-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SMeTo13aBdbw47yQ1zgbtSilz0t5YZWZDLi3/HbcGtG6EaqUQYvAkm3jeil8AWJo K5wzV5tzWqJ0x6hPYBk5Ig== 0000771677-04-000052.txt : 20040813 0000771677-04-000052.hdr.sgml : 20040813 20040813151212 ACCESSION NUMBER: 0000771677-04-000052 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEI INCOME & GROWTH FUND XXI LTD PARTNERSHIP CENTRAL INDEX KEY: 0000931755 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 411789725 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-85076 FILM NUMBER: 04973881 BUSINESS ADDRESS: STREET 1: 1300 MINNESOTA WORLD TRADE CENTER STREET 2: 30 EAST SEVENTH ST CITY: ST PAUL STATE: MN ZIP: 55101 BUSINESS PHONE: 6122277333 MAIL ADDRESS: STREET 1: 1300 MINNESOTA WORLD TRADE CENTER STREET 2: 30 EAST SEVENTH STREET CITY: ST PAUL STATE: MN ZIP: 55101 10QSB 1 q212-04.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For the Quarter Ended: June 30, 2004 Commission file number: 0-29274 AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP (Exact Name of Small Business Issuer as Specified in its Charter) State of Minnesota 41-1789725 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 30 East 7th Street, Suite 1300, St. Paul, Minnesota 55101 (Address of Principal Executive Offices) (651) 227-7333 (Issuer's telephone number) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Transitional Small Business Disclosure Format: Yes No [X] AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP INDEX PART I. Financial Information Item 1. Balance Sheet as of June 30, 2004 and December 31, 2003 Statements for the Periods ended June 30, 2004 and 2003: Income Cash Flows Changes in Partners' Capital Notes to Financial Statements Item 2. Management's Discussion and Analysis Item 3. Controls and Procedures PART II. Other Information Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP BALANCE SHEET JUNE 30, 2004 AND DECEMBER 31, 2003 (Unaudited) ASSETS 2004 2003 CURRENT ASSETS: Cash and Cash Equivalents $ 4,456,061 $ 6,018,352 Receivables 18,809 579 ----------- ----------- Total Current Assets 4,474,870 6,018,931 ----------- ----------- INVESTMENTS IN REAL ESTATE: Land 4,667,846 4,770,063 Buildings and Equipment 9,230,430 10,063,261 Property Acquisition Costs 2,904 0 Accumulated Depreciation (995,099) (862,718) ----------- ----------- 12,906,081 13,970,606 Real Estate Held for Sale 2,107,183 264,200 ----------- ----------- Net Investments in Real Estate 15,013,264 14,234,806 ----------- ----------- Total Assets $19,488,134 $20,253,737 =========== =========== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Payable to AEI Fund Management, Inc. $ 16,788 $ 160,512 Distributions Payable 405,675 951,129 Unearned Rent 32,784 0 ----------- ----------- Total Current Liabilities 455,247 1,111,641 ----------- ----------- PARTNERS' CAPITAL: General Partners 27,896 28,987 Limited Partners, $1,000 per Unit; 24,000 Units authorized and issued; 22,907 Units outstanding 19,004,991 19,113,109 ----------- ----------- Total Partners' Capital 19,032,887 19,142,096 ----------- ----------- Total Liabilities and Partners' Capital $19,488,134 $20,253,737 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP STATEMENT OF INCOME FOR THE PERIODS ENDED JUNE 30 (Unaudited) Three Months Ended Six Months Ended 6/30/04 6/30/03 6/30/04 6/30/03 RENTAL INCOME $ 330,644 $ 213,844 $ 646,218 $ 427,682 EXPENSES: Partnership Administration - Affiliates 57,354 39,766 108,520 107,074 Partnership Administration and Property Management - Unrelated Parties 8,746 2,569 17,998 15,654 Depreciation 92,997 59,717 181,360 119,442 ---------- ---------- ---------- ---------- Total Expenses 159,097 102,052 307,878 242,170 ---------- ----------- ---------- ---------- OPERATING INCOME 171,547 111,792 338,340 185,512 OTHER INCOME: Interest Income 11,034 29,828 24,175 54,550 Gain on Sale of Real Estate 0 0 137,068 0 ---------- ----------- ---------- ---------- Total Other Income 11,034 29,828 161,243 54,550 ---------- ----------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS 182,581 141,620 499,583 240,062 Income from Discontinued Operations 39,809 587,664 209,393 737,963 ---------- ----------- ---------- ---------- NET INCOME $ 222,390 $ 729,284 $ 708,976 $ 978,025 ========== =========== ========== ========== NET INCOME ALLOCATED: General Partners $ 2,224 $ 7,293 $ 7,090 $ 9,780 Limited Partners 220,166 721,991 701,886 968,245 ---------- ----------- ---------- ---------- $ 222,390 $ 729,284 $ 708,976 $ 978,025 ========== =========== ========== ========== INCOME PER LIMITED PARTNERSHIP UNIT: Continuing Operations $ 7.89 $ 6.09 $ 21.59 $ 10.32 Discontinued Operations 1.72 25.27 9.05 31.73 ---------- ----------- ---------- ---------- Total $ 9.61 $ 31.36 $ 30.64 $ 42.05 ========== =========== ========== ========== Weighted Average Units Outstanding 22,907 23,025 22,907 23,025 ========== =========== ========== ========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS FOR THE SIX-MONTH PERIODS ENDED JUNE 30 (Unaudited) 2004 2003 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 708,976 $ 978,025 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 216,512 