1

2

4

6

The Company’s repurchase plan is mandated by the Operating Agreement as included in the prospectus related to the original offering of the Units.

 

The per Unit value was the aggregate estimated value of the Company's assets less the Company's liabilities, and less the value attributable to the interest of the Managing Members, divided by the number of Units outstanding. The Company's cash, receivables and liabilities were valued at face value as of September 30, 2021.2023. Each of the Company's properties were valued by dividing their annual rental income as of December 1, 20212023 by a capitalization rate the Managing Member believed, based upon the aforementioned valuation process, to be representative of the retail market for the sale of each property. The resulting value for each property was reviewed to determine that it also reflected circumstances that may have been unique to each specific property. For recently acquired properties, an appraisal report received at or near the time of acquisition from an independent commercial property appraiser was used to determine the value of the property. The appraisal report is used to value the property for approximately one year after the date of acquisition. The valuations were estimates only, and were based on a number of assumptions which may not be accurate or complete. In addition, property values are subject to change and could decline after the date of the valuations. Accordingly, this estimated value should not be viewed as the amount at which a Limited Member may be able to sell his units, or the fair market value of the Company properties, nor does it represent the amount of net proceeds Limited Members would receive if the Company properties were sold and the proceeds distributed in a liquidation of the Company.

 

The following table provides a breakdown of each major asset type, liabilities and the number of Units that were used to calculate the estimated value per Unit, using the methodology described above, as of December 31, 20212023 and 2020:2022:

 

 

ITEM 6. (Reserved)

 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                 CONDITION AND RESULTS OF OPERATIONS.

 

This section contains "forward-looking statements" which represent management's expectations or beliefs concerning future events, including statements regarding anticipated application of cash, expected returns from rental income, growth in revenue, the sufficiency of cash to meet operating expenses, rates of distribution, and other matters. These, and other forward-looking statements, should be evaluated in the context of a number of factors that may affect the Company’s financial condition and results of operations, including the following:

 

 

Application of Critical Accounting Policies

 

The Company’s financial statements have been prepared in accordance with US GAAP. Preparing the financial statements requires management to use judgment in the application of these accounting policies, including making estimates and assumptions. These judgments will affect the reported amounts of the Company’s assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and will affect the reported amounts of revenue and expenses during the reporting periods. It is possible that the carrying amount of the Company’s assets and liabilities, or the results of reported operations, will be affected if management’s estimates or assumptions prove inaccurate.

 

Management of the Company evaluates the following accounting estimates on an ongoing basis, and has discussed the development and selection of these estimates and the management discussion and analysis disclosures regarding them with the managing memberManaging Member of the Company.

 

 

Upon acquisition of real properties, the Company records them in the financial statements at cost. The purchase price is allocated to tangible assets, consisting of land and building, and to identified intangible assets and liabilities, which may include the value of above market and below market leases and the value of in-place leases. The allocation of the purchase price is based upon the relative fair value of each component of the property. Although independent appraisals may be used to assist in the determination of fair value, in many cases these values will be based upon management’s assessment of each property, the selling prices of comparable properties and the discounted value of cash flows from the asset.

 

The fair values of above market and below market in-place leases will be recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) an estimate of fair market lease rates for the corresponding in-place leases measured over a period equal to the non-cancelable term of the lease including any bargain renewal periods. The above market and below market lease values will be capitalized as intangible lease assets or liabilities. Above market lease values will be amortized as an adjustment of rental income over the remaining term of the respective leases. Below market lease values will be amortized as an adjustment of rental income over the remaining term of the respective leases, including any bargain renewal periods. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market and below market in-place lease values relating to that lease would be recorded as an adjustment to rental income.

 

The fair values of in-place leases will include estimated direct costs associated with obtaining a new tenant, and opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease. Direct costs associated with obtaining a new tenant may include commissions, tenant improvements, and other direct costs and are estimated, in part, by management’s consideration of current market costs to execute a similar lease. These direct costs will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. The value of opportunity costs will be calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. These intangibles will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.

 

The determination of the relative fair values of the assets and liabilities acquired will require the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount and capitalization rates, interest rates and other variables. If management’s estimates or assumptions prove inaccurate, the result would be an inaccurate allocation of purchase price, which could impact the amount of reported net income.

 

 

Properties are carried at original cost, less accumulated depreciation and amortization. The Company tests long-lived assets for recoverability when events or changes in circumstances indicate that the carrying value may not be recoverable. For properties the Company will hold and operate, management determines whether impairment has occurred by comparing the property’s probability-weighted future undiscounted cash flows to its current carrying value. For properties held for sale, management determines whether impairment has occurred by comparing the property’s estimated fair value less cost to sell to its current carrying value. If the carrying value is greater than the net realizable value, an impairment loss is recorded to reduce the carrying value of the property to its net realizable value. Changes in these assumptions or analysis may cause material changes in the carrying value of the properties.

 

 

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 Company reimburses these expenses subject to detailed limitations contained in the Operating Agreement.

 

 

The Company is not aware of any material trends or uncertainties, other than national economic conditions affecting real estate generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues and investment property value. However, due to the outbreak of the coronavirus (COVID-19)current economic factors, higher interest rates, and inflation in the U.S. and globally, our tenants and operating partners may be impacted. See Note 8 on COVID-19 effect on our operations. The impact of COVID-19 on our future results could still be significant and will largely depend on continuing developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, the success of actions taken to contain or treat COVID-19, and reactions by consumers, companies, governmental entities and capital markets.

