As filed with the Securities Exchange Commission on December 29, 2000
File No. 333-
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
Under the Securities Act of 1933
AEI INCOME & GROWTH FUND 24 LLC
(Name of small business issuer in its charter)
Delaware 6500 (applied for)
(State of other (Primary Standard (IRS Employer
jurisdiction Industrial Identification
of incorporation) Classification Number)
Code Number)
1300 Minnesota World Robert P. Johnson Copies to:
Trade Center 1300 Minnesota World Thomas O. Martin
30 East Seventh Street Trade Center Dorsey & Whitney LLP
St. Paul, Minnesota 55101 30 East Seventh Street Pillsbury Center South
(651) 227-7333 or St. Paul, Minnesota 55101 220 South Sixth
(800) 328-3519 (651) 227-7333 or Minneapolis, Minnesota
(Address and telephone (800) 328-3519 55402-1498
number of principal (Name, address, including
executive offices and zip code
intended principal place and telephone number of
of business) agent for service of
process)
Approximate date of proposed sale to public: As soon as
practical after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Amount to Maximum Maximum Amount of
Securities be Offering Aggregated Registrat
to be Registered Registered Price Per Offering ion Fee
Share Price
Limited Liability 24,000 Units $1,000 $24,000,000 $6,000
Company Units
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 24
An offering of Limited Liability Company Units
$1,500,000 minimum
AEI Income & Growth Fund 24 LLC will purchase single-tenant
commercial properties leased to corporate tenants. Our long-term
"net" leases will require our tenants to pay all the operating
costs of our properties, including taxes, maintenance and
insurance.
We are offering 24,000 units ($24,000,000) of our limited
liability company interests at a price of $1,000 each. You must
purchase 2.5 units ($2,500) to invest individually or 2 units
($2,000) through your IRA or other qualified plan. We will keep
all subscriptions in a special bank escrow account until we
receive at least $1,500,000 and return subscriptions if we do not
receive at least this amount within one year.
PROCEEDS TO AEI FUND 24 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 75,000 5.0%
Proceeds to AEI Fund 24 850.00 1,275,000 85.0%
Acquisition expenses 30.00 45,000 3.0%
Working capital reserve 10.00 15,000 1.0%
Amount available for
purchase of properties $ 810.00 $1,215,000 81.0%
AEI Securities, Inc., (a company affiliated with our
managers), will act as "Dealer-Manager" and coordinate the sale
of units. Other broker dealers who are members of the NASD will
use their best efforts to offer and sell the units.
We encourage you to read the "Risks" described on Pages 5 to
8 of this prospectus:
You will not be able to evaluate our properties before they
are acquired;
We may only purchase one property if only the minimum
($1,500,000) is raised
There will be no market for the units and restrictions will
be placed on their transfer;
Our managers will operate under a number of conflicts of
interest;
We are not a mutual fund or investment company and are not
regulated under the federal Investment Company Act.
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.
, 2000
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 24
AEI Income & Growth Fund 24 LLC is a newly organized limited
liability company that will acquire a portfolio of income-
producing, net-leased commercial properties. Our objective is to
acquire properties that provide:
regular cash distributions of rents;
stable performance from long-term leases with corporate
tenants;
growth in lease income through rent escalations;
capital growth through appreciation in property values; and
passive income that can be matched with passive losses from
other investments.
To achieve these objectives we may, from time to time, sell
properties and reinvest the proceeds in replacement net leased
properties. We cannot assure you that we will achieve these
objectives. AEI Fund 24 is not a "tax shelter" and is not
intended to shelter any of your taxable income from other
sources.
Our operating agreement requires that AEI Fund 24's
existence terminate in 2051. It is the current intention of our
managers, however, to liquidate our properties and dissolve AEI
Fund 24 eight to twelve years after we complete property
acquisitions. Investors may also dissolve AEI Fund 24 earlier by
majority vote.
RISKS
An investment in our units involves a number of risks,
including risks related to your inability to evaluate properties
prior to purchase, our inability to diversify if only the minimum
amount of capital is raised, the illiquidity of the units, the
payments to be received by our managers, the discount at which
any repurchase of units may occur, and potential management
conflicts of interest that are described under "Risk Factors"
starting on page 5.
PROPERTIES AND PROPERTY ACQUISITION
We expect that most of the properties we acquire will be
leased to corporate tenants in the chain or franchised restaurant
industry, although some properties may be in the childcare or
single-tenant retail industries. We will acquire all properties
for cash: we will not use any debt financing to acquire
properties. We did not own any properties when this prospectus
was written. We will supplement this prospectus when we have
identified any property we intend to purchase.
THE UNITS
Each unit of limited liability company interest represents a
$1,000 equity interest in AEI Fund 24. Unlike profit and loss
from a corporation, which are taxed at the corporate level,
profits, gains, losses and tax deductions from AEI Fund 24 are
designed to be passed directly through to the investors and taxed
only once at the investor level. The rental income we generate
will normally be treated as "passive income" for tax purposes.
Because we expect to generate non-cash depreciation and
amortization expenses that we should be able to deduct for tax
purposes, some of the cash we generate and distribute should be
"taxed deferred" (although not "tax sheltered"). There are risks
to our ability to achieve these tax objectives described on page
[8].
3
As an investor and "limited member" of AEI Fund 24, you will
have a different interest in our profits, losses and
distributions than our managers. In addition, the cash you will
receive from rents will be allocated and paid in proportions that
are different than the cash you might receive from the sale or
refinancing of our properties. Cash distributions will be made
as follows:
1. After deducting operating expenses, rent and other income
will be paid 97% to investors and 3% to managers.
2. After provision for reserves and operating expenses, cash
from the sale of properties will be paid 99% to investors
and 1% to managers. After our investors have received both
(i) total cash distributions from property sales equal to
their initial investment, plus (ii) a 7% annual,
uncompounded return on their investment (whether from gains
on property sales or rental income), 90% of the cash from
the sale or refinancing of our 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 at 1300 Minnesota World Trade Center, 30 East
Seventh Street, Saint Paul, Minnesota 55101. 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. Our managers can be reached at
(651) 227-7333 (toll-free 800-328-3519).
COMPENSATION TO THE MANAGERS
In addition to paying our managers for their interests in
the profits and losses as managing members of AEI Fund 24, we
will reimburse our managers for the following services at their
cost:
1. The organization and offering of units in AEI Fund 24
(estimated at $225,000 at minimum subscription level),
almost all of which will be paid out to third parties.
2. The acquisition of properties (estimated at $45,000 at the
minimum subscription level).
3. The administration of Fund 24, including management,
leasing, releasing and sale of properties (estimated at
$75,000 for first 12 months at the minimum subscription
level).
There are limits to the amount we pay to our managers for
these reimbursements. The total payments for organization,
offering the Units and acquiring properties (referred to as
"front-end fees"), as well as amounts for providing
administrative services to AEI Fund 24, are limited to the
manager's cost and to what would be paid an unaffiliated third
party. In addition, the amounts we pay for these front-end fees,
plus the amount we pay to the managers for overhead and for the
costs of persons that control the managers, cannot exceed the
following:
20% of subscription capital raised, plus
10% of cash flow from operations less the interest in cash
flow we pay our managers, plus
5% of cash flow from properties managed by the manager, plus
3% of the sales price of properties if the managers provide
sales services.
4
RISK FACTORS
General Risks
You will be relying on the managers to select properties and
might not like the properties they select.
When this prospectus was printed, we had not selected any
properties. It is not likely that you will be able to
evaluate properties before they are purchased. Although
we will supplement this prospectus when we believe that a
property will be acquired, you must rely upon the ability of
our managers to choose properties. We cannot assure you
that the properties our managers select will be favorable
investments.
YOU WILL NOT HAVE A RIGHT TO A RETURN OF YOUR INVESTMENT IF
YOU DO NOT LIKE THE PROPERTIES PURCHASED.
You will not have a right to withdraw from Fund 24 or to
receive a return of your investment if you do not like the
properties our managers purchase. We will have a limited
unit repurchase program, but that program will not
necessarily return your entire investment.
YOU WILL HAVE LITTLE CONTROL OVER OPERATIONS.
Except for limited voting rights, you will have no control
over our 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.
WE WILL MAKE PAYMENTS TO OUR MANAGERS FOR THEIR SERVICES
WHETHER OR NOT WE ARE PROFITABLE.
The operating agreement that governs our operations requires
us to make payments to our managers for the services they
provide whether or not we are profitable. Although the
managers are required to act in a manner that is in our best
interests, these payments may create conflicts in how the
managers deal with us.
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, we are required to
place significant restrictions on the transfer of units.
That means that you will be required to receive approval
from the managers before reselling or transferring your
units. The managers are required to refuse a transfer when
it would adversely affect our tax status. We will also
require as a condition to the transfer of any units that you
be fully apprised by the purchaser of the apparent value of
your units, including the most recent redemption price. We
will require you to confirm your understanding of this value
by notifying us in writing. If the purchaser does not have
this information, we will provide it to you. Our operating
agreement provides that, if you agree to sell or transfer
your units before this information is provided to you, the
transfer agreement is void. Our operating agreement also
provides that you must notify us when you agree to sell your
units and that AEI Fund 24 will have a right to purchase
your units at the same price by notifying you within 15
days. Because of these requirements, there will not be a
5
public market for your units, you may not be able to sell
them at the time you desire, and any sale may be at a
substantial discount.
YOU WILL NOT HAVE A RIGHT TO A RETURN OF YOUR CAPITAL PRIOR
TO THE TERMINATION OF THE PROGRAM.
Although we intend to dissolve earlier, we are not required
to dissolve until 2051 unless you and a majority of the
other investors vote to have us dissolve earlier. You will
not have a right to redeem your units until we are
dissolved. Although we 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 at the discretion of our managers,
and is not available if there is not adequate capital to pay
for repurchases.
WE MAY NOT BE ABLE TO DIVERSIFY OUR INVESTMENTS AND
ACCOMPLISH ALL OF OUR INVESTMENT OBJECTIVES.
If we raise only $1,500,000, we may purchase only one
property and the proportion of our capital spent on
organizational and offering costs will be higher. While we
intend to diversify our investments, we are 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 our
ability to accomplish our objectives and to ask about the
current amount of subscriptions before you invest.
WE MAY BE FORCED TO DISSOLVE IF BOTH MANAGERS DIE OR
WITHDRAW.
If both our managers die, are removed, withdraw, or are
declared bankrupt, AEI Fund 24 may be required to dissolve
early. If we are forced to dissolve early, we might be
required to sell our properties at disadvantageous prices.
We will not carry insurance on the life of Robert Johnson,
the special managing member and president of our manager.
WE ARE NOT PROVIDING YOU WITH SEPARATE LEGAL OR ACCOUNTING
REPRESENTATION.
AEI Fund 24, our investors and our managers are not
represented by separate counsel. Although our 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, our counsel and accountants
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 OF OUR OPERATIONS MAY BE A
RETURN OF CAPITAL.
If our operating revenues are not sufficient to fund all our
distributions, the cash you receive may represent a partial
return of the capital you contribute. Because we intend to
distribute a fixed amount of cash each quarter during the
first 36 months of our operations, and do not expect to
generate revenues that cover all those distributions, it is
likely that some of the initial distributions you receive
will be a return of capital.
WE ARE REQUIRED TO INDEMNIFY OUR MANAGERS FOR THEIR GOOD
FAITH ACTIONS AND THE INDEMNIFICATION OBLIGATION MAY CAUSE
ANY LIABILITY THEY INCUR TO BE PAID BY AEI FUND 24.
Under our operating agreement, our managers are not liable
to us for any act or omission that they take in good faith
and that they believe is in the best interest of AEI Fund
24, except for acts of negligence or misconduct. Under
certain circumstances our managers will be entitled to
6
indemnification from us for losses they incur in defending
actions arising out of their position as our managers.
REAL ESTATE INVESTMENT RISKS
DEFAULTS BY TENANTS MAY INTERRUPT CASH FLOW OR CAUSE A
DECLINE IN A PROPERTY'S VALUE.
If a tenant defaults on its lease, we cannot assure you that
we will be able to find a new tenant for the vacant property
who will pay the same rental rate or that we will be able to
sell the property without incurring a loss. If a tenant
files for bankruptcy, we might not be able to quickly
recover the property from the bankruptcy trustee. Because we
probably could not obtain a new tenant while a property is
held by a trustee, the property might not generate rent that
covers our expenses associated with the property during this
period.
SOME PROPERTIES MAY BE SUITABLE FOR ONLY ONE USE AND MAY BE
COSTLY TO REFURBISH IF A LEASE IS TERMINATED.
Some of the properties we buy may be designed for a
particular tenant. If we own a property when the lease
terminates 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 you as an investor. Attempting to sell the property
without improvements would also likely result in a lower
sales price.
