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: March 31, 1999
Commission file number: 333-5604
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Minnesota 41-1848181
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, 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 XXII LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of March 31, 1999 and December 31, 1998
Statements for the Periods ended March 31, 1999 and 1998:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
BALANCE SHEET
MARCH 31, 1999 AND DECEMBER 31, 1998
ASSETS
1999 1998
CURRENT ASSETS:
Cash and Cash Equivalents $ 8,536,433 $10,206,442
Receivables 44,481 46,634
----------- -----------
Total Current Assets 8,580,914 10,253,076
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 2,489,306 1,886,747
Buildings and Equipment 1,618,888 373,124
Construction in Progress 784,466 340,620
Property Acquisition Costs 436,070 460,047
Accumulated Depreciation (31,195) (16,693)
----------- -----------
Net Investments in Real Estate 5,297,535 3,043,845
----------- -----------
Total Assets $13,878,449 $13,296,921
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 25,681 $ 144,805
Distributions Payable 293,806 255,963
Unearned Rent 5,701 0
----------- -----------
Total Current Liabilities 325,188 400,768
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (26,267) (21,135)
Limited Partners, $1,000 Unit Value;
24,000 Units authorized; 15,945 Units
issued and outstanding 13,579,528 12,917,288
----------- -----------
Total Partners' Capital 13,553,261 12,896,153
----------- -----------
Total Liabilities and Partners' Capital $13,878,449 $13,296,921
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
1999 1998
INCOME:
Rent $ 82,627 $ 16,913
Investment Income 112,245 82,404
----------- -----------
Total Income 194,872 99,317
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 43,213 50,134
Partnership Administration and Property
Management - Unrelated Parties 8,905 8,177
Depreciation 14,502 4,006
----------- -----------
Total Expenses 66,620 62,317
----------- -----------
NET INCOME $ 128,252 $ 37,000
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 3,848 $ 1,110
Limited Partners 124,404 35,890
----------- -----------
$ 128,252 $ 37,000
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(16,580 and 8,100 weighted average Units
outstanding in 1999 and 1998, respectively) $ 7.50 $ 4.43
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 128,252 $ 37,000
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 14,502 4,006
Decrease in Receivables 2,153 0
Increase (Decrease) in Payable to
AEI Fund Management, Inc. (119,124) 57,779
Increase in Unearned Rent 5,701 5,637
----------- -----------
Total Adjustments (96,768) 67,422
----------- -----------
Net Cash Provided By
Operating Activities 31,484 104,422
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (2,268,192) (74,806)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions from Limited Partners 972,059 2,510,270
Organization and Syndication Costs (143,883) (376,540)
Increase in Distributions Payable 37,843 42,257
Distributions to Partners (299,320) (145,446)
----------- -----------
Net Cash Provided By
Financing Activities 566,699 2,030,541
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,670,009) 2,060,157
CASH AND CASH EQUIVALENTS, beginning of period 10,206,442 5,808,792
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 8,536,433 $ 7,868,949
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1997 $ (4,970) $ 6,313,317 $ 6,308,347 7,656.00
Capital Contributions 0 2,510,270 2,510,270 2,510.27
Organization and
Syndication Costs 0 (376,540) (376,540)
Distributions (4,363) (141,083) (145,446)
Net Income 1,110 35,890 37,000
-------- ----------- ----------- -----------
BALANCE, March 31, 1998 $ (8,223) $ 8,341,854 $ 8,333,631 10,166.27
======== =========== =========== ===========
BALANCE, December 31, 1998 $(21,135) $12,917,288 $12,896,153 15,945.16
Capital Contributions 0 972,059 972,059 972.06
Organization and
Syndication Costs 0 (143,883) (143,883)
Distributions (8,980) (290,340) (299,320)
Net Income 3,848 124,404 128,252
-------- ----------- ----------- -----------
BALANCE, March 31, 1999 $(26,267) $13,579,528 $13,553,261 16,917.22
======== =========== =========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
(1) The condensed statements included herein have been prepared
by the Partnership, 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 Partnership
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
Partnership's latest annual report on Form 10-KSB.
(2) Organization -
AEI Income & Growth Fund XXII Limited Partnership
(Partnership) was formed to acquire and lease commercial
properties to operating tenants. The Partnership's
operations are managed by AEI Fund Management XXI, Inc.
(AFM), the Managing General Partner of the Partnership.
Robert P. Johnson, the President and sole shareholder of
AFM, serves as the Individual General Partner of the
Partnership. An affiliate of AFM, AEI Fund Management,
Inc., performs the administrative and operating functions
for the Partnership.
The terms of the Partnership offering call for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. Under the terms of the
Restated Limited Partnership Agreement, 24,000 Limited
Partnership Units were available for subscription which, if
fully subscribed, would result in contributed Limited
Partners' capital of $24,000,000. The Partnership commenced
operations on May 1, 1997 when minimum subscriptions of
1,500 Limited Partnership Units ($1,500,000) were accepted.
The Partnership's offering terminated January 9, 1999 when
the extended offering period expired. The Partnership
received subscriptions for 16,917.222 Limited Partnership
Units ($16,917,222). The General Partners have contributed
capital of $1,000.
During the operation of the Partnership, any Net Cash Flow,
as defined, which the General Partners determine to
distribute will be distributed 97% to the Limited Partners
and 3% to the General Partners. Distributions to Limited
Partners will be made pro rata by Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of the Partnership's properties which the General
Partners determine to distribute will, after provisions for
debts and reserves, be paid in the following manner: (i)
first, 99% to the Limited Partners and 1% to the General
Partners until the Limited Partners receive an amount equal
to: (a) their Adjusted Capital Contribution plus (b) an
amount equal to 9% of their Adjusted Capital Contribution
per annum, cumulative but not compounded, to the extent not
previously distributed from Net Cash Flow; (ii) any
remaining balance will be distributed 90% to the Limited
Partners and 10% to the General Partners. Distributions to
the Limited Partners will be made pro rata by Units.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
property, will be allocated first in the same ratio in
which, and to the extent, Net Cash Flow is distributed to
the Partners for such year. Any additional profits will be
allocated in the same ratio as the last dollar of Net Cash
Flow is distributed. Net losses from operations will be
allocated 99% to the Limited Partners and 1% to the General
Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of the Partnership's property will be
allocated in accordance with the Partnership Agreement as
follows: (i) first, to those partners with deficit balances
in their capital accounts in an amount equal to the sum of
such deficit balances; (ii) second, 99% to the Limited
Partners and 1% to the General Partners until the aggregate
balance in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital Contributions
plus an amount equal to 9% of their Adjusted Capital
Contributions per annum, cumulative but not compounded, to
the extent not previously allocated; (iii) third, the
balance of any remaining gain will then be allocated 90% to
the Limited Partners and 10% to the General Partners.
Losses will be allocated 98% to the Limited Partners and 2%
to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(3) Investments in Real Estate -
The Partnership leases its properties to various tenants
through triple net leases, which are classified as operating
leases. Under a triple net lease, the lessee is responsible
for all real estate taxes, insurance, maintenance, repairs
and operating expenses of the property. The initial Lease
terms are for 15 years, except the Champps restaurant and
the Arby's restaurant which have Lease terms of 20 years.
The Leases have renewal options which may extend the Lease
term an additional 10 years, except the Champps restaurant
which has a renewal option which may extend the Lease term
an additional 15 years. The Leases have rent clauses which
entitle the Partnership to receive additional rent in future
years based on stated rent increases.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
The Partnership's properties are all commercial, single-
tenant buildings. The cost of the property and related
accumulated depreciation at March 31, 1999 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
TGI Friday's, Greensburg, PA $ 295,020 $ 373,124 $ 668,144 $ 20,699
Hollywood Video, Saraland, AL 566,046 794,641 1,360,687 6,433
Champps Americana
Centerville, OH 462,240 451,123 913,363 4,063
Arby's, Homewood, AL 696,000 0 696,000 0
Tumbleweed, Ft. Wayne, IN 470,000 0 470,000 0
---------- ---------- ---------- ----------
$2,489,306 $1,618,888 $4,108,194 $ 31,195
========== ========== ========== ==========
On June 29, 1998, the Partnership purchased a parcel of land
in Centerville, Ohio for $1,850,988. On August 28, 1998,
the Partnership assigned, for diversification purposes, 77%
of its interest in the property to three affiliated
partnerships. The land is leased to Americana Dining
Corporation (ADC) under a Lease Agreement with a primary
term of 20 years and annual rental payments of $29,801.
Effective December 25, 1998, the annual rent was increased
to $44,701. Simultaneously with the purchase of the land,
the Partnership entered into a Development Financing
Agreement under which the Partnership will advance funds to
ADC for the construction of a Champps Americana restaurant
on the site. Initially, the Partnership charged interest on
the advances at a rate of 7.0%. Effective December 25,
1998, the interest rate was increased to 10.5%. On January
27, 1999, after the development was completed, the Lease
Agreement was amended to require annual rental payments of
$93,256. The Partnership's share of total acquisition
costs, including the cost of the land, was $913,362. The
remaining interests in the property are owned by AEI Real
Estate Fund XVII Limited Partnership, AEI Real Estate Fund
XVIII Limited Partnership and AEI Income & Growth Fund XXI
Limited Partnership, affiliates of the Partnership.
On November 20, 1998, the Partnership purchased a parcel of
land in Homewood, Alabama for $696,000. The land is leased
to RTM Alabama, Inc. (RTM) under a Lease Agreement with a
primary term of 20 years and annual rental payments of
$46,980. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement
under which the Partnership will advance funds to RTM for
the construction of an Arby's restaurant on the site.
Through March 31, 1999, the Partnership had advanced
$393,639 for the construction of the property and was
charging interest on the advances at a rate of 6.75%. The
total purchase price, including the cost of the land, will
be approximately $1,424,500. After the construction is
complete, the Lease Agreement will be amended to require
annual rental payments of approximately $93,000.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
On November 25, 1998, the Partnership purchased a parcel of
land in Ft. Wayne, Indiana for $470,000. The land is leased
to Tumbleweed, Inc. (TWI) under a Lease Agreement with a
primary term of 15 years and annual rental payments of
$39,950. Effective March 24, 1999, the annual rent was
increased to $48,175. Simultaneously with the purchase of
the land, the Partnership entered into a Development
Financing Agreement under which the Partnership will advance
funds to TWI for the construction of a Tumbleweed restaurant
on the site. Through March 31, 1999, the Partnership had
advanced $390,827 for the construction of the property and
was charging interest on the advances at a rate of 8.5%.
