We are proposing to amend and restate Section 6.5 of the Operating Agreement of AEI Income and Growth Fund 25 to read in its entirety as follows:
For purposes of the limitation contained in Section 6.5(vii), a joint venture interest (including a fractional interest in real property) shall not be considered a "property"“property”, but instead may be purchased from and sold to another program sponsored by the Managing Members or their Affiliates consistent with Section 6.6.
EXHIBIT D
AEI INCOME & GROWTH FUND 25 LLC
INDEX TO FINANCIAL STATEMENTS
|
| |
| Page |
| |
Report of Independent Registered Public Accounting Firm | 29 – 30 |
| |
Balance Sheets as of December 31, 20172021 and 20162020 | 3031 |
| |
Statements for the Years Ended December 31, 20172021 and 2016:2020: | |
| |
| IncomeOperations | 3132 |
| | |
| Cash Flows | 3233 |
| | |
| Changes in Members'Members’ Equity | 3334 |
| |
Notes to Financial Statements at December 31, 2017 and 2016 | 3435 – 4549 |
| | |
Balance Sheet as of March 31, 20182022 and December 31, 20172021 | 4650 |
| |
Statements for the Periods ended March 31, 20182022 and 2017:2021: | |
| |
| Income | 4751 |
| | |
| Cash Flows | 4852 |
| | |
| Changes in Members'Members’ Equity (Deficit) | 4953 |
| |
Notes to Financial Statements at March 31, 20182022 | 50 – 5356 |
| |
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, 20172021 and 2016,2020, and the related statements of income,operations, changes in members' equity, and cash flows for each of the years in the two-year period ended December 31, 2017,2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172021 and 2016,2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017,2021, 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'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’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'sCompany’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 of 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.
Impairment of Real Estate Investments
Description of the Matter
As described in Note 2 to the financial statements, the Company tests investments in real estate for recoverability when events or changes in circumstances indicate that the carrying value may not be recoverable. Management determines whether impairment has occurred by comparing the property’s probability-weighted future undiscounted cash flows to its carrying value. The Company’s undiscounted future cash flows analysis requires management to make significant estimates and assumptions related to future rental rates, occupancy levels, costs to obtain a tenant, holding expenses while vacant, and estimated sale proceeds. If the expected future cash flows are less than the carrying value of the property, the Company recognizes an impairment loss equal to the amount by which the carrying amount of the property exceeds the fair value of the property. Fair value is determined based on independent appraisals, selling prices of comparable properties, sale agreements under negotiation, and/or final selling prices.
We identified the impairment of real estate investments as a critical audit matter because of the significant estimates and assumptions management makes to evaluate the recoverability of real estate investments. Given these factors, the related audit effort in evaluating management’s assumptions in determining the recoverability of real estate assets was extensive and required a high degree of auditor judgment.
How We Addressed the Matter in Our Audit
Our audit procedures related to the Company’s real estate recoverability analysis included the following, among others:
●
We obtained an understanding and evaluated the design of controls over management’s evaluation of recoverability of real estate property assets, including management’s process for determining the key inputs utilized in estimating the undiscounted future cash flows.
●
We evaluated the undiscounted cash flow analysis, including management’s estimates of tenant occupency, future rental income and estimated sale proceeds, for each real estate asset with possible impairment indicators by evaluating the adequacy and reasonableness of the source information and assumptions used by management and testing mathematical accuracy of the analysis.
●
We made inquiries of management regarding the current status of potential transactions and about management’s judgments to understand the probability of future events that could affect the cash flow assumptions for the properties.
/s/ BOULAY PLLP | |
/s/ Boulay PLLP | |
| |
We have served as the Company'sCompany’s auditor since 20022002. |
PCAOB ID 542 | |
Minneapolis, Minnesota | |
March 28, 201830, 2022 | |
AEI INCOME & GROWTH FUND 25 LLC
BALANCE SHEETS
ASSETS
| | December 31, | | | December 31, | | | December 31, | | December 31, |
| | 2017 | | | 2016 | | | 2021 | | 2020 |
Current Assets: | | | | | | | | | | |
Cash | | $ | 6,081,556 | | | $ | 2,139,205 | | $ | 656,658 | $ | 703,002 |
Rent Receivable | | | 11,227 | | 123,496 |
Total Current Assets | | | 667,885 | | 826,498 |
| | | | | | | | | | | | |
Real Estate Investments: | | | | | | | | | | | | |
Land | | | 8,005,563 | | | | 9,055,563 | | | 7,103,977 | | 7,103,977 |
Buildings | | | 18,386,544 | | | | 19,871,184 | | | 18,874,469 | | 18,874,469 |
Acquired Intangible Lease Assets | | | 1,487,092 | | | | 2,327,904 | | | 2,712,159 | | 2,712,159 |
Real Estate Held for Investment, at cost | | | 27,879,199 | | | | 31,254,651 | | | 28,690,605 | | 28,690,605 |
Accumulated Depreciation and Amortization | | | (8,177,003 | ) | | | (7,475,332 | ) | | (9,941,100) | | (8,929,368) |
Real Estate Held for Investment, Net | | | 19,702,196 | | | | 23,779,319 | | | 18,749,505 | | 19,761,237 |
Long-Term Rent Receivable | | | 0 | | 11,227 |
Total Assets | | $ | 25,783,752 | | | $ | 25,918,524 | | $ | 19,417,390 | $ | 20,598,962 |
LIABILITIES AND MEMBERS'MEMBERS’ EQUITY
Current Liabilities: | | | | | | | | | | |
Payable to AEI Fund Management, Inc. | | $ | 155,267 | | | $ | 66,273 | | $ | 95,381 | $ | 121,914 |
Distributions Payable | | | 720,251 | | | | 425,214 | | | 286,181 | | 416,395 |
Unearned Rent | | | 15,485 | | | | 15,485 | | | 35,425 | | 35,090 |
Total Current Liabilities | | | 891,003 | | | | 506,972 | | | 416,987 | | 573,399 |
| | | | | | | | | | | | |
Long-term Liabilities: | | | | | | | | | | | | |
Acquired Below-Market Lease Intangibles, Net | | | 59,693 | | | | 73,209 | | | 5,629 | | 19,145 |
| | | | | | | | | | | | |
Members' Equity: | | | | | | | | | |
Members’ Equity (Deficit): | | | | | |
Managing Members | | | 7,265 | | | | 879 | | | (29,966) | | 384 |
Limited Members – 50,000 Units authorized; 40,042 and 40,217 Units issued and outstanding as of December 31, 2017 and 2016, respectively | | | 24,825,791 | | | | 25,337,464 | | |
Total Members' Equity | | | 24,833,056 | | | | 25,338,343 | | |
Total Liabilities and Members' Equity | | $ | 25,783,752 | | | $ | 25,918,524 | | |
Limited Members – 50,000 Units authorized; 38,962 Units issued and outstanding as of December 31, 2021 and 2020 | | | 19,024,740 | | 20,006,034 |
Total Members’ Equity | | | 18,994,774 | | 20,006,418 |
Total Liabilities and Members’ Equity | | $ | 19,417,390 | $ | 20,598,962 |
The accompanying Notes to Financial Statements are an integral part of these statements.
AEI INCOME & GROWTH FUND 25 LLC
STATEMENTS OF INCOMEOPERATIONS
| | | Year Ended December 31 | | | Years Ended December 31 |
| | 2017 | | | 2016 | | | 2021 | | 2020 |
| | | | | | | | | | |
Rental Income | | $ | 2,248,223 | | | $ | 2,386,264 | | $ | 1,743,816 | $ | 1,790,938 |
| | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | |
LLC Administration – Affiliates | | | 275,111 | | | | 295,178 | | | 239,334 | | 237,036 |
LLC Administration and Property Management – Unrelated Parties | | | 204,589 | | | | 205,404 | | | 197,858 | | 161,024 |
Depreciation and Amortization | | | 914,971 | | | | 936,300 | | | 913,552 | | 908,991 |
Total Expenses | | | 1,394,671 | | | | 1,436,882 | | | 1,350,744 | | 1,307,051 |
| | | | | | | | | | | | |
Operating Income | | | 853,552 | | | | 949,382 | | | 393,072 | | 483,887 |
| | | | | | | | | | | | |
Other Income: | | | | | | | | | | | | |
Gain on Sale of Real Estate | | | 757,670 | | | | 15,560 | | | 0 | | 165,255 |
Interest Income | | | 7,189 | | | | 5,931 | | | 436 | | 7,045 |
Total Other Income | | | 764,859 | | | | 21,491 | | | 436 | | 172,300 |
| | | | | | | | | | | | |
Income from Continuing Operations | | | 1,618,411 | | | | 970,873 | | |
| | | | | | | | | |
Income from Discontinued Operations | | | 0 | | | | 95,778 | | |
| | | | | | | | | |
Net Income | | $ | 1,618,411 | | | $ | 1,066,651 | | $ | 393,508 | $ | 656,187 |
| | | | | | | | | | | | |
Net Income Allocated: | | | | | | | | | | | | |
Managing Members | | $ | 64,238 | | | $ | 56,963 | | $ | 11,805 | $ | 141,988 |
Limited Members | | | 1,554,173 | | | | 1,009,688 | | | 381,703 | | 514,199 |
Total | | $ | 1,618,411 | | | $ | 1,066,651 | | $ | 393,508 | $ | 656,187 |
| | | | | | | | | | | | |
Income per LLC Unit: | | | | | | | | | |
Continuing Operations | | $ | 38.70 | | | $ | 22.70 | | |
Discontinued Operations | | | .00 | | | | 2.24 | | |
Total – Basic and Diluted | | $ | 38.70 | | | $ | 24.94 | | |
Net Income per LLC Unit | | $ | 9.80 | $ | 13.20 |
| | | | | | | | | | | | |
Weighted Average Units Outstanding – Basic and Diluted | | | 40,163 | | | | 40,482 | | | 38,962 | | 38,962 |
| | | | | | | | | | | | |
The accompanying Notes to Financial Statements are an integral part of these statements.