WE COULD LOSE MONEY ON CONSTRUCTION LOANS IF A TENANT
DEFAULTS OR FOR OTHER REASONS.
We intend to advance some funds (not more than 30% of
available funds) to some tenants prior to acquisition of a
property to assist in financing construction. This type of
"construction lending" can be risky because cost overruns,
nonperforming contractors, changes in construction codes and
changes in cost can occur during construction that can cause
default on the construction loan. If a defaults occurs, we
might be required to foreclose on the mortgage (our security
interest in the property). During a period of redemption
after foreclosure we would not be able to sell the property
and the property would likely not produce income. If we
acquire the property through foreclosure, we might not be
able to resell the property at a price equal to the
principal amount of the loan. If the property is only
partially complete at the time we foreclose, we may also
need to pay for its completion to enhance its sale.
WE CAN REINVEST PROCEEDS FROM SALES OF PROPERTIES IN NEW
PROPERTIES WITHOUT YOUR APPROVAL.
We may, from time to time, sell properties and reinvest the
proceeds in new net leased properties rather than
distributing all the proceeds to you (although we intend to
distribute any net cash gain from property sales). You will
not have the right to receive cash when we sell properties
and must rely on the ability of our managers to find
replacement properties in which to reinvest the proceeds.
Upon the final sale of all our properties, if we provide
financing to purchasers, our liquidation and the
distribution of cash to you could be delayed until such
financing is fully collected.
THE INSURANCE WE PURCHASE FOR OUR PROPERTIES MIGHT NOT BE
ADEQUATE TO COVER LOSSES WE INCUR.
Our managers will arrange for comprehensive insurance
coverage on our properties. Some losses (generally of a
catastrophic nature) may be either uninsurable or not
7
economically insurable. If a disaster occurs, we could
suffer a complete loss of capital invested in, and any
profits expected from, the affected properties.
FEDERAL INCOME TAX RISKS
OUR OPERATIONS COULD AFFECT THE PROPRIETY OF ALLOCATIONS AND
CAUSE ADDITIONAL TAX AND PENALTIES.
Each investor will be entitled to deduct his or her share of
any tax losses and will report his or her share of any
income and gain on the investor's tax return. Whether these
allocations will be honored by the IRS depends on a number
of facts related to our future operations. Because we have
not commenced operation, our 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 24 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.
Our 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,
our 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 we were characterized as a "dealer" in real estate when
properties are sold, then gain or loss on sales will be
considered ordinary income or loss. Because our character as
a dealer in real estate is dependent on future events and
the timing of property purchases and sales, our counsel has
not rendered an opinion on this issue. Because ordinary
income is, in most cases, taxed at higher rates than capital
gain, if we were characterized as a dealer the taxes you are
required to pay on the income (if any) we generate could
increase.
THE STRUCTURE OF THE PURCHASE AND LEASE TRANSACTIONS OF AEI
FUND 24 COULD CAUSE LOSS OF SOME DEPRECIATION AND OTHER
DEDUCTIONS.
Sale leaseback transactions in which the landlord provides
certain options to the seller/lessee, such as a purchase
option at a fixed price, could cause the IRS to conclude the
transaction is not a true lease. If this were to occur, we
would not be able to use some of the deductions we
anticipate 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.
Our managers will allocate expenses during our early stages
of operation 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, our
counsel has not rendered an opinion as to their propriety.
8
If the IRS determined that the allocations were improper, we
could lose some deductions and our 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:
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
Irrespective of annual gross income, a net worth of at
least $150,000 determined with the same exclusions.
If you are purchasing through a trust, IRA or other
fiduciary account, these standards must be met by the
beneficiary, the trust or other fiduciary account itself, or by
the trust donor or grantor if they are a fiduciary and directly
or indirectly supply the funds for the purchase.
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
24 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 our 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.
In addition to other considerations, trustees and custodians
of tax-qualified plans should consider the diversification
requirements of ERISA 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.
9
CAPITALIZATION
The capitalization of AEI Fund 24 at , 2001,
and after the issuance and sale of the minimum of 1,500 units is
as follows:
After Sale of
Title of Class 1,500 Units
Managers' Capital $ 1,000 $ 1,000
Investors' Capital 1,500,000
Less Offering Expenses (225,000)
--------- -----------
Total Captial $ 1,000 $ 1,275,000
========= ===========
10
ESTIMATED USE OF PROCEEDS
We expect to have 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 shows
how we expect to use these proceeds. Some of the items below
cannot be precisely calculated and could vary materially from the
amounts shown.
Minimum Maximum
(1,500 Units) (24,000 Units)
Dollars Percent Dollars Percent
Gross Offering Proceeds $ 1,500,000 100.0% $24,000,000 100.0%
Less Offering Expenses:
Selling Commissions and
Nonaccountable Expenses (150,000) 10.0% (2,400,000) 10.0%
Other Offering Expenses (75,000) 5.0% (960,000) 4.0%
----------- ---------- ----------- ----------
Amount Available for Investment
(net proceeds) $ 1,275,000 85.0% $20,640,000 86.0%
Acquisition Expenses (45,000) 3.0% (720,000) 3.0%
Working Capital Reserve (15,000) 1.0% (240,000) 1.0%
----------- ---------- ----------- ----------
Cash Available for Purchase
of Properties $ 1,215,000 81.0% $19,680,000 82.0%
=========== ========== =========== ==========
The amount available for investment in properties will not,
in any event, be less than 80% of gross offering proceeds. We
will hold the proceeds of the offering in trust for the benefit
of the purchasers of units and use them only for the purposes set
forth above.
We will continue to offer and sell units for 12 months after
the date of this prospectus. At the election of our managers, we
may offer units during a second 12 months. We will not commit to
invest more money in properties than we raise through the sale of
units. Accordingly, our managers believe that we will have
adequate capital to fund our operation for the first 24 months of
operation.
11
INVESTMENT OBJECTIVES AND POLICIES
PRINCIPAL INVESTMENT OBJECTIVES
We intend to acquire income-producing, single-tenant, net-
leased commercial properties located throughout the United
States. We may also sell properties from time to time and
purchase replacement properties when our managers believe
conditions are favorable and that we can profit from this type of
sale and reinvestment. We may commit to purchase properties when
construction is completed either at agreed prices or subject to
pricing formulas.
ACQUISITION OF PROPERTIES
We will not purchase or lease any property from, or sell or
lease any property to, our managers or their affiliates. We may,
however, purchase property that our managers or their affiliates
purchased in their own name to help us acquire the property. If
we do, we will purchase the property from our managers or
affiliate at a price no greater than the price they paid, plus
acquisition and holding expenses.
Although we do not intend to acquire any unimproved or
undeveloped properties, or to participate in the development of
any properties, we may acquire raw land prior to the building of
improvements and may advance funds or make loans in connection
with the construction of properties which we intend to acquire.
If we make construction loans, the loan will be secured by the
land or both the land and improvements under construction.
Construction loans will not exceed 30% of offering proceeds.
We will obtain an independent appraisal of the fair market
value of each property we acquire. Nevertheless, our managers
will rely on their own analysis, and not on the appraisals, in
determining whether to acquire a particular property. Copies of
appraisals will be retained at our offices for at least five
years and will be available for inspection and duplication by any
investor. Prior to the acquisition of a property, we will be
provided with evidence satisfactory to our managers that we will
acquire marketable title to the 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, we will invest all funds in short-term government
securities or in deposits with a financial institution and will
earn interest at short-term deposit rates. We will distribute to
the investors as a return of capital 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 our
managers) 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, without interest but together with a proportionate amount
of any commissions or other organization and offering expenses.
All funds will be available for our general use during this
period and may be expended in operating any properties that have
been acquired.
For purposes of the foregoing, we will consider capital as
being committed to properties, and will not return capital 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 our
12
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 our managers, we will either distribute
all or a portion of the net proceeds from sale of properties to
investors or reinvest net proceeds in properties that meet our
acquisition criteria. We will not reinvest net proceeds from the
sale of a property unless enough cash is distributed to investors
to pay income taxes resulting from the sale, assuming they are
taxed at a rate of seven percent above the individual capital
gains rate.
We may sell co-tenancy or other fractional interests in
properties, rather than selling our entire interest in a
property. Our managers believe that sales of smaller interests
through exchanges designed to comply with Section 1031 of the
Internal Revenue Code can result in greater overall profits than
listing and selling the property through a real estate broker. In
those instances in which we do not sell all of a property, we
will retain, either alone or with another program sponsored by
affiliates of our managers, the authority to manage the property.
Although we intend to sell our 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 we receive 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.
We 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 we elect
otherwise, we will report the gain on such sale proportionately
under the installment method of accounting as principal payments
are received.
JOINT VENTURE INVESTMENTS
We may purchase property jointly with another program
sponsored by our managers or their affiliates. We will make these
joint ventured investments only with a program that has
investment objectives and management compensation provisions
substantially the same as those of AEI Fund 24. Our ability to
enter into a joint venture may be important if we wish to acquire
an interest in a specific property but do not have sufficient
funds (or, at the time we enter into a commitment to acquire a
specified property, cannot determine whether we will have
sufficient funds) to acquire the entire property.
In any joint venture with another fund sponsored by our
managers or their affiliates, the following conditions must be
satisfied:
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;
We will not pay more than once for the same services and
will not act indirectly through any such joint venture if we
would be prohibited from doing so directly;
The compensation of the managers and such affiliates in the
other fund must be substantially the same as their compensation
in AEI Fund 24; and
13
We 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 we will have the right of
first refusal to purchase the other party's interest in the joint
venture, AEI Fund 24 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. We will not use net cash flow from operations (rent) to
acquire properties, although we may hold cash flow reserves and
may use cash flow to repurchase units. Distributions to investors
who elect to participate in a distribution reinvestment plan will
be applied to the purchase of additional units.
We may make distributions of a fixed percentage of
investments on a quarterly basis during the first few years of
our operations. Because these distributions may exceed the
amount of cash we generate during this period, a part of the
distribution may constitute a return of the your 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.
RESERVES FOR OPERATING EXPENSES
Our 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 our costs and other obligations, it may be necessary to
sell properties, possibly on unfavorable terms. During the
holding period of a property, we may increase reserves to meet
anticipated costs and expenses or other economic contingencies.
If our managers determine that reserves are not necessary for
operations, the excess may be distributed to investors.
MANAGEMENT OF PROPERTIES
Our managers or their affiliates will manage each property,
and enforce the lease obligations of the tenants. The managers
will:
negotiate disputes with tenants;
relet 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 our 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
As an investor, you will have no voting rights with respect
to the establishment, implementation or alteration of our
investment objectives and policies, all of which are the
responsibility of our managers. Nevertheless, our 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.
14
THE PROPERTIES
We had not acquired any properties when this prospectus was
printed. Our 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 of proceeds available from this
offering, our managers intend to diversify the type and location
of properties we acquire. We have not placed any limitations 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 our manager's judgment,
that would be in the best interest of AEI Fund 24.
Our 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 our properties will be leased to tenants in the
chain or franchise restaurant industry, although there is no
prohibition on the acquisition of properties in other industries.
Currently, we expect that we may also acquire a limited number of
properties in the childcare or single tenant retail industries.
Our managers intend to monitor industry trends and invest in
properties that serve to provide the most favorable return
balanced with risk.
The restaurant industry is a large and growing segment of
the economy. Annual sales of the top 100 restaurant chains
exceeded $118 billion in 1999. 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, our managers believe
it offers some of the best sale leaseback investment
opportunities. Our managers believe that this industry includes a
number of companies and franchisees with established track
records that are attractive. Prior programs sponsored by our
managers or their affiliates have invested in properties leased
to entities, or franchisees of entities, such as the following:
Applebees Champps Arby's Marie Calender's
TGI Fridays Taco Cabana Perkins Denny's
ACQUISITION CRITERIA
In determining whether a property may be a suitable
acquisition, our 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 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 location, condition, use and design of the property and
its suitability for a long-term net lease;
15
The demographics of the community in which a property is
located;
The prospects for long-term appreciation of the property;
and
The prospects for long-range liquidity of the investment.
Acquisitions may vary from these standards if justified to
our managers.
PROPERTY UPDATES
During the offering period, if there is a reasonable
probability that a property will be acquired, we will supplement
this prospectus to disclose important information about the
property. Based upon the experience and acquisition methods of
our 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 we will
continue to provide investors with acquisition reports containing
substantially the same information regarding the properties
acquired. You should understand that you should not rely on the
initial disclosure of a proposed acquisition as our assurance
that we 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.
MANAGERS
FIDUCIARY RESPONSIBILITY
Our managers are accountable to us as fiduciaries and must
exercise good faith in handling our affairs. Our managers have
fiduciary responsibility for the safekeeping and use of all our
capital and assets, whether or not in the managers' possession or
control. Our managers are prohibited from employing, or allowing
any other person or entity to employ, our capital or assets in
any manner except for the exclusive benefit of our investors.
