UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: June 30, 2005
Commission file number: 000-50609
AEI INCOME & GROWTH FUND 25 LLC
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Delaware 75-3074973
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
30 East 7th Street, Suite 1300, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(651) 227-7333
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes [X] No
Transitional Small Business Disclosure Format:
Yes No [X]
AEI INCOME & GROWTH FUND 25 LLC
INDEX
PART I.Financial Information
Item 1. Balance Sheet as of June 30, 2005 and December 31, 2004
Statements for the Periods ended June 30, 2005 and 2004:
Income
Cash Flows
Changes in Members' Equity
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
Item 3. Controls and Procedures
PART II.Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
Signatures
AEI INCOME & GROWTH FUND 25 LLC
BALANCE SHEET
JUNE 30, 2005 AND DECEMBER 31, 2004
(Unaudited)
ASSETS
2005 2004
CURRENT ASSETS:
Cash and Cash Equivalents $15,948,317 $15,417,372
Receivables 0 6,259
----------- -----------
Total Current Assets 15,948,317 15,423,631
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 7,430,314 4,659,606
Buildings and Equipment 13,721,944 5,457,138
Property Acquisition Costs 0 13,213
Construction in Progress 0 41,622
Accumulated Depreciation (408,737) (193,763)
----------- -----------
Net Investments in Real Estate 20,743,521 9,977,816
----------- -----------
Total Assets $36,691,838 $25,401,447
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 268,208 $ 173,137
Distributions Payable 417,380 268,604
Unearned Rent 42,098 0
----------- -----------
Total Current Liabilities 727,686 441,741
----------- -----------
MEMBERS' EQUITY (DEFICIT):
Managing Members' Equity (16,704) (7,203)
Limited Members' Equity, $1,000 per Unit;
50,000 Units authorized; 42,540 and 29,592
Units issued and outstanding in
2005 and 2004, respectively 35,980,856 24,966,909
----------- -----------
Total Members' Equity 35,964,152 24,959,706
----------- -----------
Total Liabilities and Members' Equity $36,691,838 $25,401,447
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND 25 LLC
STATEMENT OF INCOME
FOR THE PERIODS ENDED JUNE 30
(Unaudited)
Three Months Ended Six Months Ended
6/30/05 6/30/04 6/30/05 6/30/04
RENTAL INCOME $ 388,940 $ 167,811 $ 677,468 $ 279,021
EXPENSES:
LLC Administration -
Affiliates 95,494 33,212 163,137 54,726
LLC Administration and
Property Management -
Unrelated Parties 20,050 4,654 33,196 9,231
Depreciation 126,582 45,255 214,974 75,431
---------- ---------- ---------- ----------
Total Expenses 242,126 83,121 411,307 139,388
---------- ---------- ---------- ----------
OPERATING INCOME 146,814 84,690 266,161 139,633
OTHER INCOME:
Interest Income 104,697 8,737 176,351 14,767
---------- ---------- ---------- ----------
NET INCOME $ 251,511 $ 93,427 $ 442,512 $ 154,400
========== ========== ========== ==========
NET INCOME ALLOCATED:
Managing Members $ 7,545 $ 2,803 $ 13,275 $ 4,632
Limited Members 243,966 90,624 429,237 149,768
---------- ---------- ---------- ----------
$ 251,511 $ 93,427 $ 442,512 $ 154,400
========== ========== ========== ==========
NET INCOME PER LLC UNIT $ 6.40 $ 7.46 $ 12.39 $ 14.71
========== ========== ========== ==========
Weighted Average Units
Outstanding 38,104 12,144 34,655 10,182
========== ========== ========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND 25 LLC
STATEMENT OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED JUNE 30
(Unaudited)
2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 442,512 $ 154,400
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 214,974 75,431
(Increase) Decrease in Receivables 6,259 (110,107)
Increase (Decrease) in Payable to
AEI Fund Management, Inc. 95,071 (14,403)
Increase in Unearned Rent 42,098 0
----------- -----------
Total Adjustments 358,402 (49,079)
----------- -----------
Net Cash Provided By
Operating Activities 800,914 105,321
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (10,980,679) (6,063,342)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions from Limited Members 12,947,884 8,070,975
Organization and Syndication Costs (1,626,758) (1,210,646)
Increase in Distributions Payable 148,776 80,859
Distributions to Members (759,192) (223,069)
----------- -----------
Net Cash Provided By
Financing Activities 10,710,710 6,718,119
