falsedesktopAEI242020-09-30000089424520000049{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "State of Delaware\t \t41-1990952\n(State or other jurisdiction of incorporation or organization)\t \t(I.R.S. Employer Identification No.)\n \t \t \n30 East 7th Street Suite 1300 St. Paul Minnesota 55101\t \t(651) 227-7333\n(Address of principal executive offices)\t \t(Registrant’s telephone number)\n", "q10k_tbl_1": "☐ Large accelerated filer\t☐ Accelerated filer\n☐ Non-accelerated filer\t☒ Smaller reporting company\n☐ Emerging growth company\t \n", "q10k_tbl_2": " \t \t \t \t \n \t \t\t\tPage\nPart I – Financial Information\t\t\t\t \n \t \t \t\t \n \tItem 1.\tFinancial Statements (unaudited):\t\t \n \t \t \t\t \n \t \tBalance Sheets as of September 30 2020 and December 31 2019\t\t3\n \t \t \t\t \n \t \tStatements for the Periods ended September 30 2020 and 2019:\t\t \n \t \t \t \t \n \t \t \tIncome\t4\n \t \t \t \t \n \t \t \tCash Flows\t5\n \t \t \t \t \n \t \t \tChanges in Members' Equity (Deficit)\t6\n \t \t \t \t \n \t \tNotes to Financial Statements\t\t7 - 12\n \t \t \t\t \n \tItem 2.\tManagement's Discussion and Analysis of Financial\t\t \n \t \t \tCondition and Results of Operations\t13 - 19\n \t \t \t\t \n \tItem 3.\tQuantitative and Qualitative Disclosures About Market Risk\t\t20\n \t \t \t\t \n \tItem 4.\tControls and Procedures\t\t20\n \t \t \t\t \nPart II – Other Information\t\t\t\t \n \t \t \t\t \n \tItem 1.\tLegal Proceedings\t\t20\n \t \t \t\t \n \tItem 1A.\tRisk Factors\t\t20\n \t \t \t\t \n \tItem 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t\t21\n \t \t \t\t \n \tItem 3.\tDefaults Upon Senior Securities\t\t21\n \t \t \t\t \n \tItem 4.\tMine Safety Disclosures\t\t21\n \t \t \t\t \n \tItem 5.\tOther Information\t\t21\n \t \t \t\t \n \tItem 6.\tExhibits\t\t21\n \t \t \t\t \nSignatures\t\t\t\t22\n", "q10k_tbl_3": " \t \tSeptember 30\t\t \tDecember 31\t\n \t \t2020\t\t \t2019\t\n \t \t(unaudited)\t\t \t \t\nCurrent Assets:\t \t \t\t \t \t\nCash\t1878478\t\t \t8967982\t\t \n \t \t \t\t \t \t\nReal Estate Investments:\t \t \t\t \t \t\nLand\t \t1105379\t \t \t1188885\t \nBuildings\t \t3474856\t \t \t4543016\t \nAcquired Intangible Lease Assets\t \t646934\t \t \t646934\t \nReal Estate Held for Investment at cost\t \t5227169\t \t \t6378835\t \nAccumulated Depreciation and Amortization\t \t(2130515\t) \t \t(2462807\t) \nReal Estate Held for Investment Net\t \t3096654\t \t \t3916028\t \nReal Estate Held for Sale\t \t644885\t \t \t572042\t \nTotal Real Estate Investments\t \t3741539\t \t \t4488070\t \nTotal Assets\t5620017\t\t \t13456052\t\t \n", "q10k_tbl_4": "Current Liabilities:\t \t \t\t \t \t\nPayable to AEI Fund Management Inc.\t78867\t\t \t92901\t\t \nDistributions Payable\t \t163281\t \t \t7817695\t \nUnearned Rent\t \t6835\t \t \t0\t \nTotal Current Liabilities\t \t248983\t \t \t7910596\t \n \t \t \t\t \t \t\nMembers’ Equity:\t \t \t\t \t \t\nManaging Members\t \t17338\t \t \t22752\t \nLimited Members – 50000 Units authorized;    23423 Units issued and outstanding    as of 9/30/2020 and 12/31/2019\t \t5353696\t \t \t5522704\t \nTotal Members’ Equity\t \t5371034\t \t \t5545456\t \nTotal Liabilities and Members’ Equity\t5620017\t\t \t13456052\t\t \n", "q10k_tbl_5": " \t \t \t\t \t \t\t \t \t\t \t \t\n \t \tThree Months Ended September 30\t\t\t\t\t \tNine Months Ended September 30\t\t\t\t\n \t \t2020\t\t \t2019\t\t \t2020\t\t \t2019\t\n \t \t \t\t \t \t\t \t \t\t \t \t\nRental Income\t104565\t\t \t250035\t\t \t316552\t\t \t808499\t\t \n \t \t \t\t \t \t\t \t \t\t \t \t\nExpenses:\t \t \t\t \t \t\t \t \t\t \t \t\nLLC Administration – Affiliates\t \t17147\t \t \t27852\t \t \t49926\t \t \t80725\t \nLLC Administration and Property    Management – Unrelated Parties\t \t13452\t \t \t26592\t \t \t51336\t \t \t89644\t \nDepreciation and Amortization\t \t51786\t \t \t92820\t \t \t155358\t \t \t352434\t \nReal Estate Impairment\t \t0\t \t \t387578\t \t \t0\t \t \t1480670\t \nTotal Expenses\t \t82385\t \t \t534842\t \t \t256620\t \t \t2003473\t \n \t \t \t\t \t \t\t \t \t\t \t \t\nOperating Income (Loss)\t \t22180\t \t \t(284807\t) \t \t59932\t \t \t(1194974\t) \n \t \t \t\t \t \t\t \t \t\t \t \t\nOther Income:\t \t \t\t \t \t\t \t \t\t \t \t\nGain on Sale of Real Estate\t \t0\t \t \t1690116\t \t \t251516\t \t \t1690116\t \nInterest Income\t \t469\t \t \t8233\t \t \t4695\t \t \t15758\t \nTotal Other Income\t \t469\t \t \t1698349\t \t \t256211\t \t \t1705874\t \n \t \t \t\t \t \t\t \t \t\t \t \t\nNet Income\t22649\t\t \t1413542\t\t \t316143\t\t \t510900\t\t \n \t \t \t\t \t \t\t \t \t\t \t \t\nNet Income Allocated:\t \t \t\t \t \t\t \t \t\t \t \t\nManaging Members\t680\t\t \t148093\t\t \t4454\t\t \t142876\t\t \nLimited Members\t \t21969\t \t \t1265449\t \t \t311689\t \t \t368024\t \nTotal\t22649\t\t \t1413542\t\t \t316143\t\t \t510900\t\t \n \t \t \t\t \t \t\t \t \t\t \t \t\nNet Income per LLC Unit\t0.94\t\t \t53.97\t\t \t13.31\t\t \t15.69\t\t \n \t \t \t\t \t \t\t \t \t\t \t \t\nWeighted Average Units Outstanding –       Basic and Diluted\t \t23423\t \t \t23448\t \t \t23423\t \t \t23452\t \n \t \t \t\t \t \t\t \t \t\t \t \t\n", "q10k_tbl_6": " \t \t \t\t \t \t\n \t \tNine Months Ended September 30\t\t\t\t\n \t \t2020\t\t \t2019\t\nCash Flows from Operating Activities:\t \t \t\t \t \t\nNet Income\t316143\t\t \t510900\t\t \n \t \t \t\t \t \t\nAdjustments to Reconcile Net Income To Net Cash Provided by Operating Activities:\t \t \t\t \t \t\nDepreciation and Amortization\t \t174489\t \t \t387186\t \nReal Estate Impairment\t \t0\t \t \t1480670\t \nGain on Sale of Real Estate\t \t(251516\t) \t \t(1690116\t) \n(Increase) Decrease in Receivables\t \t0\t \t \t(3938\t) \nIncrease (Decrease) in Payable to    AEI Fund Management Inc.\t \t(14034\t) \t \t26670\t \nIncrease (Decrease) in Unearned Rent\t \t6835\t \t \t2754\t \nTotal Adjustments\t \t(84226\t) \t \t203226\t \nNet Cash Provided By (Used For)    Operating Activities\t \t231917\t \t \t714126\t \n \t \t \t\t \t \t\nCash Flows from Investing Activities:\t \t \t\t \t \t\nInvestments in Real Estate\t \t0\t \t \t(30000\t) \nProceeds from Sale of Real Estate\t \t823558\t \t \t4625784\t \nNet Cash Provided By (Used For)    Investing Activities\t \t823558\t \t \t4595784\t \n \t \t \t\t \t \t\nCash Flows from Financing Activities:\t \t \t\t \t \t\nDistributions Paid to Members\t \t(8144979\t) \t \t(795673\t) \nRepurchase of LLC Units\t \t0\t \t \t(6922\t) \nNet Cash Provided By (Used For)    Financing Activities\t \t(8144979\t) \t \t(802595\t) \n \t \t \t\t \t \t\nNet Increase (Decrease) in Cash\t \t(7089504\t) \t \t4507315\t \n \t \t \t\t \t \t\nCash beginning of period\t \t8967982\t \t \t1162378\t \n \t \t \t\t \t \t\nCash end of period\t1878478\t\t \t5669693\t\t \n \t \t \t\t \t \t\n", "q10k_tbl_7": " \t \tManaging Members\t\t \tLimited Members\t\t \tTotal\t\t \t\tLimited Member Units Outstanding\t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nBalance December 31 2018\t(106529\t\t) \t12845847\t\t \t12739318\t\t \t \t \t23460.43\t \n \t \t \t\t \t \t\t \t \t\t \t\t \t\nDistributions Declared\t \t(7342\t) \t \t(237401\t) \t \t(244743\t) \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nNet Loss\t \t(5133\t) \t \t(694530\t) \t \t(699663\t) \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nBalance March 31 2019\t \t(119004\t) \t \t11913916\t \t \t11794912\t \t \t \t23460.43\t \n \t \t \t\t \t \t\t \t \t\t \t\t \t\nDistributions Declared\t \t(7342\t) \t \t(237401\t) \t \t(244743\t) \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nRepurchase of LLC Units\t \t(208\t) \t \t(6714\t) \t \t(6922\t) \t \t \t(12.00\t) \n \t \t \t\t \t \t\t \t \t\t \t\t \t\nNet Loss\t \t(84\t) \t \t(202895\t) \t \t(202979\t) \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nBalance June 30 2019\t \t(126638\t) \t11466906\t\t \t11340268\t\t \t \t \t23448.43\t \n \t \t \t\t \t \t\t \t \t\t \t\t \t\nDistributions Declared\t \t(5885\t) \t \t(237400\t) \t \t(243285\t) \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nNet Income\t \t148093\t \t \t1265449\t \t \t1413542\t \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nBalance September 30 2019\t15570\t\t \t12494955\t\t \t12510525\t\t \t \t \t23448.43\t \n \t \t \t\t \t \t\t \t \t\t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nBalance December 31 2019\t22752\t\t \t5522704\t\t \t5545456\t\t \t \t \t23423.43\t \n \t \t \t\t \t \t\t \t \t\t \t\t \t\nDistributions Declared\t \t(3304\t) \t \t(160699\t) \t \t(164003\t) \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nNet Income\t \t2969\t \t \t263687\t \t \t266656\t \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nBalance March 31 2020\t \t22417\t \t \t5625692\t \t \t5648109\t \t \t \t23423.43\t \n \t \t \t\t \t \t\t \t \t\t \t\t \t\nDistributions Declared\t \t(3282\t) \t \t(159999\t) \t \t(163281\t) \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nNet Income\t \t805\t \t \t26033\t \t \t26838\t \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nBalance June 30 2020\t \t19940\t \t5491726\t\t \t5511666\t\t \t \t \t23423.43\t \n \t \t \t\t \t \t\t \t \t\t \t\t \t\nDistributions Declared\t \t(3282\t) \t \t(159999\t) \t \t(163281\t) \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nNet Income\t \t680\t \t \t21969\t \t \t22649\t \t \t\t \t\n \t \t \t\t \t \t\t \t \t\t \t\t \t\nBalance September 30 2020\t17338\t\t \t5353696\t\t \t5371034\t\t \t \t \t23423.43\t \n \t \t \t\t \t \t\t \t \t\t \t\t \t\n", "q10k_tbl_8": " \t \t \nDated:  November 12 2020\tAEI Income & Growth Fund 24 LLC\t\n \tBy:\tAEI Fund Management XXI Inc.\n \tIts:\tManaging Member\n \t \t \n \t \t \n \t \t \n \tBy:\t /s/ MARNI J NYGARD\n \t \tMarni J. Nygard\n \t \tPresident\n \t \t(Principal Executive Officer)\n \t \t \n \t \t \n \t \t \n \tBy:\t /s/ KEITH E PETERSEN\n \t \tKeith E. Petersen\n \t \tChief Financial Officer\n \t \t(Principal Accounting Officer)\n"}{"bs": "q10k_tbl_3", "is": "q10k_tbl_5", "cf": "q10k_tbl_6"}None