AEI INCOME & GROWTH FUND 25 LLC
STATEMENTS OF CASH FLOWS
| | | Year Ended December 31 | | | Years Ended December 31 |
| | 2017 | | | 2016 | | | 2021 | | 2020 |
| | | | | | | | | | |
Cash Flows from Operating Activities: | | | | | | | | | | |
Net Income | | $ | 1,618,411 | | | $ | 1,066,651 | | $ | 393,508 | $ | 656,187 |
| | | | | | | | | | | | |
Adjustments to Reconcile Net Income To Net Cash Provided by Operating Activities: | | | | | | | | | | | | |
Depreciation and Amortization | | | 963,357 | | | | 993,352 | | | 998,216 | | 981,496 |
Gain on Sale of Real Estate | | | (757,670 | ) | | | (115,427 | ) | | 0 | | (165,255) |
(Increase) Decrease in Rent Receivable | | | 123,496 | | (134,723) |
Increase (Decrease) in Payable to AEI Fund Management, Inc. | | | 88,994 | | | | (62,898 | ) | | (26,533) | | (10,135) |
Increase (Decrease) in Unearned Rent | | | 335 | | 16,757 |
Total Adjustments | | | 294,681 | | | | 815,027 | | | 1,095,514 | | 688,140 |
Net Cash Provided By (Used For) Operating Activities | | | 1,913,092 | | | | 1,881,678 | | | 1,489,022 | | 1,344,327 |
| | | | | | | | | | | | |
Cash Flows from Investing Activities: | | | | | | | | | | | | |
Investments in Real Estate | | | (81,440 | ) | | | (7,733 | ) | | 0 | | (3,577,805) |
Proceeds from Sale of Real Estate | | | 3,939,360 | | | | 765,427 | | | 0 | | 681,729 |
Net Cash Provided By (Used For) Investing Activities | | | 3,857,920 | | | | 757,694 | | | 0 | | (2,896,076) |
| | | | | | | | | | | | |
Cash Flows from Financing Activities: | | | | | | | | | | | | |
Distributions Paid to Members | | | (1,707,176 | ) | | | (2,039,445 | ) | | (1,535,366) | | (1,501,758) |
Repurchase of LLC Units | | | (121,485 | ) | | | (241,313 | ) | |
Net Cash Provided By (Used For) Financing Activities | | | (1,828,661 | ) | | | (2,280,758 | ) | |
| | | | | | | | | | | | |
Net Increase (Decrease) in Cash | | | 3,942,351 | | | | 358,614 | | | (46,344) | | (3,053,507) |
| | | | | | | | | | | | |
Cash, beginning of year | | | 2,139,205 | | | | 1,780,591 | | | 703,002 | | 3,756,509 |
| | | | | | | | | | | | |
Cash, end of year | | $ | 6,081,556 | | | $ | 2,139,205 | | $ | 656,658 | $ | 703,002 |
| | | | | | | | | | | | |
The accompanying Notes to Financial Statements are an integral part of these statements.
AEI INCOME & GROWTH FUND 25 LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
| | Managing Members | | | Limited Members | | | Total | | | Limited Member Units Outstanding | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Balance, December 31, 2015 | | $ | 3,950 | | | $ | 26,437,245 | | | $ | 26,441,195 | | | | 40,569.95 | |
| | | | | | | | | | | | | | | | |
Distributions Declared | | | (52,795 | ) | | | (1,875,395 | ) | | | (1,928,190 | ) | | | | |
| | | | | | | | | | | | | | | | |
Repurchase of LLC Units | | | (7,239 | ) | | | (234,074 | ) | | | (241,313 | ) | | | (353.30 | ) |
| | | | | | | | | | | | | | | | |
Net Income | | | 56,963 | | | | 1,009,688 | | | | 1,066,651 | | | | | |
| | | | | | | | | | | | | | | | |
Balance, December 31, 2016 | | | 879 | | | | 25,337,464 | | | | 25,338,343 | | | | 40,216.65 | |
| | | | | | | | | | | | | | | | |
Distributions Declared | | | (54,208 | ) | | | (1,948,005 | ) | | | (2,002,213 | ) | | | | |
| | | | | | | | | | | | | | | | |
Repurchase of LLC Units | | | (3,644 | ) | | | (117,841 | ) | | | (121,485 | ) | | | (174.25 | ) |
| | | | | | | | | | | | | | | | |
Net Income | | | 64,238 | | | | 1,554,173 | | | | 1,618,411 | | | | | |
| | | | | | | | | | | | | | | | |
Balance, December 31, 2017 | | $ | 7,265 | | | $ | 24,825,791 | | | $ | 24,833,056 | | | | 40,042.44 | |
| | | | | | | | | | | | | | | | |
| | Managing Members | | Limited Members | | Total | | Limited Member Units Outstanding |
| | | | | | | | |
| | | | | | | | |
Balance, December 31, 2019 | $ | (96,493) | $ | 20,950,442 | $ | 20,853,949 | | 38,961.72 |
| | | | | | | | |
Distributions Declared | | (45,111) | | (1,458,607) | | (1,503,718) | | |
| | | | | | | | |
Net Income | | 141,988 | | 514,199 | | 656,187 | | |
| | | | | | | | |
Balance, December 31, 2020 | | 384 | | 20,006,034 | | 20,006,418 | | 38,961.72 |
| | | | | | | | |
Distributions Declared | | (42,155) | | (1,362,997) | | (1,405,152) | | |
| | | | | | | | |
Net Income | | 11,805 | | 381,703 | | 393,508 | | |
| | | | | | | | |
Balance, December 31, 2021 | $ | (29,966) | $ | 19,024,740 | $ | 18,994,774 | | 38,961.72 |
| | | | | | | | |
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, 20172021 AND 20162020
(1) Organization –
AEI Income & Growth Fund 25 LLC ("Company"(“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"(“AFM”), the Managing Member. Robert P. Johnson, the Presidentprevious Chief Executive Officer and sole director of AFM, servesserved as the Special Managing Member.Member until his withdrawal date effective March 31, 2020. AFM is a wholly owned subsidiary of AEI Capital Corporation of which Mr.the Robert P. Johnson is theTrust and Patricia Johnson own a majority shareholder.interest. AEI Fund Management, Inc. ("AEI"(“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 expired.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.
During operations, any Net Cash Flow, as defined, which the Managing Members determine to distribute will be distributed 97% to the Limited Members and 3% to the Managing Members. Distributions to Limited Members will be made pro rata by Units.
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.
For tax purposes, profits from operations, other than profits attributable to the sale, exchange, financing, refinancing or other disposition of property, will be allocated 97% to the Limited Members and 3% to the Managing Members. Net losses from operations will be allocated 99% to the Limited Members and 1% to the Managing Members.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
(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.
The Managing Members are not required to currently fund a deficit capital balance. Upon liquidation of the Company or withdrawal by a Managing Member, the Managing Members will contribute to the Company an amount equal to the lesser of the deficit balances in their capital accounts or 1.01% of the total capital contributions of the Limited Members over the amount previously contributed by the Managing Members.
-34-
In July 2018, the Managing Member mailed a Consent Statement (Proxy) seeking the consent of the Limited Members to continue the Company for an additional 60 months or to initiate the final disposition, liquidation and distribution of all of the Company’s properties and assets. Approval of either proposal required the affirmative vote of holders of a majority of the outstanding units. On August 24, 2018, the votes were counted and neither proposal received the required majority vote. As a result, the Company will not liquidate and will continue in operation until the Limited Members vote to authorize the sale of all of the Company’s properties or December 31, 2053, as stated in the Operating Agreement. However, in approximately five years, the Managing Member expects to again submit the question to liquidate to a vote by the Limited Members.AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(2) Summary of Significant Accounting Policies –
Financial Statement Presentation
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, 2021 AND 2020
(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.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 relatedthe allocation of purchase price of real estate assets and intangible assets.
The Company regularly assesses whether market events and conditions indicate that it is reasonably possible to recover the carrying amounts of its investments in real estate from future operations and sales. A change in those market events and conditions could have a material effect on the carrying amount of its real estate.
Cash Concentrations of Credit Risk
The Company's cash is deposited in one financial institution and at times during the year it may exceed FDIC insurance limits.