----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 530,945 760,098
CASH AND CASH EQUIVALENTS, beginning of period 15,417,372 2,772,027
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $15,948,317 $ 3,532,125
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND 25 LLC
STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE PERIODS ENDED JUNE 30
(Unaudited)
Limited
Member
Managing Limited Units
Members Members Total Outstanding
BALANCE, December 31, 2003 $ 524 $ 6,078,783 $ 6,079,307 7,167.54
Capital Contributions 0 8,070,975 8,070,975 8,070.98
Organization and Syndication Costs 0 (1,210,646) (1,210,646)
Distributions (6,692) (216,377) (223,069)
Net Income 4,632 149,768 154,400
--------- ----------- ----------- ---------
BALANCE, June 30, 2004 $ (1,536) $12,872,503 $12,870,967 15,238.52
========= =========== =========== =========
BALANCE, December 31, 2004 $ (7,203) $24,966,909 $24,959,706 29,591.88
Capital Contributions 0 12,947,884 12,947,884 12,947.88
Organization and Syndication Costs 0 (1,626,758) (1,626,758)
Distributions (22,776) (736,416) (759,192)
Net Income 13,275 429,237 442,512
--------- ----------- ----------- --------
BALANCE, June 30, 2005 $(16,704) $35,980,856 $35,964,152 42,539.76
========= =========== =========== ========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005
(Unaudited)
(1) The condensed statements included herein have been prepared
by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of
operations for the interim period, on a basis consistent with
the annual audited statements. The adjustments made to these
condensed statements consist only of normal recurring
adjustments. Certain information, accounting policies, and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Company 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
Company's latest annual report on Form 10-KSB.
(2) Organization -
AEI Income & Growth Fund 25 LLC (the Company), a Limited
Liability Company, was formed on June 24, 2002 to acquire
and lease commercial properties to operating tenants. The
Company's operations are managed by AEI Fund Management XXI,
Inc. (AFM), the Managing Member. Robert P. Johnson, the
President and sole director of AFM, serves as the Special
Managing Member. AFM is a wholly owned subsidiary of AEI
Capital Corporation of which Mr. Johnson is the majority
shareholder. AEI Fund Management, Inc. (AEI), an affiliate
of AFM, performs the administrative and operating functions
for the Company.
The terms of the offering call 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. The Company received
subscriptions for 42,539.763 Units. Under the terms of the
Operating Agreement, the Limited Members and Managing
Members contributed funds of $42,539,763 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.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
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.
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.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate -
On February 6, 2004, the Company purchased a 21% interest in
a Jared Jewelry store in Madison Heights, Michigan for
$852,592. The property is leased to Sterling Jewelers Inc.
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $65,541. The purchase price and
annual rental payments shown are approximately 10% less than
amounts reported prior to June 30, 2004. As part of an
agreement between the lessee and the property developer, the
monthly rent was reduced by approximately 10% based on a
final accounting of the development costs. As part of the
purchase agreement between the property developer and the
Company, the purchase price paid by the Company was reduced
by the same percentage so the rate of return realized by the
Company remains the same. The remaining interests in the
property were purchased by AEI Income & Growth Fund 23 LLC
and AEI Accredited Investor Fund 2002 Limited Partnership,
affiliates of the Company.
On February 6, 2004, the Company purchased a 25% interest in
a Jared Jewelry store in Goodlettsville, Tennessee for
$988,254. The property is leased to Sterling Jewelers Inc.
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $75,840. The remaining interest
in the property was purchased by AEI Accredited Investor
Fund 2002 Limited Partnership.
On February 20, 2004, the Company purchased a 50% interest
in a parcel of land in Kansas City, Missouri for $650,000.
