As filed with the Securities Exchange Commission on November 15, 2000
File No. 000-30449
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO.6
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AEI INCOME & GROWTH FUND 23 LLC
(Name of small business issuer in its charter)
Deleware 6500 41-1848181
(State of other (Primary Standard Industrial (IRS Employer
jurisdiction Classification Code Number) Identification Number)
incorporation)
1300 Minnesota World Robert P. Johnson Copies to:
Trade Center 1300 Minnesota World Trade Center Thomas O. Martin
30 East Seventh Street 30 East Seventh Street Dorsey & Whitney LLP
St. Paul, Minnesota 55101 St. Paul, Minnesota 55101 Pillsbury Center South
(651) 227-7333 or (651) 227-7333 or 220 South Sixth Street
(800) 328-3519 (800) 328-3519 Minneapolis, Minnesota
(Address and telephone (Name, address, including 55402-1498
number of principal zip code and telephone
executive offices and number of agent for
intended principal place service of process)
of business)
Approximate date of proposed sale to public: As soon as
practical after the effective date of this Registration Statement.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
AEI INCOME & GROWTH FUND 23
LIMITED LIABILITY COMPANY
24,000 Limited Liability Company Units
($1,000 Per Unit)
SUPPLEMENT NO. 6
TO
PROSPECTUS DATED MARCH 23, 1999
This Supplement is distributed only with the Prospectus dated
March 23, 1999 and must be read in conjunction therewith.
AEI SECURITIES, INC.
1300 Minnesota World Trade Center
30 East 7th Street
St. Paul, Minnesota 55101
(651) 227-7333
(800) 328-3519
FAX (651) 227-7705
The date of this Supplement is November 15, 2000
1
THIS SUPPLEMENT
This Supplement is distributed to potential purchasers of
limited liability company interests ("Units") in AEI Income &
Growth Fund 23 LLC (the "LLC"), a limited liability company
formed to acquire existing and newly constructed commercial
properties in the United States, to lease such properties to
corporate tenants under "triple-net" leases, to hold such
properties for appreciation, and eventually to resell such
properties for a profit.
This Supplement is distributed only with the Prospectus
relating to an investment in the LLC dated March 23, 1999 (the
"Prospectus") which provides detailed information relating to the
LLC. This Supplement is intended only to update the Prospectus
by providing current information on the following topics at the
pages indicated:
Current Status
Release From Escrow 3
Operating Policies
Final Sale of Properties 3
Borrowings 3
Properties
Completed Acquisition 3
Pending Acquisitions 4
Selected Financial Data 5
Management's Discussion and Analysis 6
Financial Statements of the LLC at December 31,
1999 and 1998 and for the Periods Then Ended 10
Financial Statements of the LLC at September 30,
2000 and 1999 and for the Periods Then Ended 21
Balance Sheet of the Managing Member at
December 31, 1999 and 1998 29
Exhibit B - Prior Performance Tables B-1
Each person who has received this Supplement should also
have received a copy of the Prospectus. The Prospectus should be
carefully reviewed for a detailed description of an investment in
the LLC, including information relating to the management of the
LLC, the LLC's objectives and certain risks of investment in the
LLC. Included among the risks of investment in the LLC are:
Risks inherent in the significant compensation to be
paid to the Managing Members and their Affiliates;
Risks related to the purchase of real estate generally
(including changing market values,tenant defaults,illiquidity
of properties and difficulties of resale, among others);
Risks related to the illiquidity of an investment in
the units and the difficulty an investor may have in
disposing of his or her investment;
Risks related to conflicts of interest the Managing
Members may have in forming and operating the LLC ;
Risks related to the inability of investors to review
in advance the property which the LLC may acquire and the
reliance the investors must place on the ability of the
Managing Members to chose appropriate investments;
Risks related to the treatment of an investment in the
LLC under Federal income tax laws.
2
CURRENT STATUS
Release from Escrow
The Prospectus indicated that the LLC would not be formed
and capitalized, and all subscription funds would be held in
escrow, until receipt of subscriptions for 1,500 Units.
Subscriptions for the 1,500 Units required for release of escrow
proceeds were obtained, and the escrow proceeds released on
September 30, 1999. Since that time, the LLC has commenced the
normal operation of investigating the acquisition of properties
and has, through the date of this supplement, entered into an
agreement to acquire one property. See "Property." Pending
investment in properties, subscription proceeds have been
invested in short-term money market accounts. See "Management's
Discussion and Analysis."
At October 31, 2000, the LLC had accepted subscriptions
for 9,026.447 Units for aggregate proceeds of $9,026,447.
OPERATING POLICIES
Final Sale of Properties
Although the Operating Agreement provides that the
existence of AEI Income & Growth Fund 23 may continue until 2048,
it is likely that it will be dissolved and liquidated earlier
after the sale of all of its properties. Currently, the managers
intend to sell AEI Income & Growth Fund 23's properties and
commence liquidating the LLC 8 to 10 years after completion of
the acquisition phase, depending upon the then current real
estate and money markets, the economic climate and the income tax
consequences to investors.
Borrowings
Because of the potential adverse tax consequences for
charitable remainder trusts that purchase Units in AEI Income &
Growth Fund 23, no borrowings will be used to acquire properties.
Properties will not be financed in the future to obtain proceeds
for new property acquisitions. AEI Income & Growth Fund 23 may,
however, incur indebtedness to finance its day-to-day operations,
redeem Units submitted for repurchase under the repurchase
provisions, stabilize distributions to investors or for any other
purposes deemed by the managers to be in the best interest of AEI
Income & Growth Fund 23, other than the acquisitions of
properties. AEI Income & Growth Fund 23 will not incur borrowings
while there is cash available for distributions.
PROPERTIES
Completed Acquisition
Tumbleweed - Kettering, Ohio. On February 25, 2000, the
LLC purchased a parcel of land in Kettering, Ohio for $459,500.
The land is leased to Tumbleweed, Inc. (TWI) under a Lease
Agreement with a primary term of 15 years and annual rental
payments of $39,058. Simultaneously with the purchase of the
land, the LLC entered into a Development Financing Agreement
under which the LLC will advance funds to TWI for the
construction of a Tumbleweed restaurant on the site. On August
23, 2000, after the development was completed, the Lease
Agreement was amended to require annual rental payments of
$120,821. Total acquisition costs, including the cost of the
land, were $1,235,159.
3
The restaurant is located on East Dorothy Lane in
Kettering, Ohio, a suburb of Dayton. East Dorothy Lane is a
major artery running east and west through Kettering, connecting
Highways 49 and 675, both which run north and south through the
Dayton metro plex. The site is on a pad of a shopping center
anchored by Elder-Beerman. The immediate area is surrounded by
smaller specialty retail stores, a grocery store and other
national restaurant concepts. The population within a 3-mile
radius of the site was over 90,000 in 1997, with an average
household income of over $53,000. The restaurant is
approximately 5,400 square feet and will be located on a lot of
approximately 39,000 square feet.
Tumbleweed is a casual theme restaurant which features Tex-
Mex and mesquite grilled foods. It owns and operates 34
restaurants in Kentucky, Indiana and Ohio and has 19 additional
restaurants franchised in the United States and 7 restaurants
outside the United States. Tumbleweed is publicly traded on the
NASDAQ and reported to the Securities and Exchange Commission
total assets of $39.3 million and $36.5 million, stockholders'
equity of $17.8 million and $17.5 million, total revenues of
$42.4 million and $51.3 million, and net income of $.5 million
and $1.2 million for the nine months ending September 30, 2000
and for its year ending December 31, 1999, respectively.
Pending Acquisitions
Johnny Carino's Country Italian - Victoria, Texas. On
April 18, 2000, the LLC purchased a parcel of land in Victoria,
Texas for $409,500. The land is leased to Kona Restaurant Group,
Inc. (KRG) under a Lease Agreement with a primary term of 17
years and annual rental payments of $42,998. Simultaneously with
the purchase of the land, the LLC entered into a Development
Financing Agreement under which the LLC will advance funds to KRG
for the construction of a Johnny Carino's restaurant on the site.
Through September 30, 2000, the LLC has advanced $910,285 and is
charging interest on the advances at a rate of 10.5%. The total
purchase price, including the cost of the land, will be
approximately $1,800,000. After the construction is complete,
the Lease Agreement will be amended to require annual rental
payments of approximately $189,000.
The restaurant will be approximately 6,500 square feet,
with seating capacity for 272, on approximately 1.63 acres. The
site is located at 4904 North Navarro, which is approximately two
and one-half miles north of the central business district and one
and one-half miles south of the Victoria Mall. Navarro is a six-
lane road with a daily traffic count of approximately 30,000
cars. The immediate area is surrounded by retail properties,
banks and other local and national restaurant concepts. The
population in a five mile radius is approximately 60,000
individuals.
Johnny Carino's is a casual theme Italian restaurant
concept. Fired Up, Inc., the parent company of KRG, is a
privately held, multi-concept restaurant company, which owns and
operates sixteen Johnny Carino's and five other restaurants
operated under two other concepts.
Razzoo's - San Antonio, Texas. On April 19, 2000, the LLC
purchased a parcel of land in San Antonio, Texas for $1,558,000.
The land is leased to Razzoo's, Inc. (RI) under a Lease Agreement
with a primary term of 15 years and annual rental payments of
$132,430. Simultaneously with the purchase of the land, the LLC
entered into a Development Financing Agreement under which the
LLC will advance funds to RI for the construction of a Razzoo's
restaurant on the site. Through September 30, 2000, the LLC has
advanced $942,174 and is charging interest on the advances at a
rate of 8.5%. Effective September 15, 2000, the interest rate
was increased to 9.75%. The total purchase price, including the
cost of the land, will be approximately $3,510,000. After the
construction is complete, the Lease Agreement will be amended to
require annual rental payments of approximately $342,000.
The restaurant will be approximately 8,100 square feet,
with seating capacity for 288, on approximately 2.04 acres. The
site is located in the northeast quadrant of Highway 281 North
and Central Parkway North in San Antonio, Texas. Highway 281 is
a heavily traveled commercial artery which is surrounded by
various types of commercial businesses and multi-tenant office
buildings and other local and national restaurant concepts. The
population in a five mile radius is approximately 180,000
individuals.
4
Razzoo's - Alpharetta, Georgia. On June 30, 2000, the LLC
purchased a 44% interest in a parcel of land in Alpharetta,
Georgia for $707,520. The land is leased to Razzoo's, Inc. (RI)
under a Lease Agreement with a primary term of 15 years and
annual rental payments of $60,139. Simultaneously with the
purchase of the land, the LLC entered into a Development
Financing Agreement under which the LLC will advance funds to RI
for the construction of a Razzoo's restaurant on the site.
Through September 30, 2000, the LLC had advanced $36,045 for the
construction of the property and was charging interest on the
advances at a rate of 8.5%. The LLC's share of the total
purchase price, including the cost of the land, will be
approximately $1,685,200. After the construction is complete,
the Lease Agreement will be amended to require annual rental
payments of approximately $164,000. The remaining interests in
the property are owned by AEI Net Lease Income & Growth Fund XIX
Limited Partnership, AEI Real Estate Fund XVIII Limited
Partnership and AEI Private Net Lease Millennium Fund Limited
Partnership, affiliates of the Partnership.
The restaurant will be approximately 8,100 square feet,
with seating capacity for 288 on approximately 2.59 acres.
Alpharetta is located north of Atlanta, Georgia. The site is
located off Interstate 400 at the area known as North Point
Commons. This area is being developed with various retail,
office, hotels, national restaurants and residential. Alpharetta
has over 29,000 residents with a median household income of over
$67,000 and an employment base of over 67,000 individuals.
Razzoo's is a casual theme Cajun restaurant concept. The
company is privately held, and owns and operates ten restaurants
in Texas.
SELECTED FINANCIAL DATA
The following selected financial data for the LLC for the
nine months ended September 30, 2000 and the year ended December
31, 1999 has been derived from, and should be read in conjunction
with, the Financial Statements included elsewhere in this
Supplement:
For the
Nine Months Ended For the Year Ended
September 30, 2000 December 31, 1999
INCOME $ 254,873 $ 25,872
========= =========
NET INCOME (LOSS) $ 130,725 $ (33,786)
========= =========
TOTAL ASSETS $6,780,061 $2,583,998
========= =========
NET INCOME (LOSS)
PER LLC UNIT $ 24.39 $ (14.61)
========= =========
WEIGHTED AVERAGE
UNITS OUTSTANDING 5,198 2,289
========= =========
5
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Management's Discussion and Analysis
discusses the LLC's financial position at September 30, 2000 and
results of operation for the nine months ended September 30,
2000. Such discussion should be read in conjunction with the
financial statements of the LLC occurring elsewhere in this
Supplement and in the Prospectus of which this Supplement is a
part. In addition, such discussion should be read together with
the descriptions in the Prospectus of the planned operations of
the LLC, particularly the sections describing the conduct of the
offering, the period over which and the policy employed in
purchasing properties, and the application of proceeds contained
in the sections of the Prospectus captioned "Estimated Use of
Proceeds," "Investment Objectives and Policies," and
"Compensation to the Managers and Affiliates."
Results of Operations
Results of Operations
For the nine months ended September 30, 2000, the LLC
recognized rental income of $128,306. During the same period,
the LLC earned $126,567 in investment income from subscription
proceeds which were invested in a short-term money market account
and from development advances. This investment income
constituted 50% of total income for the period. The percentage
of total income represented by investment income declines as
subscription proceeds are invested in properties.
During the nine months ended September 30, 2000 and 1999,
the LLC paid administration expenses to affiliated parties of
$112,084 and $29,749 respectively. These administration expenses
include initial start-up costs and administrative expenses
associated with processing distributions, reporting requirements
and correspondence to the Limited Members. During the same
periods, the LLC incurred administration expenses from unrelated
parties of $7,982 and $900, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, and other property costs.
The LLC distributes all of its net income during the
offering and acquisition phases, and if net income, after
adjustment for depreciation, is not sufficient to fund the
distributions, the LLC may distribute other available cash that
constitutes capital.
As of September 30, 2000, the LLC's cash distribution rate
was 7.0% on an annualized basis. Pursuant to the Operating
Agreement, distributions of Net Cash Flow were allocated 97% to
the Limited Members and 3% to the Managing Members.
Since the LLC 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 LLC'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 LLC's Net Cash Flow available for
distributions.
Liquidity and Capital Resources
The LLC's primary sources of cash will be proceeds from
the sale of Units, investment income, rental income and proceeds
from the sale of property. Its primary uses of cash will be
investment in real properties, payment of expenses involved in
the sale of Units, the organization of the LLC, the management of
properties, the administration of the LLC, and the payment of
distributions.
6
The Operating 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
Managing Members anticipate that 15% of such proceeds will be
applied to cover organization and offering expenses if only the
minimum proceeds are obtained and that 14% of such proceeds will
be applied to 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 Managing
Members.
Before the acquisition of all such 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 LLC'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 Operating 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 LLC is purchasing properties, cash flow from
investing activities (investment in real property) will remain
negative and will constitute the principal use of the LLC's
available cash flow. Until capital is invested in properties,
the LLC will remain extremely liquid.
On February 25, 2000, the LLC purchased a parcel of land
in Kettering, Ohio for $459,500. The land is leased to
Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary
term of 15 years and annual rental payments of $39,058.
Effective June 23, 2000, the annual rent was increased to
$45,376. Simultaneously with the purchase of the land, the LLC
entered into a Development Financing Agreement under which the
LLC advanced funds to TWI for the construction of a Tumbleweed
restaurant on the site. Initially, the LLC charged interest on
the advances at a rate of 8.5%. Effective June 23, 2000, the
interest rate was increased to 9.875%. On August 23, 2000, after
the development was completed, the Lease Agreement was amended to
require annual rental payments of $120,821. Total acquisition
costs, including the cost of the land, were $1,235,159.
On April 18, 2000, the LLC purchased a parcel of land in
Victoria, Texas for $409,500. The land is leased to Kona
Restaurant Group, Inc. (KRG) under a Lease Agreement with a
primary term of 17 years and annual rental payments of $42,998.
Simultaneously with the purchase of the land, the LLC entered
into a Development Financing Agreement under which the LLC will
advance funds to KRG for the construction of a Johnny Carino's
restaurant on the site. Through September 30, 2000, the LLC had
advanced $910,285 for the construction of the property and is
charging interest on the advances at a rate of 10.5%. The total
purchase price, including the cost of the land, will be
approximately $1,800,000. After the construction is complete,
the Lease Agreement will be amended to require annual rental
payments of approximately $189,000.
On April 19, 2000, the LLC purchased a parcel of land in
San Antonio, Texas for $1,558,000. The land is leased to
Razzoo's, Inc. (RI) under a Lease Agreement with a primary term
of 15 years and annual rental payments of $132,430.
Simultaneously with the purchase of the land, the LLC entered
into a Development Financing Agreement under which the LLC will
advance funds to RI for the construction of a Razzoo's restaurant
on the site. Through September 30, 2000, the LLC had advanced
$942,174 for the construction of the property and is charging
interest on the advances at a rate of 8.5%. Effective September
15, 2000, the interest rate was increased to 9.75%. The total
purchase price, including the cost of the land, will be
approximately $3,510,000. After the construction is complete,
the Lease Agreement will be amended to require annual rental
payments of approximately $342,000.
7
On June 30, 2000, the LLC purchased a 44% interest in a
parcel of land in Alpharetta, Georgia for $707,520. The land is
leased to Razzoo's, Inc. (RI) under a Lease Agreement with a
primary term of 15 years and annual rental payments of $60,139.
Simultaneously with the purchase of the land, the LLC entered
into a Development Financing Agreement under which the LLC will
advance funds to RI for the construction of a Razzoo's restaurant
on the site. Through September 30, 2000, the LLC had advanced
$36,045 for the construction of the property and was charging
interest on the advances at a rate of 8.5%. The LLC's share of
the total purchase price, including the cost of the land, will be
approximately $1,685,200. After the construction is complete,
the Lease Agreement will be amended to require annual rental
payments of approximately $164,000. The remaining interests in
the property are owned by AEI Net Lease Income & Growth Fund XIX
Limited Partnership, AEI Real Estate Fund XVIII Limited
Partnership and AEI Private Net Lease Millennium Fund Limited
Partnership, affiliates of the LLC.
As of September 30, 2000, the LLC's commitments to acquire
properties exceeded funds available from current subscription
proceeds. The LLC anticipates future subscription proceeds will
be adequate to fund the final acquisition of these commitments.
During the offering of Units, the LLC's primary source of
cash flow will be from the sale of LLC Units. The LLC commenced
its offering of LLC Units to the public through a registration
statement which became effective March 23, 1999. From March 23,
1999 to September 30, 1999, the minimum number of LLC Units
(1,500) needed to form the LLC were sold. On September 30, 1999,
a total of 1,868.616 Units ($1,868,616) were transferred into the
LLC. Through September 30, 2000, the LLC raised a total of
$7,913,247 from the sale of 7,913.25 Units. The Managing General
Partner has extended the offering of Units to the earlier of
completion of sale of all Units or March 22, 2001. From
subscription proceeds, the LLC paid organization and syndication
costs (which constitute a reduction of capital) of $1,186,719.
After completion of the acquisition phase, the LLC's
primary use of cash flow is distribution and redemption payments
to Members. The LLC 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 LLC attempts to
maintain a stable distribution rate from quarter to quarter.
Beginning in 2002, the LLC may acquire Units from Limited
Members who have tendered their Units to the LLC. Such Units may
be acquired at a discount. The LLC is not obligated to purchase
in any year more than 2% of the number of Units outstanding at
the beginning of the year. In no event shall the LLC be
obligated to purchase Units if, in the sole discretion of the
Managing Member, such purchase would impair the capital or
operation of the LLC.
Until capital is invested in properties, the LLC will
remain extremely liquid. After completion of property
acquisitions, the LLC 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.
8
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 LLC, must be evaluated in the
context of a number of factors that may affect the LLC's
financial condition and results of operations, including the
following:
Market and economic conditions which affect the value
of the properties the LLC owns and the cash from rental
income such properties generate;
the federal income tax consequences of rental income,
deductions, gain on sales and other items and the
affects of these consequences for investors;
resolution by the Managing Members of conflicts with
which they may be confronted;
the success of the Managing Member of locating
properties with favorable risk return characteristics;
the effect of tenant defaults; and
the condition of the industries in which the tenants of
properties owned by the LLC operate.
9
REPORT OF INDEPENDENT AUDITORS
To the Members:
AEI Income & Growth Fund 23 LLC
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI Income
& Growth Fund 23 LLC (a Delaware limited liability company) as of
December 31, 1999 and 1998 and the related statements of
operations, cash flows and changes in members' equity for the
year ended December 31, 1999 and for the period from inception
(October 14, 1998) to December 31, 1998. These financial
statements are the responsibility of the LLC's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of AEI Income & Growth Fund 23 LLC as of December 31, 1999 and
1998, and the results of its operations and its cash flows for
the year ended December 31, 1999 and for the period from
inception (October 14, 1998) to December 31, 1998 in conformity
with generally accepted accounting principles.
Minneapolis, Minnesota /s/BOULAY, HEUTMAKER, ZIBELL & CO. P.L.L.P.
January 25, 2000 Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Certified Public Accountants
10
<PAGE>
AEI INCOME & GROWTH FUND 23 LLC
BALANCE SHEET
DECEMBER 31
ASSETS
1999 1998
CURRENT ASSETS:
Cash and Cash Equivalents $2,583,998 $ 1,000
========= ========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 72,484 $ 0
Distributions Payable 40,462 0
--------- --------
Total Current Liabilities 112,946 0
--------- --------
MEMBERS' EQUITY (DEFICIT):
Managing Members' Equity (633) 1,000
Limited Members' Equity, $1,000 Unit Value;
24,000 Units authorized; 2,994
Units issued and outstanding in 1999 2,471,685 0
--------- --------
Total Members' Equity 2,471,052 1,000
--------- --------
Total Liabilities and Members' Equity $2,583,998 $ 1,000
========= ========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE> 11
AEI INCOME & GROWTH FUND 23 LLC
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD FROM INCEPTION (OCTOBER 14, 1998) TO DECEMBER 31, 1998
1999 1998
INCOME:
Investment Income $ 25,872 $ 0
---------- ---------
Total Income 25,872 0
---------- ---------
EXPENSES:
LLC Administration - Affiliates 58,753 0
LLC Administration and Property
Management - Unrelated Parties 905 0
---------- ---------
Total Expenses 59,658 0
---------- ---------
NET LOSS $ (33,786) 0
========== =========
NET LOSS ALLOCATED:
Managing Members $ (338) $ 0
Limited Members (33,448) 0
---------- ---------
$ (33,786) $ 0
========== =========
NET LOSS PER LIMITED MEMBERSHIP UNIT
(2,289 weighted average Units outstanding) $ (14.61) $ 0
========== =========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE> 12
AEI INCOME & GROWTH FUND 23 LLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD FROM INCEPTION (OCTOBER 14, 1998) TO DECEMBER 31, 1998
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (33,786) $ 0
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operating Activities:
Increase in Payable to
AEI Fund Management, Inc. 72,484 0
---------- ---------
Net Cash Provided By
Operating Activities 38,698 0
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions from Managing Members 0 1,000
Capital Contributions from Limited Members 2,993,818 0
Organization and Syndication Costs (448,818) 0
Increase in Distributions Payable 40,462 0
Distributions to Members (41,162) 0
----------- ---------
Net Cash Provided By
Financing Activities 2,544,300 1,000
----------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,582,998 1,000
CASH AND CASH EQUIVALENTS, beginning of period 1,000 0
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $2,583,998 $ 1,000
========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE> 13
<PAGE>
AEI INCOME & GROWTH FUND 23 LLC
STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD FROM INCEPTION (OCTOBER 14, 1998) TO DECEMBER 31, 1998
Limited
Member
Managing Limited Units
Members Members Total Outstanding
BALANCE, October 14, 1998 $ 0 $ 0 $ 0 0
Capital Contributions 1,000 0 1,000
-------- ---------- ---------- ----------
BALANCE, December 31, 1998 $ 1,000 $ 0 $ 1,000 0
Capital Contributions 0 2,993,818 2,993,818 2,993.82
Organization and
Syndication Costs (60) (448,758) (448,818)
Distributions (1,235) (39,927) (41,162)
Net Loss (338) (33,448) (33,786)
--------- ----------- ---------- ----------
BALANCE, December 31, 1999 $ (633) $2,471,685 $2,471,052 2,993.82
========= =========== ========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
14
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) Organization -
AEI Income & Growth Fund 23 LLC (the LLC), a Limited
Liability Company, was formed on October 14, 1998 to acquire
and lease commercial properties to operating tenants. The
LLC's operations are managed by AEI Fund Management XXI,
Inc. (AFM), the Managing Member. Robert P. Johnson, the
President and sole shareholder of AFM, serves as the Special
Managing Member and an affiliate of AFM, AEI Fund
Management, Inc., performs the administrative and operating
functions for the LLC.
The terms of the offering call for a subscription price of
$1,000 per LLC Unit, payable on acceptance of the offer.
Under the terms of the Operating Agreement, 24,000 LLC Units
are available for subscription which, if fully subscribed,
will result in contributed Limited Members' capital of
$24,000,000. The LLC commenced operations on September 30,
1999 when minimum subscriptions of 1,500 Limited Membership
Units ($1,500,000) were accepted. At December 31, 1999,
2,993.818 Units ($2,993,818) were subscribed and accepted by
the LLC. The Managing Members have contributed capital of
$1,000. The LLC shall continue until December 31, 2048,
unless dissolved, terminated and liquidated prior to that
date.
During operations, any Net Cash Flow, as defined, which the
Managing Members determine to distribute will be distributed
97% to the Limited Members and 3% to the Managing Members.
Distributions to Limited Members will be made pro rata by
Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of properties which the Managing Members determine
to distribute will, after provisions for debts and reserves,
be paid in the following manner: (i) first, 99% to the
Limited Members and 1% to the Managing Members until the
Limited Members receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal to 7%
of their Adjusted Capital Contribution per annum, cumulative
but not compounded, to the extent not previously distributed
from Net Cash Flow; (ii) any remaining balance will be
distributed 90% to the Limited Members and 10% to the
Managing Members. Distributions to the Limited Members will
be made pro rata by Units.
15
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of property, will be
allocated first in the same ratio in which, and to the
extent, Net Cash Flow is distributed to the Members 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 Members and 1% to the Managing Members.
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) Organization - (Continued)
For tax purposes, profits arising from the sale, financing,
or other disposition of property will be allocated in
accordance with the Operating Agreement as follows: (i)
first, to those Members with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Members
and 1% to the Managing Members until the aggregate balance
in the Limited Members' capital accounts equals the sum of
the Limited Members' Adjusted Capital Contributions plus an
amount equal to 7% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, the balance of any
remaining gain will then be allocated 90% to the Limited
Members and 10% to the Managing Members. Losses will be
allocated 98% to the Limited Members and 2% to the Managing
Members.
The Managing Members are not required to currently fund a
deficit capital balance. Upon liquidation of the LLC or
withdrawal by a Managing Member, the Managing Members will
contribute to the LLC an amount equal to the lesser of the
deficit balances in their capital accounts or 1.01% of the
total capital contributions of the Limited Members over the
amount previously contributed by the Managing Members.
(2) Summary of Significant Accounting Policies -
Financial Statement Presentation
The accounts of the LLC are maintained on the accrual
basis of accounting for both federal income tax purposes
and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
Cash Concentrations of Credit Risk
At times throughout the year, the LLC's cash deposited in
financial institutions may exceed FDIC insurance limits.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested in
money market accounts, certificates of deposit, federal
agency notes and commercial paper with a term of three
months or less.
16
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(2) Summary of Significant Accounting Policies - (Continued)
Income Taxes
The income or loss of the LLC for federal income tax
reporting purposes is includable in the income tax returns
of the Members. Accordingly, no recognition has been
given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the LLC as such for
tax purposes, and the amount of distributable LLC income
or loss are subject to examination by federal and state
taxing authorities. If such an examination results in
changes with respect to the LLC qualification or in
changes to distributable LLC income or loss, the taxable
income of the members would be adjusted accordingly.
Real Estate
All of the properties to be purchased by the LLC will be
leased under long-term triple net leases.
The building and equipment of the LLC will be depreciated
using the straight-line method for financial reporting
purposes based on estimated useful lives of 25 years and 5
years, respectively.
(3) Related Party Transactions -
AEI, AFM and AEI Securities, Inc. (ASI) received the
following compensation and reimbursements for costs and
expenses from the LLC:
Total Incurred by the LLC
for the Year Ended December 31
1999
a.AEI and AFM are reimbursed for all costs
incurred in connection with managing the
LLC's operations, maintaining the
LLC's books and communicating
the results of operations to the Limited
Members. $ 58,753
========
b.AEI and AFM are reimbursed for all direct
expenses they have paid on the LLC's
behalf to third parties. These expenses included
printing costs, legal and filing fees, direct
administrative costs, outside audit and accounting
costs, insurance and other property costs. $ 905
========
17
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(3) Related Party Transactions - (Continued)
Total Incurred by the LLC
for the Year Ended December 31
1999
c.ASI was the underwriter of the LLC offering.
Robert P. Johnson is the sole stockholder of ASI,
which is a member of the National Association of
Securities Dealers, Inc. ASI received, as
underwriting commissions 8% for sale of certain
subscription Units ($80 per unit sold, of which it
re-allowed up to $80 per unit to other participating
broker/dealers). ASI also received a 2%
non-accountable expense allowance for all Units
it sold through broker/dealers. These costs
are treated as a reduction of members' capital. $ 299,127
========
d.AEI is reimbursed for all costs incurred in
connection with managing the LLC's
offering and organization. $ 46,632
========
e.AEI is reimbursed for all expenses it has paid
on the LLC's behalf relating to the
offering and organization of the LLC.
These expenses included printing costs, legal
and filing fees, direct administrative costs,
underwriting costs and due diligence fees. $ 103,059
========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a, b, c, d, and
e. This balance is non-interest bearing and unsecured and
is to be paid in the normal course of business.
(4) Investments in Real Estate -
On February 25, 2000, the LLC purchased a parcel of land in
Kettering, Ohio for approximately $459,500. The land is
leased to Tumbleweed, Inc. (TWI) under a Lease Agreement
with a primary term of 15 years and annual rental payments
of $39,058. Simultaneously with the purchase of the land,
the LLC entered into a Development Financing Agreement under
which the LLC will advance funds to TWI for the construction
of a Tumbleweed restaurant on the site. The LLC is charging
interest on the advances at a rate of 8.5%. The total
purchase price, including the cost of the land, will be
approximately $1,372,000. After the construction is
complete, the Lease Agreement will be amended to require
annual rental payments of approximately $135,500.
18
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(5) Members' Capital -
Cash distributions of $1,235 were made to the Managing
Members and $39,927 were made to the Limited Members for the
year ended December 31, 1999. The Limited Members'
distributions represent $17.44 per LLC Unit outstanding
using 2,289 weighted average Units in 1999. The
distributions represent $17.34 per Unit of return of
contributed capital in 1999.
Beginning in March, 2002, the LLC may acquire Units from
Limited Members who have tendered their Units to the LLC.
Such Units may be acquired at a discount. The LLC is not
obligated to purchase in any year more than 2% of the number
of Units outstanding at the beginning of the year. In no
event shall the LLC be obligated to purchase Units if, in
the sole discretion of the Managing Members, such purchase
would impair the capital or operation of the LLC.
(6) Income Taxes -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the year ended December 31:
1999
Net Loss for Financial
Reporting Purposes $ (33,786)
Capitalized Start-Up Costs
Under Section 195 59,658
---------
Taxable Income to Members $ 25,872
=========
19
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(6) Income Taxes - (Continued)
The following is a reconciliation of Members' Equity for
financial reporting purposes to Members' Equity reported for
federal income tax purposes for the year ended December 31:
1999
Members' Equity for
Financial Reporting Purposes $2,471,052
Capitalized Start-Up Costs
Under Section 195 59,658
Organization and Syndication Costs
Treated as Reduction of Capital
for Financial Reporting Purposes 448,818
----------
Members' Equity for
Tax Reporting Purposes $2,979,528
==========
(7) Fair Value of Financial Instruments -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, for the years ended
December 31:
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
Money Market Funds $2,583,998 $2,583,998 $ 1,000 $ 1,000
---------- ---------- -------- --------
Total Cash and
Cash Equivalents $2,583,998 $2,583,998 $ 1,000 $ 1,000
========== ========== ======== ========
20
AEI INCOME & GROWTH FUND 23 LLC
BALANCE SHEET
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(Unaudited)
ASSETS
2000 1999
CURRENT ASSETS:
Cash and Cash Equivalents $ 941,062 $ 2,583,998
Receivables 132,247 0
----------- -----------
Total Current Assets 1,073,309 2,583,998
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 3,156,241 0
Buildings and Equipment 666,089 0
Construction in Progress 1,888,504 0
Accumulated Depreciation (4,082) 0
----------- -----------
Net Investments in Real Estate 5,706,752 0
----------- -----------
Total Assets $ 6,780,061 $ 2,583,998
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 157,782 $ 72,484
Distributions Payable 120,065 40,462
----------- -----------
Total Current Liabilities 277,847 112,946
----------- -----------
MEMBERS' EQUITY (DEFICIT):
Managing Members' Equity (5,144) (633)
Limited Members' Equity, $1,000 Unit Value;
24,000 Units authorized; 7,913 and 2,994
Units issued and outstanding in 2000 and
1999, respectively 6,507,358 2,471,685
----------- -----------
Total Members' Equity 6,502,214 2,471,052
----------- -----------
Total Liabilities and Members' Equity $ 6,780,061 $ 2,583,998
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
21
AEI INCOME & GROWTH FUND 23 LLC
STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
Three Months Ended Nine Months Ended
9/30/00 9/30/99 9/30/00 9/30/99
INCOME:
Rent $ 79,213 $ 0 $ 128,306 $ 0
Investment Income 47,473 230 126,567 262
-------- --------- --------- ---------
Total Income 126,686 230 254,873 262
-------- --------- --------- ---------
EXPENSES:
LLC Administration -
Affiliates 40,327 15,742 112,084 29,749
LLC Administration and
Property Management -
Unrelated Parties 1,707 0 7,982 900
Depreciation 4,082 0 4,082 0
-------- --------- --------- ---------
Total Expenses 46,116 15,742 124,148 30,649
-------- --------- --------- ---------
NET INCOME (LOSS) $ 80,570 $ (15,512) $ 130,725 $ (30,387)
======== ========= ========= =========
NET INCOME (LOSS) ALLOCATED:
Managing Members $ 2,417 $ (155) $ 3,922 $ (304)
Limited Members 78,153 (15,357) 126,803 (30,083)
-------- --------- --------- ---------
$ 80,570 $ (15,512) $ 130,725 $ (30,387)
======== ========= ========= =========
NET INCOME (LOSS) PER
LLC UNIT
6,735, 1,869, 5,198 and 1,869 weighted average
Units outstanding for the periods,
respectively) $ 11.60 $ (8.22) $ 24.39 $ (16.10)
======== ========= ========= =========
The accompanying Notes to Financial Statements are an integral
part of this statement.
22
AEI INCOME & GROWTH FUND 23 LLC
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 130,725 $ (30,387)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities:
Depreciation 4,082 0
Increase in Receivables (132,247) 0
Increase in Payable to
AEI Fund Management, Inc. 85,298 31,080
----------- -----------
Total Adjustments (42,867) 31,080
----------- -----------
Net Cash Provided By
Operating Activities 87,858 693
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (5,710,834) 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions from Limited Members 4,919,429 1,868,616
Organization and Syndication Costs (737,901) (280,042)
Increase in Distributions Payable 79,603 0
Distributions to Members (281,091) 0
----------- -----------
Net Cash Provided By
Financing Activities 3,980,040 1,588,574
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,642,936) 1,589,267
CASH AND CASH EQUIVALENTS, beginning of period 2,583,998 1,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 941,062 $ 1,590,267
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
23
AEI INCOME & GROWTH FUND 23 LLC
STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
Limited
Member
Managing Limited Units
Members Members Total Outstanding
BALANCE, December 31, 1998 $ 1,000 $ 0 $ 1,000 0
Capital Contributions 0 1,868,616 1,868,616
Organization and
Syndication Costs (60) (279,982) (280,042)
Net Loss (304) (30,083) (30,387)
--------- ----------- ----------- ---------
BALANCE, September 30, 1999 $ 636 $ 1,558,551 $ 1,559,187 0
========= =========== =========== =========
BALANCE, December 31, 1999 $ (633) $ 2,471,685 $ 2,471,052 2,993.82
Capital Contributions 0 4,919,429 4,919,429 4,919.43
Organization &
Syndication Costs 0 (737,901) (737,901)
Distributions (8,433) (272,658) (281,091)
Net Income 3,922 126,803 130,725
---------- ----------- ----------- ---------
BALANCE, September 30, 2000 $ (5,144) $ 6,507,358 $ 6,502,214 7,913.25
========= =========== =========== =========
The accompanying Notes to Financial Statements are an integral
part of this statement.
24
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
(1) The condensed statements included herein have been prepared
by the LLC, 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 LLC 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 LLC's
latest annual report on Form 10-KSB.
(2) Organization -
AEI Income & Growth Fund 23 LLC (the LLC), a Limited
Liability Company, was formed on October 14, 1998 to acquire
and lease commercial properties to operating tenants. The
LLC's operations are managed by AEI Fund Management XXI,
Inc. (AFM), the Managing Member. Robert P. Johnson, the
President and sole shareholder of AFM, serves as the Special
Managing Member and an affiliate of AFM, AEI Fund
Management, Inc., performs the administrative and operating
functions for the LLC.
The terms of the offering call for a subscription price of
$1,000 per LLC Unit, payable on acceptance of the offer.
Under the terms of the Operating Agreement, 24,000 LLC Units
are available for subscription which, if fully subscribed,
will result in contributed Limited Members' capital of
$24,000,000. The LLC commenced operations on September 30,
1999 when minimum subscriptions of 1,500 Limited Membership
Units ($1,500,000) were accepted. At June 30, 2000,
6,153.36 Units ($6,153,364) were subscribed and accepted by
the LLC. The Managing Members have contributed capital of
$1,000. The LLC shall continue until December 31, 2048,
unless dissolved, terminated and liquidated prior to that
date.
During operations, any Net Cash Flow, as defined, which the
Managing Members determine to distribute will be distributed
97% to the Limited Members and 3% to the Managing Members.
Distributions to Limited Members will be made pro rata by
Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of properties which the Managing Members determine
to distribute will, after provisions for debts and reserves,
be paid in the following manner: (i) first, 99% to the
Limited Members and 1% to the Managing Members until the
Limited Members receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal to 7%
of their Adjusted Capital Contribution per annum, cumulative
but not compounded, to the extent not previously distributed
from Net Cash Flow; (ii) any remaining balance will be
distributed 90% to the Limited Members and 10% to the
Managing Members. Distributions to the Limited Members will
be made pro rata by Units.
25
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
(1) The condensed statements included herein have been prepared
by the LLC, 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 LLC 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 LLC's
latest annual report on Form 10-KSB.
(2) Organization -
AEI Income & Growth Fund 23 LLC (the LLC), a Limited
Liability Company, was formed on October 14, 1998 to acquire
and lease commercial properties to operating tenants. The
LLC's operations are managed by AEI Fund Management XXI,
Inc. (AFM), the Managing Member. Robert P. Johnson, the
President and sole shareholder of AFM, serves as the Special
Managing Member and an affiliate of AFM, AEI Fund
Management, Inc., performs the administrative and operating
functions for the LLC.
The terms of the offering call for a subscription price of
$1,000 per LLC Unit, payable on acceptance of the offer.
Under the terms of the Operating Agreement, 24,000 LLC Units
are available for subscription which, if fully subscribed,
will result in contributed Limited Members' capital of
$24,000,000. The LLC commenced operations on September 30,
1999 when minimum subscriptions of 1,500 Limited Membership
Units ($1,500,000) were accepted. At September 30, 2000,
7,913.25 Units ($7,913,247) were subscribed and accepted by
the LLC. The Managing Members have contributed capital of
$1,000. The LLC shall continue until December 31, 2048,
unless dissolved, terminated and liquidated prior to that
date.
During operations, any Net Cash Flow, as defined, which the
Managing Members determine to distribute will be distributed
97% to the Limited Members and 3% to the Managing Members.
Distributions to Limited Members will be made pro rata by
Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of properties which the Managing Members determine
to distribute will, after provisions for debts and reserves,
be paid in the following manner: (i) first, 99% to the
Limited Members and 1% to the Managing Members until the
Limited Members receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal to 7%
of their Adjusted Capital Contribution per annum, cumulative
but not compounded, to the extent not previously distributed
from Net Cash Flow; (ii) any remaining balance will be
distributed 90% to the Limited Members and 10% to the
Managing Members. Distributions to the Limited Members will
be made pro rata by Units.
26
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Continued)
(2) Organization - (Continued)
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of property, will be
allocated first in the same ratio in which, and to the
extent, Net Cash Flow is distributed to the Members 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 Members and 1% to the Managing Members.
For tax purposes, profits arising from the sale, financing,
or other disposition of property will be allocated in
accordance with the Operating Agreement as follows: (i)
first, to those Members with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Members
and 1% to the Managing Members until the aggregate balance
in the Limited Members' capital accounts equals the sum of
the Limited Members' Adjusted Capital Contributions plus an
amount equal to 7% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, the balance of any
remaining gain will then be allocated 90% to the Limited
Members and 10% to the Managing Members. Losses will be
allocated 98% to the Limited Members and 2% to the Managing
Members.
The Managing Members are not required to currently fund a
deficit capital balance. Upon liquidation of the LLC or
withdrawal by a Managing Member, the Managing Members will
contribute to the LLC an amount equal to the lesser of the
deficit balances in their capital accounts or 1.01% of the
total capital contributions of the Limited Members over the
amount previously contributed by the Managing Members.
(3) Investments in Real Estate -
On February 25, 2000, the LLC purchased a parcel of land in
Kettering, Ohio for $459,500. The land is leased to
Tumbleweed, Inc. (TWI) under a Lease Agreement with a
primary term of 15 years and annual rental payments of
$39,058. Effective June 23, 2000, the annual rent was
increased to $45,376. Simultaneously with the purchase of
the land, the LLC entered into a Development Financing
Agreement under which the LLC advanced funds to TWI for the
construction of a Tumbleweed restaurant on the site.
Initially, the LLC charged interest on the advances at a
rate of 8.5%. Effective June 23, 2000, the interest rate
was increased to 9.875%. On August 23, 2000, after the
development was completed, the Lease Agreement was amended
to require annual rental payments of $120,821. Total
acquisition costs, including the cost of the land, were
$1,235,159.
27
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Continued)
(3) Investments in Real Estate - (Continued)
On April 18, 2000, the LLC purchased a parcel of land in
Victoria, Texas for $409,500. The land is leased to Kona
Restaurant Group, Inc. (KRG) under a Lease Agreement with a
primary term of 17 years and annual rental payments of
$42,998. Simultaneously with the purchase of the land, the
LLC entered into a Development Financing Agreement under
which the LLC will advance funds to KRG for the construction
of a Johnny Carino's restaurant on the site. Through
September 30, 2000, the LLC had advanced $910,285 for the
construction of the property and is charging interest on the
advances at a rate of 10.5%. The total purchase price,
including the cost of the land, will be approximately
$1,800,000. After the construction is complete, the Lease
Agreement will be amended to require annual rental payments
of approximately $189,000.
On April 19, 2000, the LLC purchased a parcel of land in San
Antonio, Texas for $1,558,000. The land is leased to
Razzoo's, Inc. (RI) under a Lease Agreement with a primary
term of 15 years and annual rental payments of $132,430.
Simultaneously with the purchase of the land, the LLC
entered into a Development Financing Agreement under which
the LLC will advance funds to RI for the construction of a
Razzoo's restaurant on the site. Through September 30,
2000, the LLC had advanced $942,174 for the construction of
the property and is charging interest on the advances at a
rate of 8.5%. Effective September 15, 2000, the interest
rate was increased to 9.75%. The total purchase price,
including the cost of the land, will be approximately
$3,510,000. After the construction is complete, the Lease
Agreement will be amended to require annual rental payments
of approximately $342,000.
On June 30, 2000, the LLC purchased a 44% interest in a
parcel of land in Alpharetta, Georgia for $707,520. The
land is leased to Razzoo's, Inc. (RI) under a Lease
Agreement with a primary term of 15 years and annual rental
payments of $60,139. Simultaneously with the purchase of
the land, the LLC entered into a Development Financing
Agreement under which the LLC will advance funds to RI for
the construction of a Razzoo's restaurant on the site.
Through September 30, 2000, the LLC had advanced $36,045 for
the construction of the property and was charging interest
on the advances at a rate of 8.5%. The LLC's share of the
total purchase price, including the cost of the land, will
be approximately $1,685,200. After the construction is
complete, the Lease Agreement will be amended to require
annual rental payments of approximately $164,000. The
remaining interests in the property are owned by AEI Net
Lease Income & Growth Fund XIX Limited Partnership, AEI Real
Estate Fund XVIII Limited Partnership and AEI Private Net
Lease Millennium Fund Limited Partnership, affiliates of the
LLC.
(4) Receivables -
At September 30, 2000, the LLC had receivables of
construction interest and rent in the amount of $37,118 and
$95,129, respectively. These amounts are accrued on the
transactions discussed in Note 3 and are collected upon
completion of the properties.
28
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Continued)
(5) Payable to AEI Fund Management, Inc. -
AEI Fund Management, Inc. performs the administrative and
operating functions for the LLC. 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.
29
REPORT OF INDEPENDENT AUDITORS
Board of Directors
AEI Fund Management XXI, Inc.
Saint Paul, Minnesota
We have audited the accompanying balance sheet of AEI Fund
Management XXI, Inc. as of December 31, 1999 and December 31,
1998. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an
opinion on this financial statement based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of AEI
Fund Management XXI, Inc. as of December 31, 1999 and December
31, 1998, in conformity with generally accepted accounting
principles.
/s/BOULAY, HEUTMAKER, ZIBELL & CO., P.L.L.P.
