UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31,September 30, 2008
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)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
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. [X] Yes No
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 Exchange Act). Yes [X] No
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
INDEX
Part I - Financial Information
Item 1. Financial Statements:
Balance Sheet as of March 31,September 30, 2008 and December 31, 2007
Statements for the Three MonthsPeriods ended March 31,September 30, 2008 and 2007:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4T.Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A.Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
Signatures
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
BALANCE SHEET
MARCH 31,SEPTEMBER 30, 2008 AND DECEMBER 31, 2007
ASSETS
2008 2007
CURRENT ASSETS:
Cash and Cash Equivalents $ 3,180,3462,874,062 $ 1,102,753
INVESTMENTS IN REAL ESTATE:
Land 5,130,9575,110,113 5,130,957
Buildings and Equipment 9,992,5509,944,288 9,992,550
Accumulated Depreciation (2,365,038)(2,509,303) (2,280,410)
----------- -----------
12,758,469---------- ----------
12,545,098 12,843,097
Real Estate Held for Sale 1,277,088 2,702,006
----------- --------------------- ----------
Net Investments in Real Estate 14,035,55713,822,186 15,545,103
----------- --------------------- ----------
Total Assets $17,215,903$16,696,248 $16,647,856
=========== ===================== ==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 44,04140,022 $ 67,148
Distributions Payable 528,919404,901 413,767
Unearned Rent 73,308 12,249 ----------- -----------12,249
---------- ----------
Total Current Liabilities 646,268457,172 493,164
----------- --------------------- ----------
PARTNERS' CAPITAL:
General Partners 16,47713,172 12,328
Limited Partners, $1,000 per Unit;
24,000 Units authorized and issued;
22,045 Units outstanding 16,553,15816,225,904 16,142,364
----------- --------------------- ----------
Total Partners' Capital 16,569,63516,239,076 16,154,692
----------- --------------------- ----------
Total Liabilities and Partners' Capital $17,215,903$16,696,248 $16,647,856
=========== ===================== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE THREE MONTHSPERIODS ENDED MARCH 31
2008 2007SEPTEMBER 30
Three Months Ended Nine Months Ended
9/30/08 9/30/07 9/30/08 9/30/07
RENTAL INCOME $ 408,107409,437 $ 419,699421,898 $1,222,720 $1,256,170
EXPENSES:
Partnership Administration -
Affiliates 56,755 53,57157,202 57,591 172,586 167,898
Partnership Administration
and Property Management -
Unrelated Parties 11,841 10,64912,331 6,548 39,990 28,219
Depreciation 84,628 84,630
----------- -----------84,262 84,262 252,781 252,786
--------- --------- ---------- ----------
Total Expenses 153,224 148,850
----------- -----------153,795 148,401 465,357 448,903
--------- --------- ---------- ----------
OPERATING INCOME 254,883 270,849255,642 273,497 757,363 807,267
OTHER INCOME:
Interest Income 11,895 12,045
----------- -----------13,574 11,427 38,650 34,841
--------- --------- ---------- ----------
INCOME FROM CONTINUING
OPERATIONS 266,778 282,894269,216 284,924 796,013 842,108
Income from Discontinued
Operations 687,560 62,430
----------- -----------38,653 64,997 829,788 194,971
--------- --------- ---------- ----------
NET INCOME $ 954,338307,869 $ 345,324
=========== ===========349,921 $1,625,801 $1,037,079
========= ========= ========== ==========
NET INCOME ALLOCATED:
General Partners $ 9,5433,079 $ 3,4533,499 $ 16,258 $ 10,371
Limited Partners 944,795 341,871
----------- -----------304,790 346,422 1,609,543 1,026,708
--------- --------- ---------- ----------
$ 954,338307,869 $ 345,324
=========== ===========
NET349,921 $1,625,801 $1,037,079
========= ========= ========== ==========
INCOME PER LIMITED PARTNERSHIP UNIT:
Continuing Operations $ 11.9812.09 $ 12.6912.77 $ 35.75 $ 37.77
Discontinued Operations 30.88 2.80
----------- -----------1.74 2.93 37.26 8.75
--------- --------- ---------- ----------
Total $ 42.8613.83 $ 15.49
=========== ===========15.70 $ 73.01 $ 46.52
========= ========= ========== ==========
Weighted Average Units
Outstanding 22,045 22,068 =========== ===========22,045 22,068
========= ========= ========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE THREENINE MONTHS ENDED MARCH 31SEPTEMBER 30
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 954,3381,625,801 $ 345,3241,037,079
Adjustments Toto Reconcile Net Income Toto Net Cash
Provided Byby Operating Activities:
Depreciation 84,628 102,405253,395 307,215
Gain on Sale of Real Estate (621,404)(682,938) 0
Decrease in Payable to
AEI Fund Management, Inc. (23,107) (34,475)(27,126) (42,452)
Increase in Unearned Rent 61,059 49,1920 43,511
----------- -----------
Total Adjustments (498,824) 117,122(456,669) 308,274