The managers will not be liable us or our 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
the actions were in the interest of AEI Fund 24 and not the
result of negligence or misconduct. We 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 our managers in connection
with registration of the units, we 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
Our managers will have the sole and exclusive right, power
and responsibility to manage our business, including, under
certain limited circumstances not involving the acquisition of
16
properties, the right and power to have it obtain loans secured
by its property. Our managers will make all of the investment
decisions, including:
decisions relating to the properties to be acquired,
the method and timing of any refinancing of such properties,
the selection of tenants,
the terms of leases on such properties, and
the method and timing of the sale of our interest in
properties.
Our managers will coordinate and manage all of our
activities, maintain our records and accounts, and arrange for
the preparation and filing of all our tax returns. Certain of the
administrative and management functions to be performed by our
managers may be delegated to their affiliates, provided that any
compensation to affiliates of our managers is at cost.
BACKGROUND AND EXPERIENCE OF MANAGEMENT
AEI FUND MANAGEMENT XXI, INC. AEI Fund Management XXI, Inc.,
our 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 24. The sole
shareholder and director of our manager is Robert P. Johnson, who
also serves as its President. Each of the officers of our 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 56 Sole Director, Chief Executive
Officer and President
Mark E. Larson 48 Chief Financial Officer,
Treasurer and Secretary
[Graphic: Picture of Robert P. Johnson]
ROBERT P. JOHNSON will also serve as our special managing
member. 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
17
be primarily responsible for supervising the accounting functions
of the manager and AEI Fund 24, including coordination of reports
to the SEC and investors.
AEI FUND MANAGEMENT, INC.
Most of our management services will be provided on behalf
of our manager 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 13 publicly syndicated, and 2
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 our
operations are not affected by operations of the other real
estate programs for which they provide services. AEI Fund
Management employs approximately 25 persons, two of whom are
engaged primarily in property acquisitions, two in property
management, three in property sales, seven in accounting and
financial reporting, seven in investor and dealer support
services and two in general administrative services. AEI Fund
Management, Inc. has the same officers as AEI Fund Management
XXI, Inc. Management services from AEI Fund Management, Inc. will
be billed to us directly.
PRIOR PERFORMANCE
During the past 28 years, Mr. Johnson and affiliates have
syndicated 13 public and 13 private net lease property investment
partnerships in the United States.
Since 1984, Mr. Johnson and affiliates have formed,
syndicated and now manage 13 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 24. The public
partnerships sponsored by Mr. Johnson and affiliates include the
following:
Fund Name Month Investment
Offering was 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
AEI Income & Growth
Fund 23 LLC March 01 $10,023,708*
* Represents proceeds raised throgh November 30, 2000
A total of approximately 15,000 investors purchased
interests in these partnerships.
The properties purchased by all of these partnerships were
new, or recently constructed, net leased commercial properties.
At October 31, 2000, approximately $215 ,000,000 of properties
had been purchased or were under contract for purchase. The
following table sets forth the geographic distribution of the 163
properties purchased, or under contract for purchase, by prior
public partnerships:
Alabama 4 Illinois 4 Michigan 7 New Mexico 1 Tennessee 3
Arizona 5 Indiana 5 Minnesota 12 North Caro. 3 Texas 43
Arkansas 1 Iowa 2 Missouri 5 North Dakota 1 Virginia 5
California 4 Kansas 1 Montana 1 Ohio 14 Wisconsin 4
Colorado 6 Kentucky 1 Nebraska 4 Oregon 1
Florida 6 Louisiana 4 Nevada 3 Pennsylvania 1
Georgia 4 Maryland 1 New Hamp. 1 South Caro. 3
[Graphic: Map of United States showing states where AEI funds own
properties]
By cost, approximately 73% were restaurants and the balance
were other retail properties. 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. These annual reports
are also available at the SEC's web site at www.sec.gov.
18
All but four 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 that acquired seven properties on a blind
pool basis, one is a private partnership that acquired four
properties on a blind pool basis and one is a private partnership
currently being offered to accredited investors on a blind pool
basis. 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 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. When a tenant defaults, 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 meet their lease obligations, rental
payments will likely be interrupted. Although this interruption
may cause a decrease in distributions of cash flow for a period
of time, the public partnerships have diversified their
acquisitions. Because of this, 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.
COMPENSATION TO MANAGERS AND AFFILIATES
AEI Fund Management XXI and AEI Fund Management will provide
nearly all of the operational services we require 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 other broker-dealers
that solicit subscriptions for the program. AEI Fund Management
will provide administrative services and we will reimburse it 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 our managing members, 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 describes the forms of compensation,
distributions and cost reimbursements that we will, or may, pay
to AEI Fund Management XXI, AEI Fund Management and AEI
Securities for their services in connection with our
organization, operation and liquidation, assuming the minimum
1,500 units and the maximum 24,000 units are sold. The following
arrangements were formulated by our 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 $720,000
Affiliates all acquisition expenses (3). maximum and $45,000
minimum, but subject to
the limitation (3).
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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 24'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.
19
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, we will reimburse our managers and their
affiliates at cost for administrative expenses in managing all
our operations. These expenses include costs they incur providing
services for the acquisition, leasing and operation of our
properties, including:
the salaries, fees and expenses paid to employees and
consultants of our managers and their affiliates for work they
perform on our behalf;
office rent, telephone, travel, employee benefit expenses
and other expenses attributable to providing such services.
Our managers allocate and charge us for a majority of these
expenses based on the number of hours devoted by their employees
to our affairs, as recorded on employee daily time records. They
allocate some expenses at the end of each month based upon the
number of our investors and our capitalization as compared to
other programs that they manage. Our managers have committed that
they will not obtain expense reimbursements for general overhead
and for controlling person expense to the extent the
reimbursements exceed, together with Front-End Fees and sales
expenses, the sum of 20% of capital contributions, 5% of revenues
from properties, a 3% sales commission, and 7% of net cash flow.
We will not pay real estate commissions to our managers or
their affiliates for the purchase or sale of any of our
properties. We will, however, compensate our managers and their
affiliates at their cost, subject to the limitations set forth in
the preceding table and in Section 6.2 of our 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. We will not pay
acquisition fees to our managers. Further, we will not compensate
our managers or their affiliates for services not described in
the table above.
CONFLICTS OF INTEREST
We will be subject to actual and potential conflicts of
interest arising out of relationships with our managers and their
affiliates. These conflicts include:
LACK OF ARM'S-LENGTH NEGOTIATIONS WITH MANAGEMENT
Our managers may realize income from AEI Fund 24 during our
operations and upon our liquidation. Our agreements and
arrangements with the managers, including those relating to
compensation, were not negotiated at arm's-length. The interests
of our managers and our investors with respect to the timing and
price of any sale may also conflict because a significant portion
of our managers' compensation will not be payable until the sale
of properties.
20
OTHER REAL ESTATE ACTIVITIES OF MANAGERS
Our managers and their affiliates are actively engaged in
the commercial real estate business as general partners in other
programs. Mr. Johnson also intends to have his company offer
additional real estate programs in the future. We will not have
independent management but will rely on our managers and their
affiliates for our operations. Our managers will devote only so
much of their time to our business as, in their judgment, is
reasonably required. We anticipate that, although Mr. Johnson may
devote approximately 30% of his time to our business while we are
offering units and acquiring property, he may devote less than
10% of his overall work time after properties are acquired. The
allocation by our managers of their time, services and functions
among current programs and future programs they might sponsor, as
well as other business ventures in which they may be involved,
may create conflicts of interest. Our managers believe that they
have, or can retain directly or through affiliates, sufficient
staff to 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
Our managers and their affiliates may engage in other
business ventures, including forming and sponsoring other public
or private programs, and neither AEI Fund 24 nor any of our
investors will be entitled to any interest in those programs.
It is possible that we will periodically have money
available to acquire additional properties at the same time as
other programs sponsored by our managers or their affiliates. If
this happens, conflicts of interest will arise as to which
program should acquire a particular property. Our 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 are 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, the
property will be acquired by the program that first reached its
minimum investment level. Any other conflicts will be resolved by
our managers in their sole discretion.
Conflicts of interest may arise when we attempt to sell or
rent our properties. Our managers may sell less than a 100%
interest in a property and we may then own a fractional interest
in that property. Our managers may be forced to choose between
selling a property we hold and a property held by the manager or
by an affiliated program. Such conflicts will be resolved by our
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.
Our managers may allow the sale of a fractional interest they
hold or that is held by an affiliated program prior to the sale
of an interest we hold. We cannot assure you 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
We may invest in property jointly with another program
sponsored by our managers or their affiliates under the
conditions described in "Investment Objectives and Policies-Joint
21
Venture Investments." In such a situation, conflicts of interest
could arise between the joint venture partners.
MANAGER'S REPRESENTATION OF FUND IN AUDIT PROCEEDINGS
Our managing member will act as the "tax matters partner"
pursuant to Section 6231 of the Internal Revenue Code. This
grants our manager discretion and authority regarding extensions
of time for assessment of additional tax against the investors
related to our 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 our investors. Any decisions made by
our managers with respect to these matters will be made in good
faith consistent with its fiduciary duties to us and our
investors. Our managers, to the extent its actions as tax matters
partner are in good faith and reasonably intended to be in our
best interests and subject to the indemnification and exculpation
language contained in our Operating Agreement, may be entitled to
indemnity for liability incurred as a result of their actions on
tax matters. See Exhibit A, Section 6.5 at Page A-14.
LACK OF SEPARATE REPRESENTATION
Our managers and our investors are not represented by
separate counsel and our managers' counsel has formed and will
provide services to the managers relating to AEI Fund 24. The
attorneys and accountants who will perform services on behalf of
the managers also perform services for AEI Securities, Inc. and
other affiliates of the managers. Without independent legal
representation, you might not receive legal advice regarding
matters that might be in your interest but contrary to the
interest of our managers and their affiliates. Should a dispute
arise between AEI Fund 24 and our managers or their affiliates -
or should negotiations or agreements between AEI Fund 24 and our
managers, other than those existing or contemplated on the
effective date of this prospectus, be necessary - our managers
will cause AEI Fund 24 to retain separate counsel. Any future
agreement between AEI Fund 24 and the managers or their
affiliates will provide that it may be terminated at the option
of AEI Fund 24 upon 60 days' notice without penalty to AEI Fund
24.
AFFILIATION OF SELLING AGENT
AEI Securities, an affiliate of our managers, 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
Our managers and their affiliates are reimbursed at their
cost for the services they perform on our behalf. 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.
22
CASH DISTRIBUTIONS AND TAX ALLOCATIONS
CASH DISTRIBUTIONS
Our managers intend to make distributions of available net
cash flow, if any, within 30 days after the end of each fiscal
quarter. Our objective is to acquire net leased properties which
will generate partially "tax deferred" cash distributions to you.
Any net cash flow from operations for each fiscal year will be
distributed 97% to investors such as you and 3% to our managers.
When we refinance, sell or otherwise dispose of any of our
properties, we are allowed to reinvest the net proceeds from the
sale or refinancing in other properties. If we do not reinvest,
we will distribute the net proceeds from the sale or refinance as
follows:
First, 99% to the investors and 1% to the managers until the
investors have received an amount from net sales proceeds equal
to the total of their capital contributions (adjusted for
previous distributions from sale) plus an amount equal to a 7%
per annum return on their adjusted capital contributions,
cumulative but not compounded, to the extent the 7% return has
not been previously distributed to them from sales proceeds or
cash flow.
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 our 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, we will allocate 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, as follows:
net loss will 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 will be allocated to the managers; and
net income will be allocated 97% to the investors and 3% to
the managers.
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);
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; and
the balance of any remaining gain will then be allocated 90%
to the investors and 10% to the managers.
For income tax purposes, any loss on the sale, exchange or other
disposition of any property shall be allocated 99% to the
investors and 1% to the managers.
23
INCOME TAX ASPECTS
Federal income tax laws and regulations as they apply to us
are complicated and are only summarized below. As a potential
investor, you are urged to consult with your own counsel and
accountants about the state and federal income tax consequences
of ownership of units. You should realize that periodic
consultations about your individual tax situation 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 our managers, has rendered
an opinion on the material federal tax issues relating to an
investment in our units that involve a reasonable possibility of
challenge by the Internal Revenue Service. Where such an opinion
cannot be rendered with respect to a material tax issue, Dorsey &
Whitney LLP has described the reasons for its inability to opine.