Effective March 24, 1999, the interest rate was increased to
10.25%. The total purchase price, including the cost of the
land, will be approximately $1,312,250. After the
construction is complete, the Lease Agreement will be
amended to require annual rental payments of approximately
$134,500.
On January 26, 1999, the Partnership purchased a Hollywood
Video store in Saraland, Alabama for $1,360,687. The
property is leased to Hollywood Entertainment Corp. under a
Lease Agreement with a primary term of 15 years and annual
rental payments of $129,617.
In April, 1999, the Partnership entered into an Agreement to
purchase a Hollywood Video store in Minot, North Dakota.
The purchase price will be approximately $1,292,000. The
property will be leased to Hollywood Entertainment
Corporation under a Lease Agreement with a primary term of
15 years and annual rental payments of approximately
$129,000.
In April, 1999, the Partnership entered into an Agreement to
purchase a Hollywood Video store in Muscle Shoals, Alabama.
The purchase price will be approximately $1,315,000. The
property will be leased to Hollywood Entertainment
Corporation under a Lease Agreement with a primary term of
15 years and annual rental payments of approximately
$129,000.
The Partnership has incurred net costs of $480,219 relating
to the review of potential property acquisitions. Of these
costs, $44,149 have been capitalized and allocated to land,
building and equipment. The remaining costs of $436,070
have been capitalized and will be allocated to properties
acquired subsequent to March 31, 1999.
(4) Payable to AEI Fund Management, Inc. -
AEI Fund Management, Inc. performs the administrative and
operating functions for the Partnership. The payable to AEI
Fund Management represents the balance due for those
services. This balance is non-interest bearing and
unsecured and is to be paid in the normal course of
business.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the three months ended March 31, 1999 and 1998, the
Partnership recognized rental income of $82,627 and $16,913,
respectively. During the same periods, the Partnership also
earned $112,245 and $82,404, respectively, in investment income
from subscription proceeds which were invested in short-term
money market accounts. This investment income constituted 58%
and 83%, respectively, of total income. The percentage of total
income represented by investment income declines as subscription
proceeds are invested in properties.
During the three months ended March 31, 1999 and 1998, the
Partnership paid Partnership administration expenses to
affiliated parties of $43,213 and $50,134, respectively. These
administration expenses include initial start-up costs and
expenses associated with processing distributions, reporting
requirements and correspondence to the Limited Partners. The
administrative expenses decrease after completion of the offering
and acquisition phases of the Partnership's operations. During
the same period, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $8,905 and $8,177, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, insurance and other property costs.
The Partnership distributes all of its net income during
the offering and acquisition phases, and if net income after
deductions for depreciation is not sufficient to fund the
distributions, the Partnership may distribute other available
cash that constitutes capital for accounting purposes.
As of March 31, 1999, the Partnership's cash distribution
rate was 6.5% on an annualized basis. Pursuant to the
Partnership Agreement, distributions of Net Cash Flow were
allocated 97% to the Limited Partners and 3% to the General
Partners.
Since the Partnership has only recently purchased its real
estate, inflation has had a minimal effect on income from
operations. The Leases may contain cost of living increases
which will result in an increase in rental income over the term
of the Leases. Inflation also may cause the Partnership's real
estate to appreciate in value. However, inflation and changing
prices may also have an adverse impact on the operating margins
of the properties' tenants which could impair their ability to
pay rent and subsequently reduce the Partnership's Net Cash Flow
available for distributions.
The Year 2000 issue is the result of computer systems that
use two digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and has
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership intends to monitor and communicate with
tenants regarding Year 2000 compliance, although there can be no
assurance that the systems of the various tenants will be Year
2000 compliant.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Liquidity and Capital Resources
The Partnership's primary sources of cash are from
proceeds from the sale of Units, investment 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 Partnership, the
acquisition of properties, the management of properties, the
administration of the Partnership, and the payment of
distributions.
The Partnership Agreement requires that no more than 15%
of the proceeds from the sale of Units be applied to expenses
involved in the sale of Units (including Commissions) and that
such expenses, together with acquisition expenses, not exceed 20%
of the proceeds from the sale of Units. As set forth under the
caption "Estimated Use of Proceeds" of the Prospectus, the
General Partners anticipate that 14% of such proceeds will be
applied to cover such expenses if the maximum proceeds are
obtained. To the extent organization and offering expenses
actually incurred exceed 15% of proceeds, they are borne by the
General Partners.
During the offering of Units, the Partnership's primary
source of cash flow will be from the sale of Limited Partnership
Units. The Partnership offered for sale up to $24,000,000 of
limited partnership interests (the "Units") (24,000 Units at
$1,000 per Unit) pursuant to a registration statement effective
January 10, 1997. From January 10, 1997 to May 1, 1997, the
minimum number of Limited Partnership Units (1,500) needed to
form the Partnership were sold and on May 1, 1997, a total of
1,629.201 Units ($1,629,201) were transferred into the
Partnership. The Partnership's offering terminated January 9,
1999 when the extended offering period expired. The Partnership
received subscriptions for 16,917.222 Limited Partnership Units
($16,917,222). From subscription proceeds, the Partnership paid
organization and syndication costs (which constitute a reduction
of capital) of $2,454,791.
Before the acquisition of properties, cash flow from
operating activities is not significant. Net income, after
adjustment for depreciation, is lower during the first few years
of operations as administrative expenses remain high and a large
amount of the Partnership's assets remain invested on a short-
term basis in lower-yielding cash equivalents. Net income will
become the largest component of cash flow from operating
activities and the largest component of cash flow after the
completion of the acquisition phase.
The Partnership Agreement requires that all proceeds from
the sale of Units be invested or committed to investment in
properties by the later of two years after the date of the
Prospectus or six months after termination of the offer and sale
of Units. While the Partnership is purchasing properties, cash
flow from investing activities (investment in real property) will
remain negative and will constitute the principal use of the
Partnership's available cash flow.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
On June 29, 1998, the Partnership purchased a parcel of
land in Centerville, Ohio for $1,850,988. On August 28, 1998,
the Partnership assigned, for diversification purposes, 77% of
its interest in the property to three affiliated partnerships.
The land is leased to Americana Dining Corporation (ADC) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $29,801. Effective December 25, 1998, the annual
rent was increased to $44,701. Simultaneously with the purchase
of the land, the Partnership entered into a Development Financing
Agreement under which the Partnership will advance funds to ADC
for the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7.0%. Effective December 25, 1998, the
interest rate was increased to 10.5%. On January 27, 1999, after
the development was completed, the Lease Agreement was amended to
require annual rental payments of $93,256. The Partnership's
share of total acquisition costs, including the cost of the land,
was $913,362. The remaining interests in the property are owned
by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate
Fund XVIII Limited Partnership and AEI Income & Growth Fund XXI
Limited Partnership, affiliates of the Partnership.
On November 20, 1998, the Partnership purchased a parcel
of land in Homewood, Alabama for $696,000. The land is leased to
RTM Alabama, Inc. (RTM) under a Lease Agreement with a primary
term of 20 years and annual rental payments of $46,980.
Simultaneously with the purchase of the land, the Partnership
entered into a Development Financing Agreement under which the
Partnership will advance funds to RTM for the construction of an
Arby's restaurant on the site. Through March 31, 1999, the
Partnership had advanced $393,639 for the construction of the
property and was charging interest on the advances at a rate of
6.75%. The total purchase price, including the cost of the land,
will be approximately $1,424,500. After the construction is
complete, the Lease Agreement will be amended to require annual
rental payments of approximately $93,000.
On November 25, 1998, the Partnership purchased a parcel
of land in Ft. Wayne, Indiana for $470,000. The land is leased
to Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary
term of 15 years and annual rental payments of $39,950.
Effective March 24, 1999, the annual rent was increased to
$48,175. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement under
which the Partnership will advance funds to TWI for the
construction of a Tumbleweed restaurant on the site. Through
March 31, 1999, the Partnership had advanced $390,827 for the
construction of the property and was charging interest on the
advances at a rate of 8.5%. Effective March 24, 1999, the
interest rate was increased to 10.25%. The total purchase price,
including the cost of the land, will be approximately $1,312,250.
After the construction is complete, the Lease Agreement will be
amended to require annual rental payments of approximately
$134,500.
On January 26, 1999, the Partnership purchased a Hollywood
Video store in Saraland, Alabama for $1,360,687. The property is
leased to Hollywood Entertainment Corp. under a Lease Agreement
with a primary term of 15 years and annual rental payments of
$129,617.
In April, 1999, the Partnership entered into an Agreement
to purchase a Hollywood Video store in Minot, North Dakota. The
purchase price will be approximately $1,292,000. The property
will be leased to Hollywood Entertainment Corporation under a
Lease Agreement with a primary term of 15 years and annual rental
payments of approximately $129,000.
In April, 1999, the Partnership entered into an Agreement
to purchase a Hollywood Video store in Muscle Shoals, Alabama.
The purchase price will be approximately $1,315,000. The
property will be leased to Hollywood Entertainment Corporation
under a Lease Agreement with a primary term of 15 years and
annual rental payments of approximately $129,000.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
After completion of the acquisition phase, the
Partnership's primary use of cash flow is distribution and
redemption payments to Partners. The Partnership declares its
regular quarterly distributions before the end of each quarter
and pays the distribution in the first week after the end of each
quarter. The Partnership attempts to maintain a stable
distribution rate from quarter to quarter.
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the number of Units
outstanding at the beginning of the year. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership. As of March
31, 1999, the Partnership has not acquired any Units from Limited
Partners.
Until capital is invested in properties, the Partnership
will remain extremely liquid. At March 31, 1999, $8,580,914 or
62% of the Partnership's assets were in cash or cash equivalents
(including accrued interest receivable). After completion of
property acquisitions, the Partnership 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.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing 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 the Partnership, must be evaluated in
the context of a number of factors that may affect the
Partnership's financial condition and results of operations,
including the following:
<BULLET> Market and economic conditions which affect
the value of the properties the Partnership owns and
the cash from rental income such properties generate;
<BULLET> the federal income tax consequences of rental
income, deductions, gain on sales and other items and
the affects of these consequences for investors;
<BULLET> resolution by the General Partners of
conflicts with which they may be confronted;
<BULLET> the success of the General Partners of
locating properties with favorable risk return
characteristics;
<BULLET> the effect of tenant defaults; and
<BULLET> the condition of the industries in which the
tenants of properties owned by the Partnership operate.