----------- -----------
Net Cash Provided By
Operating Activities 455,514 462,4461,169,132 1,345,353
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate 2,046,3222,152,460 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable 115,152 57,769(8,866) 191
Distributions to Partners (539,395) (481,817)(1,541,417) (1,330,294)
----------- -----------
Net Cash Used For
Financing Activities (424,243) (424,048)(1,550,283) (1,330,103)
----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 2,077,593 38,3981,771,309 15,250
CASH AND CASH EQUIVALENTS, beginning of period 1,102,753 1,083,159
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 3,180,3462,874,062 $ 1,121,5571,098,409
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREENINE MONTHS ENDED MARCH 31SEPTEMBER 30
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 2006 $ 16,068 $16,512,683 $16,528,751 22,067.74
Distributions (4,818) (476,999) (481,817)(13,303) (1,316,991) (1,330,294)
Net Income 3,453 341,871 345,32410,371 1,026,708 1,037,079
-------- ----------- ----------- ----------
BALANCE, March 31,September 30, 2007 $ 14,703 $16,377,555 $16,392,25813,136 $16,222,400 $16,235,536 22,067.74
======== =========== =========== ==========
BALANCE, December 31, 2007 $ 12,328 $16,142,364 $16,154,692 22,045.04
Distributions (5,394) (534,001) (539,395)(15,414) (1,526,003) (1,541,417)
Net Income 9,543 944,795 954,338
--------16,258 1,609,543 1,625,801
------- ----------- ----------- -------------------
BALANCE, March 31,September 30, 2008 $ 16,477 $16,553,158 $16,569,63513,172 $16,225,904 $16,239,076 22,045.04
=============== =========== =========== ===================
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
MARCH 31,SEPTEMBER 30, 2008
(1) The condensed statements included herein have been prepared
by the registrant, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of
operations for the interim period, on a basis consistent with
the annual audited statements. The adjustments made to these
condensed statements consist only of normal recurring
adjustments. Certain information, accounting policies, and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the registrant
believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction
with the financial statements and the summary of significant
accounting policies and notes thereto included in the
registrant's latest annual report on Form 10-KSB.
(2) Organization -
AEI Net Lease Income & Growth Fund XX Limited Partnership
("Partnership") was formed to acquire and lease commercial
properties to operating tenants. The Partnership's
operations are managed by AEI Fund Management XX, Inc.
("AFM"), the Managing General Partner. Robert P. Johnson,
the President and sole director of AFM, serves as the
Individual General Partner. AFM is a wholly owned
subsidiary of AEI Capital Corporation of which Mr. Johnson
is the majority shareholder. AEI Fund Management, Inc.
("AEI"), an affiliate of AFM, performs the administrative
and operating functions for the Partnership.
The terms of the Partnership offering called for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. The Partnership
commenced operations on June 30, 1993 when minimum
subscriptions of 1,500 Limited Partnership Units
($1,500,000) were accepted. On January 19, 1995, the
offering terminated when the maximum subscription limit of
24,000 Limited Partnership Units was reached. Under the
terms of the Limited Partnership Agreement, the Limited
Partners and General Partners contributed funds of
$24,000,000 and $1,000, respectively.
During operations, any Net Cash Flow, as defined, which the
General Partners determine to distribute will be distributed
90% to the Limited Partners and 10% to the General Partners;
provided, however, that such distributions to the General
Partners will be subordinated to the Limited Partners first
receiving an annual, noncumulative distribution of Net Cash
Flow equal to 10% of their Adjusted Capital Contribution, as
defined, and, provided further, that in no event will the
General Partners receive less than 1% of such Net Cash Flow
per annum. Distributions to Limited Partners will be made
pro rata by Units.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
Any Net Proceeds of Sale, as defined, from the sale or
financing of properties which the General Partners determine
to distribute will, after provisions for debts and reserves,
be paid in the following manner: (i) first, 99% to the
Limited Partners and 1% to the General Partners until the
Limited Partners receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal to
12% of their Adjusted Capital Contribution per annum,
cumulative but not compounded, to the extent not previously
distributed from Net Cash Flow; (ii) any remaining balance
will be distributed 90% to the Limited Partners and 10% to
the General Partners. Distributions to the Limited Partners
will be made pro rata by Units.