The Company obtained title to the land in the form of an
undivided fee simple interest in the 50% interest purchased.
The land is leased to SWH Corporation (SWH) under a Lease
Agreement with a primary term of 20 years and annual rental
payments of $39,000. Simultaneously with the purchase of
the land, the Company entered into a Development Financing
Agreement under which the Company advanced funds to SWH for
the construction of a Mimi's Cafe restaurant on the site.
Pursuant to the Lease, any improvements to the land during
the term of the Lease become the property of the lessor.
The Company charged interest on the advances at a rate of
6%. On June 30, 2004, after the development was completed,
the Lease Agreement was amended to require annual rental
payments of $101,750. The Company's share of the total
acquisition costs, including the cost of the land, was
$1,110,561. The remaining interest in the property was
purchased by AEI Accredited Investor Fund 2002 Limited
Partnership.
On April 30, 2004, the Company purchased an Applebee's
restaurant in Macedonia, Ohio for $3,134,798. The property
is leased to Apple Ohio LLC under a Lease Agreement with a
primary term of 20 years and annual rental payments of
$238,673.
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
On November 2, 2004, the Company purchased a parcel of land
in Pueblo, Colorado for $622,500. The Company obtained
title to the land in the form of an undivided fee simple
interest. The land is leased to Kona Restaurant Group (KRG)
under a Lease Agreement with a primary term of 17 years and
annual rental payments of $35,794. Effective March 31,
2005, the annual rent was increased to $50,423.
Simultaneously with the purchase of the land, the Company
entered into a Development Financing Agreement under which
the Company advanced funds to KRG for the construction of a
Johnny Carino's restaurant on the site. Pursuant to the
Lease, any improvements to the land during the term of the
Lease become the property of the lessor. Initially, the
Company charged interest on the advances at a rate of 5.75%.
Effective March 31, 2005, the interest rate was increased to
8.1%. On June 20, 2005, after the development was
completed, the Lease Agreement was amended to require annual
rental payments of $182,663. Total acquisition costs,
including the cost of the land, were $2,286,385. At
December 31, 2004, the Company had advanced $41,622 for the
construction of the property.
On January 14, 2005, the Company purchased a 60% interest in
a Jared Jewelry store in Auburn Hills, Michigan for
$2,197,170. The property is leased to Sterling Jewelers
Inc. under a Lease Agreement with a remaining primary term
of 15 years and annual rental payments of $153,780. The
remaining interest in the property was purchased by AEI
Income & Growth Fund XXI Limited Partnership, an affiliate
of the Company.
On February 9, 2005, the Company purchased a Tractor Supply
Company store in Marion, Indiana for $2,936,825. The
property is leased to Tractor Supply Company under a Lease
Agreement with a primary term of 15 years and annual rental
payments of $210,014.
On March 18, 2005, the Company purchased a 45% interest in a
CarMax auto superstore in Lithia Springs, Georgia for
$4,237,634. The property is leased to CarMax Auto
Superstores, Inc. under a Lease Agreement with a remaining
primary term of 13.4 years and annual rental payments of
$306,180. The remaining interests in the property were
purchased by AEI Income & Growth Fund XXI Limited
Partnership, AEI Income & Growth Fund 24 LLC and AEI Private
Net Lease Millennium Fund Limited Partnership, affiliates of
the Company.
(4) 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
The Management's Discussion and Analysis contains various
"forward looking statements" within the meaning of federal
securities laws which represent management's expectations or
beliefs concerning future events, including statements regarding
anticipated application of cash, expected returns from rental
income, growth in revenue, taxation levels, the sufficiency of
cash to meet operating expenses, rates of distribution, and other
matters. These, and other forward looking statements made by our
managers, must be evaluated in the context of a number of factors
that may affect our financial condition and results of
operations, including the following:
Market and economic conditions which affect the value
of the properties we own and the cash from rental
income such properties generate;
the federal income tax consequences of rental income,
deductions, gain on sales and other items and the
affects of these consequences for members;
resolution by our managers of conflicts with which they
may be confronted;
the success of our managers of locating properties with
favorable risk return characteristics;
the effect of tenant defaults; and
the condition of the industries in which the tenants of
properties owned by the Company operate.