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the Partnership is a party or of which the Partnership's
property is subject.
ITEM 2.CHANGES IN SECURITIES
None.
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 AND REPORTS ON FORM 8-K
a. Exhibits -
Description
10.1 Purchase Agreement dated March 10,
1999 between AEI Fund Management, Inc.
and Magnum Video I, Inc. relating to the
property at 1700 South Broadway, Minot,
North Dakota.
10.2 Purchase Agreement dated April 19,
1999 between AEI Fund Management, Inc.
and NOM Muscle Shoals, Ltd. relating to
the property at 1304 Woodward Avenue,
Muscle Shoals, Alabama.
10.3 Assignment of Purchase Agreement
dated April 27, 1999, between the
Partnership and AEI Fund Management, Inc.
relating to the property at 1700 South
Broadway, Minot, North Dakota.
10.4 Assignment of Purchase Agreement
dated April 27, 1999, between the
Partnership and AEI Fund Management, Inc.
relating to the property at 1304 Woodward
Avenue, Muscle Shoals, Alabama.
10.5 First Amendment to Purchase
Agreement dated April 27, 1999, between
AEI Fund Management, Inc. and NOM Muscle
Shoals, Ltd. relating to the property at
1304 Woodward Avenue, Muscle Shoals,
Alabama.
27 Financial Data Schedule for period
ended March 31, 1999.
b. Reports filed on Form 8-K - None.
SIGNATURES
In accordance with the requirements of the Exchange Act,
the Registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: May 7, 1999 AEI Income & Growth Fund XXII
Limited Partnership
By: AEI Fund Management XXI, Inc.
Its: Managing General Partner
By: /s/ Robert P. Johnson
Robert P. Johnson
President
(Principal Executive Officer)
By: /s/ Mark E. Larson
Mark E. Larson
Chief Financial Officer
(Principal Accounting Officer)
PURCHASE AGREEMENT
for
Hollywood Video Property
1700 South Broadway, Minot, North Dakota
This Purchase Agreement (the "Agreement") entered into and
effective as of the 10 day of March , 1999, by and between Magnum
Video I, Inc. (the "Seller") and AEI Fund Management, Inc., a
Minnesota corporation, or its assigns (the "Buyer").
1. PROPERTY. Seller holds an undivided 100% interest in the
fee title to that certain real property legally described in the
attached Exhibit "A" (the "Parcel"). Seller wishes to sell, and
Buyer wishes to purchase, the Parcel and all improvements thereon
developed as Hollywood Video store (the "Improvement") on the
Parcel (the Parcel and the Improvement collectively, the
"Property").
2. LEASE. The Property is being sold subject to an existing
Lease with Hollywood Entertainment Corporation, (the "Lessee"),
of execution date June 23, 1998 (the " Lease"). Buyer shall have
the right to approve such Lease which approval shall include, but
shall not be limited to, an Opinion of Counsel from the State in
which Property is located regarding the enforceability of the
Lease, to be obtained at Buyer's expense during the First
Contingency Period as hereinafter defined.
3. CLOSING DATE. The closing date for BuyerOs purchase of the
Property shall be fifteen (15) days after the end of the First
Contingency Period as herein defined, subject to the Second Due
Diligence Period. (the "Closing Date"). Such Closing Date shall
not be before the Rent Commencement Date as defined in the Lease.
4. PURCHASE PRICE. The purchase price for the Property shall
be $1,291,680.00 (or such purchase price necessary to produce a
10.0% capitalization rate to Buyer) which price must be supported
by an MAI appraisal of the Property (Such appraisal to be
provided by Seller). Buyer will pay, for the cost of up-dating
the appraisal, up to a maximum amount of $500 and Seller will pay
any cost over that amount.
On the Closing Date, Seller will reimburse Buyer for its due
diligence expenses by payment of a fee to Buyer in an amount
equal to 1.5% of the purchase price paid by Buyer (approximately
$19,375.00).
If all conditions precedent to BuyerOs obligations to purchase
have been satisfied, Buyer shall deposit the Purchase Price with
the Title Company as described in Article 6 hereof (the "Closing
Agent") on or before the Closing Date.
Not more than five (5) business days after full execution of this
Agreement, Buyer will deposit $10,000 (the "Earnest Money") for
the purchase of the Property in an escrow account with the
Closing Agent. The Earnest Money will be credited against the
Purchase Price paid by Buyer at closing when and if the
transaction contemplated herein closes and the sale is completed.
The balance of the Purchase Price shall be deposited by Buyer
into an escrow account with the Closing Agent on or before the
Closing Date. The Earnest Money is nonrefundable following the
expiration of the First Contingency Period as set forth in
paragraph 8.01.
On the Closing Date, the Purchase Price shall be disbursed as
designated in this Agreement.
5. ESCROW. Escrow shall be opened by Seller with the Closing
Agent upon execution of this Agreement. A copy of this Agreement
will be delivered to the Closing Agent by Seller and will serve
as escrow instructions together with any additional instructions
required by Seller and/or Buyer or their respective counsels.
Seller and Buyer agree to cooperate with the Closing Agent and
sign any additional instructions reasonably required by the
Closing Agent to close escrow upon purchase of the Property. If
there is any conflict between any other instructions to the
Closing Agent and this Agreement, this Agreement shall control.
Interest accrued on the Escrow shall be paid to Buyer.
6. TITLE. Seller shall deliver to Buyer a commitment for an
ALTA Owner's Policy of Title Insurance (ALTA owner - most recent
edition), for the Property, issued by a nationally recognized
title insurance company acceptable to Buyer (the "Title
Company"), insuring marketable title to the Property subject only
to such matters as Buyer may approve and containing such
endorsements as Buyer may require, including extended coverage
and owner's comprehensive coverage (the "Title Commitment"). The
Title Commitment shall show Seller as the present fee owner of
the Property and show Buyer as the fee owner to be insured.
The Title Commitment shall also:
A. include an itemization of all outstanding and pending
special assessments and taxes affecting the Property
and the tax year to which they relate;
B. include a statement as to whether taxes are current,
and if not, show the amounts unpaid; and
C. include the tax parcel identification number and a
statement as to whether the tax parcel includes
property other than the Property to be purchased.
All easements, restrictions, documents and other items affecting
title shall be listed in Schedule "B" of the Title Commitment.
Copies of all instruments creating such exceptions must be
attached to the Title Commitment.
Buyer shall be allowed ten (10) business days after receipt of
the Title Commitment and copies of all underlying documents or
until the end of the First Contingency Period, whichever is later
to be consistent with Article 8.01 hereof, for examination and
the making of any objections to the Title Commitment, said
objections to be made in writing or deemed waived. If any
objections are so made, Seller shall be allowed thirty (30) days
to cure such objections, or in the alternative, to obtain a
commitment for insurable title insuring over Buyer's objections.
If Seller shall decide to make no effort to cure Buyer's
objections, or is unable to obtain insurable title within said
thirty (30) day period, this Agreement shall be null and void and
of no further force and effect and Buyer's Earnest Money shall be
immediately returned to Buyer in full and neither party shall
have any further duties or obligations to the other hereunder.
Buyer shall also have ten (10) business days to review and
approve any easement, lien, hypothecation or other encumbrance
placed of record affecting the Property after the date of the
Title Commitment. If necessary, the Closing Date shall be
extended by the number of days necessary for Buyer to have ten
(10) business days to review any such items. Said ten (10)
business day review period shall commence on the date Buyer is
provided with a legible copy of the instrument creating such
exception to title. Seller agrees to inform Buyer of any item
executed by Seller and placed of record affecting the Property
after the date of the Title Commitment. If any objections are so
made, Seller shall be allowed thirty (30) days to cure such
objections or, in the alternative, to obtain a commitment for
insurable title insuring over Buyer's objections. If Seller shall
decide to make no effort to cure Buyer's objections, or is unable
to obtain insurable title within said thirty (30) day period,
this Agreement shall be null and void and of no further force and
effect and the Earnest Money shall be immediately returned to
Buyer in full and neither party shall have any further duties or
obligations to the other hereunder.
7. SITE INSPECTION. Buyer shall have the option to inspect and
approve the Property during the First Contingency Period.
8. DUE DILIGENCE AND CONTINGENCY PERIODS.
8.01 FIRST DUE DILIGENCE DOCUMENTS AND FIRST CONTINGENCY PERIOD.
Buyer shall have until the later of thirty (30) days from the
Date of the Purchase Agreement, or until the end of the ten (10)
business days after the delivery of all of Seller provided First
Due Diligence Documents (the "First Contingency Period"), to
conduct all of its inspections, due diligence and review to
satisfy itself regarding each item, regarding the Property and
regarding this transaction.
As described below, Due Diligence Documents for the Property are
to be delivered by Seller at its expense, unless specifically
designated herein as being obtained by Buyer,:
A. The Title Commitment, of current or recent date and
copies of all exceptions to title listed therein;
B. Existing ALTA As-Built survey of the Property, dated
after the completion of the present improvements on the
Property accompanied by a reliance letter from the
surveyor to Buyer;
C. Copies of the Lease, and all amendments, assignments
and exhibits thereto;
D. Phase I environmental assessment report, prepared by
Material Testing Services, Inc., dated May 4, 1998,
containing evidence that the Property complies with all
federal, state and local environmental regulations and
is to be certified to Buyer.
E. Copies of the insurance certificate for Lessee as
required by the Lease;
F. Final plans and specifications for the Improvements;
G. All documents which the Title Company deems necessary
to support the authority of the persons executing any
documents on behalf of Seller or Lessee;
H. Existing soils report;
I. Permits and licenses issued or required for the
operation of the premises by Lessee, if any;
J. Real estate tax statement;
K. Certificate of Occupancy;
L. MAI appraisal (less than one year old) stating the
value of the Property with the completed improvements
thereon, of current date and certified to Buyer;
M. Seller prepared AIA Certificate of Substantial
Completion executed by the general contractor and
Seller certifying to Seller, as of the completion date
of the Improvements, that the Improvements have been
completed in accordance with the plans and
specifications and the soils report for the Property
and comply with all applicable building, zoning,
energy, environmental laws and regulations and the
Americans with Disabilities Act; and
N. Zoning compliance letter from the municipality or
county exercising land use control over the Property in
form and substance satisfactory to Buyer, to be
obtained by Buyer, to be of current date and certified
to Buyer.