Rent Receivables
Credit terms are extended to tenants in the normal course of business. The Company performs ongoing credit evaluations of its customers'customers’ financial condition and, generally, requires no collateral.
ReceivablesRent receivables are recorded at their estimated net realizable value. The Company follows a policy of providing an allowance for doubtful accounts; however, based on historical experience, and its evaluation of the current status of receivables, the Company is of the belief that such accounts, if any, will be collectible in all material respects and thus an allowance is not necessary. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company'sCompany’s credit terms. Receivables considered uncollectible are written off.
Income Taxes
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, 2021 AND 2020
(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 2014,2018, and with few exceptions, is no longer subject to state tax examinations for tax years before 2014.2018.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(2) Summary of Significant Accounting Policies – (Continued)
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, the Company recognizes the deferred rent related to the month it applies and records a rental 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.
Real Estate Investments
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'smanagement’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, 2021 AND 2020
(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'smanagement’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.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(2) Summary of Significant Accounting Policies – (Continued)
The Company tests real estate 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, it compares the carrying amount of the property to the estimated probability-weighted future undiscounted cash flows expected to result from the property and its eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the property, the Company recognizes an impairment loss byequal to the amount by which the carrying amount of the property exceeds the fair value of the property. For properties held for sale, the Company determines whether impairment has occurred by comparing the property'sproperty’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.
For financial reporting purposes, the buildings owned by the Company are depreciated using the straight-line method over an estimated useful life of 25 years. Intangible lease assets are amortized using the straight-line method for financial reporting purposes based on the remaining life of the lease.
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'sCompany’s operations and financial results. Therefore, the results from operating and selling the property are included in continuing operations. However, if a property was classified as Real Estate Held for Sale at December 31, 2013, the property was considered discontinued operations under prior accounting guidance.
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' land, building, intangible assets, liabilities, revenues and expenses.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
(2) Summary of Significant Accounting Policies – (Continued)
The Company'sCompany’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'stenant’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, 20172021 and 2016.2020.
Fair Value Measurements
As ofAt December 31, 20172021 and 2016,2020, the Company had no financial assets or liabilities measured at fair value on a recurring basis or nonrecurring basis.
Income Per Unit
Income per LLC Unit is calculated based on the weighted average number of LLC Units outstanding during each period presented. Diluted income per LLC Unit considers the effect of any potentially dilutive Unit equivalents, of which the Company had none for each of the years ended December 31, 20172021 and 2016.2020.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(2) Summary of Significant Accounting Policies – (Continued)
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'sCompany’s properties are classified as one reportable segment.
Recently IssuedAdopted Accounting Pronouncements
In May 2014,April 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09 regarding ASC Topic 606, Revenue from Contracts with Customers. The standard provides principles for recognizing revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for the Company's fiscal year beginning January 1, 2018. We evaluated the accounting, transition, and disclosure requirements of the standard and the adoption of this standard will not have a material impactquestion-and-answer document (the “Lease Modification Q&A”) focused on the financial statementsapplication of lease accounting guidance to lease concessions provided as a result of COVID-19. Under existing lease guidance, the Company earns substantially allwould have to determine, on a lease by lease basis, if a lease concession was the result of its revenue froma new arrangement reached with the tenant or if a lease contracts that fall withinconcession was under the scope of AIC Topic 840, which are not within the scope of the new revenue standard. Additionally, we have historically disposed of properties for cash with no contingencies and no future investment in the properties. Therefore, the new revenue standard will not impact the recognition of gain or loss from property sales.
In February 2016, the FASB issued ASU 2016-02, which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for theenforceable rights and obligations created by leased assets, initially measured at the present value of the lease payments. The accounting guidance for lessors is largely unchanged. The ASU is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. It is to be adopted using a modified retrospective approach. Management is currently evaluating the impact the adoption of this guidance will have on the Company's financial statements.
In January 2017, the FASB issued ASU 2017-01, which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted, and is required to be applied prospectively to any transactions occurring within the periodexisting lease agreement. The Lease Modification Q&A clarifies that entities may elect to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of adoption. We are currently evaluating the accounting and disclosure requirements of the standard. We expect the new standard will result in the majority of our real estate acquisitionsCOVID-19 on lessees is a lease modification under current lease guidance. Instead, an entity that elects not to be considered asset acquisitions, whereby external acquisition costsevaluate whether a concession directly related to these asset acquisitions will be capitalized. Currently,COVID-19 is a modification can then elect whether to apply the majority of our real estate acquisitions are considered acquisitions of businesses, whereby all acquisition-related costs are expensed as incurred. We do not expect the standard to have a significant impact on the allocation of purchase price to tangible and identifiable intangible assets and liabilities acquired based on their respective fair values.
modification guidance.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 20172021 AND 20162020
(2) Summary of Significant Accounting Policies – (Continued)
During the year ended December 31, 2020, the Company provided lease concessions to certain tenants in response to the impact of COVID-19, in the form of rent deferrals. The Company has made an election to account for such lease concessions consistent with how those concessions would be accounted for under lease guidance if enforceable rights and obligations for those concessions had already existed in the leases. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights as lessor, including concessions that result in the total payments required by the modified lease being substantially the same as or less than total payments required by the original lease.
Substantially all of the Company’s concessions to date provide for a deferral of payments with no substantive changes to the consideration in the original lease. These deferrals affect the timing, but not the amount, of the lease payments. The Company is accounting for these deferrals as if no changes to the lease were made. Under this accounting, the Company increases its rent receivables as tenant payments accrue and continues to recognize rental income. During the year ended December 31, 2020, the Company has entered into lease modifications that deferred $134,723, which was recognized as rental income for those deferred months in 2020. The rent receivable related to these rental deferrals is $11,227 as of December 31, 2021.
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 –
The Company owns the percentage interest shown below in the following properties as tenants-in-common with the affiliated entities listed: Jared Jewelry store in Madison Heights, Michigan (21% – AEI Income & Growth Fund 23 LLC and AEI Accredited Investor Fund 2002 Limited Partnership); Jared Jewelry store in Auburn Hills, Michigan (60% --– AEI Income & Growth Fund XXI Limited Partnership); property in Wichita, Kansas (60% – AEI Income & Growth Fund 26 LLC); Advance Auto Parts store in Indianapolis, Indiana (35% – AEI Income & Growth Fund XXII Limited Partnership); Dick's Sporting Goods store (27% – AEI Income & Growth Fund 23 LLC, AEI Income & Growth Fund 24 LLC and AEI Income & Growth Fund 26 LLC); Staples store (72% – AEI Income & Growth Fund XXII Limited Partnership); Coliseum Health clinic (50% – AEI Income & Growth Fund 24 LLC); and PetSmart store (73%Talecris Plasma Facility (50% – AEI Income & Growth Fund 24 LLC)XXII Limited Partnership).
The Company owned a 21% interest in a Jared Jewelry store in Madison Heights, Michigan. AEI Income & Growth Fund 23 LLC and AEI Accredited Investor Fund 2002 Limited Partnership, affiliates of the Company, owned the remaining 79% interest in this property until the property was sold to an unrelated third party in 2020. The Company owned a 73% interest in a PetSmart store. AEI Income & Growth Fund 24 LLC owned the remaining 27% interest in this property until the property was sold to the Company in 2020.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
(3) Related Party Transactions – (Continued)
AEI received the following reimbursements for costs and expenses from the Company for the years ended December 31:
| | | 2017 | | 2016 | | | 2021 | | 2020 |
| | | | | | | | | | |
a. | AEI is reimbursed for costs incurred in providing services related to managing the Company's operations and properties, maintaining the Company's books, and communicating with the Limited Members. | $ | 275,111 | $ | 295,178 | AEI is reimbursed for costs incurred in providing services related to managing the Company’s operations and properties, maintaining the Company’s books, and communicating with the Limited Members. | $ | 239,334 | $ | 237,036 |
| | | | | | | | | | |
b. | AEI is reimbursed for all direct expenses it paid on the Company's behalf to third parties related to Company administration and property management. These expenses included printing costs, legal and filing fees, direct administrative costs, outside audit costs, taxes, insurance and other property costs. These amounts included $31,347 of expenses related to Discontinued Operations in 2016. | $ | 204,589 | $ | 236,751 | AEI is reimbursed for all direct expenses it paid on the Company’s behalf to third parties related to Company administration and property management. These expenses included printing costs, legal and filing fees, direct administrative costs, outside audit costs, taxes, insurance and other property costs. | $ | 197,858 | $ | 161,024 |
| | | | | | | | | | |
c. | AEI is reimbursed for costs incurred in providing services related to the sale of property. | $ | 5,767 | $ | 5,173 | AEI is reimbursed for costs incurred in providing services and direct expenses related to the acquisition of property on behalf of the Company. | $ | 0 | $ | 50,105 |
| | | | | | | | | | |
d. | | AEI is reimbursed for costs incurred in providing services related to the sale of property on behalf of the Company. | $ | 0 | $ | 4,580 |
| | | | | | |
The payable to AEI Fund Management, Inc. represents the balance due for the services described in 3a, b, c and c.d. This balance is non-interest bearing and unsecured and is to be paid in the normal course of business.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(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 107.8 to 20 years, except for the Staples store, which had a remaining primary term of 8.4 years, and the Premier Diagnostic Imaging center, which had a remaining primary term of 7.8 years. The lease for the Advance Auto Parts store was extended to expire on April 30, 2025. The leases provide the tenants with one to five five-year renewal options subject to the same terms and conditions as the primary term.term, except for the Talecris plasma facility 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, 2021 AND 2020
(4) Real Estate Investments – (Continued)
The Company's properties are commercial, single-tenant buildings. The Jared Jewelry store in Madison Heights, Michigan was constructed in 2003 and acquired in 2004. The Jared Jewelry store in Auburn Hills, Michigan was constructed in 1999 and acquired in 2005. The Tractor Supply Company store was constructed in 2003 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 land for the Dick's Sporting Goods store was acquired in 2007 and construction of the store was completed in 2008. The Staples store was constructed in 2010 and acquired in 2011. The Coliseum Health clinic was constructed and acquired in 2012. The PetSmart store was constructed and acquired in 2013.2013 and 2020. The Premier Diagnostic Imaging center 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 facility was constructed in 2008 and acquired in 2020. There have been no costs capitalized as improvements subsequent to the acquisitions, except for $7,733 of tenant improvements related to the Staples store.