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of property, will be
allocated first in the same ratio in which, and to the
extent, Net Cash Flow is distributed to the Partners for
such year. Any additional profits will be allocated in the
same ratio as the last dollar of Net Cash Flow is
distributed. Net losses from operations will be allocated
99% to the Limited Partners and 1% to the General Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of property will be allocated in
accordance with the Partnership Agreement as follows: (i)
first, to those partners with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Partners
and 1% to the General Partners until the aggregate balance
in the Limited Partners' capital accounts equals the sum of
the Limited Partners' Adjusted Capital Contributions plus an
amount equal to 12% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, the balance of any
remaining gain will then be allocated 90% to the Limited
Partners and 10% to the General Partners. Losses will be
allocated 98% to the Limited Partners and 2% to the General
Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(3) Reclassification -
Certain items related to discontinued operations in the
prior period's financial statements have been reclassified
to conform to 2008 presentation. These reclassifications
had no effect on Partners' capital, net income or cash
flows.
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(4) Payable to AEI Fund Management, Inc. -
AEI Fund Management, Inc. performs the administrative and
operating functions for the Partnership. The payable to AEI
Fund Management represents the balance due for those
services. This balance is non-interest bearing and
unsecured and is to be paid in the normal course of
business.
(5) Discontinued Operations -
On February 27, 2008, the Partnership sold its 50% interest
in the Champps Americana restaurant in West Chester, Ohio to
an unrelated third party. The Partnership received net sale
proceeds of $2,046,322,$2,057,022, which resulted in a net gain of
$621,404.$632,104. At the time of sale, the cost and related
accumulated depreciation was $1,569,884 and $144,966,
respectively. At December 31, 2007, the property was
classified as Real Estate Held for Sale with a book value of
$1,424,918.
On June 30, 2008, the Partnership sold its 5.9250% interest
in the Applebee's restaurant in Middletown, Ohio to an
unrelated third party. The Partnership received net sale
proceeds of $95,438, which resulted in a net gain of
$50,834. The cost and related accumulated depreciation of
the interest sold was $69,106 and $24,502, respectively.
The Partnership is attempting to sell its Red Robin
restaurant on Citadel Drive in Colorado Springs, Colorado.
At March 31,September 30, 2008 and December 31, 2007, the property
was classified as Real Estate Held for Sale with a book
value of $1,277,088.
During the first threenine months of 2008 and 2007, the
Partnership distributed net sale proceeds of $115,152$286,869 and
$57,576 to the Limited and General Partners as part of their
quarterly distributions, which represented a return of
capital of $5.17$12.88 and $2.58 per Limited Partnership Unit,
respectively. The Partnership anticipates the remaining net
sale proceeds will either be reinvested in additional
property or distributed to the Partners in the future.
The financial results for these properties are reflected as
Discontinued Operations in the accompanying financial
statements. The following are the results of discontinued
operations for the three monthsperiods ended March 31:
2008 2007September 30:
Three Months Ended Nine Months Ended
9/30/08 9/30/07 9/30/08 9/30/07
Rental Income $ 66,16139,015 $ 80,21083,754 $ 148,493 $ 250,281
Property Management Expenses (5) (5)(362) (614) (1,029) (881)
Depreciation 0 (17,775)(18,143) (614) (54,429)
Gain on Disposal of Real Estate 621,404 0 0 682,938 0
-------- -------- --------- -----------------
Income from Discontinued
Operations $ 687,56038,653 $ 62,43064,997 $ 829,788 $ 194,971
======== ======== ========= =================
AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(6) Recently Issued Accounting Pronouncements -
In December 2007, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
141(R) ("SFAS 141(R)"), Business Combinations. SFAS 141(R)
requires, among other things, the expensing of acquisition-
related transaction costs. Management anticipates that SFAS
141(R) will be effective for property acquisitions completed
on or after January 1, 2009. Management is evaluating the
effect that the adoption of SFAS 141(R) will have on the
Partnership's results of operations, financial position, and
the related disclosures.