 

Results of Operations

 

For the years ended December 31, 20212023 and 2020,2022, the Company recognized rental income of $1,743,816$1,635,853 and $1,790,938,$1,628,511, respectively. In 2021,2023, rental income decreasedincreased due to the acquisition of one property and rent increases for three properties. This increase was partially offset by the sale of one property in 2020 and rent decreases related to the Jared Jewelry store in Aurora, Illinois and Staples store in Clermont, Florida, as discussed below. These decreases were partially offset by additional rent received from two property acquisitions in 2020 and a rent increase on four properties.property. Based on the scheduled rent for the properties owned as of February 28, 2022,2024, the Company expects to recognize rental income of approximately $1,613,000$1,728,000 in 2022.2024.

 

For the years ended December 31, 20212023 and 2020,2022, the Company incurred LLC administration expenses from affiliated parties of $239,334$297,779 and $237,036,$267,330, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and communicating with the Limited Members. During the same periods, the Company incurred LLC administration and property management expenses from unrelated parties of $197,858$213,804 and $161,024,$197,260, 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 higher in 2021,2023, when compared to 2020,2022, mainly due to expenses related to the Staples store.

 

The Company ownsowned a 60% interest in a former Sports Authority store in Wichita, Kansas. On March 2, 2016, the tenant, TSA Stores, Inc., and its parent company, The Sports Authority, Inc., the guarantor of the lease, filed for Chapter 11 bankruptcy reorganization. In June 2016, the tenant filed a motion with the bankruptcy court to reject the lease for this store effective June 30, 2016, at which time the tenant returned possession of the property to the owners. As of December 31, 2020, the tenant owed $29,049 of past due rent, which was not recorded for financial reporting purposes. On March 23, 2021, a motion to dismiss the bankruptcy case was issued by a federal judge to The Sports Authority, Inc., the Company will therefore not be receiving any of the past due rent. The owners listed the property for lease with a real estate broker in the Wichita area. While the property was vacant, the Company was responsible for its 60% share of real estate taxes and other costs associated with maintaining the property.

 

On September 21, 2017, the Company entered into a lease agreement with a primary term of 10 years with Biomat USA, Inc. (“Biomat”) as a replacement tenant for 28% of the square footage of the property. The tenant operates a Biomat USA Plasma Center in the space. The Company’s 60% share of annual rent, which commenced on June 18, 2018, is $55,607. Biomat agreed to pay for the costs to divide the building into two separate spaces, the costs of tenant improvements to remodel the Biomat space and 28% of the cost to replace the roof.

 

 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

 

In September 2022, the Company entered into an agreement to sell its 60% interest in Biomat in Wichita, Kansas to an unrelated third party. The whole property was classified as real estate held for sale at December 31, 2022. On February 9, 2023, the sale closed with the Company ownsreceiving net proceeds of $1,418,133, which resulted in a net gain of $44,186. At the time of sale, the cost and related accumulated depreciation was $2,839,297 and $1,465,350, respectively.

In June 2022, the Company entered into an agreement to sell its 72% interest in athe Staples store in Clermont, Florida. The remainingFlorida to an unrelated third party. On June 30, 2022, the sale closed with the Company receiving net proceeds of $1,959,687, which resulted in a net gain of $528,892.  At the time of sale, the cost and related accumulated depreciation was $2,315,045 and $884,250, respectively.

On November 1, 2022, the Company purchased an additional 50% interest in the Piedmont Health (Fka Coliseum Health) property is owned byin Macon, Georgia for $1,052,919 from AEI Income & Growth Fund 24 LLC, an affiliate of the Company. The purchase price of the property interest was based upon the property’s fair market value as determined by an independent third party, commercial property appraiser. The property interest became available because AEI Income & Growth Fund 24 LLC was in the process of liquidating its property portfolio. The Company now owns 100% interest in the property. The Company allocated $22,002 of the purchase price to Acquired Intangible Lease Assets, representing in-place lease intangibles. The annual rent for the additional 50% interest that was purchased is $84,474.

The Company owns a 100% interest in a Premier Diagnostic Imaging Center in Terre Haute, Indiana.  On July 17, 2020,May 31, 2022, the lease term ended, and the tenant returned possession of the property

to the owners.

While the property is vacant, the Company is responsible for its 72%100% share of real estate taxes and other costs associated with maintaining the property. The owners haveproperty was listed the propertywith Ten-X for sale or lease with a real estate broker in the Clermont area.auction on November 13, 2023. The annual rent from this property represented approximately 10%12% of the total annual rent of the Company’s property portfolio. The loss of rent and increased expenses related to this property will decreasedecreased the Company’s cash flow. TheHowever, at this time, the Company willdoes not anticipate the need to reduce its regular quarterly distribution rate duecash distribution.