The cost of the properties not held for sale and related accumulated depreciation at December 31, 20172021 are as follows:
| Property | Land | Buildings | Total | Accumulated Depreciation | Land | Buildings | Total | Accumulated Depreciation |
| | | | | | | | | | | | | | | | |
Jared Jewelry, Madison Heights, MI | $ | 323,259 | $ | 529,333 | $ | 852,592 | $ | 293,774 | |
Jared Jewelry, Auburn Hills, MI | | 421,489 | | 1,777,578 | | 2,199,067 | | 921,378 | $ | 421,489 | $ | 1,777,578 | $ | 2,199,067 | $ | 1,205,794 |
Tractor Supply, Yankton, SD | | 351,221 | | 1,914,715 | | 2,265,936 | | 935,022 | |
Jared Jewelry, Concord, NH | | 1,061,663 | | 3,095,971 | | 4,157,634 | | 1,496,390 | | 1,061,663 | | 3,095,971 | | 4,157,634 | | 1,991,750 |
Jared Jewelry, Aurora, IL | | 1,790,636 | | 2,027,709 | | 3,818,345 | | 976,674 | | 1,790,636 | | 2,027,709 | | 3,818,345 | | 1,301,106 |
Biomat USA Plasma Center, Wichita, KS | | 771,076 | | 1,937,641 | | 2,708,717 | | 1,059,285 | |
Biomat USA, Wichita, KS | | | 771,076 | | 1,937,641 | | 2,708,717 | | 1,330,421 |
Advance Auto Parts, Indianapolis, IN | | 289,661 | | 380,315 | | 669,976 | | 167,975 | | 289,661 | | 380,315 | | 669,976 | | 228,823 |
Dick's Sporting Goods, Fredericksburg, VA | 1,603,558 | | 1,523,043 | | 3,126,601 | | 633,802 | |
Staples, Clermont, FL | | 615,600 | | 1,398,709 | | 2,014,309 | | 345,735 | | 615,600 | | 1,398,709 | | 2,014,309 | | 569,527 |
Coliseum Health, Macon, GA | | 200,000 | | 451,517 | | 651,517 | | 98,581 | | 200,000 | | 451,517 | | 651,517 | | 170,821 |
PetSmart, Gonzales, LA | | 277,400 | | 1,501,964 | | 1,779,364 | | 272,861 | |
PetSmart, Gonzales, AR | | | 419,587 | | 2,149,142 | | 2,568,729 | | 563,877 |
Premier Diagnostic Imaging, Terre Haute, IN | Premier Diagnostic Imaging, Terre Haute, IN | 300,000 | | 1,848,049 | | 2,148,049 | | 249,491 | Premier Diagnostic Imaging, Terre Haute, IN | 300,000 | | 1,848,049 | | 2,148,049 | | 545,187 |
Tractor Supply, Canton, MS | | | 648,841 | | 2,099,841 | | 2,748,682 | | 258,987 |
Talecris Plasma Facility, Dallas, TX | | | 585,424 | | 1,707,997 | | 2,293,421 | | 96,787 |
| $ | 8,005,563 | $ | 18,386,544 | $ | 26,392,107 | $ | 7,450,968 | $ | 7,103,977 | $ | 18,874,469 | $ | 25,978,446 | $ | 8,263,080 |
| | | | | | | | | | | | | | | | |
For the years ended December 31, 2021 and 2020, the Company recognized depreciation expense of $745,264 and $704,331, respectively.
On January 17, 2020, the Company purchased an additional 27% interest in the PetSmart store in Gonzales, Louisiana for $831,455 from AEI Income & Growth Fund 24 LLC (“Fund 24”), 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 Fund 24 is in the process of liquidating its property portfolio. The Company now owns 100% of the PetSmart property. The annual rent for the additional 27% interest that was purchased is $66,468.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 20172021 AND 20162020
(4) Real Estate Investments – (Continued)
For the years ended DecemberOn July 31, 2017 and 2016,2020, the Company recognized depreciation expense from continuing operationspurchased a 50% interest in a Talecris plasma facility in Dallas, Texas for $2,746,350. The Company allocated $452,929 of $778,186the purchase price to Acquired Intangible Lease Assets, representing in-place lease intangibles of $284,439 and $792,724, respectively.above-market lease intangibles of $168,490. The property is leased to Talecris Plasma Resources, Inc. under a lease agreement with a remaining primary term of 8.1 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.
The following schedule presents the cost and related accumulated amortization of acquired lease intangibles not held for sale at December 31:
| | 2017 | | 2016 |
| | Cost | | Accumulated Amortization | | Cost | | Accumulated Amortization |
In-Place Lease Intangibles (weighted average life of 56 and 90 months, respectively) | $ | 1,108,939 | $ | 549,472 | $ | 1,432,684 | $ | 473,806 |
| | | | | | | | |
Above-Market Lease Intangibles (weighted average life of 68 and 127 months, respectively) | | 378,153 | | 176,563 | | 895,220 | | 192,655 |
Acquired Intangible Lease Assets | $ | 1,487,092 | $ | 726,035 | $ | 2,327,904 | $ | 666,461 |
| | | | | | | | |
Acquired Below-Market Lease Intangibles (weighted average life of 53 and 65 months, respectively) | $ | 104,746 | $ | 45,053 | $ | 104,746 | $ | 31,537 |
| | | | | | | | |
| | | | | | | | |
| | 2021 | | 2020 |
| | Cost | | Accumulated Amortization | | Cost | | Accumulated Amortization |
In-Place Lease Intangibles (weighted average life of 37 and 44 months, respectively) | $ | 1,771,908 | $ | 1,200,563 | $ | 1,771,908 | $ | 1,032,275 |
| | | | | | | | |
Above-Market Lease Intangibles (weighted average life of 55 and 67 months, respectively) | | 940,251 | | 477,457 | | 940,251 | | 379,277 |
Acquired Intangible Lease Assets | $ | 2,712,159 | $ | 1,678,020 | $ | 2,712,159 | $ | 1,411,552 |
| | | | | | | | |
Acquired Below-Market Lease Intangibles (weighted average life of 5 and 17 months, respectively) | $ | 104,746 | $ | 99,117 | $ | 104,746 | $ | 85,601 |
| | | | | | | | |
For the years ended December 31, 20172021 and 2016,2020, the value of in-place lease intangibles amortized to expense was $136,785$168,288 and $143,576,$204,660, the decrease to rental income for above-market leases was $61,902$98,180 and $70,568,$86,021, and the increase to rental income for below-market leases was $13,516 and $13,516, respectively.
For lease intangibles not held for sale at December 31, 2017,2021, the estimated amortization for the next five years is as follows:
| | Amortization Expense for In-Place Lease Intangibles | | Decrease to Rental Income for Above-Market Leases | | Increase to Rental Income for Below-Market Leases |
| | | | | | | | | |
2018 | | $ | 120,823 | | $ | 35,904 | | $ | 13,516 |
2019 | | | 124,556 | | | 35,904 | | | 13,516 |
2020 | | | 97,753 | | | 35,904 | | | 13,516 |
2021 | | | 88,824 | | | 35,904 | | | 13,516 |
2022 | | | 66,953 | | | 35,904 | | | 5,629 |
| | $ | 498,909 | | $ | 179,520 | | $ | 59,693 |
| | | | | | | | | |
| | | | | | | | | |
| | Amortization Expense for In-Place Lease Intangibles | | Decrease to Rental Income for Above-Market Leases | | Increase to Rental Income for Below-Market Leases |
| | | | | | | | | |
2022 | | $ | 146,417 | | $ | 98,180 | | $ | 5,629 |
2023 | | | 88,154 | | | 80,264 | | | 0 |
2024 | | | 76,268 | | | 66,358 | | | 0 |
2025 | | | 73,576 | | | 62,276 | | | 0 |
2026 | | | 73,576 | | | 62,276 | | | 0 |
| | $ | 457,991 | | $ | 369,354 | | $ | 5,629 |
| | | | | | | | | |
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 20172021 AND 20162020
(4) Real Estate Investments – (Continued)
The Company owns a 60% interest in thea 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, 2017,2020, the tenant owed $29,049 of past due rent, which was not accruedrecorded 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 iswas vacant, the Company iswas responsible for its 60% share of real estate taxes and other costs associated with maintaining the property. The annual rent from this property represented approximately 13% of the total annual rent of the Company's property portfolio. The loss of rent and increased expenses related to this property decreased the Company's cash flow. Consequently, beginning with the third quarter of 2016, the Company reduced its regular quarterly cash distribution rate from $12.85 per Unit to $10.27 per Unit.