The Application of Critical Accounting Policies
The preparation of the Company's financial statements
requires management to make estimates and assumptions that may
affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities. Management evaluates these estimates on an ongoing
basis, including those related to the carrying value of real
estate and the allocation by AEI Fund Management, Inc. of
expenses to the Company as opposed to other funds they manage.
The Company purchases properties and records them in the
financial statements at the lower of cost or estimated realizable
value. The Company initially records the properties at cost
(including capitalized acquisition expenses). The Company is
required to periodically evaluate the carrying value of
properties to determine whether their realizable value has
declined. For properties the Company will hold and operate,
management determines whether impairment has occurred by
comparing the property's probability-weighted cash flows to its
current carrying value. For properties held for sale, management
determines whether impairment has occurred by comparing the
property's estimated fair value less cost to sell to its current
carrying value. If the carrying value is greater than the
realizable value, an impairment loss is recorded to reduce the
carrying value of the property to its realizable value. A change
in these assumptions or analysis could cause material changes in
the carrying value of the properties.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
AEI Fund Management Inc. allocates expenses to each of the
funds they manage primarily on the basis of the number of hours
devoted by their employees to each fund's affairs. They also
allocate expenses at the end of each month that are not directly
related to a fund's operations based upon the number of investors
in the fund and the fund's capitalization relative to other funds
they manage. The Company reimburses these expenses subject to
detailed limitations contained in the Operating Agreement.
Management of the Company has discussed the development
and selection of the above accounting estimates and the
management discussion and analysis disclosures regarding them
with the managing member of the Company.
Results of Operations
For the six months ended June 30, 2005, the Company
recognized rental income of $677,468 representing six months rent
from seven properties and rent from three properties acquired
during the period. At June 30, 2005, the scheduled annual rent
for the ten properties was $1,671,380. For the six months ended
June 30, 2004, the Company recognized rental income of $279,021
representing six months rent from two properties and rent from
four properties acquired during the period. Rental income
increased as the Company invested its available subscription
proceeds in properties.
For the six months ended June 30, 2005 and 2004, the
Company incurred LLC administration expenses from affiliated
parties of $163,137 and $54,726, respectively. These
administration expenses included initial start-up costs and
expenses associated with the management of the properties,
processing distributions, reporting requirements and
correspondence to the Limited Members. During the same periods,
the Company incurred LLC administration and property management
expenses from unrelated parties of $33,196 and $9,231,
respectively. These expenses represented direct payments to
third parties for legal and filing fees, direct administrative
costs, outside audit costs, taxes, insurance, and other property
costs. As the Company raises additional subscription proceeds
and purchases additional properties, the administration and
property management expenses increase.
For the six months ended June 30, 2005 and 2004, the
Company recognized interest income of $176,351 and $14,767,
respectively, from subscription proceeds temporarily invested in
a money market account and from construction advances. In 2005,
interest income increased due to the Company receiving greater
interest from construction advances and having more money
invested in a money market account due to the sale of additional
LLC Units. In addition, money market interest rates were higher
in 2005.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Inflation has had a minimal effect on income from
operations. Leases may contain rent increases, based on the
increase in the Consumer Price Index over a specified period,
which will result in an increase in rental income over the term
of the leases. In addition, leases may contain rent clauses
which entitle the Company to receive additional rent in future
years if gross receipts for the property exceed certain specified
amounts. Increases in sales volumes of the tenants, due to
inflation and real sales growth, may result in an increase in
rental income over the term of the leases. Inflation also may
cause the real estate to appreciate in value. However, inflation
and changing prices may have an adverse impact on the operating
margins of the properties' tenants, which could impair their
ability to pay rent and subsequently reduce the Net Cash Flow
available for distributions.