Item 2. Management's Discussion and Analysis of Financial
Item 3. Quantitative & Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II – Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities & Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
Exhibits
EX-31.1
ex31-124.htm
EX-31.2
ex31-224.htm
EX-32
ex32-24.htm
AEI Income & Growth Fund 24 Earnings 2020-09-30
Balance Sheet
Income Statement
Cash Flow
10-Q 1 q243-20.htm QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2020
Commission File Number: 000-49653
AEI INCOME & GROWTH FUND 24 LLC
(Exact name of registrant as specified in its charter)
State of Delaware
41-1990952
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
30 East 7th Street, Suite 1300 St. Paul, Minnesota 55101
(651) 227-7333
(Address of principal executive offices)
(Registrant’s telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
None
None
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
☐ Large accelerated filer
☐ Accelerated filer
☐ Non-accelerated filer
☒ Smaller reporting company
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
1
AEI INCOME & GROWTH FUND 24 LLC
INDEX
Page
Part I – Financial Information
Item 1.
Financial Statements (unaudited):
Balance Sheets as of September 30, 2020 and December 31, 2019
3
Statements for the Periods ended September 30, 2020 and 2019:
Income
4
Cash Flows
5
Changes in Members' Equity (Deficit)
6
Notes to Financial Statements
7 - 12
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
13 - 19
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
20
Item 4.
Controls and Procedures
20
Part II – Other Information
Item 1.
Legal Proceedings
20
Item 1A.
Risk Factors
20
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
21
Item 3.
Defaults Upon Senior Securities
21
Item 4.
Mine Safety Disclosures
21
Item 5.
Other Information
21
Item 6.
Exhibits
21
Signatures
22
2
AEI INCOME & GROWTH FUND 24 LLC
BALANCE SHEETS
ASSETS
September 30,
December 31,
2020
2019
(unaudited)
Current Assets:
Cash
$
1,878,478
$
8,967,982
Real Estate Investments:
Land
1,105,379
1,188,885
Buildings
3,474,856
4,543,016
Acquired Intangible Lease Assets
646,934
646,934
Real Estate Held for Investment, at cost
5,227,169
6,378,835
Accumulated Depreciation and Amortization
(2,130,515
)
(2,462,807
)
Real Estate Held for Investment, Net
3,096,654
3,916,028
Real Estate Held for Sale
644,885
572,042
Total Real Estate Investments
3,741,539
4,488,070
Total Assets
$
5,620,017
$
13,456,052
LIABILITIES AND MEMBERS’ EQUITY
Current Liabilities:
Payable to AEI Fund Management, Inc.
$
78,867
$
92,901
Distributions Payable
163,281
7,817,695
Unearned Rent
6,835
0
Total Current Liabilities
248,983
7,910,596
Members’ Equity:
Managing Members
17,338
22,752
Limited Members – 50,000 Units authorized;
23,423 Units issued and outstanding
as of 9/30/2020 and 12/31/2019
5,353,696
5,522,704
Total Members’ Equity
5,371,034
5,545,456
Total Liabilities and Members’ Equity
$
5,620,017
$
13,456,052
The accompanying Notes to Financial Statements are an integral part of these statements.
3
AEI INCOME & GROWTH FUND 24 LLC
STATEMENTS OF INCOME
(unaudited)
Three Months Ended September 30
Nine Months Ended September 30
2020
2019
2020
2019
Rental Income
$
104,565
$
250,035
$
316,552
$
808,499
Expenses:
LLC Administration – Affiliates
17,147
27,852
49,926
80,725
LLC Administration and Property
Management – Unrelated Parties
13,452
26,592
51,336
89,644
Depreciation and Amortization
51,786
92,820
155,358
352,434
Real Estate Impairment
0
387,578
0
1,480,670
Total Expenses
82,385
534,842
256,620
2,003,473
Operating Income (Loss)
22,180
(284,807
)
59,932
(1,194,974
)
Other Income:
Gain on Sale of Real Estate
0
1,690,116
251,516
1,690,116
Interest Income
469
8,233
4,695
15,758
Total Other Income
469
1,698,349
256,211
1,705,874
Net Income
$
22,649
$
1,413,542
$
316,143
$
510,900
Net Income Allocated:
Managing Members
$
680
$
148,093
$
4,454
$
142,876
Limited Members
21,969
1,265,449
311,689
368,024
Total
$
22,649
$
1,413,542
$
316,143
$
510,900
Net Income per LLC Unit
$
0.94
$
53.97
$
13.31
$
15.69
Weighted Average Units Outstanding –
Basic and Diluted
23,423
23,448
23,423
23,452
The accompanying Notes to Financial Statements are an integral part of these statements.