205,593 Gain on Sale of Real Estate (265,704) (437,913) (Increase) Decrease in Receivables (18,230) 15,194 Decrease in Payable to AEI Fund Management, Inc. (143,724) (1,757) Increase in Unearned Rent 32,784 0 ----------- ----------- Total Adjustments (178,362) (218,883) ----------- ----------- Net Cash Provided By Operating Activities 530,614 759,142 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in Real Estate (1,996,338) (1,348,836) Proceeds from Sale of Real Estate 1,267,072 1,781,436 ----------- ----------- Net Cash Provided By (Used For) Investing Activities (729,266) 432,600 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in Distributions Payable (545,454) (242,423) Distributions to Partners (818,185) (818,188) ----------- ----------- Net Cash Used For Financing Activities (1,363,639) (1,060,611) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,562,291) 131,131 CASH AND CASH EQUIVALENTS, beginning of period 6,018,352 4,653,629 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 4,456,061 $ 4,784,760 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL FOR THE PERIODS ENDED JUNE 30 (Unaudited) Limited Partnership General Limited Units Partners Partners Total Outstanding BALANCE, December 31, 2002 $ 17,954 $18,020,886 $18,038,840 23,025.33 Distributions (8,182) (810,006) (818,188) Net Income 9,780 968,245 978,025 -------- ----------- ----------- ----------- BALANCE, June 30, 2003 $ 19,552 $18,179,125 $18,198,677 23,025.33 ======== =========== =========== =========== BALANCE, December 31, 2003 $ 28,987 $19,113,109 $19,142,096 22,907.49 Distributions (8,181) (810,004) (818,185) Net Income 7,090 701,886 708,976 -------- ----------- ----------- ----------- BALANCE, June 30, 2004 $ 27,896 $19,004,991 $19,032,887 22,907.49 ======== =========== =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 (Unaudited) (1) The condensed statements included herein have been prepared by the Partnership, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results of operations for the interim period, on a basis consistent with the annual audited statements. The adjustments made to these condensed statements consist only of normal recurring adjustments. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Partnership believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in the Partnership's latest annual report on Form 10-KSB. (2) Organization - AEI Income & Growth Fund XXI Limited Partnership (Partnership) was formed to acquire and lease commercial properties to operating tenants. The Partnership's operations are managed by AEI Fund Management XXI, Inc. (AFM), the Managing General Partner. Robert P. Johnson, the President and sole director of AFM, serves as the Individual General Partner. AFM is a wholly owned subsidiary of AEI Capital Corporation of which Mr. Johnson is the majority shareholder. AEI Fund Management, Inc. (AEI), an affiliate of AFM, performs the administrative and operating functions for the Partnership. The terms of the Partnership offering call for a subscription price of $1,000 per Limited Partnership Unit, payable on acceptance of the offer. The Partnership commenced operations on April 14, 1995 when minimum subscriptions of 1,500 Limited Partnership Units ($1,500,000) were accepted. On January 31, 1997, the offering terminated when the maximum subscription limit of 24,000 Limited Partnership Units was reached. Under the terms of the Limited Partnership Agreement, the Limited Partners and General Partners contributed funds of $24,000,000 and $1,000, respectively. During operations, any Net Cash Flow, as defined, which the General Partners determine to distribute will be distributed 90% to the Limited Partners and 10% to the General Partners; provided, however, that such distributions to the General Partners will be subordinated to the Limited Partners first receiving an annual, noncumulative distribution of Net Cash Flow equal to 10% of their Adjusted Capital Contribution, as defined, and, provided further, that in no event will the General Partners receive less than 1% of such Net Cash Flow per annum. Distributions to Limited Partners will be made pro rata by Units. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Continued) (2) Organization - (Continued) Any Net Proceeds of Sale, as defined, from the sale or financing of properties which the General Partners determine to distribute will, after provisions for debts and reserves, be paid in the following manner: (i) first, 99% to the Limited Partners and 1% to the General Partners until the Limited Partners receive an amount equal to: (a) their Adjusted Capital Contribution plus (b) an amount equal to 10% of their Adjusted Capital Contribution per annum, cumulative but not compounded, to the extent not previously distributed from Net Cash Flow; (ii) any remaining balance will be distributed 90% to the Limited Partners and 10% to the General Partners. Distributions to the Limited Partners will be made pro rata by Units. For tax purposes, profits from operations, other than profits attributable to the sale, exchange, financing, refinancing or other disposition of property, will be allocated first