Boulay, Heutmaker, Zibell & Co., P.L.L.P.
Certified Public Accountants
Minneapolis, Minnesota
April 4, 2000
30
<PAGE>
AEI FUND MANAGEMENT XXI, INC.
BALANCE SHEET
ASSETS
December 31, December 31,
1999 1998
CURRENT ASSETS:
Cash and Cash Equivalents $ 31,851 $ 2,339
Partnership Distributions Receivable 8,115 7,806
Receivable from AEI Fund Management, Inc. 239 159
--------- ---------
Total Current Assets $ 40,205 $ 10,304
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
NONCURRENT LIABILITIES:
Deficit in Real Estate Partnership Investments $ 27,119 $ 13,053
STOCKHOLDER'S EQUITY:
Common Stock, Par Value $.01 Per Share,
1,000 Shares Issued 10 10
Additional Paid-in Capital 990 990
Retained Earnings (Deficit) 12,086 (3,749)
--------- ---------
Total Stockholder's Equity (Deficit) 13,086 (2,749)
--------- ---------
Total Liabilities and
Stockholder's Equity $ 40,205 $ 10,304
========= =========
The accompanying notes to Balance Sheet are an integral part of
this statement.
</PAGE> 31
<PAGE>
AEI FUND MANAGEMENT XXI, INC.
NOTES TO BALANCE SHEET
DECEMBER 31, 1999 AND 1998
(1) Summary of Organization and Significant Accounting Policies -
Organization
AEI Fund Management XXI, Inc. (Company) is the Managing
General Partner of AEI Income & Growth Fund XXI Limited
Partnership (Fund XXI), and AEI Income & Growth Fund XXII
Limited Partnership (Fund XXII). The Company is the
Managing Member of AEI Income & Growth Fund 23 LLC (Fund
23), which was formed in October, 1998. At December 31,
1999 and 1998, the Company owned 22 Limited Partnership
Units of Fund XXII, which were purchased in the fourth
quarter of 1998. Investors in Fund XXI, Fund XXII and Fund
23 have no interest in the assets or operations of the
Company.
Financial Statement Presentation
The Company accounts for its investments in Partnerships
under the equity method of accounting. The Company's major
source of revenue is its share of distributions allocated
under the terms of the Partnerships' Limited Partnership
Agreements. The combined assets, revenues and net income
for the above referenced entities was $33,977,791,
$2,901,829 and $2,171,371 for 1999 and $31,626,515,
$2,400,462 and $1,581,042 for 1998. The Company's share of
income (loss) ranges from 1% to 2%. At December 31, 1999
and December 31, 1998, the Company has accumulated deficits
of $27,119 and $13,053, respectively, in excess of its basis
in Fund XXI, Fund XXII and Fund 23. The Company would be
responsible to fund a deficiency in its capital account if
the Partnership terminates.
Accounting Estimates
Management uses estimates and assumptions in preparing this
balance sheet in accordance with generally accepted
accounting principles. Those estimates and assumptions
affect the reported amounts of assets, liabilities and
stockholder's equity. Actual results could differ from
those estimates.
Cash Equivalents
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
(2) Receivable from AEI Fund Management, Inc. -
AEI Fund Management, Inc. performs the administrative and
operating functions of the Company. The receivable from AEI
Fund Management, Inc. represents the balance due for those
services. The balance is non-interest bearing and unsecured
and is to be paid in the normal course of business.
(3) Income Taxes -
The Company elected S-Corporation status. As a result, the
income of the Company for Federal and State income tax
reporting purposes is includable in the income tax return of
the sole stockholder. Accordingly, there is no provision
for income taxes.
32
EXHIBIT B
PRIOR PERFORMANCE TABLES
The information presented in the following tables represents the
historical experience of all public real estate programs organized by
the Manager or their Affiliates during the periods indicated. Limited
Members in the Fund should not assume that they will experience returs
if any, comparable to those experienced by investors in such prior real
estate programs. Investors will have no interest in the assets or
operations of the Managing Members.
Additional information relating to the performance of prior
programs is contained in Part II of the Registratioin Statement, of
which this Prospectus is a part of, that has been filed with the
Securities and Exchange Commission. Such information may be
obtained by contacting Mr. Robert P. Johnson, President, AEI Fund
Management XXI, Inc., 1300 Minnesota World Trade Center, 30 East
Seventh Street, Saint Paul, Minnesota 55101.
The programs included in the following tables have investment
objectives similiar to those of the Partnership, including protection
of capital, distribution of partially "tax sheltered" cash flow
from operations, and capital appreciation.
Table Index Description Page
I Experience in Raising and Investing Funds B-2
II Compensation to Sponsors B-3
III Operating Results of Prior Partnerships B-4
IV Results of Completed Programs B-7
V Sales or Disposals of Properties B-8
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
(Unaudited)
The following table provides information at December 31, 1999, as to the
experience of the General Partners and their Affiliates in raising and
investing funds with respect to all prior public programs closed in the
last five years.
AEI AEI
Net Lease Net Lease AEI AEI
Income & Income & Income & Income &
Growth Growth Growth Growth
Fund XIX Fund XX Fund XXI Fund XXII
Dollar Amount Offered $30,000,000 $24,000,000 $24,000,000 $24,000,000
Dollar Amount Raised $21,151,928 $24,000,000 $24,000,000 $16,917,222
Percentage of Amount
Raised 100.0% 100.0% 100.0% 100.0%
Less Offering Expenses:
Selling Commissions
and Discounts 7.0 8.0 8.0 8.0
Organizational
Expenses 7.3 5.7 5.6 6.5
Other (a) 4.2 2.2 4.3 6.4
Less Reserves 0.1 0.1 0.1 0.1
----------- ----------- ----------- ------------
Percent Available
for Investment 81.4% 84.0% 82.0% 79.0%
=========== =========== =========== ============
Acquisition Costs:
Prepaid Items and
Fees Related
to Purchase of
Property 0.0% 0.0% 0.0% 0.0%
Investment in
Properties (b) 81.4 84.0 82.0 79.0
Acquisition Fees 0.0 0.0 0.0 0.0
----------- ----------- ----------- -----------
Total Acquisition Cost 81.4% 84.0% 82.0% 79.0%
=========== =========== =========== ===========
Percent Leverage 0.0% 0.0% 0.0% 0.0%
Date Offering Began Feb. 91 Jan. 93 Feb. 95 Jan. 97
Length of Offering
(months) 24 24 24 24
Months to Invest 90% of
Amount Available for
Investment (measured
from beginning of
offering) 34 38 36 32
(a) Represents distributions in excess of net cash flow (return of capital).
(b) Includes cash down payments and capitalized costs and expenses related
to the purchase of properties, including the cost of appraisals,
attorney's fees, expenses of personnel in investigating properties, and
overhead allocated to such activities.
B-2
TABLE II
COMPENSATION TO SPONSORS
(Unaudited)
The following table provides information as to the compensation paid to
the General Partners and their Affiliates during the period from February,
1991 to December 31, 1999 for all prior public programs closed in the last
five years.
AEI AEI
Net Lease Net Lease AEI AEI
Income & Income & Income & Income &
Growth Growth Growth Growth
Fund XIX Fund XX Fund XXI Fund XXII
Type of Compensation
Date Offering Commenced Feb. 91 Jan. 93 Feb. 95 Jan. 97
Dollar Amount Raised $21,151,928 $24,000,000 $24,000,000 $16,917,222
Amount Paid to Sponsors
From Proceeds of Offering:
Underwriting Fees (a) 407,378 471,307 466,013 339,667
Acquisition Expenses
purchase option on
property 0 0 0 0
real estate
commission 0 0 0 0
expense
reimbursement 953,576(c) 837,332(c) 559,739(c) 502,009(c)
Organization Offering
Expenses 345,490 227,451 359,605 294,122
Dollar Amount of Cash
Generated From
Operations Before
Deducting Payments
to Sponsors 13,865,184 11,178,129 6,524,759 1,605,829
Amount Paid to Sponsors
From Operations:
Property Management
Fees (b) 0 0 0 0
Partnership
Management Fees (b) 0 0 0 0
Reimbursements 2,117,427 1,593,631 1,101,903 522,988
Leasing Commissions 0 0 0 0
Participation in Cash
Distributions 128,811 101,291 64,593 66,220
Dollar Amount of Property
Sales and Refinancing
Before Deducting
Payments to Sponsors:
- cash 9,408,938 3,987,111 3,819,057 0
- notes 2,216,982 0 0 0
Amount Paid to Sponsors
From Property Sales
and Refinancing:
Real Estate
Commissions 0 0 0 0
Incentive Fees 0 0 0 0
Participation in Cash
Distributions 11,758 8,885 10,302 0
[FN]
(a) Does not include fees paid to AEI Securities Incorporated which were
reallowed to participating dealers.
(b) Although not paid a fixed fee for property management and
partnership management, the General Partners and Affiliates were
reimbursed at their Cost for the provision of such services. Such
reimbursements are reflected under the line item "Amount Paid to
Sponsors From Operations-Reimbursements."
(c) The Partnerships received reimbursements from the lessees in the
form of financing fees, commitment fees and expense reimbursements
to offset these costs. The reimbursements received by Fund XIX,
Fund XX, Fund XXI and Fund XXII totaled $692,332, $385,381, $419,713
and $394,389, respectively.
</FN>
B-3
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PARTNERSHIPS
(Unaudited)
The following tables provide information as to the results of all prior
programs closed in the past five years for each year of the five years (or
from inception if formed after January 1, 1995) ended December 31, 1999.
<CAPTION>
AEI NET LEASE INCOME & GROWTH FUND XIX
Years Ended December 31
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Gross Revenues from Operations $ 2,282,282 $ 2,124,542 $ 1,792,599 $ 1,848,907 $ 1,913,647
Profit on Sale of Properties 969,054 571,927 77,703 0 271,956
Less:
Operating Expenses 292,268 352,591 360,253 392,075 315,938
Depreciation 369,226 340,721 313,146 298,712 341,282
Real Estate Impairment 0 0 1,310,484 0 0
Minority Interest in Net
Operating Income 311,287 0 0 0 0
----------- ----------- ----------- ----------- -----------
Net Income (Loss)-GAAP Basis $ 2,278,555 $ 2,003,157 $ (113,581) $ 1,158,120 $ 1,528,383
=========== =========== =========== =========== ===========
Taxable Income (Loss):
-from operations $ 1,206,527 $ 1,500,668 $ 952,997 $ 888,074 $ 1,041,960
-from gain on sale 933,622 588,768 93,755 0 264,801
=========== =========== =========== =========== ===========
Cash Generated (Deficiency)From Operations $ 1,466,120 $ 1,929,889 $ 1,423,151 $ 1,483,926 $ 1,556,205
Cash Generated From Sales 5,375,793 1,373,382 1,353,011 1,492,795 801,641
Cash Generated From Refinancing 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated From Operations,
Sales and Refinancing 6,841,913 3,303,271 2,776,162 2,976,721 2,357,849
Less: Cash Distributions to Investors
-from operating cash flow 1,466,120 1,799,923 1,423,151 1,427,647 1,556,208
-from sales and refinancing 419,246 121,458 247,028 222,115 0
-from cash reserves (a) 224,365 0 109,996 0 40,184
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions 4,732,182 1,381,890 995,987 1,326,959 761,457
Less: Special Items (Not Including
Sales and Refinancing) 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions and
Special Items $ 4,732,182 $ 1,381,890 $ 995,987 $ 1,326,959 $ 761,457
=========== =========== =========== =========== ===========
Tax and Distribution Data
Per $1,000 Invested (b)
Federal Income Tax Results:
Ordinary Income (Loss)
-from operations 57 70 45 42 50
-from recapture 23 4 1 0 4
Capital Gain (Loss) 20 24 3 0 8
Cash Distributions to Investors:
Source (on GAAP basis)
-Investment Income 99 90 0 55 73
-Return of Capital 0 0 84 23 3
Cash Distributions to Investors:
Source (on cash basis)
-Sales 20 6 12 10 0
-Refinancing 0 0 0 0 0
-Operations 69 84 67 68 74
-Cash Reserves (a) 10 0 5 0 2
Amount (in percentage terms) remaining
invested in program properties at the
end of the last period reported in the
Table 0 0 0 0 99%
</TABLE>
(a) Represents initial capital or cash retained from prior years' cash flow.
(b) Based on an investment of a weighted average unit outstanding.
<TABLE>
B-4
TABLE III (Continued)
OPERATING RESULTS OF PRIOR PARTNERSHIPS
(Unaudited)
<CAPTION>
AEI NET LEASE INCOME & GROWTH FUND XX
Years Ended December 31
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Gross Revenues from Operations $ 1,852,292 $ 2,359,797 $ 2,003,892 $ 2,038,914 $ 2,160,458
Profit on Sale of Properties 225,180 87,281 472,575 134,164 0
Less:
Operating Expenses 292,122 255,505 354,554 354,215 325,561
Depreciation 251,092 381,794 390,066 370,937 405,310
Real Estate Impairment 0 0 626,800 0 0
Minority Interest in Net Operating Income 19,454 0 0 0 0
----------- ----------- ----------- ----------- -----------
Net Income (Loss)-GAAP Basis $ 1,514,804 $ 1,809,779 $ 1,105,047 $ 1,447,926 $ 1,429,587
=========== =========== =========== =========== ===========
Taxable Income (Loss):
-from operations $ 1,275,827 $ 1,720,326 $ 1,274,296 $ 1,315,460 $ 1,450,466
-from gain on sale 223,456 85,640 469,188 133,941 0
=========== =========== =========== =========== ===========
Cash Generated (Deficiency)From Operations $ 1,583,637 $ 2,145,303 $ 1,604,421 $ 1,689,142 $ 1,820,773
Cash Generated From Sales 988,838 461,077 2,098,981 438,215 0
Cash Generated From Refinancing 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated From Operations,
Sales and Refinancing 2,572,475 2,606,380 3,703,402 2,127,357 1,820,773
Less: Cash Distributions to Investors
-from operating cash flow 1,467,084 2,034,864 1,604,421 1,449,862 1,820,773
-from sales and refinancing 486,375 100,571 124,011 78,041 99,509
-from cash reserves (a) 0 0 388,234 0 20,449
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions 619,016 470,945 1,586,736 599,454 (119,958)
Less: Special Items (Not Including
Sales and Refinancing) 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions and
Special Items $ 619,016 $ 470,945 $ 1,586,736 $ 599,454 $ (119,958)
=========== =========== =========== =========== ===========
Tax and Distribution Data
Per $1,000 Invested (b)
Federal Income Tax Results:
Ordinary Income (Loss)
-from operations 53 72 53 56 62
-from recapture 2 1 4 1 0
Capital Gain (Loss) 7 3 15 5 0
Cash Distributions to Investors:
Source (on GAAP basis)
-Investment Income 63 75 46 61 61
-Return of Capital 18 14 43 3 21
Cash Distributions to Investors:
Source (on cash basis)
-Sales 20 4 5 3 4
-Refinancing 0 0 0 0 0
-Operations 61 85 68 61 77
-Cash Reserves (a) 0 0 16 0 1
Amount (in percentage terms) remaining
invested in program properties at the
end of the last period reported in the
Table 0 0 0 0 98%
(a) Represents initial capital or cash retained from prior years' cash flow.
(b) Based on an investment of a weighted average Unit outstanding.
</TABLE>
<TABLE>
B-5
TABLE III (Continued)
OPERATING RESULTS OF PRIOR PARTNERSHIPS
(Unaudited)
<CAPTION>
AEI INCOME & GROWTH FUND XXI
Years Ended December 31
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Gross Revenues from Operations $ 263,399 $ 1,341,753 $ 1,513,094 $ 1,854,751 $ 1,891,099
Profit on Sale of Properties 0 0 106,551 235,377 522,233
Less:
Operating Expenses 144,180 278,563 348,934 356,890 309,758
Depreciation 11,687 150,958 251,272 448,810 505,566
Real Estate Impairment 0 0 580,200 0 0
----------- ----------- ----------- ----------- -----------
Net Income (Loss)-GAAP Basis $ 107,532 $ 912,232 $ 439,239 $ 1,284,428 $ 1,598,008
=========== =========== =========== =========== ===========
Taxable Income (Loss):
-from operations $ 245,581 $ 1,135,292 $ 937,374 $ 1,104,024 $ 1,144,059
-from gain on sale 0 0 102,599 229,440 488,319
=========== =========== =========== =========== ===========
Cash Generated (Deficiency) From Operations $ 171,812 $ 1,098,924 $ 966,562 $ 1,642,315 $ 1,564,043
Cash Generated From Sales 0 0 520,790 862,718 2,435,549
Cash Generated From Refinancing 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated From Operations,
Sales and Refinancing 171,812 1,098,924 1,487,352 2,505,033 3,999,592
Less: Cash Distributions to Investors
-from operating cash flow 171,812 1,098,924 966,562 1,371,531 1,564,043
-from sales and refinancing 0 0 352,009 411,231 266,998
-from cash reserves (a) 21,611 75,670 720,708 0 77,731
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions (21,611) (75,670) (551,927) 722,271 2,090,820
Less: Special Items (Not Including
Sales and Refinancing) 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions and
Special Items $ (21,611) $ (75,670) $ (551,927) $ 722,271 $ 2,090,820
=========== =========== =========== =========== ===========
Tax and Distribution Data
Per $1,000 Invested (b)
Federal Income Tax Results:
Ordinary Income (Loss)
-from operations 35 64 39 46 48
-from recapture 0 0 0 0 1
Capital Gain (Loss) 0 0 4 9 19
Cash Distributions to Investors:
Source (on GAAP basis)
-Investment Income 15 52 18 53 66
-Return of Capital 13 14 66 21 13
Cash Distributions to Investors:
Source (on cash basis)
-Sales 0 0 14 17 11
-Refinancing 0 0 0 0 0
-Operations 25 62 40 57 65
-Cash Reserves (a) 3 4 30 0 3
Amount (in percentage terms) remaining
invested in program properties at the
end of the last period reported in the
Table 0 0 0 0 98%
(a) Represents initial capital or cash retained from prior years' cash flow.
(b) Based on an investment of a weighted average Unit outstanding.
</TABLE>
<TABLE>
B-6
TABLE III (Continued)
OPERATING RESULTS OF PRIOR PARTNERSHIPS
(Unaudited)
<CAPTION>
AEI INCOME & GROWTH FUND XXII
July 31, 1996
(Operations Commenced) Years Ended December 31
to December 31, 1996 1997 1998 1999
<S> <C> <C> <C> <C>
Gross Revenues from Operations $ 0 $ 116,807 $ 545,711 $ 984,858
Profit on Sale of Properties 0 0 0 0
Less:
Operating Expenses 357 138,339 233,072 192,767
Depreciation 0 668 16,025 184,942
Real Estate Impairment 0 0 0 0
----------- ----------- ----------- -----------
Net Loss - GAAP Basis $ (357) $ (22,200) $ 296,614 $ 607,149
=========== =========== =========== ===========
Taxable Income (Loss):
-from operations $ 0 $ 114,913 $ 500,917 $ 596,673
-from gain on sale 0 0 0 0
=========== =========== =========== ===========
Cash Generated (Deficiency)From Operations $ (57) $ 139,614 $ 249,364 $ 708,899
Cash Generated From Sales 0 0 0 0
Cash Generated From Refinancing 0 0 0 0
----------- ----------- ----------- -----------
Cash Generated From Operations,
Sales and Refinancing (57) 139,614 249,364 708,899
Less: Cash Distributions to Investors
-from operating cash flow 0 77,357 249,364 708,899
-from sales and refinancing 0 0 0 0
-from cash reserves (a) 0 0 430,475 484,397
----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions (57) 62,257 (430,475) (484,397)
Less: Special Items (Not Including
Sales and Refinancing) 0 0 0 0
----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions and
Special Items $ (57) $ 62,257 $ (430,475) $ (484,397)
=========== =========== =========== ===========
Tax and Distribution Data
Per $1,000 Invested (b)
Federal Income Tax Results:
Ordinary Income (Loss)
-from operations 0 30 42 35
-from recapture 0 0 0 0
Capital Gain (Loss) 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis)
-Investment Income 0 0 25 35
-Return of Capital 0 20 32 34
Cash Distributions to Investors:
Source (on cash basis)
-Sales 0 0 0 0
-Refinancing 0 0 0 0
-Operations 0 20 21 41
-Cash Reserves (a) 0 0 36 28
Amount (in percentage terms) remaining
invested in program properties at the
end of the last period reported in the
Table 0 0 0 100%
(a) Represents initial capital or cash retained from prior years' cash flow.
(b) Based on an investment of a weighted average Unit outstanding.
</TABLE>
B-7
TABLE IV
RESULTS OF COMPLETED PROGRAMS
None of the public partnerships sponsored by the General
Partners or their Affiliates have completed operations.
B-8
<TABLE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
(Unaudited)
The following table provides information with respect to
sales or disposals of property by prior programs during the past
three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C><C> <C> <C> <C> <C> <C> <C>
AEIReal Estate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Jan. 97 176,383 0 0 0 176,383 0 150,060 150,060 11,427
AEI Net Lease Applebee's
Income& Growth Temple Terrace,
Fund XIX Florida(b) Oct. 93 Jan. 97 175,838 0 0 0 175,838 0 122,139 122,139 51,877
AEI Net Lease Arby's/Mrs. Winner's
Income &Growth Smyrna,
Fund XX Georgia(b) May 94 Jan. 97 224,838 0 0 0 224,838 0 196,635 196,635 57,179
AEIReal Estate Sizzler
Fund XVI Kings Island,
Ohio(e) Jan. 90 Jan. 97 149,201 0 0 0 149,201 0 468,140 468,140 131,616
AEIReal Estate Sizzler
Fund XVII Kings Island,
Ohio(e) Jan. 90 Jan. 97 315,229 0 0 0 315,229 0 1,048,666 1,048,666 279,192
AEIReal Estate Sizzler
Fund XVIII Kings Island,
Ohio(e) Jan. 90 Jan. 97 19,867 0 0 0 19,867 0 66,093 66,093 17,519
AEIReal Estate Children's World
Fund XV Moreno Valley,
California May 87 Jan. 97 1,301,342 0 0 0 1,301,342 0 963,717 963,717 1,195,705
AEIet Lease Rally's
Income& Growth Brownsville,
Fund XIX Texas July 93 Feb. 97 250,000 0 0 0 250,000 0 281,713 281,713 81,507
</TABLE> B-9
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures<F26>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI Net Lease Rally's
Income& Growth Edinburg,
Fund XIX Texas July 93 Feb. 97 250,000 0 0 0 250,000 0 281,761 281,761 81,528
AEIReal Estate Automax
Fund XV Minneapolis,
Minnesota June 86 Feb.97 411,993 0 0 0 411,993 0 388,800 388,800 539,623
AEIReal Estate Taco Cabana
Fund XVIII San Antonio,
Texas(b) July 91 Feb.97 192,268 0 0 0 192,268 0 133,503 133,503 95,414
AEIReal Estate Applebee's
Fund XVIII Destin,
Florida(b) Nov. 91 Mar.97 230,971 0 0 0 230,971 0 175,029 175,029 117,929
AEIReal Estate Champps
Fund XVIII Columbus,
Ohio(b) Aug. 96 Mar.97 220,067 0 0 0 220,067 0 181,887 181,887 10,447
AEIReal Estate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Mar.97 42,331 0 0 0 42,331 0 36,092 36,092 3,449
AEIReal Estate Applebee's
Fund XVIII Destin,
Florida(b) Nov. 91 Mar.97 231,740 0 0 0 231,740 0 175,028 175,028 118,592
AEIReal Estate Champps
Fund XVIII Columbus,
Ohio(b) Aug. 96 Mar.97 219,568 0 0 0 219,568 0 181,886 181,886 11,039
</TABLE> B-10
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures<F26>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEIReal Estate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Mar.97 219,996 0 0 0 219,996 0 187,574 187,574 18,517
AEI Net Lease Arby's/Mrs. Winner's
Income & Growth Smyrna,
Fund XX Georgia(b) May 94 Apr. 97 185,171 0 0 0 185,171 0 166,517 166,517 53,623
AEI RealEstate Champps
Fund XVIII Columbus,
Ohio(b) Aug. 96 July 97 368,142 0 0 0 368,142 0 304,040 304,040 30,138
AEI Net Lease Arby's/Mrs. Winner's
Income & Growth Smyrna,
Fund XX Georgia(b) May 94 Aug 97 174,495 0 0 0 174,495 0 152,812 152,812 54,721
AEI RealEstate Applebee's
Fund XVIII Destin,
Florida (b) Nov 91 Sept.97 216,157 0 0 0 216,157 0 160,443 160,443 118,263
AEI RealEstate Applebee's
Fund XVIII Destin,
Florida(b) Nov 91 Sept.97 263,568 0 0 0 263,568 0 198,898 198,898 147,315
AEI RealEstate Sizzler
Fund XVIII Fairfield,
Ohio Mar.91 Sept.97 528,476 0 0 0 528,476 0 1,608,265 1,608,265 208,636
AEI RealEstate Taco Cabana
Fund XVIII San Antonio,
Texas (b) July 91 Sept.97 267,448 0 0 0 267,448 0 180,533 180,533 143,024
</TABLE> B-11
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures<F26>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI Net Lease Arby's/Mrs. Winner's
Income & Growth Smyrna
Fund XX Georgia (b) May 94 Sept.97 224,663 0 0 0 224,663 0 180,203 180,203 67,210
AEI Net Lease Applebee's
Income & Growth Middletown,
Fund XX Ohio (b) July 94 Sept.97 135,839 0 0 0 135,839 0 107,517 107,517 37,838
AEI Income & Champps
Growth Fund Columbus,
XXI Ohio (b) Aug. 96 Sept.97 225,622 0 0 0 225,622 0 189,156 189,156 21,417
AEI RealEstate Taco Cabana
Fund XVIII San Antonio,
Texas (b) July 91 Oct. 97 226,316 0 0 0 226,316 0 147,978 147,978 118,031
AEI Net Lease Arby's/Mrs. Winner's
Income & Growth Smyrna,
Fund XX Georgia(b) May 94 Oct. 97 169,721 0 0 0 169,721 0 136,955 136,955 51,473
AEI Net Lease Applebee's
Income & Growth Middletown,
Fund XX Ohio (b0 July 94 Oct. 97 275,421 0 0 0 275,421 0 217,027 217,027 77,008
Net Lease Rio Bravo
Income & Growth St. Paul,
Fund 84-A Minnesota(b) Feb. 85 Oct. 97 177,504 0 0 0 177,504 0 202,961 202,961 267,864
AEI RealEstate Taco Cabana
Fund XVIII San Antonio,
Texas (b) July 91 Oct. 97 226,315 0 0 0 226,315 0 147,977 147,977 118,888
</TABLE> B-12
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Lease Chi-Chi's
Income & Growth Appleton,
Fund 84-A Wisconsin(b) Feb. 85 Nov. 97 276,279 0 0 0 276,279 0 246,174 246,174 398,842
AEI RealEstate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Nov. 97 296,961 0 0 0 296,961 0 237,846 237,846 38,903
AEI Income & Champps
Growth Fund Columbus,
XXI Ohio (b) Aug. 96 Nov. 97 295,168 0 0 0 295,168 0 239,850 239,850 29,608
AEI RealEstate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Nov. 97 182,816 0 0 0 182,816 0 150,061 150,061 25,256
AEI Net Lease Applebee's
Income & Growth Middletown,
Fund XX Ohio(b) July 94 Dec. 97 227,960 0 0 0 227,960 0 177,891 177,891 66,211
Net Lease Gingham's
Income & Growth St. Charles,
Fund 84-A Missouri(b) July 85 Dec. 97 226,762 0 0 0 226,762 0 232,334 232,334 278,773
AEI Net Lease Applebee's
Income & Growth Middletown,
Fund XX Ohio (b) July 94 Dec. 97 225,225 0 0 0 225,225 0 175,756 175,756 66,207
AEI Net Lease Applebee's
Income & Growth Middletown,
Fund XX Ohio (b) July 94 Dec. 97 218,596 0 0 0 218,596 0 170,775 170,775 64,386
</TABLE> B-13
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Lease Rio Bravo
Income & Growth St. Paul,
Fund 84-A Minnesota(b) Feb. 85 Dec. 97 271,675 0 0 0 271,675 0 302,919 302,919 404,755
AEI Real J.T. McCord's
Estate Fund Irving,
XVI Texas Dec. 87 Dec. 97 741,635 0 0 0 741,635 0 1,147,333 1,147,333 35,207
AEI Net Lease Applebee's
Income & Growth Middletown
Fund XX Ohio(b) July 94 Jan. 98 239,893 0 0 0 239,893 0 177,891 177,891 68,324
AEI Income & Champps
Growth Fund Columbus
XXI Ohio(b) Aug. 96 Jan. 98 227,414 0 0 0 227,414 0 189,156 189,156 26,890
Net Lease Chi-Chi's
Income & Growth Appleton
Fund 84-A Wisconsin(b) Feb. 85 Jan. 98 170,985 0 0 0 170,985 0 153,193 153,193 252,160
AEI Net Lease Champps
Income & Growth Lyndhurst
Fund XX Ohio (b) Apr. 96 Jan. 98 184,032 0 0 0 184,032 0 149,183 149,183 25,949
AEI Net Lease Champps
Income & Growth Columbus,
Fund XXI Ohio(b) Aug. 96 Feb. 98 181,855 0 0 0 181,855 0 132,408 132,408 20,481
AEI Real Estate am/pm
Fund 86-A Mini Market
Carson City,
Nevada Aug. 87 Feb. 98 955,401 0 0 0 955,401 0 779,896 779,896 1,103,787
</TABLE> B-14
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI RealEstate am/pm
Fund XVII Mini Market
Carson City,
Nevada Nov. 88 Feb. 98 850,996 0 0 0 850,996 0 703,871 703,871 872,915
AEI Income & Champps
Growth Fund Columbus,
XXI Ohio (b) Aug. 96 Mar. 98 226,394 0 0 0 226,394 0 165,510 27,455
Net Lease Rio Bravo
Income& Growth St. Paul,
Fund 84-A Minnesota (b) Feb. 85 Apr. 98 198,039 0 0 0 198,039 0 222,627 222,627 302,865
AEI Net Lease Red Line
Income &Growth Burgers
Fund XIX Houston,Texas Feb. 93 Apr. 98 0 0 0 0 0 0 303,629 303,629 103,564
Net Lease Chi-Chi's
Income& Growth Appleton,
Fund 84-A Wisconsin(b) Feb. 85 May 98 123,721 0 0 0 123,721 0 107,267 107,267 180,300
Net Lease Chi-Chi's
Income& Growth Appleton
Fund 84-A Wisconsin (b) Feb. 85 June 98 174,596 0 0 0 174,596 0 149,883 149,883 253,585
AEI RealEstate Tractor Supply
Fund 85-A Maryville,
Tennessee (b) Feb. 96 July 98 133,251 0 0 0 133,251 0 95,494 95,494 24,905
AEI Income Champps
& Growth Columbus,
Fund XXI Ohio (b) Aug. 96 July 98 227,055 0 0 0 227,055 0 171,422 171,422 34,463
</TABLE> B-15
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI RealEstate Sizzler
Fund 86-A Springboro,
Ohio (c) Aug. 90 July 98 25,385 0 0 0 25,385 0 89,097 89,097 7,807
AEI RealEsate Sizzler
Fund XVIII Springboro,
Ohio (c) Aug. 90 July 98 350,635 0 0 0 350,635 0 1,310,562 1,310,562 123,458
AEI RealEstate Fair Muffler
Fund 85-B Park Forest,
Illinois Aug. 86 Aug. 98 704 0 0 0 704 0 284,903 284,903 199,526
Net Lease Rio Bravo
Income&Growth St. Paul,
Fund 84 A Minnesota (b) Feb 85 Sep. 98 218,158 0 0 0 218,158 0 244,662 244,662 341,599
AEI RealEstate Rio Bravo
Fund 85-A St. Paul
Minnesota (b) Feb. 85 Sep. 98 35,196 0 0 0 35,196 0 39,465 39,465 54,675
AEI RealEstate Rio Bravo
Fund 85-A St. Paul
Minnesota (b) Feb. 85 Sep. 98 235,092 0 0 0 235,092 0 284,015 284,015 393,475
Net Lease Chi-Chi's
Income& Growth Appleton
Fund 84-A Wisconsin (b) Feb. 85 Sep. 98 260,327 0 0 0 260,327 0 230,825 230,825 399,281
AEI RealEstate Rio Bravo
Fund 85-A St. Paul
Minnesota (b) Feb. 85 Oct. 98 181,897 0 0 0 181,897 0 204,542 204,542 285,371
</TABLE> B-16
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI RealEstate Rio Bravo
Fund 85-A St. Paul
Minnesota (b) Feb. 85 Nov. 98 115,604 0 0 0 115,604 0 132,575 132,575 185,783
Net Lease Chi-Chi's
Income& Growth Appleton
Fund 84-A Wisconsin (b) Feb. 85 Dec. 98 226,402 0 0 0 226,402 0 201,781 201,781 353,632
AEI RealEstate Applebee's
Fund 85-A Harlingen,
Texas (b) Dec. 95 Dec. 98 1,858,837 0 0 0 1,858,837 0 1,393,470 1,393,470 471,138
AEI RealEstate Hometown Buffet
Fund XVIII Tucson,
Arizona (b) Jun. 93 Feb.99 131,430 0 0 0 131,430 0 94,554 94,554 68,634
AEI RealEstate Hometown Buffet
Fund XVIII Tucson,
Arizona (b) Jun. 93 Feb.99 131,441 0 0 0 131,441 0 94,553 94,553 68,634
AEI RealEstate Hometown Buffet
Fund XVIII Tucson,
Arizona (b) Jun. 93 Mar.99 160,729 0 0 0 160,729 0 114,626 114,626 83,555
AEI Net Lease Hometown Buffet
Income &Growth Tucson,
Fund XIX Arizona Jun. 93 Mar.99 16,056 0 0 0 16,056 0 11,642 11,642 8,337
AEI Net Lease Hometown Buffet
Income &Growth Tucson,
Fund XIX Arizona Jun. 93 Mar.99 208,196 0 0 0 208,196 0 151,972 151,972 110,138
</TABLE> B-17
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI Net Lease Hometown Buffet
Income &Growth Tucson,
Fund XIX Arizona (b) Jun. 93 Mar.99 223,640 0 0 0 223,640 0 162,231 162,231 117,689
AEI RealEstate Zapata's
Fund XV Waco,
Texas (d) Dec. 87 May 99 128,879 0 0 0 128,879 0 548,010 548,010 57,689
AEI RealEstate Zapata's
Fund XVI Waco,
Texas (d) Dec. 87 May 99 158,131 0 0 0 158,131 0 674,285 674,285 75,923
Net Lease Gingham's
Income& Growth St. Charles
Fund 84-A Missouri (b) July 85 May 99 218,667 0 0 0 218,667 0 204,181 204,181 282,091
AEI RealEstate Fuddruckers
Fund XV St. Louis
Missouri (d) Mar 88 June 99 1,145,424 0 0 0 1,145,424 0 1,138,296 1,138,296 1,830,096
AEI RealEstate Fuddruckers
Fund XVI St. Louis
Missouri (d) Mar 88 June 99 763,611 0 0 0 763,611 0 761,053 761,053 1,219,663
AEI Net Lease Hometown Buffet
Income &Growth Tucson,
Fund XIX Arizona (b) Jun. 93 June 99 353,749 0 0 0 353,749 0 256,493 256,493 193,341
Net Lease Chi-Chi's
Income &Growth Appleton,
Fund 84-A Wisconsin(b) Feb. 85 June 99 191,835 0 0 0 191,835 0 176,761 176,761 322,373
</TABLE> B-18
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI Net Lease Red Line Burgers
Income &Growth Houston,
Fund XIX Texas Feb. 93 July 99 0 0 0 0 0 0 299,531 299,531 88,807
AEI Income & Arby's
Growth Fund Montgomery,
XXI Alabama (b) May 95 July 99 221,994 0 0 0 221,994 0 185,359 185,359 79,992
AEI Income & Arby's
Growth Fund Montgomery,
XXI Alabama (b) May 95 July 99 212,651 0 0 0 212,651 0 174,979 174,979 75,569
AEI Income & Arby's
Growth Fund Montgomery,
XXI Alabama (b) May 95 Aug 99 222,987 0 0 0 222,987 0 185,359 185,359 80,544
AEI RealEstate Timber Lodge
Fund XV St. Cloud
Minnesota (b) Nov 97 Aug 99 109,271 0 0 0 109,271 0 97,031 97,031 16,565
Net Lease Chi-Chi's
Income &Growth Appleton,
Fund 84-A Wisconsin(b) Feb. 85 Sept 99 135,853 0 0 0 135,853 0 121,068 121,068 223,328
AEI RealEstate Timber Lodge
Fund XV St. Cloud
Minnesota (b) Nov 97 Oct 99 96,357 0 0 0 96,357 0 87,191 87,191 16,371
AEI RealEstate Timber Lodge
Fund XV St. Cloud
Minnesota (b) Nov 97 Oct 99 222,208 0 0 0 222,208 0 198,162 198,162 37,422
</TABLE> B-19
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI Income & Arby's
Growth Fund Montgomery,
XXI Alabama (b) May 95 Oct 99 224,050 0 0 0 224,050 0 185,359 185,359 84,767
AEI Income & Caribou Coffee
Growth Fund Charlotte,
XXI North Carolina July 97 Oct 99 1,553,867 0 0 0 1,553,867 0 1,310,597 1,310,597 324,549
Net Lease Gingham's
Income& Growth St. Charles
Fund 84-A Missouri (b) July 85 Nov 99 313,461 0 0 0 313,461 0 287,001 287,001 414,786
AEI RealEstate Timber Lodge
Fund XV St. Cloud
Minnesota (b) Nov 97 Nov 99 138,275 0 0 0 138,275 0 128,251 128,251 25,563
AEI RealEstate Timber Lodge
Fund XVII St. Cloud
Minnesota (b) Nov 97 Nov 99 32,724 0 0 0 32,724 0 29,373 29,373 6,052
AEI RealEstate Rally's
Fund XVIII San Antonio,
Texas Dec. 92 Dec 99 0 0 0 0 0 0 303,640 303,640 148,978
Net Lease Gingham's
Income& Growth St. Charles
Fund 84-A Missouri (b) July 85 Dec 99 226,745 0 0 0 226,745 0 205,001 205,001 297,884
AEI RealEstate Timber Lodge
Fund XVII St. Cloud
Minnesota (b) Nov 97 Dec 99 225,900 0 0 0 225,900 0 187,891 187,891 39,700
</TABLE> B-20
[FN]
(a) Does not include deduction for partnership general and
administrative expenses not related to the properties.
(b) Sale of less than a majority interest in the property.
(c) This property was owned jointly by AEI Real Estate Funds 86-A and XVIII.
(d) This property was owned jointly by AEI Real Estate Funds XV
and XVI.
(e) This property was owned jointly by AEI Real Estate Funds
XVI, XVII and XVIII.
</FN>
AEI INCOME & GROWTH FUND 23
AN OFFERING OF LIMITED LIABILITY COMPANY UNITS
$1,500,000 minimum
AEI Income & Growth Fund 23 LLC is a limited liability
company organized to purchase commercial properties
throughout the United States. These properties will be
leased to single corporate tenants under leases that
require the tenant to pay most of the property operation
costs ("net leases"). AEI Fund 23 is not a mutual fund or
an investment company.
SECURITY OFFERED 24,000 Units ($24,000,000 total)
of limited liability company interest
at a price of $1,000 each
MINIMUM PURCHASE 2.5 Units ($2,500); 2 Units ($2,000)
for IRAs and Keoghs (higher in
certain states).
MINIMUM OFFERING SIZE All moneys will be placed in a
special bank escrow until receipt of
$1,500,000.
OFFERING PERIOD The offering will last one year,
extendable to two years.
DEALER MANAGER AEI Securities, Inc., a company
affiliated with the managers, will
act as "Dealer-Manager" and
coordinate sale of units. AEI
Securities will contract with other
broker dealers that are members of
the NASD who will use their best
efforts to offer and sell the units.
PROCEEDS TO AEI FUND 23 Per Unit Total (minimum)
Public Price $1,000.00 $1,500,000 100.0%
Commissions & expenses 100.00 150,000 10.0%
Other offering costs 50.00 50,000 5.0%
Proceeds to AEI Fund 23 850.00 1,300,000 85.0%
Acquisition expenses 40.00 60,000 4.0%
Working capital reserve 10.00 15,000 1.0%
Amount available for
purchase of properties $800.00 $1,274,500 80.0%
WE ENCOURAGE YOU TO READ THE "RISK FACTORS" BEGINNING ON
PAGE 5 OF THIS PROSPECTUS:
You likely will not be able to evaluate properties
before you invest;
$1,500,000 (the minimum) of subscriptions would
allow the purchase of only two properties;
There will be no secondary market for these units
and restrictions will be placed on their resale or
transfer;
The managers of AEI Fund 23 will operate under a
number of conflicts of interest.
Neither the SEC nor any state securities administrator
has approved the units or determined that this prospectus
is accurate and complete. Any representation to the
contrary is a criminal offense. We cannot use projections
in this offering and we cannot make any representation,
verbally or in writing, about the cash or tax benefits
you might receive from investing. We cannot accept your
subscription for units until at least five business days
after you have received this prospectus.
AEI SECURITIES, INC.
March , 1999
-1-
TABLE OF CONTENTS
Summary Page 3
Risk factors Page 5
Who may invest Page 8
Capitalization Page 9
Estimated use of proceeds Page 9
Investment objectives and policies Page 10
The Properties Page 14
Managers Page 17
Prior performance Page 19
Compensation to managers and affiliates Page 22
Conflicts of interest Page 24
Cash distributions and tax allocations Page 27
Income tax aspects Page 28
Restrictions on transfer Page 39
Summary of operating agreement Page 39
Reports to investors Page 45
Plan of distribution Page 46
Sales materials Page 48
Legal proceedings Page 48
Experts Page 48
Legal opinion Page 48
Financial statements Page 49
Operating Agreement Exhibit A
Prior Performance Tables Exhibit B
Certain State Suitability Requirements Exhibit C
Subscription Agreement Exhibit D
-2-
SUMMARY
AEI FUND 23
AEI Income & Growth Fund 23 LLC is a newly organized
limited liability company that will acquire a portfolio
of net leased commercial properties. Our objective is to
acquire properties that provide:
Regular cash distributions of lease income;
Growth in lease income through rent escalations;
Capital growth through appreciation in property
values; and
Stable performance from long-term leases with
corporate tenants.
To achieve these objectives, we may sell properties and
reinvest the proceeds in additional net leased
properties. We cannot assure you that we will achieve
these objectives. AEI Fund 23 is not a "tax shelter" and
is not intended to shelter your taxable income from other
sources.
AEI Fund 23 will continue in existence until 2048 unless
the investors, by majority vote, decide to dissolve it
earlier.
RISKS
There are substantial risks in this investment
associated with the inability of investors to
evaluate properties, the inability of AEI Fund
23 to diversify if only the minimum, invested
the illiquidity of the units, and manager
conflicts which are described under "RISK FACTORS"
starting on page 5.
PROPERTIES AND PROPERTY ACQUISITION
AEI Fund 23 did not own any properties when this
prospectus was written. We will, however, supplement this
prospectus when we have identified any property we intend
to purchase. Most of the properties will be leased to
corporate tenants in the chain or franchised restaurant
industry or in the retail industry. We will acquire
properties for cash whenever possible, although
properties may be acquired with assumable indebtedness if
the financing terms are attractive. Properties may later
be financed for up to 60% of the total purchase price of
all properties in the portfolio.
THE UNITS
Each unit represents a $1,000 equity interest in AEI Fund
23. Unlike profit and loss from a corporation, which are
taxed at the corporate level, profits, gains, losses and
tax deductions in AEI Fund 23 are designed to be passed
directly through to the investors.
Investors in units (limited members) will have a
different interest in profits, losses and distributions
than will the managers. For example: cash from rents will
be allocated and paid to investors and managers
differently than cash from the sale or financing of
properties. Cash distributions will be made as follows:
-3-
1. After deducting any operating expenses, rent and
other income will be paid 97% to investors and 3% to
managers;
2. After provision for debts, reserves and operating
expenses, cash from the sale or refinancing of
properties will be paid 99% to investors and 1% to
the managers. After the investors have received
payout (which occurs when total cash distributions
from property sales or financing equals an
investor's initial investment plus a 7% annual,
uncompounded return on investment) 90% of the cash
from the sale or refinancing of properties will be
paid to investors and 10% will be paid to managers.
THE MANAGERS
This investment program will be managed by AEI Fund
Management XXI, Inc., a Minnesota corporation operating
from its principal offices of the manager at 1300
Minnesota World Trade Center, 30 East Seventh Street,
Saint Paul, Minnesota 55101 and its telephone number is
(651) 227-7333 (toll-free 800-328-3519). Robert P.
Johnson, President of AEI Fund Management XXI, will also
serve as special managing member and will be responsible
for overseeing the corporate manager's activities.
COMPENSATION TO THE MANAGERS
In addition to their interests in the profits and losses
as managing members of AEI Fund 23, the managers will be
reimbursed for the following services at their cost:
1. The organization of AEI Fund 23 and this offering,
almost all of which will be paid to third parties.
This amount is estimated at $200,000 at the minimum.
2. The acquisition of properties. Estimated at
$60,000 at minimum subscriptions;
3. The administration of AEI Fund 23 (including
management, leasing, releasing and sale of
properties). Estimated at $75,000 for first 12
months at the minimum subscriptions.
The payments in 1-3 above will be limited to:
The manager's "cost" (the direct expense of
providing the service including employee
compensation, a portion of office and depreciation
costs);
What an unaffiliated party would charge for
providing comparable services in the same area;
20% of the subscription capital raised in the
case of organizational expenses and acquisition
expenses;
A "basket amount" in the case of all organizational,
acquisition, sales and overhead reimbursed, plus the
portion of reimbursements that represent salaries of
controlling persons of the managers. The basket
amount is equal to 20% of initial capital, plus 5%
of cash flow from commercial properties that are
managed, plus 3% of the sales price of the
properties if the managers provide sales services,
plus 7% of cash flow from operations.