In June 2023, the Company performed a long-lived asset valuation analysis and determined the Premier Diagnostic Imaging Center in Terre Haute, Indiana was impaired. As a result, in the second quarter of 2023, the Company recognized real estate impairment of $90,000 to decrease the carrying value to the estimated fair value of  $1,401,977. The charge was recorded against the land, building, in-place lease and above market lease. In December 2023, the Company performed another long-lived asset valuation analysis and determined the Premier Diagnostic Imaging Center in Terre Haute, Indiana was impaired. As a result, in the fourth quarter of 2023, the Company recognized real estate impairment of $996,000 to decrease the carrying value to the estimated fair value of  $405,977. The charge was recorded against the land, building, in-place lease and above market lease. This property has been classified as Real Estate Held for Sale as of December 31, 2023 on the balance sheet with a carrying value of $405,977. In November 2023, the Company entered into an agreement to sell its 100% interest in cash flow.the Premier Diagnostic Imaging Center in Terre Haute, Indiana. On January 2, 2024, the sale closed with the Company receiving net proceeds of $406,432, which resulted in a net gain of $455. At the time of sale, the cost and related accumulated depreciation was $1,248,000 and $842,023 respectively.

 

For the years ended December 31, 20212023 and 2020,2022, the Company recognized interest income of $436$55,467 and $7,045,$12,077, respectively. In 2021,2023, interest income decreasedincreased due to the Company having lessmore money invested in a money market account due to property acquisitionsand higher money market interest rates in 2020.2023.

 

Management believes inflation has not significantly affected income from operations. Leases may contain rent increases, based on the increase in the Consumer Price Index over a specified period, which will result in an increase in rental income over the term of the leases. Inflation also may cause the real estate to appreciate in value. However, inflation and changing prices may have an adverse impact on the operating margins of the properties' tenants, which could impair their ability to pay rent and subsequently reduce the Net Cash Flow available for distributions.

 

Liquidity and Capital Resources

 

During the year ended December 31, 2021,2023, the Company's cash balances decreased $46,344 primarily$601,389 as a result of cash being used to purchase property, distributions paid to the Members in excess of cash generated from operating activities. During the year ended December 31, 2020, the Company's cash balances decreased $3,053,507 as a result ofand cash used to purchase property and distributions paid to the Membersrepurchase Units in excess of cash generated from operating activities, which was partially offset by the sale of one property. During the year ended December 31, 2022, the Company's cash balances increased $1,106,164 as a result of cash generated from operating activities due to proceeds received from the sale of real estate and cash generated from operating activities in excess of distributions paid to the Members, which was partially offset by cash used to purchase property.

 

Net cash provided by operating activities increased from $1,344,327$1,344,121 in 20202022 to $1,489,022$1,372,422 in 20212023 as a result of an increase in total rental income, an increase in interest income in 2023 and net timing differences in the collection of payments from the tenants and the payment of expenses in 2023, which waswere partially offset by a decrease in total rental and interest income in 2021 and an increase in LLC administration and property management expenses in 2021.expenses.

 

The major components of the Company's cash flow from investing activities are investments in real estate and proceeds from the sale of real estate. During the year ended December 31, 2020,2023, the Company generated cash flow from the sale of real estate of $681,729.$1,418,133. During the same period, the Company expended $3,577,805$1,217,438 to invest in real properties as the Company reinvested cash generated from property sales.

 

The Company's primary use of cash flow, other than investment in real estate, is distribution payments to Members and cash used to repurchase Units. The Company 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 Company attempts to maintain a stable distribution rate from quarter to quarter. The Company may repurchase tendered Units on April 1st and October 1st of each year subject to limitations.

 

For the years ended December 31, 20212023 and 2020,2022, the Company declared distributions of $1,405,152$1,136,906 and $1,503,718,$1,144,725, respectively. Pursuant to the Operating Agreement, distributions of Net Cash Flow were allocated 97% to the Limited Members and 3% to the Managing Members. Distributions of Net Proceeds of Sale were allocated 99% to the Limited Members and 1% to the Managing Members. The Limited Members received distributions of $1,362,997$1,102,799 and $1,458,607$1,110,383 and the Managing Members received distributions of $42,155$34,107 and $45,111$34,342 for the years respectively. The Company temporarily reduced distribution rates for the period ended June 30, 2020 due to rent deferral agreements entered with tenantsDecember 31, 2023 and concerns regarding the ongoing COVID-19 situation.

 

The Company may repurchase Units from Limited Members who have tendered their Units to the Company. Such Units may be acquired at a discount. The Company will not be obligated to purchase in any year more than 2% of the total number of Units outstanding on January 1 of such year. In no event shall the Company be obligated to purchase Units if, in the sole discretion of the Managing Member, such purchase would impair the capital or operation of the Company.

During 20212023, the Company repurchased a total of 1,803.42 Units for $1,016,467 from 59 Limited Members in accordance with the Operating Agreement. The Company acquired these Units using net sales proceeds. The repurchase increases the remaining Limited Members' ownership interest in the Company. As a result of this repurchase and 2020,pursuant to the Operating Agreement, the Managing Members received distributions of $19,490 in 2023. During 2022, the Company did not repurchase any Units from the Limited Members.

 

The continuing rent payments from the properties, together with cash generated from property sales, should be adequate to fund continuing distributions and meet other Company obligations on both a short-term and long-term basis.

 

Off-Balance Sheet Arrangements

 

As of December 31, 20212023 and 2020,2022, the Company had no material off-balance sheet arrangements that had or are reasonably likely to have current or future effects on its financial condition, results of operations, liquidity or capital resources.

 

 

Not required for a smaller reporting company.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

See accompanying index to financial statements.