As described below, counsel has not rendered an opinion on
federal tax issues whose outcome depends upon facts and
circumstances that will be determinable or will arise only in the
future. In particular, counsel has rendered no opinion 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 we will be characterized as a "dealer" in real
estate at the time of sale or disposition of our properties;
whether our properties will be considered to be "held for
investment";
whether the leases we enter into will be "true leases" or
will be "stepped payment leases" for purposes of determining
whether we will be considered an "owner" of properties entitled
to take depreciation and other deductions and for purposes of the
timing of recognition of rental income; and
whether our allocation of start-up, organization,
syndication and acquisition 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 24 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 24 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 24 or the managers and the risks of changes in tax
laws, rules, regulations and interpretations.
24
GENERAL
We have not been formed to serve as a "tax shelter." We
provide a tax advantaged form of investment primarily because:
we avoid two levels of taxation by using a "pass-through"
organizational structure;
we "defer" some taxes because some of the cash we generate
in early years can be offset for tax purposes by non-cash
depreciation and amortization charges; and
most of the income (from rents) that we might generate is
"passive income" that can be offset by passive losses from
other sources.
There are, however, a number factors that can affect our ability
to achieve these benefits, the timing of the benefits and the
taxes you might have to pay. These are described below.
PARTNERSHIP STATUS
We have been formed as a limited liability company to allow
our investors to obtain a direct pass-through of their pro rata
share of our operating results. 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 share of our profits, losses, gains, income,
deductions and credits. Subject to limitations, including
limitations on passive activity losses, each investor and manager
may deduct his or her share of our 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 24 as of the
end of such year. Likewise, each investor and manager must
include his or her distributive share of any of our taxable
income for each year with his or her other taxable income whether
or not he or she has received cash distributions from us during
the year.
We have received an opinion from our managers' legal counsel
that we will be treated as a partnership for federal income tax
purposes and will not be treated as an "association" taxable as a
corporation. In rendering this opinion, counsel has relied on the
existing tax regulations and our representation that we will not,
for any period, elect to be treated as an association taxable as
a corporation.
Under the Internal Revenue Code, if more than 90% of our
income is from "passive-type investments," we can be treated as a
"publicly traded partnership" and taxed as if we were a
corporation. If this were to happen, most of our income would be
treated as "portfolio income" and could not be offset by passive
losses.
IRS Regulations provide several "safe harbors" from publicly
traded partnership status for partnerships interests that are not
traded on an established securities market or readily tradable on
a secondary market or the substantial equivalent. On the basis of
these safe harbors, and based on the provisions of our operating
agreement, and provided transfers of interests are made only in
accordance with those provisions, counsel to our managers is of
the opinion that we will not be considered a publicly traded
partnership.
FACTORS THAT CAN AFFECT THE AMOUNT, TIMING AND ALLOCATION OF
INCOME AND LOSSES.
ALLOCATIONs. Our operating agreement allocates to each
investor and manager his or her distributive share of income,
gain, loss, deduction, or credit. Whether these allocations will
be respected for federal income tax purposes depends upon whether
they have "substantial economic effect" under applicable IRS
regulations. If the allocations do not have substantial economic
25
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 24 they hold rather than
in accordance with the contractual allocation.
Because the application of the law concerning substantial
economic effect to the allocations that may be made under our
operating agreement is uncertain, counsel has not rendered 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 our operating agreement) throughout our existence and that the
after-tax economic consequences of the allocations made in our
operating agreement do not violate the "substantiality"
requirement imposed by IRS regulations, counsel is of the opinion
that it is more likely than not that allocations made under the
operating agreement will have substantial economic effect.
Counsel is unable to render an opinion on the allocation of
losses or deductions 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.
DEPRECIATION DEDUCTIONS. 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 these deductions. We will claim
depreciation, cost recovery and amortization deductions on the
properties we acquire. Although these deductions will reduce our
taxable income, they will also reduce our adjusted basis in the
properties, and increase the potential gain (or decrease the
potential loss) when the properties are sold.
Because they will consist solely of commercial properties,
we will depreciate most of our real property over 39 years using
the straight-line method (although some of our property may be
tax-exempt use property that must be depreciated over a 40-year
period). A small portion of the properties we purchase is
expected to be fifteen-year or 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 we cannot assure you that the allocations made by
our managers will be accepted by the IRS. Because none of our
properties have been acquired and the issue depends on facts that
are not yet determined, counsel has not rendered an opinion on
this issue. Adjustment of the allocation of the purchase price of
a property could decrease depreciation deductions thereby
increasing taxable income or decreasing losses we recognize and
pass on to our investors.
THE FORM OF OUR LEASES. Although we anticipate that we will
be treated as the "owner" of our properties, the IRS has taken
the position in some situations that lease transactions should be
treated as financing transactions. If one of our leases were to
be considered a financing transaction for federal income tax
purposes, we would not be treated as the owner and would not
entitled to take depreciation and other deductions on our
investment. Although we intend to use leases that will result in
our being treated as the owner of the leased property because we
have not yet entered into any leases, counsel has not expressed
an opinion on our status as owner and lessor of properties.
Further, 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. This can occur
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. Prior programs sponsored by our managers have entered
into leases of this type. In certain instances, these agreements
may require accrual of a constant amount of rental income despite
26
changes in rental rates or may require recapture on the
disposition of the property subject to the lease. Because we have
not yet entered into any leases, we cannot tell you whether this
treatment will apply. If we enter into a lease that requires
accrual of a constant amount, such an accrual could result in
recognition of a greater amount of income than we receive in some
years.
ORGANIZATION AND SYNDICATION COSTS AND OTHER PAYMENTS TO OUR
MANAGERS. Our managers and their affiliates will be reimbursed
for costs they incur on our behalf. These reimbursements will
include the costs of forming, managing and selling units in AEI
Fund 24, and related general and administrative costs. Our
managers will categorize these reimbursements as start-up,
syndication, organization, management or acquisition costs.
Although the Internal Revenue Code allows deduction of amounts
paid to organize AEI Fund 24 ("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
our managers' determination of the classification of costs, and
because the issue is factual in nature, 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 our 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, the IRS could
allege that some of those expenses are not currently deductible.
Counsel has not issued an opinion on the deductibility of these
expenses because their deductibility is a factual issue.
BASIS OF FUND INTEREST. Subject to the "at risk rules" and
the "passive activity loss limitations" that are described in
greater detail below, an investor will generally be allowed to
deduct his or her share of our losses 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 plus the investor's pro rata share of indebtedness as
to which neither AEI Fund 24 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 24 will qualify as
amounts "at risk."
An investor's adjusted basis of his or her units will
increase by the investor's share of our income for each year and
decrease by his or her share of our losses and by distributions
of cash and other property we make to the investor. The
investor's share of any reduction in principal of our
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.
Distributions of cash to an investor that are not made when
we are liquidating will, in most cases, be treated 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.
27
SALES OF FUND PROPERTY AND FORECLOSURE. If we sell a
property, gain will be recognized to the extent that the amount
realized from the sale exceeds our 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 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. These 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 24 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.
LIQUIDATION. When we are liquidated, you will recognize
taxable gain to the extent that any money distributed to you
exceeds the adjusted basis of your units. You will recognize a
loss only if you receive liquidation distributions consisting
solely of money, unrealized receivables or inventory items and
then only to the extent that the adjusted basis of you units
exceeds your basis in the items we distribute.
THE AFFECT OF YOUR TAX STATUS ON INCOME AND GAIN WE GENERATE
The provisions of the Code discussed below may have tax
consequences to investors beyond their investment in AEI Fund 24,
and the applicability of such provisions to an investment in AEI
Fund 24 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.
SALE OF YOUR 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. You might
have to report ordinary income, however, to the extent that:
we have "unrealized receivables and inventory items" at the
time you sell your units, including depreciation recapture
property or items that are not a capital asset or because
we are considered a "dealer" in such property;
we have nonrecourse partnership liabilities on properties
at the time of your sale that would create additional gain
or ordinary income for you. Your gain on the sale or exchange
of units can exceed the cash proceeds from the sale, and the
28
income taxes payable with respect to such gain also may exceed
the cash proceeds.
you make a gift of your units at a time when your share of
our nonrecourse liabilities exceeds your basis of the units.
Because of the complexities and added expense of the tax
accounting required to implement special elections to adjust the
basis of a transferee in units, we do not intend to make "Section
754" elections when an investor sells units. You may have greater
difficulty selling your units or may realize a lower sales price
because the purchaser will obtain no current tax benefits from
his investment to the extent that his cost of the investment
exceeds his allocable share of AEI Fund 24's basis in its assets.
LOSSES AND CREDITS FROM PASSIVE ACTIVITIES. Our manager
intends to conduct our operations in a manner that will cause
most of the income you derive from our real estate rental
activities to constitute "passive activity income." Our
managers' counsel has rendered an opinion that it is more likely
than not that our income from rental activities will constitute
passive activity income. Under the Internal Revenue Code, losses
and credits from a "passive activity" are deductible only against
the income and gain from 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 you
dispose of our units or we are liquidated, any passive activity
losses that you have not deducted, together with any losses
caused by the disposition or liquidation, will deductible: (1)
first against passive income or gain from AEI Fund 24, (2) next
against income or gain from other passive activities and (3)
lastly against any other income or gain.
The interest income we earn on the investment of the
proceeds of this offering before we purchase properties and the
interest income we earn on other working capital investments will
be treated as portfolio income. You will not be able to deduct
losses from passive activities (for example, our rental
activities) from your share of income we derive from these
portfolio income items.
MINIMUM TAX. Passive losses, such as operating losses we
might generate, are not allowed as a deduction from alternative
minimum taxable income to the extent they exceed alternative
minimum taxable income from passive activities. The amount of any
passive loss that is disallowed 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. You should consult you tax advisor about
the effect of the alternative minimum tax on your tax position.
TAX AUDIT, RETURNS AND PENALTIES
Our managers will arrange for the preparation and filing of
all our tax returns. The managers also will serve as the "tax
matters partner" under the Internal Revenue Code. As tax matters
partner, our manager will have discretion and authority regarding
extensions of time for assessment of additional tax against you
caused by AEI Fund 24 and regarding settlement or litigation of
controversies involving federal tax. This is significant because
controversies regarding determination of taxable income will be
resolved, under regulations, through settlement or litigation at
the AEI Fund 24 level. You will be required to report any item of
income, gain or loss consistently with the way we report the
item, unless you include a specific explanation of the
inconsistency in your income tax return.
29
If you have an interest of 1% or more in our revenues you
will receive notice of any tax controversy from the IRS. You will
have the right to participate in settlement or litigation of any
tax controversy if such right is exercised timely. If you do not
reserve your right to reject settlements accepted by our manager,
you 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 you for understatement of tax if there
was not "substantial basis" for the treatment claimed by AEI Fund
24.
FOREIGN INVESTORS
Although this discussion is not intended to describe foreign
or federal tax consequences of an investment in AEI Fund 24 by
foreign investors, you should understand 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 the taxpayers were
engaged in a trade or business in the United States. If we
dispose of properties or if a foreign investor disposes of units
in AEI Fund 24, the foreign investor may be subject to tax and
withholding as a result of the disposition.
We are required to withhold federal income tax on 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. We are 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 we may acquire properties. You should consult with your
own tax counsel about the state income tax consequences in your
state of residence.
RESTRICTIONS ON TRANSFER
We do not expect a public market for the units to develop.
You should not expect to be able to easily sell your units or use
them as collateral for a loan. If you wish to transfer units, you
might not be able to find a buyer due to market conditions or the
general illiquidity of the units. Moreover, if you are able to
sell units, depending upon the price negotiated, you might
receive less than your original investment. We cannot assure you
that the units can be resold for their original purchase price.
Our operating agreement allows transfers, other than
"permitted transfers," only if they comply with certain safe
harbors created by the IRS from treatment as a "publicly traded
partnership" for tax purposes.
Our operating agreement also prohibits us from transferring
units that you sell unless you confirm, directly and not through
a power of attorney, that you knew the repurchase price that we
were offering when you agreed to sell the units. The operating
agreement provides that your agreement to sell your units without
this information is void. Our operating agreement requires this
information because our managers believe that investors in
affiliated funds have been defrauded into selling units at well
below their value by persons who withheld this information.
30
You must also provide us with 15 days notice before you can
complete a sale of your units. We have the right to purchase
your units on the same terms you propose to sell them to a third
party by notifying you during this 15 day period. This may
render it more difficult for you to sell your units.
Under our operating agreement, we will require any
substituted investor to agree in the instrument of assignment to
become an investor and to pay reasonable legal fees and filing
costs in connection with his substitution as an investor. We will
recognize transfers of units only as of the last day of the month
in which we receive written evidence regarding the assignment in
form satisfactory to our managers.
SUMMARY OF OPERATING AGREEMENT
Your rights as a member in AEI Fund 24 are established and
governed by the operating agreement that is enclosed with this
prospectus as Exhibit A. The subscription agreement that you must
sign to invest includes a power of attorney that gives our
managers the power to sign the operating agreement on your
behalf.
