Purchase and Sale
Agreement dated May 6, 2009 between the Partnership, AEI
Income & Growth Fund 27 LLC and AEI Fund Management, Inc.
relating to the Property at 1600 North Milwaukee Avenue,
Vernon Hills, Illinois (incorporated by reference to Exhibit
10.1 of Form 8-K filed May 29, 2009).
10.11 Assignment and Assumption of Lease dated May 22,
2009 between the Partnership, AEI Income & Growth Fund 27
LLC and Bradford Landing South LLC relating to the Property
at 1600 North Milwaukee Avenue, Vernon Hills, Illinois
(incorporated by reference to Exhibit 10.2 of Form 8-K filed
May 29, 2009).
31.1 Certification of Chief Executive Officer of General
Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer of General
Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief
Financial Officer of General Partner pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AEI NET LEASE INCOME & GROWTH FUND XX
Limited Partnership
By: AEI Fund Management XX, Inc.
Its Managing General Partner
March 29, 2010 By: /s/ ROBERT P JOHNSON
Robert P. Johnson, President
and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Name Title Date
/s/ROBERT P JOHNSON President (Principal Executive Officer) March 29, 2010
Robert P. Johnson and Sole Director of Managing General
Partner
/s/PATRICK W KEENE Chief Financial Officer and Treasurer March 29, 2010
Patrick W. Keene (Principal Accounting Officer