 

 

 

 

 

AEI INCOME & GROWTH FUND 25 LLC

 

INDEX TO FINANCIAL STATEMENTS

 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Members:

AEI Income & Growth Fund 25 LLC

St. Paul, Minnesota

 

Opinion on the Financial Statements

We have audited the accompanying balance sheets of AEI Income & Growth Fund 25 LLC (a Delaware limited liability company) (the “Company”) as of December 31, 20212023 and 2020,2022, and the related statements of operations, changes in members' equity, and cash flows for each of the years in the two-year period ended December 31, 2021,2023, and the related notes (collectively referred to as the financial statements)“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021,2023, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication ofWe determined that there were no critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.matters.

 

AEI INCOME & GROWTH FUND 25 LLC

BALANCE SHEETS

 

ASSETS

 

 

LIABILITIES AND MEMBERS’ EQUITY

 

 

AEI INCOME & GROWTH FUND 25 LLC

STATEMENTS OF CASH FLOWSOPERATIONS

 

 

 

 

 

 

The accompanying Notes to Financial Statements are an integral part of these statements.

AEI INCOME & GROWTH FUND 25 LLC

STATEMENTS OF CASH FLOWS

STATEMENTS OF CHANGES IN MEMBERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying Notes to Financial Statements are an integral part of these statements.

AEI INCOME & GROWTH FUND 25 LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

 

(1)  Organization –

AEI Income & Growth Fund 25 LLC (“Company”(the “Company”), a Limited Liability Company, was formed on June 24, 2002 to acquire and lease commercial properties to operating tenants. The Company's operations are managed by AEI Fund Management XXI, Inc. (“AFM”), the Managing Member. Robert P. Johnson, the previous Chief Executive Officer and sole director of AFM, served as the Special Managing Member until his withdrawal date effective March 31, 2020. AFM is a wholly owned subsidiary of AEI Capital Corporation of which the Robert P.Credit Trust fbo of Patricia Johnson Trust and Patricia Johnson own a majority interest. AEI Fund Management, Inc. (“AEI”), an affiliate of AFM, performs the administrative and operating functions for the Company.

 

The terms of the offering called for a subscription price of $1,000 per LLC Unit, payable on acceptance of the offer. The Company commenced operations on September 11, 2003 when minimum subscriptions of 1,500 LLC Units ($1,500,000) were accepted. The offering terminated May 12, 2005, when the extended offering period ended. The Company received subscriptions for 42,434.763 Units. Under the terms of the Operating Agreement, the Limited Members and Managing Members contributed funds of $42,434,763 and $1,000, respectively. The Company shall continue until December 31, 2053, unless dissolved, terminated and liquidated prior to that date.

 

 

Any Net Proceeds of Sale, as defined, from the sale or financing of properties which the Managing Members determine to distribute will, after provisions for debts and reserves, be paid in the following manner: (i) first, 99% to the Limited Members and 1% to the Managing Members until the Limited Members receive an amount equal to: (a) their Adjusted Capital Contribution plus (b) an amount equal to 7% 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 Members and 10% to the Managing Members. Distributions to the Limited Members will be made pro rata by Units.

 

 

AEI INCOME & GROWTH FUND 25 LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

 

(1)  Organization – (Continued)

 

For tax purposes, profits arising from the sale, financing, or other disposition of property will be allocated in accordance with the Operating Agreement as follows: (i) first, to those Members with deficit balances in their capital accounts in an amount equal to the sum of such deficit balances; (ii) second, 99% to the Limited Members and 1% to the Managing Members until the aggregate balance in the Limited Members' capital accounts equals the sum of the Limited Members' Adjusted Capital Contributions plus an amount equal to 7% 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 Members and 10% to the Managing Members. Losses will be allocated 99% to the Limited Members and 1% to the Managing Members.

 

 

 

(2)  Summary of Significant Accounting Policies –

 

 

The accounts of the Company are maintained on the accrual basis of accounting for both federal income tax purposes and financial reporting purposes.

 

AEI INCOME & GROWTH FUND 25 LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

 

(2)  Summary of Significant Accounting Policies – (Continued)

 

Accounting Estimates

 

Management uses estimates and assumptions in preparing these financial statements in accordance with United States Generally Accepted Accounting Principles (US GAAP). Those estimates and assumptions may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates, and the difference could be material. Significant items, subject to such estimates and assumptions, include the carrying value of real estate held for investment, real estate held for sale and the allocation of purchase price of real estate assets and intangible assets.

 

 

 

The Company's cash is deposited in one financial institution and at times during the year it may exceed FDIC insurance limits.

 

 

Credit terms are extended to tenants in the normal course of business. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral.

 

 

 

The income or loss of the Company for federal income tax reporting purposes is includable in the income tax returns of the Members. In general, no recognition has been given to income taxes in the accompanying financial statements.

 

AEI INCOME & GROWTH FUND 25 LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

 

(2)  Summary of Significant Accounting Policies – (Continued)

 

The tax return and the amount of distributable Company income or loss are subject to examination by federal and state taxing authorities. If such an examination results in changes to distributable Company income or loss, the taxable income of the members would be adjusted accordingly. Primarily due to its tax status as a partnership, the Company has no significant tax uncertainties that require recognition or disclosure. The Company is no longer subject to U.S. federal income tax examinations for tax years before 2018,2020, and with few exceptions, is no longer subject to state tax examinations for tax years before 2018.2020.