Liquidity and Capital Resources
The Company's primary sources of cash are proceeds from
the sale of Units, interest income, rental income and proceeds
from the sale of property. Its primary uses of cash are
investment in real properties, payment of expenses involved in
the sale of Units, the organization of the Company, the
management of properties, the administration of the Company, and
the payment of distributions.
The Company generated $800,914 of cash from operations
during the six months ended June 30, 2005, representing net
income of $442,512, a non-cash expense of $214,974 for
depreciation and $143,428 of net timing differences in the
collection of payments from the lessees and the payment of
expenses. The Company generated $105,321 of cash from operations
during the six months ended June 30, 2004, representing net
income of $154,400 and a non-cash expense of $75,431 for
depreciation, which were partially offset by $124,510 of net
timing differences in the collection of payments from the lessees
and the payment of expenses.
The major components of the Company's cash flow from
investing activities are investments in real estate and proceeds
from the sale of real estate. During the six months ended June
30, 2005 and 2004, the Company expended $10,980,679 and
$6,063,342 to invest in real properties (inclusive of acquisition
expenses).
On February 6, 2004, the Company purchased a 21% interest
in a Jared Jewelry store in Madison Heights, Michigan for
$852,592, and a 25% interest in a Jared Jewelry store in
Goodlettsville, Tennessee for $988,254. On April 30, 2004, the
Company purchased an Applebee's restaurant in Macedonia, Ohio for
$3,134,798.
On February 20, 2004, the Company purchased a 50% interest
in a parcel of land for $650,000. The Company obtained title to
the land in the form of an undivided fee simple interest in the
50% interest purchased. Simultaneously with the purchase of the
land, the Company entered into a Development Financing Agreement
under which the Company advanced funds to SWH Corporation for the
construction of a Mimi's Cafe restaurant on the site. Pursuant
to the Lease, any improvements to the land during the term of the
Lease become the property of the lessor. The Company charged
interest on the advances at a rate of 6%. On June 30, 2004, the
development was completed. The Company's share of the total
acquisition costs, including the cost of the land, was
$1,110,561.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On November 2, 2004, the Company purchased a parcel of
land in Pueblo, Colorado for $622,500. The Company obtained
title to the land in the form of an undivided fee simple
interest. Simultaneously with the purchase of the land, the
Company entered into a Development Financing Agreement under
which the Company advanced funds to KRG for the construction of a
Johnny Carino's restaurant on the site. Pursuant to the Lease,
any improvements to the land during the term of the Lease become
the property of the lessor. Initially, the Company charged
interest on the advances at a rate of 5.75%. Effective March 31,
2005, the interest rate was increased to 8.1%. On June 20, 2005,
the development was completed. Total acquisition costs,
including the cost of the land, were $2,286,385.
On January 14, 2005, the Company purchased a 60% interest
in a Jared Jewelry store in Auburn Hills, Michigan for
$2,197,170. On February 9, 2005, the Company purchased a Tractor
Supply store in Marion, Indiana for $2,936,825. On March 18,
2005, the Company purchased a 45% interest in a CarMax auto
superstore in Lithia Springs, Georgia for $4,237,634.
During the offering of Units, the Company's primary source
of cash flow was from the sale of LLC Units. The Company
commenced the offering of LLC Units to the public through a
registration statement that became effective May 13, 2003 and
continued until May 12, 2005, when the extended offering period
expired. The Company raised a total of $42,539,763 from the sale
of 42,539.763 Units. From subscription proceeds, the Company
paid organization and syndication costs (which constitute a
reduction of capital) of $5,988,257.
After completion of the acquisition phase, the Company's
primary use of cash flow is distribution and redemption payments
to Members. The Company declares its regular quarterly
distributions before the end of each quarter and pays the
distribution in the first ten days after the end of each quarter.
For the six months ended June 30, 2005 and 2004, the Company
declared distributions of $759,192 and $223,069, respectively,
which were distributed 97% to Limited Members and 3% to the
Managing Members.
Beginning in September 2006, the Company may acquire 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.