-4-
RISK FACTORS
GENERAL RISKS
YOU WILL BE RELYING ON THE MANAGERS TO SELECT PROPERTIES
AND MIGHT NOT LIKE THE PROPERTIES THEY SELECT.
It is not likely that you will be able to evaluate
properties before they are purchased. Except through
the redemption option offered by AEI Fund 23, you will
not have a right to a return of your investment if you
do not like the properties purchased. AEI Fund 23 is
retaining the managers and will rely on them to find
and acquire its properties. We cannot assure you that
the managers will be able to find suitable properties
or that the business or investment objectives of AEI
Fund 23 will be achieved.
YOU WILL HAVE LITTLE CONTROL OVER OPERATIONS.
Except for limited voting rights, investors have no
control over AEI Fund 23's management and must rely
almost exclusively on the managers. The managers may
take actions with which you disagree. You will not have
any right to object to most management decisions unless
the managers breach their duties to AEI Fund 23.
WHETHER AEI FUND 23 IS PROFITABLE OR NOT, SUBSTANTIAL
FEES WILL BE PAID TO THE MANAGERS FOR THEIR SERVICES.
In operating AEI Fund 23, the managers may make
business decisions that you would not. The managers may
have duties to other programs that may conflict with
their duties to AEI Fund 23. The managers will receive
payments from AEI Fund 23 whether or not it operates
profitably.
THERE WILL NOT BE A MARKET FOR YOUR UNITS AND THERE WILL
BE RESTRICTIONS PLACED ON THEIR TRANSFER.
To avoid being taxed as a corporation, AEI Fund 23 is
required to place significant restrictions on the
transfer of units. That means investors are required to
receive approval from the manager before reselling or
transferring their units. The manager is required to
refuse a transfer when it would adversely affect the
tax status of AEI Fund 23. Because of these
requirements, there will not be a public market for
your units and you may not be able to sell them at the
time you desire.
YOU WILL NOT HAVE A RIGHT TO A RETURN OF YOUR CAPITAL
PRIOR TO THE TERMINATION OF THE PROGRAM.
Although its intent is to dissolve earlier, AEI Fund 23
is not required to dissolve until 2048 unless investors
vote to have it dissolve earlier. You will not have a
right to redeem your units until it is dissolved.
Although AEI Fund 23 will have a unit repurchase
program, that program is limited, provides for
discounts that may not provide you with full value for
your investment, may be periodically suspended in the
discretion of the managers, and is not available if
there is not adequate capital to pay for repurchases.
-5-
AEI FUND 23 MAY NOT BE ABLE TO DIVERSIFY ITS INVESTMENTS
AND ACCOMPLISH ALL OF ITS INVESTMENT OBJECTIVES.
If it raises only $1,500,000, AEI Fund 23 may purchase
as few as two properties and the proportion of its
capital spent on organizational and offering costs will
be higher. While AEI Fund 23 intends to diversify its
investments, it is under no obligation to do so and may
invest in a single property. PENNSYLVANIA INVESTORS:
Because the minimum is less than $2,400,000, you are
cautioned to carefully evaluate AEI Fund 23's ability
to accomplish its objectives and to ask about the
current amount of subscriptions before you invest.
AEI FUND 23 MAY DISSOLVE IF BOTH MANAGERS DIE OR
WITHDRAW.
If both managers die, are removed, withdraw, or are
declared bankrupt, AEI Fund 23 may be required to
dissolve. In that kind of situation, it might face
selling its properties at disadvantageous prices. AEI
Fund 23 will not carry insurance on the life of
Robert Johnson, the special managing member and
president of the manager.
AEI FUND 23 IS NOT PROVIDING YOU WITH SEPARATE LEGAL OR
ACCOUNTING REPRESENTATION.
AEI Fund 23, its investors and the managers are not
represented by separate counsel. Although counsel has
given the tax opinion referenced in the Tax Matters
section of this prospectus, and an opinion that there
is legal authority to issue the units, the legal
counsel and accountants for AEI Fund 23 have not been
retained, and will not be available, to provide other
legal counsel or tax advice to individual investors.
DISTRIBUTIONS IN THE EARLY STAGES MAY BE A RETURN OF
CAPITAL.
If operating revenues are not sufficient to fund all
distributions, the cash you receive may represent a
return of capital.
REAL ESTATE INVESTMENT RISKS
DEFAULTS BY TENANTS MAY INTERRUPT CASH FLOW OR CAUSE A
DECLINE IN A PROPERTY'S VALUE.
If a tenant defaults, we cannot assure you that AEI
Fund 23 will be able to find a new tenant for the
vacant property at the same rental rate or that it will
be able to sell the property without incurring a loss.
If a tenant files for bankruptcy, we may not be able
to quickly recover the property from the
bankruptcy trustee. If that were to happen, it might
delay re-letting the property and we may not receive
rent from the trustee sufficient to cover our expenses.
SOME PROPERTIES MAY BE SUITABLE FOR ONLY ONE USE AND MAY
BE COSTLY TO UPGRADE IF A LEASE IS TERMINATED.
AEI Fund 23's properties may be designed for a
particular tenant. If AEI Fund 23 holds a property at
termination of the lease, and the tenant does not
renew, or if the tenant defaults on its lease, the
property might not be marketable without substantial
capital improvements. Improvements could require the
use of cash that would otherwise be distributed to
investors. If a decision was made to sell the property,
the sales price might be lower than expected.
-6-
AEI FUND 23 COULD LOSE PROPERTIES IF IT DEFAULTS ON
BORROWINGS.
When purchasing a property, AEI Fund 23 might assume an
existing mortgage. It might also finance properties
initially purchased for all cash. This practice is
known as "Leveraging." Leveraging increases the
capital available for investment, but may also increase
the risk of loss. If AEI Fund 23 were to default on
mortgage payments, and the mortgage holder foreclosed,
AEI Fund 23 could lose its ownership interest in the
property.
FEDERAL INCOME TAX RISKS
OPERATION OF AEI FUND 23 COULD AFFECT THE PROPRIETY OF
ALLOCATIONS AND CAUSE ADDITIONAL TAX AND PENALTIES.
Each investor will be entitled to deduct his or her
allocated share of any tax losses and will report his
or her allocated share of income and gain on the
investor's tax return. Whether those allocations will
be honored by the IRS depends on a number of facts
related to the future operation of AEI Fund 23. Because
AEI Fund 23 has not commenced operation, counsel has
not rendered an opinion as to these allocations. If
these allocations were not honored by the IRS, a change
in the tax treatment of income, gain, loss and
deduction from AEI Fund 23 could occur and on audit,
each investor could be forced to pay taxes or
penalties, or both.
THE TIMING OF TAX DEDUCTIONS COULD BE CHALLENGED BASED ON
THE ALLOCATION OF "BASIS" AMONG PROPERTIES AND INVESTORS
COULD BE SUBJECTED TO INCREASED TAX.
The managers will allocate the purchase price of
properties among buildings (the cost of which is
depreciable), personal property (the cost of which is
depreciable over a shorter period), and the underlying
land (the cost of which is not depreciable).
Because properties have not been purchased, counsel has
not rendered an opinion on whether the allocation of
purchase price, the rate of depreciation or the timing
of deductions is proper. If the IRS successfully
challenged these allocations, investors could lose a
portion of the deductions and be subject to increased
taxable income in the early years of operations.
THE RESALE OF PROPERTIES COULD CAUSE GAINS TO BE TAXED AS
ORDINARY INCOME.
If AEI Fund 23 is characterized as a "dealer" in real
estate when properties are sold, gain or loss on such
sales will be considered ordinary income or loss.
Because the character of AEI Fund 23 as a dealer in
real estate is dependent on future events and the
timing of property purchases and sales, counsel has not
rendered an opinion on this issue. Because ordinary
income is, in most cases, taxed at higher rates than
capital gain, characterization of AEI Fund 23 as a
dealer could cause an increase in taxes payable by an
investor.
THE STRUCTURE OF THE PURCHASE AND LEASE TRANSACTIONS OF
AEI FUND 23 COULD CAUSE LOSS OF SOME DEPRECIATION AND
OTHER DEDUCTIONS.
Sale leaseback transactions in which the lessor
provides certain options to the seller/lessee, such as
a purchase option at a fixed price, could cause the IRS
-7-
to conclude the transaction is not a true lease. If
this were to occur, AEI Fund 23 would not be able to
use some of the deductions it anticipates and more
taxable income would be recognized during operation of
a property.
INCORRECT ALLOCATION OF EXPENSES AMONG START-UP,
ORGANIZATION AND SYNDICATION COULD CAUSE MORE TAXABLE
INCOME.
The manager will allocate expenses during the early
stages of AEI Fund 23's operations to start-up,
organization, syndication and acquisition expenses for
purposes of the deduction or capitalization of such
expenses. These allocations cannot be made until the
expenses are incurred and, therefore, counsel has not
rendered an opinion as to their propriety. If the IRS
determined that the allocations were improper, AEI Fund
23 could lose some deductions and investors would
recognize more income during the early stages of the
operation of properties.
WHO MAY INVEST
To purchase units you must be able to represent in
writing that you have either:
1. A net worth (exclusive of homes, home furnishings
and automobiles) of at least $45,000 and an annual
gross income of at least $45,000; or
2. Irrespective of annual gross income, a net worth
of at least $150,000 determined with the same
exclusions.
You will be required to purchase a minimum of two and one-
half units ($2,500) unless you are investing through an
IRA or other tax-qualified plan. The minimum investment
for IRAs and other tax-qualified plans is two units
($2,000), provided that the person who established the
account or plan meets the standards for an individual
investor. An investment in AEI Fund 23 will not create an
IRA or other tax-qualified plan for any investor.
Investment firms that participate in the distribution of
this offering and solicit orders for units are required
to make every reasonable effort to determine that the
purchase is appropriate for each investor. In addition to
net worth and income standards, the investment firms are
required to determine:
whether you can reasonably benefit from an
investment in the units based on your
investment objectives,
your ability to bear the risk of the
investment, and
your understanding of the risks of the
investment.
They must also determine whether you understand:
the lack of liquidity of the units,
the restrictions on transferability of the
units,
the background and qualifications of the
managers, and
the tax consequences of the investment.
Additional requirements applicable to residents of some
states are set forth in Exhibit C to this prospectus.
-8-
In addition to any other considerations, trustees and
custodians of tax-qualified plans should consider the
following when making an investment decision:
If AEI Fund 23 borrows money to purchase a
property, some of its income may be unrelated
business taxable income. A tax-qualified plan,
although generally exempt from federal income tax,
may be subject to some taxation i f its unrelated
business taxable income, after investment in AEI
Fund 23, exceeds $1,000 in any taxable year.
ERISA establishes diversification requirements
that should be considered. ERISA should also be
considered in light of the nature of an investment
in, and the compensation structure of, the
investment and the potential lack of liquidity of
the units. The prudence of a particular investment
must be determined by the responsible fiduciary
taking into account all the facts and circumstances
of the tax-qualified retirement plan and the
investment.
BECAUSE IT IS POSSIBLE THAT AEI FUND 23 WILL GENERATE
UNRELATED BUSINESS TAXABLE INCOME, IT IS NOT AN
APPROPRIATE INVESTMENT FOR CHARITABLE REMAINDER TRUSTS.
CAPITALIZATION
The capitalization of AEI Fund 23 at December 31, 1998,
and after the issuance and sale of the minimum of 1,500
units is as follows:
December 31, 1998
Title of Class Actual After Sale of 1,500
Units
Managers' Capital $ 1,000 $ 1,000
Investors' Capital $ 0 $ 1,500,000
Less Offering Expenses $ 0 $ (200,000)
___________ ___________
Total Capital $ 1,000 $ 1,300,00
=========== ===========
ESTIMATED USE OF PROCEEDS
AEI Fund 23 expects that there will be approximately
$1,275,000 available for investment in properties and
reserves if $1,500,000 is raised and $20,640,000 if
$24,000,000 is raised. The following table estimates the
use of proceeds from the sale of units. Some of the
items below cannot be precisely calculated and could vary
materially from the amounts shown.
-9-
Minimum Maximum
(1,500 Units) (24,000 Units)
Dollars Percent Dollars Percent
Gross Offering Proceeds $ 1,500,000 100.00% $24,000,000 100.00%
Less Offering Expenses
Selling commissions and
nonaccountable expenses $ (150,000) 10.00% $(2,400,000) 10.00%
Other offering expenses $ (75,000) 5.00% $ (960,000) 4.00%
Amount Available for
Investment
(net proceeds) $ 1,275,000 85.00% $20,640,000 86.00%
Acquistion Expenses $ (60,000) 4.00% $ (720,000) 3.00%
Working Capital Reserve $ (15,000) 1.00% $ (240,000) 1.00%
___________ ___________
CASH AVAILABLE FOR PURCHASE
OF PROPERTIES $ 1,200,000 80.00% $19,680,000 82.00%
=========== ===========
The amount available for investment in properties will
not, in any event, be less than 80% of gross offering
proceeds. The proceeds of the offering will be held in
trust by AEI Fund 23 for the benefit of the purchasers of
units and used only for the purposes set forth above.
AEI Fund 23 will continue to offer and sell units for 12
months after the date of this prospectus. At the election
of the managers, units may be offered during a second 12
months. Except for indebtedness secured by properties, it
will not commit itself to invest more money in properties
than it has raised through the sale of units.
Accordingly, the managers believe that AEI Fund 23 will
have adequate capital to fund its operation for the first
24 months of operation.
INVESTMENT OBJECTIVES AND POLICIES
PRINCIPAL INVESTMENT OBJECTIVES
AEI Fund 23 intends to acquire free-standing, single-
tenant, net-leased commercial properties located
throughout the United States. It may also sell properties
from time to time and purchase other similar properties
when its managers believe conditions are favorable. It
may commit to purchase properties when construction is
completed at agreed prices or pursuant to pricing
formulas.
ACQUISITION OF PROPERTIES
AEI Fund 23 will not purchase or lease any property from,
or sell or lease any property to, the managers or their
affiliates. It may, however, purchase property from the
managers or their affiliates if they purchased the
property in their own name and temporarily held title to
it to help acquire the property or obtain financing.
Purchases from a manager or affiliate will be for a price
no greater than the price paid by the manager or
affiliate, plus acquisition expenses.
-10-
Although AEI Fund 23 does not intend to acquire any
unimproved or undeveloped properties, or to participate
in the development of any properties, it may acquire raw
land prior to the building of improvements and it may
advance funds or make loans in connection with the
construction of improvements. Any construction loan will
be secured by the land and improvements under
construction. Construction loans will not exceed 30% of
offering proceeds.
The purchase price of each property will be supported by
an independent appraisal of its fair market value.
Nevertheless, the managers will rely on their own
analysis, and not on such appraisals, in determining
whether to acquire a particular property. Copies of
appraisals will be retained at the office of AEI Fund 23
for at least five years and will be available for
inspection and duplication by any investor.
Prior to the acquisition of a property, AEI Fund 23 will
be provided with evidence satisfactory to the managers
that it will acquire marketable title to such property,
subject only to acceptable liens and encumbrances. Such
evidence may include a policy of title insurance, an
opinion of counsel or such other evidence as is customary
in the locality in which the property is situated.
TEMPORARILY INVESTED FUNDS
After release from escrow, and before investment in
properties, all funds will be invested in short-term
government securities or in insured deposits with a
financial institution and will earn interest at short-
term deposit rates. Any of the net proceeds of this
offering (except for amounts used to pay operating
expenses or to establish working capital reserves as
determined by the manager) that have not been invested or
committed for investment in real property within 24
months after the date of this prospectus or six months
after termination of the offering of units will be
distributed, without interest but together with a
proportionate amount of any commissions or other
organization and offering expenses, to the investors as a
return of capital. All funds will be available for the
general use of AEI Fund 23 during such period and may be
expended in operating any properties that have been
acquired.
Investment capital will not be segregated or held
separate from other capital of AEI Fund 23 pending
investment. For purposes of the foregoing, capital will
be considered committed to properties, and will not be
returned to the investors, if written contractual
agreements have been signed prior to the period described
above, regardless of whether the property is ultimately
purchased. To the extent that funds have been reserved to
make contingent payments in connection with a property
under a written contractual agreement, or because the
managers determine that additional reserves are necessary
in connection with a property, regardless of whether such
payment is ultimately made, funds will not be returned to
investors.
SALE OF PROPERTIES
At the discretion of the managers, net proceeds from sale
of properties may either be distributed to investors or
reinvested in properties that meet the acquisition
-11-
criteria of AEI Fund 23. Net proceeds from the sale of a
property will not be reinvested unless enough cash is
distributed for investors to pay their income taxes
resulting from the sale, assuming they are taxed at a
rate of seven percent above the individual capital gains
rate.
AEI Fund 23 may sell co-tenancy or other fractional
interests in properties, rather than selling its entire
interest in a property. The manager believes that,
depending on market conditions, sales of smaller
interests through exchanges designed to comply with
Section 1031 of the Internal Revenue Code can result in
greater overall profits to AEI Fund 23. In those
instances in which AEI Fund 23 does not sell all of a
property, it will retain, either alone or with another
program sponsored by affiliates of the managers, the
authority to direct management and policies relating to
the operation and sale of the property.
Although AEI Fund 23 intends to sell its properties for
cash, purchase money obligations secured by mortgages may
be taken as partial payment. The terms of payment may be
affected by custom in the area in which the property is
located and by prevailing economic conditions. To the
extent AEI Fund 23 receives notes and property other than
cash, that portion of the proceeds will not be included
in net proceeds from sale until and to the extent the
notes or other property are actually collected, sold,
refinanced or otherwise liquidated. Therefore, the
distribution to investors of the cash proceeds of a sale
may be delayed until the notes or other property are
collected at maturity, sold, refinanced or otherwise
converted to cash.
AEI Fund 23 may receive payments (cash and other
property) in the year of sale in an amount less than the
full sales price and subsequent payments may be spread
over several years. The entire balance of the principal
may be a balloon payment due at maturity. For federal
income tax purposes, unless it elects otherwise, AEI Fund
23 will report the gain on such sale proportionately
under the installment method of accounting as principal
payments are received.
BORROWING POLICIES
The managers might not finance all properties. They do
not intend to use any financing unless it can be
obtained at rates that are likely to generate an
attractive spread over rental rates. Although the
managers believe that the current interest rate
environment is favorable, if rates increase, the managers
may decide not to use any mortgage financing. In no event
will the total amount of indebtedness exceed 60% of the
purchase price of all properties, or 60% of the fair
market value of the properties on the date they are
refinanced. To the extent that any financing is not
fully amortizing, and it exceeds 25% of the purchase
price of properties, its maturity (its due date) will not
be earlier than ten years after the date of purchase of
the mortgaged property or two years after the anticipated
holding period of the property (provided such holding
period is at least seven years).
AEI Fund 23 will not obtain permanent financing from the
managers or their affiliates. Recourse for any
indebtedness will be limited to the particular property
to which the indebtedness relates. To the extent recourse
is limited to a particular property, under most
circumstances such indebtedness would increase the
investors' tax basis in the units. AEI Fund 23 will not
issue any senior securities and will not invest in junior
mortgages, junior deeds of trust or similar obligations.
-12-
JOINT VENTURE INVESTMENTS
Property may be purchased jointly with another program
sponsored by the managers or their affiliates. These
joint ventured investments will be made only with a
program that has investment objectives and management
compensation provisions substantially the same as those
of AEI Fund 23. AEI Fund 23's ability to enter into a
joint venture may be important if it wishes to acquire an
interest in a specific property but does not have
sufficient funds (or, at the time it enters into a
commitment to acquire a specified property, cannot
determine whether it will have sufficient funds) to
acquire the entire property.
In any joint venture with another fund sponsored by the
managers or their affiliates, the following conditions
must be satisfied:
1. The joint venture must have comparable investment
objectives and the investment by each party to the
joint venture must be on substantially the same
terms and conditions;
2. AEI Fund 23 may not pay more than once for the
same services and may not act indirectly through any
such joint venture if it would be prohibited from
doing so directly;
3. The compensation of the managers and such
affiliates in the other fund must be substantially
identical to their compensation in AEI Fund 23;
4. AEI Fund 23 must have a right of first refusal to
purchase the other party's interest if the other
party to the joint venture wishes to sell a property
There is a potential risk of impasse on joint venture
decisions and a risk that, even though AEI Fund 23 will
have the right of first refusal to purchase the other
party's interest in the joint venture, it may not have
the resources to exercise such right.
DISTRIBUTIONS
We intend to distribute net cash flow from operations to
investors within 30 days after the close of each fiscal
quarter. The amount of any distribution will depend upon
the degree to which operations have been profitable and
have generated cash flow. Net cash flow from operations
will not be used for the acquisition of properties,
although it may be held as reserves. Net cash flow may be
used to repurchase units. Distributions to investors who
elect to participate in a distribution reinvestment plan
will be applied to the purchase of additional units.
The quarterly distribution rate during the first 36
months after the date of this prospectus will likely
exceed the amount of cash generated from operations.
Although the managers have not established a specific
rate of distribution, and may change the rate of
distribution from time to time, because the distribution
will likely exceed the amount of cash generated during
this period, a part of the distribution will likely
constitute a return of the investors initial investment.
After that time, the distribution rate will be allowed to
float quarterly based on the cash flow or proceeds of
sale available for distribution.
-13-
RESERVES FOR OPERATING EXPENSES
The managers expect that about 1% of the offering
proceeds will initially be reserved to meet costs
and expenses. To the extent that such reserves and any
income are insufficient to defray the costs and other
obligations of AEI Fund 23, it may be necessary to
finance or refinance properties or, if that is not
available on acceptable terms, to sell properties,
possibly on unfavorable terms. During the holding period
of a property, AEI Fund 23 may increase reserves to meet
anticipated costs and expenses or other economic
contingencies. If the managers determine that reserves
are not necessary for operations, the excess may be
distributed to investors.
MANAGEMENT OF PROPERTIES
The manager or its affiliates will manage each property,
and enforce the lease obligations of the tenants. The
managers will:
negotiate with tenants,
reflect and remodel properties,
receive and deposit monthly lease payments,
periodically verify payment of real estate taxes
and insurance coverage, and
periodically inspect properties and tenant sales
records, where applicable.
Because the properties will be net leased, the tenants
will be responsible for most of the day-to-day on-site
management, taxes, insurance and maintenance expenses, of
the properties.
CHANGES IN INVESTMENT OBJECTIVES AND POLICIES
Investors have no voting rights with respect to the
establishment, implementation or alteration of the
investment objectives and policies of AEI Fund 23, all of
which are the responsibility of the managers.
Nevertheless, the managers will not make any material
changes in the investment objectives and policies
described above without first obtaining the written
consent or approval of investors owning in the aggregate
more than 50% of outstanding Units.
THE PROPERTIES
As of the date of this prospectus, AEI Fund 23 had not
acquired any properties. The managers are continually
evaluating properties for acquisition and engaging in
negotiations with sellers, tenants and developers
regarding the potential purchase of properties. Depending
upon the amount proceeds available from this offering,
the managers intend to diversify the type and location of
properties acquired. There is no limitation on the amount
or percentage of assets that may be invested in any one
property. Although we currently intend to purchase two or
more properties with the net proceeds of this offering,
we may purchase only a single property if, in the
manager's judgment, that would be in the best interest of
AEI Fund 23.
-14-
Most of the leases will provide that risks such as
fitness for use or purpose, design or condition, quality
of material or workmanship, latent or patent defects,
compliance with specifications, location, use, condition,
quality, description or durability will be borne by the
lessee. It is customary in commercial property
transactions that leases provide for early termination
upon the occurrence of certain events (e.g., casualty or
substantial condemnation). Some commercial leases,
particularly those for properties used in the sale of
retail goods or services, require that the landlord bear
the costs of maintaining the structural integrity of the
building, including the roof and foundation.
ACQUISITION CANDIDATES
Many of the properties will be leased to tenants in the
chain or franchise restaurant industry and the retail
industry. There is no prohibition on the acquisition of
properties in other industries. The managers intend to
monitor industry trends and invest in properties that
serve to provide the most favorable return balanced with
risk.
THE RESTAURANT INDUSTRY
The restaurant industry is one of the largest and
fastest growing in the United States. Annual sales of
the top 100 restaurant chains exceeded $118 billion in
1997. With a steady increase in the number of two-
income families and a rapidly expanding senior citizen
population, demographic trends are particularly
favorable for the casual dining segment of the
restaurant industry. Because this industry is highly
property-dependent, the managers believe it offers some
of the best sale leaseback investment opportunities.
The managers believe that this industry includes a
number of companies and franchisees with established
track records that are attractive to AEI Fund 23.
[Graphic: Bar chart illustrating the growth in restaurant sales
from 1991 through 1998]
THE RETAIL INDUSTRY
We believe trends in this industry have increased the
attractiveness of retail properties. Consumer demand for
a large selection of merchandise in a single category at
discount prices has caused many retailers to turn to
freestanding properties that have minimal interior
partitions. These retail buildings, or "superstores," are
often grouped together in a "power center" that has few,
if any, small retailers. Many of the large retailers
operating these establishments use lease financing for
the purchase and construction of their outlets. The
managers believe that the rapid expansion in this
industry may present attractive properties for
acquisition.
[Graphic: Bar chart illustrating the growth in retail sales
from 1993 through 1998]
-15-
ACQUISITION CRITERIA
In determining whether a property is a suitable
acquisition for AEI Fund 23, the managers will consider
the following factors, among others:
The creditworthiness of the lessee and the lease
guarantor, if any, and their ability to meet the
lease obligations;
The location, condition, use and design of the
property and its suitability for a long-term net
lease;
The terms of the proposed lease and guaranty, if
any, including any provisions relating to rent
increases and the passing on of operating
expenses to tenants;
The prospects for long-term appreciation of the
property;
The prospects for long-range liquidity of the
investment; and
The demographics of the community in which a
property is located.
The managers will apply the following standards when
selecting properties:
Tenants must be actively involved in the
operation of the business type occupying the
property.
Tenants must have a history of successful
operations in the business for which the
property is leased.
Tenants will be required to provide evidence
of cash flow, independent of cash flow generated
by the property, or cash reserves, sufficient
to allow the tenant to meet its current
obligations under the lease.
Acquisitions may vary from these standards, but any
variation must be justified to the managers.
PROPERTY UPDATES
When there is a reasonable probability that a property
will be acquired during the offering period, this
prospectus will be supplemented to disclose important
information about it. Based upon the experience and
acquisition methods of the managers, this will normally
occur when a legally binding purchase agreement is signed
for a property, but may occur sooner or later depending
upon the circumstances involved.
Supplements to this prospectus will describe the property
to be acquired, the proposed terms of purchase, the
financial results of any prior operations of the
property, and other information considered appropriate
for an understanding of the transaction. Upon termination
of this offering, no further supplements to this
prospectus will be distributed, but investors will
continue to receive acquisition reports containing
substantially the same information regarding the
properties acquired.
It should be understood that the initial disclosure of
any proposed acquisition cannot be relied upon as an
assurance that AEI Fund 23 will ultimately consummate the
acquisition or that the information provided concerning
an acquisition will not change between the date of this
prospectus (or supplement) and the actual purchase date.
-16-
MANAGERS
FIDUCIARY RESPONSIBILITY
The managers are accountable to AEI Fund 23 as
fiduciaries and must exercise good faith in handling its
affairs. The managers have fiduciary responsibility for
the safekeeping and use of all capital and assets of AEI
Fund 23, whether or not in the managers' possession or
control. The managers are prohibited from employing, or
allowing any other person or entity to employ, the
capital or assets of AEI Fund 23 in any manner except for
the exclusive benefit of its investors.
The managers will not, however, be liable to AEI Fund 23
or the investors for acts or omissions which may occur in
the exercise of their judgment as long as their actions
were made in the good faith belief that such actions were
in the best interest of AEI Fund 23 and not the result of
negligence or misconduct. AEI Fund 23 will indemnify the
managers for any claim or liability arising out of their
activities on its behalf, unless the claim or liability
was the result of negligence or misconduct.
In the opinion of the SEC, and the securities
administrators of most states, indemnification for
liabilities arising under securities laws is against
public policy and therefore unenforceable. If a claim for
indemnification for liabilities under securities laws is
asserted by the managers in connection with registration
of the units, AEI Fund 23 will submit to a court of
appropriate jurisdiction, after apprising such court of
the position of the SEC and state securities
administrators, the question of whether indemnification
by it is against public policy and will be governed by
the final adjudication of such issue.
MANAGEMENT
The managers will have the sole and exclusive right,
power and responsibility to manage AEI Fund 23's
business, including, under certain limited circumstances,
the right and power to have it obtain loans secured by
its property. The managers will make all of the
investment decisions, including:
decisions relating to the properties to be
acquired,
the method and timing of any financing of such
properties,
the selection of tenants,
the terms of leases on such properties, and
the method and timing of the sale of properties.
The managers will coordinate and manage all of the
activities of AEI Fund 23, maintain its records and
accounts, and arrange for the preparation and filing of
all its tax returns. Certain of the administrative and
management functions to be performed by the managers may
be delegated to their affiliates, provided that any
compensation to affiliates of the managers will be at
cost.
-17-
BACKGROUND AND EXPERIENCE OF MANAGEMENT
AEI FUND MANAGEMENT XXI, INC.
AEI Fund Management XXI, Inc., the manager, is a
Minnesota corporation formed in 1994 to serve as a
general partner of AEI Income & Growth Fund XXI Limited
Partnership, an affiliated limited partnership with
investment objectives and structure similar to AEI Fund
23. The sole shareholder and director of the manager is
Robert P. Johnson, who also serves as its President.
Each of the officers of the manager also holds a
position as an officer in the corporations formed to
serve as general partners of prior funds sponsored by
the managers and their affiliates. The officers and
sole director of the manager are as follows:
Name Age Position
Robert P. Johnson 54 Sole Director, Chief Executive
Officer and President
Mark E. Larson 46 Chief Financial Officer, Treasurer
and Secretary
[Graphic: Picture of Robert P. Johnson]
ROBERT P. JOHNSON will also serve as the special
managing member of AEI Fund 23. Mr. Johnson is the
President, Chief Executive Officer, sole shareholder
and sole director of the manager. From 1970 to the
present he has been employed exclusively in the
investment industry, specializing in limited
partnership investments. In that capacity, he has been
involved in the development, analysis, marketing and
management of public and private investment programs
investing in net lease properties as well as public and
private investment programs investing in energy
development.
Since 1971, Mr. Johnson has been the President, a
director and a registered principal of AEI Securities,
Inc., which is registered with the Securities and
Exchange Commission as a securities broker-dealer, is a
member of the National Association of Securities
Dealers, Inc. (NASD) and is a member of the Security
Investors Protection Corporation (SIPC). Mr. Johnson
has been President, a director and the principal
shareholder of AEI Fund Management, Inc., a real estate
management company founded by him, since 1978. Mr.
Johnson is currently a general partner or principal of
the general partner of each of the limited partnerships
set forth under "Prior Performance." Although not
currently subject to any material contingent
liabilities, Mr. Johnson could become subject to the
claims of creditors as a general partner of such
limited partnerships or other Funds he manages.
[Graphic: Picture of Mark E. Larson]
MARK E. LARSON, a Certified Public Accountant, is Chief
Financial Officer, Secretary and Treasurer of the
manager, and is a director of AEI Fund Management, Inc.
and has been employed by AEI Fund Management, Inc. and
affiliated entities since 1985. From 1979 to 1985, Mr.
Larson was with Apache Corporation as manager of
Program Accounting responsible for the accounting and
reports for approximately 45 public partnerships. Mr.
Larson will be primarily responsible for supervising
the accounting functions of the manager and AEI Fund
23, including coordination of reports to the SEC and
investors.
-18-
AEI FUND MANAGEMENT, INC.
Most of the management services for AEI Fund 23 will be
performed by AEI Fund Management, Inc., a Minnesota
corporation having the same officers as the manager.
AEI Fund Management, Inc. is a property and program
management company that provides services to the 12
publicly syndicated, and 12 privately placed, real
estate programs that are described under the caption
"Prior Performance" below.
The sponsors are using a separate company, (AEI Fund
Management XXI, Inc.) as the corporate manager so that
operation of AEI Fund 23 is not affected by operations
of the other real estate programs for which it provides
services. AEI Fund Management employs approximately 30
persons, four of whom are engaged primarily in property
acquisitions, three in property management, three in
property sales, seven in accounting and financial
reporting, eight in investor support services and
eight in general administrative services. AEI Fund
Management, Inc. has the same officers as AEI Fund
Management XXI, Inc. Management services will be
billed directly to AEI Fund 23.
YEAR 2000
AEI Fund Management maintains a computerized
information system for program, investor and financial
reporting. It is currently installing a new system that
replaces both hardware and software components with
client-server components. Although AEI does not believe
that its former management information system will
properly report date specific information after
December 31, 1999, it has been assured by the vendors
of the new system that it will accurately report such
date specific information.
At the date of this prospectus, it was operating its
program and investor reporting functions with the new
system and anticipates that financial reporting will be
converted to the new system by March 31, 1999. AEI Fund
Management has also inquired of its vendors, including
payroll and banking vendors, of their sensitivity to
date specific problems after December 31, 1999 and all
of them have assured the company that their systems
will properly handle date specific information by
December 31, 1999. If AEI Fund Management were unable
to operate its financial reporting systems on the new
system, it would be required to procure an alternate
system prior to year end. The information system is not
a direct cost of AEI Fund 23. So, unless a new system
was not installed and operating by December 31, 1999,
there should not be any material impact on AEI Fund 23.
PRIOR PERFORMANCE
During the past twenty-five years, Mr. Johnson and
affiliates have syndicated twelve public and twelve
private net lease property investment partnerships in the
United States.
Since 1984, Mr. Johnson and affiliates have formed,
syndicated and now manage twelve public real estate
partnerships that have purchased, for cash, single tenant
properties under long-term net leases. With the exception
of size and the ability to use mortgage indebtedness for
the acquisition of properties, all of such partnerships
are similar to AEI Fund 23. The public partnerships
sponsored by Mr. Johnson and affiliates include the
following:
-19-
Fund Name Month Offering Investment
was Completed Raised
Net Lease Income & Growth
Fund 84-A Limited
Partnership December 84 $5,000,000
AEI Real Estate Fund 85-A
Limited Partnership June 85 $7,500,000
AEI Real Estate Fund 85-B
Limited Partnership February 86 $7,500,000
AEI Real Estate Fund 86-A
Limited Partnership July 86 $7,500,000
AEI Real Estate Fund XV
Limited Partnership December 86 $7,500,000
AEI Real Estate Fund XVI
Limited Partnership November 87 $15,000,000
AEI Real Estate Fund XVII
Limited Partnership November 88 $23,388,750
AEI Real Estate Fund XVIII
Limited Partnership December 90 $22,783,050
AEI Net Lease Income &
Growth Fund XIX Limited
Partnership February 93 $21,157,928
AEI Net Lease Income &
Growth Fund XX Limited
Partnership January 95 $24,000,000
AEI Income & Growth Fund XXI
Limited Partnership January 97 $24,000,000
AEI Income & Growth Fund
XXII Limited Partnership January 99 $16,917,222
A total of approximately 13,500 investors purchased
interests in these partnerships.
The properties purchased by all of these partnerships
were new, or recently constructed, net leased commercial
properties. At September 30, 1998, approximately
$184,000,000 of properties had been purchased or were
under contract for purchase. The following table sets
forth the geographic distribution of the 143 properties
purchased, or under contract for purchase, by prior
public partnerships:
Alabama 1 Georgia 3 Louisiana 4 Nevada 2 Pennsylvania 1
Arizona 5 Illinois 4 Michigan 6 New Hamp. 1 South Caro. 3
Arkansas 1 Indiana 3 Minnesota 12 New Mexico 1 Tennessee 3
California 4 Iowa 2 Missouri 5 North Caro. 3 Texas 38
Colorado 5 Kansas 1 Montana 1 Ohio 14 Virginia 5
Florida 6 Kentucky 1 Nebraska 4 Oregon 1 Wisconsin 3
[Graphic: Map of United States showing states where AEI funds own
properties]
-20-
By cost, approximately 74% were restaurants, 12% were
retail facilities, 8% were childcare centers, 6% were
auto service centers, convenience centers, a motel and an
office building. Upon request and upon payment of a fee
to cover costs of reproduction and mailing, the managers
will provide any potential investor with a copy of the
Annual Report on Form 10-KSB as filed with the Securities
and Exchange Commission for any of these partnerships.
[Graphic: Pie chart showing percentage of properties as
restaurants, general retail, child care, and other]
All but two of the private partnerships were specified
property offerings. Of the remaining private
partnerships, one acquired four properties on a "blind
pool" basis, one is a private partnership offered to
institutional investors that acquired seven properties on
a blind pool basis, and one is a private partnership
currently being offered to accredited investors on a
blind pool basis. The private partnerships purchased 13
properties for $6,371,894, 10 of which were
restaurants, two supermarkets and one automotive center.
Six properties were in Minnesota, three in Florida and
one each in Nebraska, Iowa, Michigan and Ohio. As with
this offering, the primary objective of the earlier
private partnerships was production of income (not tax
shelter) by investment in single-tenant properties under
leases requiring tenants to pay most of the operating
costs of the properties. Many of the private partnerships
acquired properties with a significant amount of
indebtedness.
Like most entities engaged in real estate operations, the
partnerships sponsored by the managers and their
affiliates have owned some properties leased to tenants
that failed to fully perform under the terms of their
leases, including timely payment of rent. In those
events, the affiliates managing the properties take such
action as they deem prudent in commercial lease
transactions. Such actions may include termination of
leases, in which the property may be relet to a new
tenant or sold.
When tenants fail to perform, rental payments will likely
be interrupted. Although rental interruption may cause a
decrease in distributions of cash flow for a period of
time, the public partnerships diversified their
acquisitions. So, no default, or series of defaults, has
caused a public partnership sponsored by the managers to
miss a quarterly cash distribution or to have inadequate
cash to fund operations. It is a continuing objective of
the managers to minimize tenant defaults through careful
property evaluation of the creditworthiness of lessees
and by renegotiating leases or locating new tenants with
the intent of minimizing any interruption of rents.
-21-
COMPENSATION TO MANAGERS AND AFFILIATES
AEI Fund Management XXI and AEI Fund Management will
provide nearly all of the operational services AEI Fund
23 requires and will be compensated accordingly. AEI
Securities will coordinate the sale of units and will
receive commissions and expense allowances, most of which
will be paid or "reallowed" to broker-dealers that
solicit subscriptions for the program. AEI Fund
Management will provide administrative services and will
be reimbursed for all of its expenses in furnishing
services at its "cost," including a portion of its
general expenses directly related to the furnishing of
such services. In addition, AEI Fund Management XXI and
Robert P. Johnson, as managing members of AEI Fund 23,
will receive an interest in net cash flow and net
proceeds from sale of properties. Robert P. Johnson, the
individual manager, is the sole shareholder and the chief
executive officer of AEI Fund Management XXI, AEI Fund
Management and AEI Securities.
The following table sets forth the forms of compensation,
distributions and cost reimbursements that will or may be
paid to AEI Fund Management XXI, AEI Fund Management and
AEI Securities in connection with the organization,
operation and liquidation of AEI Fund 23 and its
properties, assuming the minimum 1,500 units and the
maximum 24,000 units are sold. The following arrangements
were formulated by the managers and are not the result of
arm's-length negotiations.
Person or Form and Method Estimated
Entity of Compensation Dollar
Receiving Amount
Compensation
Offering Stage
AEI Selling commissions and $2,520,000 maximum and
Securities, Inc. nonaccountable expense $157,500 minimum, all
allowance equal to 10% but approximately
of proceeds, all or a $480,000 (maximum) and
portion of which may be and $30,000 (minimum) of
reallowed to other which is expected to be
investment firms, and a reallowed.
1/2% due diligence
allowance, a portion of
which will be reallowed
to other investment firms.
Managers and Reimbursement at cost Estimated $840,000
Affiliates for other organization maximum and $67,500
and offering expenses. (1) minimum, but subject
to limitation (2). Most
organization and offering
expenses are paid to
nonaffiliates.
Property Acquisition Stage
Managers and Reimbursement at cost for Estimated $700,000
Affiliates all acquisition expenses (3). maximum and $60,000
minimum, but subject to
the limitation (3).
-22-
Operating Stage
Managers Three percent (3%) of net Not presently
cash flow. determinable
Managers and Reimbursement at cost for all Estimated $75,000 to
Affiliates administrative expenses, $250,000 for the first 12
including all expenses related months of operations and
to management and disposition and $20,000 to $280,000
of AEI Fund 23's properties each year after that.
and all other transfer agency, The cumulative amount
reporting, investor relations of such expense
and other administrative reimbursements for
functions (4). general overhead of the
the managers and
affiliates, and for
controlling person
expenses, together
with front- end fees and
sales expenses, are
subject to limitation(4).
Property Sale or Financing Stage
Managers 1% of distributions of net Not presently
proceeds of sale until determinable
investors have received an
amount equal to (a) their
"adjusted capital
contributions," plus (b) an
amount equal to 7% of their
adjusted capital
contributions per annum,
cumulative but not compounded,
to the extent not previously
distributed. 10% of
distributions of net proceeds
of sale thereafter.
1. Includes federal and state securities registration
fees, fees of counsel, accountant's fees, printing
expenses, and other out-of-pocket expenses paid to
nonaffiliates.
2. To the extent organization and offering expenses,
including payments to AEI Securities and third parties,
when added to Acquisition Expenses exceed 20% of the
capital contributions, they will be borne by the
managers.
3. Acquisition expenses include amounts paid for
legal fees, travel and communication, appraisal costs,
accounting fees, title expenses and other expenses in
acquiring properties. These expenses will be paid at
"cost," which includes the time spent by the manager's
employees in performing these services.
4. Subject to the limitations set forth in Section
6.2b of the Operating Agreement, AEI Fund 23 will
reimburse the managers and their affiliates at cost for
administrative expenses in managing all operations of
AEI Fund 23. These expenses include costs incurred in
connection with providing services for the acquisition,
leasing and operation of properties. Such expenses
include the salaries, fees and expenses paid to
employees and consultants of the managers and its
affiliates for work performed for AEI Fund 23 including
office rent, telephone, travel, employee benefit
expenses and other expenses attributable to providing
such services. The allocation of a majority of these
-23-
expenses is based on the number of hours devoted by
employees to the affairs of AEI Fund 23 as recorded on
employee daily time records. Excess expenses are
allocated at the end of each month based upon the
number of investors and the capitalization of AEI Fund
23. The cumulative amount of such expense
reimbursements for general overhead of the managers and
affiliates, and for controlling persons, together with
Front-End Fees and sales expenses may not exceed the
sum of 20% of capital contributions, 5% of revenues
from properties, a 3% sales commission, and 7% of net
cash flow.
No real estate commissions will be paid to the managers
or affiliates in connection with the purchase or sale of
any of AEI Fund 23's properties. The managers and
affiliates are, however, compensated at their Cost,
subject to the limitations set forth in the preceding
table and in Section 6.2 of the Operating Agreement, for
all expenses they incur in connection with the purchase
and sale of properties which may include bonus
compensation to non-controlling employees. No acquisition
fees will be paid to the managers. The managers and their
affiliates will not be compensated for services not set
forth in the table above.
-24-
CONFLICTS OF INTEREST
AEI Fund 23 will be subject to actual and potential
conflicts of interest arising out of relationships with
the managers and their affiliates. These conflicts
include, but are not limited to, the following:
LACK OF ARM'S-LENGTH NEGOTIATIONS WITH MANAGEMENT
The managers may realize income from AEI Fund 23 during
its operation and upon its liquidation. Agreements and
arrangements with the managers, including those
relating to compensation, are not the result of arm's-
length negotiations. Moreover, because a significant
portion of the managers' compensation will not be
payable until the sale of properties, the interests of
the managers and the investors with respect to the
timing and price of any sale may conflict.
OTHER REAL ESTATE ACTIVITIES OF MANAGERS
The managers and their affiliates are actively engaged
in the commercial real estate business as general
partners in other programs. Mr. Johnson also intends to
offer additional real estate programs in the future.
AEI Fund 23 will not have independent management but
will rely on the managers and their affiliates for its
operations. The managers will devote only so much of
their time to the business of AEI Fund 23 as, in their
judgment, is reasonably required. It is anticipated
that, although Mr. Johnson may devote approximately 30%
of his time to the business of AEI Fund 23 during its
offering and property acquisition stages, he may devote
less than 10% of his overall work time after properties
are acquired. The allocation of management time,
services and functions among current programs and any
future programs, as well as other business ventures in
which they are involved, may create conflicts of
interest. The managers and their affiliates believe
that they have, or can retain, sufficient staff to
-25-
be fully capable of discharging their responsibilities
to all Programs with which they are affiliated.
COMPETITION WITH MANAGERS AND OTHER AFFILIATED PROGRAMS
FOR PURCHASE AND SALE OF PROPERTIES
The managers and their affiliates may engage in other
business ventures, including forming and sponsoring
other public or private programs, and neither AEI Fund
23 nor any investor will be entitled to any interest
therein.
It is possible that AEI Fund 23 will periodically have
money available to acquire additional properties at the
same time as other programs sponsored by the managers
or their affiliates. If this happens, conflicts of
interest will arise as to which program should acquire
a particular property. The managers will review the
investment portfolio of each program and will make a
decision as to which program will acquire the property
on the basis of several factors, including:
The cash flow requirements of each program;
The degree of diversification of each program;
The estimated income tax effects of the purchase
on each program;
The amount of funds available to each program; and
The length of time such funds have been available
for investment.
If funds should be available in two or more programs to
purchase the same property, and the factors enumerated
above have been evaluated and deemed equally applicable
to each program, it will be acquired by the program
that first reached its minimum investment level. Any
other conflicts will be resolved by the managers in
their sole discretion.
Conflicts of interest may arise when AEI Fund 23
attempts to sell or rent its properties. The managers
may sell less than a 100% interest in a property and
AEI Fund 23 may then own a fractional interest in that
property. The managers may be forced to choose between
selling a property held by AEI Fund 23 and a property
held by the manager or an affiliated program. Such
conflicts will be resolved by the managers, in their
discretion, after consideration of the investment
objectives of the program holding the property and the
length of time until the planned final disposition of
properties. The managers may allow the sale of a
fractional interest held by the managers or an
affiliated program prior to the sale of an interest
held by AEI Fund 23. There can be no assurances that
the terms of sale of all fractional interest in a
property sold at different times will be the same.