This section of the prospectus summaries some of the
provisions of the operating agreement. It is not, however, as
complete or as detailed as the Operating Agreement itself. You
should carefully review the operating agreement with your
advisors.
Some provisions of the Operating Agreement are described in
other sections of this prospectus:
For a discussion of compensation and payments to our
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 our 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."
TERM AND DISSOLUTION
Our operating agreement provides that we will be dissolved
and liquidated at any of the following times or events:
December 31, 2051;
The decision of investors holding a majority of the units;
The final sale or disposition of our assets;
The final decree of a court that dissolution is required
under law; or
If our managers withdraw without a successor either being
appointed.
RETURN OF CAPITAL
Prior to dissolution and liquidation, you will not have the
right to demand the return of your investment unless we are
unable to fully utilize the offering proceeds, either by
purchasing properties or through joint ventures with other
similar programs.
31
VOTING RIGHTS
As a limited member, you will have the right to vote on and
approve the following matters:
Amendments to our operating agreement;
Removal of either or both of our managers;
Election of a new manager;
The sale of all or substantially all of our assets; or
Dissolution by our 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 our managers may
not be approved without their consent.
MEETINGS
Periodic meetings of our investors are not required and we
currently do not intend to hold meetings. Our managers may,
however, call a meeting at any time and are required to call a
meeting if investors holding at least 10% of the units properly
request a meeting. After receipt of a request for a meeting, our
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).
REPURCHASE OF UNITS
Starting 36 months after the date of this prospectus, and
subject to certain conditions discussed in the operating
agreement, we will repurchase an investor's unit(s) upon a proper
written request. The repurchase price will be equal to 80% of the
net value per unit, as estimated by our manager. For these
purposes, our manager will base the net value per unit 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.
Our managers will calculate and make available to you on as
soon as possible after first business day of January and July of
each year the price at which units may be presented for
repurchase. Our 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.
You will be allowed to present your units for repurchase
during two different periods in each year. If you want your units
repurchased, you must submit notification of the number of units
you want repurchased on a form provided by our manager. You must
mail the notice after January 1 but before January 31, or after
July 1 but before July 31 of the year of repurchase. If investors
tender units totaling more than 2% of the units outstanding at
the beginning of the purchase period, we will honor repurchase
requests with the earliest postmarks first. We will repurchase
units on March 31 and September 30 of each year based on the
value at the beginning of the repurchase period. You will not be
entitled to distributions from the beginning of the repurchase
period to the date of repurchase and any distributions you
receive will be deducted from the repurchase price that is paid
to you. 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.
32
We are not obligated to repurchase any unit(s) if doing so
would, in the discretion of our managers, impair our operations.
We will fund repurchases out of either revenues otherwise
distributable to investors or borrowings. We cannot assure you
that revenues or borrowings will be available for repurchases,
that we will be able to repurchase any or all of the units
tendered, or that our 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
We have established a distribution reinvestment plan for
investors who elect in writing to have their distributions of our
cash reinvested in additional units during the period of this
offering. Our managers, in their discretion, may decide at any
time to terminate the reinvestment plan. Our reinvestment plan
allows participating investors to directly purchase units at the
public offering price of $1,000 per unit.
No distributions accruing 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. All
other distributions to participants in the reinvestment plan will
be reinvested within 30 days after the date of the distribution,
provided that:
the sale of units continues to be registered or qualified
for sale under federal and applicable state securities laws;
each participant has received a current copy of this
prospectus, including any supplements, and has executed a
confirmation within one year of such reinvestment indicating
his or her intention to purchase units and 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 this
offering. If one of the requirements described above is not
satisfied, distributions will be paid in cash to participants
rather than used in the reinvestment plan.
If you participate in the reinvestment plan you must agree
that, if you at any time fail to meet our suitability standards
or cannot make the other investor representations contained in
our current prospectus, the subscription agreement, or the
operating agreement, you will promptly notify us in writing.
You should understand that affirmative action is required to
change or withdraw from 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 our managers of written notice of change or
withdrawal. In the event you transfers your units, the transfer
will terminate the your participation in the reinvestment plan as
of the first day of the quarter in which the transfer is
effective.
We will pay selling commissions of up to 10% on units
purchased with reinvested distributions. If you participate in
the reinvestment plan you will be permitted to identify, change
or eliminate the name of your account executive at a
participating dealer for any distribution. If you do not identify
an account executive, or if your account executive is not
employed by a broker-dealer with which we have a dealer
agreement, no selling commission will be paid on your reinvested
distribution, and we will retain for additional investment in
real estate any amounts otherwise payable as commissions. All
33
holders of units, based on the number of units outstanding, will
receive the benefit of the savings we realize from investors who
do not identify account executives.
We will not charge or offset any reinvestment fee against
any reinvested distributions under the reinvestment plan. The
cost of administering the reinvestment plan will be considered an
organization and offering cost and the actual cost of
administering the reinvestment plan may be reimbursed to our
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 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.
We reserve 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. Our 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 24 in interests of a program having
substantially identical investment objectives as AEI Fund 24, if
affiliates of our managers publicly offer the program interests
after the termination of the offering of units under this
prospectus. Investors would be allowed to reinvest distributions
from AEI Fund 24 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.
Our managers are not obligated to continue the offering of units
or to offer units in any subsequent real estate programs or
permit reinvestment therein.
LIABILITIES OF INVESTORS
You will not be liable for any of our obligations in excess
of the capital you agree to contribute by signing a subscription
agreement, plus your share of undistributed net income. If,
however, you receive a return of your capital contribution you
will be liable, for a period of one year if the capital
contribution was returned, for any obligations to creditors who
extended credit, or whose claims arose, before your capital
contribution was returned, but not in excess of the returned
capital contribution with interest, necessary to discharge the
liabilities. You will not have the right to a return of your
capital contributions except in accordance with the distribution
and repurchase provisions of our operating agreement.
34
RIGHTS, POWER AND DUTIES OF THE MANAGERS
Our managers will have the exclusive right to manage our
business. Our managers will be responsible for the selection,
acquisition, sale, refinancing and leasing of all our properties.
The rights, powers and duties of our managers may be delegated or
contracted to an affiliate of the managers at cost. AEI Fund
Management XXI, Inc. will initially serve as our manager.
WITHDRAWAL OR REMOVAL OF A MANAGER
AEI Fund Management XXI (the manager), and during the first
twenty four months of our operations Robert P. Johnson (the
special managing member) may not, withdraw from AEI Fund 24
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
You will not have the right to substitute an investor in
your place unless you have represented to us that you have
received information necessary to make a decision to assign your
units, including information about the most recent repurchase
price units, and unless the substituted investor has agreed in
the instrument of assignment to become an investor, has paid all
expenses in connection with admission as a substituted investor.
An assignee who does not become a substitute investor will only
have the right to receive the distributions from AEI Fund 24 to
which the assigning investor would have been entitled if no such
assignment had been made. The assignee will have no right to
require any information or account from us or to inspect our
books.
APPOINTMENT OF MANAGERS AS ATTORNEYS-IN-FACT
By signing the subscription agreement, you will irrevocably
constitute and appoint our managers as your attorney-in-fact,
with power to execute documents necessary to carry out the
provisions of our operating agreement.
"ROLL-UPS"
Our 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 our
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 24 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 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 our managers.
Our operating agreement provides, in material part, that we
may not participate in any roll-up that would:
reduce the democracy rights of our investors;
35
impede the ability of the equity owners of the resulting
entity to purchase the securities of that entity;
limit the voting rights of our 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 24.
Further, our operating agreement requires that we obtain an
appraisal by a competent independent expert of our assets, based
on all available information and assuming an orderly liquidation
of our assets, in connection with any roll-up that we summarize
for investors. If the appraisal is included in a roll-up
prospectus, it must be filed with securities authorities and we
will have liability for misrepresentations or omissions that it
contains.
A roll-up requires the vote of holders of not less than a
majority of the units. Our operating agreement provides that an
investor who votes against the roll-up must be given the option
of accepting securities in the resulting entity or accepting
either cash for the investor's units at the pro rata appraised
value of our assets or the ability to retain the investor's
interest in AEI Fund 24 on the same terms and conditions as
existed previously.
REPORTS TO INVESTORS
Our books and records will be maintained at our principal
offices and will be open for examination and inspection by our
investors during reasonable business hours. We will furnish a
list of names and addresses and number of units held by investors
to any investor who requests the 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 the assignee is
admitted as a substitute member in accordance with our operating
agreement.
Within 75 days after the close of each taxable year, we will
distribute all information relating to AEI Fund 24 that is
necessary for the preparation of your federal income tax returns.
We will issue a separate valuation report solely for purposes of
asset evaluation by tax-qualified plans.
Within 120 days after the end of each fiscal year, we will
also distribute to you 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 our activities
during the period reported upon. The annual report will describe
all reimbursements to our managers and their affiliates and all
distributions to investors, including the source of the payments.
Within 60 days after the end of each quarter, we will also
distribute to you 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 our managers or their affiliates and describing the
services rendered for these fees.
Our 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
36
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, we
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. Our managers are permitted to combine such
reports so long as they are distributed in a timely manner.
PLAN OF DISTRIBUTION
We are offering, through AEI Securities, as the manager of a
syndicate of broker-dealers that will solicit purchase of units,
$24,000,000 of our limited liability company interests in the
form of 24,000 units of $1,000 each. You must purchase a minimum
of two and one-half units ($2,500) to invest, 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 of
this prospectus. We will not sell any units unless we receive
subscriptions for at least 1,500 within one year after the date
of this prospectus.
To invest, you will be required to accept and adopt the
provisions of the operating agreement attached to this prospectus
as Exhibit A and to complete and sign the subscription agreement
attached as Exhibit D. At the time you submit a subscription
agreement, you must submit a check for $1,000 for each Unit you
are purchasing. Checks should be made payable to "Fidelity Bank-
AEI Fund 24 Escrow." We will sell units to you only if you
represent in writing that, at the time you sign the subscription
agreement, you meet the suitability requirements described under
"How to Invest" above.
We will deposit all funds received from investors in an
escrow account with the Fidelity Bank, Edina, Minnesota until
$1,500,000 has been deposited. Purchases by our managers and
their affiliates will not be counted for purposes of meeting this
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. An investor
may not withdraw his funds from the escrow account. When we have
received subscriptions for the minimum number of units, our
managers may remove funds from escrow and instruct the escrow
agent to pay accrued selling commissions. After this initial
release from escrow, the escrow account will convert to a
convenience clearing account for our use.
Upon admission to AEI Fund 24, you will receive your pro
rata share of any interest earned on escrowed funds based on the
date of deposit of your 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, we 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 five business days prior
to each admittance date will be admitted as limited members on
such date.
Our managers have complete discretion to reject any
subscription agreement within 30 days of its submission. Funds
from a rejected subscriber will be returned within 10 days after
rejection. 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 24. Our managers and their
37
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. We will pay AEI Securities 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.
We will indemnify the broker-dealers that act as
participating dealers and their controlling persons, 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. We will also
reimburse our managers for certain expenses incurred by them in
connection with the supervision and monitoring of the
organizational and pre-sale activities of AEI Fund 24.
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 include a brochure, video, slide
presentation and transmittal letter prepared by our managers
describing AEI Fund 24 and our proposed operations. In certain
states, all sales materials may not be available. Except for
these materials, sales materials have not been authorized for use
by our managers and should be disregarded.
This 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 24 nor the managers are parties to any
pending legal proceedings that are material to AEI Fund 24.
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 24 LLC and
AEI Fund Management XXI, Inc. as of and
and , 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-Federal Income Tax Risks" have been reviewed by Dorsey &
Whitney LLP, counsel for our managers, 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
38
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
24 by counsel our managers, Dorsey & Whitney LLP.
INDEPENDENT AUDITOR'S REPORT
To the Partners
AEI Income & Growth Fund 24 LLC
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI
Income & Growth Fund 24 LLC as of December 7, 2000. 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 statement 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 24 LLC as of December 7, 2000 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
December 7, 2000
AEI INCOME & GROWTH FUND 24 LLC
BALANCE SHEET
December 7, 2000
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.
AEI INCOME & GROWTH FUND 24 LLC
NOTES TO THE BALANCE SHEET
DECEMBER 7, 2000
(1)Summary of Organization and Significant Accounting Policies -
Organization
AEI Income & Growth Fund 24 LLC (the LLC), a Limited
Liability Company, commenced operations on December 7,
2000 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 2051.
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 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.
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
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.
31
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.