in the same ratio in which, and to the extent, Net Cash Flow is distributed to the Partners for such year. Any additional profits will be allocated in the same ratio as the last dollar of Net Cash Flow is distributed. Net losses from operations will be allocated 99% to the Limited Partners and 1% to the General Partners. For tax purposes, profits arising from the sale, financing, or other disposition of property will be allocated in accordance with the Partnership Agreement as follows: (i) first, to those partners with deficit balances in their capital accounts in an amount equal to the sum of such deficit balances; (ii) second, 99% to the Limited Partners and 1% to the General Partners until the aggregate balance in the Limited Partners' capital accounts equals the sum of the Limited Partners' Adjusted Capital Contributions plus an amount equal to 10% of their Adjusted Capital Contributions per annum, cumulative but not compounded, to the extent not previously allocated; (iii) third, the balance of any remaining gain will then be allocated 90% to the Limited Partners and 10% to the General Partners. Losses will be allocated 98% to the Limited Partners and 2% to the General Partners. The General Partners are not required to currently fund a deficit capital balance. Upon liquidation of the Partnership or withdrawal by a General Partner, the General Partners will contribute to the Partnership an amount equal to the lesser of the deficit balances in their capital accounts or 1% of total Limited Partners' and General Partners' capital contributions. (3) Reclassification - Certain items in the prior year's financial statements have been reclassified to conform to 2004 presentation. These reclassifications had no effect on Partners' capital, net income or cash flows. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Continued) (4) Investments in Real Estate - On September 19, 2003, the Partnership purchased a 37% interest in a Winn-Dixie store in Panama City, Florida for $1,714,965. The property is leased to Winn-Dixie Montgomery, Inc. under a Lease Agreement with a primary term of 20 years and annual rental payments of $138,380. The remaining interests in the property were purchased by AEI Net Lease Income & Growth Fund XIX Limited Partnership and AEI Income & Growth Fund 24 LLC, affiliates of the Partnership. Through March 31, 2004, the Partnership sold 16.5975% of the Winn-Dixie store in Panama City, Florida, in four separate transactions, to unrelated third parties. The Partnership received net sale proceeds of $900,843, which resulted in a net gain of $139,707. The cost and related accumulated depreciation of the interest sold was $769,300 and $8,164, respectively. For the six months ended June 30, 2004 and 2003, the net gain was $137,068 and $-0-, respectively. On December 30, 2003, the Partnership purchased a Johnny Carino's restaurant in Laredo, Texas for $2,605,079. The property is leased to Kona Restaurant Group, Inc. under a Lease Agreement with a primary term of 13 years and annual rental payments of $215,646. On February 9, 2004, the Partnership purchased a 50% interest in a Jared Jewelry store in Hanover, Maryland for $1,983,138. The property is leased to Sterling Jewelers Inc. under a Lease Agreement with a primary term of 20 years and annual rental payments of $153,228. The remaining interest in the property was purchased by AEI Net Lease Income & Growth Fund XX Limited Partnership, an affiliate of the Partnership. In March 2004, the Partnership entered into an agreement to purchase a 50% interest in an Eckerd drug store in Buffalo, New York for approximately $1,606,500. In May 2004, by mutual agreement of the parties, the agreement was terminated. (5) Payable to AEI Fund Management, Inc. - AEI Fund Management, Inc. performs the administrative and operating functions for the Partnership. The payable to AEI Fund Management represents the balance due for those services. This balance is non-interest bearing and unsecured and is to be paid in the normal course of business. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Continued) (6) Discontinued Operations - During the first nine months of 2003, the Partnership sold the Children's World in Mundelein, Illinois, in seven separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $2,010,839, which resulted in a net gain of $495,127. The total cost and related accumulated depreciation of the interests sold was $1,618,824 and $103,112, respectively. For the six months ended June 30, 2003, the net gain was $437,913. During the third quarter of 2003, the Partnership sold its 25% interest in the Champps Americana restaurant in Centerville, Ohio, in five separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $1,384,939, which resulted in a net gain of $498,449. The total cost and related accumulated depreciation of the interests sold was $984,426 and $97,936, respectively. During the fourth quarter of 2003, the Partnership sold 37.0128% of the Garden Ridge retail store in Pineville, North Carolina, in eleven separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $3,968,116, which resulted in a net gain of $1,347,739. The