POSSIBLE JOINT INVESTMENT WITH AFFILIATED PROGRAMS
AEI Fund 23 may invest in property jointly with another
program sponsored by the managers or their affiliates
under the conditions described in "Investment
Objectives and Policies Joint Venture Investments." In
such a situation, conflicts of interest could arise
between the joint venture partners.
-26-
MANAGER'S REPRESENTATION OF FUND IN AUDIT PROCEEDINGS
The manager will act as the "tax matters partner"
pursuant to Section 6231 of the Internal Revenue Code.
This grants the manager certain discretion and
authority regarding extensions of time for assessment
of additional tax against the investors related to Fund
income, deductions or credits and for settlement or
litigation of controversies involving such items. The
positions taken by the manager on tax matters may have
differing effects on the managers and the investors.
Any decisions made by the manager with respect to such
matters will be made in good faith consistent with its
fiduciary duties to AEI Fund 23 and the investors. The
manager, to the extent its actions as tax matters
partner are in good faith and reasonably intended to be
in the best interests of AEI Fund 23 and subject to the
indemnification and exculpation language contained in
the Operating Agreement, may be entitled to indemnity
for liability incurred as a result of such actions. See
Exhibit A, Section 6.5 at Page A-14.
LACK OF SEPARATE REPRESENTATION
AEI Fund 23, the managers and the investors are not
represented by separate counsel. The attorneys and
accountants who will perform services for AEI Fund 23
also perform services for affiliates of AEI Fund 23,
including the managers, AEI Securities, Inc. and other
affiliates of the managers. Without independent legal
representation, investors may not receive legal advice
regarding certain matters that might be in their
interest but contrary to the interest of the managers
and their affiliates. Should a dispute arise between
AEI Fund 23 and the managers or their affiliates - or
should negotiations or agreements between AEI Fund 23
and the managers, other than those existing or
contemplated on the effective date of this Prospectus,
be necessary - the managers will cause AEI Fund 23 to
retain separate counsel. Any future agreement between
AEI Fund 23 and the managers or their affiliates will
provide that it may be terminated at the option of AEI
Fund 23 upon 60 days' notice without penalty to AEI
Fund 23.
AFFILIATION OF SELLING AGENT
AEI Securities is serving as "Dealer-Manager" for the
offering of units. Accordingly, the "due diligence"
investigation customarily performed by an underwriter
is being performed by an affiliate of the managers. AEI
believes, however, that such due diligence has, in
fact, been exercised. Moreover, under Rule 2810(b)(2)
of the NASD Conduct Rules, each investment firm that
sells units has an obligation to make an appropriate
independent inquiry about the offering.
EXPENSE REIMBURSEMENTS
The managers and their affiliates are reimbursed at
their cost for the services they perform on behalf of
AEI Fund 23. The aggregate cost of such reimbursements
can be as much as the fees and increased interest in
net cash flow interest the managers are allowed to be
paid under applicable state regulation.
-27-
CASH DISTRIBUTIONS AND TAX ALLOCATIONS
CASH DISTRIBUTIONS
The managers intend to make distributions of available
net cash flow, if any, within 30 days after the end of
each fiscal quarter. AEI Fund 23's objective is to
acquire net leased properties which will generate
partially "tax deferred" cash distributions to investors.
Any net cash flow from operations for each fiscal year
will be distributed 97% to investors and 3% to managers.
Upon financing, sale or other disposition of any
properties, net proceeds of sale may be reinvested in
additional properties. If not reinvested, net proceeds of
sale will be distri-buted as follows:
First, 99% to the investors and 1% to the
managers until the investors have received
an amount from net proceeds of sale equal
to the total of their adjusted capital
contributions, plus an amount equal to a 7%
per annum return on their adjusted capital
contributions, cumulative but not compounded,
to the extent such 7% return has not been
previously distributed to them.
Any remaining balance will be distributed
90% to the investors and 10% to the
managers.
The 1% unsubordinated interest in net proceeds of sale
received by the managers for a $1,000 capital
contribution is not proportionate to the interest that
would be received by an investor with the same capital
contribution.
TAX ALLOCATIONS
For income tax purposes, all income, profits, gains and
losses for each fiscal year, other than any gain or loss
realized upon the sale, exchange or other disposition of
any property, shall be allocated as follows:
net loss shall be allocated 99% to the
investors and 1% to the managers so long
as the investors have positive balances
in their capital accounts. If their capital
accounts are reduced to zero, all losses are
allocated to the managers; and
net income will be allocated first in the
ratio, and to the extent, net cash flow is
distributed to the investors for such year
and any additional income for such year
will be allocated in the same ratio as the
last dollar of net cash flow is distributed.
For income tax purposes, the gain realized upon the sale,
exchange or other disposition of any property will be
allocated as follows:
first, to and among the investors in an
amount equal to the negative balances in
their respective capital accounts (pro
rata based on the relative amounts of
such negative balances),
-28-
then, 99% to the investors and 1% to the
managers until the balance in each
investor's capital account equals the
sum of such investor's Adjusted Capital
Contribution plus an amount equal to a
7% per annum return on such investor's
Adjusted Capital Contribution, cumulative
but not compounded, to the extent not
previously distributed,
the balance of any remaining gain will then
be allocated to the investors and the managers
in the same manner as the last dollar distributed.
For income tax purposes, any loss on the sale, exchange
or other disposition of any property shall be allocated
98% to the investors and 2% to the managers.
INCOME TAX ASPECTS
Federal income tax laws and regulations as they apply to
AEI Fund 23 are complicated and are only summarized
below. Investors are urged to consult with their own
counsel and accountants about the state and federal
income tax consequences of ownership of units. Investors
must realize that periodic consultations about their
individual tax situations may be necessary because of
future changes in statutes and regulations or in
interpretations by courts or state and federal tax
authorities.
OPINION OF COUNSEL
Dorsey & Whitney LLP, counsel to AEI Fund 23, has
rendered an opinion on the material federal tax issues
relating to an investment in AEI Fund 23 which involve a
reasonable possibility of challenge by the Internal
Revenue Service or, where such an opinion cannot be
rendered with respect to a material tax issue, has
described the reasons for the inability to opine. As set
forth below, counsel has not rendered an opinion on
certain federal tax issues whose outcome depends upon
facts and circumstances that will be determinable or will
arise only in the future. In particular, as more fully
described below, no opinion is given with respect to the
probable outcome of:
the allocation of basis among buildings
(the cost of which is depreciable),
personal property (the cost of which is
depreciable over a shorter period), and the
underlying land (the cost of which is not
depreciable);
whether AEI Fund 23 will be characterized
as a "dealer" in real estate at the time
of sale or disposition of AEI Fund 23's
properties;
whether the properties will be considered
to be "held for investment";
whether the leases to be entered into by
AEI Fund 23 will be "true leases" or
will be "stepped payment leases" for
purposes of determining whether AEI Fund
23 will be considered an "owner" of properties
entitled to take depreciation and other deductions
thereon and for purposes of the timing of
recognition of rental income thereon; and
whether AEI Fund 23's allocation of start-up,
organization, syndication and acquisition
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expenses for purposes of the deduction or
capitalization of such expenses will be upheld.
Where counsel has not issued an opinion because the
factors relevant to the issue involved cannot be
determined at this time, depend on an investor's tax
situation, or turn on aspects of law that are at present
uncertain, no inferences should be drawn as to any
possible legal outcome. Furthermore, as explained below
in more detail under "Allocation," because of the
uncertainty in the law regarding whether allocations made
to members of a limited liability company treated as a
partnership for tax purposes such as AEI Fund 23 will
have "substantial economic effect," counsel has rendered
a qualified opinion as to whether allocations made to
investors under the operating agreement will be respected
for tax purposes.
Subject to the information contained in this prospectus
and in counsel's opinion (a copy of which is filed as
Exhibit 8 to the registration statement that has been
filed with the SEC), counsel has advised AEI Fund 23 that
in the aggregate the significant tax benefits, as
described herein, potentially available to an investor
will probably be realized. An opinion of counsel
represents only such counsel's best legal judgment and
has no binding effect or official status of any kind. No
assurance can be given that the conclusions reached in an
opinion would be sustained by a court if challenged by
the IRS. Therefore, investors will assume the risks of a
challenge by the IRS of the tax interpretations set forth
herein or otherwise made by AEI Fund 23 or the managers
and the risks of changes in tax laws, rules, regulations
and interpretations.
GENERAL
A limited liability company formed under the Delaware law
is generally treated in the same manner as a partnership
for federal income tax purposes. The limited liability
com-pany form has been employed to allow investors in AEI
Fund 23 to obtain a direct pass-through of their pro rata
share of the operating results of AEI Fund 23. Under the
Internal Revenue Code, no federal income tax is payable
by a limited liability company that is not a "publicly
traded partnership." Each investor and manager is
required to report on his or her federal income tax
return his or her distributive share of the profits,
losses, gains, income, deductions and credits of AEI Fund
23. Subject to certain limitations, including limitations
on passive activity losses, each investor and manager may
deduct his or her share of AEI Fund 23's losses, if any,
for any fiscal year on his or her individual return to
the extent of the adjusted basis of his or her interest
in AEI Fund 23 as of the end of such year. Likewise, each
investor and manager must include his or her distributive
share of any Fund taxable income for each year with his
or her other taxable income whether or not he or she has
received cash distributions from AEI Fund 23 during such
year.
PARTNERSHIP STATUS
AEI Fund 23 has received an opinion from its legal
counsel to the effect that, under currently applicable
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treasury regulations, AEI Fund 23 will be treated as a
partnership for federal income tax purposes and will not
constitute an "association" taxable as a corporation. In
rendering this opinion, counsel has relied on the
existing treasury regulations and the representation that
AEI Fund 23 will not, for any period, elect to be treated
as an association taxable as a corporation.
PUBLICLY TRADED PARTNERSHIPS
The Internal Revenue Code contains several provisions
that significantly change the tax treatment of "publicly
traded partnerships" and the income and loss they
generate. Unless 90% of a publicly traded partnership's
income is from passive-type investments, a publicly
traded partnership will be taxed as if it were a
corporation. Generally, income from a publicly traded
partnership will be treated as portfolio income. Such
income from a publicly traded partnership cannot be
offset by passive losses from other sources and losses
from the publicly traded partnership cannot be used to
offset passive income from other sources.
IRS Regulations provide several "safe harbors" from
publicly traded partnership status for partnerships
interests which are not traded on an established
securities market or readily tradable on a secondary
market or the substantial equivalent thereof. On the
basis of these safe harbors, and based on the provisions
of AEI Fund 23's operating agreement, and provided
transfers of interests are made only in accordance with
such provisions, counsel to AEI Fund 23 is of the opinion
that AEI Fund 23 will not be considered a publicly traded
partnership as defined in section 7704 of the Internal
Revenue Code.
ALLOCATIONS
The operating agreement of AEI Fund 23 allocates to each
investor and manager his or her distributive share of
income, gain, loss, deduction, or credit. The operating
agreement also provides for a specific allocation of
proceeds among the investors and the managers upon
dissolution and termination of AEI Fund 23, upon the
refinancing, sale, or other disposition of AEI Fund 23
properties, and a specific allocation of cash flow.
Whether these allocations will be given effect for
federal income tax purposes depends upon whether they
have "substantial economic effect" under applicable IRS
Regulations. If the allocations in the operating
agreement do not have substantial economic effect, the
distributive share of income, gain, loss, deduction, or
credit of each investor and manager will be determined in
accordance with the interest in AEI Fund 23 held by such
investor or manager.
Because the application of the law concerning the
substantial economic effect of allocations to the
allocations that may be made under the operating
agreement is uncertain, counsel to the Fund is unable to
render an unqualified opinion concerning whether the
allocations made to investors will be respected.
Nevertheless, assuming that all investors and managers
have positive balances in their capital accounts
(determined after adjusting capital accounts as provided
in the operating agreement of AEI Fund 23) throughout the
term of AEI Fund 23 and that the after-tax economic
consequences of the allocations made in the operating
agreement do not violate the "substantiality" requirement
imposed by the IRS regulations, counsel is of the opinion
that it is more likely than not that allocations made in
accordance with the operating agreement will have
substantial economic effect. Counsel is unable to render
an opinion on the allocation of losses or deductions
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where the investors have negative balances in their
capital accounts, because the operating agreement does
not contain an unconditional obligation to restore such
deficit balance.
STATUS OF AEI FUND 23 AS OWNER AND LESSOR OF THE
IMPROVEMENTS
Although it is anticipated that AEI Fund 23 will be
treated as the "owner" of its properties, the IRS has
taken the position in certain situations that lease
transactions should be treated as financing transactions.
If a lease is considered a financing transaction for
federal income tax purposes, the lessor of the property
is not treated as the owner and is not entitled to take
depreciation and other deductions with respect to his or
her investment. The managers intend to attempt to enter
into leases that will result in AEI Fund 23 being treated
as the owner of the leased property. Nevertheless, the
characterization of transactions as leases involves
analysis of complex factual situations under evolving
judicial doctrines. Because AEI Fund 23 has not yet
entered into any leases and no analysis thereof is
possible, counsel for AEI Fund 23 has not expressed an
opinion on the status of AEI Fund 23 as owner and lessor
of properties.
STEPPED PAYMENT LEASES
Under section 467 of the Internal Revenue Code, a lessor
may be required to accrue rental income for income tax
purposes during a taxable period in amounts that differ
from the actual rental payments received during the
period if (1) rental payments are made after the close of
the calendar year following the calendar year in which
the use of the property occurs, or (2) rental payments
increase over the term of the lease ("Section 467
Lease"). Prior programs sponsored by the managers have
entered into leases which may qualify as Section 467
Leases. In certain instances, such agreements may require
accrual of a constant amount of rental income despite
changes in rental rates or may require recapture on the
disposition of the property subject to the lease. Because
AEI Fund 23 has not yet entered into any lease
agreements, it is not possible to determine what
treatment of AEI Fund 23's leases may be required under
section 467. If AEI Fund 23 enters into agreements that
require accrual of a constant amount, such an accrual
could result in AEI Fund 23's recognition in certain
years of a greater amount of income than is actually
received. If, on the other hand, AEI Fund 23 is required
to recapture ordinary income on the disposition of
property subject to its leases, AEI Fund 23 will
recognize ordinary income rather than capital gain to the
extent of the recapture.
ORGANIZATION AND SYNDICATION COSTS AND OTHER PAYMENTS TO THE
MANAGERS
The managers and their affiliates will be reimbursed for
costs they incur that are attributable to AEI Fund 23.
These reimbursements will include the costs of
syndicating, organizing and managing AEI Fund 23, as well
as related general and administrative costs. The managers
will categorize reimbursements as start-up, syndication,
organization, management or acquisition costs. Although
the Internal Revenue Code allows deduction of amounts
-32-
paid to organize AEI Fund 23 ("organization expenses"),
or to create an active trade or business ("start-up
expenses") over a period of not less than 60 months, it
does not allow deduction of amounts paid to issue or
market the units ("syndication expenses"). There can be
no assurance that the IRS will accept the managers'
determination of the classification of costs, and because
the issue is factual in nature, counsel to AEI Fund 23
has not issued an opinion on this issue.
Expenses to acquire properties will generally be added to
the purchase price and deducted over their useful lives.
All other reimbursements will be deducted as management
expenses. Although the managers believe that the
management expenses for which they will be reimbursed
will be deductible and will be paid for necessary and
ordinary services rendered to AEI Fund 23. The IRS could
allege that some of those expenses are not currently
deductible. AEI Fund 23's legal counsel has not issued an
opinion on the deductibility of these expenses because
their deductibility is inherently a factual issue that
depends upon their amount or the appropriateness of the
relevant items for reimbursement.
DEPRECIATION DEDUCTIONS
GENERAL
The Internal Revenue Code allows a taxpayer to claim
depreciation deductions on property used in a trade or
business or held for the production of income. As a
general rule, the cost of acquiring or constructing
property, including incidental costs, may be included
in its tax basis for purposes of computing cost
recovery deductions.
AEI Fund 23 will claim depreciation, cost recovery and
amortization deductions on the properties it acquires
as permitted by the applicable Internal Revenue Code
provisions. Although these deductions will reduce AEI
Fund 23's taxable income, they will also reduce its
adjusted basis in the properties, and increase the
potential gain (or decrease the potential loss) to
AEI Fund 23 when the properties are sold.
Because they will consist solely of commercial
properties, AEI Fund 23 will depreciate most of its
real properties over 39 years using the straight-line
method, although it might be required to use longer
depreciation periods for properties that are tax-exempt
use properties as described below. Some properties,
including automotive service station buildings and car
wash buildings, have shorter useful lives and are
depreciated over a shorter recovery period (e.g. 15
years). A small portion of the property to be purchased
by AEI Fund 23 is expected to be five-year recovery
property.
Allocation of the purchase price of a property among
the various depreciable and non-depreciable assets is a
factual question, and there can be no assurance that
the allocations made by the manager will be accepted by
the IRS. Because none of AEI Fund 23's properties have
been acquired and the issue depends on facts that are
not yet determined, counsel to AEI Fund 23 has not
rendered an opinion on this issue. Adjustment of the
allocation of the purchase price of a property could
decrease Fund depreciation deductions thereby
increasing Fund taxable income or decreasing Fund
losses.
-33-
TAX-EXEMPT USE PROPERTY
Units will be purchased by both tax-exempt investors
and investors not exempt from taxation. The Internal
Revenue Code provides that in some cases where a
limited liability company has both tax-exempt entities
and non tax-exempt entities as members, a portion of
the property owned by the limited liability company
will be deemed "tax-exempt use property" that must be
depreciated over the greater of 40 years or 125% of any
long-term lease. It is likely that, to the extent of
the interests of tax-exempt investors in AEI Fund
23, a portion of its property will be depreciated over
40 years and that depreciation deductions to all
investors will be decreased in early years of operation
as a result of this adjustment.
BASIS OF FUND INTEREST
Subject to the "at risk rules" and the "passive activity
loss limitations" that are described in greater detail
under "Personal Tax Consequences" below, an investor will
generally be allowed to deduct his or her share of losses
from AEI Fund 23 to the extent of the adjusted basis in
the investor's units. Each investor's adjusted basis of
the units initially will include the investor's
investment in AEI Fund 23 plus the investor's pro rata
share of indebtedness as to which neither AEI Fund 23 nor
any investor is personally liable ("nonrecourse
liabilities"). Under the "at risk" rules, a taxpayer
cannot deduct losses arising from an activity, including
the activity of holding real property, to the extent the
losses exceed the aggregate amount with respect to which
the taxpayer is financially "at risk" in such activity.
Generally, a taxpayer is "at risk" in the amount of the
investor's investment plus the investor's share of
recourse liabilities and "qualified nonrecourse
liabilities." The managers will attempt to ensure
that financing, if any, that may be placed on
properties will be qualified nonrecourse financing.
Because that determination depends on facts not yet in
existence, no assurances can be given that any loans
actually obtained by AEI Fund 23 will qualify as amounts
"at risk."
An investor's adjusted basis of his or her units will
increase by the investor's share of income from AEI Fund
23 for each year and decrease by his or her share of
losses and by distributions of cash and other property
made to the investor by AEI Fund 23. The investor's share
of any reduction in principal of AEI Fund 23's
indebtedness will be treated as a distribution of cash to
the investor. The adjusted basis of an investor's units
may not be reduced below zero. In the event that the
amount of losses allocated to an investor for any fiscal
year exceeds the investor's available basis of his or her
units, the excess losses may be carried forward to the
time, if ever, that the basis is sufficient to absorb
such excess losses.
NONLIQUIDATING DISTRIBUTIONS
Nonliquidating distributions of cash to an investor
generally will be regarded as a return of capital for tax
purposes to the extent of a investor's adjusted basis of
his or her units and serve to reduce basis by an amount
equal to the cash distributed. If the cash distributed
exceeds the investor's adjusted basis of her or his units
prior to distribution, the investor will recognize
taxable gain in the amount of the excess.
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SALES OF FUND PROPERTY AND FORECLOSURE
If AEI Fund 23 sells a property, gain will be recognized
to the extent that the amount realized from the sale
exceeds AEI Fund 23's adjusted basis in the property and
loss will be recognized to the extent that the adjusted
basis of the property exceeds the amount realized. The
amount realized from the sale of a property includes all
cash received, all liabilities assumed and the fair
market value of all property received other than cash. In
general, investors will also recognize taxable gain on
foreclosure of a mortgage securing a property of AEI Fund
23 to the extent the foreclosed liability exceeds the
adjusted basis of the property.
If property is sold within one year after it is acquired,
gain, if any, will be recaptured as ordinary income to
the extent that depreciation deductions were taken. If
the depreciated property is sold in an installment sale,
all depreciation will be recaptured in the year of sale.
Under certain circumstances, the sale of property may not
generate net cash proceeds in amounts sufficient to cover
the tax liabilities created for the investors. Such
circumstances might include:
the sale of a property on adverse terms, i.e.,
for gross proceeds that exceed the depreciated
book value of the property by an amount
significantly greater than the net proceeds
after payment of the remaining principal amount
of the related mortgage or deed of trust;
the sale or transfer of a property pursuant to
foreclosure; or
the sale of a property for proceeds that include
illiquid assets, such as promissory notes of the
purchaser.
Any gain or loss on the sale or other disposition of (a)
property that is held by AEI Fund 23 as a "dealer" or (b)
property that is neither a capital asset nor a Section
1231 asset will be taxed as ordinary income or loss.
SALE OF UNITS
INVESTORS MUST RECOGNIZE THAT NO PUBLIC MARKET FOR UNITS
MAY EXIST AT THE TIME THE INVESTOR WISHES TO SELL HIS
UNITS.
Unless you are a "dealer" in securities, gain or loss on
sale or disposition (including transfer by gift) of your
units will be treated as capital gain or loss.
Nevertheless, you may have to report ordinary income if
AEI Fund 23's "unrealized receivables and inventory
items" have appreciated substantially in value. For this
purpose, unrealized receivables of AEI Fund 23 include
depreciation recapture property to the extent that any
gain realized if AEI Fund 23 had sold the property at its
fair market value would have been taxed as ordinary
income (as described above, with respect to depreciation
recapture). Inventory items include all items of AEI Fund
23 that, if sold by AEI Fund 23 or if held by the selling
investor and sold by him, would have been taxed as
ordinary income either because the property was neither a
capital asset nor a "Section 1231 asset" or because AEI
Fund 23 or the selling investor would be a "dealer" in
-35-
such property. Furthermore, in determining the amount
received upon the sale or exchange of a unit, an investor
must take into account his or her share of any reduction
of the nonrecourse partnership liabilities. Accordingly,
an investor's gain on the sale or exchange of units may
substantially exceed the cash proceeds from the sale, and
the income taxes payable with respect to such gain also
may exceed the cash proceeds.
A gift of units by an investor may result in the
imposition of income tax on the investor if the gift is
made at a time when the investor's share of AEI Fund 23's
nonrecourse liabilities exceeds the basis of the units
that are the subject of the gift. The taxable income
resulting from a gift of units would be equal to the
amount by which the investor's share of nonrecourse
partnership liabilities exceeds his basis in the units
given. Such a gift also may result in a federal gift tax
being imposed upon the donor.
If an investor transfers units, AEI Fund 23 may elect,
pursuant to section 754 of the Internal Revenue Code, to
adjust the transferee's share of the basis of the assets
of AEI Fund 23. The manager has discretion to determine
whether such adjustment to the basis of the assets of AEI
Fund 23 will be made. Because of the complexities and
added expense of the tax accounting required to implement
such an election, the manager does not intend to cause
AEI Fund 23 to make the Section 754 election. Therefore,
any benefit that might be available to the investors by
reason of such an election probably will not be
available. Moreover, an investor may have greater
difficulty in selling his units or may realize a lower
sales price since the purchaser will obtain no current
tax benefits from his investment to the extent that his
cost of such investment exceeds his allocable share of
AEI Fund 23's basis in its assets.
LIQUIDATION OF AEI FUND 23
When AEI Fund 23 is liquidated, an investor will
recognize taxable gain to the extent that any money
distributed to the investor exceeds the adjusted basis of
the investor's interest in AEI Fund 23. An investor will
recognize a loss only if he or she receives liquidation
distributions from AEI Fund 23 consisting solely of
money, unrealized receivables or inventory items and then
only to the extent that the adjusted basis of his or her
interest in AEI Fund 23 exceeds the basis of the items
distributed to the investor.
TAX AUDIT, RETURNS AND PENALTIES
The manager will arrange for the preparation and filing
of all tax returns for AEI Fund 23. The manager also will
serve as the "tax matters partner" under the Internal
Revenue Code. As tax matters partner, the manager will
have discretion and authority regarding extensions of
time for assessment of additional tax against investors
related to income, deductions or credits from AEI Fund 23
and settlement or litigation of controversies involving
such items. This is significant because controversies
regarding determination of taxable income will be
resolved, under regulations, through settlement or
litigation at the AEI Fund 23 level. Investors are
required to report any item of income, gain or loss
consistently with the reporting of such item by AEI Fund
23, unless a specific explanation of the inconsistency is
included with the affected income tax return.
-36-
Each investor whose interest in revenues of AEI Fund 23
is 1% or more will receive notice of any tax
controversy from the IRS. Each investor will have the
right to participate in settlement or litigation of any
tax controversy if such right is exercised timely.
Investors who do not reserve their right to reject
settlements accepted by the manager will be bound by the
settlement. All investors will be bound by the outcome of
any litigation that may result. The IRS may assess
penalties against investors for understatement of tax
based on whether treatment of taxable items by the Fund
had "substantial basis."
PERSONAL TAX CONSEQUENCES
The provisions of the Code discussed below may have tax
consequences to investors beyond their investment in AEI
Fund 23, and the applicability of such provisions to an
investment in AEI Fund 23 must be considered with regard
to the total individual tax situation of the investor,
which is beyond the scope of the tax discussion contained
in this Prospectus.
1. INVESTMENT BY TAX-QUALIFIED PLANS/UBTI
Tax-qualified plans, although generally exempt from
federal income taxation, nevertheless are subject to
tax to the extent that their unrelated business taxable
income ("UBTI") exceeds $1,000 during any tax year. An
allocable portion of income from property that is "debt-
financed property" will constitute UBTI. Debt-financed
property is generally defined to mean any property as to
which there is "acquisition indebtedness." Acquisition
indebtedness includes indebtedness incurred in
acquiring or improving a property, indebtedness
incurred before acquisition or improvement if such
indebtedness would not have occurred but for the
acquisition or improvement, and indebtedness incurred
after acquisition or improvement if reasonably
foreseeable at the time of acquisition or improvement.
If AEI Fund 23 properties are financed with acquisition
indebtedness, tax-qualified plans that invest will be
required to recognize UBTI. If a tax-qualified plan's
share of UBTI from AEI Fund 23 together with UBTI from
other investments of the plan exceeds $1,000 during any
tax year, the plan will be required to pay federal
income tax on the UBTI. If any of AEI Fund 23's
properties are financed with acquisition indebtedness,
a portion of the income directly associated with the
financed properties reduced by a portion of the
deductions directly associated with the financed
properties will be treated as UBTI. When AEI Fund 23
disposes of a property with acquisition indebtedness,
the tax-qualified plan will be required to recognize a
portion of the gain as UBTI.
The portion of AEI Fund 23's income that is not deemed
to be UBTI will continue to be exempt for a tax-
qualified plan even if a portion of AEI Fund 23's
income is deemed to be UBTI. Moreover, the UBTI will
not affect the tax-qualified plan's tax status or its
exemption from taxation of normal investment income
from other sources.
2. INVESTMENT BY CHARITABLE REMAINDER TRUSTS/UBTI
AEI FUND 23 IS NOT AN APPROPRIATE INVESTMENT FOR A
CHARITABLE REMAINDER TRUST BECAUSE SUCH AN INVESTMENT
WOULD LIKELY CAUSE ALL OF THE TRUST'S INCOME TO BE
-37-
SUBJECT TO FEDERAL TAX. A charitable remainder trust
loses its exemption from income tax if it has any
amount of UBTI. Since AEI Fund 23 may borrow money to
purchase one or more of the properties that it
acquires, AEI Fund 23 may have "acquisition
indebtedness" with respect to such properties, and a
charitable remainder trust, as a member, would be
deemed to have its proportionate share of such
acquisition indebtedness. Therefore, a charitable
remainder trust that invested in AEI Fund 23 (either
directly or indirectly, through a partnership or
another entity taxable as a partnership) would derive
at least some unrelated business taxable income from
that investment, which would cause all of its income to
become subject to federal income tax.
3. LOSSES AND CREDITS FROM PASSIVE ACTIVITIES
Under the Internal Revenue Code, losses from a "passive
activity" are deductible only against the income from
that activity and other passive activities. Passive
activity losses that are not deductible are carried
forward and become deductible against future passive
activity income or when the taxpayer liquidates his or
her interest in the activity. When an investor disposes
of his or her units or AEI Fund 23 is liquidated, any
passive activity losses not previously deducted by the
investor together with any losses recognized as a
result of the disposition or liquidation, will be
allowed as a deduction against income in the following
order: (1) passive income or gain from AEI Fund 23, (2)
net income or gain from all passive activities and
(3) any other income or gain (subject to limitations on
the deductibility of capital items). Credits from
passive activities are, in general, limited to the tax
attributable to income from passive activities.
Accordingly, to the extent losses or deductions from
passive activities of AEI Fund 23, when combined with
deductions from all other passive activities of such
investor, exceed the investor's income from passive
activities, the excess losses or deductions will be
suspended and carried forward to future years until
applied.
Interest, dividends, annuities or royalties not derived
in the ordinary course of a trade or business on
property held for investment, and associated expenses
and gain or loss on sale, are not taken into account in
computing income or loss from passive activity.
Instead, these items are considered "portfolio income
items." If a limited liability company holds assets
producing portfolio income items, the gross income (and
gain or loss) from and expenses allocable to such
portfolio assets are considered to arise from an
activity that is separate from any passive activity
engaged in by the limited liability company. Also, that
portion of any gain from the sale of an interest in
such a limited liability company will be considered a
portfolio income item to the extent the underlying
assets determined on an applicable date generate
portfolio income items.
The manager intends to conduct AEI Fund 23's affairs in
a manner so that an investor's distributive share of
income derived from AEI Fund 23's real estate rental
activities will constitute passive activity income
which may be utilized by the investor as an offset
against passive activity losses. In the opinion of
counsel for AEI Fund 23, and subject to IRS regulations
which may be adopted in the future, it is more likely
than not that the real estate rental activities of AEI
Fund 23, from which AEI Fund 23 does not derive the
equivalent of a guaranteed return or portfolio income
-38-
or other item not allocable thereto, will constitute
passive activities with respect to an investor, and
therefore that an investor's distributive share of
income or loss (computed without taking into account
portfolio income items and other non-passive activity
items, if any) will constitute income or loss from
passive activities. Interest income earned on the
proceeds of the offering of units prior to the
investment of such proceeds in real property and income
(or loss) attributable to working capital investments
will be treated as portfolio income items, and losses
from passive activities will not offset an investor's
share of income derived from such portfolio income
items.
4. MINIMUM TAX
Passive losses, such as operating losses from AEI Fund
23, if any, are not allowed in determining alternative
minimum taxable income to the extent they exceed
alternative minimum taxable income from passive
activities. In applying these limitations, minimum tax
rules apply to the measurement and allowability of all
relevant items of income, deduction and credit. The
amount of any passive loss that is subject to
disallowance is determined after computing all
preferences and making all other adjustments to income
that apply for minimum tax purposes. Thus, the amount
of suspended losses attributable to passive activities
may differ for minimum and regular tax purposes.
Prospective investors are urged to consult their tax
advisors with respect to the effect of the alternative
minimum tax on their specific situations.
5. FOREIGN INVESTORS
Although this discussion is not intended to describe
foreign or federal tax consequences of an investment in
AEI Fund 23 by foreign investors, it should be noted
that the Foreign Investment in Real Property Tax Act of
1980 taxes nonresident aliens and foreign corporations
on gains from the disposition of United States real
property interests as if such taxpayers were engaged in
a trade or business in the United States. If AEI Fund
23 disposes of properties or if a foreign investor
disposes of an interest in AEI Fund 23, the foreign
investor may be subject to tax and withholding as a
result of the disposition.
Furthermore, AEI Fund 23 is required to withhold
federal income tax on amounts of income allocable to
foreign investors (rather than amounts actually
distributed to them). The rates of withholding are 35%
of the amount of income allocable to a foreign investor
that is a corporation and 39.6% of the amount of income
allocable to any other foreign investor. AEI Fund 23 is
obliged to make estimated quarterly withholding
payments based on annualized taxable income.
STATE INCOME TAXES
This prospectus does not summarize the state income tax
consequences of owning a unit in the various states in
which investors may reside or of owning property in the
various states in which AEI Fund 23 may acquire
properties. An investor is advised to consult with his
own tax counsel as to the state income tax consequences
in his particular state of residence.
-39-
RESTRICTIONS ON TRANSFER
It is anticipated that there will never be a public
market for the units and, therefore, an investor should
not expect to readily liquidate this investment or to use
the units as collateral for a loan. If an investor wishes
to transfer units, he or she might not be able to find a
buyer for the units due to market conditions or the
general illiquidity of the units. Moreover, if an
investor was able to sell his or her units, depending
upon the price negotiated, he or she might receive less
than the amount of his or her original investment. No
representation is made that the units could be resold for
their original purchase price.
The operating agreement allows transfers, other than
"permitted transfers," only to the extent that they
comply with certain safe harbors created by the IRS from
treatment as a "publicly traded partnership" for tax
purposes. Counsel for AEI Fund 23 has advised the
managers that these limitations are necessary to fall
within the safe harbor provisions from treatment as a
publicly traded partnership for tax purposes.
Under AEI Fund 23's operating agreement, any substituted
investor must, as a condition of receiving any interest
in AEI Fund 23, agree in the instrument of assignment to
become an investor and pay reasonable legal fees and
filing costs in connection with his substitution as an
investor. Transfer of units will be recognized by AEI
Fund 23 only as of the last day of the month in which
written evidence respecting the assignment is received by
AEI Fund 23 in form satisfactory to the managers.
SUMMARY OF OPERATING AGREEMENT
The rights of members in AEI Fund 23 are established and
governed by the operating agreement that is enclosed with
this prospectus as Exhibit A. The subscription agreement
that each investor signs includes a power of attorney
that gives the managers the power to sign the operating
agreement on the investor's behalf. Each investor and
his advisors should carefully review the operating
agreement. The following summarizes certain provisions of
it, but is not as complete or as detailed as the
operating agreement itself.
Some provisions of the operating agreement are described
in other sections of this prospectus:
For a discussion of compensation and payments to
the managers and their affiliates, see "Compensation
to Managers and Affiliates";
For a discussion of the distribution of cash and
the allocation of profits and losses for tax
purposes, see "Cash Distributions and Tax
Allocations";
For a discussion of investment objectives and
policies, see "Investment Objectives and Policies";
For a discussion of the liability of the managers
for their acts or omissions and the indemnification
of the managers, see "Managers Fiduciary
Responsibility";
For a discussion of the reports to be received by
the investors, see "Reports to Investors."
-40-
TERM AND DISSOLUTION
The operating agreement provides that AEI Fund 23 will be
dissolved and liquidated at any of the following times or
events:
December 31, 2048;
The decision of investors holding a majority of
the units;
The sale or disposition of its final assets;
The final decree of a court that such dissolution
is required under law;
Or, if the managers withdraw without a successor
either being appointed by the withdrawing managers
or being elected by investors holding a majority of
the units.
RETURN OF CAPITAL
Prior to dissolution and liquidation, no investor will
have the right to demand the return of his capital
contribution unless AEI Fund 23 is unable to fully
utilize the offering proceeds, either by purchasing
properties or through joint ventures with other similar
programs.
VOTING RIGHTS
The investors, as limited members, will have the right to
vote on and approve the following matters:
Amendments to the Operating Agreement;
Removal of either or both of the managers;
Election of a new manager;
The sale of all or substantially all of the assets
of AEI Fund 23;
Dissolution of AEI Fund 23 by the members.
Investors may vote at a meeting or by written consent. In
either case, the vote of the holders of the majority of
the units outstanding will decide each matter, except
that any amendment to the operating agreement that
adversely effects the managers may not be approved
without their consent.
MEETINGS
No regular or periodic meeting of unit holders is
required or contemplated. Upon delivery of proper
notification, the managers may at any time call a meeting
of the investors. In addition, investors holding at least
10% of the units have the right to request that the
manager call a meeting. After receipt of a request for a
meeting, the managers are required to send notice to all
investors of the meeting within 10 days and hold the
meeting at the time requested (which must be more than 15
days and less than 60 days after the request).
-41-
REPURCHASE OF UNITS
Starting 36 months after the date of this prospectus, and
subject to certain conditions discussed in the Operating
Agreement, AEI Fund 23 will repurchase an investor's
unit(s) upon the written request of the investor. The per
unit repurchase price will be equal to 80% of the net
value of AEI Fund 23's assets, as estimated by the
manager, divided by the number of units outstanding. For
these purposes, the manager will base the net value of
assets on the discounted present value of the rental
income from properties, on the most recent price at which
units have been purchased by third parties, or such other
method as it believes is reasonable.
The managers will calculate and make available to
investors on the first business day of January and July
of each year the price at which units may be presented
for repurchase. AEI Fund 23's obligation to repurchase
units is limited in any year to 2% of the number of units
outstanding at the beginning of the year of repurchase.
Investors will be allowed to present their units for
repurchase during two different periods in each year.
Investors who want their units repurchased must submit
notification, as directed by the manager, of the
number of units they want repurchased. The notification
must be postmarked after January 1 but before January 31,
or after July 1 but before July 31 of the year of
repurchase. If units totaling more than 2% are
tendered, repurchase requests with the earliest postmarks
will be honored first. Units will be repurchased
on March 31 and September 30 of each year and any
investor who tenders units that are not repurchased
must re-tender the units in succeeding periods if he or
she wants the request reconsidered.
AEI Fund 23 is not obligated to repurchase any unit(s) if
doing so would, in the discretion of the managers, impair
its operations. Repurchases will be funded out of either
revenues otherwise distributable to investors or
borrowings. No assurances can be given that revenues or
borrowings will be available, that AEI Fund 23 will be
able to repurchase any or all of the units tendered, or
that the managers will not suspend repurchases. A
repurchase will result in smaller distributions to
remaining investors in the year of repurchase, but will
not result in a reduction of taxable income or gains to
such investors. In addition, a repurchase may result in
certain adverse tax consequences to the tendering
investor.
DISTRIBUTION REINVESTMENT PLAN
The managers have established a distribution reinvestment
plan to enable investors who elect in writing to have
their distributions of cash flow from AEI Fund 23
reinvested in additional units of AEI Fund 23 during the
period of the offering pursuant to this Prospectus. The
managers, in their discretion, may determine not to
provide such a reinvestment plan or to terminate the
reinvestment plan at any time. The reinvestment plan
provides for the direct purchase by the reinvesting
investor of units at the public offering price per unit
of $1,000.
No distributions accrue to an investor who participates
in the reinvestment plan prior to release of funds from
escrow and execution of the Operating Agreement will be
reinvested.
-42-
All other distributions to participants in the
reinvestment plan will be reinvested within 30 days after
the date of the distribution in additional units or
fractional units, provided that:
the sale of units continues to be registered or
qualified for sale under federal and applicable
state securities laws;
each continuing participant has received a current
prospectus relating to AEI Fund 23, including any
supplements, and executed a confirmation within one
year of such reinvestment indicating his or her
intention to purchase units in AEI Fund 23 and
confirming that he or she continues to satisfy the
investor suitability requirements; and
there has been no distribution of sales or
refinancing proceeds to investors.
The reinvestment plan will terminate upon completion of
the public offering of the units. If at any time one of
the requirements described above is not satisfied,
distributions will be paid in cash to participants in the
reinvestment plan.
Each investor participating in the reinvestment plan
agrees that, if at any time the investor fails to meet
suitability standards or cannot make the other investor
representations contained in the current fund prospectus,
the subscription agreement, or the operating agreement,
he or she will promptly notify the manager in writing.
Investors should note that affirmative action is required
to change or withdraw from participation in the
reinvestment plan. Change in or withdrawal from
participation in the reinvestment plan will be effective
only with respect to distributions made 30 days following
receipt by the managers of written notice of change or
withdrawal. In the event an investor transfers his or her
units, the transfer will terminate the investor's
participation in the reinvestment plan as of the first
day of the quarter in which such transfer is effective.
Selling commissions may be paid by AEI Fund 23 in amounts
not to exceed 8% with respect to any units purchased
with reinvested distributions. Each participant in the
reinvestment plan is permitted to identify, change or
eliminate the name of his or her account executive at a
participating dealer. Identification of the account
executive may be changed or eliminated for subsequent
distributions. If no account executive is identified, or
if the account executive is not employed by a broker-
dealer having a dealer agreement with AEI Fund 23, no
selling commission will be paid with respect to
distributions which are then reinvested, and AEI Fund 23
will retain for additional investment in real estate any
amounts otherwise payable as commissions. All holders of
units, based on the number of units outstanding, will
receive the benefit of the savings realized by AEI Fund
23 from investors who do not identify account executives.
No reinvestment fee or charge will be offset against any
reinvested distributions pursuant to the reinvestment
plan. The cost of administering the reinvestment plan
will be considered an organization and offering cost of
AEI Fund 23 and the actual cost of administering such
reinvestment plan may be reimbursed to the managers in
accordance with the limitations on reimbursements for
organization and offering expenses.
Following each reinvestment each participant in the
plan will be sent a statement showing the
distributions received and the number and price of
units issued to the participant. Taxable participants
-43-
will incur tax liability for income allocated to them
even though they have elected not to receive their
distributions in cash but rather to have their
distributions reinvested in the purchase of units.
AEI Fund 23 reserves the right to amend any aspect of the
reinvestment plan, or to terminate the reinvestment plan,
with respect to any distribution of cash flow subsequent
to notice of such amendment or termination, provided that
notice is sent to all participants in the plan at least
10 days prior to the record date for the distribution.
The managers also reserve the right to assign the
administrative duties of the reinvestment plan to a
reinvestment agent who may hold units on behalf of
participants, provide reports to participants, and
satisfy other record keeping requirements.
Investors may also be given the opportunity to reinvest
distributions from AEI Fund 23 in interests of a program
having substantially identical investment objectives as
AEI Fund 23, if affiliates of the managers publicly offer
such program interests after the termination of the
offering of units under this prospectus. Investors would
be allowed to reinvest distributions from AEI Fund 23 in
a subsequent program only if each of the following
conditions are satisfied:
the subsequent program is registered under federal
and applicable state securities laws;
the subsequent program has substantially identical
investment objectives;
reinvesting investors are afforded the revocation
rights described above with respect to such
reinvestments and the payment of commissions on such
reinvestments; and
each participating investor receives the
prospectus relating to such subsequent program and
satisfies the investment qualifications, including
minimum investment requirements, for such subsequent
offering.
Nothing herein shall be construed as obligating the
managers or any affiliate to continue the offering of
units or to offer units in any subsequent real estate
programs or permit reinvestment therein.
LIABILITIES OF INVESTORS
No investor will be liable for any obligations of AEI
Fund 23 in excess of the capital contribution he or she
has agreed in the operating agreement to make by signing
a subscription agreement, plus his or her share of
undistributed net income; except that an investor
receiving a return of his or her capital contribution
will be liable to AEI Fund 23, for a period of one year
if such capital contribution was returned in accordance
with the Operating Agreement and for a period of six
years if it was not, for any sum, not in excess of such
returned capital contribution with interest, necessary to
discharge the liabilities to all creditors who extended
credit, or whose claims arose, before such capital
contribution was returned. Investors will not have the
right to a return of their capital contributions except
in accordance with the distribution and repurchase
provisions of the Operating Agreement.
-44-
RIGHTS, POWER AND DUTIES OF THE MANAGERS
The managers will have the exclusive right to manage the
business of AEI Fund 23. The managers will be responsible
for the selection, acquisition, sale, financing,
refinancing and leasing of the properties. The rights,
powers and duties of the managers may be delegated or
contracted to an affiliate of the managers at cost. AEI
Fund Management XXI, Inc. will initially serve as
manager.
WITHDRAWAL OR REMOVAL OF A MANAGER
Neither AEI Fund Management XXI (the manager) nor Robert
P. Johnson (the special managing member) may withdraw
from AEI Fund 23 without providing a substitute manager.
Any substitute manager must be accepted by the vote of a
majority, by interest, of the investors at a special
meeting called by the manager for such purpose. A manager
shall be expelled or replaced upon its bankruptcy or
insolvency or upon a finding of fraud or breach of its
management duties or upon the vote of a majority, by
interest, of the investors at a special meeting called
for the purpose of replacing such manager.
SUBSTITUTED INVESTORS; ASSIGNEES
No investor will have the right to substitute an investor
in his or her place unless the substituted investor has
agreed in the instrument of assignment to become an
investor and has paid all expenses in connection with
admission as a substituted investor. An assignee who does
not become a substitute investor as provided above will
only have the right to receive the distributions from AEI
Fund 23 to which the assigning investor would have been
entitled if no such assignment had been made. Such
assignee will have no right to require any information or
account of AEI Fund 23's transactions or to inspect AEI
Fund 23's books.
APPOINTMENT OF MANAGERS AS ATTORNEYS-IN-FACT
Each investor will irrevocably constitute and appoint the
managers, and each of them individually, to be his true
and lawful attorney-in-fact, with full power to execute
such documents as may be necessary or appropriate to
carry out the provisions of the operating agreement.