EXHIBIT A
OPERATING AGREEMENT
OF
AEI INCOME & GROWTH FUND 24 LLC
TABLE OF CONTENTS
Article Page
I. Formation of Limited Liability Company A-1
II. Definitions A-1
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-12
VII. Provisions Applicable to Limited Members A-19
VIII.Books of Account; Reports and Fiscal Matters A-21
IX. Assignment of Limited Member's Interest A-24
X. Death Withdrawal, Expulsion and Replacement
of the Managing Members A-26
XI. Amendment of Agreement and Meetings A-27
XII. Dissolution and Liquidation A-28
XIII.Miscellaneous Provisions A-29
OPERATING AGREEMENT
OF
AEI INCOME & GROWTH FUND 24 LLC
THIS OPERATING AGREEMENT is entered into as of this
day of , 2001 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 24 LLC.
1.2 AGENT FOR SERVICE. The agent for service of process is
The Corporation Trust Company. The location of the 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, 2051, 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.
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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,
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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 Per Unit" means the aggregate value of the
Company's assets less the Company's liabilities, and less the value
attributable to the interest of the Managing Members, divided by
the number of Units outstanding. Such aggregate value shall be as
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determined by the Managing Members, 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 , 2001.
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
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"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
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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, Inc. 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 five business 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
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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
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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
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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 97% to
the Limited Members, 1.8% to the Managing Member and 1.2% to the
Special Managing Member.
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:
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(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 99% to
the Limited Members and 1% to the Managing Members.
5.4 DISTRIBUTION OF NET PROCEEDS OF SALE. Upon 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, 6% 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)
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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
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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
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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
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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.
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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, (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
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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 not
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:
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(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
similar 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.
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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.
(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, Inc. 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, Inc. 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
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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,
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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.
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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 (hereafter, a "Repurchase Date"), 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 Per Unit as of
the preceding December 31 (in the case of purchases as of March
31) or June 30 (in the case of purchases as of September 30)
(such dates being hereafter referred to as a "Determination
Date"), and less any distributions to the tendering Limited
Member after the Determination Date and prior to the Repurchase
Date. The Managing Members shall publish the repurchase price
offered for Units based on its determination of the Net Value
Per Unit as soon as possible after each Determination Date. 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
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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 formation 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
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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
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
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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, prominently displayed in type size no less than
14 point; PROVIDED, HOWEVER, that the Managing Member may not
refuse to provide the list if the materials contain the foregoing
information because it is not otherwise satisfied with the
materials to be sent. 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 LIMITATIONS ON TRANSFER RELATED TO TAX STATUS. 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).
9.2 PROTECTIVE PROVISIONS RELATING TO TRANSFER FRAUD. No
Limited Member shall be obligated to sell, assign or transfer any
Units or any other interest in the Company, prior to receipt of
adequate disclosure relating to the Company. The Company shall
provide to any Limited Member, upon request and without charge,
prior to the date of any transfer, copies of the most recent
reports (forms 10-Q, 10-K etc.) filed by the Company with the
Securities and Exchange Commission, together with information
relating to the Net Value Per Unit as of the most recent
Determination Date. Other than pursuant to a Permitted Transfer, no
Limited Member shall transfer any part of his or her interest in
the Company, and no such transfer or assignment or any agreement
executed by a Limited Member with respect to such transfer or
assignment shall be recognized by the Company but shall be null and
void, unless such Limited Member shall have confirmed in writing to
the Managing Member that he or she received and reviewed such
information relating to Net Value Per Unit at least 24 hours prior
to execution of any such agreement of transfer, and has received
copies of such reports as he or she may have requested. For
purposes of the foregoing, confirmation on behalf of a Limited
Member by power of attorney shall not be effective unless the
attorney so appointed provides proof acceptable to the Managing
Member of the Limited Member's incapacity to provide confirmation
directly.
9.3 RIGHT OF FIRST REFUSAL. Except with respect to (A)
Permitted Transfers, (B) Qualified Matching Service Transfers, or
(C) transfers pursuant to the repurchase provisions of section 7.7
of this agreement, no Member (the "Offering Member") may assign,
transfer, convey or otherwise dispose of all or any part of any
Unit directly or indirectly unless such Member shall give have
given notice ("Offer Notice") in writing to the Company, setting
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forth the number of Units (the "Offered Units") to be Transferred,
the consideration (the "Offer Price") for which such Units would be
Transferred and the name of the proposed transferee. Subject to the
terms and conditions hereinafter set forth, the Company shall have
the right to purchase all but not less than all of the Offered
Units at the Offer Price. The Company may exercise such right by
delivering to the Offering Member its election to exercise within
15 days after the date on which the Company has received the Offer
Notice. Subject to the limitations set forth in Section 9.1 (which
shall be controlling), the closing of any such purchase by the
Company shall occur within 60 days of such exercise by delivery of
payment on the same terms as specified in the Offer Notice.
Offered Units purchased by the Company shall be canceled. Unless
all Units are purchased pursuant to the option granted in this
Section 9.3, the Offering Member shall be free, for a period of 90
days after the expiration of such fifteen day period, to sell the
Offered Units to the proposed transferee on the same terms as were
described in the Offer Notice. Unless the transfer is approved by
the Managing Member in accordance with this Article IX and the
transferee acknowledges in writing that he, she or it is bound by
the terms of this Agreement as provided in Section 9.5, the
transferee shall not become a Member of the Company but shall only
be an assignee of the financial rights of his, her or its assignor.
Any Member who transfers all of his, her or its financial rights
shall cease to be a Member of the Company. All notices shall be in
writing.
9.4 TRANSFERS. Except as provided in Section 9.1, 9.2 and
9.3, 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 above and the provisions of section 9.2
or 9.3. In any case that a transfer is not permitted for any
reason other than pursuant to the limitations set forth in section
9.1, 9.2 or 9.3, 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.
9.5 ADMISSION OF ASSIGNEE AS MEMBER. 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 confirmed the matters set forth in Section 9.2, (ii)
his or her assignor has stated such intention in the instrument of
assignment, (iii) such assignee shall pay all expenses in
connection with such admission as a substitute Limited Member, as
described in Section 9.8 and (iv) the transfer to such assignee has
been made in compliance with Section 9.1 and 9.3. 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.
9.6 MINIMUM SIZE. 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.
9.7 DEATH OF LIMITED MEMBER. 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.
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9.8 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.
9.9 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.
9.10 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).
9.11 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, 2002.
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)
A-26
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,
A-27
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.
A-28
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
A-29
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 , .
LIMITED MEMBERS MANAGING MEMBERS
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
A-30
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 returns
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,
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 AEI
Income & Income & Income &
Growth Growth Growth
Fund XXI Fund XXII Fund 23
Dollar Amount Offered $24,000,000 $24,000,000 $24,000,000
Dollar Amount Raised $24,000,000 $16,917,222 $ 2,993,818
Percentage of Amount
Raised 100.0% 100.0% 100.0%
Less Offering Expenses:
Selling Commissions
and Discount 8.0 8.0 10.0
Organizational
Expenses 5.6 6.5 5.0
Other (a) 4.3 6.4 1.4
Less Reserves 0.1 0.1 0.1
----------- ----------- -----------
Percent Available
for Investment 82.0% 79.0% 83.5%
=========== =========== ===========
Acquisition Costs:
Prepaid Items and
Fees Related
to Purchase of
Property 0.0% 0.0% 0.0%
Investment in
Properties (b) 82.0 79.0 0.0(c)
Acquisition Fees 0.0 0.0 0.0
----------- ----------- -----------
Total Acquisition Cost 82.0% 79.0% 0.0%
=========== =========== ===========
Percent Leverage 0.0% 0.0% 0.0%
Date Offering Began Feb. 95 Jan. 97 Mar. 99
Length of Offering
(months) 24 24 (d)
Months to Invest 90% of
Amount Available for
Investment (measured
from beginning of
offering) 36 32 (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, 1999. Offering
had not closed as of December 31, 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,
1995 to December 31, 1999 for all prior public programs closed in the last
five years.
AEI AEI AEI
Income & Income & Income &
Growth Growth Growth
Fund XXI Fund XXII Fund 23
Type of Compensation
Date Offering Commenced Feb. 95 Jan. 97 Mar. 99
Dollar Amount Raised $24,000,000 $16,917,222 $2,993,818
Amount Paid to Sponsors
From Proceeds of Offering:
Underwriting Fees (a) 466,013 339,667 63,961
Acquisition Expenses
- purchase option on
property 0 0 0
- real estate
commission 0 0 0
- expense
reimbursement 559,739(c) 502,009(c) 0
Organization Offering
Expenses 359,605 294,122 46,632
Dollar Amount of Cash
Generated From
Operations Before
Deducting Payments
to Sponsors 6,524,759 1,605,829 24,967
Amount Paid to Sponsors
From Operations:
Property Management
Fees (b) 0 0 0
Partnership
Management Fees (b) 0 0 0
Reimbursements 1,101,903 522,988 58,753
Leasing Commissions 0 0 0
Participation in Cash
Distributions 64,593 66,220 1,235
Dollar Amount of Property
Sales and Refinancing
Before Deducting
Payments to Sponsors:
- cash 3,819,057 0 0
- notes 0 0 0
Amount Paid to Sponsors
From Property Sales
and Refinancing:
Real Estate
Commissions 0 0 0
Incentive Fees 0 0 0
Participation in Cash
Distributions 10,302 0 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 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 XXI and Fund
XXII totaled $419,713 and $394,389, respectively.
B-3
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
(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.
<TABLE>
<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-4
TABLE III (Continued)
OPERATING RESULTS OF PRIOR PROGRAMS
(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 Income (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%
</TABLE>
(a) Represents initial capital or cash retained from prior years' cash flow.
(b) Based on an investment of a weighted average Unit outstanding.
B-5
TABLE III (Continued)
OPERATING RESULTS OF PRIOR PROGRAMS
(Unaudited)
AEI INCOME & GROWTH FUND 23
Year Ended
December 31, 1999
Gross Revenues from Operations $ 25,872
Profit on Sale of Properties 0
Less:
Operating Expenses 59,658
Depreciation 0
Real Estate Impairment 0
----------
Net Loss - GAAP Basis $ (33,786)
==========
Taxable Income:
-from operations $ 25,872
-from gain on sale 0
==========
Cash Generated (Deficiency) From Operations $ 38,698
Cash Generated From Sales 0
Cash Generated From Refinancing 0
----------
Cash Generated From Operations,
Sales and Refinancing 38,698
Less: Cash Distributions to Investors
-from operating cash flow 700
-from sales and refinancing 0
-from cash reserves (a) 0
----------
Cash Generated (Deficiency)
After Cash Distributions 37,998
Less: Special Items (Not Including
Sales and Refinancing) 0
----------
Cash Generated (Deficiency)
After Cash Distributions and
Special Items $ 37,998
==========
Tax and Distribution Data
Per $1,000 Invested (b)
Federal Income Tax Results:
Ordinary Income (Loss)
-from operations 11
-from recapture 0
Capital Gain (Loss) 0
Cash Distributions to Investors:
Source (on GAAP basis)
-Investment Income 0
-Return of Capital 0
Cash Distributions to Investors:
Source (on cash basis)
-Sales 0
-Refinancing 0
-Operations 0
-Cash Reserves (a) 0
Amount (in percentage terms) remaining
invested in program properties at the
end of the last period reported in the
Table (c)
(a) Represents initial capital or cash retained from prior years' cash flow.
(b) Based on an investment of a weighted average Unit outstanding.
(c) As of December 31, 1999, no properties had been acquired by the program.
B-6
TABLE IV
RESULTS OF COMPLETED PROGRAMS
None of the public programs sponsored by the General Partners
or their Affiliates have completed operations.