4
AEI INCOME & GROWTH FUND 24 LLC
STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended September 30
2020
2019
Cash Flows from Operating Activities:
Net Income
$
316,143
$
510,900
Adjustments to Reconcile Net Income
To Net Cash Provided by Operating Activities:
Depreciation and Amortization
174,489
387,186
Real Estate Impairment
0
1,480,670
Gain on Sale of Real Estate
(251,516
)
(1,690,116
)
(Increase) Decrease in Receivables
0
(3,938
)
Increase (Decrease) in Payable to
AEI Fund Management, Inc.
(14,034
)
26,670
Increase (Decrease) in Unearned Rent
6,835
2,754
Total Adjustments
(84,226
)
203,226
Net Cash Provided By (Used For)
Operating Activities
231,917
714,126
Cash Flows from Investing Activities:
Investments in Real Estate
0
(30,000
)
Proceeds from Sale of Real Estate
823,558
4,625,784
Net Cash Provided By (Used For)
Investing Activities
823,558
4,595,784
Cash Flows from Financing Activities:
Distributions Paid to Members
(8,144,979
)
(795,673
)
Repurchase of LLC Units
0
(6,922
)
Net Cash Provided By (Used For)
Financing Activities
(8,144,979
)
(802,595
)
Net Increase (Decrease) in Cash
(7,089,504
)
4,507,315
Cash, beginning of period
8,967,982
1,162,378
Cash, end of period
$
1,878,478
$
5,669,693
The accompanying Notes to Financial Statements are an integral part of these statements.
5
AEI INCOME & GROWTH FUND 24 LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DEFICIT)
(unaudited)
Managing Members
Limited Members
Total
Limited Member Units Outstanding
Balance, December 31, 2018
$
(106,529
)
$
12,845,847
$
12,739,318
23,460.43
Distributions Declared
(7,342
)
(237,401
)
(244,743
)
Net Loss
(5,133
)
(694,530
)
(699,663
)
Balance, March 31, 2019
(119,004
)
11,913,916
11,794,912
23,460.43
Distributions Declared
(7,342
)
(237,401
)
(244,743
)
Repurchase of LLC Units
(208
)
(6,714
)
(6,922
)
(12.00
)
Net Loss
(84
)
(202,895
)
(202,979
)
Balance, June 30, 2019
(126,638
)
$
11,466,906
$
11,340,268
23,448.43
Distributions Declared
(5,885
)
(237,400
)
(243,285
)
Net Income
148,093
1,265,449
1,413,542
Balance, September 30, 2019
$
15,570
$
12,494,955
$
12,510,525
23,448.43
Balance, December 31, 2019
$
22,752
$
5,522,704
$
5,545,456
23,423.43
Distributions Declared
(3,304
)
(160,699
)
(164,003
)
Net Income
2,969
263,687
266,656
Balance, March 31, 2020
22,417
5,625,692
5,648,109
23,423.43
Distributions Declared
(3,282
)
(159,999
)
(163,281
)
Net Income
805
26,033
26,838
Balance, June 30, 2020
19,940
$
5,491,726
$
5,511,666
23,423.43
Distributions Declared
(3,282
)
(159,999
)
(163,281
)
Net Income
680
21,969
22,649
Balance, September 30, 2020
$
17,338
$
5,353,696
$
5,371,034
23,423.43
The accompanying Notes to Financial Statements are an integral part of these statements.
6
AEI INCOME & GROWTH FUND 24 LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(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’s latest annual report on Form 10K.
(2) Organization –
AEI Income & Growth Fund 24 LLC (“Company”), a Limited Liability Company, was formed on November 21, 2000 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 Chief Executive Officer and sole director of AFM served as the Special Managing Member until his withdrawal date effective March 31, 2020. AFM is a wholly owned subsidiary of AEI Capital Corporation of which Mr. Johnson and his wife own a majority interest. AEI Fund Management, Inc. (“AEI”), an affiliate of AFM, performs the administrative and operating functions for the Company.
The terms of the offering called for a subscription price of $1,000 per LLC Unit, payable on acceptance of the offer. The Company commenced operations on October 31, 2001 when minimum subscriptions of 1,500 LLC Units ($1,500,000) were accepted. The offering terminated May 17, 2003 when the extended offering period ended. The Company received subscriptions for 24,831.283 Units. Under the terms of the Operating Agreement, the Limited Members and Managing Members contributed funds of $24,831,283 and $1,000, respectively. The Company shall continue until December 31, 2051, 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.
7
AEI INCOME & GROWTH FUND 24 LLC
NOTES TO FINANCIAL STATEMENTS
(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.
In January 2018, the Managing Member mailed a Consent Statement (Proxy) seeking the consent of the Limited Members, as required by Section 6.1 of the Operating Agreement, to initiate the final disposition, liquidation and distribution of all of the Company’s properties and assets within the next 12 to 24 months. On February 12, 2018, the proposal was approved with a majority of Units voting in favor of the proposal. As a result, the Managing Member is proceeding with the planned liquidation of the Company.
(3) Recently Issued Accounting Pronouncements –
Management has reviewed recently issued, but not yet effective, accounting pronouncements and does not expect the implementation of these pronouncements to have a significant effect on the Company’s financial statements.