(All of the above described documents (a) through (n) are
hereinafter collectively the "First Due Diligence Documents").
In its sole discretion, Buyer may cancel this Agreement for any
reason by delivering a cancellation notice, return receipt
requested, to Seller and Closing Agent prior to the end of the
First Contingency Period. All due diligence documents provided
by Seller are to be returned to Seller and the Earnest Money
shall be immediately returned to Buyer in full and neither party
shall have any further duties or obligations to the other
hereunder. Such notice shall be deemed effective upon mailing by
Buyer.
8.02 FORM OF CLOSING DOCUMENTS. Prior to the end of the First
Contingency Period, Seller and Buyer shall agree on the form of
the following documents, all to be delivered to Buyer by Seller
on the Closing Date, as set forth in Article 14 hereof:
A. Special warranty deed;
B. Seller's Affidavit;
C. FIRPTA Affidavit;
D. Assignment of the Lease;
E. Assignment of warranties from the party or parties
constructing the Improvements on the Property;
G. Seller prepared AIA Certificate of Substantial
Completion executed by the general contractor and
Seller, certifying, to Seller as of the completion date
of the Improvements, that the Improvements have been
completed in accordance with the plans and
specifications and the soils report for the Property
and comply with all applicable building, zoning,
energy, environmental laws and regulations and the
Americans with Disabilities Act;
H. Estoppel from Lessee;
I. Indemnity from Seller in favor of Buyer over
representations and warranties including but not
limited to construction matters for which the Landlord
is liable under the Lease;
J. Any documentation modifying the Lease as may be
required by Buyer and agreed to between Buyer and/or
Seller and Tenant; and
K. The Assignments of all warranties, and if such
warranties are not unassignable on their face, the
written consents of the assignments thereof by the
party giving the warranty from the party or parties
constructing the Improvements on the Property.
In the event that Seller and Buyer and, where applicable Lessee,
do not reach mutual agreement on the form of the above-described
documents [(a) through (k)] prior to the end of the First
Contingency Period, this Agreement may be terminated by either
Seller or Buyer and the Earnest Money shall be immediately
returned to Buyer in full and neither party shall have any
further duties or obligations to the other hereunder.
8.03 SECOND DUE DILIGENCE DOCUMENTS AND SECOND CONTINGENCY
PERIOD.
As soon as available, but in any event no less than ten (10)
business days prior to the Closing Date (the "Second Contingency
Period"), Seller shall deliver to Buyer the following items for
Buyer's review and acceptance:
1. Any documents or written summary of facts known to
Seller that materially change or render incomplete,
invalid, or inaccurate any of the First Due Diligence
Documents; and
2. Seller's representation to Buyer that the transaction
contemplated herein does not represent a fraudulent
conveyance by Seller.
(All of the above described documents (1) through (2) are
hereinafter collectively referred to as the "Second Due
Diligence Documents").
Buyer shall have ten (10) business days to examine and accept or
reject all of the above-described Second Due Diligence Documents.
If any of the Second Due Diligence Documents are not acceptable
to Buyer, in its sole discretion, Buyer may cancel this Agreement
by delivering a cancellation notice, as provided herein, to
Seller and Closing Agent prior to the end of the Second
Contingency Period. Such notice shall be deemed effective upon
mailing by Buyer. If Buyer so terminates this Agreement, the
Earnest Money shall be immediately returned to Buyer in full and
thereafter neither party shall have any further duties or
obligations to the other hereunder.
It shall be a condition precedent to Buyer's obligations to close
the purchase of the Property hereunder that, after the date of
any due diligence document and prior to closing, there have been
no material changes in any of the information reflected in the
First or Second Due Diligence Documents.
Until this Agreement is terminated, or the Closing has occurred,
Seller shall deliver to Buyer any documentation, including the
Lease, that comes into Seller's possession and modifies any of
the First or Second Due Diligence Documents, or could render any
of the First or Second Due Diligence Documents materially
inaccurate, incomplete or invalid. Buyer shall, in any event,
have five (5) business days before the Closing Date to review any
such document and, if necessary, the Closing Date shall be
extended by the number of days necessary for Buyer to have five
(5) full business days to review any such document or documents.
9. CLOSING COSTS. Seller shall pay all costs of closing,
including, but not limited to, the ownerOs title insurance
commitment and policy, recording fees, escrow fees, any brokerage
fees and the costs of updating and certifying all Due Diligence
Documents unless such costs are otherwise designated herein as
being paid by Buyer. Each party will pay its own attorneys' fees
to close this transaction. Buyer is to pay any transfer fees or
mortgage registration taxes resulting from its recording of a
mortgage or deed of trust on the Property.
On the Closing Date, Seller will reimburse Buyer for its due
diligence expenses in an amount equal to 1.5% of the purchase
price of the Property (approximately $19,375.00).
10. REAL ESTATE TAXES AND ASSESSMENTS. Seller represents to
Buyer that to the best of Seller's knowledge all real estate
taxes and installments of special assessments due and payable on
or before the Closing Date have been, or will be, paid in full as
of the Closing Date. It is understood between Seller and Buyer
that all unpaid levied and pending special assessments are paid
by the Lessee and shall be the responsibility of the Lessee under
the Lease after the Closing Date.
In the event Lessee does not pay any special assessments or real
estate taxes that are the responsibility of the Lessee under the
Lease, Seller and Buyer agree to each pay its prorata share of
said assessments or taxes as of the Closing Date.
11. PRORATIONS. As of the Closing Date, Buyer and Seller shall
prorate: (i) all rent due under the Leases, (ii) ad valorem
taxes, personal property taxes, charges or assignments affecting
the Property (on a calendar year basis), (iii) utility charges,
including charges for water, gas, electricity, and sewer, if any,
(iv) other expenses relating to the Property which have accrued
and become delinquent and not paid in the year of closing, as of
the Closing Date based upon the most current ascertainable tax
bill and other relevant billing information, including any
charges arising under any of the encumbrances to the Property.
To the extent that information for any such proration is not
available on the Closing Date, or if the actual amount of such
taxes, charges or expenses differs from the amount used in the
prorations at Closing, then the parties shall make any
adjustments necessary so that the prorations at Closing Date are
adjusted based upon the actual amount of such taxes, charges or
expenses. The parties agree to make such reprorations as soon as
possible after the actual amount of real estate taxes, charges or
expenses prorated at closing becomes available.
12. SELLEROS REPRESENTATIONS AND WARRANTIES. For the Property,
Seller represents and warrants as of this date and to the best of
Seller's actual knowledge that:
A. Except for this Agreement, and the Lease between Seller
and Hollywood Entertainment Corporation, it is not
aware of any other agreements or leases in existence
with respect to the Property.
B. Seller has all requisite power and authority to
consummate the transaction contemplated by this
Agreement and has, by proper proceedings, duly
authorized the execution and delivery of this Agreement
and the consummation of the transaction contemplated
hereunder.
C. Seller does not have any actions or proceedings pending
which would materially affect the Property or Lessee,
except matters fully covered by insurance.
D. The consummation of the transaction contemplated
hereunder, and the performance of this Agreement and
the delivery of the special warranty deed to Buyer,
will not result in any breach of, or constitute a
default under, any instrument to which Seller is a
party or by which Seller may be bound or affected.
E. All of Seller's covenants, agreements, and
representations made herein, and in any and all
documents which may be delivered pursuant hereto, shall
survive the delivery to Buyer of the special warranty
deed and other documents furnished in accordance with
this Agreement for a period of one (1) year and this
provision hereof shall continue to inure to Buyer's
benefit and its successors and assigns.
F. The Property is in good condition, substantially
undamaged by fire and other hazards, and has not been
made the subject of any condemnation proceeding.
G. The use and operation of the Property is currently in
full compliance with applicable local, state and
federal laws, ordinances, regulations and requirements.
H. These SellerOs representations and warranties are
deemed to be true and correct as of the Closing Date
and shall survive the closing for a period of one year.
I. To Seller's best knowledge, the Property is not in
violation of any federal, state or local law, ordinance
or regulations relating to industrial hygiene or to the
environmental conditions on, under or about the
Property, including, but not limited to, soil and
groundwater conditions. To Seller's actual knowledge,
there is no proceeding or inquiry by any governmental
authority with respect to the presence of hazardous
materials on the Property or the migration of hazardous
materials from or to other property. Seller has not
caused or permitted the Property to be in violation of
any federal, state or local law, ordinance or
regulations relating to industrial hygiene or to the
environmental conditions on, under or about the
Property, including, but not limited to, soil and
groundwater conditions.
J. The transaction contemplated herein does not represent
a fraudulent conveyance by Seller.
K. Seller has, or will have prior to the Closing Date,
provided to Lessee all documents and warranties
required by the Lease.
13. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Seller that:
A. Buyer has all requisite power and authority to
consummate the transaction contemplated by this
Agreement and has, by proper proceedings, duly
authorized the execution and delivery of this Agreement
and the consummation of the transaction contemplated
hereunder.
B. To Buyer's knowledge, neither the execution and
delivery of this Agreement, nor the consummation of the
transaction contemplated hereunder, will violate or be
in conflict with any agreement or instrument to which
Buyer is a party or by which Buyer is bound.
C. These Buyer's representations and warranties deemed to
be true and correct as of the Closing Date and shall
survive the closing.
14. CLOSING.
A. Three (3) days prior to the Closing Date, with simultaneous
copy to Buyer, Seller will deposit into escrow with the Closing
Agent the following documents, for the Property:
1. A Special warranty deed conveying insurable title to
the Property to Buyer, in form and substance as agreed
to between Seller and Buyer during the First
Contingency Period;
2. Estoppel letter from Lessee in form and substance as
agreed to between Seller and Buyer during the First
Contingency Period;
3. Affidavit of Seller in form and substance as agreed to
between Seller and Buyer during the First Contingency
Period;
4. FIRPTA Affidavit in form and substance as agreed to
between Seller and Buyer during the First Contingency
Period;
5. Assignment of Lease in form and substance as agreed to
between Seller and Buyer during the First Contingency
Period;
6. Any documentation modifying the Lease as may be
required by Buyer and agreed to between Buyer and/or
Seller and Lessee during the First Contingency Period;
7. Assignments of all warranties and the written consents
of the assignments thereof by the party giving the
warranty. from the party or parties constructing the
Improvements on the Property;
8. Original insurance policy of Lessee as required by the
Lease;
9. Copy of the final unconditional Certificate of
Occupancy for the Property authorizing LesseeOs use and
occupancy of the Property;
10. Certificate of Completion executed by the projectOs
general contractor and Seller, in form and substance as
agreed to between Seller and Buyer prior to the end of
the First Contingency Period;
11. A down-dated title commitment for an owner's title
insurance policy reflecting only permitted exceptions
approved by Buyer during the First Contingency Period
and including all endorsements required by Buyer. with
any Schedule C requirements removed;
12. Copies of any and all certificates, permits, licenses
and other authorizations of any governmental body or
authority which are necessary to permit the use and
occupancy of the Improvements;
13. Project cost statement signed by Seller and itemizing,
at a minimum, the following costs: land acquisition,
building construction and site work;
14. Seller's indemnification to Buyer for Landlord's
representations and warranties in the Lease, if any;
and
15. The original Lease and any Amendments or Exhibits
thereto, executed by all parties.