 

Revenue Recognition

 

The Company's real estate is leased under net leases, classified as operating leases. The leases provide for base annual rental payments payable in monthly installments. The Company recognizes rental income according to the terms of the individual leases. For deferred rents due to COVID-19 or similar event, the Company recognizes the deferred rent related to the month it applies and records a rentalrent receivable. For leases that contain stated rental increases, the increases are recognized in the year in which they are effective. Contingent rental payments are recognized when the contingencies on which the payments are based are satisfied and the rental payments become due under the terms of the leases.

 

 

Upon acquisition of real properties, the Company records them in the financial statements at cost. The purchase price is allocated to tangible assets, consisting of land and building, and to identified intangible assets and liabilities, which may include the value of above market and below market leases and the value of in-place leases. The allocation of the purchase price is based upon the relative fair value of each component of the property. Although independent appraisals may be used to assist in the determination of fair value, in many cases these values will be based upon management’s assessment of each property, the selling prices of comparable properties and the discounted value of cash flows from the asset.

 

The fair values of above market and below market in-place leases will be recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) an estimate of fair market lease rates for the corresponding in-place leases measured over a period equal to the non-cancelable term of the lease including any bargain renewal periods. The above market and below market lease values will be capitalized as intangible lease assets or liabilities. Above market lease values will be amortized as an adjustment of rental income over the remaining term of the respective leases. Below market lease values will be amortized as an adjustment of rental income over the remaining term of the respective leases, including any bargain renewal periods. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market and below market in-place lease values relating to that lease would be recorded as an adjustment to rental income.

AEI INCOME & GROWTH FUND 25 LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

 

(2)  Summary of Significant Accounting Policies – (Continued)

 

The fair values of in-place leases will include estimated direct costs associated with obtaining a new tenant, and opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease. Direct costs associated with obtaining a new tenant may include commissions, tenant improvements, and other direct costs and are estimated, in part, by management’s consideration of current market costs to execute a similar lease. These direct costs will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. The value of opportunity costs will be calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. These intangibles will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.

 

 

 

The disposition of a property or classification of a property as Real Estate Held for Sale by the Company does not represent a strategic shift that will have a major effect on the Company’s operations and financial results. Therefore, the results from operating and selling the property are included in continuing operations.

 

The Company 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 Company's percentage share of the properties'properties land, building, intangible assets, liabilities, revenues and expenses.

 

AEI INCOME & GROWTH FUND 25 LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

 

(2)  Summary of Significant Accounting Policies – (Continued)

 

The Company’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 Company 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, 20212023 and 2020.2022.

 

Fair Value Measurements

 

At December 31, 2021 and 2020,2022 the Company had no financial assets or liabilities measured at fair value on a recurring basis or nonrecurring basis. The Company had the following nonfinancial assets measured on a nonrecurring basis that were recorded at fair value during 2023.

 

Income (Loss) Per Unit

 

 

Reportable Segments

 

The Company invests in single tenant commercial properties throughout the United States that are net leased to tenants in various industries. Because these net leased properties have similar economic characteristics, the Company evaluates operating performance on an overall portfolio basis. Therefore, the Company’s properties are classified as one reportable segment.

 

 

 

Other accounting standards that have been issued or proposed by the FASB are currently not applicable to the Company or are not expected to have a significant impact on the Company’s financial position, results of operations and cash flows.

 

(3)  Related Party Transactions –

 

 

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

 

(3)  Related Party Transactions – (Continued)

 

AEI received the following reimbursements for costs and expenses from the Company for the years ended December 31:

 

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.

 

(4)  Real Estate Investments –

 

The Company leases its properties to tenants under net leases, classified as operating leases. Under a net lease, the tenant is responsible for real estate taxes, insurance, maintenance, repairs and operating expenses for the property. For some leases, the Company is responsible for repairs to the structural components of the building, the roof, and the parking lot. At the time the properties were acquired, the remaining primary lease terms varied from 7.8 to 20 years. The leases provide the tenants with one to five five-year renewal options subject to the same terms and conditions as the primary term, except for the Talecris plasma facilityPlasma Facility in Dallas, Texas which has one ten-year renewal option. The leases for the Jared Jewelry store in Auburn Hills, Michigan, Jared Jewelry store in Aurora, IL, and the Advance Auto Parts store were extended to end on December 31, 2024, April 30, 2025, and April 30, 2025, respectively.

 

AEI INCOME & GROWTH FUND 25 LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

 

(4)  Real Estate Investments – (Continued)

 

The Company'sCompany’s properties are commercial, single-tenant buildings. The Jared Jewelry store in Auburn Hills, Michigan was constructed in 1999 and acquired in 2005. The Jared Jewelry store in Concord, New Hampshire was constructed and acquired in 2005. The Jared Jewelry store in Aurora, Illinois was constructed in 2000 and acquired in 2005. The building in Wichita, Kansas was constructed in 1996, renovated in 2001 and acquired in 2005. The Advance Auto Parts store in Indianapolis, Indiana was constructed in 2005 and acquired in 2006. The Staples store was constructedPiedmont Health (Fka Coliseum Health) in 2010 and acquired in 2011. The Coliseum Health clinicMacon, Georgia was constructed and acquired in 2012.2012 and 2022. The PetSmart store in Gonzales, Louisiana was constructed and acquired in 2013 and 2020. The Premier Diagnostic Imaging centerin Terre Haute, Indiana was constructed in 2005, renovated in 2012 and acquired in 2014. The Tractor Supply Company store in Canton, Mississippi was constructed in 2013 and acquired in 2018. The Talecris plasma facilityPlasma Facility in Dallas, Texas was constructed in 2008 and acquired in 2020. There have been no costs capitalized as improvements subsequent to the acquisitions, except for $7,733The University of tenant improvements related to the Staples store.Iowa Health Facility in Riverside, Iowa was constructed in 2010 and acquired in 2023.