B-7
<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 Over Expen-
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 Estate 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(b) 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 Real Estate 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
AEI Real Estate 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
</TABLE>
<TABLE>
B-9
TABLE V (Continued)
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 Over Expen-
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 Estate 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
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
</TABLE>
<TABLE>
B-10
TABLE V (Continued)
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 Over Expen-
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 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 Income Champps
& 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
AEI Real Estate 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 XXI Columbus,
Ohio(b) Aug. 96 Mar. 98 226,394 0 0 0 226,394 0 165,510 165,510 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
</TABLE>
<TABLE>
B-11
TABLE V (Continued)
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 Over Expen-
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
Inome & Growth Houston,
Fund XIX Texas Feb. 93 Apr. 98 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 Real Estate 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
AEI Real Estate 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 Real Estate 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 Real Estate Fair Muffler
Fund 85-B Park Forest,
Illinois Aug. 86 Aug. 98 704 0 0 0 704 0 284,903 284,903 199,526
</TABLE>
<TABLE>
B-12
TABLE V (Continued)
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 Over Expen-
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 Sep. 98 218,158 0 0 0 218,158 0 244,662 244,662 341,599
AEI Real Estate 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 Real Estate Rio Bravo
Fund 85-A St. Paul,
Minnesota(b)Feb. 85 Sep. 98 253,092 0 0 0 253,092 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 Real Estate 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 Real Estate 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 Feb. 85 Dec. 98 226,402 0 0 0 226,402 0 201,781 201,781 353,632
AEI Real Estate Applebee's
Fund 85-A Harlingen,
Texas Dec. 95 Dec. 98 1,858,837 0 0 0 1,858,837 0 1,393,470 1,393,470 471,138
</TABLE>
<TABLE>
B-13
TABLE V (Continued)
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 Over Expen-
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 Estate HomeTown Buffet
Fund XVIII Tucson,
Arizona(b) June 93 Feb. 99 131,430 0 0 0 131,430 0 94,554 94,554 68,634
AEI Real Estate HomeTown Buffet
Fund XVIII Tucson,
Arizona(b) June 93 Feb. 99 131,441 0 0 0 131,441 0 94,553 94,553 68,634
AEI Real Estate HomeTown Buffet
Fund XVIII Tucson,
Arizona(b) June 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(b) June 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(b) June 93 Mar. 99 208,196 0 0 0 208,196 0 151,972 151,972 110,138
AEI Net Lease HomeTown Buffet
Income & Growth Tucson,
Fund XIX Arizona(b) June 93 Mar. 99 223,640 0 0 0 223,640 0 162,231 162,231 117,689
AEI Real Estate 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 Real Estate 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
</TABLE>
<TABLE>
B-14
TABLE V (Continued)
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 Over Expen-
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 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 Real Estate 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 Real Estate 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) June 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
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
</TABLE>
<TABLE>
B-15
TABLE V (Continued)
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 Over Expen-
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 Aug. 99 222,987 0 0 0 222,987 0 185,359 185,359 80,544
AEI Real Estate 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 Real Estate 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 Real Estate 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
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 Miss Missouri(b) July 85 Nov. 99 313,461 0 0 0 313,461 0 287,001 287,001 414,786
</TABLE>
<TABLE>
B-16
TABLE V (Continued)
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 Over Expen-
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 Estate 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 Real Estate 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 Real Estate 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 Real Estate 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
AEI Real Estate Caribou Coffee
Fund XVI Marietta,
Georgia Aug. 97 Feb. 00 1,468,504 0 0 0 1,468,504 0 1,247,571 1,247,571 347,849
AEI Income & Children's World
Growth Fund DePere,
XXII Wisconsin(b)July 99 Feb. 00 236,003 0 0 0 236,003 0 204,365 204,365 11,197
AEI Income & Marie Callender's
Growth Fund Henderson,
XXII Nevada(b) Sept.99 Mar. 00 228,337 0 0 0 228,337 0 212,299 212,299 7,966
</TABLE>
<TABLE>
B-17
TABLE V (Continued)
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 Over Expen-
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 & Marie Callender's
Growth Fund Henderson,
XXII Nevada(b) Sept.99 Mar. 00 287,570 0 0 0 287,570 0 250,650 250,650 9,467
AEI Income & Children's World
Growth Fund DePere,
XXII Wisconsin(b)July 99 Mar. 00 224,224 0 0 0 224,224 0 198,688 198,688 11,960
AEI Income & Children's World
Growth Fund DePere,
XXII Wisconsin(b)July 99 Mar. 00 204,452 0 0 0 204,452 0 175,786 175,786 10,792
AEI Income & Marie Callender's
Growth Fund Henderson,
XXII Nevada(b) Sept.99 Mar. 00 205,532 0 0 0 205,532 0 184,495 184,495 8,192
AEI Income & Hollywood Video
Growth Fund Saraland,
XXII Alabama(b) Jan. 99 Mar. 00 205,263 0 0 0 205,263 0 167,058 167,058 18,151
Net Lease Arby's
Income & Growth Hudsonville,
Fund 84-A Michigan(b) Sept.99 Apr. 00 278,155 0 0 0 278,155 0 264,379 264,379 14,457
AEI Income & Marie Callender's
Growth Fund Henderson,
XXII Nevada(b) Sept.99 Apr. 00 193,529 0 0 0 193,529 0 179,153 179,153 8,890
AEI Income & Hollywood Video
Growth Fund Saraland,
XXII Alabama(b) Jan. 99 Apr. 00 211,847 0 0 0 211,847 0 173,383 173,383 19,830
</TABLE>
<TABLE>
B-18
TABLE V (Continued)
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 Over Expen-
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 Arby's
Income & Growth Hudsonville,
Fund 84-A Michigan(b) Sept.99 Apr. 00 190,662 0 0 0 190,662 0 176,991 176,991 10,157
AEI Real Arby's
Estate Hudsonville,
Fund 85-A Michigan(b) Sept.99 Apr. 00 64,098 0 0 0 64,098 0 59,937 59,937 3,433
Net Lease Gingham's
Income & Growth St. Charles,
Fund 84-A Missouri(b) July 85 Apr. 00 209,806 0 0 0 209,806 0 191,060 191,060 287,613
AEI Real Pasta Fair
Estate Belleview,
Fund XVIII Florida Apr. 90 May 00 730,550 0 0 0 730,550 0 932,862 932,862 711,259
AEI Net Lease Marie Callender's
Income & Growth Henderson,
Fund XIX Nevada(b) Sept.99 June 00 140,120 0 0 0 140,120 0 124,520 124,520 8,214
AEI Income & Marie Callender's
Growth Fund Henderson,
XXII Nevada(b) Sept.99 June 00 120,831 0 0 0 120,831 0 111,300 111,300 7,047
AEI Net Lease Marie Callender's
Income & Growth Henderson,
Fund XIX Nevada(b) Sept.99 June 00 178,063 0 0 0 178,063 0 159,062 159,062 10,866
AEI Income & Hollywood Video
Growth Fund Saraland,
XXII Alabama(b) Jan. 99 June 00 178,740 0 0 0 178,740 0 148,826 148,826 19,704
</TABLE>
<TABLE>
B-19
TABLE V (Continued)
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 Over Expen-
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 Timber Lodge
Estate Rochester,
Fund XVII Minnesota(b)Sept.98 July 00 214,308 0 0 0 214,308 0 192,653 192,653 38,582
AEI Net Lease Red Line Burgers
Income & Growth Corpus Christi,
Fund XIX Texas Apr. 93 July 00 949 0 0 0 949 0 280,378 280,378 119,686
AEI Net Lease Marie Callender's
Income & Growth Henderson,
Fund XIX Nevada(b) Sept.99 July 00 132,876 0 0 0 132,876 0 119,296 119,296 9,076
AEI Real Sports City Cafe
Estate Mesquite,
Fund XVI Texas(e) Dec. 87 July 00 311,882 0 0 0 311,882 0 520,109 520,109 186,539
AEI Real Sports City Cafe
Estate Mesquite,
Fund XVII Texas(e) Dec. 87 July 00 579,215 0 0 0 579,215 0 956,343 956,343 291,564
AEI Net Lease Media Play
Income & Growth Apple Valley,
Fund XIX Minnesota(f)Dec. 95 Aug. 00 136,514 0 660,000 0 796,514 0 1,389,367 1,389,367 168,608
AEI Net Lease Media Play
Income & Growth Apple Valley,
Fund XX Minnesota(f)Dec. 95 Aug. 00 136,514 0 660,000 0 796,514 0 1,422,701 1,422,701 168,608
AEI Income & Media Play
Growth Fund Apple Valley,
XXI Minnesota(f)Dec. 95 Aug. 00 140,651 0 680,000 0 820,651 0 1,414,060 1,414,060 173,753
</TABLE>
<TABLE>
B-20
TABLE V (Continued)
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 Over Expen-
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 Marie Callender's
Income & Growth Henderson,
Fund XIX Nevada(b) Sept.99 Aug. 00 223,510 0 0 0 223,510 0 198,829 198,829 16,539
AEI Net Lease Marie Callender's
Income & Growth Henderson,
Fund XIX Nevada(b) Sept.99 Aug. 00 179,183 0 0 0 179,183 0 159,062 159,062 13,231
Net Lease Champps
Income & Growth Columbus,
Fund 84-A Ohio(b) Apr. 99 Aug. 00 286,420 0 0 0 286,420 0 247,960 247,960 38,373
Net Lease Champps
Income & Growth Columbus,
Fund 84-A Ohio(b) Apr. 99 Sept.00 181,463 0 0 0 181,463 0 154,974 154,974 24,568
Net Lease Champps
Income & Growth Schaumburg,
Fund 84-A Illinois(b) Dec. 97 Sept.00 180,831 0 0 0 180,831 0 145,552 145,552 43,213
AEI Income & Children's World
Growth DePere,
Fund XXII Wisconsin(b)July 99 Sept.00 180,668 0 0 0 180,668 0 156,602 156,602 15,912
Net Lease Champps
Income & Growth Schaumburg,
Fund 84-A Illinois(b) Dec. 97 Sept.00 223,306 0 0 0 223,306 0 181,937 181,937 54,381
Net Lease Champps
Income & Growth Schaumburg,
Fund 84-A Illinois(b) Dec. 97 Sept.00 261,912 0 0 0 261,912 0 209,593 209,593 62,647
</TABLE>
<TABLE>
B-21
TABLE V (Continued)
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 Over Expen-
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 Timber Lodge
Estate Rochester,
Fund XVII Minnesota(b)Sept.98 Sept.00 294,303 0 0 0 294,303 0 250,450 250,450 56,157
Net Lease Champps
Income & Growth Schaumburg,
Fund 84-A Illinois(b) Dec. 97 Sept.00 102,559 0 0 0 102,559 0 82,838 82,838 25,069
AEI Income & Champps
Growth Schaumburg,
Fund XXI Illinois(b) Dec. 97 Sept.00 192, 011 0 0 0 192,011 0 151,124 151,124 46,711
</TABLE>
(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 and XVII.
(f) This property was owned jointly by AEI Income & Growth Fund XXI and AEI Net
Lease Income & Growth Funds XIX and XX.
B-22
EXHIBIT D
AEI INCOME & GROWTH FUND 24 LLC
SUBSCRIPTION AGREEMENT
(Including Power of Attorney)
MAKE YOUR CHECK PAYABLE TO "FIDELITY BANK - AEI FUND 24 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 [ ] NAV
Number of Units Amount of Investment (for
($1,000 x No. of Units) $ Broker
use
2. OWNERSHIP [ ] Tenants in Common [ ] IRA [ ] Taxable Trust only)
[ ] 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
REQUIRED FOR BLUE SKY REGISTRATION REQUIREMENTS FOR ALL ACCOUNT TYPES.
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 IS 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,
Address and Phone Number
(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;
Plan election must be re-confirmed annually.)
Do you elect 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")* and its Supplement
(if any) dated (Investor must enter the date of the
Supplement, if any, accompanying the Prospectus.
IF THE DATE IS NOT ENTERED, THE SUBSCRIPTION
AGREEMENT WILL BE RETURNED FOR COMPLETION.)
[ ] 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).
Note: If this investment is to be held within a qualified plan, such
as an IRA or Keogh Plan, the investor(s) and custodian must sign in
Block 7.
(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 24 LLC to you
electronically. These reports would include:
annual reports that contain audited financial statements, and
quarterly reports containing unaudited condensed financial
statements.
You agree 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.)
Consent to Electronic Delivery of Reports (please check):
[ ] Please post the reports on your web site, or in a hyperlink from
your web site, and advise me by e-mail to the address above when
they are 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 Rule 2810 (b)(2) of the NASD'S Conduct Rules,
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 AEI Fund 24, hereby accepts this
Subscription Agreement this day of By
ATTEST Its
AEI INCOME & GROWTH FUND 24 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 24 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 ALSO SIGN THE SUBSCRIPTION AGREEMENT
IN BLOCK 7.
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 THREE SPACES MUST BE INITIALED BY THE
INVESTOR.
7. INVESTOR IRS regulations require our escrow bank to have the
CERTIFICATIONS W-9 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 and enter your
signature(s) where indicated.
BROKER/DEALER IT IS NECESSARY THAT ALL ITEMS BE FULLY 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.
AEI INCOME & GROWTH FUND 24 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 24 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
24 ESCROW and return with the Subscription Agreement
to:
AEI Fund Management, Inc. WIRING INSTRUCTIONS
1300 Minnesota World Trade Center Bank: Fidelity Bank
30 East Seventh Street 7600 Parklawn Avenue
St. Paul, Minnesota 55101 Edina, MN 55435
Phone#: (952) 831-6600
651-227-7333 651-227-7705 (fax) 800-328-3519 RT#: 091014924
Account Name: AEI Income &
Growth Fund 24 Escrow
Account #: xx-xx-xxx
Special instructions:
Contact Dorene Tryon or
Jane Holtan when wire
is received.