8
AEI INCOME & GROWTH FUND 24 LLC
NOTES TO FINANCIAL STATEMENTS
(4) Real Estate Investments –
In July 2018, the Company entered into an agreement with the tenant of the Best Buy store in Lake Geneva, Wisconsin to extend the lease term five years to end on March 31, 2024. As part of the agreement, the annual rent decreased from $153,826 to $133,316 effective February 1, 2019. In addition, beginning on February 1, 2019, the tenant received free rent for one month that equaled $11,110.
The Company owned a 35% interest in a Dick’s Sporting Goods store in Fredericksburg, Virginia. The remaining interests in the property were owned by three affiliates of the Company. On January 31, 2019, the lease term ended, and the tenant returned possession of the property to the owners. While the property was vacant, the Company was responsible for its 35% share of real estate taxes and other costs associated with maintaining the property. The owners listed the property for lease with a real estate broker in the Fredericksburg area. The annual rent from this property represented approximately 21% 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 first quarter of 2019, the Company reduced its regular quarterly cash distribution rate from $12.66 per Unit to $10.12 per Unit.
Based on its long-lived asset valuation analysis, the Company determined the former Dick’s Sporting Goods store was impaired. As a result, in the first quarter of 2019, the Company recognized real estate impairment of $792,845 to decrease the carrying value to the estimated fair value of $1,260,000. The charge was recorded against the cost of the land and building.
In October 2019, after marketing the property for lease for many months, the Company decided to sell its 35% interest in the former Dick’s Sporting Goods store. In the third quarter of 2019, as a result of deciding to sell the property, the Company recognized an additional real estate impairment of $387,578 to decrease the carrying value to the estimated fair value of $857,500. The charges were recorded against the cost of the land and building. In November 2019, the Company entered into an agreement to sell the property to an unrelated third party. On December 27, 2019, the sale closed with the Company receiving net proceeds of $859,807, which resulted in a net gain of $2,307. At the time of sale, the cost and related accumulated depreciation was $1,795,363 and $937,863, respectively.
In June 2019, the Company entered into an agreement with the tenant of the Tractor Supply Company store in Grand Forks, North Dakota to extend the lease term ten years to end on November 30, 2030. The annual rent remained the same with a 4.0% increase scheduled to occur after five years. As part of the agreement, the Company paid a tenant improvement allowance of $30,000 that was capitalized.
In June 2019, the Company reached an agreement to sell its 50% interest in the Tractor Supply Company store to an unrelated third party. On August 1, 2019, the sale closed with the Company receiving net proceeds of $1,738,496, which resulted in a net gain of $885,311. At the time of sale, the cost and related accumulated depreciation was $1,433,934 and $580,749, respectively.
9
AEI INCOME & GROWTH FUND 24 LLC
NOTES TO FINANCIAL STATEMENTS
(4) Real Estate Investments – (Continued)
In June 2019, the Company entered into an agreement to sell the Applebee’s restaurant in Fishers, Indiana to an unrelated third party. On September 27, 2019, the sale closed with the Company receiving net proceeds of $2,887,288, which resulted in a net gain of $804,805. At the time of sale, the cost and related accumulated depreciation was $3,002,553 and $920,070, respectively.
The Company owns a 45% interest in an Advance Auto Parts store in Middletown, Ohio. The remaining interest in the property is owned by an affiliate of the Company. On July 31, 2019, 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 45% 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 Middletown area. The annual rent from this property represented approximately 6% 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. However, at this time, the Company does not anticipate the need to further reduce its regular quarterly cash distribution rate.
Based on its long-lived asset valuation analysis, the Company determined the Advance Auto store was impaired. As a result, in the second quarter of 2019, a charge to operations for real estate impairment of $300,247 was recognized, which was the difference between the carrying value at June 30, 2019 of $446,497 and the estimated fair value of $146,250. The charge was recorded against the cost of the land and building.
In October 2019, the Company entered into an agreement to sell the Fresenius Medical Center in Grove City, Ohio to an unrelated third party. On December 11, 2019, the sale closed with the Company receiving net proceeds of $2,598,639, which resulted in a net gain of $795,214. At the time of sale, the cost and related accumulated depreciation and amortization was $2,375,000 and $571,575, respectively.
On January 17, 2020, the Company sold its 27% interest in the PetSmart store in Gonzales, Louisiana to AEI Income & Growth Fund 25 LLC, an affiliate of the Company. The purchase price of the property interest was based upon the property’s fair market value as determined by an independent, third-party, commercial property appraiser. The Company received net proceeds of $823,558, which resulted in a net gain of $251,516. At the time of sale, the cost and related accumulated depreciation and amortization was $842,400 and $270,358, respectively. At December 31, 2019, the property was classified as Real Estate Held for Sale with a carrying value of $572,042.
In October 2020, the Company entered into an agreement to sell its 45% interest in the Fresenius Medical Center in Shreveport, Louisiana to an unrelated third party. The sale is subject to contingencies and may not be completed. If the sale is completed, the Company expects to receive net proceeds of approximately $1,200,600, which will result in a net gain of approximately $555,700. At September 30, 2020, the property was classified as Real Estate Held for Sale with a carrying value of $644,885.
10
AEI INCOME & GROWTH FUND 24 LLC
NOTES TO FINANCIAL STATEMENTS
(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.
(6) Members’ Equity –
For the nine months ended September 30, 2020 and 2019, the Company declared distributions of $490,565 and $732,771, respectively. The Limited Members received distributions of $480,697 and $712,202 and the Managing Members received distributions of $9,868 and $20,569 for the periods, respectively. The Limited Members' distributions represented $20.52 and $30.37 per LLC Unit outstanding using 23,423 and 23,452 weighted average Units in 2020 and 2019, respectively. The distributions represented $13.31 and $15.40 per Unit of Net Income and $7.21 and $14.97 per Unit of return of contributed capital in 2020 and 2019, respectively.