B. On or before the Closing Date, Buyer will deposit the
Purchase Price with the Closing Agent;
C. Both parties will sign and deliver to the Closing Agent any
other documents reasonably required by the Closing Agent and/or
the Title Company.
15. TERMINATION. This Agreement may be terminated prior to
closing at Buyer's option and the Earnest Money immediately
returned to Buyer in full in the event of any of the following
occurrences:
A. Seller fails to comply with any of the terms hereof;
B. A default exists in any material financial obligation
of Seller or Lessee;
C. Any representation made or contained in any submission
from Seller or Lessee, or in the Due Diligence
Documents, proves to be untrue, substantially false or
misleading at any time prior to the Closing Date;
D. There has been a material adverse change in the
financial condition of Lessee or there shall be a
material action, suit or proceeding pending or
threatened against Seller which affects SellerOs
ability to perform under this Agreement or against
Lessee which affects Lessee's ability to perform under
the Lease;
E. Any bankruptcy, reorganization, insolvency, withdrawal,
or similar proceeding is instituted by or against
Seller or Lessee;
F. Seller or Lessee shall be dissolved, liquidated or
wound up; and
G. Notice given by Buyer pursuant to any right of
termination herein.
16. DAMAGES, DESTRUCTION AND EMINENT DOMAIN. If, prior to the
Closing Date, any one of the Property, or any part thereof,
should be destroyed or further damaged by fire, the elements, or
any cause, due to events occurring subsequent to the date of this
Agreement, this Agreement shall become null and void at BuyerOs
option, exercised by written notice to Seller within ten (10)
business days after Buyer has received written notice from Seller
of said destruction or damage. Seller, however, shall have the
right to adjust or settle any insured loss until (a) all
contingencies set forth in Article 8 hereof have been satisfied
or waived; and (b) any period provided for above in Article 8
hereof for Buyer to elect to terminate this Agreement has expired
or Buyer has, by written notice to Seller, waived Buyer's right
to terminate this Agreement. If Buyer elects to proceed and to
consummate the purchase despite said damage or destruction, there
shall be no reduction in, or abatement of, the respective
Purchase Price and Seller shall assign to Buyer all of Seller's
right, title and interest in and to all insurance proceeds
resulting from said damage or destruction to the extent that the
same are payable with respect to damage to the Property, subject
to rights of the Lessee.
If prior to closing the Property, or any part thereof, is taken
by eminent domain, this Agreement shall become null and void at
Buyer's option. If Buyer elects to proceed and to consummate the
purchase despite said taking, there shall be no reduction in, or
abatement of, the Purchase Price and Seller shall assign to Buyer
all Seller's right, title and interest in and to any award made,
or to be made, in the condemnation proceeding pro-rata, subject
to rights of the Lessee.
In the event that this Agreement is terminated by Buyer as
provided above, the Earnest Money shall be immediately returned
to Buyer after execution by Buyer of such documents reasonably
requested by Seller to evidence the termination hereof.
17. Notices. All notices from either of the parties hereto to
the other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified mail,
return receipt requested, postage prepaid, or by a nationally
recognized courier service guaranteeing overnight delivery to the
party at his/her or its address set forth below, or to such other
address as such party may hereafter designate by written notice
to the other party.
If to Seller: Magnum Video I, Inc.
4535 Leavenworth Avenue, Suite 12
Omaha, NE 68106
Attention: Mr. John Hughes
Phone No.: 402-558-2200
If to Buyer: AEI Fund Management, Inc.
1300 Minnesota World Trade Center
30 East Seventh Street
St. Paul, Minnesota 55101
Attention: Robert P. Johnson
Phone No.: 651- 227-7333
Notice shall be deemed received 48 hours after proper
deposit in US Mail, or 24 hours after deposit with a nationally
recognized overnight courier.
18. MISCELLANEOUS.
A. This Agreement may be amended only by written agreement
signed by both Seller and Buyer. All waivers must be in writing
and signed by the waiving party. Time is of the essence. This
Agreement will not be construed for or against a party whether or
not that party has drafted this Agreement. If there is any
action or proceeding between the parties relating to this
Agreement, the prevailing party will be entitled to recover
attorneyOs fees and costs. This is an integrated agreement
containing all agreements of the parties about the Property and
the other matters described and it supersedes any other agreement
or understandings. Exhibits attached to this Agreement are
incorporated into this Agreement.
B. If the transaction contemplated hereunder does not close by
the Closing Date, through no fault of Buyer, Buyer may, at its
election, either extend the Closing Date, exercise any remedy
available to it by law, or terminate this Agreement and receive
the immediate full return of its Earnest Money.
C. At its option, this Agreement shall be assignable by Buyer
to an affiliate(s) of Buyer, in whole or in part and in such
manner as Buyer may determine.
D. Buyer warrants Seller that it is acting as a principal in
this transaction it is not represented by any real estate agent.
Seller acknowledges that it is solely responsible for any claim
of commission that may arise concerning this transaction for any
real estate agent which it has retained.
Buyer is submitting this offer by signing a copy of this
Agreement and delivering it to Seller. Seller has until midnight
March 11, 1999 to accept this offer by signing and returning this
Agreement to Buyer. When executed by both parties, this
Agreement will be a binding agreement for valid and sufficient
consideration which will bind and benefit Seller, Buyer and their
respective successors and assigns.
IN WITNESS WHEREOF, Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
SELLER:
MAGNUM VIDEO I, INC.
By: /s/ Joseph H Kutilek
Mr. Joseph H. Kutilek
Its: President
BUYER:
AEI FUND MANAGEMENT, INC.
By: /s/ Robert P Johnson
Robert P. Johnson
Its: President
EXHIBIT A
LEGAL DESCRIPTION OF THE PARCEL
Lot 1, Block 2, Roosevelt Heights Addition to the City of Minot,
Ward County, North Dakota
EXHIBIT "B"
FINANCIAL DOCUMENTATION REQUIREMENTS
Prior to closing, the following must be received and
approved by AEI, along with those items specified more
fully in the Purchase Agreement:
I. Representation, satisfactory to Buyer, that the
sale of the Parcel does not constitute a fraudulent
conveyance.
II.Itemized budget of total project cost for the
property to be purchased.
Items I & II above must be signed by an authorized officer of
Seller certifying to the accuracy thereof. The certification
language must read as follows:
"THE UNDERSIGNED HEREBY CERTIFIES AND WARRANTS THAT
THE INFORMATION CONTAINED IN THESE DOCUMENTS IS TRUE
AND CORRECT, UNDERSTANDS THAT AEI IS RELYING UPON
SUCH INFORMATION AS AN INDUCEMENT FOR ENTERING INTO
A PURCHASE TRANSACTION WITH THE UNDERSIGNED, AND
EXPRESSLY REPRESENTS THAT AEI MAY HAVE RELIANCE UPON
SUCH INFORMATION."
-- EXECUTION COPY --
PURCHASE AGREEMENT
FOR
HOLLYWOOD VIDEO PROPERTY
AT
1304 WOODWARD AVENUE
MUSCLE SHOALS, ALABAMA
THIS PURCHASE AGREEMENT (the "Agreement") entered into and
effective as of the 19th day of April , 1999, by and between NOM
Muscle Shoals, Ltd. (the "Seller") and AEI Fund Management, Inc.,
a Minnesota corporation, or its assigns (the "Buyer").
1. PROPERTY. Seller holds an undivided 100% interest in the fee
title to that certain real property legally described in the
attached Exhibit "A" (the "Parcel"). Seller wishes to sell, and
Buyer wishes to purchase, the Parcel and all improvements thereon
developed as a Hollywood Video store (the "Improvement") on the
Parcel (the Parcel and the Improvement collectively, the
"Property").
2. LEASE. The Property is being sold subject to an existing
Lease with Hollywood Entertainment Corporation, (the "Lessee"),
of execution date September 3, 1998 (the " Lease"). Buyer shall
have the right to approve such Lease which approval shall
include, but shall not be limited to, an Opinion of Counsel from
the State in which Property is located regarding the
enforceability of the Lease, to be obtained at Buyer's expense
during the First Contingency Period as hereinafter defined.
3. CLOSING DATE. The closing date for Buyer's purchase of the
Property shall be fifteen (15) days after the end of the First
Contingency Period as herein defined, subject to the Second Due
Diligence Period. (the "Closing Date").
4. PURCHASE PRICE. The purchase price for the Property shall be
one million two hundred seventy-seven thousand dollars
($1,277,000) which price must be supported by an MAI appraisal of
the Property (such appraisal shall be provided by Buyer at no
cost to Seller). If all conditions precedent to Buyer's
obligations to purchase have been satisfied, Buyer shall deposit
the Purchase Price with a nationally recognized title insurance
company acceptable to Buyer as described in Article 6 hereof (the
"Closing Agent") on or before the Closing Date.
Not more than five (5) business days after full execution of this
Agreement, Buyer will deposit twenty thousand dollars ($20,000)
for the purchase of the Property in an escrow account with the
Closing Agent. Such deposit and all interest earned thereon
(collectively, the "Earnest Money") will be credited against the
Purchase Price paid by Buyer at closing when and if the
transaction contemplated herein closes and the sale is completed.
The balance of the Purchase Price shall be deposited by Buyer
into an escrow account with the Closing Agent on or before the
Closing Date. The Earnest Money is nonrefundable following the
expiration of the First Contingency Period as set forth in
paragraph 8.01, except as otherwise set forth herein.
On the Closing Date, the Purchase Price shall be disbursed as
designated in this Agreement.