total cost and related accumulated depreciation of the interests sold was $3,310,163 and $689,786, respectively. On January 13, 2004, the Partnership sold its remaining 3.7372% interest in the Garden Ridge retail store to an unrelated third party. The Partnership received net sale proceeds of $392,836, which resulted in a net gain of $128,636. At December 31, 2003, the property was classified as Real Estate Held for Sale with a book value of $264,200. On October 31, 2002, the Partnership purchased a parcel of land in Farmington, New Mexico for $810,000. The Partnership obtained title to the land in the form of an undivided fee simple interest. The land is leased to SFG Farmington I Limited Partnership (SFG) under a Lease Agreement with a primary term of 20 years and annual rental payments of $85,050. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to SFG for the construction of a Johnny Carino's restaurant on the site. Pursuant to the Lease, any improvements to the land during the term of the Lease, become property of the lessor. The Partnership charged interest on the advances at a rate of 10.5%. On May 28, 2003, after the development was completed, the Lease Agreement was amended to require annual rental payments of $231,000. Total acquisition costs, including the cost of the land, were $2,183,344. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Continued) (6) Discontinued Operations - (Continued) In June 2004, the Partnership entered into an agreement to sell the Johnny Carino's restaurant in Farmington, New Mexico to an unrelated third party. The sale is subject to contingencies and may not be completed. If the sale is completed, the Partnership expects to receive net sale proceeds of approximately $2,900,000, which will result in a net gain of approximately $793,000. If this sale is not completed, it is likely the Partnership will seek another buyer for the property and may not be able to negotiate a similar purchase agreement. At June 30, 2004, the property was classified as Real Estate Held for Sale with a book value of $2,107,183. During the first six months of 2004 and 2003, the Partnership distributed $158,402 and $72,483 of net sale proceeds to the Limited and General Partners as part of their quarterly distributions, which represented a return of capital of $6.85 and $3.12 per Limited Partnership Unit, respectively. The Partnership anticipates the remaining net sale proceeds will either be reinvested in additional property or distributed to the Partners in the future. The financial results for these properties are reflected as Discontinued Operations in the accompanying financial statements. The following are the results of discontinued operations for the periods ended June 30: Three Months Ended Six Months Ended 6/30/04 6/30/03 6/30/04 6/30/03 Rental Income $ 57,750 $ 196,351 $ 116,754 $ 389,233 Property Management Expenses (365) (2,269) (845) (3,032) Depreciation (17,576) (44,331) (35,152) (86,151) Gain on Disposal of Real Estate 0 437,913 128,636 437,913 --------- --------- --------- --------- Income from Discontinued Operations $ 39,809 $ 587,664 $ 209,393 $ 737,963 ========= ========= ========= ========= ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS The Management's Discussion and Analysis contains various "forward looking statements" within the meaning of federal securities laws which represent management's expectations or beliefs concerning future events, including statements regarding anticipated application of cash, expected returns from rental income, growth in revenue, taxation levels, the sufficiency of cash to meet operating expenses, rates of distribution, and other matters. These, and other forward looking statements made by the Partnership, must be evaluated in the context of a number of factors that may affect the Partnership's financial condition and results of operations, including the following: Market and economic conditions which affect the value of the properties the Partnership owns and the cash from rental income such properties generate; the federal income tax consequences of rental income, deductions, gain on sales and other items and the affects of these consequences for the Partners; resolution by the General Partners of conflicts with which they may be confronted; the success of the General Partners of locating properties with favorable risk return characteristics; the effect of tenant defaults; and the condition of the industries in which the tenants of properties owned by the Partnership operate. The Application of Critical Accounting Policies The preparation of the Partnership's financial statements requires management to make estimates and assumptions that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management evaluates these estimates on an ongoing basis, including those related to the carrying value of real estate and the allocation by AEI Fund Management, Inc. of expenses to the Partnership as opposed to other funds they manage. The Partnership purchases properties and records them in the financial statements at the lower of cost or estimated realizable value. The Partnership initially records