As part of the distributions discussed above, the Company distributed net sale proceeds of $242,424 and $70,707 in 2020 and 2019, respectively. The Limited Members received distributions of $240,000 and $70,000 and the Managing Members received distributions of $2,424 and $707 for the periods, respectively. The Limited Members’ distributions represented $10.25 and $2.99 per Unit for the periods, respectively.
For the nine months ended September 30, 2020, the Company did not repurchase any Units from the Limited Members. For the nine months ended September 30, 2019, the Company repurchased a total of 12.00 Units for $6,714 from two Limited Members in accordance with the Operating Agreement. 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 $208 in 2019.
(7) Fair Value Measurements –
Fair value, as defined by US GAAP, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. US GAAP establishes a hierarchy in determining the fair value of an asset or liability. The fair value hierarchy has three levels of inputs, both observable and unobservable. US GAAP requires the utilization of the lowest possible level of input to determine fair value. Level 1 inputs include quoted market prices in an active market for identical assets or liabilities. Level 2 inputs are market data, other than Level 1 inputs, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data.
11
AEI INCOME & GROWTH FUND 24 LLC
NOTES TO FINANCIAL STATEMENTS
(7) Fair Value Measurements – (Continued)
At September 30, 2020 and December 31, 2019, the Company had no financial assets or liabilities measured at fair value on a recurring basis or nonrecurring basis that would require disclosure. The Company had the following nonfinancial assets measured on a nonrecurring basis that were recorded at fair value during 2019.
The Dick’s Sporting Goods store in Fredericksburg, Virginia with a carrying amount of $2,052,845 at March 31, 2019, was written down to its estimated fair value of $1,260,000 after completing our long-lived asset valuation analysis. The resulting impairment charge of $792,845 was included in earnings for the first quarter of 2019. The fair value of the property was based upon an appraisal prepared by an independent commercial property appraiser. The appraisal is considered a Level 3 input in the valuation hierarchy. At September 30, 2019, the property was written down to its estimated fair value of $857,500 after completing our long-lived asset valuation analysis. The resulting impairment charge of $387,578 was included in earnings for the third quarter of 2019. The fair value of the property was based upon a signed purchase agreement, which is considered a Level 3 input in the valuation hierarchy.
The Advance Auto store in Middletown, Ohio with a carrying amount of $446,497 at June 30, 2019, was written down to its estimated fair value of $146,250 after completing our long-lived asset valuation analysis. The resulting impairment charge of $300,247 was included in earnings for the second quarter of 2019. The fair value of the property was based upon comparable sales of similar properties, which are considered Level 2 inputs in the valuation hierarchy.
(8) Coronavirus Outbreak –
During the first quarter of 2020, there was a global outbreak of a new strain of coronavirus, 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 the coronavirus. Nevertheless, the coronavirus 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 not received modification rent requests from any tenant of the five properties owned by the Company. All rent has been paid in full by each tenant.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
This section contains "forward-looking statements" which represent management's expectations or beliefs concerning future events, including statements regarding anticipated application of cash, expected returns from rental income, growth in revenue, the sufficiency of cash to meet operating expenses, rates of distribution, and other matters. These, and other forward-looking statements, should be evaluated in the context of a number of factors that may affect the Company’s financial condition and results of operations, including the following:
—
Market and economic conditions which affect the value of the properties the Company owns and the cash from rental income such properties generate;
—
the federal income tax consequences of rental income, deductions, gain on sales and other items and the effects of these consequences for Members;
—
resolution by the Managing Members of conflicts with which they may be confronted;
—
the success of the Managing Members 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.
Application of Critical Accounting Policies
The Company’s financial statements have been prepared in accordance with US GAAP. Preparing the financial statements requires management to use judgment in the application of these accounting policies, including making estimates and assumptions. These judgments will affect the reported amounts of the Company’s assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and will affect the reported amounts of revenue and expenses during the reporting periods. It is possible that the carrying amount of the Company’s assets and liabilities, or the results of reported operations, will be affected if management’s estimates or assumptions prove inaccurate.
Management of the Company evaluates the following accounting estimates on an ongoing basis, and has discussed the development and selection of these estimates and the management discussion and analysis disclosures regarding them with the managing member of the Company.
Allocation of Purchase Price of Acquired Properties
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 fair value of each component of the property. Although independent appraisals may be used to assist in the determination of fair value, in many cases these values will be based upon management’s assessment of each property, the selling prices of comparable properties and the discounted value of cash flows from the asset.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The fair values of above market and below market in-place leases will be recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) an estimate of fair market lease rates for the corresponding in-place leases measured over a period equal to the non-cancelable term of the lease including any bargain renewal periods. The above market and below market lease values will be capitalized as intangible lease assets or liabilities. Above market lease values will be amortized as an adjustment of rental income over the remaining term of the respective leases. Below market lease values will be amortized as an adjustment of rental income over the remaining term of the respective leases, including any bargain renewal periods. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market and below market in-place lease values relating to that lease would be recorded as an adjustment to rental income.
The fair values of in-place leases will include estimated direct costs associated with obtaining a new tenant, and opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease. Direct costs associated with obtaining a new tenant may include commissions, tenant improvements, and other direct costs and are estimated, in part, by management’s consideration of current market costs to execute a similar lease. These direct costs will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. The value of opportunity costs will be calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. These intangibles will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.
The determination of the fair values of the assets and liabilities acquired will require the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount and capitalization rates, interest rates and other variables. If management’s estimates or assumptions prove inaccurate, the result would be an inaccurate allocation of purchase price, which could impact the amount of reported net income.