On September 21, 2017, the Company entered into a lease agreement with a primary term of 10 years with Biomat USA, Inc. ("Biomat"(“Biomat”) as a replacement tenant for 28% of the square footage of the property. The tenant will operateoperates a Biomat USA Plasma Center in the space. The Company'sCompany’s 60% share of annual rent, is $55,607 and is expected to commencewhich commenced on June 18, 2018.2018, is $55,607. Biomat has 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.
On August 27, 2019, the Company entered into a lease 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 center in the space. The Company’s 60% share of annual rent, which was to commence on February 23, 2020, is $117,000. As part of the agreement, the Company will pay a tenant improvement allowance of $96,000 when certain conditions are met by the tenant. Due to ongoing difficulties relating to the COVID-19 pandemic the Company was negotiating a rent commencement date of April 1, 2021. As a part of the negotiations, the tenant improvement allowance was to be responsiblereplaced with a ten month rent abatement starting April 1, 2021. Additionally, this agreement would forebear rent and additional charges for payingthe 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 remaining cost to replace the roof, which is expected to be approximately $170,000. At December 31, 2017, the Company accrued its 60% share of lease commissionscommission due to real estate brokers totaling $81,440 that were owed 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 Companyproperty is continuing to pursue additional tenantscurrently being marketed for sale or lease with a real estate broker in the remaining space.Wichita area.
In the third quarter of 2017, the Company decided to sell the Fresenius Medical Center in Gretna, Louisiana. In October 2017, the Company entered into an agreement to sell the property to an unrelated third party. On December 6, 2017, the sale closed with the Company receiving net proceeds of $3,939,360, which resulted in a net gain of $757,670. At the time of sale, the cost and related accumulated depreciation and amortization was $3,456,892 and $275,202, respectively.
In February 2018,March 2020, the Company entered into an agreement with the tenant of the Advance Auto PartsJared Jewelry store in Indianapolis, IndianaAurora, Illinois to extend the lease term five years to expireend on April 30, 2025. As part of the agreement, the annual rent decreased from $51,630$370,686 to $44,079$235,989 effective JanuaryMay 1, 2018. In addition, beginning on March 1, 2018, the tenant will receive free rent for four months that equals $14,693.2020.
For properties owned as of December 31, 2017, the minimum future rent payments required by the leases are as follows:
2018 | $ | 2,101,887 |
2019 | | 1,754,796 |
2020 | | 1,171,400 |
2021 | | 1,033,394 |
2022 | | 917,274 |
Thereafter | | 1,808,978 |
| $ | 8,787,729 |
| | |
There were no contingent rents recognized in 2017 and 2016.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 20172021 AND 20162020
(4) Real Estate Investments – (Continued)
In January 2020, the Company entered into an agreement to sell its 21% interest in the Jared Jewelry store in Madison Heights, Michigan to an unrelated third party. On March 4, 2020, the sale closed with the Company receiving net proceeds of $681,729, which resulted in a net gain of $165,255. At the time of sale, the cost and related accumulated depreciation was $852,592 and $336,118, respectively.
The Company owns a 72% interest in a Staples store in Clermont, Florida. The remaining interest in the property is owned by an affiliate of the Company. On July 17, 2020, 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% share of real estate taxes and other costs associated with maintaining the property. The owners have listed the property for sale or lease with a real estate broker in the Clermont area. The annual rent from this property represented approximately 10% of the total annual rent of the Company’s property portfolio. The loss of rent and increased expenses related to this property will decrease the Company’s cash flow. The Company will reduce its regular quarterly distribution rate due to the decrease in cash flow.
In March 2022, the Partnership entered into an agreement to sell its 72% interest in the Staples store in Clermont, Florida to an unrelated third party. The sale is subject to contingencies and may not be completed. If the sale is completed, the Partnership expects to receive net sale proceeds of approximately $1,959,000, which will result in a net gain of approximately $528,000.
For properties owned as of December 31, 2021, the minimum future rent payments required by the leases are as follows:
2022 | $ | 1,705,887 |
2023 | | 1,412,076 |
2024 | | 1,339,362 |
2025 | | 985,983 |
2026 | | 545,700 |
Thereafter | | 793,021 |
| $ | 6,782,029 |
| | |
There were no contingent rents recognized in 2021 and 2020.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
(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:
Tenants | | Industry | | 2017 | | 2016 | | Industry | | 2021 | | 2020 |
| | | | | | | | | | | | |
Sterling Jewelers Group | | Retail | $ | 982,724 | $ | 982,724 | | Retail | $ | 775,654 | $ | 807,280 |
Dick's Sporting Goods, Inc. | | Retail | | 232,950 | | N/A | |
PetSmart LLC | | | Retail | | 226,639 | | 223,780 |
Terre Haute Regional Hospital L.P. | | | Medical | | 216,938 | | 212,949 |
Tractor Supply Company | | | Retail | | 178,568 | | N/A |
Aggregate rental income of major tenants | | | $ | 1,215,674 | $ | 982,724 | | | $ | 1,397,799 | $ | 1,244,009 |
Aggregate rental income of major tenants as a percentage of total rental income | | | | 54% | | 41% | | | | 80% | | 69% |
| | | | | | | | | | | | |
(6) Discontinued OperationsMembers’ Equity –
The tenant ofFor the Johnny Carino's restaurants was experiencing financial difficultiesyears ended December 31, 2021 and closed the restaurants in Pueblo, Colorado (October 2013) and Lake Charles, Louisiana (January 2014). On March 27, 2014, the tenant filed for Chapter 11 bankruptcy reorganization. Shortly thereafter, the tenant filed a motion with the bankruptcy court to reject the leases and returned possession of the properties to the Company. As of the date of the bankruptcy filing, the tenant owed $97,680 of past due rent, which was not accrued for financial reporting purposes. While the properties were vacant,2020, the Company was responsibledeclared distributions of $1,405,152 and $1,503,718, respectively. The Limited Members received distributions of $1,362,997 and $1,458,607 and the Managing Members received distributions of $42,155 and $45,111 for the real estate taxesyears, respectively. The Limited Members' distributions represented $34.98 and other costs associated with maintaining the properties.$37.44 per LLC Unit outstanding using 38,962 Units in 2021 and 2020. The Company submitted a Proofdistributions represented $9.80 and $13.20 per Unit of Claim for damages to the bankruptcy court for each property. The tenant's reorganization plan was approved by the bankruptcy court effective February 2, 2015. In August 2015, the Company received payments totaling $137,474 on its claims from the plan. In 2016, the Company received final claim payments totaling $27,258.Net Income and $25.18 and $24.24 per Unit of return of contributed capital in 2021 and 2020, respectively.
In September 2013, the Company decided to sell both Johnny Carino's restaurants and classified them as Real Estate Held for Sale. On August 1, 2014, the Company sold the Lake Charles property to an unrelated third party. In late March 2016, the Company entered into an agreement to sell the Pueblo property to an unrelated third party. On August 4, 2016, the sale closed with the Company receiving net proceeds of $749,867, which resulted in a net gain of $99,867. At the time of sale, the carrying value of the property was $650,000.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 20172021 AND 20162020
(6) Discontinued Operations – (Continued)
The financial results for these properties are reflected as Discontinued Operations in the accompanying financial statements. The following are the results of discontinued operations for the years ended December 31:
| | 2017 | | 2016 |
| | | | |
Bankruptcy Claim Payments Received | $ | 0 | $ | 27,258 |
Property Management Expenses | | 0 | | (31,347) |
Gain on Disposal of Real Estate | | 0 | | 99,867 |
Income from Discontinued Operations | $ | 0 | $ | 95,778 |
| | | | |
| | 2017 | | 2016 |
| | | | |
Cash Flows from Discontinued Operations: | | | | |
Operating Activities | $ | 0 | $ | (4,089) |
Investing Activities | $ | 0 | $ | 749,867 |
| | | | |
(7) Members' Capital –
For the years ended December 31, 2017 and 2016, the Company declared distributions of $2,002,213 and $1,928,190, respectively. The Limited Members received distributions of $1,948,005 and $1,875,395 and the Managing Members received distributions of $54,208 and $52,795 for the years, respectively. The Limited Members' distributions represented $48.50 and $46.33 per LLC Unit outstanding using 40,163 and 40,482 weighted average Units in 2017 and 2016, respectively. The distributions represented $35.76 and $19.12 per Unit of Net Income and $12.74 and $27.21 per Unit of return of contributed capital in 2017 and 2016, respectively.