the properties at cost (including capitalized acquisition expenses). The Partnership is required to periodically evaluate the carrying value of properties to determine whether their realizable value has declined. For properties the Partnership will hold and operate, management determines whether impairment has occurred by comparing the property's probability-weighted cash flows to its current carrying value. For properties held for sale, management determines whether impairment has occurred by comparing the property's estimated fair value less cost to sell to its current carrying value. If the carrying value is greater than the realizable value, an impairment loss is recorded to reduce the carrying value of the property to its realizable value. A change in these assumptions or analysis could cause material changes in the carrying value of the properties. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) AEI Fund Management Inc. allocates expenses to each of the funds they manage primarily on the basis of the number of hours devoted by their employees to each fund's affairs. They also allocate expenses at the end of each month that are not directly related to a fund's operations based upon the number of investors in the fund and the fund's capitalization relative to other funds they manage. The Partnership reimburses these expenses subject to detailed limitations contained in the Partnership Agreement. Management of the Partnership has discussed the development and selection of the above accounting estimates and the management discussion and analysis disclosures regarding them with the managing partner of the Partnership. Results of Operations For the six months ended June 30, 2004 and 2003, the Partnership recognized rental income from continuing operations of $646,218 and $427,682, respectively. In 2004, rental income increased as a result of additional rent received from three property acquisitions in 2003 and 2004 and rent increases on two properties. For the six months ended June 30, 2004 and 2003, the Partnership incurred Partnership administration expenses from affiliated parties of $108,520 and $107,074, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and correspondence to the Limited Partners. During the same periods, the Partnership incurred Partnership administration and property management expenses from unrelated parties of $17,998 and $15,654, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit and accounting costs, taxes, insurance and other property costs. For the six months ended June 30, 2004 and 2003, the Partnership recognized interest income of $24,175 and $54,550, respectively. In 2004, interest income decreased due to the Partnership receiving interest from construction advances in 2003. For the six months ended June 30, 2004, the Partnership recognized gain on sale of real estate from continuing operations of $137,068 from the sale of the Winn-Dixie store. Since the Partnership retains an ownership interest in the property, the operating results and gain on sale of the property were not classified as discontinued operations. Through March 31, 2004, the Partnership sold 16.5975% of the Winn-Dixie store in Panama City, Florida, in four separate transactions, to unrelated third parties. The Partnership received net sale proceeds of $900,843, which resulted in a net gain of $139,707. The cost and related accumulated depreciation of the interest sold was $769,300 and $8,164, respectively. For the six months ended June 30, 2004 and 2003, the net gain was $137,068 and $-0-, respectively. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, upon complete disposal of a property or classification of a property as Real Estate Held for Sale, the Partnership includes the operating results and sale of the property in discontinued operations. In addition, the Partnership reclassifies the prior periods operating results and any partial sales of the property to discontinued operations. For the six months ended June 30, 2004, the Partnership recognized income from discontinued operations of $209,393, representing rental income less property management expenses and depreciation of $80,757 and gain on disposal of real estate of $128,636. For the six months ended June 30, 2003, the Partnership recognized income from discontinued operations of $737,963, representing rental income less property management expenses and depreciation of $300,050 and gain on disposal of real estate of $437,913. During the first nine months of 2003, the Partnership sold the Children's World in Mundelein, Illinois, in seven separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $2,010,839, which resulted in a net gain of $495,127. The total cost and related accumulated depreciation of the interests sold was $1,618,824 and $103,112, respectively. For the six months ended June 30, 2003, the net gain was $437,913. During the third quarter of 2003, the Partnership sold its 25.0% interest in the Champps Americana restaurant in Centerville, Ohio, in five separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $1,384,939, which resulted in a net gain of $498,449. The total cost and related