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 make such 24,000 Units
offer or solicitation. Neither the AEI INCOME & GROWTH
delivery of this prospectus nor
any sale hereunder shall under any FUND 24 LLC
circumstances create an implication
that there has been no change in AEI
Fund 24's affairs since the date
hereof. If, however, any material
change in AEI Fund 24's affairs
occurs at any time when this
prospectus is required to be delivered,
this prospectus will be amended or PROSPECTUS
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 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 AEI Securities, Inc.
(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 24. Indemnification of Directors and Officers.
The Operating Agreement provides that any losses sustained by
the Manager Members arising out of their activities on behalf of the
Fund will be reimbursed by the Fund unless such losses were the
result of their negligence or misconduct. Reference is made to
Section 6.5 of the Operating Agreement which is attached to the
Prospectus as Exhibit A.
The Registrant will agree to indemnify the nonaffiliated
Dealers and their controlling persons, and the Dealers will agree to
indemnify the Registrant and its controlling persons, against
certain liabilities, including liabilities under the Securities Act
of 1933. Reference is made to the Dealer-Manager Agreement and the
Dealer Agreement filed as Exhibits 1.1 and 1.2, respectively.
For information regarding the Registrant's undertaking to
submit to adjudication the issue of indemnification for violation of
the securities laws see Item 26 hereof.
Item 25. Other Expenses of Issuance and Distribution.
Other expenses in connection with the registration of the
securities hereunder (other than commissions and dealer expenses),
which will be paid by the Registrant, will be substantially as
follows:
Amount
Item Minimum Maximum
SEC fees $ 6,000 $ 6,000
NASD fees 2,900 2,900
Blue sky expenses 10,000* 60,000*
Legal 20,000* 115,000*
Printing 7,500* 75,000*
Accounting 3,000* 13,000*
Literature
(printing and mailing) 9,500* 80,000*
Postage, etc. 1,000* 60,000*
Personnel charges for
subscription processing, etc. 7,600* 390,000*
Travel expenses - 25,000*
Dealer due diligence
reimbursement 7,500 120,000
Miscellaneous - 13,100*
-------- ---------
Total $ 75,000 $960,000*
======== =========
* Estimated.
Item 26. Recent Sales of Unregistered Securities.
Not applicable.
II-2
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
24 Consent of Independent Public Accountants
Item 28. Undertakings.
The Registrant undertakes (a) to file, during the period in
which offers or sales are being made, a post-effective amendment to
this Registration Statement to include any prospectuses required by
Section 10(a)(3) of the Securities Act of 1933 and to include any
material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material
change to such information in the Registration Statement, (b) that
for the purpose of determining any liability under the Act each such
post-effective amendment may be deemed to be a new registration
statement relating to the securities offered therein and the
offering of such securities at that time may be deemed to be the
initial bona fide offering thereof, (c) that all post-effective
amendments will comply with the applicable forms, rules and
regulations of the Commission in effect at the time such post-
effective amendments are filed, and (d) to remove from registration
by means of a post-effective amendment any of the securities being
registered which remain at the termination of the offering.
The Registrant undertakes to send to each Limited Member at
least on an annual basis a detailed statement of any transactions
with the Managing Members or their Affiliates, and of fees,
commissions, compensation and other benefits paid, or accrued to the
Managing Members or their Affiliates for the fiscal year completed,
showing the amount paid or accrued to each recipient and the
services performed.
The Registrant undertakes to provide to the Limited Members
the financial statements required by Form 10-K for the first full
fiscal year of operations of the Fund.
The Registrant undertakes to file a sticker supplement
pursuant to Rule 424(b)(3) under the Act during the distribution
period describing each property not identified in the prospectus at
such time as there arises a reasonable probability that such
property will be acquired and to consolidate such information in a
post-effective amendment filed at least once every three months,
with the information contained in such supplement or post-effective
amendment provided simultaneously to the existing Limited Members.
Each sticker supplement shall disclose all compensation and fees
received by the Managing Members and their Affiliates in connection
with any such acquisition.
The Registrant also undertakes to file, after the end of the
distribution period, a current report on Form 8-K containing the
financial statements and any additional information required by Form
S-11, to reflect each commitment (i.e., the signing of a binding
purchase agreement) made after the end of the distribution period
involving the use of 10% or more (on a cumulative basis) of the net
proceeds of the offering and to provide the information contained in
such report to the Limited Members at least once each quarter after
the distribution period of the offering has ended.
II-3
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Managing Members of the
Registrant pursuant to the Operating Agreement, or otherwise, the
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a Managing Member of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by a Managing
Member in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
<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.
II-4
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI REAL ESTATE FUND XV
Timber Lodge Champps
Steakhouse Americana Children's World Razzoo's
St. Cloud, Troy, West Chester, Austin,
Name, Location and Minnesota Michigan Ohio Texas
Type of Property Restaurant Restaurant Child Care Ctr. Restaurant
Gross Leasable Space 6,981 11,089 7,897 (b)
Date of Purchase 11/18/97 9/3/98 7/14/99 5/8/00
Mortgage Financing at
Date of Purchase 0 0 0 0
Cash Down Payment $485,005(a) $1,295,206(a) $986,743 $299,200(a)
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 (c)
Total Acquisition Cost $510,635 $1,330,265 $999,162 $ 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 September 30, 2000.
(c) A final allocation of capital costs has not been completed.
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 Razzoo's
St. Cloud, Greensburg, Troy, Rochester, Centerville, Austin,
Name, Location and Minnesota Pennsylvania Michigan Minnesota Ohio Texas
Type of Property Restaurant Restaurant Restaurant Restaurant Restaurant
Restaurant
<S> <C> <C> <C> <C> <C> <C>
Gross Leasable Space 6,981 4,510 11,089 6,981 9,368 (b)
Date of Purchase 11/18/97 12/10/97 9/3/98 9/3/98 1/27/99 5/8/00
Mortgage Financing at
Date of Purchase 0 0 0 0 0 0
Cash Down Payment $485,005(a) $990,000(a) $1,270,056(a) $1,849,868 $551,320(a) $231,200(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 11,487 19,045 19,079 60,900 357 (c)
Total Acquisition Cost $493,492 $1,009,045 $1,289,135 $1,910,768 $551,677 $ 0
</TABLE>
(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 September 30, 2000.
(c) A final allocation of capital costs has not been completed.
I-6
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI REAL ESTATE FUND XVIII
<CAPTION>
Champps Old Country Champps
Americana Tumbleweed Tumbleweed Buffet Americana Razzoo's
Troy, Chillicothe, Columbus, Northlake, Centerville, Alpharetta,
Name, Location and Michigan Ohio Ohio Illinois Ohio Georgia
Type of Property Restaurant Restaurant Restaurant Restaurant Restaurant Restaurant
<S> <C> <C> <C> <C> <C> <C>
Gross Leasable Space 11,089 5,483 5,483 8,991 9,368 (b)
Date of Purchase 9/3/98 11/20/98 12/28/98 12/29/98 1/27/99 6/30/00
Mortgage Financing at
Date of Purchase 0 0 0 0 0 0
Cash Down Payment $1,190,794(a) $564,750(a) $545,800(a) $1,339,000 $1,496,440(a) $385,920(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 1,702 9,081 8,469 11,804 5,812 (c)
Total Acquisition Cost $1,192,496 $573,831 $554,269 $1,350,804 $1,502,252 $ 0
</TABLE>
(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 September 30, 2000.
(c) A final allocation of capital costs has not been completed.
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
</TABLE>
(a) Represents a partial ownership interest in such property. An affiliated
partnership(s) owns the remaining interest.
II-8
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI NET LEASE INCOME & GROWTH FUND XIX (Continued)
Razzoo's Razzoo's
Austin, Alpharetta,
Name, Location and Texas Georgia
Type of Property Restaurant Restaurant
Gross Leasable Space (b) (b)
Date of Purchase 5/8/00 6/30/00
Mortgage Financing at
Date of Purchase 0 0
Cash Down Payment $176,800(a) $257,280(a)
Contract Purchase
Price Plus
Acquisition Fee 0 0
Other Cash Expenditures
Expensed 0 0
Other Cash Expenditures
Capitalized (c) (c)
Total Acquisition Cost $ 0 $ 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 September 30, 2000.
(c) A final allocation of capital costs has not been completed.
II-9
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI NET LEASE INCOME & GROWTH FUND XX
Champps Champps
Americana Americana
Schaumburg, Columbus,
Name, Location and Illinois Ohio
Type of Property Restaurant Restaurant
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) owns the remaining interest.
II-10
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI INCOME & GROWTH FUND XXI
<CAPTION>
Champps Champps Champps Champps
Americana Americana Americana Americana Tumbleweed
San Antonio, Schaumburg, Livonia, Centerville, Fort Wayne,
Name, Location and Texas Illinois Michigan Ohio Indiana
Type of Property Restaurant Restaurant Restaurant Restaurant Restaurant
<S> <C> <C> <C> <C> <C>
Gross Leasable Space 8,680 11,158 9,154 9,368 5,700
Date of Purchase 12/23/97 12/31/97 5/19/98 1/27/99 9/11/00
Mortgage Financing at
Date of Purchase 0 0 0 0 0
Cash Down Payment $2,753,700 $2,199,801(a) $4,087,000 $965,382 $1,316,665
Contract Purchase
Price Plus
Acquisition Fee 0 0 0 0 0
Other Cash Expenditures
Expensed 0 0 0 0 0
Other Cash Expenditures
Capitalized 79,657 56,661 63,061 19,044 4,896
Total Acquisition Cost $2,833,357 $2,256,462 $4,150,061 $984,426 $1,321,561
</TABLE>
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s) owns the remaining interest.
II-11
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI INCOME & GROWTH FUND XXII
<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
</TABLE>
(a) Represents a partial ownership interest in such property. An
affiliated partnership(s) owns the remaining interest.
II-12
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI INCOME & GROWTH FUND XXII (Continued)
<CAPTION>
Children's Children's Hollywood Hollywood Marie
World World Video Video Tumbleweed 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
</TABLE>
(a) Represents a partial ownership interest in such property. An affiliated
partnership(s) owns the remaining interest.
II-13
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI INCOME & GROWTH FUND XXII (Continued)
<CAPTION>
Children's
World Razzoo's
Golden, Austin,
Name, Location and Colorado Texas
Type of Property Child Care Ctr. Restaurant
<S> <C> <C>
Gross Leasable Space 8,570 (b)
Date of Purchase 9/28/00 5/8/00
Mortgage Financing at
Date of Purchase 0 0
Cash Down Payment $662,436(a) $652,800(a)
Contract Purchase
Price Plus
Acquisition Fee 0 0
Other Cash Expenditures
Expensed 0 0
Other Cash Expenditures
Capitalized 4,193 (c)
Total Acquisition Cost $666,629 $ 0
</TABLE>
(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 September 30, 2000.
(c) A final allocation of capital costs has not been completed.
II-14
<TABLE>
TABLE VI (Continued)
ACQUISITIONS OF PROPERTIES BY PROGRAMS
(Unaudited)
AEI INCOME & GROWTH FUND 23
<CAPTION>
Johnny
Tumbleweed Carino's Razzoo's Razzoo's
Kettering, Victoria, San Antonio, Alpharetta,
Name, Location and Ohio Texas Texas Georgia
Type of Property Restaurant Restaurant Restaurant Restaurant
<S> <C> <C> <C>
Gross Leasable Space 5,483 (b) (b) (b)
Date of Purchase 8/23/00 4/18/00 4/19/00 6/30/00
Mortgage Financing at
Date of Purchase 0 0 0 0
Cash Down Payment $1,223,505 $409,500 $1,558,000 $707,520(a)
Contract Purchase
Price Plus
Acquisition Fee 0 0 0 0
Other Cash Expenditures
Expensed 0 0 0 0
Other Cash Expenditures
Capitalized 11,654 (c) (c) (c)
Total Acquisition Cost $1,235,159 $ 0 $ 0 $ 0
</TABLE>
(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 September 30, 2000.
(c) A final allocation of capital costs has not been completed.
SIGNATURES
In accordance with 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
authorized this Registration Statement to be signed on its behalf by
the undersigned, in the City of St. Paul, State of Minnesota,
on December 29, 2000.
AEI INCOME & GROWTH FUND 24 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 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 December 29, 2000
Robert P. Johnson President (principal
executive officer)
By/s/ MARK E. LARSON Chief Financial Officer December 29, 2000
Mark E. Larson and Treasurer (principal
financial and accounting
officer)
INDIVIDUAL Managing Member
By /s/ROBERT P. JOHNSON Individual Managing Member December 29, 2000
Robert P. Johnson
EXHIBIT INDEX
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 registered,
including consent
8 Opinion of Dorsey & Whitney LLP as to tax
matters, including consent (Exhibit to be
filed with an amendment to this filing).
10 Form of Impoundment Agreement with Fidelity
Bank, Edina, Minnesota
24 Consent of Independent Public Accountants