"ROLL-UPS"
The operating agreement prohibits transactions in which
units are required to be exchanged for securities of
another entity (as defined in the operating agreement as
a "roll-up") unless certain rights of the investors are
maintained in the resulting entity and unless a vote of
the majority of the investors is obtained. The operating
agreement defines a roll-up to include certain
transactions involving the acquisition, merger,
conversion, or consolidation, either directly or
indirectly, of AEI Fund 23 and the issuance of securities
from another entity. This definition comports with
requirements under certain state securities laws but
differs slightly from definitions used by the SEC and may
-45-
differ from definitions contained in rules or legislation
promulgated in the future. The determination of whether a
transaction constitutes a roll-up will, in the first
instance, be made by the managers.
The operating agreement provides, in material part, that
AEI Fund 23 may not participate in any roll-up that
would:
reduce the democracy rights of investors;
impede the ability of the equity owners of the
resulting entity to purchase the securities of
that entity;
limit the voting rights of the investors as equity
owners of the resulting entity;
limit rights to access to records of the resulting
entity; or
provide, without the consent of investors, that
the costs of the roll-up are to be borne by AEI Fund
23.
Further, the operating agreement requires AEI Fund 23 to
obtain an appraisal by a competent independent expert of
its assets, based on all available information and
assuming an orderly liquidation of AEI Fund 23's assets,
in connection with any roll-up and to provide a summary
of that appraisal to investors. If the appraisal is
included in a prospectus to offer securities of the
entity that results from the roll-up, it must be filed
with securities authorities and AEI Fund 23 will have
liability for misrepresentations or omissions therein.
Any roll-up requires the vote of holders of not less than
a majority of the units. The operating agreement provides
that an investor who votes against the amendments must be
given the option of accepting securities in the
resulting entity or accepting either cash for such
investor's units at the pro rata appraised value of the
assets or retention of such investor's interest in AEI
Fund 23 on the same terms and conditions as existed
previously.
REPORTS TO INVESTORS
The books and records of AEI Fund 23 will be maintained
at its principal offices and will be open for examination
and inspection by the investors during reasonable
business hours. AEI Fund 23 will furnish a list of names
and addresses and number of units held by all investors
to any investor who requests such a list in writing for a
proper purpose, with costs of photocopying and postage to
be borne by the requesting investor. The assignee of an
investor does not have a right to receive any reports
unless such assignee is admitted as a substitute member
in accordance with the Operating Agreement.
WITHIN 75 DAYS AFTER THE CLOSE OF EACH TAXABLE YEAR OF
AEI FUND 23, THE MANAGERS WILL DISTRIBUTE TO EACH
INVESTOR ALL INFORMATION NECESSARY FOR THE PREPARATION OF
INVESTOR'S FEDERAL INCOME TAX RETURNS. A separate report
will be issued, solely for purposes of asset evaluation
by tax-qualified plans, that will contain the managers'
estimate of the fair market value of the units.
-46-
WITHIN 120 DAYS AFTER THE END OF EACH FISCAL YEAR, THE
MANAGERS WILL ALSO DISTRIBUTE TO THE INVESTORS AN ANNUAL
REPORT containing a balance sheet and statements of
operations, changes in members' equity and cash flows
(which will be prepared on a GAAP basis of accounting and
will be examined and reported upon by an independent
public accountant) and a report of AEI Fund 23's
activities during the period reported upon. Such annual
report will describe all reimbursements to the managers
and their affiliates and all distributions to investors,
including the source of such payments.
WITHIN 60 DAYS AFTER THE END OF EACH QUARTER, THE
MANAGERS WILL ALSO DISTRIBUTE TO THE INVESTORS A REPORT
CONTAINING A CONDENSED BALANCE SHEET, CONDENSED
STATEMENTS OF OPERATION, AND A RELATED CASH FLOW
STATEMENT, together with a detailed statement describing
all real properties acquired (including the geographic
locale and the plan of operation, the appraised value and
purchase price and all other material information),
setting forth all fees, if any, received by the managers
or their affiliates and describing the services rendered
for such fees.
THE MANAGERS INTEND TO MAKE ALL OF THE FOREGOING REPORTS
AVAILABLE ELECTRONICALLY, AND TO ALLOW DELIVERY TO AN E-
MAIL ADDRESS OR THROUGH ACCESS AT ONE OF THE MANAGER'S
WEB SITES. BECAUSE ELECTRONIC DELIVERY IS EXPECTED TO
SAVE CONSIDERABLE PRINTING AND MAILING COSTS, ALL
INVESTORS WHO HAVE THE ABILITY TO ACCEPT ELECTRONIC
DELIVERY ARE URGED TO COMPLETE THE PORTION OF THE
SUBSCRIPTION AGREEMENT THAT PROVIDES WRITTEN CONSENT TO
THIS FORM OF DELIVERY.
Finally, when and if required by applicable SEC rules,
AEI Fund 23 will make available to investors, upon
request, the information set forth in SEC Form 10-QSB
within 45 days after the close of each quarter and SEC
Form 10-KSB within 90 days after the close of each fiscal
year. The managers are permitted to combine such reports
so long as they are distributed in a timely manner.
PLAN OF DISTRIBUTION
AEI Fund 23 is offering, through AEI Securities, as the
manager of a syndicate of broker-dealers that will
solicit purchase of units, $24,000,000 of its limited
liability company interests in the form of 24,000 units
of $1,000 each. The minimum investment required of each
investor is two and one-half units ($2,500), except that
IRAs and other tax-qualified plans will be permitted
to purchase two units ($2,000). The offering period will
commence on the date hereof. No units will be sold unless
subscriptions for at least 1,500 units are received
within one year after the date of this prospectus.
EACH INVESTOR WILL BE REQUIRED TO ACCEPT AND ADOPT THE
PROVISIONS OF THE OPERATING AGREEMENT ATTACHED TO THIS
PROSPECTUS AS EXHIBIT A AND TO COMPLETE AND EXECUTE A
SUBSCRIPTION AGREEMENT, WHICH INCLUDES A POWER OF
ATTORNEY (EXHIBIT D). At the time the prospective
investor submits a subscription agreement, he or she must
tender a check to AEI Fund 23 in the amount of $1,000 for
each unit being purchased. Checks should be made payable
to "Fidelity Bank_AEI Real Estate Escrow 23." Units will
only be sold to an investor who represents in writing
that, at the time the investor executes the Subscription
Agreement, he or she meets the applicable suitability
requirements.
-47-
ALL FUNDS RECEIVED FROM SUBSCRIBERS WILL BE DEPOSITED IN
AN ESCROW ACCOUNT WITH THE FIDELITY BANK, EDINA,
MINNESOTA UNTIL $1,500,000 HAS BEEN DEPOSITED. Purchases
by the managers and their affiliates will not be counted
for purposes of meeting the minimum. If the required
$1,500,000 has not been deposited within one year after
the date of this prospectus, all subscriptions will be
canceled and all funds will be promptly returned to
investors with interest and without any deduction. A
subscriber may not withdraw his funds from the escrow
account. When subscriptions for the minimum number of
units have been received, the managers may remove funds
from escrow and instruct the escrow agent to pay accrued
selling commissions. When subscriptions for the minimum
number of units have been received, the escrow account
will convert to a convenience clearing account for use
by AEI Fund 23 and the managers.
UPON ADMISSION TO AEI FUND 23, EACH INVESTOR WILL RECEIVE
HIS PRO RATA SHARE OF ANY INTEREST EARNED ON ESCROWED
FUNDS BASED ON THE DATE OF DEPOSIT OF HIS SUBSCRIPTION
PAYMENT. Escrow funds will be invested in insured
deposits with a financial institution and will earn
interest at short-term deposit rates. Following first
admission, AEI Fund 23 will admit additional investors as
limited members on or before the first business day of
each month until the termination of the offering. Only
subscribers whose subscriptions have been received and
accepted at least three days prior to each admittance
date will be admitted as limited members on such date.
THE MANAGERS HAVE COMPLETE DISCRETION TO REJECT ANY
SUBSCRIPTION AGREEMENT EXECUTED BY ANY SUBSCRIBER WITHIN
30 DAYS OF ITS SUBMISSION AND FUNDS FROM A REJECTED
SUBSCRIBER WILL BE RETURNED WITHIN 10 DAYS THEREAFTER.
Subscriptions may be rejected for an investor's failure
to meet the suitability requirements, an over-
subscription of the offering, or for other reasons
determined to be in the best interest of AEI Fund 23. The
managers and their affiliates may purchase units, without
limitation, on the same terms as other investors. Any
purchase by the managers or affiliates will be for
investment and not for redistribution.
AEI SECURITIES, AND OTHER BROKER-DEALERS THAT ARE
MEMBERS OF THE NASD AS "PARTICIPATING DEALERS," HAVE
AGREED TO USE THEIR "BEST EFFORTS" TO SELL THE UNITS.
None of these broker-dealers are obligated to purchase
units and resell them or to sell any or all of the units.
Participating dealers in the offering will offer and
sell units on the same terms and conditions as AEI
Securities. AEI Securities will receive selling
commissions and a non-accountable expense allowance
totaling 10% of the gross proceeds from the sale of
units, all or a portion of which it will repay to
participating dealers. AEI Securities may also receive up
to one-half of 1% of the gross offering proceeds for the
reimbursement of due diligence expenses of the
participating dealers, all of which will be repaid by AEI
Securities to the participating dealers.
The broker-dealers that act as participating dealers
and their controlling persons, will be indemnified by the
managers against certain liabilities, including
liabilities under the Securities Act of 1933. As of the
date of this prospectus, no broker-dealers have entered
into a Participating Dealer Agreement. The managers will
receive reimbursement of certain expenses incurred by
them in connection with the supervision and monitoring of
the organizational and pre-sale activities of AEI Fund
23.
-48-
SALES MATERIALS
SALES MATERIAL MAY BE USED IN CONNECTION WITH THIS
OFFERING ONLY WHEN ACCOMPANIED OR PRECEDED BY THE
DELIVERY OF THIS PROSPECTUS. The sales materials that may
be disseminated to prospective investors are a brochure,
video, slide presentation and transmittal letter prepared
by the managers describing AEI Fund 23 and its proposed
operations. In certain states, all sales materials may
not be available. With the aforementioned exceptions,
sales materials have not been authorized for use by the
managers and should be disregarded.
THE OFFERING IS MADE ONLY BY MEANS OF THIS PROSPECTUS.
Although the information contained in the supplemental
sales material does not conflict with the information
contained in this prospectus, such sales material does
not purport to be complete and should not be considered
part of this prospectus or as forming the basis of the
offering of the units.
LEGAL PROCEEDINGS
Neither AEI Fund 23 nor the managers are parties to any
pending legal proceedings that are material to AEI Fund
23. Neither AEI Fund Management XXI, Inc. nor Robert P.
Johnson, who is the general partner of other investment
programs, is an adverse party in any legal proceedings
with limited partners in such other limited partnerships.
EXPERTS
The balance sheets of AEI Income & Growth Fund 23 LLC and
AEI Fund Management XXI, Inc. as of December 31, 1998 and
December 31, 1998 and December 31, 1997, respectively,
included in this Prospectus have been examined by Boulay,
Heutmaker, Zibell & Co., P.L.L.P., independent public
accountants, as indicated in their report with respect
thereto, and are included herein in reliance on the
authority of said firm as experts in giving such report.
The statements concerning federal taxes under the
headings "Income Tax Aspects" and "Risks and Other
Important Factors" have been reviewed by Dorsey & Whitney
LLP, counsel for AEI Fund 23, and have been included
herein, to the extent they constitute matters of law, in
reliance upon the authority of said firm as experts
thereon. Counsel for AEI Fund 23 believes that such
material constitutes a full and fair general disclosure
of the material tax risks associated with an investment
in the units.
LEGAL OPINION
The legality of the units will be passed upon for AEI
Fund 23 by its counsel, Dorsey & Whitney LLP.
-49-
INDEPENDENT AUDITOR'S REPORT
To the Partners
AEI Income & Growth Fund 23 LLC
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI Income
& Growth Fund 23 LLC as of December 31, 1998. This financial
statement is the responsibility of the Partnership's management.
Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the balance sheet is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
Balance Sheet presentation. We believe that our audit of
the balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of AEI
Income & Growth Fund 23 LLC as of December 31,1998 in conformity
with generally accepted accounting principles.
/s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Boulay, Heutmaker, Zibell & Co. P.L.L.P
Certified Public Accountants
Minneapolis, Minnesota
February 22, 1999
-50-
AEI INCOME & GROWTH FUND 23 LLC
BALANCE SHEET
December 31, 1998
ASSETS
Cash $ 1,000
========
LIABILITIES AND MEMBERS' EQUITY
MEMBERS' EQUITY:
Managing Members' Equity $ 1,000
--------
Total Liabilities and Members' Equity $ 1,000
========
The accompanying Notes to the Balance Sheet are an integral
part of this statement.
-51-
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO THE BALANCE SHEET
DECEMBER 31, 1998
(1) Summary of Organization and Significant Accounting Policies -
Organization
AEI Income & Growth Fund 23 LLC (the LLC), a Limited
Liability Company, commenced operations on October 14,
1998 to acquire and lease commercial properties to
operating tenants. The LLC's operations are managed by
AEI Fund Management XXI, Inc. (AFM), the Manager of the
LLC. Robert P. Johnson, the President and sole
shareholder of AFM, serves as the Special Managing
Member of the LLC. The LLC has elected December 31 for
its fiscal year end. The Membership Agreement provides
that the entity is to expire in the year 2048.
The terms of the offering call for a subscription price
of $1,000 per LLC Unit, payable on acceptance of the
offer. The LLC has not yet sold any Units.
Under the terms of the Restated Operating Agreement,
24,000 LLC Units are available for subscription which,
if fully subscribed, will result in contributed Limited
Members' capital of $24,000,000. The agreement sets
forth the methods for allocation of Net Cash Flow, Net
Proceeds of Sale and profits, losses and other items.
Operations
In the interim period since inception, the LLC did not
engage in any operations or incur any expenses except
for banking fees and a minor management fee.
Accordingly, a Statement of Income, Statement of Cash
Flows and Statement of Changes in Members' Capital are
not presented.
Accounting Estimates
Management uses estimates and assumptions in preparing
the balance sheet in accordance with generally accepted
accounting principles. Those estimates and assumptions
affect the reported amounts of assets, liabilities and
equity. Actual results could differ from those
estimates.
(2) Income Taxes -
The income or loss of the LLC for federal income tax
reporting purposes is includable in the income tax
returns of the members. Accordingly, no recognition has
been given to income taxes in the accompanying balance
sheet.
The tax return, the qualification of the LLC as such for
tax purposes, and the amount of distributable LLC income
or loss are subject to examination by federal and state
taxing authorities. If such an examination results in
changes with respect to the LLC qualification or in
changes to distributable LLC income or loss, the taxable
income of the members would be adjusted accordingly.
(3) Fair Value of Financial Instruments -
The carrying value of certain assets and liabilities
approximate fair value.
-52-
REPORT OF INDEPENDENT AUDITORS
Board of Directors
AEI Fund Management XXI, Inc.
Saint Paul, Minnesota
We have audited the accompanying balance sheet of AEI
Fund Management XXI, Inc. as of December 31, 1998 and
December 31, 1997. This financial statement is the
responsibility of the Company's management. Our
responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
Balance Sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above
presents fairly, in all material respects, the financial
position of AEI Fund Management XXI, Inc. as of December
31, 1998 and December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Boulay, Heutmaker, Zibell & Co. P.L.L.P
Certified Public Accountants
Minneapolis, Minnesota
February 22, 1999
-53-
AEI FUND MANAGEMENT XXI, INC.
BALANCE SHEET
ASSETS
December 31, December 31,
1998 1997
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,339 $ 10,196
Partnership Distributions Receivable 7,806 4,453
Receivable from AEI Fund Management, Inc. 159 10
--------- ---------
Total Current Assets $ 10,304 $ 14,659
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
NONCURRENT LIABILITIES:
Deficit in Real Estate Partnership
Investments $ 13,053 $ 17,806
STOCKHOLDER'S EQUITY:
Common Stock, Par Value $.01 Per Share,
1,000 Shares Issued 10 10
Additional Paid-in Capital 990 990
Retained Earnings (Deficit) (3,749) (4,147)
--------- ----------
Total Stockholder's Equity (Deficit) (2,749) (3,147)
--------- ----------
Total Liabilities and
Stockholder's Equity $ 10,304 $ 14,659
========= =========
The accompanying notes to Balance Sheet are an integral part
of this statement.
-54-
AEI FUND MANAGEMENT XXI, INC.
NOTES TO BALANCE SHEET
DECEMBER 31, 1998 AND 1997
(1) Summary of Organization and Significant Accounting Policies -
Organization
AEI Fund Management XXI, Inc. (Company) is the Managing
General Partner of AEI Income & Growth Fund XXI Limited
Partnership (Fund XXI), and AEI Income & Growth Fund
XXII Limited Partnership (Fund XXII). The Company is
the Managing Member of AEI Income & Growth Fund 23 LLC
(Fund 23), which was formed in October, 1998. At
December 31, 1998, the Company owned 22 Limited
Partnership Units of Fund XXII, which were purchased in
the fourth quarter of 1998. Investors in Fund XXI,
Fund XXII and Fund 23 have no interest in the assets or
operations of the Company.
Financial Statement Presentation
The Company accounts for its investments in
Partnerships under the equity method of accounting.
The Company's major source of revenue is its share of
distributions allocated under the terms of the
Partnerships' Limited Partnership Agreements. The
combined assets, revenues and net income for the above
referenced entities was $31,626,515, $3,263,180 and
$1,581,042 for 1998 and $25,399,227, $2,150,692 and
$417,039 for 1997. The Company's share of income
(loss) ranges from 1% to 2%. At December 31, 1998 and
December 31, 1997, the Company has accumulated deficits
of $13,053 and $17,806, respectively, in excess of its
basis in Fund XXI and Fund XXII. The Company would be
responsible to fund a deficiency in its capital account
if the Partnership terminates.
Accounting Estimates
Management uses estimates and assumptions in preparing
this balance sheet in accordance with generally
accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets,
liabilities and stockholder's equity. Actual results
could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid debt
instruments purchased with a maturity of three months
or less to be cash equivalents.
(2) Receivable from AEI Fund Management, Inc. -
AEI Fund Management, Inc. performs the administrative
and operating functions of the Company. The receivable
from AEI Fund Management, Inc. represents the balance
due for those services. The balance is non-interest
bearing and unsecured and is to be paid in the normal
course of business.
(3) Income Taxes -
The Company elected S-Corporation status. As a result,
the income of the Company for Federal and State income
tax reporting purposes is includable in the income tax
return of the sole stockholder. Accordingly, there is
no provision for income taxes.
-55-
EXHIBIT A
OPERATING AGREEMENT
OF
AEI INCOME & GROWTH FUND 23 LLC
TABLE OF CONTENTS
Article Page
I. Formation of Limited Liability Company A-2
II. Definitions A-2
III. Purpose and Character of Business A-6
IV. Capital A-6
V. Allocation of Profits, Gains and
Losses; Distributions to Members A-9
VI. Rights, Powers and Duties of Managing Members A-11
VII. Provisions Applicable to Limited Members A-17
VIII. Books of Account; Reports and Fiscal Matters A-19
IX. Assignment of Limited Member's Interest A-21
X. Death Withdrawal, Expulsion and Replacement
of the Managing Members A-22
XI. Amendment of Agreement and Meetings A-23
XII. Dissolution and Liquidation A-24
XIII. Miscellaneous Provisions A-25
OPERATING AGREEMENT
OF
AEI INCOME & GROWTH FUND 23 LLC
THIS OPERATING AGREEMENT is entered into as of this
day of , 1998, by and among AEI Fund Management XXI,
Inc. (the "Managing Member"), a Minnesota corporation,
Robert P. Johnson (the "Special Managing Member"), and all
other parties comprising the Limited Members, who shall
execute this agreement and whose addresses appear at the end
of this agreement.
I. FORMATION OF THE LIMITED LIABILITY COMPANY
The parties hereto do hereby confirm the formation of
a limited liability company (the "Company") pursuant to the
provisions of the Delaware Limited Liability Company Act
(the " Act") by the filing of a Certificate of Formation on
and agree that the Company shall be governed by the terms of
this agreement. The parties agree that they shall promptly
file any amended certificates of formation that may be
required in the appropriate office in the State of Delaware
and in such other offices as may be required, and that the
parties shall comply with the other provisions and
requirements of the Limited Liability Company Act as in
effect in Delaware, which Act shall govern the rights and
liabilities of the Members, except as herein or otherwise
expressly stated.
1.1 NAME. The business of the Company is conducted
under the firm name and style of: AEI INCOME & GROWTH FUND
23 LLC.
1.2 AGENT FOR SERVICE. The agent for service of
process is The Corporation Trust Company. The location of
the and agent for service of process of the Company shall be
at The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware
19801.
1.3 PRINCIPAL PLACE OF BUSINESS /NAMES AND ADDRESSES.
The location of the principal place of business, principal
office and agent for service of process of the Company shall
be at the offices of the Managing Member, 1300 Minnesota
World Trade Center, 30 East Seventh Street, Saint Paul,
Minnesota 55101. The Company may also maintain offices at
such other place of business as the Managing Member may from
time to time determine. The name and address of the Managing
Member is AEI Fund Management XXI, Inc., 1300 Minnesota
World Trade Center, 30 East Seventh Street, Saint Paul,
Minnesota 55101. The name and address of the Special
Managing Member is Robert P. Johnson, 1300 Minnesota World
Trade Center, 30 East Seventh Street, Saint Paul, Minnesota
55101. The names and addresses of the Limited Members are
set forth on Schedule A at the end of this agreement.
1.4 Term. The Company shall commence business on the
date hereof, and shall continue until December 31, 2048,
unless dissolved, terminated and liquidated prior thereto
under the provisions of Article XIII.
II. DEFINITIONS
As used in this agreement, the following terms shall
have the following meanings:
2.1 "Acquisition Expenses" means expenses including,
but not limited to, legal fees and expenses, travel and
communication expenses, costs of appraisals, non-refundable
option payments on properties not acquired, accounting fees
and expenses, title insurance and miscellaneous expenses
related to selection and acquisition of properties, whether
or not acquired.
2.2 "Acquisition Fees" means the total of all fees
and commissions paid by any party in connection with making
or investing in mortgage loans or the purchase, development
or construction of Properties, whether designated as a real
estate commission relating to the purchase of Properties,
selection fee, Development Fee, Construction Fee,
nonrecurring management fee, loan fees or points paid by
borrowers to the Managing Member if the Company invests in
mortgage loans, or any fee of a similar nature, however
designated or however treated for tax or accounting
purposes. Acquisition Fees shall not include Development
Fees and Construction Fees paid to any person or entity not
Affiliates of the Managing Members in connection with the
actual development and construction of a project.
2.3 "Adjusted Capital Contributions" means the
aggregate original capital contribution of a Limited Member
reduced, from time to time, by (i) any return of capital
contributions pursuant to Section 4.5, and (ii) to the
extent the Company has paid a cumulative (but not
compounded) 6% per annum return on Adjusted Capital
Contributions, by total cash distributed from Net Proceeds
of Sale with respect to the Units; and increased from time
to time by the product of (i) the Adjusted Capital
Contribution of any Limited Member whose Units are
repurchased and (ii) the ratio of each remaining Limited
Member's Units to the total Units outstanding after such
repurchase. Adjusted Capital Contributions shall not be
reduced by distributions of Net Cash Flow.
2.4 "Administrative Expenses" means expenses incurred
by the Managing Members and their Affiliates during the
operation of the Company directly attributable to rendering
the following services to the Company: (i) administering
the Company (including agency type services, member
relations and communications, financial and tax reporting ,
accounting and payment of accounts, payment of
distributions, payment of unit redemptions, staffing and
processing other investor requests); (ii) property
management (including collecting, depositing and monitoring
rental payments and penalties, monitoring compliance with
leases, monitoring the maintenance of property and liability
insurance and the payment of taxes, maintenance of lease
insurance (if applicable), monitoring and negotiating other
forms of tenant security and financial condition, ongoing
site inspections and property reviews and reviewing tenant
reports); (iii) property and lease workout (including
enforcing lease provisions in default, filing lease
insurance claims, enforcing guarantees, collecting letters
of credit or foreclosing other collateral, if applicable,
eviction of tenants in default, re-leasing of properties,
and monitoring tenant disputes and foreclosures); (iv)
property financing and refinancing; and (v) Company
dissolution and liquidation (accounting, final payment to
creditors, administrative filings and other costs).
2.5 "Affiliate" means (i) any person directly or
indirectly controlling, controlled by or under common
control with another person, (ii) any person owning or
controlling 10% or more of the outstanding voting securities
of such other person, (iii) any officer, director or partner
of such person and (iv) if such other person is an officer,
director or partner, any such company for which such person
acts in such capacity.
2.6 "Competitive Real Estate Commissions" means real
estate or brokerage commissions paid for the purchase or
sale of a Property that are reasonable, customary and
competitive in light of the size, type and location of such
Property and which do not, in any event, exceed 6% of the
contract price for the sale of such Property.
2.7 "Construction Fee" means a fee or other
remuneration for acting as general contractor and/or
construction manager to construct improvements, supervise
and coordinate projects or to provide Major Repairs or
Rehabilitation of Company Property.
2.8 "Cost" means, when used with respect to services
furnished by the Managing Members or their Affiliates to, or
on behalf of, the Company, the lesser of (i) the actual
expenses incurred by such Managing Members and Affiliates in
providing services necessary to the prudent operation of the
Company, including salaries and expenses paid to officers,
directors, employees and consultants, depreciation and
amortization, office rent, travel and communication
expenses, employee benefit expenses, supplies and other
overhead expenses directly attributable to the furnishing of
such services; or (ii) the price that would be charged by
unaffiliated parties rendering similar services in the same
geographic location. Overhead expenses shall be charged
only if directly attributable to such services and shall be
allocated based upon the amount of time personnel actually
spend providing such services, or such other method of
allocation as is acceptable to the Company's independent
public accountant.
2.9 "Development Fee" means a fee for packaging the
Company's Property, including negotiating and approving
plans, and undertaking to assist in obtaining zoning and
necessary variances and necessary financing for a specific
Property, either initially or at a later date.
2.10 "Front-End Fees" means fees and expenses paid by
any party for services rendered during the Company's
Organizational or acquisition phase, including
Organizational and Offering Expenses, Acquisition Fees,
Acquisition Expenses, interest on deferred fees and expenses
and other similar fees, however designated by the Managing
Member.
2.11 "Managing Members" means the Managing Member,
the Special Managing Member and any substitute Managing
Member as provided in Article X.
2.12 "Special Managing Member" means Robert P.
Johnson, and any substitute as provided in Article X.
2.13 "Investment in Properties" means the amount of
capital contributions actually paid or allocated to the
purchase of Properties, including working capital reserves
allocable thereto (except that working capital reserves in
excess of 5% will not be included) and other cash payments
such as interest and taxes, but excluding Front-End Fees.
2.14 "Limited Members" means all parties who shall
execute, either personally or by an authorized attorney-in-
fact, this agreement as Limited Members and comply with the
conditions in Section 4.2, and any and all assignees of the
Limited Members, whether or not such assignees are admitted
to the Company as substitute Limited Members; provided,
however, that an assignee of the interest of any Limited
Member shall not be considered a "Limited Member" for
purposes of Articles X and XI hereof unless such assignee is
admitted as a substitute Limited Member as provided in
Article IX.
2.15 "Limited Liability Company Act" means the
Delaware Limited Liability Company Act, as the same may be
amended.
2.16 "Limited Liability Company Unit" or "Unit" means
the Company interest and appurtenant rights, powers and
privileges of a Limited Member and represents the stated
capital contributions with respect thereto, all as set forth
elsewhere in this agreement.
2.17 "Major Repairs or Rehabilitation" means the
repair, rehabilitation or reconstruction of a Property where
the aggregate costs exceed 10% of the fair market value of
the Property at the time of such services.
2.18 "Managing Member" means AEI Fund Management XXI,
Inc., and any substitute as provided in Article X.
2.19 "Net Value" means the aggregate value of the
Company's assets less the Company's liabilities, as
determined by the Managing Member, after taking into account
(i) the present value of future net cash flow from rental
income on the Fund's properties, (ii) the price at which
Units of the Company have last been purchased, and (ii) such
other factors as the Managing Members deem relevant.
2.20 "Net Cash Flow" means Company cash funds
provided from operations, including lease payments from
builders and sellers without deduction for depreciation, but
after deducting cash funds used to pay all other expenses,
debt payments, capital improvements and replacements and
less the amount set aside for restoration or creation of
reserves.
2.21 "Net Proceeds of Sale" means the excess of gross
proceeds from any sale, refinancing (including the financing
of a Property that was initially purchased debt-free) or
other disposition of a Property over all costs and expenses
related to the transaction, including fees payable in
connection therewith, and over the payments made or required
to be made on any prior encumbrances against such Property
in connection with such transaction.
2.22 "Members" means the Managing Member, the Special
Managing Member and the Limited Members.
2.23 "Organization and Offering Expenses" means those
expenses incurred in connection with and in preparing the
Company for registration and subsequently offering and
distributing it to the public, including any sales
commissions, nonaccountable expense allowances or
reimbursement of due diligence expenses paid to broker-
dealers in connection with the distribution of the Company
and all advertising expenses.
2.24 "Company" means the limited liability company
formed by this agreement.
2.25 "Permitted Transfer" means, with respect to the
transfer of Units in any fiscal year of the Company (i)
transfers in which the basis of the Unit in the hands of the
transferee is determined, in whole or in part, by reference
to its basis in the hands of the transferor, or is
determined under Section 732 of the Internal Revenue Code of
1986, as amended (the "Code"), (ii) transfers of Units upon
the death of a Limited Member, (iii) transfers of Units
between members of a family (as defined in Section 267(c)(4)
of the Code), (iv) transfers of Units at original issuance
and sale, (v) transfers of Units pursuant to distribution
under a Qualified Plan, and (vi) block transfers of Units by
a single Member in one or more transactions during any
thirty calendar day period representing in the aggregate
more than five percent (5%) of the total interest of all
Members in Company capital and profits.
2.26 "Properties" or "Property" means real properties
or any interest therein acquired directly or indirectly by
the Company and all improvements thereon and all repairs,
replacements or renewals thereof, together with all personal
property acquired by the Company that from time to time is
located thereon or specifically used in connection
therewith.
2.27 "Prospectus" means that certain prospectus
of the Company dated , 1999.
2.28 "Qualified Matching Service" means a listing
system operation, provided either through the Managing
Members or through any unrelated third party (including any
dealer in the Units), in which Limited Members contact the
operator to list Units they desire to transfer and through
which the operator attempts to match the listing Limited
Member with a customer desiring to buy Units without (i)
regularly quoting prices at which the operator stands ready
to buy or sell interests, (ii) making such quotes available
to the public, or (iii) buying or selling interests for its
own account.
2.29 "Qualified Matching Service Transfer" means a
transfer of Units through a Qualified Matching Service in
which (i) at least a fifteen (15) calendar day delay occurs
between the day (the "Contact Date") a Limited Member
provides written confirmation to the Qualified Matching
Service that his or her Units are available for sale and the
earlier of (A) the day information is made available to
potential buyers that such Units are available for sale, or
(B) the day information is made available to the selling
Limited Member regarding the existence of outstanding bids
to purchase Units, (ii) the closing of the transfer does not
occur until at least forty five (45) days after the Contact
Date, (iii) the Limited Member's offer to sell is removed
from the Qualified Matching Service within one hundred and
twenty (120) days of the Contact Date, and (iv) no Units of
such Limited Member are entered for listing by the Qualified
Matching Service for at least sixty (60) days after the
removal of the Limited Member's information from such
Qualified Matching Service; provided, however, that no
transfer shall be a Qualified Matching Service Transfer if,
after giving effect to such transfer, the aggregate of (a)
Qualified Matching Service Transfers, (b) transfers pursuant
to the repurchase provisions contained in section 7.7 of
this agreement of Limited Member interests and (c) all other
transfers of Limited Member interests except Permitted
Transfers since the beginning of the fiscal year in which
such transfer is made would exceed ten percent (10%) of the
Company interests outstanding.
2.30 "Qualified Plans" means Keogh Plans and
pension/profit-sharing plans that are qualified under
Section 401 of the Internal Revenue Code.
2.31 "Roll-Up" means a transaction involving the
acquisition, merger, conversion, or consolidation, either
directly or indirectly, of the Company and the issuance of
securities of a Roll-Up Entity; provided, however, that a
Roll-Up shall not include a transaction involving the
conversion to corporate, trust or association form of only
the Company if, as a consequence of such transaction, there
will be no significant adverse change in any of the
following:
(i) voting rights of Limited Members;
(ii) the term of existence of the surviving entity
beyond that of the Company;
(iii) compensation to the Managing Members or their
Affiliates;
(iv) the investment objectives of the Company or the
surviving entity.
2.32 "Roll-Up Entity" means a Company, real estate
investment trust, corporation, trust or other entity that
would be created or would survive after successful
completion of a proposed Roll-Up Transaction.
2.33 "Sponsor" means any person, Company,
corporation, association or other entity which is directly
or indirectly instrumental in organizing, wholly or in part,
the Company or any person, Company, corporation, association
or other entity which will manage or participate in the
management of the Company, and any Affiliate of such person,
Company, corporation, association or other entity, but does
not include a person, Company, corporation, association or
other entity whose only relation with the Company is as that
of an independent property manager, whose only compensation
is as such. "Sponsor" does not include wholly independent
third parties such as attorneys, accountants, and
underwriters whose only compensation is for professional
services rendered in connection with the offering of Company
interests. A person, Company, corporation, association or
other entity may also be a Sponsor of the Company by: (i)
taking the initiative, directly or indirectly, in founding
or organizing the business or enterprise of the Company,
either alone or in conjunction with one or more other
persons, companies, corporations, associations or other
entities; (ii) receiving a material participation in the
Company in connection with the founding or organizing of the
business of the Company, in consideration of services or
property, or both services and property; (iii) having a
substantial number of relationships and contacts with the
Company; (iv) possessing significant rights to control
Company Properties; (v) receiving fees for providing
services to the Company which are paid on a basis that is
not customary in the industry; (vi) providing goods or
services to the Company on a basis which was not negotiated
at arm's length with the Company.
III. PURPOSE AND CHARACTER OF THE BUSINESS
The purpose and character of the business of the
Company shall be to acquire an interest in the Properties
upon such terms and conditions as the Managing Member, in
its absolute discretion, shall determine, including, without
limitation, taking title to the Properties; to own, lease,
operate and manage the Properties for income-producing
purposes; to furnish services and goods in connection with
the operation and management of the Properties; to enter
into agreements pertaining to the operation and management
of the Properties; to borrow funds for such purposes and to
mortgage or otherwise encumber any or all of the Company's
assets or Properties to secure such borrowings; to sell or
otherwise dispose of the Properties and the assets of the
Company; and to undertake and carry on all activities
necessary or advisable in connection with the acquisition,
ownership, leasing, operation, management and sale of the
Properties.
IV. CAPITAL
4.1 MANAGING MEMBERS. The Managing Member and the
Special Managing Member shall be obligated to make capital
contributions to the Company, to the extent not previously
made, in the amounts of $600 and $400, respectively. The
Managing Members shall not be obligated to make any other
contributions to the capital of the Company, except that, in
the event that the Managing Members have negative balances
in their capital accounts after dissolution and winding up
of, or withdrawal from, the Company, the Managing Members
will contribute to the Company an amount equal to the lesser
of (a) the deficit balances in their capital accounts or (b)
1.01% of the total capital contributions of the Limited
Members' over the amount previously contributed by the
Managing Members hereunder.
4.2 LIMITED MEMBER CAPITAL CONTRIBUTIONS.
(a) INITIAL CONTRIBUTION. There shall initially be
available for subscription by prospective Limited
Members an aggregate of 24,000 Limited Liability Company
Units. The purchase price of each Unit shall be $1,000,
except that the AEI Securities Incorporated may purchase
Units for $920. Except as provided in section 4.10,
each subscriber must subscribe for a minimum purchase of
two and one-half Units, with the exception of Qualified
Plans and Individual Retirement Accounts, which must
subscribe for a minimum purchase of two Units and
subscribers may purchase fractional Units above such
minimums.
(b) REQUIREMENTS FOR LIMITED MEMBER STATUS. Upon the
initial closing of the sale of Units, the purchasers
will be admitted as Limited Members not later than 15
days after the release from impound of the purchasers'
funds. Thereafter, an investor will be admitted to the
Company not later than the first day of each month
provided that his or her subscription for Units has been
received at least three days prior to such date. All
subscriptions for Units shall be accepted or rejected by
the Company within 30 days of their receipt; if
rejected, all funds shall be returned to the subscriber
within ten business days. The Members shall not be
obligated to make any additional contributions to the
capital of the Company.
4.3 CAPITAL ACCOUNTS. A separate capital account
shall be maintained by the Company for each Member. It is
intended that the capital account of each Member will be
maintained in accordance with the capital accounting rules
of Treas. Reg. Section 1.704-1(b)(2)(iv). In general this
will mean that the capital account of each Member shall be
initially credited with the amount of his or her cash
contribution to the capital of the Company. The capital
account of each Member shall further be credited by the
amount of any additional contributions to the capital of the
Company made by such Member from time to time, shall be
debited by the amount of any cash distributions made by the
Company to such Member and shall be credited with the amount
of income and gains and debited with the amount of losses of
the Company allocated to such Member. In all instances the
capital accounting rules in Treas. Reg. Section 1.704-
1(b)(2)(iv) will determine the proper debits or credits to
each Member's capital account. The Managing Member may, at
its option, increase or decrease the capital accounts of the
Members to reflect a revaluation of Company Property on the
Company's books at the times when, pursuant to Treas. Reg.
Section 1.704-1(b)(2)(iv), such adjustments may occur. The
adjustments, if made, will be made in accordance with such
Regulation, including allocating taxable items, as computed
for book purposes, to the capital accounts as prescribed in
such Regulation. In the case of the transfer of all or a
part of an interest in the Company, the capital account of
the transferor Member attributable to the transferred
interest will carry over to the transferee Member. In the
case of termination of the Company pursuant to Section 708
of the Code, the rules of Treas. Reg. Section 1.704-
1(b)(2)(iv) shall govern adjustments to the capital
accounts. If there are any adjustments to Company property
as a result of Sections 732, 734, or 743, the capital
accounts of the Members shall be adjusted as provided in
Treas. Reg. Section 1.701-1(b)(2)(iv)(m). Except as
provided in Section 4.1 of this agreement, in the event that
any Member has a negative capital account balance after
dissolution and winding up of the Company, such Member will
not be obligated to contribute capital in the amount of such
deficit.
4.4 NO RIGHT TO RETURN OF CONTRIBUTION. The Limited
Members shall have no right to withdraw or to receive a
return of their contributions to the capital of the Company,
as reflected in their respective capital accounts from time
to time, except upon presentment of Units in accordance with
Section 7.7 or upon the dissolution and liquidation of the
Company pursuant to Article XII.
4.5 RETURN OF UNUSED NET OFFERING PROCEEDS. In the
event that any portion of the Limited Members' capital
contributions is not invested or committed for investment in
real property before the later of two years after the date
of the Prospectus or six months after the date of the offer
and sale of Units pursuant to the Prospectus is terminated
(except for amounts utilized to pay operating expenses of
the Company and to establish reasonable working capital
reserves as determined by the Managing Member), such portion
of the capital contributions shall be distributed, without
interest but with any Front-End Fees, including without
limitation commissions or other Organization and Offering
Costs, paid thereon, by the Company to the Limited Members
as a return of capital. All of such capital contributions
will be available for the general use of the Company during
such period and may be expended in operating the Properties
that have been acquired. For the purpose of the foregoing,
funds will be deemed to have been committed to investment,
and will not be returned to the Limited Members to the
extent written contractual agreements have been executed
prior to the expiration of the preceding period, regardless
of whether any such investment is ultimately consummated
pursuant to the written contractual agreement. To the
extent any funds have been reserved to make contingent
payments in connection with any Property pursuant to a
written contractual agreement in connection with such
Property or pursuant to a reasonable decision of the
Managing Members that additional reserves are necessary in
connection with any Property, regardless of whether any such
payment is ultimately made, subscription funds will not be
returned to the Limited Members.
4.6 LOANS TO COMPANY; NO INTEREST ON CAPITAL. The
Members may make loans to the Company from time to time, as
authorized by the Managing Member, in excess of their
contributions to the capital of the Company, and any such
loans shall not be treated as a contribution to the capital
of the Company for any purpose hereunder, nor shall any such
loans entitle such Member to any increase in his or her
share of the profits and losses and cash distributions of
the Company, nor shall any such loans constitute a lien
against the Properties. The amount of any such loans with
interest thereon at a rate determined by the Managing
Member, in its absolute discretion, but not to exceed the
rate that otherwise would be charged by unaffiliated lending
institutions on comparable loans for the same purpose, shall
be an obligation of the Company to such Member. The
Managing Members or their Affiliates may loan funds to the
Company during the offering period for the purpose of
acquiring a Property. Interest on such loans shall not be
in excess of the rate that either would be charged by an
unrelated lending institution on comparable loans for the
same purpose in the same locality of the Properties or
represents the cost of funds of the Managing Members or
their Affiliates. No interest shall be paid by the Company
on the contributions to the capital of the Company by the
Members.
4.7 PURCHASE OF LIMITED LIABILITY COMPANY UNITS BY
MANAGING MEMBERS. The Managing Members and their Affiliates
may subscribe for and acquire Units for their own account;
provided, however, that any Units acquired by the Managing
Members or their Affiliates will be acquired for investment
and not with a view to the distribution thereof and that the
aggregate amount of Units so purchased by the Managing
Members will not exceed five percent (5%) of the Units
offered. With respect to such Units, the Managing Members
and their Affiliates shall have all the rights afforded to
Limited Members under this agreement, except as may be
expressly provided in this agreement.
4.8 NONRECOURSE LOANS. A creditor who makes a
nonrecourse loan to the Company will not have or acquire, at
any time as a result of making the loan, any direct or
indirect interest in the profits, capital or property of the
Company other than as a secured creditor.
4.9 WORKING CAPITAL RESERVE. The Managing Members
shall use their best efforts to maintain a working capital
reserve of one percent (1%) of the aggregate Adjusted
Capital Contributions and to restore such reserve if
depleted.
4.10 DISTRIBUTION REINVESTMENT PLAN.
(a) A Limited Member may elect to participate in a
program for the reinvestment of his or her distributions
of Net Cash Flow (the "Distribution Reinvestment Plan")
and have his or her distributions of Net Cash Flow from
operations reinvested in Units of the Company. Limited
Members participating in the Distribution Reinvestment
Plan may purchase fractional Units and there shall be no
minimum purchase amount with respect to such
participants. Each Limited Member electing to
participate in the Distribution Reinvestment Plan shall
receive, at the time of each distribution of Net Cash
Flow, a notice advising such Limited Member of the
number of additional Units purchased with such
distribution and advising such Limited Member of his or
her ability to change his or her election to participate
in the Distribution Reinvestment Plan.
(b) If a Limited Member withdraws from the
Distribution Reinvestment Plan, such withdrawal shall be
effective only with respect to distributions made more
than 30 days following receipt by the Company of written
notice of such withdrawal. In the event of a transfer
by a Limited Member of Units, such transfer shall
terminate the Limited Member's participation in the plan
as of the first day of the quarter in which the transfer
is effective.
(c) Distributions may be reinvested only if (i) the
sale of Units continues to be registered or qualified
for sale under federal and applicable state securities
laws; (ii) each continuing Participant has received a
current prospectus relating to the Company, including
any supplements thereto, and executed a confirmation
within one year of such reinvestment indicating such
Participant's intention to purchase units in the Company
through the Plan and confirming that the Participant
continues to satisfy the investor suitability
requirements; (iii) there has been no distribution of
Net Proceeds of Sale or Refinancing. If (A) any of the
foregoing conditions are not satisfied at the time of
any distribution, or (B) no interests are available to
be purchased, such distributions shall be paid in cash.
(d) Each Limited Member electing to participate in
the Distribution Reinvestment Plan hereby agrees that
his or her investment in this Company constitute his or
her agreement to be a Limited Member of the Company and
to be bound by the terms and conditions of this
agreement and, if at any time he or she fails to meet
applicable investor suitability guidelines or cannot
make the other investor representations required or set
forth in the then current Company agreement prospectus
or subscription agreement, he or she will promptly
notify the Managing Members in writing.
(e) The Company shall pay a commission in connection
with any reinvestment pursuant to the plan to any broker-
dealer designated by the Participant in the plan. If no
broker-dealer is designated or the Limited Member has
advised the Company that he or she desires that such
commissions not be paid, or if the designated broker-
dealer has not signed a dealer agreement with respect to
the Company, or if the broker-dealer is no longer
qualified under applicable law to engage in the
solicitation of the sale of such Company interests, then
no commission shall be paid and all Limited Members in
the Company shall be credited with a pro rata portion of
the commission not so paid. No fees shall be paid to
the Company or the Managing Members at the time of any
such reinvestment, but the Managing Members of the
Company may be reimbursed for the Cost incurred in
making such reinvestment, in accordance with the
provisions of this agreement.
(f) The Managing Members may, at their option, elect
to terminate the Distribution Reinvestment Plan at any
time without notice to Limited Members.
V. ALLOCATION OF PROFITS, GAINS AND LOSSES; DISTRIBUTIONS
TO MEMBERS
The Members agree that the income, profits, gains and
losses of the Company shall be allocated and that cash
distributions of the Company shall be made as follows:
5.1 ALLOCATION OF INCOME, PROFITS, GAINS AND LOSSES.
For income tax purposes, income, profits, gains and losses
of the Company for each fiscal year, other than any gain or
loss realized upon the sale, exchange or other disposition
of any Property, using such methods of accounting for
depreciation and other items as the Managing Member
determines to use for federal income tax purposes, shall be
allocated as of the end of each fiscal year to each Member
based on his or her varying interest in the Company during
such fiscal year. The Company shall determine, in the
discretion of the Managing Member and as recommended by the
Company auditors, whether to prorate items of income and
deduction according to the portion of the year for which a
Member was a member of the Company or whether to close the
books on an interim basis and divide such fiscal year into
segments. Subject to Section 5.6, for income tax purposes,
income, profits, gains and losses, other than any gain or
loss realized upon the sale, exchange or other disposition
of any Property, shall be allocated as follows:
(a) Net loss shall be allocated 99% to the Limited
Members, .6% to the Managing Member and .4% to the
Special Managing Member; and
(b) Net income, profits and gains shall be allocated
first in the ratio in which, and to the extent, Net Cash
Flow is distributed to the Members for such year, and
any additional income, profits and gains for such year
will be allocated in the same ratio as the last dollar
of Net Cash Flow is distributed.