Carrying Value of Properties
Properties are carried at original cost, less accumulated depreciation and amortization. The Company tests long-lived assets for recoverability when events or changes in circumstances indicate that the carrying value may not be recoverable. For properties the Company will hold and operate, management determines whether impairment has occurred by comparing the property’s probability-weighted future undiscounted cash flows to its current carrying value. For properties held for sale, management determines whether impairment has occurred by comparing the property’s estimated fair value less cost to sell to its current carrying value. If the carrying value is greater than the net realizable value, an impairment loss is recorded to reduce the carrying value of the property to its net realizable value. Changes in these assumptions or analysis may cause material changes in the carrying value of the properties.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Allocation of Expenses
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.
Factors Which May Influence Results of Operations
The Company is not aware of any material trends or uncertainties, other than national economic conditions affecting real estate generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues and investment property value. However, due to the recent outbreak of the coronavirus (COVID-19) in the U.S. and globally, our tenants and operating partners may be impacted. The impact of the coronavirus on our future results could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus, the success of actions taken to contain or treat the coronavirus, and reactions by consumers, companies, governmental entities and capital markets.
Results of Operations
For the nine months ended September 30, 2020 and 2019, the Company recognized rental income of $316,552 and $808,499, respectively. In 2020, rental income decreased due to the sale of five properties and the lease terms ending for the Advance Auto store as discussed below. The decreases were partially offset by one month free rent in 2019 for the Best Buy store in Lake Geneva, Wisconsin as discussed below. Based on the scheduled rent for the properties owned as of October 31, 2020, the Company expects to recognize rental income of approximately $421,000 and $418,000 in 2020 and 2021, respectively.
For the nine months ended September 30, 2020 and 2019, the Company incurred LLC administration expenses from affiliated parties of $49,926 and $80,725, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and communicating with the Limited Members. During the same periods, the Company incurred LLC administration and property management expenses from unrelated parties of $51,366 and $89,644, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit costs, taxes, insurance and other property costs. These expenses were higher in 2019, when compared to 2020, mainly due to expenses related to the Dick’s Sporting Goods store and a parking lot repair at one property.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
In July 2018, the Company entered into an agreement with the tenant of the Best Buy store in Lake Geneva, Wisconsin to extend the lease term five years to end on March 31, 2024. As part of the agreement, the annual rent decreased from $153,826 to $133,316 effective February 1, 2019. In addition, beginning on February 1, 2019, the tenant received free rent for one month that equaled $11,110.
The Company owned a 35% interest in a Dick’s Sporting Goods store in Fredericksburg, Virginia. The remaining interests in the property were owned by three affiliates of the Company. On January 31, 2019, the lease term ended, and the tenant returned possession of the property to the owners. While the property was vacant, the Company was responsible for its 35% share of real estate taxes and other costs associated with maintaining the property. The owners listed the property for lease with a real estate broker in the Fredericksburg area. The annual rent from this property represented approximately 21% 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 first quarter of 2019, the Company reduced its regular quarterly cash distribution rate from $12.66 per Unit to $10.12 per Unit.
Based on its long-lived asset valuation analysis, the Company determined the former Dick’s Sporting Goods store was impaired. As a result, in the first quarter of 2019, the Company recognized real estate impairment of $792,845 to decrease the carrying value to the estimated fair value of $1,260,000. The charge was recorded against the cost of the land and building.
In October 2019, after marketing the property for lease for many months, the Company decided to sell its 35% interest in the former Dick’s Sporting Goods store. In the third quarter of 2019, as a result of deciding to sell the property, the Company recognized an additional real estate impairment of $387,578 to decrease the carrying value to the estimated fair value of $857,500. The charges were recorded against the cost of the land and building. In November 2019, the Company entered into an agreement to sell the property to an unrelated third party. On December 27, 2019, the sale closed with the Company receiving net proceeds of $859,807, which resulted in a net gain of $2,307. At the time of sale, the cost and related accumulated depreciation was $1,795,363 and $937,863, respectively.
The Company owns a 45% interest in an Advance Auto Parts store in Middletown, Ohio. The remaining interest in the property is owned by an affiliate of the Company. On July 31, 2019, 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 45% 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 Middletown area. The annual rent from this property represented approximately 6% 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. However, at this time, the Company does not anticipate the need to further reduce its regular quarterly cash distribution rate.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Based on its long-lived asset valuation analysis, the Company determined the Advance Auto store was impaired. As a result, in the second quarter of 2019, a charge to operations for real estate impairment of $300,247 was recognized, which was the difference between the carrying value at June 30, 2019 of $446,497 and the estimated fair value of $146,250. The charge was recorded against the cost of the land and building.
For the nine months ended September 30, 2020 and 2019, the Company recognized interest income of $4,695 and $15,758, respectively. In 2020, interest income decreased due to the Company having more money invested in a money market account due to property sales and higher money market interest rates in 2019.
Management believes inflation has not significantly affected income from operations. Leases may contain rent increases, based on the increase in the Consumer Price Index over a specified period, which will result in an increase in rental income over the term of the leases. Inflation also may cause the real estate to appreciate in value. However, inflation and changing prices may have an adverse impact on the operating margins of the properties' tenants, which could impair their ability to pay rent and subsequently reduce the Net Cash Flow available for distributions.
Liquidity and Capital Resources
During the nine months ended September 30, 2020, the Company's cash balances decreased $7,089,504 as a result of distributions paid to the Members in excess of cash generated from operating activities, which was partially offset by cash generated from the sale of property. During the nine months ended September 30, 2019, the Company's cash balances increased $4,507,315 as a result of cash generated from the sale of property, which was partially offset by cash paid for a tenant improvement allowance, and distributions paid to the Members and cash used to repurchase Units in excess of cash generated from operating activities.