5. ESCROW. Escrow shall be opened by Seller with the Closing
Agent upon full execution of this Agreement. A copy of this
Agreement will be delivered to the Closing Agent by Seller and
will serve as escrow instructions together with any additional
instructions required by Seller and/or Buyer or their respective
counsels. Seller and Buyer agree to cooperate with the Closing
Agent and sign any additional instructions reasonably required by
the Closing Agent to close escrow upon purchase of the Property.
If there is any conflict between any other instructions to the
Closing Agent and this Agreement, this Agreement shall control.
6. TITLE. Seller shall deliver to Buyer a commitment for an
ALTA Owner's Policy of Title Insurance (ALTA owner - most recent
edition) for the Property, issued by a nationally recognized
title insurance company acceptable to Buyer (the "Title
Company"), insuring marketable title to the Property subject only
to such matters as Buyer may approve and containing such
endorsements as Buyer may require, including extended coverage
and owner's comprehensive coverage (the "Title Commitment"). The
Title Commitment shall show Seller as the present fee owner of
the Property and show Buyer as the fee owner to be insured.
The Title Commitment shall also:
A. include an itemization of all outstanding and pending
special assessments and taxes affecting the Property
and the tax year to which they relate;
B. include a statement as to whether taxes are current,
and if not, show the amounts unpaid; and
C. include the tax parcel identification number and a
statement as to whether the tax parcel includes
property other than the Property to be purchased.
All easements, restrictions, documents and other items affecting
title shall be listed in Schedule "B" of the Title Commitment.
Copies of all instruments creating such exceptions must be
attached to the Title Commitment.
Buyer shall be allowed ten (10) business days after receipt of
the Title Commitment and copies of all underlying documents or
until the end of the First Contingency Period, whichever is later
to be consistent with Article 8.01 hereof, for examination and
the making of any objections to the Title Commitment, said
objections to be made in writing or deemed waived. If any
objections are so made, Seller shall be allowed thirty (30) days
to cure such objections, or in the alternative, to obtain a
commitment for insurable title insuring over Buyer's objections.
If Seller shall decide to make no effort to cure Buyer's
objections, or is unable to obtain insurable title within said
thirty (30) day period, this Agreement shall be null and void and
of no further force and effect and Buyer's Earnest Money shall be
immediately returned to Buyer in full and neither party shall
have any further duties or obligations to the other hereunder.
Buyer shall also have ten (10) business days to review and
approve any easement, lien, hypothecation or other encumbrance
placed of record affecting the Property after the date of the
Title Commitment. If necessary, the Closing Date shall be
extended by the number of days necessary for Buyer to have ten
(10) business days to review any such items. Said ten (10)
business day review period shall commence on the date Buyer is
provided with a legible copy of the instrument creating such
exception to title. Seller agrees to inform Buyer of any item
executed by Seller and placed of record affecting the Property
after the date of the Title Commitment. If any objections are so
made, Seller shall be allowed thirty (30) days to cure such
objections or, in the alternative, to obtain a commitment for
insurable title insuring over BuyerOs objections. If Seller shall
decide to make no effort to cure BuyerOs objections, or is unable
to obtain insurable title within said thirty (30) day period,
this Agreement shall be null and void and of no further force and
effect and the Earnest Money shall be immediately returned to
Buyer in full and neither party shall have any further duties or
obligations to the other hereunder.
7. SITE INSPECTION. Buyer shall have the option to inspect and
approve the Property during the First Contingency Period.
8. DUE DILIGENCE AND CONTINGENCY PERIODS.
8.01 FIRST DUE DILIGENCE DOCUMENTS AND FIRST CONTINGENCY PERIOD.
Buyer shall have until the later of thirty (30) days from the
Date of the Purchase Agreement, or until the end of ten (10)
business days after the delivery of all of Seller provided First
Due Diligence Documents (the "First Contingency Period"), to
conduct all of its inspections, due diligence and review and to
satisfy itself regarding each item, regarding the Property and
regarding this transaction.
The following Due Diligence Documents for the Property are to be
delivered to Buyer by Seller at Sellers expense, unless
specifically designated herein as being obtained by Buyer,:
A. The Title Commitment, of current or recent date and
copies of all exceptions to title listed therein;
B. Existing ALTA As-Built survey of the Property, dated
after the completion of the present improvements on the
Property accompanied by a reliance letter from the
surveyor to Buyer;
C. Copies of the Lease, and all amendments and assignments
thereto;
D. Phase I environmental site assessment report and report
of limited groundwater investigation, prepared by Bhate
Environmental Associates, Inc., environmental
engineers, containing evidence that the Property
complies with all federal, state and local
environmental regulations and of current date and
certified to Buyer.
E. Copies of the insurance certificate for Lessee as
required by the Lease;
F. Final plans and specifications for the Improvements;
G. All documents which the Title Company deems necessary
to support the authority of the persons executing any
documents on behalf of Seller or Lessee;
H. Existing soils report;
I. Permits and licenses issued or required for the
operation of the premises by Lessee, if any;
J. Real estate tax statement;
K. Certificate of Occupancy;
L. MAI appraisal (less than one year old) stating the
value of the Property with the completed improvements
thereon, of current date and certified to Buyer (If
Buyer elects to rely upon the appraisal of the Property
dated August 20, 1998, prepared by Huber & Lamb
Appraisal Group, Inc., Buyer shall pay the cost, if
any, of having the appraisal certified to Buyer.);
M. Seller prepared AIA Certificate of Substantial
Completion executed by the general contractor and
Seller certifying to Seller, as of the completion date
of the Improvements, that the Improvements have been
completed in accordance with the plans and
specifications and the soils report for the Property
and comply with all applicable building, zoning,
energy, environmental laws and regulations and the
Americans with Disabilities Act; and
N. Zoning compliance letter from the municipality or
county exercising land use control over the Property in
form and substance satisfactory to Buyer, to be
obtained by Buyer, to be of current date and certified
to Buyer.
All of the above described documents (A) through (N) are
hereinafter collectively the "First Due Diligence Documents".
In its sole discretion, Buyer may cancel this Agreement for any
reason by delivering a cancellation notice, return receipt
requested, to Seller and Closing Agent prior to the end of the
First Contingency Period. In the event of such cancellation, all
due diligence documents provided by Seller shall be returned to
Seller and the Earnest Money shall be immediately returned to
Buyer in full and neither party shall have any further duties or
obligations to the other hereunder. Such notice shall be deemed
effective upon mailing by Buyer.
8.02 FORM OF CLOSING DOCUMENTS. Prior to the end of the First
Contingency Period, Seller and Buyer shall agree on the form of
the following documents, all to be delivered to Buyer by Seller
on the Closing Date, as set forth in Article 14 hereof:
A. Special warranty deed;
B. Seller's Affidavit;
C. FIRPTA Affidavit;
D. Assignment of the Lease;
E. Assignment of warranties from the party or parties
constructing the Improvements on the Property;
G. Seller prepared AIA Certificate of Substantial
Completion executed by the general contractor and
Seller, certifying to Seller, as of the completion date
of the Improvements, that the Improvements have been
completed in accordance with the plans and
specifications and the soils report for the Property
and comply with all applicable building, zoning,
energy, environmental laws and regulations and the
Americans with Disabilities Act;
H. Estoppel from Lessee;
I. Indemnity from Seller in favor of Buyer for
representations and warranties for which the Landlord
is liable under the Lease, including but not limited to
construction matters;
J. Any documentation modifying the Lease as may be
required by Buyer and agreed to between Buyer and/or
Seller and Tenant; and
K. The assignments of all warranties, and if such
warranties are not unassignable on their face, the
written consents of the assignments thereof by the
party giving the warranty from the party or parties
constructing the Improvements on the Property.
In the event that Seller and Buyer, and where applicable Lessee,
do not reach mutual agreement on the form of the above-described
documents (A) through (K) prior to the end of the First
Contingency Period, this Agreement may be terminated by either
Seller or Buyer and the Earnest Money shall be immediately
returned to Buyer in full and neither party shall have any
further duties or obligations to the other hereunder.
8.03 SECOND DUE DILIGENCE DOCUMENTS AND SECOND CONTINGENCY
PERIOD.
As soon as available, but in any event no less than ten (10)
business days prior to the Closing Date (the "Second Contingency
Period"), Seller shall deliver to Buyer the following items for
Buyer's review and acceptance:
1. Any documents or written summary of facts known to
Seller that materially change or render incomplete,
invalid, or inaccurate any of the First Due Diligence
Documents; and
2. Seller's representation to Buyer that the transaction
contemplated herein does not represent a fraudulent
conveyance by Seller.
All of the above described documents (1) and (2) are
hereinafter collectively referred to as the "Second Due
Diligence Documents".
Buyer shall have ten (10) business days to examine and
accept or reject all of the Second Due Diligence Documents.
If any of the Second Due Diligence Documents are not
acceptable to Buyer, in its sole discretion, Buyer may
cancel this Agreement by delivering a cancellation notice,
as provided herein, to Seller and Closing Agent prior to the
end of the Second Contingency Period. Such notice shall be
deemed effective upon mailing by Buyer. If Buyer so
terminates this Agreement, the Earnest Money shall be
immediately returned to Buyer in full and thereafter neither
party shall have any further duties or obligations to the
other hereunder.
It shall be a condition precedent to Buyer's obligations to close
the purchase of the Property hereunder that, after the date of
any due diligence document and prior to closing, there have been
no material changes in any of the information reflected in the
First or Second Due Diligence Documents.
Until this Agreement is terminated, or the Closing has occurred,
Seller shall deliver to Buyer any documentation, including the
Lease, that comes into Seller's possession and modifies any of
the First or Second Due Diligence Documents, or could render any
of the First or Second Due Diligence Documents materially
inaccurate, incomplete or invalid. Buyer shall, in any event,
have five (5) business days before the Closing Date to review any
such document and to terminate this agreement if such document is
not acceptable to Buyer in its sole discretion. If necessary, the
Closing Date shall be extended by the number of days necessary
for Buyer to have five (5) full business days to review and
approve any such document or documents.
9. CLOSING COSTS. Seller shall pay the following costs of
closing: the owner's title insurance commitment and policy
(including the cost of deletion of any standard exceptions, but
not the cost of any further endorsements), recording costs,
transfer fees, any brokerage fees and the costs of updating and
certifying all Due Diligence Documents unless such costs are
otherwise designated herein as being paid by Buyer. Buyer
represents that it has dealt with no broker in regards to this
transaction other than Wade Lennox of the Lennox / Massell
Companies whose brokerage fee, if any, shall be paid by Seller.