5.2 DISTRIBUTIONS OF NET CASH FLOW. Net Cash Flow
from operations, if any, with respect to a fiscal year will
first be distributed 97% to the Limited Members and 3% to
the Managing Members. Any amounts distributed to the
Limited Members in accordance with this Section 5.2 shall be
allocated among the Limited Members pro rata based on the
number of Units held by each Limited Member and the number
of days such Units were held during such fiscal year.
5.3 ALLOCATION OF GAIN OR LOSS UPON SALE, EXCHANGE OR
OTHER DISPOSITION OF A PROPERTY.
(a) Subject to Section 5.6, for income tax purposes,
the gain realized upon the sale, exchange or other
disposition of any Property shall be allocated as
follows:
(i) First, to and among the Members in an
amount equal to the negative balances in their
respective capital accounts (pro rata based on the
respective amounts of such negative balances).
(ii) Next, 99% to the Limited Members and
1% to the Managing Members until the balance in each
Limited Member's capital account equals the sum of
such Limited Member's Adjusted Capital Contribution
plus an amount equal to a 7% per annum return on such
Limited Member's Adjusted Capital Contribution,
cumulative but not compounded, to the extent not
previously distributed pursuant to Section 5.2 and
Section 5.4(a).
(iii) The balance of any remaining gain
will then be allocated 90% to the Limited Members and
10% to the Managing Members.
(b) Subject to Section 5.6, any loss on the sale,
exchange or other disposition of any Property will be
allocated 98% to the Limited Members and 2% to the
Managing Members.
5.4 DISTRIBUTION OF NET PROCEEDS OF SALE. Upon
financing, refinancing, sale or other disposition of any of
the Properties, Net Proceeds of Sale may be reinvested in
additional properties; provided, however, that sufficient
cash is distributed to the Limited Members to pay state and
federal income taxes (assuming Limited Members are taxable
at a marginal rate of 7% above the federal capital gains
rate applicable to individuals) created as a result of such
transaction. Except for distributions upon liquidation of
the Company (which are governed by Section 12.3 of this
agreement), Net Proceeds of Sale that are not reinvested in
additional properties will be distributed as follows:
(a) First, 99% to the Limited Members and 1% to the
Managing Members until the Limited Members have received
an amount from Net Proceeds of Sale equal to the sum of
(i) an amount equal to a 7% per annum return on their
Adjusted Capital Contributions, cumulative but not
compounded, to the extent such 7% return has not been
previously distributed to them pursuant to Section 5.2
and this Section 5.4(a), plus (ii) their Adjusted
Capital Contributions.
(b) Any remaining balance will be distributed 90% to
the Limited Members and 10% to the Managing Members.
In no event will the Managing Members receive more than 10%
of Net Proceeds of Sale.
5.5 CUMULATIVE RETURN. The Company shall pay a
cumulative, but not compounded, 7% per annum return on
Adjusted Capital Contributions before applying Net Proceeds
of Sale to a reduction of Adjusted Capital Contributions.
The cumulative (but not compounded) return on Adjusted
Capital Contributions with respect to each Unit shall
commence on the first day of the calendar quarter following
the date on which such Unit is initially held by a Limited
Member.
5.6 REGULATORY ALLOCATIONS. The following Regulatory
Allocations shall be made in the following order:
(a) MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Section 1.704-2(f) of the Treasury
Regulations, notwithstanding any other provision of
these Regulatory Allocations, if there is a net decrease
in Company minimum gain during any Company fiscal year,
each Member shall be specially allocated items of
Company income and gain for such year (and, if
necessary, subsequent years) in an amount equal to that
Member's share of the net decrease in Company minimum
gain (within the meaning of Treas. Reg. 1.704-2(b)(2)
and 1.704-2(d)) determined in accordance with Treas.
Reg. 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant
thereto. The items to be so allocated shall be
determined in accordance with Treas. Reg. 1.704-
2(f)(6) and 1.704-2(j)(2). This paragraph (a) is
intended to comply with the minimum gain chargeback
requirement in Treas. Reg. 1.704-2(f) and shall be
interpreted consistently therewith.
(b) MEMBER MINIMUM GAIN CHARGEBACK. Except as
otherwise provided in Treas. Reg. 1.704-2(i)(4),
notwithstanding any other provision of these Regulatory
Allocations, if there is a net decrease in Member
nonrecourse debt minimum gain, as defined in Treas. Reg.
1.704-2(i)(2) and determined pursuant to Treas. Reg.
1.704-2(i)(3), attributable to a Member nonrecourse
debt, as defined in Treas. Reg. 1.704-2(b)(4), during
any Company fiscal year, each Member who has a share of
the Member nonrecourse debt minimum gain attributable to
such Member nonrecourse debt, determined in accordance
with Treas. Reg. 1.704-2(i)(5), shall be specially
allocated items of Company income and gain for such year
(and if necessary, subsequent years) in an amount equal
to such Member's share of the net decrease in Member
nonrecourse debt minimum gain attributable to such
Member nonrecourse debt, determined in accordance with
Treas. Reg. 1.704-2(i)(4). Allocations pursuant to
the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Treas.
Regulations 1.704-2(i)(4) and 1.704-2(j)(2). This
paragraph (b) is intended to comply with the minimum
gain chargeback requirement in Treas. Reg. 1.704-
2(i)(4) and shall be interpreted consistently therewith.
(c) QUALIFIED INCOME OFFSET. If a Member
unexpectedly receives an adjustment, allocation or
distribution described in Treas. Reg. s 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), and such unexpected
adjustment, allocation or distribution puts such
Member's capital account into a deficit balance or
increases such deficit balance determined after such
account is credited by any amounts which the Member is
obligated to restore or is deemed to be obligated to
restore pursuant to the penultimate sentence of Treas.
Reg. 1.704-2(g)(1) and 1.704-2(i)(5) and debited by
the items described in Treas. Reg. 1.704-
1(b)(2)(ii)(d)(4), (5) and (6) and for all other
allocations tentatively made pursuant to these
Regulatory Allocations as if this paragraph (c) were not
in this agreement, such Member shall be allocated items
of Company income and gain in an amount and manner
sufficient to eliminate such deficit or increase as
quickly as possible. It is intended that this paragraph
(c) shall meet the requirement that this agreement
contain a "qualified income offset" as defined in Treas.
Reg. 1.704-1(b)(2)(ii)(d) and this Section shall be
interpreted and applied consistently therewith.
(d) GROSS INCOME ALLOCATION. In the event any Member
has a deficit capital account at the end of any fiscal year
which is in excess of the sum of (i) the amount such Member
is obligated to restore pursuant to any provision of this
agreement, and (ii) the amount such Member is deemed to be
obligated to restore pursuant to the penultimate sentences
of Treas. Reg. 1.704-2(g)(1) and 1.704-2(i)(5), each such
Member shall be specially allocated items of Company income
and gain in the amount of such excess as quickly as possible,
provided that an allocation pursuant to this paragraph (d)
shall be made only if and to the extent that such Member
would have a deficit capital account in excess of such sum
after all other allocations provided for in these Regulatory
Allocations have been made as if paragraph (c) and this
paragraph (d) were not in the Agreement.
(e) NONRECOURSE DEDUCTIONS. Nonrecourse deductions,
within the meaning of Treas. Reg. 1.704-2(b)(1), for any
fiscal year or other period shall be specially allocated to
the Members in proportion to their Units.
(f) MEMBER NONRECOURSE DEDUCTIONS. Any Member
nonrecourse deductions, within the meaning of Treas.
Reg. 1.704-2(i)(1) and 1.704-2(i)(2), for any fiscal
year or other period shall be specially allocated to the
Member who bears the economic risk of loss with respect
to the Member nonrecourse debt to which such Member
nonrecourse deductions are attributable in accordance
with Treas. Regulations Section 1.704-2(i).
(g) SECTION 754 ADJUSTMENT. To the extent an
adjustment to the adjusted tax basis of any Company
asset pursuant to Code Sections 732, 734(b) or 743(b) is
required, pursuant to Treas. Reg. 1.704-
1(b)(2)(iv)(m)(2) or (4), to be taken into account in
determining capital accounts, the amount of such
adjustment to the capital accounts shall be treated as
an item of gain (if the adjustment increases the basis
of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specially
allocated to the Members in a manner consistent with the
manner in which their capital accounts are required to
be adjusted pursuant to such Sections of the Treasury
Regulations.
The Regulatory Allocations are intended to comply with
certain requirements of the Treasury Regulations. It is the
intent of the Members that to the extent possible, all
Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other
items of Company income, gain, loss, or deduction pursuant
to this paragraph. Therefore, notwithstanding any other
provision of these Regulatory Allocations (other than the
Regulatory Allocations), the Managing Member shall make such
offsetting special allocations of Company income, gain,
loss, or deduction in whatever manner it determines
appropriate so that, after such offsetting allocations are
made, each Member's capital account balance is, to the
extent possible, equal to the capital account balance such
Member would have had if the Regulatory Allocations were not
part of the Agreement and all Company items were allocated
pursuant to Section 12.1 and Section 12.2. In exercising
its discretion under this paragraph, the Managing Member
shall take into account future Regulatory Allocations under
Sections paragraphs (a) and (b) that, although not yet made,
are likely to offset other Regulatory Allocations previously
made under paragraphs (e) and (f).
5.7 LIMITATION ON LOSS ALLOCATION. Notwithstanding
anything in Sections 5.1 above, losses allocated pursuant to
Section 5.1 shall not exceed the maximum amount of losses
that can be so allocated without causing a Member to have an
adjusted capital account deficit at the end of any fiscal
year. In the event one of the Members would have an
adjusted capital account deficit as a consequence of an
allocation of losses pursuant to Section 5.1, the limitation
set forth herein shall be applied on a Member by Member
basis so as to allocate the maximum permissible losses to
each Member under Section 1.704-1(b)(2)(ii)(d) of the
Regulations. All losses in excess of the foregoing
limitation shall be allocated to the Members in proportion
to their Units.
5.8 ALLOCATION AMONG MANAGING MEMBERS. Any
allocations or distributions to the Managing Members shall
be made in the following ratio: 60% to the Managing Member
and 40% to the Special Managing Member.
VI. RIGHTS, POWERS AND DUTIES OF MANAGING MEMBERS
The Members agree that the Managing Members, acting
through the Managing Member, shall have the following
rights, powers and, where provided, duties in connection
with the conduct of the business of the Company.
The Managing Member shall manage the affairs of the
Company in a prudent and business-like fashion and shall use
its best efforts to carry out the purposes and character of
the business of the Company. The Managing Member shall
devote such of its time as it deems necessary to the
management of the business of the Company and may enter into
agreements with an Affiliate to provide services for the
Company, provided that such services are furnished at Cost.
6.1 APPOINTMENT OF MANAGING MEMBER. Subject to the
limitations herein, and to the express rights afforded
Limited Members herein, including, without limitation, the
rights set forth in Articles VII and XI herein, the Special
Managing Member and the Limited Members delegate to the
Managing Member the sole and exclusive authority for all
aspects of the conduct, operation and management of the
business of the Company, including making any decision
regarding the sale, exchange, lease or other disposition of
the Properties; PROVIDED, HOWEVER, that the Managing Member
shall be required to obtain the prior consent of a majority
of the Limited Members, by interest, to the sale of all or
substantially all of the assets of the Company. In the
event the Managing Member proposes to cause the Company to
enter into a transaction requiring the consent of the
Special Managing Member, the Managing Member shall forthwith
notify the Special Managing Member of its intentions in
writing. The Special Managing Member shall be considered to
have consented to such proposal if he fails to notify the
Managing Member of his objection thereto within 20 days of
the date of notice of such proposal, such notification to
include a brief statement of each reason for the Special
Managing Member's opposition to such proposal. With the
exceptions stated above, the Managing Member shall have the
exclusive authority to make all decisions affecting the
Company and to exercise all rights and powers granted to the
Managing Members.
6.2 REIMBURSEMENT OF EXPENSES.
(a) Subject to the limitations set forth in Section
6.2(b), the Company shall reimburse the Managing Members
and their affiliates at their Cost: (i) for any
expenditures of their own funds for purposes of
organizing the Company and arranging for the offer and
sale of Units (including commissions); (ii) for all
Acquisition Expenses incurred by them, (iii) for the
services they provide in the sales effort of the
Properties, and (iv) for the expenses of controlling
persons and overhead expenses directly attributable to
the forgoing services or attributable to Administrative
Services (which overhead expenses shall be allocated
based upon the amount of time personnel actually spend
providing such services, or such other method of
allocation as is acceptable to the Company's independent
public accountant). In addition, the Company shall
reimburse the Managing Members and their affiliates at
their Cost for Administrative Expenses necessary for the
prudent operation of the Company, provided that any
expenses of controlling persons and overhead expenses
included in such Administrative Expense reimbursements
shall be subject to the limitations set forth in Section
6.2(b).
(b) The aggregate cumulative reimbursements pursuant
to Section 6.2(a)(i) to (iv) to the Managing Members and
their Affiliates, will not exceed, at the end of any
fiscal year, the sum of (i) the Front-End Fees of up to
20% of capital contributions, (ii) property management
fees of up to 1% of Net Cash Flow, except for a one time
initial leasing fee of 3% of the gross revenues on each
lease payable over the first five full years of the
original term of the lease, (iii) real estate commission
of 3% of Net Proceeds of Sale of properties on which the
Managing Members or Affiliates furnish a substantial
amount of sales efforts, and (iv) 10% of Net Cash Flow
less the Net Cash Flow actually distributed to the
Managing Members. The Managing Members will review the
reimbursements that they and their Affiliates receive at
the end of each fiscal year of the Company. If the
Managing Members and their Affiliates receive
reimbursement for items set forth in Section 6.2(a)(i)
to (iv) in excess of the limitations set forth in this
section, they will refund the difference to the Company
within 30 days of discovery of such excess. Such review
shall not take into account any of the fees that might
be paid in years after the fiscal year for which the
calculation is made.
(c) The Company's annual report to Limited Members
will contain information concerning reimbursements made
to the Managing Member and its Affiliates. Within the
scope of the annual audit, an independent certified
public accountant shall verify the allocation of costs
to the Company. The methods of verification shall be in
accordance with generally accepted auditing standards
and shall, accordingly, include such tests of the
accounting records and such other auditing procedures
that the Managing Member's independent certified public
accountants consider appropriate in the circumstances.
Such methods of verification shall at a minimum provide:
(i) a review of the time records of employees and
control persons, the costs of whose services were
reimbursed and (ii) a review of the specific nature of
the work performed by each such employee and control
person. The additional cost of such verification will
be itemized by such accountant on a program-for-program
basis, and the Managing Members will be reimbursed for
such additional cost only to the extent that the cost of
such verification, when added to all reimbursements to
the Managing Members for services rendered to the
Company, does not exceed the competitive price for such
services which would be charged by non-affiliated
persons rendering similar services in the same or
comparable geographic location.
(d) The Managing Members and their Affiliates will
not be reimbursed or otherwise paid for any services
except as set forth in Section 6.2(a).
6.3 OTHER ACTIVITIES OF MANAGING MEMBERS. The
Managing Members, during the term of this Company, may
engage in and possess an interest for their own account in
other business ventures of every nature and description,
independently or with others, including, but not limited to,
the ownership, financing, leasing, operation, management,
syndication, brokerage, investment in and development of
real estate; and neither the Company nor any Member, by
virtue of this agreement, shall have any right in and to
said independent ventures or any income or profits derived
therefrom. Nothing in this section shall be deemed to
diminish the Managing Member's overriding fiduciary
obligation to the Company, or to constitute a waiver of any
right or remedy the Company or Limited Members may have in
the event of a breach by a Managing Member of such
obligation.
6.4 INDEMNIFICATION AND LIABILITY OF MANAGING
MEMBERS.
(a) The Company shall indemnify each of the Managing
Members and their Affiliates (other than an Affiliate
that is acting in the capacity of a Broker-Dealer
selling Units) against any claim or liability incurred
or imposed upon such Managing Member or such Affiliates
provided such Managing Member or Affiliate was acting on
behalf of or performing services for the Company and the
Managing Member has determined, in good faith, that the
course of conduct which caused the loss or liability was
in the best interests of the Company, and such conduct
of the Managing Member or Affiliate did not constitute
misconduct or negligence. The Managing Members or
Affiliates shall not be liable to the Company or any
Member by reason of any act or omission of such Managing
Member or Affiliate provided the Managing Member has
determined, in good faith, that the course of conduct
which caused the loss or liability was in the best
interests of the Company, and such conduct of the
Managing Member or Affiliate did not constitute
misconduct or negligence. Solely for purposes of this
Section 6.4, but for all such purposes, the term
"Affiliate" shall mean only those Affiliates, as defined
in Section 2.5, that furnish services to the Company
within the scope of the Managing Members' authority.
(b) No Managing Member or Affiliate or any Broker-
Dealer selling Units shall be indemnified for any
liability imposed by judgment, or costs associated
therewith, including attorneys' fees, arising from or
out of a violation of state or federal securities laws.
The Managing Members and such Affiliates, and such
Broker-Dealers, shall be indemnified for settlements and
related expenses of lawsuits alleging securities law
violations, and for expenses incurred in successfully
defending such lawsuits, provided that the party seeking
indemnification places before the court the position of
the Massachusetts Securities Division, of the Missouri
Securities Division, of the Pennsylvania Securities
Commission, of the administrator of other relevant state
securities laws and of the Securities and Exchange
Commission on indemnification for securities law
violations, and the court thereafter either:
(i) approves the settlement and finds that
indemnification of the settlement and related costs
should be made, or
(ii) approves indemnification of litigation
costs if a successful defense is made.
Any indemnification pursuant to this Section 6.4, or
otherwise, shall be recoverable only from the assets of
the Company and not from any of the Limited Members. No
Managing Member or Affiliate shall be entitled to
advances for legal expenses and other costs incurred as
a result of legal action initiated against the Managing
Members or Affiliate unless (1) the action relates to
the performance of the duties of such Managing Member or
Affiliate on behalf of the Company, (2) the action is
not initiated by a Limited Member, and (iii) the
Managing Member or Affiliate undertakes to repay such
advances in cases in which it is determined they are not
entitled to indemnification.
(c) The Managing Member shall have fiduciary
responsibility for the safekeeping and use of all funds
and assets of the Company, whether or not in its
immediate possession or control, and the Managing Member
shall not employ, or permit another to employ, such
funds or assets in any manner except for the exclusive
benefit of the Company. The Managing Members and the
Company may not permit the Limited Members to contract
away the fiduciary duty owed to the Limited Members by
the Managing Members under the common law.
6.5 PROHIBITED TRANSACTIONS. Notwithstanding
anything to the contrary contained herein, the Managing
Members and Affiliates of the Managing Members (i) may not
receive interest and other financing charges or fees on
loans made to the Company in excess of the amounts that
would otherwise be charged by unaffiliated lending
institutions on comparable loans for the same purpose and in
the same locality of the Property if the loan is made in
connection with a particular Property, (ii) may not require
a prepayment charge or penalty on any loan from the Managing
Members to the Company, (iii) may not provide financing to
the Company that is payable over a period exceeding 48
months or for which more than 50% of the principal is due in
more than 24 months, (iv) may not grant to themselves an
exclusive listing for the sale of any Property, (v) may not
directly or indirectly pay or award any commissions or other
compensation to any person engaged by a potential investor
for investment advice as an inducement to such adviser to
advise the purchaser of the Units, provided, however, that
this provision shall not prohibit the normal sales
commissions payable to a registered broker-dealer or other
properly licensed person for selling the Units, (vi) may not
commingle Company funds with the funds of any other person,
(vii) may not sell property to, purchase property from, or
lease property to or from the Company, provided that the
Company may purchase real property from the Managing Members
or their Affiliates (but not from affiliated programs unless
the interest purchased by the Company from the affiliated
program is equal to or smaller than the interest retained by
the affiliated program and the joint venture so created
complies with section 6.6 of this agreement) if the Managing
Members or their Affiliates purchased the property in their
own name and temporarily held title thereto for a period not
in excess of twelve months for the purpose of facilitating
the acquisition of the property, the borrowing of money, the
obtaining of financing for the Company or any other purpose
related to the business of the Company, and the property is
purchased by the Company for a price no greater than the
price paid by the Managing Members or their Affiliates plus
Acquisition Expenses in accordance with the provisions of
this agreement, and any profit or loss on such property
during such period is paid to or charged against the
Company, and there is no other benefit arising out of such
transaction to the Managing Members or their Affiliates
apart from compensation otherwise permitted by this
agreement (the prohibitions of this Section 6.5(vii) shall
also apply to any program in which the Managing Members have
an interest), (viii) may not receive a commission or fee in
connection with the reinvestment or distribution of the
proceeds of the resale, exchange or refinancing of the
Properties (ix) may not cause the Company to incur
indebtedness directly or indirectly related to the purchase
of properties, from any source, aggregating in excess of 60%
of the purchase price of all Company Properties, (x) may not
cause the Company to invest in other limited partnerships or
limited liability companies, provided that joint venture
arrangements set forth in Section 6.6 shall not be
prohibited, (xi) may not cause the Company to acquire
property in exchange for Units, (xii) may not cause the
Company to pay a fee to the Managing Members or their
Affiliates for insurance coverage or brokerage services,
(xiii) may not cause the Company to make loans or
investments in real property mortgages other than in
connection with the purchase or sale of the Company's
properties, (xiv) may not cause the Company to operate in a
manner as to be classified as an "investment company" for
purposes of the Investment Company Act of 1940, (xv) may not
cause the Company to underwrite or invest in the securities
of other issuers, except as specifically discussed in
Section 6.6 and in the Prospectus, (xvi) may not cause the
Company to incur the cost of that portion of liability
insurance that insures the Managing Members or their
Affiliates for any liability as to which such Managing
Members or their Affiliates are prohibited from being
indemnified under Section 6.4., (xvii) may not receive a
real estate commission in connection with the purchase, sale
or financing of a Property and will not permit aggregate
compensation to others in connection with the sale of any
Property to exceed a Competitive Real Estate Commission,
(xviii) may not receive an Acquisition Fee (including,
without limitation, Development Fee or Construction Fee) or
permit such Acquisition Fees, together with Acquisition
Expenses paid to any party, by the Company to exceed 18% of
the total capital contributions of Limited Members pursuant
to Section 4.2 of this agreement, (xix) may not cause the
Company to incur Front-End Fees to the extent that such fees
would cause the Company's Investment in Properties to be
less than 80% of capital contributions, (xx) may not receive
any rebate or give-up nor participate in any reciprocal
business arrangement in circumvention of the NASAA
Guidelines, nor shall any Managing Member participate in any
reciprocal business arrangement that would circumvent the
restrictions of such NASAA Guidelines against dealing with
affiliates or promoters, and (xxi) may not cause the Company
to make any loans or advances at any time to the Managing
Members or their Affiliates.
6.6 INVESTMENTS IN OTHER PROGRAMS. The Company may
purchase limited partnership or limited liability company
interests of another program. The Company may, however,
invest (a) in general partnerships or ventures that own and
operate a particular property provided the Company, either
alone or together with any publicly-registered Affiliate,
acquires a controlling interest in such other ventures or
general partnerships, and such general partnerships or joint
venture does not result in duplicate fees, (b) in joint
venture arrangements with another publicly-registered
program sponsored by the Managing Members or their
Affiliates, or (c) in joint venture arrangements with the
Managing Members or their Affiliates other than another
publicly registered program. For purposes of Section
6.6(a), "controlling interest" means an equity interest
possessing the power to direct or cause the direction of the
management and policies of the Company or joint venture,
including the authority to:
(i) review all contracts entered into by the general
Company or joint venture that will have a material
effect on its business or property;
(ii) cause a sale or refinancing of the property or
the Company's interest therein subject in certain cases
where required by the Company or joint venture
agreement, to limits as to time, minimum amounts and/or
a right of first refusal by the joint venture Member or
consent of the joint venture Member;
(iii) approve budgets and major capital expenditures,
subject to a stated minimum amount;
(iv) veto any sale or refinancing of the property,
or, alternatively, to receive a specified preference on
sale or refinancing proceeds; and,
(v) exercise a right of first refusal on any desired
sale or refinancing by the joint venture Member of its
interest in the property except for transfer to an
Affiliate of the joint venture Member.
For purposes of 6.6(b), the Company shall be permitted
to invest in joint venture arrangements with another
publicly-registered program or programs sponsored by the
Managing Members or their Affiliates for the purpose of
acquiring a property from unaffiliated parties only if all
the following conditions are met:
(a) The two programs have substantially identical
investment objectives;
(b) There are no duplicate property management or
other fees;
(c) The Managing Members' compensation is
substantially identical in each program;
(d) In the event of a proposed sale of property held
in the joint venture by the other joint venture member,
the Company will have a right of first refusal to
purchase the other party's interest; and
(e) The investment by each of the programs in the
joint venture must be on substantially the same terms
and conditions.
For purposes of 6.6(c), the Company shall be permitted to
invest in joint venture arrangements with the Managing
Members or their Affiliates other than a publicly-registered
program for the purpose of acquiring a property from
unaffiliated parties only if all the following conditions
are met:
(a) The investment is necessary to relieve the
Managing Member from any commitment to purchase the
property entered into in compliance with Section
6.5(vii) prior to the closing of the offering period of
the Company;
(b) There are no duplicate property management or
other fees;
(c) The investment by each of the programs in the
joint venture must be on substantially the same terms
and conditions;
(d) In the event of a proposed sale of property held
in the joint venture by the other joint venture member,
the Company will have a right of first refusal to
purchase the other party's interest.
6.7 UNIMPROVED OR NON-INCOME PRODUCING
PROPERTY/PROPERTY UNDER CONSTRUCTION.
(a) The Company may not acquire unimproved or non-
income producing property except in amounts and upon
terms which can be financed by the Limited Members'
capital contributions or from funds provided from
operations. In no event shall the Company acquire
unimproved or non-income producing property exceeding
10% of the total capital contributions of Limited
Members pursuant to Section 4.2 of this agreement. For
purposes of this Section 6.7, properties that are
expected to produce income within two years shall not be
considered unimproved or non-income producing
properties. Neither the Managing Members nor any
Affiliate will develop, construct or provide Major
Repairs or Rehabilitation for properties, or render
services in connection with such activities; provided
that nothing in this section shall prohibit an
unaffiliated third party from engaging in such
activities on behalf of the Company.
(b) The Company may not acquire property which
is under construction unless completion is guaranteed at
the purchase price contracted for by (i) a completion
bond, (ii) a written guarantee of completion by a person
who, or entity that, has provided financial statements
demonstrating sufficient net worth and collateral, or
(iii) retention of a reasonable portion of the purchase
price as an offset in the event the seller does not
perform.
6.8 INVESTMENTS IN JUNIOR TRUST DEEDS. The Company
may not invest in junior trust deeds and other similar
obligations except to the extent such investments arise upon
sale of Properties. In no event shall such investments
exceed 10% of the gross assets of the Company.
6.9 REQUIREMENT FOR REAL PROPERTY APPRAISAL. All
Property acquisitions by the Company will be supported by an
appraisal prepared by a competent, independent appraiser.
The appraisal will be maintained in the Company's records
for at least five years and will be available for inspection
and duplication by any Limited Member.
6.10 BALLOON PAYMENTS.
(a) Any Indebtedness of the Company (which shall, in
any event, be subject to the limitations contained in
Section 6.5(ix) of this agreement) which is not fully
amortized in equal payments over a period of not more
than 30 years, shall have a maturity date (due date)
which is not earlier than ten years after the date of
purchase of the underlying property or two years after
the anticipated holding period of the property (provided
such holding period is at least seven years); provided,
however, that this Section 6.10(a) shall not limit the
ability of the Company to finance Properties using
adjustable rate mortgages.
(b) The Company may not incur indebtedness of any
kind, including all-inclusive and wrap-around loans and
interest-only loans, in connection with the purchase of
a Property, but may assume indebtedness on operating
properties that complies with the provisions of this
section 6.10 and section 6.5(ix).
(c) The provisions of this Section 6.10 shall not
apply (but the provisions of section 6.5(ix) shall
apply) to indebtedness representing, in the aggregate,
25% or less of the total purchase price of all
Properties acquired, or to interim financing, including
construction financing, with a full take-out commitment.
6.11 SELLING COMMISSIONS.
(a) Except as otherwise provided in this Section
6.11, the Company shall pay any and all Selling
Commissions and expense allowances in the amount of $100
per Unit sold in accordance with the Dealer Manager
Agreement with AEI Securities Incorporated. The Company
shall also reimburse the Dealer Manager for the bona
fide due diligence expenses of dealers selling Units to
the extent the aggregate of such reimbursements do not
exceed $5.00 per Unit sold.
(b) A registered principal or representative of AEI
Securities Incorporated or any other broker-dealer may
purchase Units net of commissions, at a per Unit
purchase price of $920.
6.12 ROLL-UP TRANSACTIONS
(a) The Company shall not participate in any Roll-Up
(i) which would result in Limited Members having
democracy rights in the Roll-Up Entity which are less
than those provided in this Company Agreement (provided
that, if the form of the Roll-Up entity is other than a
Company, the democracy rights shall conform to those
provided in this Company Agreement to the greatest
extent possible); (ii) which includes provisions that
would act to materially impede or frustrate the
accumulation of shares of any purchaser of the
securities of the Roll-Up entity (except to the extent
required to preserve the tax status of the Roll-Up
Entity); (iii) which would limit the rights of Limited
Members to exercise voting rights in the securities of
the Roll-Up entity on the basis of the number of equity
interests held by such Limited Members; (iv) which would
result in a Roll-Up Entity which would have rights to
access of records less than those of the Company; or (v)
which provides for the costs of the Roll-Up to be borne
by the Company and which is not approved by Limited
Members.
(b) No Roll-Up shall be conducted unless an
appraisal of all material Company assets has been
obtained from a competent person or entity that has no
material current or prior business or personal
relationship with the Managing Members or their
Affiliates and who is engaged to a substantial extent in
the business of rendering opinions regarding the value
of assets of the type held by the Company and is
qualified to perform such appraisal. The appraisal
shall be based on an evaluation of all relevant
information, assuming an orderly liquidation of the
Company's assets over a 12-month period, and shall
indicate the value of the Company's material assets as
of a date immediately preceding announcement of the
proposed Roll-Up. The appraiser expert performing the
appraisal shall be engaged for the benefit of the
Company and its Members. A summary of the appraisal
shall be included in a report to the Limited Members in
connection with the Proposed Roll-Up and if such report
is a part of a prospectus used to offer securities in
the Roll-Up Entity, the appraisal shall be filed with
the SEC and the states in connection with the
registration statement for the offering.
(c) Any Limited Member who votes against a Roll-Up
that is completed, shall be given the option to (i)
accept the securities in the Roll-Up Entity in the Roll-
Up, or (ii) either one of (x) remaining a Limited Member
in the Company or (y) receiving cash in the amount of
the appraised value of the assets of the Company.
VII. PROVISIONS APPLICABLE TO LIMITED MEMBERS
The following provisions shall apply to the Limited
Members, and the Limited Members hereby agree thereto.
7.1 LIABILITY. The Limited Members shall be liable
with respect to the Company only to the extent of the amount
of the contribution to capital made by such Limited Members
as provided in Section 4.2. The Units are nonassessable.
7.2 NO PARTICIPATION IN MANAGEMENT. No Limited
Member shall take any part or participate in the conduct of,
or have any control over, the business of the Company, and
no Limited Member shall have any right or authority to act
for or to bind the Company; provided, however, that the
Company may not sell all or substantially all of the assets
of the Company without the prior written consent of a
majority of the Limited Members, by interest.
7.3 NO WITHDRAWAL OR DISSOLUTION. No Limited Member
shall at any time withdraw from the Company except as
provided in this agreement. No Limited Member shall have
the right to have the Company dissolved or to have his or
her contribution to the capital of the Company returned
except as provided in this agreement. The death or
bankruptcy of a Limited Member shall not dissolve or
terminate the Company.
7.4 CONSENT. To the fullest extent permitted by law,
each of the Limited Members hereby consents to the exercise
by the Managing Member of all the rights and powers
conferred on the Managing Member by this agreement.
7.5 POWER OF ATTORNEY. Each of the Limited Members
and the Special Managing Member hereby irrevocably
constitute and appoint the Managing Member his or her or its
true and lawful attorney, in his or her or its name, place
and stead to make, swear to, execute, acknowledge and file:
(a) this Operating Agreement and any and all
certificates of formation of the Company, and any
amendments thereto that may be required by the Limited
Liability Company Act, including amendments required for
the reflection of return of capital to any Member or the
contribution of any additional capital, and the
continuation of the business of the Company by a
substitute and/or additional Managing Member;
(b) any certificate or other instrument and any
amendments thereto that may be required to be filed by
the Company in order to accomplish the business and the
purposes of the Company, including any business
certificate, fictitious name certificate or assumed name
certificate;
(c) any cancellation of such certificates of
formation, this Operating Agreement and any and all
other documents and instruments that may be required
upon the dissolution and liquidation of the Company;
(d) new certificates of formation and any and all
documents and instruments that may be required to effect
a continuation of the business of the Company as
provided in this agreement; and
(e) any amended operating agreement or certificate of
formation that has been duly adopted hereunder or
authorized hereby.
It is expressly intended that the foregoing power of
attorney is (1) coupled with an interest and shall survive
the bankruptcy, death, incompetence or dissolution of any
person hereby giving such power and (2) does not affect the
Limited Members' rights to approve or disapprove any
amendments to this agreement or other matters as provided
elsewhere herein.
If a Limited Member assigns his or her interest in the
Company, as provided in Article IX, the foregoing power of
attorney shall survive the delivery of the instruments
effecting such assignment for the purpose of enabling the
Managing Member to sign, swear to, execute and acknowledge
and file any and all amendments to the certificates of
formation of the Company and other instruments and documents
necessary to effectuate the substitution of the assignee as
a Limited Member.
7.6 LIMITATION OF ACQUISITION OF EQUITY SECURITIES OF
THE MANAGING MEMBERS. The Limited Members (excluding the
Managing Members or their Affiliates who purchase Limited
Liability Company Units) shall not own, directly or
indirectly, individually or in the aggregate, more than 20%
of the outstanding equity securities of either of any
Managing Member or its Affiliates.
The phrase "own, directly or indirectly" used herein
shall have the meaning set forth in Section 318 of the
Internal Revenue Code of 1954, as currently in effect or as
hereafter amended. As of the date hereof, such term
includes ownership by a Limited Member, his or her spouse,
children, grandchildren, parents, any Company of which the
Limited Member or any of the foregoing is a member, any
estate or trust of which the Limited Member or any of the
foregoing is the beneficiary and any corporation at least
50% owned in the aggregate by said Limited Member or any of
the foregoing.
7.7 RIGHT TO PRESENT UNITS FOR PURCHASE.
(a) Beginning 36 months from the date of the
Prospectus, each Limited Member shall have the right,
subject to the provisions of this Section 7.7, to
present his or her Units to the Company for purchase by
submitting notice on a form supplied by the Company to
the Managing Member specifying the number of Units he or
she wishes repurchased. Such notice must be postmarked
after January 1 but before January 31, and after July 1
but before July 31 of each year. On March 31 and
September 30 of each year, and subject to the
limitations set forth below, the Managing Member shall
cause the Company to purchase the Units of Limited
Members who have tendered their Units to the Company.
The purchase price shall be equal to eighty percent
(80%) of the Net Value of the Company's assets divided
by the number of Units outstanding. The Managing
Members shall publish the repurchase price offered for
Units based on the Net Value of the Company's assets on
the first business day of January and July of each year.
The Company will not be obligated to purchase in any
year any number of Units such that such Units, when
aggregated with all other transfers of Units that have
occurred since the beginning of the same calendar year
(excluding Permitted Transfers) would exceed two percent
(2%) of the total number of Units outstanding on January
1 of such year. In the event requests for purchase of
Units received in any given year exceed the two percent
(2%) limitation, the Units to be purchased will be
determined based on the postmark date of the written
notice of Limited Members tendering Units. Any Units
tendered but not selected for purchase in any given year
will be considered for purchase in subsequent years only
if the Limited Member retenders his or her Units. In no
event shall the Company be obligated to purchase Units
if, in the sole discretion of the Managing Member, such
purchase would impair the capital or operation of the
Company nor shall the Company purchase any Units in
violation of applicable legal requirements.
(b) For purposes of all calculations pursuant to
Article V of this agreement, any Net Cash Flow or Net
Proceeds of Sale used to repurchase Units or to repay
borrowings that were used to repurchase Units shall be
deemed distributed to the remaining Limited Members pro
rata based on the ratio of the number of Units owned to
all Units outstanding after such repurchase.
7.8 VOTING RIGHTS. To the extent permitted under the
Limited Liability Company Act, as amended, the Limited
Members may, by vote of a majority of the outstanding Units
(excluding Units held by the Managing Members for their own
accounts), and without the concurrence of the Managing
Members:
(1) amend this Operating Agreement in
accordance with the provisions of Article XI;
(2) remove the Managing Member and elect a
new Managing Member in accordance with Section
10.4 of this agreement;
(3) approve or disapprove the sale of all
or substantially all of the assets of the
Company;
(4) dissolve the Company in accordance with
Section 12.1(g).
VIII. BOOKS OF ACCOUNT; REPORTS AND FISCAL MATTERS
8.1 BOOKS; PLACE; ACCESS. The Managing Member shall
maintain accurate books of account and each and every
transaction shall be entered therein. The Company records
shall contain the names and addresses of all Members and
shall maintain, for a period of six years after completion
of the offering of Units, copies of all subscriptions and
other materials used to determine that the purchase of the
Units was suitable for each Limited Member. The books of
account and the records shall be kept at the office of the
Company in St. Paul, Minnesota, and any Member or his or her
legal counsel may inspect and copy the Company books and
records at any time during ordinary business hours. The
Managing Member shall have no obligation to deliver or mail
to Limited Members copies of certificates of limited Company
or amendments thereto.
8.2 METHOD. The books of account shall be kept in
accordance with generally accepted accounting principles.
8.3 FISCAL YEAR. The fiscal year of the Company
shall end on December 31 of each year.
8.4 ANNUAL REPORT. At the Company's expense, the
books of account shall be audited at the close of each
fiscal year by a firm of independent public accountants
selected by the Managing Member, and a copy of its report
shall be transmitted within 120 days after the close of such
fiscal year to the Members and to such state securities
commissioners as may be required by the rules and
regulations of the various states.
The annual report shall contain (a) a balance sheet as
of year end, a statement of operations for the year then
ended, a statement of Members' equity, and statement of cash
flows, all of which shall be audited with a report
containing an unqualified opinion expressed thereon, or an
opinion containing no material qualification of an
independent public accountant, (b) a report of the
activities of the Company during the period covered by the
report and (c) the amount of any fees or other
reimbursements to the Managing Members or any Affiliates of
the Managing Members during the fiscal year to which such
annual report relates, including information required by
Section 6.2. Such report shall set forth distributions to
Limited Members for the period covered thereby and shall
separately identify distributions from (i) cash flow from
operations during the period, (ii) cash flow from operations
during a prior period that had been held as reserves, (iii)
proceeds from the disposition of property and investments
and (iv) reserves from the gross proceeds of the offering
originally obtained from the Limited Members. The financial
information contained in the annual report will be prepared
on the GAAP basis. The Managing Member also shall make
available to each Limited Member, upon request, a copy of
any annual reports that the Company may be required to file
with the Securities and Exchange Commission within 90 days
after the close of the period to which such reports relate.
8.5 QUARTERLY REPORTS. During the life of the
Company, the Managing Member shall prepare and distribute to
all Members within 60 days after the end of each quarter and
to such state securities commissioners as may be required by
the rules and regulations of the various states, a quarterly
summary of Company financial results. Such quarterly
reports shall contain (a) a current condensed balance sheet,
which may be unaudited, (b) a condensed operating statement
for the quarter then ended, which may be unaudited, (c) a
condensed cash flow statement for the quarter then ended,
which may be unaudited, and (d) other pertinent information
regarding the Company and its activities during the quarter
covered by the report. Such quarterly reports shall also
contain a detailed statement setting forth the services
rendered, or to be rendered, by the Managing Members or
their Affiliates and the amount of the fees received. The
Managing Member also shall make available to each Limited
Member, upon request, a copy of any reports that the Company
may be required to file with the Securities and Exchange
Commission within 45 days after the close of the period to
which such reports relate.
8.6 SPECIAL REPORTS. The Managing Member shall have
prepared, as of the end of each quarter in which a Property
is acquired, a special report of real property acquisitions
within the quarter. Such special reports shall be
distributed to the Limited Members for each quarter in which
a Property is acquired until all proceeds available from the
offering of Units are invested or returned to the Limited
Members as provided in Section 4.5. Such special reports
shall describe the Properties acquired and shall include a
description of the geographic location and the market upon
which the Managing Member is relying. The special report
shall include all facts that reasonably appear to materially
influence the value of the Property, including, but not
limited to, the date and amount of the appraised value, the
purchase price and terms of the purchase, the amount of
proceeds in the Company that remain unexpended or
uncommitted and any Acquisition Expenses paid by the Company
to the Managing Members or their Affiliates in connection
with real property acquisitions within the quarter.
8.7 TAX RETURNS; TAX INFORMATION. Within 75 days
after the close of each fiscal year, all necessary tax
information shall be transmitted to all Members and to such
state securities commissioners as may be required by the
rules and regulations of the various states.
8.8 BANK ACCOUNTS. Except as otherwise described in
the Prospectus, the Managing Member shall select a bank
account or accounts for the funds of the Company, and all
funds of every kind and nature received by the Company shall
be deposited in such account or accounts. The Managing
Member shall designate from time to time the persons
authorized to withdraw funds from such accounts. The funds
of the Company will not be commingled with funds of any
other person or entity.
8.9 TAX ELECTIONS. In the event of a transfer of all
or part of the Company interest of any Member, the Company,
in the sole discretion of the Managing Member, may elect
pursuant to Section 754 of the Internal Revenue Code of 1986
(or any successor provisions) to adjust the basis of the
assets of the Company. The Managing Member shall be the
"tax matters Member" for the Company as that term is defined
in Section 6231 of the Internal Revenue Code of 1986, as
amended.
8.10 INVESTOR LIST. In addition to the other records
maintained by the Company, the Company shall maintain at all
times, in alphabetical order and on white paper with
printing in not less than 10 point type, a list of Limited
Members, including the names, addresses and business
telephone numbers of the Limited Members and the number of
Units held by each, which shall be updated at least
quarterly to reflect changes in the information contained
therein. The list of Limited Members shall be available for
inspection by any Limited Member or such Limited Member's
designated agent at the office of the Company upon request
of such Limited Member. In addition, a copy of the Limited
Member list shall be mailed to any Limited Member requesting
the same within ten (10) days of the receipt of a written
request. The Company may charge a reasonable fee to such
Limited Member to cover the costs of reproduction and
postage. The purposes for which such list may be requested
by the Limited Members shall include, without limitation,
matters relating to voting rights of the Limited Members and
the exercise of rights of the Limited Members under federal
proxy laws. If the Managing Member neglects or refuses to
exhibit, produce or mail a copy of the Limited Member list
as requested, the Managing Member shall be liable for the
costs, including attorneys' fees, incurred by the Limited
Member in compelling the production of the list and for the
actual damages suffered by the Limited Member by reason of
such refusal or neglect. It shall be a defense that the
actual purpose and reason for the request for inspection or
for a copy of the Limited Member list is to secure such list
or other information for the purpose of selling such list or
copies thereof, or of using the same for a commercial
purpose other than in the interest of the applicant as a
Limited Member relative to the affairs of the Company. The
Managing Member may require the Limited Member requesting
such list to represent that the list is not requested for a
commercial purpose unrelated to the Limited Member's
interest in the Company. For all such purposes, the
acquisition of additional Units shall be considered a
commercial purpose unrelated to the Limited Member's
interest in the Company. The Managing Member may also
require, as a condition to making such list available, (i)
that the list be requested under the signature of the
Limited Member of record rather than a person or entity
holding a power of attorney for such Limited Member; and
(ii) whenever the Managing Member has a reasonable belief
that such list will be used to solicit purchases of Units,
that the requesting Limited Member agree to provide
materials to the persons solicited, and to the Managing
Member for review and comment prior to use, generally
complying with the disclosure requirements of Section 14(d)
of the Securities Exchange Act of 1934 and Rule 14d-6
promulgated thereunder, including, without limitation, the
price at which the Fund last agreed to repurchase Units and
the price at which Units were last purchased in any
secondary trading service that is published. The remedies
set forth in this section 8.10 shall be in addition to, and
not by way of limitation of, remedies available to Limited
Members under federal law, or the laws of any state.
IX. ASSIGNMENT OF LIMITED MEMBER'S INTEREST
The Company interest of a Limited Member shall be
represented by a Certificate of Participation. The form and
content of the Certificate of Participation shall be
determined by the Managing Member. The Company interest of
a Limited Member may not be assigned, pledged, mortgaged,
sold or otherwise disposed of, and no Limited Member shall
have the right to substitute an assignee in his or her
place, except as provided in this Article IX.
9.1 LIMITED MEMBERS.
(a) Other than pursuant to a Permitted Transfer, no
Limited Member shall transfer or assign any part of his
or her interest in the Company, and no such transfer or
assignment shall be recognized by the Company but shall
be null and void, if such transfer or assignment, when
added to all other transfers or assignments made during
the same fiscal year, other than (A) Permitted
Transfers, (B) Qualified Matching Service Transfers, or
(C) transfers pursuant to the repurchase provisions of
section 7.7 of this agreement, would constitute
transfers of in excess of two percent (2%) of Company
interests outstanding. The Managing Member may request
such information from a transferring Limited Member as
is necessary to determine whether a transfer is a
Permitted Transfer or a Qualified Matching Service
Transfer. The Managing Member may refuse to affect any
transfer if the transferring Limited Member is unable,
or refuses, to demonstrate that the transfer is a
Permitted Transfer or Qualified Matching Service
Transfer or if the Managing Member is not able to
verify, to its satisfaction, that the transfer will
qualify for a safe harbor under Treasury Regulation
1.7704-1(e) or (g).