As part of the distributions discussed above, the Company distributed net sale proceeds of $292,929 and $252,525 in 2017 and 2016, respectively. The Limited Members received distributions of $290,000 and $250,000 and the Managing Members received distributions of $2,929 and $2,525 for the years, respectively. The Limited Members' distributions represented $7.24 and $6.16 per Unit for the years, respectively.
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 2017, the Company repurchased a total of 174.25 Units for $117,841 from 10 Limited Members in accordance with the Operating Agreement. On October 1, 2016, the Company repurchased a total of 353.30 Units for $234,074 from 17 Limited Members. The Company acquired these Units using Net Cash Flow from operations. The repurchases increase the remaining Limited Members' ownership interest in the Company. As a result of these repurchases and pursuant to the Operating Agreement, the Managing Members received distributions of $3,644 and $7,239 in 2017 and 2016, respectively.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(8) Income Taxes –
The following is a reconciliation of net income for financial reporting purposes to income reported for federal income tax purposes for the years ended December 31:
| | 2017 | | 2016 | | 2021 | | 2020 |
| | | | | | | | |
Net Income for Financial Reporting Purposes | $ | 1,618,411 | $ | 1,066,651 | $ | 393,508 | $ | 656,187 |
| | | | | | | | |
Depreciation for Tax Purposes Under Depreciation and Amortization for Financial Reporting Purposes | | 355,036 | | 334,423 | | 336,998 | | 397,070 |
| | | | | | | | |
Income Accrued for Tax Purposes Over (Under) Income for Financial Reporting Purposes | | 0 | | 29,049 | | (28,714) | | 16,757 |
| | | | | | | | |
Gain on Sale of Real Estate for Tax Purposes Under Gain for Financial Reporting Purposes | | (186,956) | | (982,685) | |
Gain / Loss on Sale of Real Estate for Tax Purposes Compared to Gain for Financial Reporting Purposes | | | 0 | | (119,719) |
Taxable Income to Members | $ | 1,786,491 | $ | 447,438 | $ | 701,792 | $ | 950,295 |
| | | | | | | | |
The following is a reconciliation of Members'Members’ Equity for financial reporting purposes to Members'Members’ Equity reported for federal income tax purposes for the years ended December 31:
| | 2017 | | 2016 | | 2021 | | 2020 |
| | | | | | | | |
Members' Equity for Financial Reporting Purposes | $ | 24,833,056 | $ | 25,338,343 | |
Members’ Equity for Financial Reporting Purposes | | $ | 18,994,774 | $ | 20,006,418 |
| | | | | | | | |
Adjusted Tax Basis of Investments in Real Estate Over Net Investments in Real Estate for Financial Reporting Purposes | | 3,800,338 | | 3,632,258 | | 4,541,056 | | 4,204,058 |
| | | | | | | | |
Income Accrued for Tax Purposes Over Income for Financial Reporting Purposes | | 44,534 | | 44,534 | | 35,425 | | 64,139 |
| | | | | | | | |
Syndication Costs Treated as Reduction of Capital For Financial Reporting Purposes | | 6,015,670 | | 6,015,670 | | 6,015,670 | | 6,015,670 |
Members' Equity for Tax Reporting Purposes | $ | 34,693,598 | $ | 35,030,805 | |
Members’ Equity for Tax Reporting Purposes | | $ | 29,586,925 | $ | 30,290,285 |
| | | | | | | | |
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
(8) COVID-19 Outbreak –
During the first quarter of 2020, there was a global outbreak of COVID-19 which continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The global impact of the outbreak has been rapidly evolving, and as cases of the virus have continued to be identified in additional countries, many countries have reacted by instituting quarantines, placing restrictions on travel, and limiting hours of operations of non-essential offices and retail centers. Such actions are creating disruption in global supply chains, and adversely impacting a number of industries, such as retail, restaurants and transportation. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID19 presents material uncertainty and risk with respect to the Company’s performance and financial results, such as the potential negative impact to the tenants of its properties, the potential closure of certain of its properties, increased costs of operations, decrease in values of its properties, changes in law and/or regulation, and uncertainty regarding government and regulatory policy. Up to the date of this filing, the Company has entered into rent deferral agreements with three tenants of the eleven properties owned by the Company. In June 2020, the Company entered into an agreement with the tenant of the Jared Jewelry stores in Concord, New Hampshire, Aurora, Illinois, and Auburn Hills, Michigan to defer base rent in April and May 2020. The tenant started paying the deferred amounts in twelve equal monthly installments beginning on February 1, 2021.
The Company has elected not to account for these deferrals of rent as a lease modification under COVID-19 guidance issued by the FASB. Deferred rent of $134,723 was recognized as rental income during the year ended December 31, 2020 and a corresponding rent receivable was recorded. The rent receivable related to these rental deferrals is $11,227 as of December 31, 2021. The Company continues to work closely with tenants to determine the best course of action to meet the tenants short-term rental needs during these unprecedented times.
AEI INCOME & GROWTH FUND 25 LLC
BALANCE SHEETS
ASSETS
| | March 31, | | December 31, |
| | 2022 | | 2021 |
| | (unaudited) | | |
Current Assets: | | | | |
Cash | $ | 711,581 | $ | 656,658 |
Rent Receivable | | 0 | | 11,227 |
Total Current Assets | | 711,581 | | 667,885 |
| | | | |
Real Estate Investments: | | | | |
Land | | 6,488,377 | | 7,103,977 |
Buildings | | 17,475,760 | | 18,874,469 |
Acquired Intangible Lease Assets | | 2,411,423 | | 2,712,159 |
Real Estate Held for Investment, at cost | | 26,375,560 | | 28,690,605 |
Accumulated Depreciation and Amortization | | (9,309,788) | | (9,941,100) |
Real Estate Held for Investment, Net | | 17,065,772 | | 18,749,505 |
Real Estate Held for Sale | | 1,430,795 | | 0 |
Total Real Estate Investments | | 18,496,567 | | 18,749,505 |
Total Assets | $ | 19,208,148 | $ | 19,417,390 |
| | March 31, | | | December 31, | |
| | 2018 | | | 2017 | |
| | (unaudited) | | | | |
Current Assets: | | | | | | |
Cash | | $ | 5,827,931 | | | $ | 6,081,556 | |
| | | | | | | | |
Real Estate Investments: | | | | | | | | |
Land | | | 8,005,563 | | | | 8,005,563 | |
Buildings | | | 18,386,544 | | | | 18,386,544 | |
Acquired Intangible Lease Assets | | | 1,487,092 | | | | 1,487,092 | |
Real Estate Held for Investment, at cost | | | 27,879,199 | | | | 27,879,199 | |
Accumulated Depreciation and Amortization | | | (8,398,494 | ) | | | (8,177,003 | ) |
Real Estate Held for Investment, Net | | | 19,480,705 | | | | 19,702,196 | |
Total Assets | | $ | 25,308,636 | | | $ | 25,783,752 | |
LIABILITIES AND MEMBERS'MEMBERS’ EQUITY
Current Liabilities: | | | | | | | | | | |
Payable to AEI Fund Management, Inc. | | $ | 177,923 | | | $ | 155,267 | | $ | 105,277 | $ | 95,381 |
Distributions Payable | | | 424,330 | | | | 720,251 | | | 286,181 | | 286,181 |
Unearned Rent | | | 43,155 | | | | 15,485 | | | 20,765 | | 35,425 |
Total Current Liabilities | | | 645,408 | | | | 891,003 | | | 412,223 | | 416,987 |
| | | | | | | | | | | | |
Long-term Liabilities: | | | | | | | | | |
Long-Term Liabilities: | | | | | |
Acquired Below-Market Lease Intangibles, Net | | | 56,314 | | | | 59,693 | | | 2,252 | | 5,629 |
| | | | | | | | | | | | |
Members' Equity: | | | | | | | | | |
Members’ Equity (Deficit): | | | | | |
Managing Members | | | 481 | | | | 7,265 | | | (36,000) | | (29,966) |
Limited Members – 50,000 Units authorized; 40,042 Units issued and outstanding as of 3/31/2018 and 12/31/2017 | | | 24,606,433 | | | | 24,825,791 | | |
Total Members' Equity | | | 24,606,914 | | | | 24,833,056 | | |
Total Liabilities and Members' Equity | | $ | 25,308,636 | | | $ | 25,783,752 | | |
Limited Members – 50,000 Units authorized; 38,961.72 Units issued and outstanding as of 3/31/2022 and 12/31/2021 | | | 18,829,673 | | 19,024,740 |
Total Members’ Equity | | | 18,793,673 | | 18,994,774 |
Total Liabilities and Members’ Equity | | $ | 19,208,148 | $ | 19,417,390 |
The accompanying Notes to Financial Statements are an integral part of these statements.