In September 2006, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 157
("SFAS 157"), Fair Value Measurements. SFAS 157 defines
fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value
measurements. The statement is effective for (1) financial
assets and liabilities in financial statements issued for
fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years and (2) certain non-
financial assets and liabilities in financial statements
issued for fiscal years beginning after November 15, 2008,
and interim periods within those fiscal years. When testing
for recoverability of properties under SFAS 144, Accounting
for Impairment or Disposal of Long-Lived Assets, the
provisions of this statement are used when comparing fair
value to carrying value. Management is evaluating the
effect that the adoption of SFAS 157 will have on the
Partnership's results of operations, financial position, and
the related disclosures.
ITEM 2. MANAGEMENT'S2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The Management's Discussion and AnalysisThis section contains various "forward looking statements" within the meaning of federal
securities laws which
represent management's expectations or beliefs concerning future
events, including statements regarding anticipated application of
cash, expected returns from rental income, growth in revenue, the
sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements, made by the
Partnership, mustshould 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The Application of Critical Accounting Policies
The preparation of the Partnership's financial statements
requires management to make estimates and assumptions that may
affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities. Management evaluates these estimates on an ongoing
basis, including those related to the carrying value of real
estate and the allocation by AEI Fund Management, Inc. of
expenses to the Partnership as opposed to other funds they
manage.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The Partnership purchases properties and records them in
the financial statements at cost (including capitalized
acquisition expenses). The Partnership anticipates that for
acquisitions completed on or after January 1, 2009, acquisition-
related transaction costs will be expensed as incurred as a
result of the adoption of Statement of Financial Accounting
Standards No. 141(R), Business Combinations. 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 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.
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 threenine months ended March 31,September 30, 2008 and 2007, the
Partnership recognized rental income from continuing operations
of $408,107$1,222,720 and $419,699$1,256,170 respectively. In 2008, rental
income decreased due to lease amendments that reduced the annual
rent for two properties. These decreases were partially offset
by rent increases on fourfive properties.
For the threenine months ended March 31,September 30, 2008 and 2007, the
Partnership incurred Partnership administration expenses from
affiliated parties of $56,755$172,586 and $53,571,$167,898, respectively. These
administration expenses include costs associated with the
management of the properties, processing distributions, reporting
requirements and correspondence to the Limited Partners. During
the same periods, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $11,841$39,990 and $10,649,$28,219, 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
For the threenine months ended March 31,September 30, 2008 and 2007, the
Partnership recognized interest income of $11,895$38,650 and $12,045,$34,841,
respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
In accordance with Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, upon complete disposal of a property or
classification of a property as Real Estate Held for Sale, the
Partnership includes the operating results and sale of the
property in discontinued operations. In addition, the
Partnership reclassifies the prior periods' operating results of
the property to discontinued operations. For the threenine months
ended March 31,September 30, 2008, the Partnership recognized income from
discontinued operations of $687,560,$829,788, representing rental income
less property management expenses and depreciation of $66,156$146,850
and gain on disposal of real estate of $621,404.$682,938. For the threenine
months ended March 31,September 30, 2007, the Partnership recognized
income from discontinued operations of $62,430,$194,971, representing
rental income less property management expenses and depreciation.
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 $2,046,322,$2,057,022, which resulted in a net gain of
$621,404.$632,104. At the time of sale, the cost and related accumulated
depreciation was $1,569,884 and $144,966, respectively. At
December 31, 2007, the property was classified as Real Estate
Held for Sale with a book value of $1,424,918.
On June 30, 2008, the Partnership sold its 5.9250%
interest in the Applebee's restaurant in Middletown, Ohio to an
unrelated third party. The Partnership received net sale
proceeds of $95,438, which resulted in a net gain of $50,834.
The cost and related accumulated depreciation of the interest
sold was $69,106 and $24,502, respectively.
The Partnership is attempting to sell its Red Robin
restaurant on Citadel Drive in Colorado Springs, Colorado. At
March 31,September 30, 2008 and December 31, 2007, the property was
classified as Real Estate Held for Sale with a book value of
$1,277,088.