(b) Except as provided in Section 9.1(a), each
Limited Member may transfer or assign all or part of his
or her interest in the Company as provided in the
Limited Liability Company Act; provided, however, that
no transfer or assignment shall be effective until
written notice thereof is received by the Managing
Member and the Managing Member approves such transfer or
assignment. Such approval shall be granted unless the
Managing Member determines that the transfer will cause
a violation of the provisions of this agreement,
including the percentage limitations referred to in
Section 9.1(a) above. In any case that a transfer is
not permitted for any reason other than pursuant to the
limitations set forth in section 9.1(a), the decision to
prohibit the transfer shall be supported by an opinion
of counsel. All transfers or assignments of interests
in the Company occurring during any month shall be
deemed effective (i.e., the transferee shall become a
Limited Member of record) on the last day of the
calendar month in which written notice thereof is
received by the Managing Member.
(c) No assignee of all or part of the Company
interests of any Limited Member shall have the right to
become a substitute Limited Member unless (i) his or her
assignor has stated such intention in the instrument of
assignment, (ii) such assignee shall pay all expenses in
connection with such admission as a substitute Limited
Member, as described in Section 9.2 and (iii) such the
transfer to such assignee has been made in compliance
with Section 9.1(a).
(d) No purported sale, assignment or transfer by a
Limited Member of less than two and one-half Units (two
Units for transfers by Qualified Plans and Individual
Retirement Plans) will be permitted or recognized,
except by gift, inheritance, intra-family transfers,
family dissolutions, transfers to Affiliates or by
operation of law.
(e) If a Limited Member dies, his or her executor,
administrator or trustee, or if he or she is adjudged
incompetent or insane, his or her committee guardian or
conservator, or if he or she becomes bankrupt, the
receiver or trustee of his or her estate, shall have the
rights of a Limited Member for the purpose of settling
or managing his or her estate and such power as the
decedent or incompetent possessed to assign all or any
part of his or her Units and to join with the assignee
thereof in satisfying conditions precedent to such
assignee becoming a substitute Limited Member. The
death, dissolution or adjudication of incompetency or
bankruptcy of a Limited Member shall not dissolve the
Company.
(f) By executing and adopting this agreement, each
Limited Member hereby consents to the admission of
additional or substitute Limited Members by the Managing
Member and to any assignee of his or her Units becoming
a substitute Limited Member.
9.2 DOCUMENTS AND EXPENSES. As a condition to
admission as a substitute Limited Member, an assignee of all
or part of the Company interest of any Limited Member or the
legatee or distributee of all or any part of the Company
interest of any Limited Member shall execute and acknowledge
such instruments, in form and substance satisfactory to the
Managing Member, as the Managing Member shall deem necessary
or advisable to effectuate such admission and to confirm the
agreement of the person being admitted as such substitute
Limited Member to be bound by all of the terms and
provisions of this agreement. Such assignee, legatee or
distributee shall pay all reasonable expenses, not exceeding
$100, in connection with such admission as a substitute
Limited Member.
9.3 ACQUIT COMPANY. In the absence of written notice
to the Company of any assignment of a Company interest, any
payment to the assigning Member or his or her executors,
administrators or representatives shall acquit the Company
of liability to the extent of such payment to any other
person who may have an interest in such payment by reason of
an assignment by the Member or by reason of such Member's
death or otherwise.
9.4 RESTRICTION ON TRANSFER. Notwithstanding the
foregoing provisions of this Article IX, no sale or exchange
of a Company interest may be made if the interest sought to
be sold or exchanged, when added to the total of all other
Company interests sold or exchanged within the period of 12
consecutive months prior thereto, would result in the
termination of the Company under section 708 of the Internal
Revenue Code of 1986 (or any successor section).
9.5 ENDORSEMENT ON CERTIFICATE. The foregoing
provisions governing the assignment of the Company interest
of a Limited Member shall be indicated by an endorsement on
the certificate evidencing such Limited Member's interest in
the Company, in the form as determined from time to time by
the Managing Member.
X. DEATH, WITHDRAWAL, EXPULSION AND REPLACEMENT OF THE
MANAGING MEMBERS
10.1 DEATH. In the event of the death of the
Special Managing Member, the estate of the Special Managing
Member shall assume all of his obligations under this
agreement and be responsible for their discharge. The
estate may elect to withdraw from the Company only upon
satisfaction of the conditions in Section 10.2 applicable to
the Special Managing Member.
10.2 WITHDRAWAL. The Managing Member may not withdraw
from the Company without first providing 90 days' written
notice to the Limited Members of its intent to so withdraw
and providing a substitute Managing Member to the Company
that shall be accepted by a vote of not less than a
majority, by interest, of the Limited Members (excluding any
Limited Company Units held by any Managing Member for its
own account); provided, however, that nothing in this
agreement shall be deemed to prevent the merger,
consolidation or reorganization of the Managing Member into
or with a successor entity controlled by, or under common
control with, a Managing Member, and such successor entity
shall be deemed to be the Managing Member of the Company for
all purposes and effects and shall succeed to and enjoy all
rights and benefits and bear all obligations and burdens
conferred or imposed hereunder upon the Managing Member.
The Limited Members shall vote to accept or reject the
proposed substitute Managing Member in person or by proxy at
a meeting called by the Managing Member for such purpose in
accordance with Section 11.1 of this agreement.
The Special Managing Member may not withdraw from the
Company prior to December 31, 2000.
10.3 EXPULSION. A Managing Member shall be expelled
without further action for "cause," which means (1) final
judicial determination or admission of its bankruptcy or
insolvency, (2) withdrawal from the Company without
providing a substitute Managing Member in accordance with
Section 10.2 or (3) final judicial determination that it (i)
was grossly negligent in its failure to perform its
obligations under this agreement, (ii) committed a fraud
upon the Members or upon the Company, (iii) committed a
felony in connection with the management of the Company or
its business or (iv) was in material breach of its
obligations under this agreement. This section does not
limit the right of the Limited Members to remove the
Managing Members upon a majority vote of the Limited
Members.
10.4 REMOVAL AND REPLACEMENT OF MANAGING MEMBERS.
In the event of (i) the wrongful withdrawal of a Managing
Member or the expulsion of a Managing Member under
circumstances that the Company lacks a Managing Member or
(ii) the written proposal of Limited Members holding 10% or
more of the issued and outstanding Units, and upon providing
not less than 10 nor more than 60 days' written notice by
certified mail to all Members, the Limited Members may call
a meeting of the Company for the purpose of removing or
replacing any or all of the Managing Members. At such
meetings, any of the Managing Members may be removed or
replaced without cause by a vote (rendered in person or by
proxy) of a majority, by interest, of the Limited Members
(excluding Units held by the Managing Members for their own
accounts).
10.5 PAYMENT FOR REMOVED MANAGING MEMBER'S INTEREST.
Upon the expulsion, withdrawal or removal of a Managing
Member, the Company shall pay to the terminated Managing
Member all amounts then accrued and owing to the terminated
Managing Member and an amount equal to the then present fair
market value of the terminated Managing Member's interest in
the Company determined by agreement of the terminated
Managing Member and the Company, or, if they cannot agree,
by arbitration in accordance with the then current rules of
the American Arbitration Association. The expense of
arbitration shall be borne equally by the terminated
Managing Member and the Company. The fair market value of
the terminated Managing Member's interest shall be the
amount the terminated Managing Member would receive upon
dissolution and termination of the Company assuming that
such dissolution or termination occurred on the date of the
terminating event and the assets of the Company were sold
for their then fair market value without any compulsion on
the part of the Company to sell such assets. In the case of
a voluntary withdrawal, the withdrawing Managing Member
shall be paid the fair market value of its or his interest
by the issuance by the Company of a non-interest bearing
unsecured promissory note providing for payment of principal
from distributions that the withdrawing Managing Member
otherwise would have been entitled to receive under this
agreement had such Managing Member not withdrawn. In the
case of an involuntary termination, the terminated Managing
Member shall be paid the fair market value of its or his
interest by the issuance by the Company of a promissory note
with a five year maturity payable in five equal installments
of principal and interest at the prevailing market rate of
interest.
10.6 FAILURE TO ADMIT SUBSTITUTE MANAGING MEMBER. In
the event that a substitute Managing Member has not been
appointed and admitted as provided in Section 10.4 so that
there is no Managing Member acting, the Company shall then
be dissolved, terminated and liquidated.
XI. AMENDMENT OF AGREEMENT AND MEETINGS
11.1 GENERAL. Either Managing Member may, at any
time, propose an amendment to this agreement and shall
notify all Members thereof in writing, together with a
statement of the purpose(s) of the amendment and such other
matters as the Managing Member deems material to the
consideration of such amendment. If such proposal does not
adversely affect the rights of the Limited Members, such
proposal shall be considered adopted and this agreement
deemed amended. At any time, Limited Members holding not
less than 10% of the issued and outstanding Units may
propose an amendment to this agreement, or a meeting of
Limited Members to consider any other proposal for which the
Limited Members may vote hereunder, including the sale of
all or substantially all of the assets of the Company. Upon
the request in writing to the Managing Member of any person
entitled to call a meeting, or in the event a proposal of a
Managing Member adversely effects the rights of Limited
Members, or in the event of objection by 10% of Limited
Members by interest to such a proposal, the Managing Member
shall call a special meeting of all Members, in each case at
a location convenient to Limited Members, to consider the
proposal at the time requested by the person requesting the
meeting which shall be not less than 15 nor more than 60
days after receipt of such request. Written notice of the
meeting shall be given to all Members either personally or
by certified mail not less than 10 nor more than 60 days
before the meeting, but in any case where a meeting is duly
called by request of Limited Members, not more than 10 days
after receipt of such request. Included in the notice shall
be a detailed statement of the action proposed, including a
verbatim statement of the wording of any resolution or
amendment proposed. The notice shall provide that Limited
Members may vote in person or by proxy. The affirmative
vote of a majority, by interest, of the Limited Members
(excluding any Units held by the Managing Members for their
own accounts) shall decide the matter, without the consent
of the Managing Members. In any event, however, no such
amendment shall affect the allocation of economic interests
to the Members or alter the allocation of Company management
responsibilities and control without the approval of each
Managing Member and a majority by interest, of the Limited
Members, except as otherwise provided in Article X.
11.2 ALTERNATIVE TO MEETINGS. As an alternative to
voting at meetings of the Company pursuant to this and other
Articles of this agreement, the Limited Members may consent
to and approve by written action any matter that the Limited
Members may consent to and approve by vote at a meeting. In
order to consent to and approve the matter, the same
percentage of Limited Members, by interest, must sign the
written action as is required by vote at a meeting;
provided, however, that written notice is given to all
Members at least 15 days before solicitation of signatures
is begun.
XII. DISSOLUTION AND LIQUIDATION
12.1 EVENTS CAUSING DISSOLUTION. The Company shall
be dissolved only upon the occurrence of one or more of the
following events:
(a) the expiration of the term set forth in
Section 1.4;
(b) the occurrence of any event that, under the laws
of the jurisdictions governing the Company shall
dissolve the Company;
(c) the bankruptcy of the Company or any of the
Managing Members;
(d) the withdrawal or the expulsion of a Managing
Member if a substitute Managing Member has not been
timely admitted as provided in Article X, with the
result that there is no Managing Member acting;
(e) the decree of court that other circumstances
render a dissolution of the Company equitable or
required by law;
(f) the sale or other disposition of all or
substantially all of the assets of the Company; and
(g) at any time by the affirmative vote of a
majority, by interest, of the Limited Members (excluding
Units held by the Managing Members for their own
accounts) at a meeting called in accordance with Section
11.1 of this agreement.
12.2 CONTINUATION OF BUSINESS. Except as provided in
Section 12.3, upon the dissolution of the Company for any
reason, the business of the Company and title to the
property of the Company shall be vested in the Company
continuing the business. Upon any such dissolution no
Member, nor his or her legal representatives, shall have the
right to an account of his or her interest as against the
Company continuing the business, and no Member, nor his or
her legal representatives, as against the Company continuing
the business, shall have the right to have the value of his
or her interest as of the date of dissolution ascertained
nor have any right as a creditor or otherwise with respect
to the value of his or her interest.
12.3 LIQUIDATION AND WINDING UP. If dissolution of
the Company should be caused by reason of (a) an event that
makes it unlawful for the business of the Company to be
carried on or for the Members to carry it on in the Company,
(b) the bankruptcy of the Company, (c) the withdrawal or
expulsion of a Managing Member and no substitute Managing
Member has been timely admitted as provided in Article X,
with the result that there is no Managing Member acting, (d)
a decree of court that other circumstances render a
dissolution and winding up of the affairs of the Company
equitable or required by law, (e) the sale of all or
substantially all of the assets of the Company, (f) the
express will of Limited Members as provided in Section
12.1(g) above, the Company shall be liquidated and the
Managing Member (or the person or persons selected by a
decree of court to carry out the winding up of the affairs
of the Company) shall wind up the affairs of the Company.
The Managing Member or the person winding up the
affairs of the Company shall promptly proceed to liquidate
the Company. No distribution upon liquidation in kind of
property and assets shall be made to Limited Members. In
settling the accounts of the Company, the assets and the
property of the Company shall be distributed in the
following order of priority:
(a) To the payment of all debts and liabilities of
the Company, including loans by Members that are secured
by mortgages, but excluding any other loans or advances
that may have been made by the Members to the Company,
in the order of priority as provided by law;
(b) To the establishment of any reserves deemed
necessary by the Managing Member or the person winding
up the affairs of the Company for any contingent
liabilities or obligations of the Company;
(c) To the repayment of any unsecured loans or
advances that may have been made by any Members to the
Company in the order of priority as provided by law;
(d) Any remaining balance will be distributed to the
Members pro rata based on each Member's positive capital
account balance, after giving effect to allocations
pursuant to Sections 5.1 and 5.3 and after taking into
account all capital account adjustments for the Company
taxable year during which liquidation occurs (other than
those made pursuant to this Section 12.3(d)).
XIII. MISCELLANEOUS PROVISIONS
13.1 INTERPRETATION. The terms and provisions of
this agreement shall be governed by and construed in
accordance with the laws of the State of Delaware. All
references herein to Articles and Sections refer to Articles
and Sections of this agreement. All Article and Section
headings are for reference purposes only and shall not
affect the interpretation of this agreement. The use of the
masculine gender, for all purposes of this agreement, shall
be deemed to refer to both male and female Members.
13.2 NOTICE. Any notice given in connection with the
business of the Company shall be duly given if mailed, by
certified or registered mail, postage prepaid: if to the
Company, to the principal office of the Company set forth in
Section 1.3 or to such other address as the Company may
hereafter designate by notice to the Members; if to the
Managing Member or the Special Managing Member, to the
address set forth in Section 1.3 or such other address as
such Managing Members may hereafter designate by notice to
the Company; if to the Limited Members, to the addresses set
forth in the subscription agreement executed by each Limited
Member or to such other address as such Limited Members may
hereafter designate by notice to the Company.
13.3 SUCCESSORS AND ASSIGNS. Except as herein
otherwise provided to the contrary, this agreement shall be
binding upon and inure to the benefit of the parties hereto
and their personal representatives, assigns and successors.
13.4 COUNTERPARTS. This agreement may be executed in
several counterparts, and all so executed shall constitute
one agreement, binding on all parties hereto,
notwithstanding that all of the parties are not signatory to
the original or the same counterpart.
13.5 SEVERABILITY. In the event that any provision
of this agreement shall be held to be invalid, the same
shall not affect the validity of the remainder of this
agreement or the validity or the formation of the Company as
a limited Company under the Limited Liability Company Act.
IN WITNESS WHEREOF, this agreement has been executed
as of the day of 1999.
LIMITED MEMBERS MANAGING MEMBERS
1. By AEI Fund Management XXI, Inc., AEI Fund Management XXI, Inc.
attorney-in-fact Managing Member
By By
Robert P. Johnson, President Robert P. Johnson, President
Robert P. Johnson, Special Managing
Member
EXHIBIT B
PRIOR PERFORMANCE TABLES
The information presented in the following tables represents the
historical experience of all public real estate programs organized by
the Manager or their Affiliates during the periods indicated. Limited
Members in the Fund should not assume that they will experience returs
if any, comparable to those experienced by investors in such prior real
estate programs. Investors will have no interest in the assets or
operations of the Managing Members.
Additional information relating to the performance of prior
programs is contained in Part II of the Registratioin Statement, of
which this Prospectus is a part of, that has been filed with the
Securities and Exchange Commission. Such information may be
obtained by contacting Mr. Robert P. Johnson, President, AEI Fund
Management XXI, Inc., 1300 Minnesota World Trade Center, 30 East
Seventh Street, Saint Paul, Minnesota 55101.
The programs included in the following tables have investment
objectives similiar to those of the Partnership, including protection
of capital, distribution of partially "tax sheltered" cash flow
from operations, and capital appreciation.
Table Index Description Page
I Experience in Raising and Investing Funds B-2
II Compensation to Sponsors B-3
III Operating Results of Prior Partnerships B-4
IV Results of Completed Programs B-7
V Sales or Disposals of Properties B-8
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
(Unaudited)
The following table provides information at December 31, 1998, as to the
experience of the General Partners and their Affiliates in raising and
investing funds with respect to all prior public programs closed in the
last five years.
AEI AEI
Net Lease Net Lease AEI AEI
Income & Income & Income & Income &
Growth Growth Growth Growth
Fund XIX Fund XX Fund XXI Fund XXII
Dollar Amount Offered $30,000,000 $24,000,000 $24,000,000 $24,000,000
Dollar Amount Raised $21,151,928 $24,000,000 $24,000,000 $15,945,163(d)
Percentage of Amount
Raised 100.0% 100.0% 100.0% 100.0%
Less Offering Expenses:
Selling Commissions
and Discounts 7.0 8.0 8.0 8.0
Organizational
Expenses 7.3 5.7 5.6 6.5
Other (a) 4.2 2.2 4.3 4.5
Less Reserves 0.1 0.1 0.1 0.1
----------- ----------- ----------- ------------
Percent Available
for Investment 81.4% 84.0% 82.0% 80.9%
=========== =========== =========== ============
Acquisition Costs:
Prepaid Items and
Fees Related
to Purchase of
Property 0.0% 0.0% 0.0% 0.0%
Investment in
Properties (b) 81.4 84.0 82.0(c) 19.2(c)
Acquisition Fees 0.0 0.0 0.0 0.0
----------- ----------- ----------- -----------
Total Acquisition Cost 81.4% 84.0% 82.0% 19.2%
=========== =========== =========== ===========
Percent Leverage 0.0% 0.0% 0.0% 0.0%
Date Offering Began Feb. 91 Jan. 93 Feb. 95 Jan. 97
Length of Offering
(months) 24 24 24 24
Months to Invest 90% of
Amount Available for
Investment (measured
from beginning of
offering) 34 38 36 (c)
(a) Represents distributions in excess of net cash flow (return of capital).
(b) Includes cash down payments and capitalized costs and expenses related
to the purchase of properties, including the cost of appraisals,
attorney's fees, expenses of personnel in investigating properties, and
overhead allocated to such activities.
(c) Acquisitions are in process.
(d) Represents subscriptions accepted through December 31, 1998. Offering
closed January 9, 1999.
B-2
TABLE II
COMPENSATION TO SPONSORS
(Unaudited)
The following table provides information as to the compensation paid to
the General Partners and their Affiliates during the period from February,
1991 to December 31, 1998 for all prior public programs closed in the last
five years.
AEI AEI
Net Lease Net Lease AEI AEI
Income & Income & Income & Income &
Growth Growth Growth Growth
Fund XIX Fund XX Fund XXI Fund XXII
Type of Compensation
Date Offering Commenced Feb. 91 Jan. 93 Feb. 95 Jan. 97
Dollar Amount Raised $21,151,928 $24,000,000 $24,000,000 $15,945,163
Amount Paid to Sponsors
From Proceeds of Offering:
Underwriting Fees (a) 407,378 471,307 466,013 320,026
Acquisition Expenses
purchase option on
property 0 0 0 0
real estate
commission 0 0 0 0
expense
reimbursement 953,576(c) 837,332(c) 554,098(c) 394,640(c)
Organization Offering
Expenses 345,490 227,451 359,605 250,396
Dollar Amount of Cash
Generated From
Operations Before
Deducting Payments
to Sponsors 12,041,596 9,101,309 4,715,631 648,319
Amount Paid to Sponsors
From Operations:
Property Management
Fees (b) 0 0 0 0
Partnership
Management Fees (b) 0 0 0 0
Reimbursements 1,891,548 1,351,708 874,116 357,569
Leasing Commissions 0 0 0 0
Participation in Cash
Distributions 112,889 82,880 48,780 30,394
Dollar Amount of Property
Sales and Refinancing
Before Deducting
Payments to Sponsors:
- cash 8,607,297 3,987,111 1,383,508 0
- notes 2,216,982 0 0 0
Amount Paid to Sponsors
From Property Sales
and Refinancing:
Real Estate
Commissions 0 0 0 0
Incentive Fees 0 0 0 0
Participation in Cash
Distributions 11,758 7,890 7,632 0
(a) Does not include fees paid to AEI Securities, Incorporated which
were reallowed to participating dealers.
(b) Although not paid a fixed fee for property management and
partnership management, the General Partners and Affiliates were
reimbursed at their Cost for the provision of such services. Such
reimbursements are reflected under the line item "Amount Paid to
Sponsors From OperationsDReimbursements."
(c) The Partnerships received reimbursements from the lessees in the
form of financing fees, commitment fees and expense reimbursements
to offset these costs. The reimbursements received by Fund XIX,
Fund XX, Fund XXI and Fund XXII totaled $692,332, $385,381, $400,650
and $80,737, respectively.
B-3
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PARTNERSHIPS
(Unaudited)
The following tables provide information as to the results of all prior
programs closed in the past five years for each year of the five years (or
from inception if formed after January 1, 1992) ended December 31, 1998.
<CAPTION>
AEI NET LEASE INCOME & GROWTH FUND XIX
Years Ended December 31
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Gross Revenues from Operations $ 2,407,235 $ 2,282,282 $ 2,124,542 $ 1,792,599 $ 1,848,907
Profit on Sale of Properties 431,484 969,054 571,927 77,703 0
Less:
Operating Expenses 291,636 292,268 352,591 360,253 392,075
Depreciation 373,799 369,226 340,721 313,146 298,712
Real Estate Impairment 0 0 0 1,310,484 0
Minority Interest in Net
Operating Income 165,801 311,287 0 0 0
----------- ----------- ----------- ----------- -----------
Net Income (Loss)-GAAP Basis $ 2,007,483 $ 2,278,555 $ 2,003,157 $ (113,581) $ 1,158,120
=========== =========== =========== =========== ===========
Taxable Income (Loss):
-from operations $ 1,470,087 $ 1,206,527 $ 1,500,668 $ 952,997 $ 888,074
-from gain on sale 438,278 933,622 588,768 93,755 0
=========== =========== =========== =========== ===========
Cash Generated (Deficiency)From Operations $ 2,099,865 $ 1,466,120 $ 1,929,889 $ 1,423,151 $ 1,483,926
Cash Generated From Sales 1,765,130 5,375,793 1,373,382 1,353,011 1,492,795
Cash Generated From Refinancing 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated From Operations,
Sales and Refinancing 3,864,995 6,841,913 3,303,271 2,776,162 2,976,721
Less: Cash Distributions to Investors
-from operating cash flow 1,915,568 1,466,120 1,799,923 1,423,151 1,427,647
-from sales and refinancing 165,972 419,246 121,458 247,028 222,115
-from cash reserves (a) 0 224,365 0 109,996 0
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions 1,783,455 4,732,182 1,381,890 995,987 1,326,959
Less: Special Items (Not Including
Sales and Refinancing) 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions and
Special Items $ 1,783,455 $ 4,732,182 $ 1,381,890 $ 995,987 $ 1,326,959
=========== =========== =========== =========== ===========
Tax and Distribution Data
Per $1,000 Invested (b)
Federal Income Tax Results:
Ordinary Income (Loss)
-from operations 69 57 70 45 42
-from recapture 7 23 4 1 0
Capital Gain (Loss) 13 20 24 3 0
Cash Distributions to Investors:
Source (on GAAP basis)
-Investment Income 94 99 90 0 55
-Return of Capital 3 0 0 84 23
Cash Distributions to Investors:
Source (on cash basis)
-Sales 8 20 6 12 10
-Refinancing 0 0 0 0 0
-Operations 89 69 84 67 68
-Cash Reserves (a) 0 10 0 5 0
Amount (in percentage terms) remaining
invested in program properties at the
end of the last period reported in the
Table 0 0 0 0 99%
</TABLE>
(a) Represents initial capital or cash retained from prior years' cash flow.
(b) Based on an investment of a weighted average unit outstanding.
<TABLE>
B-4
TABLE III (Continued)
OPERATING RESULTS OF PRIOR PARTNERSHIPS
(Unaudited)
<CAPTION>
AEI NET LEASE INCOME & GROWTH FUND XX
Years Ended December 31
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Gross Revenues from Operations $ 1,046,839 $ 1,852,292 $ 2,359,797 $ 2,003,892 $ 2,003,892
Profit on Sale of Properties 0 225,180 87,281 472,575 134,164
Less:
Operating Expenses 297,038 292,122 255,505 354,554 354,215
Depreciation 124,146 251,092 381,794 390,066 370,937
Real Estate Impairment 0 0 0 626,800 0
Minority Interest in Net Operating Income 0 19,454 0 0 0
----------- ----------- ----------- ----------- -----------
Net Income (Loss)-GAAP Basis $ 625,655 $ 1,514,804 $ 1,809,779 $ 1,105,047 $ 1,447,926
=========== =========== =========== =========== ===========
Taxable Income (Loss):
-from operations $ 809,315 $ 1,275,827 $ 1,720,326 $ 1,274,296 $ 1,315,460
-from gain on sale 0 223,456 85,640 469,188 133,941
=========== =========== =========== =========== ===========
Cash Generated (Deficiency)From Operations $ 637,370 $ 1,583,637 $ 2,145,303 $ 1,604,421 $ 1,689,142
Cash Generated From Sales 0 988,838 461,077 2,098,981 438,215
Cash Generated From Refinancing 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated From Operations,
Sales and Refinancing 637,370 2,572,475 2,606,380 3,703,402 2,127,357
Less: Cash Distributions to Investors
-from operating cash flow 637,370 1,467,084 2,034,864 1,604,421 1,449,862
-from sales and refinancing 0 486,375 100,571 124,011 78,041
-from cash reserves (a) 216,850 0 0 388,234
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions (216,850) 619,016 470,945 1,586,736 599,454
Less: Special Items (Not Including
Sales and Refinancing) 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions and
Special Items $ (216,850) $ 619,016 $ 470,945 $ 1,586,736 599,454
=========== =========== =========== =========== ===========
Tax and Distribution Data
Per $1,000 Invested (b)
Federal Income Tax Results:
Ordinary Income (Loss)
-from operations 58 53 72 53 56
-from recapture 0 2 1 4 1
Capital Gain (Loss) 0 7 3 15 5
Cash Distributions to Investors:
Source (on GAAP basis)
-Investment Income 45 63 75 46 61
-Return of Capital 16 18 14 43 3
Cash Distributions to Investors:
Source (on cash basis)
-Sales 0 20 4 5 3
-Refinancing 0 0 0 0 0
-Operations 45 61 85 68 61
-Cash Reserves (a) 16 0 0 16 0
Amount (in percentage terms) remaining
invested in program properties at the
end of the last period reported in the
Table 0 0 0 0 98%
(a) Represents initial capital or cash retained from prior years' cash flow.
(b) Based on an investment of a weighted average Unit outstanding.
</TABLE>
<TABLE>
B-5
TABLE III (Continued)
OPERATING RESULTS OF PRIOR PARTNERSHIPS
(Unaudited)
<CAPTION>
AEI INCOME & GROWTH FUND XXI
August 31, 1994
(Operations Commenced) Years Ended December 31
to December 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Gross Revenues from Operations $ 0 $ 263,399 $ 1,341,753 $ 1,513,094 $ 1,854,751
Profit on Sale of Properties 0 0 0 106,551 235,377
Less:
Operating Expenses 2,915 144,180 278,563 348,934 356,890
Depreciation 0 11,687 150,958 251,272 448,810
Real Estate Impairment 0 0 0 580,200 0
----------- ----------- ----------- ----------- -----------
Net Income (Loss)-GAAP Basis $ (2,915) $ 107,532 $ 912,232 $ 439,239 $ 1,284,428
=========== =========== =========== =========== ===========
Taxable Income (Loss):
-from operations $ 0 $ 245,581 $ 1,135,292 $ 937,374 $ 1,104,024
-from gain on sale 0 0 0 102,599 229,440
=========== =========== =========== =========== ===========
Cash Generated (Deficiency) From Operations $ (14) $ 171,812 $ 1,098,924 $ 966,562 $ 1,642,315
Cash Generated From Sales 0 0 0 520,790 862,718
Cash Generated From Refinancing 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated From Operations,
Sales and Refinancing (14) 171,812 1,098,924 1,487,352 2,505,033
Less: Cash Distributions to Investors
-from operating cash flow 0 171,812 1,098,924 966,562 1,371,531
-from sales and refinancing 0 0 0 352,009 411,231
-from cash reserves (a) 0 21,611 75,670 720,708 0
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions (14) (21,611) (75,670) (551,927) 722,271
Less: Special Items (Not Including
Sales and Refinancing) 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions and
Special Items $ (14) $ (21,611) $ (75,670) $ (551,927) $ 722,271
=========== =========== =========== =========== ===========
Tax and Distribution Data
Per $1,000 Invested (b)
Federal Income Tax Results:
Ordinary Income (Loss)
-from operations 0 35 64 39 46
-from recapture 0 0 0 0 0
Capital Gain (Loss) 0 0 0 4 9
Cash Distributions to Investors:
Source (on GAAP basis)
-Investment Income 0 15 52 18 53
-Return of Capital 0 13 14 66 21
Cash Distributions to Investors:
Source (on cash basis)
-Sales 0 0 0 14 17
-Refinancing 0 0 0 0 0
-Operations 0 25 62 40 57
-Cash Reserves (a) 0 3 4 30 0
Amount (in percentage terms) remaining
invested in program properties at the
end of the last period reported in the
Table 0 0 0 0 98%
(a) Represents initial capital or cash retained from prior years' cash flow.
(b) Based on an investment of a weighted average Unit outstanding.
</TABLE>
<TABLE>
B-6
TABLE III (Continued)
OPERATING RESULTS OF PRIOR PARTNERSHIPS
(Unaudited)
<CAPTION>
AEI INCOME & GROWTH FUND XXII
July 31, 1996
(Operations Commenced) Years Ended December 31
to December 31, 1996 1997 1998
<S> <C> <C> <C>
Gross Revenues from Operations $ 0 $ 116,807 $ 545,711
Profit on Sale of Properties 0 0 0
Less:
Operating Expenses 357 138,339 233,072
Depreciation 0 668 16,025
Real Estate Impairment 0 0 0
----------- ----------- -----------
Net Loss - GAAP Basis $ (357) $ (22,200) $ 296,614
=========== =========== ===========
Taxable Income (Loss):
-from operations $ 0 $ 114,913 $ 500,917
-from gain on sale 0 0 0
=========== =========== ===========
Cash Generated (Deficiency)From Operations $ (57) $ 139,614 $ 249,364
Cash Generated From Sales 0 0 0
Cash Generated From Refinancing 0 0 0
----------- ----------- -----------
Cash Generated From Operations,
Sales and Refinancing (57) 139,614 249,364
Less: Cash Distributions to Investors
-from operating cash flow 0 77,357 249,364
-from sales and refinancing 0 0 0
-from cash reserves (a) 0 0 430,475
----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions (57) 62,257 (430,475)
Less: Special Items (Not Including
Sales and Refinancing) 0 0 0
----------- ----------- -----------
Cash Generated (Deficiency)
After Cash Distributions and
Special Items $ (57) $ 62,257 (430,475)
=========== =========== ===========
Tax and Distribution Data
Per $1,000 Invested (b)
Federal Income Tax Results:
Ordinary Income (Loss)
-from operations 0 30 42
-from recapture 0 0 0
Capital Gain (Loss) 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis)
-Investment Income 0 0 25
-Return of Capital 0 20 32
Cash Distributions to Investors:
Source (on cash basis)
-Sales 0 0 0
-Refinancing 0 0 0
-Operations 0 20 21
-Cash Reserves (a) 0 0 36
Amount (in percentage terms) remaining
invested in program properties at the
end of the last period reported in the
Table 0 0 100%
(a) Represents initial capital or cash retained from prior years' cash flow.
(b) Based on an investment of a weighted average Unit outstanding.
</TABLE>
B-7
TABLE IV
RESULTS OF COMPLETED PROGRAMS
None of the public partnerships sponsored by the General
Partners or their Affiliates have completed operations.
B-8
TABLE V
SALES OR DISPOSALS OF PROPERTIES
(Unaudited)
The following table provides information with respect to
sales or disposals of property by prior programs during the past
three years.
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<TABLE>
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Lease Auto Max
Income & Growth St. Paul,
Fund 84-A Minnesota May 85 Mar. 96 327,622 0 0 0 327,622 0 302,540 302,540 436,484
AEI Real Estate Super 8
Fund XV Hot Springs,
Arkansas(d) Apr.88 Mar. 96 663,386 0 0 0 663,386 0 581,541 581,541 635,940
AEI Real Estate Super 8
Fund XVI Hot Springs,
Arkansas(d) Apr.88 Mar. 96 663,386 0 0 0 663,386 0 583,653 583,653 635,834
AEI Net Lease HomeTown Buffet
Income &Growth Tucson,
Fund XIX Arizona(b) Jun.93 Apr. 96 201,357 0 0 0 201,357 0 164,251 164,251 55,127
AEI RealEstate Office Building
Fund 86-A Kearney,
Nebraska Dec.86 Apr. 96 329,785 0 0 0 329,785 0 434,623 434,623 236,988
AEI Net Lease Applebee's
Income& Growth Crestview Hills,
Fund XIX Kentucky(b) June 93 Apr. 96 86,495 0 0 0 86,495 0 63,334 63,334 22,161
AEI RealEstate Taco Cabana
Fund XVIII New Braunfels,
Texas May 92 May 96 962,298 0 0 0 962,298 0 784,045 784,045 431,686
AEI Net Lease Applebee's
Income &Growth Crestview Hills,
Fund XIX Kentucky(b) June 93 May 96 216,781 0 0 0 216,781 0 158,335 158,335 56,433
</TABLE> B-13
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Lease Auto Max
Income& Growth St. Paul,
Fund 84-A Minnesota May 85 May 96 401,778 9,254 0 0 411,032 60,000 340,650 400,650 558,426
AEI Net Lease Applebee's
Income & Growth Temple Terrace,
Fund XIX Florida(b) Oct.93 June 96 87,119 0 0 0 87,119 0 60,501 60,501 21,024
AEI RealEstate Taco Cabana
Fund XVIII San Antonio,
Texas(b) July 91 Aug. 96 217,259 0 0 0 217,259 0 158,441 158,441 100,302
AEIReal Estate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Sept.96 123,933 0 0 0 123,933 0 108,418 108,418 3,925
AEI Real Estate Danny's Family
Fund XVII Car Wash
Phoenix,
Arizona Feb. 89 Sept.96 1,690,844 0 0 0 1,690,844 0 1,688,271 1,688,271 1,544,183
AEI Net Lease Arby's/Mrs. Winner's
Income & Growth Smyrna,
Fund XX Georgia(b) May 94 Sept.96 181,497 0 0 0 181,497 0 152,813 152,813 39,599
AEI Real Estate Taco Cabana
Fund XVIII San Antonio,
Texas,(b) Jul. 91 Oct. 96 173,913 0 0 0 173,913 0 122,467 122,467 80,899
AEI Real Estate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Oct. 96 147,152 0 0 0 147,152 0 127,551 127,551 5,677
</TABLE> B-14
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C><C> <C> <C> <C> <C> <C> <C>
AEI Net Lease Applebee's
Income & Growth Crestview Hills,
Fund XIX Kentucky(b) June 93 Oct. 96 224,036 0 0 0 224,036 0 172,104 172,104 70,701
AEI Net Lease Taco Cabana
Income & Growth Round Rock,
Fund XIX Texas July 94 Nov. 96 303,049 0 660,000 0 963,049 0 784,210 784,210 437,864
AEI Net Lease Applebee's
Income& Growth Temple Terrace,
Fund XIX Florida(b) Oct. 93 Nov. 96 215,688 0 0 0 215,688 0 152,674 152,674 62,188
AEI Net Lease Arby's/Mrs. Winner's
Income& Growth Smyrna,
Fund XX Georgia(b) May 94 Dec. 96 279,580 0 0 0 279,580 0 240,680 240,680 67,468
AEI RealEstate Taco Cabana
Fund XVIII San Antonio,
Texas(b) July 91 Dec. 96 216,663 0 0 0 216,663 0 153,084 153,084 104,707
AEIReal Estate Applebee's
Fund XVIII Destin,
Florida(b) Nov. 91 Dec. 96 191,781 0 0 0 191,781 0 141,215 141,215 91,618
AEI RealEstate Applebee's
Fund XVIII Destin,
Florida(b) Nov. 91 Dec. 96 168,333 0 0 0 168,333 0 123,976 123,976 80,435
AEIReal Estate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Jan. 97 176,383 0 0 0 176,383 0 150,060 150,060 11,427
</TABLE> B-15
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C><C> <C> <C>
AEI Net Lease Applebee's
Income& Growth Temple Terrace,
Fund XIX Florida(b) Oct. 93 Jan. 97 175,838 0 0 0 175,838 0 122,139 122,139 51,877
AEI Net Lease Arby's/Mrs. Winner's
Income &Growth Smyrna,
Fund XX Georgia(b) May 94 Jan. 97 224,838 0 0 0 224,838 0 196,635 196,635 57,179
AEIReal Estate Sizzler
Fund XVI Kings Island,
Ohio(e) Jan. 90 Jan. 97 149,201 0 0 0 149,201 0 468,140 468,140 131,616
AEIReal Estate Sizzler
Fund XVII Kings Island,
Ohio(e) Jan. 90 Jan. 97 315,229 0 0 0 315,229 0 1,048,666 1,048,666 279,192
AEIReal Estate Sizzler
Fund XVIII Kings Island,
Ohio(e) Jan. 90 Jan. 97 19,867 0 0 0 19,867 0 66,093 66,093 17,519
AEIReal Estate Children's World
Fund XV Moreno Valley,
California May 87 Jan. 97 1,301,342 0 0 0 1,301,342 0 963,717 963,717 1,195,705
AEIet Lease Rally's
Income& Growth Brownsville,
Fund XIX Texas July 93 Feb. 97 250,000 0 0 0 250,000 0 281,713 281,713 81,507
AEI Net Lease Rally's
Income& Growth Edinburg,
Fund XIX Texas July 93 Feb. 97 250,000 0 0 0 250,000 0 281,761 281,761 81,528
</TABLE> B-16
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures<F26>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEIReal Estate Automax
Fund XV Minneapolis,
Minnesota June 86 Feb.97 411,993 0 0 0 411,993 0 388,800 388,800 539,623
AEIReal Estate Taco Cabana
Fund XVIII San Antonio,
Texas(b) July 91 Feb.97 192,268 0 0 0 192,268 0 133,503 133,503 95,414
AEIReal Estate Applebee's
Fund XVIII Destin,
Florida(b) Nov. 91 Mar.97 230,971 0 0 0 230,971 0 175,029 175,029 117,929
AEIReal Estate Champps
Fund XVIII Columbus,
Ohio(b) Aug. 96 Mar.97 220,067 0 0 0 220,067 0 181,887 181,887 10,447
AEIReal Estate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Mar.97 42,331 0 0 0 42,331 0 36,092 36,092 3,449
AEIReal Estate Applebee's
Fund XVIII Destin,
Florida(b) Nov. 91 Mar.97 231,740 0 0 0 231,740 0 175,028 175,028 118,592
AEIReal Estate Champps
Fund XVIII Columbus,
Ohio(b) Aug. 96 Mar.97 219,568 0 0 0 219,568 0 181,886 181,886 11,039
AEIReal Estate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Mar.97 219,996 0 0 0 219,996 0 187,574 187,574 18,517
</TABLE> B-17
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures<F26>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI Net Lease Arby's/Mrs. Winner's
Income & Growth Smyrna,
Fund XX Georgia(b) May 94 Apr. 97 185,171 0 0 0 185,171 0 166,517 166,517 53,623
AEI RealEstate Champps
Fund XVIII Columbus,
Ohio(b) Aug. 96 July 97 368,142 0 0 0 368,142 0 304,040 304,040 30,138
AEI Net Lease Arby's/Mrs. Winner's
Income & Growth Smyrna,
Fund XX Georgia(b) May 94 Aug 97 174,495 0 0 0 174,495 0 152,812 152,812 54,721
AEI RealEstate Applebee's
Fund XVIII Destin,
Florida (b) Nov 91 Sept.97 216,157 0 0 0 216,157 0 160,443 160,443 118,263
AEI RealEstate Applebee's
Fund XVIII Destin,
Florida(b) Nov 91 Sept.97 263,568 0 0 0 263,568 0 198,898 198,898 147,315
AEI RealEstate Sizzler
Fund XVIII Fairfield,
Ohio Mar.91 Sept.97 528,476 0 0 0 528,476 0 1,608,265 1,608,265 208,636
AEI RealEstate Taco Cabana
Fund XVIII San Antonio,
Texas (b) July 91 Sept.97 267,448 0 0 0 267,448 0 180,533 180,533 143,024
AEI Net Lease Arby's/Mrs. Winner's
Income & Growth Smyrna
Fund XX Georgia (b) May 94 Sept.97 224,663 0 0 0 224,663 0 180,203 180,203 67,210
</TABLE> B-18
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures<F26>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI Net Lease Applebee's
Income & Growth Middletown,
Fund XX Ohio (b) July 94 Sept.97 135,839 0 0 0 135,839 0 107,517 107,517 37,838
AEI Income & Champps
Growth Fund Columbus,
XXI Ohio (b) Aug. 96 Sept.97 225,622 0 0 0 225,622 0 189,156 189,156 21,417
AEI RealEstate Taco Cabana
Fund XVIII San Antonio,
Texas (b) July 91 Oct. 97 226,316 0 0 0 226,316 0 147,978 147,978 118,031
AEI Net Lease Arby's/Mrs. Winner's
Income & Growth Smyrna,
Fund XX Georgia(b) May 94 Oct. 97 169,721 0 0 0 169,721 0 136,955 136,955 51,473
AEI Net Lease Applebee's
Income & Growth Middletown,
Fund XX Ohio (b0 July 94 Oct. 97 275,421 0 0 0 275,421 0 217,027 217,027 77,008
Net Lease Rio Bravo
Income & Growth St. Paul,
Fund 84-A Minnesota(b) Feb. 85 Oct. 97 177,504 0 0 0 177,504 0 202,961 202,961 267,864
AEI RealEstate Taco Cabana
Fund XVIII San Antonio,
Texas (b) July 91 Oct. 97 226,315 0 0 0 226,315 0 147,977 147,977 118,888
Net Lease Chi-Chi's
Income & Growth Appleton,
Fund 84-A Wisconsin(b) Feb. 85 Nov. 97 276,279 0 0 0 276,279 0 246,174 246,174 398,842
</TABLE> B-19
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI RealEstate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Nov. 97 296,961 0 0 0 296,961 0 237,846 237,846 38,903
AEI Income & Champps
Growth Fund Columbus,
XXI Ohio (b) Aug. 96 Nov. 97 295,168 0 0 0 295,168 0 239,850 239,850 29,608
AEI RealEstate Tractor Supply
Fund XVIII Bristol,
Virginia(b) Apr. 96 Nov. 97 182,816 0 0 0 182,816 0 150,061 150,061 25,256
AEI Net Lease Applebee's
Income & Growth Middletown,
Fund XX Ohio(b) July 94 Dec. 97 227,960 0 0 0 227,960 0 177,891 177,891 66,211
Net Lease Gingham's
Income & Growth St. Charles,
Fund 84-A Missouri(b) July 85 Dec. 97 226,762 0 0 0 226,762 0 232,334 232,334 278,773
AEI Net Lease Applebee's
Income & Growth Middletown,
Fund XX Ohio (b) July 94 Dec. 97 225,225 0 0 0 225,225 0 175,756 175,756 66,207
AEI Net Lease Applebee's
Income & Growth Middletown,
Fund XX Ohio (b) July 94 Dec. 97 218,596 0 0 0 218,596 0 170,775 170,775 64,386
Net Lease Rio Bravo
Income & Growth St. Paul,
Fund 84-A Minnesota(b) Feb. 85 Dec. 97 271,675 0 0 0 271,675 0 302,919 302,919 404,755
</TABLE> B-20
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI Real J.T. McCord's
Estate Fund Irving,
XVI Texas Dec. 87 Dec. 97 741,635 0 0 0 741,635 0 1,147,333 1,147,333 35,207
AEI Net Lease Applebee's
Income & Growth Middletown
Fund XX Ohio(b) July 94 Jan. 98 239,893 0 0 0 239,893 0 177,891 177,891 68,324
AEI Income & Champps
Growth Fund Columbus
XXI Ohio(b) Aug. 96 Jan. 98 227,414 0 0 0 227,414 0 189,156 189,156 26,890
Net Lease Chi-Chi's
Income & Growth Appleton
Fund 84-A Wisconsin(b) Feb. 85 Jan. 98 170,985 0 0 0 170,985 0 153,193 153,193 252,160
AEI Net Lease Champps
Income & Growth Lyndhurst
Fund XX Ohio (b) Apr. 96 Jan. 98 184,032 0 0 0 184,032 0 149,183 149,183 25,949
AEI Net Lease Champps
Income & Growth Columbus,
Fund XXI Ohio(b) Aug. 96 Feb. 98 181,855 0 0 0 181,855 0 132,408 132,408 20,481
AEI Real Estate am/pm
Fund 86-A Mini Market
Carson City,
Nevada Aug. 87 Feb. 98 955,401 0 0 0 955,401 0 779,896 779,896 1,103,787
</TABLE> B-21
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI RealEstate am/pm
Fund XVII Mini Market
Carson City,
Nevada Nov. 88 Feb. 98 850,996 0 0 0 850,996 0 703,871 703,871 872,915
AEI Income & Champps
Growth Fund Columbus,
XXI Ohio (b) Aug. 96 Mar. 98 226,394 0 0 0 226,394 0 165,510 27,455
Net Lease Rio Bravo
Income& Growth St. Paul,
Fund 84-A Minnesota (b) Feb. 85 Apr. 98 198,039 0 0 0 198,039 0 222,627 222,627 302,865
AEI Net Lease Red Line
Income &Growth Burgers
Fund XIX Houston,Texas Feb. 93 Apr. 98 0 0 0 0 0 0 303,629 303,629 103,564
Net Lease Chi-Chi's
Income& Growth Appleton,
Fund 84-A Wisconsin(b) Feb. 85 May 98 123,721 0 0 0 123,721 0 107,267 107,267 180,300
Net Lease Chi-Chi's
Income& Growth Appleton
Fund 84-A Wisconsin (b) Feb. 85 June 98 174,596 0 0 0 174,596 0 149,883 149,883 253,585
AEI RealEstate Tractor Supply
Fund 85-A Maryville,
Tennessee (b) Feb. 96 July 98 133,251 0 0 0 133,251 0 95,494 95,494 24,905
</TABLE> B-22
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI Income Champps
& Growth Columbus,
Fund XXI Ohio (b) Aug. 96 July 98 227,055 0 0 0 227,055 0 171,422 171,422 34,463
AEI RealEstate Sizzler
Fund 86-A Springboro,
Ohio (c) Aug. 90 July 98 25,385 0 0 0 25,385 0 89,097 89,097 7,807
AEI RealEsate Sizzler
Fund XVIII Springboro,
Ohio (c) Aug. 90 July 98 350,635 0 0 0 350,635 0 1,310,562 1,310,562 123,458
AEI RealEstate Fair Muffler
Park Forest,
Illinois Aug. 86 Aug. 98 704 0 0 0 704 0 284,903 284,903 199,526
Net Lease Rio Bravo
Income&Growth St. Paul,
Fund 84 A Minnesota (b) Feb 85 Sep. 98 218,158 0 0 0 218,158 0 244,662 244,662 341,599
AEI RealEstate Rio Bravo
Fund 85-A St. Paul
Minnesota (b) Feb. 85 Sep. 98 35,196 0 0 0 35,196 0 39,465 39,465 54,675
AEI RealEstate Rio Bravo
Fund 85-A St. Paul
Minnesota (b) Feb. 85 Sep. 98 235,092 0 0 0 235,092 0 284,015 284,015 393,475
Net Lease Chi-Chi's
Income& Growth Appleton
Fund 84-A Wisconsin (b) Feb. 85 Sep. 98 260,327 0 0 0 260,327 0 230,825 230,825 399,281
</TABLE>
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI RealEstate Fair Muffler
Park Forest,
Illinois Aug. 86 Aug. 98 704 0 0 0 704 0 284,903 284,903 199,526
Net Lease Rio Bravo
Income&Growth St. Paul,
Fund 84 A Minnesota (b) Feb 85 Sep. 98 218,158 0 0 0 218,158 0 244,661 244,661 341,599
AEI RealEstate Rio Bravo
Fund 85-A St. Paul
Minnesota (b) Feb. 85 Sep. 98 35,196 0 0 0 35,196 0 39,466 39,466 54,675
AEI RealEstate Rio Bravo
Fund 85-A St. Paul
Minnesota (b) Feb. 85 Sep. 98 235,092 0 0 0 235,092 0 284,015 284,015 393,475
Net Lease Chi-Chi's
Income& Growth Appleton
Fund 84-A Wisconsin (b) Feb. 85 Sep. 98 260,327 0 0 0 260,327 0 230,825 230,825 399,281
AEI RealEstate Rio Bravo
Fund 85-A St. Paul
Minnesota (b) Feb. 85 Oct. 98 181,897 0 0 0 181,897 0 204,542 204,542 285,371
AEI RealEstate Rio Bravo
Fund 85-A St. Paul
Minnesota (b) Feb. 85 Nov. 98 115,604 0 0 0 115,604 0 132,575 132,575 185,783
Net Lease Chi-Chi's
Income& Growth Appleton
Fund 84-A Wisconsin (b) Feb. 85 Dec. 98 226,402 0 0 0 226,402 0 201,781 201,781 353,632
</TABLE>
<TABLE>
The following table provides information with respect to sales or
disposals of property by prior programs during the past three years.