AEI INCOME & GROWTH FUND 25 LLC
STATEMENTS OF INCOME
(unaudited)
| | | | |
| | Three Months Ended March 31 |
| | 2022 | | 2021 |
| | | | |
Rental Income | $ | 435,366 | $ | 434,849 |
| | | | |
Expenses: | | | | |
Partnership Administration – Affiliates | | 70,409 | | 61,516 |
Partnership Administration and Property Management – Unrelated Parties | | 51,629 | | 48,737 |
Depreciation and Amortization | | 228,393 | | 228,388 |
Total Expenses | | 350,431 | | 338,641 |
| | | | |
Operating Income (Loss) | | 84,935 | | 96,208 |
| | | | |
Other Income: | | | | |
Interest Income | | 145 | | 115 |
| | | | |
Net Income | $ | 85,080 | $ | 96,323 |
| | | | |
Net Income (Loss) Allocated: | | | | |
General Partners | $ | 2,552 | $ | 2,890 |
Limited Partners | | 82,528 | | 93,433 |
Total | $ | 85,080 | $ | 96,323 |
| | | | |
Net Income (Loss) per Limited Partnership Unit | $ | 2.12 | $ | 2.40 |
| | | | |
Weighted Average Units Outstanding – Basic and Diluted | | 38,962 | | 38,962 |
| | | | |
The accompanying Notes to Financial Statements are an integral part of these statements.
AEI INCOME & GROWTH FUND 25 LLC
STATEMENTS OF INCOMECASH FLOWS
(unaudited)
| | Three Months Ended March 31 | |
| | 2018 | | | 2017 | |
| | | | | | |
Rental Income | | $ | 511,374 | | | $ | 562,394 | |
| | | | | | | | |
Expenses: | | | | | | | | |
LLC Administration – Affiliates | | | 66,111 | | | | 71,180 | |
LLC Administration and Property Management – Unrelated Parties | | | 38,934 | | | | 52,701 | |
Depreciation and Amortization | | | 212,515 | | | | 234,152 | |
Total Expenses | | | 317,560 | | | | 358,033 | |
| | | | | | | | |
Operating Income | | | 193,814 | | | | 204,361 | |
| | | | | | | | |
Other Income: | | | | | | | | |
Interest Income | | | 4,374 | | | | 1,552 | |
| | | | | | | | |
Net Income | | $ | 198,188 | | | $ | 205,913 | |
| | | | | | | | |
Net Income Allocated: | | | | | | | | |
Managing Members | | $ | 5,946 | | | $ | 6,177 | |
Limited Members | | | 192,242 | | | | 199,736 | |
Total | | $ | 198,188 | | | $ | 205,913 | |
| | | | | | | | |
Net Income per LLC Unit | | $ | 4.80 | | | $ | 4.97 | |
| | | | | | | | |
Weighted Average Units Outstanding – Basic and Diluted | | | 40,042 | | | | 40,217 | |
| | | | | | | | |
| | | | |
| | Three Months Ended March 31 |
| | 2022 | | 2021 |
Cash Flows from Operating Activities: | | | | |
Net Income (Loss) | $ | 85,080 | $ | 96,323 |
| | | | |
Adjustments to Reconcile Net Income To Net Cash Provided by Operating Activities: | | | | |
Depreciation and Amortization | | 249,561 | | 249,554 |
(Increase) Decrease in Rent Receivable | | 11,227 | | 22,454 |
Increase (Decrease) in Payable to AEI Fund Management, Inc. | | 9,896 | | 3,209 |
Increase (Decrease) in Unearned Rent | | (14,660) | | 6,834 |
Total Adjustments | | 256,024 | | 282,051 |
Net Cash Provided By (Used For) Operating Activities | | 341,104 | | 378,374 |
| | | | |
Cash Flows from Financing Activities: | | | | |
Distributions Paid to Members | | (286,181) | | (416,395) |
| | | | |
Net Increase (Decrease) in Cash | | 54,923 | | (38,021) |
| | | | |
Cash, beginning of period | | 656,658 | | 703,002 |
| | | | |
Cash, end of period | $ | 711,581 | $ | 664,981 |
| | | | |
The accompanying Notes to Financial Statements are an integral part of these statements.
AEI INCOME & GROWTH FUND 25 LLC
STATEMENTS OF CASH FLOWSCHANGES IN MEMBERS' EQUITY
(unaudited)
| | Three Months Ended March 31 | |
| | 2018 | | | 2017 | |
Cash Flows from Operating Activities: | | | | | | |
Net Income | | $ | 198,188 | | | $ | 205,913 | |
| | | | | | | | |
Adjustments to Reconcile Net Income To Net Cash Provided by Operating Activities: | | | | | | | | |
Depreciation and Amortization | | | 218,112 | | | | 248,415 | |
Increase (Decrease) in Payable to AEI Fund Management, Inc. | | | 22,656 | | | | 141,328 | |
Increase (Decrease) in Unearned Rent | | | 27,670 | | | | 44,382 | |
Total Adjustments | | | 268,438 | | | | 434,125 | |
Net Cash Provided By (Used For) Operating Activities | | | 466,626 | | | | 640,038 | |
| | | | | | | | |
Cash Flows from Financing Activities: | | | | | | | | |
Distributions Paid to Members | | | (720,251 | ) | | | (425,214 | ) |
| | | | | | | | |
Net Increase (Decrease) in Cash | | | (253,625 | ) | | | 214,824 | |
| | | | | | | | |
Cash, beginning of period | | | 6,081,556 | | | | 2,139,205 | |
| | | | | | | | |
Cash, end of period | | $ | 5,827,931 | | | $ | 2,354,029 | |
| | | | | | | | |
| | General Partners | | Limited Partners | | Total | | Limited Partnership Units Outstanding |
| | | | | | | | |
Balance, December 31, 2020 | $ | 384 | $ | 20,006,034 | $ | 20,006,418 | | 38,961.72 |
| | | | | | | | |
Distributions Declared | | (12,492) | | (403,903) | | (416,395) | | |
| | | | | | | | |
Net Income | | 2,890 | | 93,433 | | 96,323 | | |
| | | | | | | | |
Balance, March 31, 2021 | $ | (9,218) | $ | 19,695,564 | $ | 19,686,346 | | 38,961.72 |
| | | | | | | | |
| | | | | | | | |
Balance, December 31, 2021 | $ | (29,966) | | 19,024,740 | | 18,994,774 | | 38,961.72 |
| | | | | | | | |
Distributions Declared | | (8,586) | | (277,595) | | (286,181) | | |
| | | | | | | | |
Net Income | | 2,552 | | 82,528 | | 85,080 | | |
| | | | | | | | |
Balance, March 31, 2022 | $ | (36,000) | $ | 18,829,673 | $ | 18,793,673 | | 38,961.72 |
| | | | | | | | |
The accompanying Notes to Financial Statements are an integral part of these statements.
AEI INCOME & GROWTH FUND 25 LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DEFICIT)
(unaudited)
| | Managing Members | | | Limited Members | | | Total | | | Limited Member Units Outstanding | |
| | | | | | | | | | | | |
Balance, December 31, 2016 | | $ | 879 | | | $ | 25,337,464 | | | $ | 25,338,343 | | | | 40,216.65 | |
| | | | | | | | | | | | | | | | |
Distributions Declared | | | (12,819 | ) | | | (414,503 | ) | | | (427,322 | ) | | | | |
| | | | | | | | | | | | | | | | |
Net Income | | | 6,177 | | | | 199,736 | | | | 205,913 | | | | | |
| | | | | | | | | | | | | | | | |
Balance, March 31, 2017 | | $ | (5,763 | ) | | $ | 25,122,697 | | | $ | 25,116,934 | | | | 40,216.65 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Balance, December 31, 2017 | | $ | 7,265 | | | $ | 24,825,791 | | | $ | 24,833,056 | | | | 40,042.44 | |
| | | | | | | | | | | | | | | | |
Distributions Declared | | | (12,730 | ) | | | (411,600 | ) | | | (424,330 | ) | | | | |
| | | | | | | | | | | | | | | | |
Net Income | | | 5,946 | | | | 192,242 | | | | 198,188 | | | | | |
| | | | | | | | | | | | | | | | |
Balance, March 31, 2018 | | $ | 481 | | | $ | 24,606,433 | | | $ | 24,606,914 | | | | 40,042.44 | |
| | | | | | | | | | | | | | | | |
The accompanying Notes to Financial Statements are an integral part of these statements.
AEI INCOME & GROWTH FUND 25 LLC
CONDENSED NOTES TO FINANCIAL STATEMENTS
MARCHMarch 31, 20182022
(unaudited)
(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 United States Generally Accepted Accounting Principles (US GAAP) 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'sregistrant’s latest annual report on Form 10‑K.10K.
(2) Organization –
AEI Income & Growth Fund 25 LLC ("Company"(“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"(“AFM”), the Managing Member. Robert P. Johnson, the Presidentprevious Chief Executive Officer and sole director of AFM, servesserved as the Special Managing Member.Member until his withdrawal date effective March 31, 2020. AFM is a wholly owned subsidiary of AEI Capital Corporation of which Mr.the Robert P. Johnson is theTrust and Patricia Johnson own a majority shareholder.interest. AEI Fund Management, Inc. ("AEI"(“AEI”), an affiliate of AFM, performs the administrative and operating functions for the Company.