 

The cost of the properties not held for sale and related accumulated depreciation at December 31, 20212023 are as follows:

 

For the years ended December 31, 20212023 and 2020,2022, the Company recognized depreciation expense of $745,264$630,836 and $704,331,$691,811, respectively.

 

AEI INCOME & GROWTH FUND 25 LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

(4)  Real Estate Investments – (Continued)

On July 31, 2020,August 3, 2023, the Company purchased a 50%30% interest in a Talecris plasma facilitythe University of Iowa Health in Dallas, TexasRiverside, Iowa for $2,746,350.$1,193,470 from AEI Property Corporation (“APC”), an affiliate of the Company. The purchase price of the property was based upon the property’s fair market value as determined by an independent third party, commercial property appraiser. The Company allocated $452,929$141,940 of the purchase price to Acquired Intangible Lease Assets, representing in-place lease intangibles of $284,439 and above-market lease intangibles of $168,490.intangibles. The property is leased to Talecris Plasma Resources, Inc.Board of Regents, State of Iowa under a lease agreement with a remaining primary term of 8.1approximately 10 years (as of the date of purchase) and annual rent of $182,035. The remaining interest in this property was purchased by AEI Income & Growth Fund XXII Limited Partnership, an affiliate of the Company.$73,215 scheduled to increase annually at 2.5%.

The following schedule presents the cost and related accumulated amortization of acquired lease intangibles not held for sale at December 31:

For the years ended December 31, 20212023 and 2020,2022, the value of in-place lease intangibles amortized to expense was $168,288$101,934 and $204,660,$146,969, the decrease to rental income for above-market leases was $98,180$80,263 and $86,021,$98,180, and the increase to rental income for below-market leases was $13,516$0 and $13,516,$5,629, respectively.

For lease intangibles not held for sale at December 31, 2021,2023, the estimated amortization for the next five years is as follows:

 

AEI INCOME & GROWTH FUND 25 LLC

DECEMBER 31, 20212023 AND 20202022

 

(4)  Real Estate Investments – (Continued)

 

The Company ownsowned a 60% interest in a former Sports Authority store in Wichita, Kansas. On March 2, 2016, the tenant, TSA Stores, Inc., and its parent company, The Sports Authority, Inc., the guarantor of the lease, filed for Chapter 11 bankruptcy reorganization. In June 2016, the tenant filed a motion with the bankruptcy court to reject the lease for this store effective June 30, 2016, at which time the tenant returned possession of the property to the owners. As of December 31, 2020, the tenant owed $29,049 of past due rent, which was not recorded for financial reporting purposes. On March 23, 2021, a motion to dismiss the bankruptcy case was issued by a federal judge to The Sports Authority, Inc., the Company will therefore not be receiving any of the past due rent. The owners listed the property for lease with a real estate broker in the Wichita area. While the property was vacant, the Company was responsible for its 60% share of real estate taxes and other costs associated with maintaining the property.

 

On September 21, 2017, the Company entered into a lease agreement with a primary term of 10 years with Biomat USA, Inc. (“Biomat”) as a replacement tenant for 28% of the square footage of the property. The tenant operates a Biomat USA Plasma Center in the space. The Company’s 60% share of annual rent, which commenced on June 18, 2018, is $55,607. Biomat agreed to pay for the costs to divide the building into two separate spaces, the costs of tenant improvements to remodel the Biomat space and 28% of the cost to replace the roof.

 

In June 2022, the Company entered into an agreement with a primary term of 10 years with BigTime Fun Center, LLC as a replacement tenant for 57% of the square footage of the property. The tenant was to operate an indoor sports entertainment centersell its 72% interest in the space. The Company’s 60% share of annual rent, which wasStaples store in Clermont, Florida to commence on February 23, 2020, is $117,000. As part ofan unrelated third party. On June 30, 2022, the agreement,sale closed with the Company will payreceiving net proceeds of $1,959,687, which resulted in a tenant improvement allowancenet gain of $96,000 when certain conditions are met by$528,892.  At the tenant. Due to ongoing difficulties relating totime of sale, the COVID-19 pandemic the Companycost and related accumulated depreciation was negotiating a rent commencement date of April 1, 2021. As a part of the negotiations, the tenant improvement allowance was to be replaced with a ten month rent abatement starting April 1, 2021. Additionally, this agreement would forebear rent$2,315,045 and additional charges for the period from February 23, 2020 to March 31, 2021. In September 2019, the Company paid $49,140 to a real estate broker for its 60% share of the lease commission due as part of the lease transaction. This amount was capitalized and will be amortized over the term of the lease. On January 22, 2021, the owner of Big Time Fun Center, LLC informed the Company it does not intend to open the Wichita property. As a result of the tenant informing the Company of their intention not to open, the full amount of the lease commission was amortized in the fourth quarter of 2020. The property is currently being marketed for sale or lease with a real estate broker in the Wichita area.$884,250, respectively.