Net cash provided by operating activities decreased from $714,126 in 2019 to $231,917 in 2020 as a result of a decrease in total rental and interest income in 2020, which was partially offset by a decrease in LLC administration and property management expenses in 2020 and net timing differences in the collection of payments from the tenants 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 nine months ended September 30, 2020, the Company generated cash flow from the sale of real estate of $823,558. During the nine months ended September 30, 2019, the Company generated cash flow from the sale of real estate of $4,625,784. During the same period, the Company expended $30,000 to invest in real properties.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On January 17, 2020, the Company sold its 27% interest in the PetSmart store in Gonzales, Louisiana to AEI Income & Growth Fund 25 LLC, an affiliate of the Company. The purchase price of the property interest was based upon the property’s fair market value as determined by an independent, third-party, commercial property appraiser. The Company received net proceeds of $823,558, which resulted in a net gain of $251,516. At the time of sale, the cost and related accumulated depreciation and amortization was $842,400 and $270,358, respectively. At December 31, 2019, the property was classified as Real Estate Held for Sale with a carrying value of $572,042.
In October 2020, the Company entered into an agreement to sell its 45% interest in the Fresenius Medical Center in Shreveport, Louisiana to an unrelated third party. The sale is subject to contingencies and may not be completed. If the sale is completed, the Company expects to receive net proceeds of approximately $1,200,600, which will result in a net gain of approximately $555,700. At September 30, 2020, the property was classified as Real Estate Held for Sale with a carrying value of $644,885.
In June 2019, the Company entered into an agreement with the tenant of the Tractor Supply Company store in Grand Forks, North Dakota to extend the lease term ten years to end on November 30, 2030. The annual rent remained the same with a 4.0% increase scheduled to occur after five years. As part of the agreement, the Company paid a tenant improvement allowance of $30,000 that was capitalized.
In June 2019, the Company reached an agreement to sell its 50% interest in the Tractor Supply Company store to an unrelated third party. On August 1, 2019, the sale closed with the Company receiving net proceeds of $1,738,496, which resulted in a net gain of $885,311. At the time of sale, the cost and related accumulated depreciation was $1,433,934 and $580,749, respectively.
In June 2019, the Company entered into an agreement to sell the Applebee’s restaurant in Fishers, Indiana to an unrelated third party. On September 27, 2019, the sale closed with the Company receiving net proceeds of $2,887,288, which resulted in a net gain of $804,805. At the time of sale, the cost and related accumulated depreciation was $3,002,553 and $920,070, respectively.
In October 2019, the Company entered into an agreement to sell the Fresenius Medical Center in Grove City, Ohio to an unrelated third party. On December 11, 2019, the sale closed with the Company receiving net proceeds of $2,598,639, which resulted in a net gain of $795,214. At the time of sale, the cost and related accumulated depreciation and amortization was $2,375,000 and $571,575, respectively.
The Company's primary use of cash flow, other than investment in real estate, is distribution payments to Members and cash used to repurchase Units. The Company declares its regular quarterly distributions before the end of each quarter and pays the distribution in the first week after the end of each quarter. The Company attempts to maintain a stable distribution rate from quarter to quarter. The Company may repurchase tendered Units on April 1st and October 1st of each year subject to limitations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
For the nine months ended September 30, 2020 and 2019, the Company declared distributions of $490,565 and $732,771, respectively. Pursuant to the Operating Agreement, distributions of Net Cash Flow were allocated 97% to the Limited Members and 3% to the Managing Members. Distributions of Net Proceeds of Sale were allocated 99% to the Limited Members and 1% to the Managing Members. The Limited Members received distributions of $480,697 and $712,202 and the Managing Members received distributions of $9,868 and $20,569 for the periods, respectively. In December 2019, the Company declared a special distribution of net sale proceeds of $7,575,758 which was paid in the first week of January 2020 and resulted in higher distributions declared in 2019 and a higher distributions payable at December 31, 2019.
As part of the distributions discussed above, the Company distributed net sale proceeds of $242,424 and $70,707 in 2020 and 2019, respectively. The Limited Members received distributions of $240,000 and $70,000 and the Managing Members received distributions of $2,424 and $707 for the periods, respectively. The Limited Members’ distributions represented $10.25 and $2.99 per Unit for the periods, 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 any number of Units that, when aggregated with all other transfers of Units that have occurred since the beginning of the same calendar year (excluding Permitted Transfers as defined in the Operating Agreement), would exceed 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.
For the nine months ended September 30, 2020, the Company did not repurchase any Units from the Limited Members. For the nine months ended September 30, 2019, the Company repurchased a total of 12.00 Units for $6,714 from two Limited Members in accordance with the Operating Agreement. 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 $208 in 2019.
The continuing rent payments from the properties, together with cash generated from property sales, should be adequate to fund continuing distributions and meet other Company obligations on both a short-term and long-term basis.
Off-Balance Sheet Arrangements
As of September 30, 2020 and December 31, 2019, the Company had no material off-balance sheet arrangements that had or are reasonably likely to have current or future effects on its financial condition, results of operations, liquidity or capital resources.
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ITEM 3. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures.
Under the supervision and with the participation of management, including its President and Chief Financial Officer, the Managing Member of the Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, the President and Chief Financial Officer of the Managing Member concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to management, including the President and Chief Financial Officer of the Managing Member, in a manner that allows timely decisions regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting.
During the most recent period covered by this report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company is a party or of which the Company's property is subject.
ITEM 1A. RISK FACTORS.
Not required for a smaller reporting company.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES & USE OF PROCEEDS.
(a) None.
(b) Not applicable.
(c) 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 per Unit, 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 may be repurchased 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 any number of Units that, when aggregated with all other transfers of Units that have occurred since the beginning of the same calendar year (excluding Permitted Transfers as defined in the Operating Agreement), would exceed 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. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
31.1
Certification of President 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.
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Certification of President and Chief Financial Officer of Managing Member pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.