(3) Recently Issued Accounting Pronouncements –
In April 2020, the Financial Accounting Standards Board (FASB) issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant or if a lease concession was under the enforceable rights and obligations within the existing lease agreement. The termsLease Modification Q&A clarifies that entities may elect to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under current lease guidance. Instead, an entity that elects not to evaluate whether a concession directly related to COVID-19 is a modification can then elect whether to apply the offering called for a subscription price of $1,000 per LLC Unit, payable on acceptance ofmodification guidance.
Other accounting standards that have been issued or proposed by 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 expired. 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.
During operations, any Net Cash Flow, as defined, which the Managing Members determine to distribute will be distributed 97%FASB are currently not applicable to the Limited MembersCompany or are not expected to have a significant impact on the Company’s financial position, results of operations and 3% to the Managing Members. Distributions to Limited Members will be made pro rata by Units.
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.
For tax purposes, profits from operations, other than profits attributable to the sale, exchange, financing, refinancing or other disposition of property, will be allocated 97% to the Limited Members and 3% to the Managing Members. Net losses from operations will be allocated 99% to the Limited Members and 1% to the Managing Members.
cash flows.
AEI INCOME & GROWTH FUND 25 LLC
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) 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.
The Managing Members are not required to currently fund a deficit capital balance. Upon liquidation of the Company or withdrawal by a Managing Member, the Managing Members will contribute to the Company an amount equal to the lesser of the deficit balances in their capital accounts or 1.01% of the total capital contributions of the Limited Members over the amount previously contributed by the Managing Members.
(3) Recently Adopted Accounting Pronouncements –
In May 2014, with subsequent updates issued in August 2015 and March, April and May 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09 regarding ASC Topic 606, Revenue from Contracts with Customers. This standard was developed to enable financial statement users to better understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The update's core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Entities are to use a five-step contract review model to ensure revenue is recognized, measured and disclosed in accordance with this principle. Those steps include the following: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to each performance obligation in the contract, and (v) recognize revenue when or as the entity satisfies a performance obligation.
Management has concluded that all of the Company's material revenue streams fall outside of the scope of this guidance. The new standard may be applied retrospectively to each prior period presented or prospectively with the cumulative effect, if any, recognized as of the date of adoption. During 2018, the Company selected the modified retrospective transition method as of the date of adoption effective January 1, 2018. Management has concluded that the majority of total revenues consist of rental income from leasing arrangements, which are specifically excluded from the standard. The Company analyzed its remaining revenue streams, inclusive of gains and losses on real estate sales, and concluded there are no changes in revenue recognition with the adoption of the new standard. As such, adoption of the standard did not result in a cumulative adjustment recognized as of January 1, 2018, and the standard did not have a material impact on the Company's financial statements.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Recently Adopted Accounting Pronouncements – (Continued)
In January 2017, the FASB issued ASU 2017-01, which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted, and is required to be applied prospectively to any transactions occurring within the period of adoption. We expect the new standard will result in all of our real estate acquisitions being considered asset acquisitions, whereby substantially all acquisition costs related to our real estate acquisitions will be capitalized. Prior to the adoption of the new standard, all of our real estate acquisitions completed after January 1, 2009, were considered acquisitions of businesses, whereby all acquisition-related costs were expensed as incurred. During 2018, the Company has adopted the accounting pronouncement effective January 1, 2018, and applied this guidance prospectively. The adoption did not have a material effect on its financial statements.
(4) Real Estate Investments –
The Company owns a 60% interest in thea 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 MarchDecember 31, 2018,2020, the tenant owed $29,049 of past due rent, which was not accrued 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 iswas vacant, the Company iswas responsible for its 60% share of real estate taxes and other costs associated with maintaining the property.
On September 21, 2017,August 27, 2019, the Company entered into a lease agreement with a primary term of 10 years with Biomat USA, Inc. ("Biomat")BigTime Fun Center, LLC as a replacement tenant for 28%57% of the square footage of the property. The tenant willwas to operate a Biomat USA Plasma Centeran indoor sports entertainment center in the space. The Company'sCompany’s 60% share of annual rent, is $55,607 and is expectedwhich was to commence on June 18, 2018. Biomat has agreedFebruary 23, 2020, is $117,000. As part of the agreement, the Company will pay a tenant improvement allowance of $96,000 when certain conditions are met by the tenant. Due to payongoing difficulties due to the COVID-19 pandemic the Company 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 and additional charges for the costsperiod from February 23, 2020 to divideMarch 31, 2021. In September 2019, the building into two separate spaces, the costs of tenant improvementsCompany paid $49,140 to remodel the Biomat space and 28% of the cost to replace the roof. The Company will be responsiblea real estate broker for paying its 60% share of the remaining cost to replace the roof, which is expected to be approximately $170,000. At December 31, 2017, the Company accrued its 60% share of lease commissionscommission due to real estate brokers totaling $81,440 that were owed 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 Companyproperty is continuing to pursue additional tenantscurrently being marketed for sale or lease with a real estate broker in the remaining space.Wichita area.
In March 2022, the third quarter of 2017, the Company decided to sell the Fresenius Medical Center in Gretna, Louisiana. In October 2017, the CompanyPartnership entered into an agreement to sell its 72% interest in the propertyStaples store in Clermont, Florida to an unrelated third party. On December 6, 2017,The sale is subject to contingencies and may not be completed. If the sale closed withis completed, the Company receivingPartnership expects to receive net sale proceeds of $3,939,360,approximately $1,959,000, which resultedwill result in a net gain of $757,670. At the time of sale, the cost and related accumulated depreciation and amortization was $3,456,892 and $275,202, respectively.approximately $528,000.
In February 2018, the Company entered into an agreement with the tenant of the Advance Auto Parts store in Indianapolis, Indiana to extend the lease term five years to end on April 30, 2025. As part of the agreement, the annual rent decreased from $51,630 to $44,079 effective January 1, 2018. In addition, beginning on March 1, 2018, the tenant will receive free rent for four months that equals $14,693.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) Payable to AEI Fund Management, Inc. –
AEI Fund Management, Inc. performs the administrative and operating functions for the Company. The payable to AEI Fund Management represents the balance due for those services. This balance is non-interest bearing and unsecured and is to be paid in the normal course of business.
AEI INCOME & GROWTH FUND 25 LLC
CONDENSED NOTES TO FINANCIAL STATEMENTS
(6) Members' CapitalMembers’ Equity –
For the three months ended March 31, 20182022 and 2017,2021, the Company declared distributions of $424,330$286,181 and $427,322,$416,395, respectively. The Limited Members received distributions of $411,600$277,595 and $414,503$403,903 and the Managing Members receivedwere allocated distributions of $12,730$8,586 and $12,819$12,492 for the periods, respectively. The Limited Members' distributions represented $10.28$7.12 and $10.31$10.37 per LLC Unit outstanding using 40,042 and 40,21738,962 weighted average Units in 2018 and 2017, respectively.for both periods. The distributions represented $4.80$2.12 and $4.97$2.40 per Unit of Net Income and $5.48$5.00 and $5.34$7.97 per Unit of return of contributed capital in 20182022 and 2017,2021, respectively.
(7) Fair Value Measurements –
As ofAt March 31, 20182022 and December 31, 2017,2021, the Company had no financial assets or liabilities measured at fair value on a recurring basis or nonrecurring basis.
CONSENT FORM
AEI INCOME & GROWTH FUND 25 LLC
CONSENT OF LIMITED MEMBERS
This consent is presented by
AEI Fund Management XXI, Inc., Managing Member
The undersigned, a Limited Member of AEI Income & Growth Fund 25 LLC ("(“Fund 25"25”), hereby consents (unless otherwise directed below) to the proposals identified below as indicated below. Indicate your vote by placing an "X"“X” or check mark on the appropriate line. Failure to vote will have the effect of voting "AGAINST"“AGAINST” each proposal.
Please vote "FOR"“FOR” only one of the first two proposals. Do not vote "FOR"“FOR” both Proposal #1 and Proposal #2: they are mutually exclusive and cannot be implemented simultaneously:
Proposal #1 – to liquidate:
FOR _____ AGAINST ______
ABSTAIN ______
Proposal #2 – to continue Fund 25's25’s operations for an additional 60 months:
FOR _____AGAINST ______
ABSTAIN ______
__________________________________________________________________________________________________________
Please Vote on Proposal #3 – to amend Fund 25's25’s unit repurchase plan:
FOR _____AGAINST ______
ABSTAIN ______
_______________________________________________________________________________________________________________________________
Please vote on Proposal #4 – to sell certain properties to other AEI Affiliated Funds:
FOR _____ AGAINST ______
ABSTAIN ______
The units held by the signing Limited Member will be voted as directed. They will be voted "FOR" the proposal if no box is checked.
Please sign exactly as your name appears below. All owners of record and trustees must sign. When units are held by joint tenants, both owners must sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.
After marking your vote and signing this Consent Form, please return it in the enclosed, postage paid envelope. You may also return the Consent Form via email to investorservices@aeifunds.com or via “Fax” to 1-651-227-7705. To be counted, this Consent Form must be received not later than the close of business on August 23, 2018.15, 2022.
Dated: ________________________
______________________________________________
______________________________________________ ____Signatory #3
Signatory #4
-