 

In June 2023, the Company entered into an agreement with the tenant of the Piedmont Health store (Fka Coliseum Health) in Macon, Georgia to extend the lease term 87 months commencing on April 1, 2024 and expiring on June 30, 2025.2031. As an inducement for the Tenant’s extension of the lease term, fixed rent will be abated for the first three months of the new lease term. As part of the agreement, the annual rent decreased from $370,686$168,948 to $235,989$167,375 effective MayJuly 1, 2020.2024. The Company also agrees to pay a commission to the Tenant’s real estate broker in the amount of 2% of the Fixed Rent to be paid during the period from April 1, 2024, to June 30, 2031, which is the amount of $23,968. The commission is recorded within acquired intangible assets on the balance sheet and will be amortized over the lease term.

 

AEI INCOME & GROWTH FUND 25 LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

 

(4)  Real Estate Investments – (Continued)

 

In June 2023, the Company performed a long-lived asset valuation analysis and determined the Premier Diagnostic Imaging Center in Terre Haute, Indiana was impaired. As a result, in the second quarter of 2023, the Company recognized real estate impairment of $90,000 to decrease the carrying value to the estimated fair value of  $1,401,977. The charge was recorded against the land, building, in-place lease and above market lease. In December 2023, the Company performed another long-lived asset valuation analysis and determined the Premier Diagnostic Imaging Center in Terre Haute, Indiana was impaired. As a result, in the fourth quarter of 2023, the Company recognized real estate impairment of $996,000 to decrease in cash flow.

 

For properties owned as of December 31, 2021,2023, the minimum future rent payments required by the leases are as follows:

There were no contingent rents recognized in 20212023 and 2020.

AEI INCOME & GROWTH FUND 25 LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

 

(5)  Major Tenants –

 

The following schedule presents rental income from individual tenants, or affiliated groups of tenants, who each contributed more than ten percent of the Company's total rental income for the years ended December 31:

 

 

(6)  Members’ Equity –

 

 

AEI INCOME & GROWTH FUND 25 LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20212023 AND 20202022

(7)  Income Taxes –

 

The following is a reconciliation of Members’ Equity for financial reporting purposes to Members’ Equity reported for federal income tax purposes for the years ended December 31:

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

                ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES.

 

(a)  Disclosure Controls and Procedures.

 

Under the supervision and with the participation of management, including its President and Chief Financial Officer, the Managing Member of the Company 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 Member 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 Member, 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 Member, through its management, is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, and for performing an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021.2023. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP. Our system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management of the Managing Member; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

 

Management of the Managing Member performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 20212023 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 Member determined that our internal control over financial reporting was effective as of December 31, 20212023 based on the criteria in Internal Control-Integrated Framework (2013) issued by the COSO.

 

ITEM 9A. CONTROLS AND PROCEDURES. (Continued)

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

 

(ii)  Changes in Internal Control Over Financial Reporting. During the most recent period covered by this report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION.

 

None.

 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

The registrant is a limited liability company and has no officers, directors, or direct employees. The Managing Members manage and control the Company’s affairs and have general responsibility and the ultimate authority in all matters affecting the Company’s business. The Managing Members are AEI Fund Management XXI, Inc. (“AFM”), the Managing Member, and Robert P. Johnson, Chief Executive Officer and sole director of AFM, the Special Managing Member until his withdrawal date effective March 31, 2020. AFM is a wholly owned subsidiary of AEI Capital Corporation of which the Robert P.Credit Trust fbo Patricia Johnson Trust and Patricia Johnson own a majority interest. AFM has only one senior financial executive, its Chief Financial Officer. The Chief Financial Officer reports directly to Marni J. Nygard, President of AFM, and Kevin Steele, Chief Operating Officer of AFM, and is accountable for his actions to both. Although AFM requires that all of its personnel, including the Chief Financial Officer, engage in honest and ethical conduct, ensure full, fair, accurate, timely, and understandable disclosure, comply with all applicable governmental laws, rules and regulations, and report to Ms. Nygard and Mr. Steele any deviation from these principles, because the organization is composed of only approximately 40 individuals, because the management of a company by an entity that has different interests in distributions and income than investors involves numerous conflicts of interest that must be resolved on a daily basis, and because the ultimate decision makers in all instances is Ms. Nygard and Mr. Steele, AFM has not adopted a formal code of conduct. Instead, the materials pursuant to which investors purchase Units disclose these conflicts of interest in detail and Ms. Nygard, as the President of AFM, and Mr. Steele, as Chief Operating Officer of AFM, resolve conflicts to the best of their ability, consistent with their fiduciary obligations to AFM and the fiduciary obligations of AFM to the Company. The director and officers of AFM are as follows:

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

                 (Continued)

 

Robert P. Johnson, deceased, was Chief Executive Officer and sole director and had held these positions since the formation of AFM in August 1994, and had been elected to continue in these positions until December 2021. He was President of AFM from August 1994 to July 2019. From 1970 to his date of death, May 22, 2021, he had been employed exclusively in the investment industry, specializing in limited partnership investments. In that capacity, he was involved in the development, analysis, marketing and management of public and private investment programs investing in net lease properties as well as public and private investment programs investing in energy development. Since 1971, Mr. Johnson was the president, a director and a registered principal of AEI Securities, Inc., which is registered with the SEC as a securities broker-dealer, is a member of the Financial Industry Regulatory Authority (FINRA) and is a member of the Security Investors Protection Corporation (SIPC). Mr. Johnson was Chief Executive Officer, a director and the principal shareholder of AEI Fund Management, Inc., a real estate management company founded by him, since 1978. Mr. Johnson was a general partner or principal of the general partner in eight limited partnerships up until his date of death.