The Operating Agreement requires that all proceeds from
the sale of Units, subject to a reasonable reserve for ongoing
operations, be invested or committed to investment in properties
by the later of two years after the date the offering of units
commences or twelve months after the offering terminates. As of
the date of this filing, the Company had no formal contractual
commitments to expend capital.
Until capital is invested in properties, the Company will
remain extremely liquid. After completion of property
acquisitions, the Company will attempt to maintain a cash reserve
of only approximately 1% of subscription proceeds. Because
properties are purchased for cash and leased under triple-net
leases, this is considered adequate to satisfy most
contingencies.
ITEM 3.CONTROLS AND PROCEDURES.
(a) Evaluation of disclosure controls and procedures
Under the supervision and with the participation of
management, including its President and Chief Financial Officer,
the Managing Member of the Company evaluated the effectiveness of
the design and operation of its disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Exchange Act).
Based upon that evaluation, the President and Chief Financial
Officer of the Managing Member concluded that, as of the end of
the period covered by this report, the disclosure controls and
procedures of the Company are adequately designed to ensure that
information required to be disclosed by us in the reports we file
or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in
applicable rules and forms.
(b) Changes in internal controls
There were no significant changes made in the Company's
internal controls during the most recent period covered by this
report that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial
reporting.
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the Company is a party or of which the Company's property is
subject.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
(a) During the period covered by this report, the Company
did not sell any equity securities that are not registered under
the Securities Act of 1933.
(b) The registration statement for the offering (No. 333-
99677) was declared effective on May 13, 2003. The offering
commenced on May 13, 2003 and terminated May 12, 2005, when the
extended offering period expired. AEI Securities, Inc. (ASI) is
the dealer manager of the offering. The registration statement
covers 50,000 Units of limited liability company interest at an
aggregate price of up to $50 million. The Company sold
42,539.763 Units for gross offering proceeds of $42,539,763.
From gross offering proceeds, the Company paid $4,226,667
in selling commissions to ASI, an affiliate of the Managing
Members. Of this amount, $2,985,046 was re-allowed by ASI to
participating broker/dealers not affiliated with the Managing
Members. The gross offering proceeds were further reduced by
underwriting discounts of $24,076 and other organization and
syndication costs of $1,737,514 of which $1,162,504 was paid to
AEI Fund Management, Inc., an affiliate of the Managing Members,
for costs incurred in connection with managing the Company's
offering and organization. From inception to June 30, 2005, the
Company paid commissions, organization and syndication costs
totaling $5,988,257.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
From the net offering proceeds, the Company expended
$21,152,258 to acquire real estate of which $20,901,323
represented cash paid to unaffiliated sellers of real estate and
$250,935 represented cash paid to reimburse AEI Fund Management,
Inc. for costs and direct expenses incurred by it in acquiring
properties on behalf of the Company.
(c) Beginning in September 2006, pursuant to Section 7.7
of the Operating Agreement, each Limited Member has the right to
present Units to the Company for purchase by submitting notice to
the Managing Member during January or July of each year. The
purchase price of the Units is equal to 80% of the net asset
value of the Units, as of the first business day of January or
July of each year, as determined by the Managing Member in
accordance with the provisions of the Operating Agreement. Units
tendered to the Company during January and July are redeemed on
April 1st and October 1st, respectively, of each year subject to
the following limitations. 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 the period covered by this
report, the Company did not purchase any Units.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5.OTHER INFORMATION
None.
ITEM 6.EXHIBITS
Description
10.1 First Amendment to Net Lease Agreement dated June 20,
2005 between the Company and Kona Restaurant Group, Inc.
relating to the Property at 5700 North Elizabeth Street,
Pueblo, Colorado.
31.1 Certification of Chief Executive Officer of Managing
Member pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer of Managing
Member pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief
Financial Officer of Managing Member pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: August 5, 2005 AEI Income & Growth Fund 25 LLC
By: AEI Fund Management XXI, Inc.
Its: Managing Member
By: /s/ Robert P Johnson
Robert P. Johnson
President
(Principal Executive Officer)
By: /s/ Patrick W Keene
Patrick W. Keene
Chief Financial Officer
(Principal Accounting Officer)