Seller and Buyer shall each pay one-half of the escrow fee. Each
party will pay its own attorneys' fees to close this transaction.
Buyer is to pay any transfer fees or mortgage registration taxes
resulting from its recording of a mortgage or deed of trust on
the Property.
10. REAL ESTATE TAXES AND ASSESSMENTS. Seller represents to
Buyer that to the best of Seller's knowledge all real estate
taxes and installments of special assessments due and payable on
or before the Closing Date have been, or will be, paid in full as
of the Closing Date. It is understood between Seller and Buyer
that all unpaid levied and pending special assessments are paid
by the Lessee and shall be the responsibility of the Lessee under
the Lease after the Closing Date.
In the event Lessee does not pay any special assessments or real
estate taxes that are the responsibility of the Lessee under the
Lease, Seller and Buyer agree to each pay its prorata share of
said assessments or taxes as of the Closing Date.
11. PRORATIONS. As of the Closing Date, Buyer and Seller shall
prorate: (i) all rent due under the Leases, (ii) ad valorem
taxes, personal property taxes, charges or assignments affecting
the Property (on a calendar year basis), (iii) utility charges,
including charges for water, gas, electricity, and sewer, if any,
(iv) other expenses relating to the Property which have accrued
and become delinquent and not paid in the year of closing, as of
the Closing Date based upon the most current ascertainable tax
bill and other relevant billing information, including any
charges arising under any of the encumbrances to the Property. To
the extent that information for any such proration is not
available on the Closing Date, or if the actual amount of such
taxes, charges or expenses differs from the amount used in the
prorations at Closing, then the parties shall make any
adjustments necessary so that the prorations at Closing Date are
adjusted based upon the actual amount of such taxes, charges or
expenses. The parties agree to make such reprorations as soon as
possible after the actual amount of real estate taxes, charges or
expenses prorated at closing becomes available.
12. SELLER'S REPRESENTATIONS AND WARRANTIES. For the Property,
Seller represents and warrants as of this date and to the best of
Seller's actual knowledge that:
A. Except for this Agreement, and the Lease between Seller
and Hollywood Entertainment Corporation, it is not
aware of any other agreements or leases in existence
with respect to the Property.
B. Seller has all requisite power and authority to
consummate the transaction contemplated by this
Agreement and has, by proper proceedings, duly
authorized the execution and delivery of this Agreement
and the consummation of the transaction contemplated
hereunder.
C. Seller does not have any actions or proceedings pending
which would materially affect the Property or Lessee,
except matters fully covered by insurance.
D. The consummation of the transaction contemplated
hereunder, and the performance of this Agreement and
the delivery of the special warranty deed to Buyer,
will not result in any breach of, or constitute a
default under, any instrument to which Seller is a
party or by which Seller may be bound or affected.
E. All of Seller's covenants, agreements, representations
and warranties made herein, and in any and all
documents which may be delivered pursuant hereto, shall
survive the delivery to Buyer of the special warranty
deed and other documents furnished in accordance with
this Agreement for a period of one (1) year and this
provision hereof shall continue to inure to Buyer's
benefit and its successors and assigns.
F. The Property is in good condition, substantially
undamaged by fire and other hazards, and has not been
made the subject of any condemnation proceeding.
G. The use and operation of the Property is currently in
full compliance with applicable local, state and
federal laws, ordinances, regulations and requirements.
H. These Seller's representations and warranties are
deemed to be true and correct as of the Closing Date
and shall survive the closing for a period of one year.
I. To Seller's best knowledge, the Property is not in
violation of any federal, state or local law, ordinance
or regulations relating to industrial hygiene or to the
environmental conditions on, under or about the
Property, including, but not limited to, soil and
groundwater conditions. To Seller's actual knowledge,
there is no proceeding or inquiry by any governmental
authority with respect to the presence of hazardous
materials on the Property or the migration of hazardous
materials from or to other property. Seller has not
caused or permitted the Property to be in violation of
any federal, state or local law, ordinance or
regulations relating to industrial hygiene or to the
environmental conditions on, under or about the
Property, including, but not limited to, soil and
groundwater conditions.
J. The transaction contemplated herein does not represent
a fraudulent conveyance by Seller.
13. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Seller that:
A. Buyer has all requisite power and authority to
consummate the transaction contemplated by this
Agreement and has, by proper proceedings, duly
authorized the execution and delivery of this Agreement
and the consummation of the transaction contemplated
hereunder.
B. To Buyer's knowledge, neither the execution and
delivery of this Agreement, nor the consummation of the
transaction contemplated hereunder, will violate or be
in conflict with any agreement or instrument to which
Buyer is a party or by which Buyer is bound.
C. These Buyer's representations and warranties deemed to
be true and correct as of the Closing Date and shall
survive the closing for a period of one (1) year.
14. CLOSING.
A. Three (3) days prior to the Closing Date, with simultaneous
copy to Buyer, Seller will deposit into escrow with the Closing
Agent the following documents, for the Property:
1. A Special warranty deed conveying insurable title to
the Property to Buyer, in form and substance as agreed
to between Seller and Buyer during the First
Contingency Period;
2. Estoppel letter from Lessee in form and substance as
agreed to between Seller and Buyer during the First
Contingency Period;
3. Affidavit of Seller in form and substance as agreed to
between Seller and Buyer during the First Contingency
Period;
4. FIRPTA Affidavit in form and substance as agreed to
between Seller and Buyer during the First Contingency
Period;
5. Assignment of Lease in form and substance as agreed to
between Seller and Buyer during the First Contingency
Period;
6. Any documentation modifying the Lease as may be
required by Buyer and agreed to between Buyer and/or
Seller and Lessee during the First Contingency Period;
7. Assignments of all warranties and the written consents
of the assignments thereof by the party giving the
warranty. from the party or parties constructing the
Improvements on the Property;
8. Original insurance policy of Lessee as required by the
Lease;
9. Copy of the final unconditional Certificate of
Occupancy for the Property authorizing Lessee's use and
occupancy of the Property;
10. Certificate of Completion executed by the project's
general contractor and Seller, in form and substance as
agreed to between Seller and Buyer prior to the end of
the First Contingency Period;
11. A down-dated title commitment for an owner's title
insurance policy reflecting only permitted exceptions
approved by Buyer during the First Contingency Period
and including all endorsements required by Buyer with
any Schedule C requirements removed;
12. Copies of any and all certificates, permits, licenses
and other authorizations of any governmental body or
authority which are necessary to permit the use and
occupancy of the Improvements;
13. Project cost statement signed by Seller and itemizing,
at a minimum, the following costs: land acquisition,
building construction and site work;
14. SellerOs indemnification to Buyer for Landlord's
representations and warranties in the Lease, if any;
and
15. The original Lease and any Amendments thereto, executed
by all parties.
B. On or before the Closing Date, Buyer will deposit the
Purchase Price with the Closing Agent;
C. Both parties will sign and deliver to the Closing Agent any
other documents reasonably required by the Closing Agent and/or
the Title Company.
15. TERMINATION. This Agreement may be terminated prior to
closing at Buyer's option and the Earnest Money immediately
returned to Buyer in full in the event of any of the following
occurrences:
A. Seller fails to comply with any of the terms hereof;
B. A default exists in any material financial obligation
of Seller or Lessee;
C. Any representation made or contained in any submission
from Seller or Lessee, or in the Due Diligence
Documents, proves to be untrue, substantially false or
misleading at any time prior to the Closing Date;
D. There has been a material adverse change in the
financial condition of Lessee or there shall be a
material action, suit or proceeding pending or
threatened against Seller which affects Seller's
ability to perform under this Agreement or against
Lessee which affects Lessee's ability to perform under
the Lease;
E. Any bankruptcy, reorganization, insolvency, withdrawal,
or similar proceeding is instituted by or against
Seller or Lessee;
F. Seller or Lessee shall be dissolved, liquidated or
wound up; and
G. Notice given by Buyer pursuant to any right of
termination herein.
16. DAMAGES, DESTRUCTION AND EMINENT DOMAIN. If, prior to the
Closing Date, the Property or any part thereof should be
destroyed or damaged by fire, the elements, or any cause, due to
events occurring subsequent to the date of this Agreement, this
Agreement shall become null and void at Buyer's option, exercised
by written notice to Seller within ten (10) business days after
Buyer has received written notice from Seller of said destruction
or damage. Seller, however, shall have the right to adjust or
settle any insured loss until (a) all contingencies set forth in
Article 8 hereof have been satisfied or waived; and (b) any
period provided for in Article 8 hereof for Buyer to elect to
terminate this Agreement has expired, or Buyer has, by written
notice to Seller, waived Buyer's right to terminate this
Agreement. If Buyer elects to proceed and to consummate the
purchase despite said damage or destruction, there shall be no
reduction in, or abatement of, the respective Purchase Price and
Seller shall assign to Buyer all of SellerOs right, title and
interest in and to all insurance proceeds resulting from said
damage or destruction to the extent that the same are payable
with respect to damage to the Property, subject to rights of the
Lessee.
If, prior to closing, the Property or any part thereof is taken
by eminent domain, this Agreement shall become null and void at
Buyer's option. If Buyer elects to proceed and to consummate the
purchase despite said taking, there shall be no reduction in, or
abatement of, the Purchase Price and Seller shall assign to Buyer
all Seller's right, title and interest in and to any award made,
or to be made, in the condemnation proceeding pro-rata, subject
to rights of the Lessee.
In the event this Agreement is terminated by Buyer as provided
herein, the Earnest Money shall be immediately returned to Buyer
after execution by Buyer of such documents reasonably requested
by Seller to evidence the termination hereof.
17. NOTICES. All notices from either of the parties hereto to
the other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified mail,
return receipt requested, postage prepaid, or by a nationally
recognized courier service guaranteeing overnight delivery to the
party at his/her or its address set forth below, or to such other
address as such party may hereafter designate by written notice
to the other party.
If to Seller: Newton Oldacre McDonald
200 31st Avenue North, Suite 200
Nashville, Tennessee 37203
Attn: Mr. Mark McDonald
Phone: 615-383-6866
If to Buyer: AEI Fund Management, Inc.
1300 Minnesota World Trade Center
30 East Seventh Street
St. Paul, Minnesota 55101
Attn: Robert P. Johnson
Phone: 651-227-7333
Notice shall be deemed received 48 hours after proper
deposit in US Mail, or 24 hours after deposit with a nationally
recognized overnight courier.