Inflation has had a minimal effect on income from
operations. Leases may contain rent increases, based on the
increase in the Consumer Price Index over a specified period,
which will result in an increase in rental income over the term
of the leases. In addition, leases may contain rent clauses
which entitle the Partnership to receive additional rent in
future years if gross receipts for the property exceed certain
specified amounts. Increases in sales volumes of the tenants,
due to inflation and real sales growth, may result in an increase
in rental income over the term of the leases. Inflation also may
cause the real estate to appreciate in value. However, inflation
and changing prices may have an adverse impact on the operating
margins of the properties' tenants, which could impair their
ability to pay rent and subsequently reduce the Net Cash Flow
available for distributions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Liquidity and Capital Resources
During the threenine months ended March 31,September 30, 2008, the
Partnership's cash balances increased $2,077,593$1,771,309 as a result of
cash generated from the sale of property, andwhich was partially
offset by distributions paid to the Partners in excess of cash
generated from operating activities in excess of distributions paid to the
Partners.activities. During the threenine months
ended March 31,September 30, 2007, the Partnership's cash balances
increased $38,398$15,250 as a result of cash generated from operating
activities in excess of distributions paid to the Partners.
Net cash provided by operating activities decreased from
$462,446$1,345,353 in 2007 to $455,514$1,169,132 in 2008 as a result of a
decrease in total rental income and interest income in 2008, and an increase
in Partnership administration and property management expenses in
2008 which were partially offset byand net timing differences in the collection of payments
from the tenants and the payment of expenses.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The major components of the Partnership's cash flow from
investing activities are investments in real estate and proceeds
from the sale of real estate. During the threenine months ended
March 31,September 30, 2008, the Partnership generated cash flow from the
sale of real estate of $2,046,322.$2,152,460.
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 in the fourth quarter of each year.
For the threenine months ended March 31,September 30, 2008 and 2007, the
Partnership declared distributions of $539,395$1,541,417 and $481,817,$1,330,294,
respectively, which were distributed 99% to the Limited Partners
and 1% to the General Partners. The Limited Partners received
distributions of $534,001$1,526,003 and $476,999$1,316,991 and the General
Partners received distributions of $5,394$15,414 and $4,818$13,303 for the
periods, respectively. In March 20082007, the Partnership declared a
special distribution of net sale proceeds of $57,576. In March
and 2007,June 2008, the Partnership declared special distributions of
net sale proceeds of $115,152 and $57,576,$171,717, respectively, which
resulted in higher distributions in 2008. These special
distributions represented a return of capital of $5.17$12.88 and $2.58
per Limited Partnership Unit, respectively. These special
distributions resulted in higher distributions in 2008 and a
higher distribution payable at March 31, 2008. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
During 2008, the Partnership did not redeem any Units from
the Limited Partners. During 2007, two Limited Partners redeemed
a total of 22.7 Partnership Units for $11,562 in accordance with
the Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, a total of
122 Limited Partners redeemed 1,932.26 Partnership Units for
$1,489,150. The redemptions increase the remaining Limited
Partners' ownership interest in the Partnership. As a result of
these redemption payments and pursuant to the Partnership
Agreement, the General Partners received distributions of $117 in
2007.
The continuing rent payments from the properties, together
with cash generated from property sales, should be adequate to
fund continuing distributions and meet other Partnership
obligations on both a short-term and long-term basis.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4T.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) 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.
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which
the Partnership is a party or of which the Partnership's property
is subject.
ITEM 1A.RISK1A. RISK FACTORS.
Not applicable.
PART II - OTHER INFORMATION
(Continued)
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
(a) None.
(b) Not applicable.
(c) Pursuant to Section 7.7 of the Partnership Agreement,
each Limited Partner has the right to present Units to the
Partnership for purchase by submitting notice to the Managing
General Partner during September of each year. The purchase
price of the Units is based on a formula specified in the
Partnership Agreement. Units tendered to the Partnership are
redeemed on October 1st 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. During the period covered by this report, the
Partnership did not purchase any Units.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5.OTHER INFORMATION.
None.
PART II - OTHER INFORMATION
(Continued)
ITEM 6.EXHIBITS.6.EXHIBITS
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 the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Dated: May 9,November 7, 2008 AEI Net Lease Income & Growth Fund XX
Limited Partnership
By: AEI Fund Management XX, Inc.
Its: Managing General Partner
By: /s/ RobertROBERT P Johnson
Robert P. JohnsonJOHNSON
ROBERT P JOHNSON
President
(Principal Executive Officer)
By: /s/ PatrickPATRICK W Keene
Patrick W. KeeneKEENE
PATRICK W KEENE
Chief Financial Officer
(Principal Accounting Officer)