<CAPTION>
SELLING PRICE, NET OF CLOSING COSTS COSTS OF PROPERTIES, INCLUDING
AND GAAP ADJUSTMENTS CLOSING AND SOFT COSTS
Excess of
Total Property
Cash Purchase Adjustment Acquisition Operating
Received Money resulting Cost, Capital Cash
Net of Mortgage Mortgage from Original Improvements, Receipts
Date Date Closing Balance at Taken Back Application Mortgage Closing and OverExpen-
Program Property Acquired of Sale Costs Time of Sale by Program of GAAP Total Financing Soft Costs Total ditures(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AEI RealEstate Applebee's
Fund 85-A Harlingen,
Texas (b) Dec. 95 Dec. 98 1,858,837 0 0 0 1,858,837 0 1,393,470 1,393,470 471,138
AEI RealEstate Hometown Buffet
Fund XVIII Tucson,
Arizona (b) Jun. 93 Feb.99 136,335 0 0 0 136,335 0 94,554 94,554 68,634
AEI RealEstate Hometown Buffet
Fund XVIII Tucson,
Arizona (b) Jun. 93 Feb.99 136,335 0 0 0 136,335 0 94,553 94,553 68,634
AEI RealEstate Hometown Buffet
Fund XVIII Tucson,
Arizona (b) Jun. 93 Mar.99 165,280 0 0 0 165,280 0 114,626 114,626 83,555
AEI Net Lease Hometown Buffet
Income &Growth Tucson,
Fund XIX Arizona Jun. 93 Mar.99 16,430 0 0 0 16,430 0 11,642 11,642 8,340
<FN>
(a) Does not include deduction for partnership general and
administrative expenses not related to the properties.
(b) Sale of less than a majority interest in the property.
(c) This property was owned jointly by AEI Real Estate Funds 86-A and XVIII.
(d) This property was owned jointly by AEI Real Estate Funds XV
and XVI.
(e) This property was owned jointly by AEI Real Estate Funds
XVI, XVII and XVIII.
</FN>
</PAGE> 179
C-1
EXHIBIT C
CERTAIN STATE REQUIREMENTS
The information below sets forth various state law provisions
with respect to financial suitability standards for investors in
certain states. The dealer agreement between AEI Securities and
the investment firms that will solicit purchases of the units
requires that the investment firms diligently make inquiries as
required by law of you to ascertain whether a purchase of the
units is suitable for you. Units will be sold only to investors
who represent, by executing the signature pages attached to this
prospectus, that they meet the suitability standards contained
under the caption "Who May Invest" (at page 7 of this prospectus),
and if applicable, higher standards as set forth in the table
below. The minimum net worth standards in the table exclude the
investor's home, furnishings and automobiles.
IOWA:
The minimum investment for Iowa tax-qualified plans, other
than IRAs and Keoghs, is $2,500.
MISSOURI
Missouri investors must have either (i) a net worth
(excluding home, furniture and automobiles) of at least $60,000
and an annual taxable income of at least $60,000 or (ii)
irrespective of gross income, a net worth of at least $225,000
(determined with the same exclusions.
NEW HAMPSHIRE:
Investors must have (i) a net worth (exclusive of homes, home
furnishings and automobiles) of at least $45,000 and an annual
gross income of at least $45,000, or (ii) irrespective of annual
gross income, a net worth of at least $150,000 (determined with
the same exclusions).
PENNSYLVANIA AND OHIO:
The amount of an investor's investment in the Fund may not
exceed 10% of such investor's net worth.
NORTH CAROLINA:
North Carolina investors must have either (i) a net worth
(excluding home, home mortgage, furniture and automobiles) of at
least $60,000 and an annual taxable income of at least $60,000 or
(ii) irrespective of gross income, a net worth of at least
$225,000 (determined with the same exclusions), in each case
without regard to the investment that is proposed.
EXHIBIT D
AEI INCOME & GROWTH FUND 23 LLC
SUBSCRIPTION AGREEMENT
(Including Power of Attorney)
MAKE YOUR CHECK PAYABLE TO "FIDELITY BANK - AEI FUND 23 ESCROW"
IMPORTANT REPRESENTATIONS ARE MADE ON THIS FORM. PLEASE
READ CAREFULLY BEFORE SIGNING. PLEASE TYPE OR PRINT.
1. INVESTMENT [ ] Initial Investment [ ] Add-On to Existing Investment
Number of Units Amount of Investment
($1,000 x No. of Units) $
2. OWNERSHIP [ ] Tenants in Common [ ] IRA [ ] Taxable Trust
[ ] Uniform Gift to Minors Act of the State of
[ ] Individual [ ] Community Property [ ] Keogh [ ] Partnership
[ ] Joint Tenants [ ] Other (Explain)
[ ] Pension/Profit Sharing Plan [ ] Non-Taxable Trust Corporation
3. REGISTERED OWNER (Name of Trust, Partnership or Corporation, if
applicable. Give both names if jointly held.)
Last Name(s) First Name(s) Initial(s)
[ ] Mr. [ ] Ms.
[ ] Mr. [ ] Ms.
Mailing Address Street City State Zip Code Phone
Residential Address Street City State Zip Code Phone
4. QUARTERLY DISTRIBUTIONS AUTHORIZATION FOR AUTOMATIC
Please send my distribution checks to the DEPOSITS (ACH) _ Please
following address (Insert "same" if checks include a copy of voided check
are to be sent to mailing address. Insert or savings deposit slip.
name, address, account number and phone I authorize AEI Fund Management,
number if checks are to be sent to a Inc., and Fidelity Bank of Edina,
financial institution.) Minnesota, to initiate variable
entries to my checking or savings
account. This authority will
remain in effect until I notify
AEI in writing to cancel in such
Name and complete address: time as to afford AEI a
reasonable opportunity to act on
the cancellation.
Phone Number
Financial Institution Name and
Address
(Please Print):
Account Type (Circle One):
[ ] Checking [ ] Savings [ ] Other
Account Number:
Office Use Only: Bank Routing No.
Trans. Code
5. DISTRIBUTION REINVESTMENT PLAN (Expires after the offering period.)
Do you wish to participate in the distribution reinvestment plan [ ] Yes [ ] No
(If you elect to participate by checking "Yes," rental income and
other Fund income included in "Net Cash Flow" will not be distributed
to you but instead will be applied to the purchase of additional Units,
or fractional Units, at $1,000 per Unit as long as such purchase continues
to comply with applicable securities laws and the Fund has not
distributed proceeds from sale or refinancing of properties.) UNLESS YOU
DIRECT OTHERWISE, COMMISSIONS OF UP TO 8% AND EXPENSES WILL BE PAID TO
THE BROKER DEALER DESIGNATED BELOW ON YOUR REINVESTED NET CASH FLOW.
6. INVESTOR REPRESENTATIONS (Each of the following MUST BE INITIALED BY
INVESTOR for this Subscription Agreement to be accepted)
[ ] I have received a copy of the Prospectus of the LLC,
dated (the "Prospectus")*.
[ ] I understand that there will be no public market for the
Units and that it may not be possible to liquidate readily
an investment in the LLC.
[ ] I meet the suitability standards set forth in the Prospectus
under the heading "Who May Invest" and as further specified
in Exhibit C to the Prospectus and am purchasing Units for
my own account.
[ ] I hereby make, constitute and appoint the Managing Member,
or either of them, with full power of substitution, my true
and lawful attorney for the purposes and in the manner
provided in Section 7.5 of the Agreement, which section of
the Agreement is incorporated herein by reference and hereby
made a part hereof.
*Your broker is obligated to provide you with a copy of the
Prospectus five business days before you subscribe. We are
prohibited from selling the Units to you until five business
days after you receive the Prospectus. If you did not receive
the Prospectus five business days in advance, you have the right
to withdraw your subscription.
NOTE: SIGNATURES AUTHORIZING THIS INVESTMENT MUST APPEAR ON
THE REVERSE SIDE OF THIS FORM.
Please turn over
7. INVESTOR SIGNATURES AND CERTIFICATIONS
IMPORTANT FORM W-9 CERTIFICATION INSTRUCTIONS: YOU MUST CROSS OUT ITEM
(2) BELOW IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO
BACKUP WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON
YOUR TAX RETURN. However, if after being notified by the IRS that you
were subject to backup withholding you received another notification
from the IRS that you are no longer subject to backup withholding, do not
cross out item (2). Under penalties of perjury I certify that:: (1)
The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), AND (2) I am
not subject to backup withholding either because I have not been notified
by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends,
or the IRS has notified me that I am no longer subject to backup
withholding.
IMPORTANT CHECK ONE:
THE INVESTOR IS A UNITED STATES CITIZEN. Check Here [ ]
THE INVESTOR IS A FOREIGN INVESTOR. Check Here [ ]
(Nonresident Alien or Individual, Foreign Corporation,
Foreign Partnership, or Foreign Trust or Estate).
(I/WE ARE AUTHORIZED TO ENTER INTO THIS SUBSCRIPTION AGREEMENT ON BEHALF OF
THE PERSON(s) OR ENTITY(s) LISTED IN 3 ABOVE) NEITHER A BROKER, DEALER,
INVESTMENT ADVISER NOR ANY OF THEIR AGENTS MAY SIGN ON BEHALF OF AN
INVESTOR. (Custodians must sign for custodial accounts. All other forms of
registration must be signed by the investing parties.)
Investor Signature(s) [X] [X]
Print Name & Capacity Print Name & Capacity
Tax ID Number Tax ID Number
Primary
8. CONSENT TO ELECTRONIC DELIVERY OF REPORTS
By intialing one of the boxes below, you will be consenting to delivery
of periodic reports by AEI Income & Growth Fund 23 LLC to you
electronically. These reports would include:
annual reports that contain audited financial statements, and
quarterly reports containing unaudited condensed financial
statements.
You have the option of either (1) having these reports sent to the e-mail
address you designate below, or (2) agreeing to download these reports
from our web site once you have been notified by e-mail that they have
been posted. You must have an e-mail address to use this service. IF
YOU ELECT TO RECEIVE THESE REPORTS ELECTRONICALLY, YOU WILL NOT RECEIVE
PAPER COPIES OF THE REPORTS IN THE MAIL, UNLESS YOU LATER REVOKE YOUR
CONSENT. You may revoke your consent and receive paper copies at any
time by notifying us in writing at AEI Securities Incorporated, 1300
Minnesota World Trade Center, 30 East Seventh Street, St. Paul, MN
55101.
If you agree to accept reports electronically, please complete the
following enrollment information:
Name of Investor:
E-Mail Address
(I understand that I must immediately advise the Fund
at the address above if my e-mail address changes.)
Form of Delivery (please check one):
[ ] Please deliver the full report directly to my e-mail address above.
[ ] Please post the report on your web site, or in a hyperlink from
your website, and advise me by e-mail to the address above when
it is posted.
Investor Signature(s) [X] [X]
BROKER/DEALER INFORMATION (Registered representative signature required
for processing. Please type or print.)
Broker/Dealer Firm Registered Representative Name
Registered Representative's Office Address
City State Zip Code Phone (including area code)
To substantiate compliance with Appendix F to Article 3, Section 34 of
the NASD's Rules of Fair Practice, the undersigned registered representative
hereby certifies as follows:
1. I have reasonable grounds to believe, based on information obtained from
the Subscriber concerning investment objectives, other investments,
financial situations and needs and other information known to me, that
investment in the Fund is suitable for such Subscriber in light of
income, finnancial position, net worth and other suitability
characteristics.
2. I have discussed with the Subscriber the risks associated with and the
liquidity of an investment in the Fund.
Dated:
Signature Registered Representative
AEI Fund Management XXI, Inc., as Manager AEI Fund Management XXI, Inc.
of the Fund, hereby accepts this
Subscription Agreement this day of By
ATTEST Its
AEI INCOME & GROWTH FUND 23 LLC
STANDARD REGISTRATION REQUIREMENTS
The following requirements have been established for the
various forms of registration. Accordingly, complete
subscription agreements and such supporting material as
may be necessary, must be provided.
TYPE OF OWNERSHIP AND SIGNATURE(S) REQUIRED
1. INDIVIDUAL: One signature required.
2. JOINT TENANTS WITH RIGHT OF SURVIVORSHIP: All parties
must sign.
3. TENANTS IN COMMON: All parties must sign.
4. COMMUNITY PROPERTY: Only one investor signature is
required.
5. PENSION/PROFIT SHARING PLANS: The trustee signs the
Subscription Agreement.
6. IRA AND IRA ROLLOVERS: Requires signature of authorized
signer (e.g. an officer) of the bank, trust company, or
other fiduciary. The address of the trustee must be
provided in order for them to receive checks and other
pertinent information regarding the investment.
7. KEOGH (HR 10): Same rules as those applicable to IRAs.
8. TRUST: The trustee signs the Subscription Agreement.
Provide the name of the trust, the name of the trustee
and the name of the beneficiary.
9. PARTNERSHIP: Identify the entity as to whether it is a
general or limited partnership. The general partners
must be identified and their signatures obtained on the
order. In the case of an investment by a general
partnership, all partners must sign (unless a "managing
partner" has been designated for the partnership, in
which case he may sign on behalf of the partnership if
a certified copy of the document granting him authority
to invest on behalf of the partnership is submitted).
10. CORPORATION: The Subscription Agreement must be
accompanied by (1) a certified copy of the resolution
of the Board of Directors designating the officer(s) of
the corporation authorized to sign on behalf of the
corporation and (2) a certified copy of the Board's
resolution authorizing the investment.
11. UNIFORM GIFT TO MINORS ACT (UGMA): The required
signature is that of the custodian, not of the parent
(unless the parent has been designated as the
custodian). Only one child is permitted in each
investment under the Uniform Gift to Minors Act. In
addition, designate state under which UGMA is being
made.
12. OTHER: Please indicate any other ownership type. This
space may also be used to indicate that Transfer On
Death ("TOD") instructions are included with the
Subscription Agreement. If TOD instructions are
included, the form of Ownership must still be indicated
within Section 2. Please contact AEI Investment
Services at 800-328-3519 to obtain the form(s)
necessary to provide complete TOD instructions.
SUBSCRIPTION DOCUMENTS INCLUDE:
1. Completed Subscription Agreement
(all information completed, dated and signed)
2. Subscriber's Check
(made payable to Fidelity Bank _ AEI Fund 23 Escrow)
IMPORTANT: MISSING SIGNATURES OR INVESTOR REPRESENTATIONS
WILL DELAY ORDER PROCESSING. ORIGINAL SIGNATURES ARE
REQUIRED.
MAIL TO: Make your check payable to FIDELITY BANK_AEI FUND
23 ESCROW and return with the Subscription Agreement
to:
AEI Fund Management, Inc.
1300 Minnesota World Trade Center
30 East Seventh Street
St. Paul, Minnesota 55101
651-227-7333 651-227-7705 (fax) 800-328-3519
AEI INCOME & GROWTH FUND 23 LLC
SUBSCRIPTION AGREEMENT INSTRUCTIONS
INVESTOR To purchase Units of the currently effective LLC
INSTRUCTIONS complete and sign the Subscription Agreement and
deliver it to your broker, together with your check.
YOUR CHECK SHOULD BE MADE PAYABLE TO: FIDELITY BANK
AEI FUND 23 ESCROW. In order to invest, it is
necessary that all items on the Subscription
Agreement be completed.
1. INVESTMENT Limited Liability Company interests in the Fund are
being offered in units of $1,000. Insert the number of
Units to be purchased, multiply the dollar amount of
the investment ($1,000 x No. of Units). An individual,
partnership, corporation, trust, association or other
legal entity must purchase a minimum of two and one-
half ($2,500) Units. The minimum investment for an
Individual Retirement Account, Keogh Plan or other
Qualified Plan is at least two ($2,000) Units.
According to state law, individuals in Nebraska must
purchase a minimum of five ($5,000) Units.
2. OWNERSHIP Check the appropriate box indicating the manner in
which title is to be held. Please note that the box
checked must be consistent with the number of
signatures appearing in Section 7. (See Instruction
7). In the case of partnerships, corporations,
custodianships or trusts, the box checked must be
consistent with the legal title (registration).
PARTICIPANTS IN IRAS AND KEOGH PLANS SHOULD NOTE THE PURCHASE OF LLC UNITS
DOES NOT IN ITSELF CREATE THE PLAN; YOU MUST CREATE THE PLAN THROUGH A
BONAFIDE CUSTODIAN OR TRUSTEE WHO WILL EXECUTE THE SUBSCRIPTION AGREEMENT.
3. REGISTERED Please type or print the exact name (registration)
OWNER that the investor desires on the account. If the
investor is an individual, a partnership or a
corporation, please include in this space the
complete name and title in which the investment
is to be held. If the investor is a trust such as
an IRA or Keogh Plan, please include the name and
address of the trustee and the trust name. In the
case of a trust or custodian investment including
IRAs, Keogh Plans and other trusts or
custodianships, quarterly distributions and
investment correspondence will normally be sent
to the trustee or custodian at the mailing address.
The plan participant will receive correspondence
at home. ALL ACCOUNTS MUST SUPPLY THE INVESTOR'S
RESIDENTIAL ADDRESS (FOR BLUE SKY REGISTRATION
PURPOSES).
4. QUARTERLY After impounds are met, Fidelity Bank will release
DISTRIBUTIONS the interest earned during the impound period to
(Automatic the designated address (distribution reinvestment
deposits does not apply to impound interest).The Partnership
or checks) will then commence distributions of cash available
for distribution to investors. Please insert "same"
if the checks are to be mailed to the mailing
address. Please insert the name and address of the
financial institution as well as the account number,
if checks are to be sent to a bank, savings and loan,
or other financial institution or destination.
For Electronic Direct Deposit through ACH, a voided check or savings
deposit slip is required.
5. DISTRIBUTION Answer the question by checking yes or no if the
REINVESTMENT investor elects to participate in the Distribution
Reinvestment Plan.
6. INVESTOR To comply with securities regulations,the investor
REPRESENTATIONS MUST make the representations in this Subscription
Agreement. ALL FOUR SPACES MUST BE INITIALED BY THE
INVESTOR.
7. INVESTOR IRS regulations require our escrow bank to have the
CERTIFICATIONS W-9 SIGNATURES AND certification completed for all
Limited Members. This certifies that the taxpayer
is not subject to backup withholding. If
certification is not completed, the escrow agent
must legally withhold, and pay to the IRS, 20% of
the taxpayer's escrow interest. Read the Subscription
Agreement carefully for additional W-9 Certification
Instructions. If the investor is a Nonresident Alien
or Individual, Foreign Corporation, Foreign
Partnership or Foreign Trust or Estate, please check
the Foreign Status Certification box. To authorize
the investment, sign in the space(s) provided. If
title is to be held as joint tenancy or tenants in
common, at least two signatures are required. In the
case of community property, only one investor
signature is required (see reverse side for details
on required signatures). ALL INVESTORS AND/OR PLAN
PARTICIPANTS MUST PROVIDE SOCIAL SECURITY NUMBERS.
Trusts, corporations, partnerships, custodians and
estates MUST ADDITIONALLY FURNISH a tax
identification number.
8. CONSET TO ELEC- Please complete this section if you consent to
TRONIC DELIVERY electronic delivery of financial reports. You must
OR REPORTS have an e-mail address to use this service. Enter
your name and e-mail address, indicate the from of
delivery you desire, and enter your signature(s)
where indicated.
BROKER/DEALER IT IS NECESSARY THAT ALL ITEMS BE FULLY INFORMATION
COMPLETED. INCLUDE REGISTERED REPRESENTATIVE'S NAME
AND BRANCH OFFICE ADDRESS. THE REGISTERED
REPRESENTATIVE MUST SIGN AND DATE WHERE INDICATED
IN ORDER FOR THE APPLICATION TO BE ACCEPTED.
COMPLETE THE REGISTERED REPRESENTATIVE'S TELEPHONE
NUMBER. IN SOME CASES, THE HOME OFFICE MUST ALSO
SIGN THE APPROVAL.
No person has been authorized in
connection with this offering
to give any information or to
make any representation other than
those contained in this prospectus.
This prospectus does not constitute
an offer or solicitation in any
state or other jurisdiction to any
person to whom it is unlawful to 24,000 Units
make such offer or solicitation. AEI INCOME & GROWTH
Neither the delivery of this
prospectus nor any sale hereunder FUND 23 LLC
shall under any circumstances create
an implication that there has been
no change in AEI Fund 23's affairs PROSPECTUS
since the date hereof. If, however,
any material change in AEI Fund 23's
affairs occurs at any time when this
prospectus is required to be delivered,
this prospectus will be amended or
supplemented accordingly.
DEALER PROSPECTUS DELIVERY OBLIGATION.
Until [90 days after the effective
date], all dealers that effect
transactions in these securities,
whether or not participating in this
offering, may be required to deliver a
prospectus. This is in addition to
the dealers' obligation to deliver
a prospectus when acting as AEI Securities, Inc.
underwriters and with respect to
their unsold allotments or subscriptions.
Investors are not to construe the
contents of this prospectus as legal
or tax advice. Each investor should
consult his or her own counsel,
accountant and other financial
advisors (and be responsible for their
fees) regarding the legal, tax and
investment aspects of this offering.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 27. Exhibits.
EXHIBIT NO. DESCRIPTION
*1.1 Form of Dealer-Manager Agreement
*1.2 Form of Dealer Agreement
*3.1 Certificate of Formation
*3.2 Form of Operating Agreement
included as Exhibit A to Prospectus
*5 Opinion of Dorsey & Whitney LLP as to the
legality of the securities being
registered, including consent
*8 Opinion of Dorsey & Whitney LLP as to tax
matters, including consent
*10 Form of Impoundment Agreement with
Fidelity Bank, Edina, Minnesota
*10.1 Development Financing Agreement dated
February 25, 2000, between AEI Income
& Growth Fund 23 LLC and Tumbleweed,
Inc. relating to the property at 2030
E. Dorothy Lane, Kettering, Ohio.
(incorporated by reference to Exhibit
10.2 of Form 10-KSB filed with the
Commission on March 30, 2000).
*10.2 Net Lease Agreement dated February 25,
2000, between AEI Income & Growth Fund
23 LLC and Tumbleweed, Inc. relating to
the property at 2030 E. Dorothy Lane,
Kettering, Ohio. (incorporated by
reference to Exhibit 10.3 of Form 10-KSB
filed with the Commission on March 30,
2000).
*10.3 Development Financing Agreement dated
April 18, 2000 between the LLC and
Kona Restaurant Group, Inc. relating
to the property at 4904 North Navarro,
Victoria, Texas (incorporated by
reference to Exhibit 10.1 of Form 8-K
filed with the Commission on May 3, 2000).
*10.4 Net Lease Agreement dated April 18,
2000 between the LLC and Kona Restaurant
Group, Inc. relating to the property at
4904 North Navarro, Victoria, Texas
(incorporated by reference to Exhibit
10.2 of Form 8-K filed with the
Commission on May 3, 2000).
*10.5 Development Financing Agreement
dated April 19, 2000 between the LLC and
Razzoo's, Inc. relating to the property
at 14404 U.S. Highway 281 North, San
Antonio, Texas (incorporated by reference
to Exhibit 10.3 of Form 8-K filed with
the Commission on May 3, 2000).
*10.6 Net Lease Agreement dated April 19,
2000 between the LLC and Razzoo's, Inc.
relating to the property at 14404 U.S.
Highway 281 North, San Antonio, Texas
(incorporated by reference to Exhibit
10.4 of Form 8-K filed with the
Commission on May 3, 2000).
*10.7 Development Financing Agreement
dated June 30, 2000 between the LLC, AEI
Net Lease Income & Growth Fund XIX
Limited Partnership, AEI Real Estate Fund
XVIII Limited Partnership, AEI Private
Net Lease Millennium Fund Limited
Partnership and Razzoo's, Inc. relating
to the property at 5970 North Point
Parkway, Alpharetta, Georgia.(incorporated
by reference to Exhibit 10.1 of Form
10QSB filed with the Commission on
August 14, 2000).
*10.8 Net Lease Agreement dated June 30,
2000 between the LLC, AEI Net Lease
Income & Growth Fund XIX Limited
Partnership, AEI Real Estate Fund XVIII
Limited Partnership, AEI Private Net
Lease Millennium Fund Limited Partnership
and Razzoo's, Inc. relating to the
property at 5970 North Point Parkway,
Alpharetta, Georgia. (incorporated by
reference to Exhibit 10.2 of Form 10QSB
filed with the Commission on
August 14, 2000).
*10.9 First Amendment to Net Lease Agreement
dated August 23, 2000 between the LLC and
Tumbleweed, Inc. relating to the property
at 2030 E Dorothy Lane, Kettering Ohio.
(Incorporated by reference to Exhibit 10.1
on Form 10-QSB filed with the Commission
on November 13, 2000).
*10.10 Second Amendment to Net Lease Agreement
dated August 23, 2000 between the LLC and
Tumbelweed, Inc. relating to the property
at 2030 E Dorothy Lane, Kettering, Ohio.
(Incorporated by reference to Exhibit 10.2
on Form 10-QSB filed with the Commission
on November 13, 2000).
24 Consent of Independent Public Accountants
* Previously Filed
</TABLE>
<TABLE>
TABLE VI
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
The following table provides information with respect to properties
acquired in the past three years.
<CAPTION>
Net Lease Net Lease Net Lease
Income & Income & Income &
Growth Growth Growth AEI Real Estate AEI Real Estate
Fund 84-A Fund 84-A Fund 84-A Fund 85-A Fund 85-A
Champps Champps
Americana Americana Arby's Arby's Marie Callender's
Schaumburg, Columbus, Hudsonville, Hudsonville, Gresham,
Name, Location and Illinois Ohio Michigan Michigan Oregon
Type of Property Restaurant Restaurant Restaurant Restaurant Restaurant
<S> <C> <C> <C> <C> <C>
Gross Leasable Space 11,158 10,962 3,305 3,305 5,864
Date of Purchase 12/31/97 4/16/99 9/3/99 9/3/99 9/28/99
Mortgage Financing at
Date of Purchase 0 0 0 0 0
Cash Down Payment $594,301(a) $1,331,178(a) $440,800(a) $661,200(a) $1,596,000
Contract Purchase
Price Plus
Acquisition Fee 0 0 0 0 0
Other Cash Expenditures
Expensed 0 0 0 0 0
Other Cash Expenditures
Capitalized 25,619 22,664 569 5,555 20,533
Total Acquisition Cost $619,920 $1,353,842 $441,369 $666,755 $1,616,533
</TABLE>
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s) owns the remaining interest.
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
<CAPTION>
AEI Real Estate AEI Real Estate AEI Real Estate AEI Real Estate
Fund XV Fund XV Fund XV Fund XVI
Timber Lodge Champps
Steakhouse Americana Children's World Caribou Coffee
St. Cloud, Troy, West Chester, Marietta,
Name, Location and Minnesota Michigan Ohio Georgia
Type of Property Restaurant Restaurant Child Care Ctr. Store
<S> <C> <C> <C> <C>
Gross Leasable Space 6,981 11,089 7,897 4,254
Date of Purchase 11/18/97 9/3/98 7/14/99 8/15/97
Mortgage Financing at
Date of Purchase 0 0 0 0
Cash Down Payment $485,005(a) $1,295,206(a) $986,743 $1,235,000
$1,235,000
Contract Purchase
Price Plus
Acquisition Fee 0 0 0 0
Other Cash Expenditures
Expensed 0 0 0 0
Other Cash Expenditures
Capitalized 25,630 35,059 12,419 12,571
Total Acquisition Cost $510,635 $1,330,265 $999,162 $1,247,571
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s) owns the remaining interest.
</TABLE>
II-5
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI REAL ESTATE FUND XVII
<CAPTION>
Timber Lodge Champps Timber Lodge
Steakhouse TGI Friday's Americana Steakhouse Champps
St. Cloud, Greensburg, Troy, Rochester, Centerville,
Name, Location and Minnesota Pennsylvania Michigan Minnesota Ohio
Type of Property Restaurant Restaurant Restaurant Restaurant Restaurant
<S> <C> <C> <C> <C> <C>
Gross Leasable Space 6,981 4,510 11,089 6,981 9,368
Date of Purchase 11/18/97 12/10/97 9/3/98 9/3/98 1/27/99
Mortgage Financing at
Date of Purchase 0 0 0 0 0
Cash Down Payment $485,005(a) $990,000(a) $1,270,056(a) $1,849,868 $551,320(a)
Contract Purchase
Price Plus
Acquisition Fee 0 0 0 0 0
Other Cash Expenditures
Expensed 0 0 0 0 0
Other Cash Expenditures
Capitalized 11,487 19,045 19,079 60,900 357
Total Acquisition Cost $493,492 $1,009,045 $1,289,135 $1,910,768 $551,677
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s) owns the remaining interest.
</TABLE>
II-6
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI REAL ESTATE FUND XVIII
<CAPTION>
Champps Old Country Champps
Fuddrucker's Americana Tumbleweed Tumbleweed Buffet Americana
Thornton, Troy, Chillicothe, Columbus, Northlake, Centerville
Name, Location and Colorado Michigan Ohio Ohio Illinois Ohio
Type of Property Restaurant Restaurant Restaurant Restaurant Restaurant Restaurant
<S> <C> <C> <C> <C> <C> <C>
Gross Leasable Space 4,977 11,089 5,483 5,483 8,991 9,368
Date of Purchase 7/30/97 9/3/98 11/20/98 12/28/98 12/29/98 1/27/99
Mortgage Financing at
Date of Purchase 0 0 0 0 0 0
Cash Down Payment $1,380,342 $1,190,794(a) $564,750(a) $545,800(a) $1,339,000 $1,496,440(a)
Contract Purchase
Price Plus
Acquisition Fee 0 0 0 0 0 0
Other Cash Expenditures
Expensed 0 0 0 0 0 0
Other Cash Expenditures
Capitalized 25,429 1,702 9,081 8,469 11,804 5,812
Total Acquisition Cost $1,405,771 $1,192,496 $573,831 $554,269 $1,350,804 $1,502,252
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s), or Individual General Partner, owns
the remaining interest.
</TABLE>
II-7
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI NET LEASE INCOME & GROWTH FUND XIX
<CAPTION>
Champps Marie
Party City Americana Tumbleweed Tumbleweed Callender's
Gainesville, Troy, Chillicothe, Columbus Henderson,
Name, Location and Georgia Michigan Ohio Ohio Nevada
Type of Property Retail Store Restaurant Restaurant Restaurant Restaurant
<S> <C> <C> <C> <C> <C>
Gross Leasable Space 10,528 11,089 5,483 5,483 6,016
Date of Purchase 12/18/97 9/3/98 11/20/98 12/28/98 9/28/99
Mortgage Financing at
Date of Purchase 0 0 0 0 0
Cash Down Payment $1,370,475 $1,167,671(a) $502,000(a) $818,700(a) $796,415(a)
Contract Purchase
Price Plus
Acquisition Fee 0 0 0 0 0
Other Cash Expenditures
Expensed 0 0 0 0 0
Other Cash Expenditures
Capitalized 64,834 13,514 3,225 4,796 8,496
Total Acquisition Cost $1,435,309 $1,181,185 $505,225 $823,496 $804,911
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s) or Individual General Partner, owns the
remaining interest.
</TABLE>
II-8
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI NET LEASE INCOME & GROWTH FUND XX
<CAPTION>
Champps Champps
Americana Americana
Schaumburg, Columbus,
Name, Location and Illinois Ohio
Type of Property Restaurant Restaurant
<S> <C> <C>
Gross Leasable Space 11,158 10,962
Date of Purchase 12/31/97 4/16/99
Mortgage Financing at
Date of Purchase 0 0
Cash Down Payment $1,640,981(a) $2,036,700(a)
Contract Purchase
Price Plus
Acquisition Fee 0 0
Other Cash Expenditures
Expensed 0 0
Other Cash Expenditures
Capitalized 35,214 32,238
Total Acquisition Cost $1,676,195 $2,068,938
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s), or Individual General Partner owns
the remaining interest.
</TABLE>
II-9
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI INCOME & GROWTH FUND XXI
<CAPTION>
Champps Champps Champps
Denny's Caribou Coffee Americana Americana Americana
Covington, Charlotte, San Antonio, Schaumburg, Livonia,
Name, Location and Louisiana North Carolina Texas Illinois Michigan
Type of Property Restaurant Store Restaurant Restaurant Restaurant
<S> <C> <C> <C> <C> <C>
Gross Leasable Space 4,880 4,411 8,680 11,158 9,154
Date of Purchase 3/19/97 7/31/97 12/23/97 12/31/97 5/19/98
Mortgage Financing at
Date of Purchase 0 0 0 0 0
Cash Down Payment $1,255,489 $1,273,375(a) $2,753,700 $2,199,801(a) $4,087,000
Contract Purchase
Price Plus
Acquisition Fee 0 0 0 0 0
Other Cash Expenditures
Expensed 0 0 0 0 0
Other Cash Expenditures
Capitalized 49,459 37,223 79,657 56,661 63,061
Total Acquisition Cost $1,304,948 $1,310,598 $2,833,357 $2,256,462 $4,150,061
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s) owns the remaining interest.
</TABLE>
II-10
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI INCOME & GROWTH FUND XXI (Continued)
<CAPTION>
Champps
Americana Tumbleweed
Centerville, Fort Wayne
Name, Location and Ohio Indiana
Type of Property Restaurant Restaurant
<S> <C> <C>
Gross Leasable Space 9,368 (b)
Date of Purchase 1/27/99 3/8/00
Mortgage Financing at
Date of Purchase 0 0
Cash Down Payment $965,382 $549,000
Contract Purchase
Price Plus
Acquisition Fee 0 0
Other Cash Expenditures
Expensed 0 0
Other Cash Expenditures
Capitalized 19,044 (c)
Total Acquisition Cost $984,426 $ 0
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s) owns the remaining interest.
(b) Cash down payment represents purchase of land. Restaurant is under
construction as of march 31, 2000.
(c) A final allocation of capital costs has not been completed.
</TABLE>
II-11
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI INCOME & GROWTH FUND XXII
<TABLE>
<CAPTION>
Hollywood Champps Children's Children's
TGI Friday's Video Americana Arby's World World
Greensburg, Saraland, Centerville, Homewood Abingdon, Houston
Name, Location and Pennsylvania Alabama Ohio Alabama Maryland Texas
Type of Property Restaurant Store Restaurant Restaurant Child Care Ctr. Child Care Ctr.
<S> <C> <C> <C> <C> <C> <C>
Gross Leasable Space 4,510 7,488 9,368 3,256 7,417 7,255
Date of Purchase 12/10/97 1/26/99 1/27/99 7/9/99 7/14//99 7/14/99
Mortgage Financing at
Date of Purchase 0 0 0 0 0 0
Cash Down Payment $660,000(a) $1,332,305 $905,740(a) $1,357,000 $1,005,773 $870,466
Contract Purchase
Price Plus
Acquisition Fee 0 0 0 0 0 0
Other Cash Expenditures
Expensed 0 0 0 0 0 0
Other Cash Expenditures
Capitalized 8,144 45,586 19,103 35,592 45,999 21,752
Total Acquisition Cost $668,144 $1,377,891 $924,843 $1,392,592 $1,051,772 $892,219
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s) owns the remaining interest.
</TABLE>
II-12
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI INCOME & GROWTH FUND XXII
<TABLE>
<CAPTION>
Children's Children's Hollywood Hollywood Marie
World World Video Video Tumbelweed Callender's
Pearland, DePere, Minot Muscle Shoals, Fort Wayne Henderson
Name, Location and Texas Wisconsin North Dakota Alabama Indiana Nevada
Type of Property Child Care Ctr. Child Care Ctr. Store Store Restaurant Restaurant
<S> <C> <C> <C> <C> <C> <C>
Gross Leasable Space 7,595 10,180 7,506 6,721 5,573 6,016
Date of Purchase 7/14/99 7/14/99 7/16/99 8/26/99 8/31/99 9/28/99
Mortgage Financing at
Date of Purchase 0 0 0 0 0 0
Cash Down Payment $919,305 $1,161,469 $1,291,680 $1,315,310 $1,290,000 $911,600(a)
Contract Purchase
Price Plus
Acquisition Fee 0 0 0 0 0 0
Other Cash Expenditures
Expensed 0 0 0 0 0 0
Other Cash Expenditures
Capitalized 24,110 25,983 38,320 25,317 26,695 26,297
Total Acquisition Cost $943,415 $1,187,452 $1,330,000 $1,340,627 $1,316,695 $937,897
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s) owns the remaining interest.
</TABLE>
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to
believe that it meets the requirements for filing on Form SB-2
and has duly caused this Post-Effective Amendment No. 6 to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Paul
on the 14th day of November, 2000.
AEI INCOME & GROWTH FUND 23 LLC
By AEI Fund Management XXI, Inc.
Managing Member
By /s/ ROBERT P Johnson
Robert P. Johnson, President
In accordance with the requirements of the Securities Act of 1933,
this Amendment No. 6 to the Registration Statement was signed by the
following persons in the capacities and on the dates stated.
MANAGING MEMBER
AEI Fund Management XXI, Inc. Date
By /s/ ROBERT P JOHNSON Sole Director and November 14, 2000
Robert P. Johnson President (principal
executive officer)
By /s/ MARK E LARSON Chief Financial Officer November 14, 2000
Mark E. Larson and Treasurer (principal
financial and accounting
officer)
INDIVIDUAL Managing Member
By /s/ ROBERT P JONHSON Individual Managing Member November 14, 2000
Robert P. Johnson
AEI INCOME & GROWTH FUND 23 LLC
REGISTRATION STATEMENT
ON FORM SB-2/A
EXHIBITS
Exhibit No. Description Page
*1.1 Form of Dealer-Manager Agreement
*1.2 Form of Dealer Agreement
*3.1 Certificate of Formation
*3.2 Form of Operating Agreement
included as Exhibit A to Prospectus
*5 Opinion of Dorsey & Whitney LLP as to
the legality of the securities being
registered, including consent
*8 Opinion of Dorsey & Whitney LLP as to
tax matters, including consent
*10 Form of Impoundment Agreement with
Fidelity Bank, Edina, Minnesota
*10.1 Development Financing Agreement dated
February 25, 2000, between AEI Income
& Growth Fund 23 LLC and Tumbleweed,
Inc. relating to the property at 2030
E. Dorothy Lane, Kettering, Ohio.
(incorporated by reference to Exhibit
10.2 of Form 10-KSB filed with the
Commission on March 30, 2000).
*10.2 Net Lease Agreement dated February 25,
2000, between AEI Income & Growth Fund
23 LLC and Tumbleweed, Inc. relating to
the property at 2030 E. Dorothy Lane,
Kettering, Ohio. (incorporated by
reference to Exhibit 10.3 of Form 10-KSB
filed with the Commission on March 30,
2000).
*10.3 Development Financing Agreement dated
April 18, 2000 between the LLC and
Kona Restaurant Group, Inc. relating
to the property at 4904 North Navarro,
Victoria, Texas (incorporated by
reference to Exhibit 10.1 of Form 8-K
filed with the Commission on May 3, 2000).
*10.4 Net Lease Agreement dated April 18,
2000 between the LLC and Kona Restaurant
Group, Inc. relating to the property at
4904 North Navarro, Victoria, Texas
(incorporated by reference to Exhibit
10.2 of Form 8-K filed with the
Commission on May 3, 2000).
*10.5 Development Financing Agreement
dated April 19, 2000 between the LLC and
Razzoo's, Inc. relating to the property
at 14404 U.S. Highway 281 North, San
Antonio, Texas (incorporated by reference
to Exhibit 10.3 of Form 8-K filed with
the Commission on May 3, 2000).
*10.6 Net Lease Agreement dated April 19,
2000 between the LLC and Razzoo's, Inc.
relating to the property at 14404 U.S.
Highway 281 North, San Antonio, Texas
(incorporated by reference to Exhibit
10.4 of Form 8-K filed with the
Commission on May 3, 2000).
*10.7 Development Financing Agreement
dated June 30, 2000 between the LLC, AEI
Net Lease Income & Growth Fund XIX
Limited Partnership, AEI Real Estate Fund
XVIII Limited Partnership, AEI Private
Net Lease Millennium Fund Limited
Partnership and Razzoo's, Inc. relating
to the property at 5970 North Point
Parkway, Alpharetta, Georgia.(incorporated
by reference to Exhibit 10.1 of Form
10QSB filed with the Commission on
August 14, 2000).
*10.8 Net Lease Agreement dated June 30,
2000 between the LLC, AEI Net Lease
Income & Growth Fund XIX Limited
Partnership, AEI Real Estate Fund XVIII
Limited Partnership, AEI Private Net
Lease Millennium Fund Limited Partnership
and Razzoo's, Inc. relating to the
property at 5970 North Point Parkway,
Alpharetta, Georgia. (incorporated by
reference to Exhibit 10.2 of Form 10QSB
filed with the Commission on
August 14, 2000).
*10.9 First Amendment to Net Lease Agreement
dated August 23, 2000 between the LLC and
Tumbleweed, Inc. relating to the property
at 2030 E Dorothy Lane, Kettering Ohio.
(Incorporated by reference to Exhibit 10.1
on Form 10-QSB filed with the Commission
on November 13, 2000).
*10.10 Second Amendment to Net Lease Agreement
dated August 23, 2000 between the LLC and
Tumbelweed, Inc. relating to the property
at 2030 E Dorothy Lane, Kettering, Ohio.
(Incorporated by reference to Exhibit 10.2
on Form 10-QSB filed with the Commission
on November 13, 2000).
24 Consent of Independent Public Accountants
* Previously Filed