18. MISCELLANEOUS.
A. This Agreement may be amended only by written agreement
signed by both Seller and Buyer. All waivers must be in writing
and signed by the waiving party. Time is of the essence. This
Agreement will not be construed for or against a party whether or
not that party has drafted this Agreement. If there is any action
or proceeding between the parties relating to this Agreement, the
prevailing party will be entitled to recover attorney's fees and
costs. This is an integrated agreement containing all agreements
of the parties about the Property and the other matters described
and it supersedes any other agreement or understandings. Exhibits
attached to this Agreement are incorporated into this Agreement.
B. If the transaction contemplated hereunder does not close by
the Closing Date, through no fault of Buyer, Buyer may, at its
election, either extend the Closing Date, exercise any remedy
available to it by law, or terminate this Agreement and receive
the immediate full return of the Earnest Money.
C. At its option, this Agreement shall be assignable by Buyer
to an affiliate(s) of Buyer, in whole or in part and in such
manner as Buyer may determine.
(The rest of this page intentionally left blank.)
IN WITNESS WHEREOF, Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
SELLER: WITNESS:
NOM Muscle Shoals, Ltd. By: /s/ Cynthia M Knight
By: Corporate General, Inc.,
its sole general partner Print: Cyntia M Knight
By: /s/ Mark McDonald
Mark McDonald
Its: Vice President
NOTARY: /s/ Dawn Curtis
commission expires 7/27/2002
BUYER: WITNESS:
AEI FUND MANAGEMENT, INC. By: /s/ Thomas E Lehmann
By: /s/ Robert P Johnson Print: Thomas E Lehmann
Robert P. Johnson
Its: President
NOTARY: /s/ Barbara J Kochevar
[notary seal]
EXHIBIT "A"
LEGAL DESCRIPTION
Colbert County, Alabama, and being more particularly described s
follows: Commence at the NE corner of the SE 1/4 of the SE 1/4
of said Section 34; thence N 88 degrees 53O 26O W. 19.32 feet to
the point of beginning of the tract of land hereby described;
thence S 88 degrees 53O 26O E. 19.32 feet to a point; thence S 89
degrees 15O 31O E. 798.68 feet to a point on the West right of
way line of Woodward Avenue; thence along the West line of
Woodward Avenue, South 310.80 feet to a point; thence leave said
right of way, N 89 degrees 15O W. 337.00 feet to a point; thence
North 60.60 feet to a point; thence West 480.96 feet to a point
on a fence; thence generally along a fence, North 256.60 feet to
the point of beginning of the tract of land hereby described.
TRACT TWO
That tract or lot of land lying in the City of Muscle Shoals,
County of Colbert, State of Alabama, known and described as
follows, to-wit: Lots 477, 478 and 479, known and designated
according to the map and survey of Highland Park Subdivision,
Plat No. 3, as the plat appears in the Office of the Judge of
Probate of Colbert County, Alabama, in Map Book 2, Page 31.
EXHIBIT "B"
FINANCIAL DOCUMENTATION REQUIREMENTS
Prior to closing, the following must be received and
approved by AEI, along with those items specified more
fully in the Purchase Agreement:
I. Representation, satisfactory to Buyer, that the
sale of the Parcel does not constitute a fraudulent
conveyance.
II.Itemized budget of total project cost for the
property to be purchased.
Items I & II above must be signed by an authorized officer of
Seller certifying to the accuracy thereof. The certification
language must read as follows:
"THE UNDERSIGNED HEREBY CERTIFIES AND WARRANTS THAT
THE INFORMATION CONTAINED IN THESE DOCUMENTS IS TRUE
AND CORRECT, UNDERSTANDS THAT AEI IS RELYING UPON
SUCH INFORMATION AS AN INDUCEMENT FOR ENTERING INTO
A PURCHASE TRANSACTION WITH THE UNDERSIGNED, AND
EXPRESSLY REPRESENTS THAT AEI MAY HAVE RELIANCE UPON
SUCH INFORMATION."
ASSIGNMENT
OF
PURCHASE AGREEMENT
THIS ASSIGNMENT made and entered into this 27th day of
April, 1999, by and between AEI FUND MANAGEMENT, INC., a
Minnesota corporation, ("Assignor") and AEI INCOME & GROWTH
FUND XXII LIMITED PARTNERSHIP, a Minnesota limited
partnership ("Assignee");
WITNESSETH, that:
WHEREAS, on the 10th day of March, 1999, Assignor
entered into Purchase Agreement ("the Agreement") for that
certain property located at 1700 South Broadway, Minot,
North Dakota (the "Property") Magnum Video I, Inc., as
Seller; and
WHEREAS, Assignor desires to assign all of its rights,
title and interest in, to and under the Agreement to
Assignee as hereinafter provided;
NOW, THEREFORE, for One Dollar ($1.00) and other good
and valuable consideration, receipt of which is hereby
acknowledged, it is hereby agreed between the parties as
follows:
1. Assignor assigns all of its rights, title and
interest in, to and under the Agreement to Assignee, to
have and to hold the same unto the Assignee, its
successors and assigns;
2. Assignee hereby assumes all rights, promises,
covenants, conditions and obligations under the
Agreement to be performed by the Assignor thereunder,
and agrees to be bound for all of the obligations of
Assignor under the Agreement.
All other terms and conditions of the Agreement shall remain
unchanged and continue in full force and effect.
AEI FUND MANAGEMENT, INC.
("Assignor")
By: /s/ Robert P Johnson
Robert P. Johnson, its President
AEI INCOME & GROWTH FUND XXII
LIMITED PARTNERSHIP
("Assignee")
BY: AEI FUND MANAGEMENT XXI, INC.
By: /s/ Robert P Johnson
Robert P. Johnson, its President
ASSIGNMENT
OF
PURCHASE AGREEMENT
THIS ASSIGNMENT made and entered into this 27th day of
April, 1999, by and between AEI FUND MANAGEMENT, INC., a
Minnesota corporation, ("Assignor") and AEI INCOME & GROWTH
FUND XXII LIMITED PARTNERSHIP, a Minnesota limited
partnership ("Assignee");
WITNESSETH, that:
WHEREAS, on the 19th day of April, 1999, Assignor
entered into Purchase Agreement ("the Agreement") for that
certain property located 1304 Woodward Avenue, Muscle
Shoals, AL (the "Property") NOM Muscle Shoals LTD., as
Seller; and
WHEREAS, Assignor desires to assign all of its rights,
title and interest in, to and under the Agreement to
Assignee as hereinafter provided;
NOW, THEREFORE, for One Dollar ($1.00) and other good
and valuable consideration, receipt of which is hereby
acknowledged, it is hereby agreed between the parties as
follows:
1. Assignor assigns all of its rights, title and
interest in, to and under the Agreement to Assignee, to
have and to hold the same unto the Assignee, its
successors and assigns;
2. Assignee hereby assumes all rights, promises,
covenants, conditions and obligations under the
Agreement to be performed by the Assignor thereunder,
and agrees to be bound for all of the obligations of
Assignor under the Agreement.
All other terms and conditions of the Agreement shall remain
unchanged and continue in full force and effect.
AEI FUND MANAGEMENT, INC.
("Assignor")
By: /s/ Robert P Johnson
Robert P. Johnson, its President
AEI INCOME & GROWTH FUND XXII
LIMITED PARTNERSHIP
("Assignee")
BY: AEI FUND MANAGEMENT XXI, INC.
By: /s/ Robert P Johnson
Robert P. Johnson, its President
FIRST AMENDMENT
TO
PURCHASE AGREEMENT
THIS AMENDMENT made and entered into this 27th day of
April, 1999, (effective April 26, 1999), by and between AEI
FUND MANAGEMENT, INC., a Minnesota corporation, ("AEI") and
NOM Muscle Shoals, Ltd., an Alabama limited partnership,
("Seller");
WITNESSETH, that:
WHEREAS, on the 19th day of April 1999 the parties
hereto executed a Purchase Agreement ("Agreement"), and
WHEREAS, AEI and Seller have agreed to amend certain
terms and conditions of said Agreement as hereinafter
provided;
NOW, THEREFORE, for One Dollar ($1.00) and other good
and valuable consideration, receipt of which is hereby
acknowledged, it is hereby agreed between the parties as
follows:
1.Article 4 of the Agreement is amended to provide for
a purchase price of one million three hundred
fifteen thousand three hundred ten dollars
($1,315,310.00).
2.The following sentence is added to the end of
Article 9: "Seller shall pay to Buyer at closing
the amount of thirty-eight thousand three hundred
ten dollars as reimbursement of Buyer's overhead
expenses."
3.Article 17 is amended by deleting Seller's former
address and telephone number and by adding Seller's
current address and telephone number, which is
Newton Oldacre McDonald; 3841 Green Hills Village
Drive, Suite 400; Nashville, Tennessee 37215;
Attention: Mark McDonald; Phone: 615-269-5444
EXCEPT AS SPECIFICALLY SET FORTH ABOVE all other terms
and conditions of said Agreement shall remain unchanged and
in full force and effect.
(The rest of this page intentionally left blank.)
IN WITNESS WHEREOF, Seller and Buyer have executed this
amendment to the Agreement effective as of the day and year
above first written.
SELLER: WITNESS:
NOM Muscle Shoals, Ltd. By: /s/ EH Camp III
By: Corporate General, Inc.,
its sole general partner Print: EH Camp III
By: /s/ William A Oldacre
William A. Oldacre
Its: Vice President
BUYER: WITNESS:
AEI FUND MANAGEMENT, INC. By: /s/ Thomas E Lehmann
By: /s/ Robert P Johnson Print: Thomas E Lehmann
Robert P. Johnson
Its: President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001023458
<NAME> AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 8,536,433
<SECURITIES> 0
<RECEIVABLES> 44,481
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,580,914
<PP&E> 5,328,730
<DEPRECIATION> (31,195)
<TOTAL-ASSETS> 13,878,449
<CURRENT-LIABILITIES> 325,188
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13,553,261
<TOTAL-LIABILITY-AND-EQUITY> 13,878,449
<SALES> 0
<TOTAL-REVENUES> 194,872
<CGS> 0
<TOTAL-COSTS> 66,620
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 128,252
<INCOME-TAX> 0
<INCOME-CONTINUING> 128,252
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,252
<EPS-PRIMARY> 7.50
<EPS-DILUTED> 7.50
</TABLE>