 

Marni J. Nygard, Esq., age 47,49, is President of AFM and has held this position since July 11, 2019, when she assumed the role from Mr. Johnson. She has been elected to continue in this position until December 2022. Ms. Nygard continues as Chief Investment Officer for AEI and is a General Securities Principal of AEI Securities, Inc. She joined AEI in 2005 and is responsible for the implementation of AEI’s acquisition investment objectives and strategies. As President, she drives corporate initiatives for the development, analysis, marketing and management of AEI public and private Funds investing in net leased commercial properties. Prior to joining AEI, she was employed as an attorney at CI Title in St. Paul, Minnesota in the residential and commercial property departments.

 

Kevin S. Steele, age 58,60, is Chief Operating Officer and has held this position since August 1, 2020. He joined AEI in 2012 and is responsible for AEI’s net lease commercial property acquisition strategy and sourcing through the development of business relationships with preferred corporate developers, tenant corporations, and net lease property owners. Kevin is responsible for leading the execution of the organizational strategy established by the leadership team.  Kevin has more than 30 years of sales, marketing, and corporate business operations experience. Prior to joining AEI, he was employed with Sheraton Hotels and Stan Johnson Company as well as the owner operator of a Midwest grocery company.

 

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

                 (Continued)

 

Keith E. Petersen, CPA (inactive), age 47,49, is Chief Financial Officer, Treasurer and Secretary of AFM and has held these positions since February 1, 2020, when he assumed these roles from Mr. Keene. He has been elected to continue in these positions until December 2022. Mr. Petersen has been employed by AEI Fund Management, Inc. and affiliated entities since November 2016. Prior to being elected to the positions above, he was Controller of the various entities. Prior to joining AEI, Keith was employed with Pine River Capital Management as the Vice President of Tax Compliance and with Deloitte, an international accounting and auditing firm, as a Senior Tax Manager.

 

All of the duties that might be assigned to an audit committee are assigned to Patricia Johnson, the wife of the deceased. Mrs. Johnson is not an audit committee financial expert, as defined.

 

Before the independent auditors are engaged, Mrs. Johnson, as the sole director of AFM, approves all audit-related fees, and all permissible nonaudit fees, for services of our auditors.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Under federal securities laws, the directors and officers of the Managing Member of the Company, and any beneficial owner of more than 10% of a class of equity securities of the Company, are required to report their ownership of the Company'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 Company is required to disclose in this Annual Report on 10-K any delinquent filing of such reports and any failure to file such reports during the fiscal year ended December 31, 2021.2023. Based upon information provided by officers and directors of the Managing Member, all officers, directors and 10% owners filed all reports on a timely basis in the 20212023 fiscal year.

 

ITEM 11. EXECUTIVE COMPENSATION.

 

The Managing Member and affiliates are reimbursed at cost for all services performed on behalf of the registrant and for all third party expenses paid on behalf of the registrant. The cost for services performed on behalf of the registrant is based on actual time spent performing such services plus an overhead burden. These services include organizing the registrant and arranging for the offer and sale of Units, reviewing properties for acquisition and rendering administrative, property management and property sales services. The amount and nature of such payments are detailed in Item 13 of this annual report on Form 10-K.

 

 

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 Company to beneficially own 5% or more of the Units, by each Managing Member, and by each officer or director of the Managing Member as of February 28, 2022:2024:

 

 

The Managing Members 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 Managing Member of the registrant are governed by, and are conducted in conformity with, the limitations set forth in the Operating 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, 20212023 and 2020.2022.

 

Neither the registrant, nor the Managing Member of the registrant, has a board of directors consisting of any members who are “independent.”  The sole director of the Managing Member, Robert P. Johnson, was the Chief Executive Officer, and indirectly the principal owner, of the Managing Member. Accordingly, there is no disinterested board, or other functioning body, that reviews related party transactions, or the transactions between the registrant and the Managing Members, except as performed in connection with the audit of its financial statements.

 

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

The following is a summary of the fees billed to the Company by Boulay PLLP for professional services rendered for the years ended December 31, 20212023 and 2020:2022:

 

 

Audit Fees - Consists of fees billed for professional services rendered for the audit of the Company’s annual financial statements and review of the interim financial statements included in quarterly reports, and services that are normally provided by Boulay PLLP in connection with statutory and regulatory filings or engagements.

 

Audit-Related Fees - Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of financial statements and are not reported under "Audit Fees." These services include consultations concerning financial accounting and reporting standards.

 

Tax Fees - Consists of fees billed for professional services for federal and state tax compliance, tax advice and tax planning.

 

All Other Fees - Consists of fees for products and services other than the services reported above.

 

Policy for Preapproval of Audit and Permissible Non-Audit Services

 

Before the Independent Registered Public Accounting Firm is engaged by the Company to render audit or non-audit services, the engagement is approved by Mrs. Johnson acting as the Company’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 17.18.

 

(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.

 

 

 

 

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.

 

 

 

 

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.