accumulated depreciation of the interests sold was $984,426 and $97,936, respectively. During the fourth quarter of 2003, the Partnership sold 37.0128% of the Garden Ridge retail store in Pineville, North Carolina, in eleven separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $3,968,116, which resulted in a net gain of $1,347,739. The total cost and related accumulated depreciation of the interests sold was $3,310,163 and $689,786, respectively. On January 13, 2004, the Partnership sold its remaining 3.7372% interest in the Garden Ridge retail store to an unrelated third party. The Partnership received net sale proceeds of $392,836, which resulted in a net gain of $128,636. At December 31, 2003, the property was classified as Real Estate Held for Sale with a book value of $264,200. In June 2004, the Partnership entered into an agreement to sell the Johnny Carino's restaurant in Farmington, New Mexico to an unrelated third party. The sale is subject to contingencies and may not be completed. If the sale is completed, the Partnership expects to receive net sale proceeds of approximately $2,900,000, which will result in a net gain of approximately $793,000. If this sale is not completed, it is likely the Partnership will seek another buyer for the property and may not be able to negotiate a similar purchase agreement. At June 30, 2004, the property was classified as Real Estate Held for Sale with a book value of $2,107,183. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) In 2003 and the first quarter of 2004, the Partnership realized significant gains from the sale of property. While the real estate market is expected to remain attractive for sellers of property, there can be no assurance the Partnership will be able to achieve a similar level of sales activity or sales profitability during the remainder of 2004 due to unforeseen changes in the real estate market. In addition, it is likely the Partnership will curtail its selling activity as it is becoming more difficult to find attractive property in which to reinvest the proceeds from property sales. Inflation has had a minimal effect on income from operations. Leases may contain rent increases, based on the increase in the Consumer Price Index over a specified period, which will result in an increase in rental income over the term of the leases. In addition, leases may contain rent clauses which entitle the Partnership to receive additional rent in future years if gross receipts for the property exceed certain specified amounts. Increases in sales volumes of the tenants, due to inflation and real sales growth, may result in an increase in rental income over the term of the leases. Inflation also may cause the real estate to appreciate in value. However, inflation and changing prices may have an adverse impact on the operating margins of the properties' tenants, which could impair their ability to pay rent and subsequently reduce the Net Cash Flow available for distributions. Liquidity and Capital Resources During the six months ended June 30, 2004, the Partnership's cash balances decreased $1,562,291 as a result of cash used to purchase property and distributions paid to the Partners in excess of cash generated from operating activities, which were partially offset by cash generated from the sale of property. During the six months ended June 30, 2003, the Partnership's cash balances increased $131,131 as a result of cash generated from the sale of property, which was partially offset by cash used to purchase property and distributions paid to the Partners in excess of cash generated from operating activities. Net cash provided by operating activities decreased from $759,142 in 2003 to $530,614 in 2004 mainly as a result of a decrease in total rental and interest income in 2004 and net timing differences in the collection of payments from the lessees and the payment of expenses. The major components of the Partnership's cash flow from investing activities are investments in real estate and proceeds from the sale of real estate. During the six months ended June 30, 2004 and 2003, the Partnership generated cash flow from the sale of real estate of $1,267,072 and $1,781,436, respectively. During the same periods, the Partnership expended $1,996,338 and $1,348,836, respectively, to invest in real properties (inclusive of acquisition expenses) as the Partnership reinvested cash generated from property sales. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) On October 31, 2002, the Partnership purchased a parcel of land in Farmington, New Mexico for $810,000. The Partnership obtained title to the land in the form of an undivided fee simple interest. The land is leased to SFG Farmington I Limited Partnership (SFG) under a Lease Agreement with a primary term of 20 years and annual rental payments of $85,050. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to SFG for the construction of a Johnny Carino's restaurant on the site. Pursuant to the Lease, any improvements to the land during the term of the Lease, become property of the lessor. The Partnership charged interest on the advances at a rate of 10.5%. On May 28, 2003, after the development was completed, the Lease Agreement was amended to require annual rental payments of $231,000. Total acquisition costs, including the cost of the land, were $2,183,344. On September 19, 2003, the Partnership purchased a 37% interest in a Winn-Dixie store in Panama City, Florida for $1,714,965. The property is leased to Winn-Dixie Montgomery, Inc. under a Lease Agreement with a primary term of 20 years and annual rental payments of $138,380. The remaining interests in the property were purchased by AEI Net Lease Income & Growth Fund XIX Limited Partnership and AEI Income & Growth Fund 24 LLC, affiliates of the Partnership. On December 30, 2003, the Partnership purchased a Johnny Carino's restaurant in Laredo, Texas for $2,605,079. The property is leased to Kona Restaurant Group, Inc. under a Lease Agreement with a primary term of 13 years and annual rental payments of $215,646. On February 9, 2004, the Partnership purchased a 50% interest in a Jared Jewelry store in Hanover, Maryland for $1,983,138. The property is leased to Sterling Jewelers Inc. under a Lease Agreement with a primary term of 20 years and annual rental payments of $153,228. The remaining interest in the property was purchased by AEI Net Lease Income & Growth Fund XX Limited Partnership, an affiliate of the Partnership. In March 2004, the Partnership entered into an agreement to purchase a 50% interest in an Eckerd drug store in Buffalo, New York for approximately $1,606,500. In May 2004, by mutual agreement of the parties, the agreement was terminated. The Partnership's primary use of cash flow, other than investment in real estate, is distribution and redemption payments to Partners. The Partnership declares its regular quarterly distributions before the end of each quarter and pays the distribution in the first ten days after the end of each quarter. The Partnership attempts to maintain a stable distribution rate from quarter to quarter. Redemption payments are paid to redeeming Partners in the fourth quarter of each year. For the six months ended June 30, 2004 and 2003, the Partnership declared distributions of $818,185 and $818,188, respectively, which were distributed 99% to the Limited Partners and 1% to the General Partners. The Limited Partners received distributions of $810,004 and $810,006 and the General Partners received distributions of $8,181 and $8,182 for the periods, respectively. In December 2003, the Partnership declared a bonus distribution of $545,455 of net sale proceeds, which resulted in a higher distribution payable at December 31, 2003. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) During the first six months of 2004 and 2003, the Partnership distributed $158,402 and $72,483 of net sale proceeds to the Limited and General Partners as part of their quarterly distributions, which represented a return of capital of $6.85 and $3.12 per Limited Partnership Unit, respectively. The Partnership anticipates the remaining net sale proceeds will either be reinvested in additional property or distributed to the Partners in the future. The Partnership may acquire Units from Limited Partners who have tendered their Units to the Partnership. Such Units may be acquired at a discount. The Partnership will not be obligated to purchase in any year any number of Units that, when aggregated with all other transfers of Units that have occurred since the beginning of the same calendar year (excluding Permitted Transfers as defined in the Partnership Agreement), would exceed 5% of the total number of Units outstanding on January 1 of such year. In no event shall the Partnership be obligated to purchase Units if, in the sole discretion of the Managing General Partner, such purchase would impair the capital or operation of the Partnership. During 2003, eight Limited Partners redeemed a total of 117.84 Partnership Units for $81,076 in accordance with the Partnership Agreement. The Partnership acquired these Units using Net Cash Flow from operations. In prior years, a total of 41 Limited Partners redeemed 974.67 Partnership Units for $804,867. The redemptions increase the remaining Limited Partners' ownership interest in the Partnership. As a result of these redemption payments and pursuant to the Partnership Agreement, the General Partners received distributions of $819 in 2003. The continuing rent payments from the properties, together with cash generated from property sales, should be adequate to fund continuing distributions and meet other Partnership obligations on both a short-term and long-term basis. ITEM 3. CONTROLS AND PROCEDURES. (a) Evaluation of disclosure controls and procedures Under the supervision and with the participation of management, including its President and Chief Financial Officer, the Managing General Partner of the Partnership evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-14(c) under the Exchange Act). Based upon that evaluation, the President and Chief Financial Officer of the Managing General Partner concluded that, as of the end of the period covered by this report, the disclosure controls and procedures of the Partnership are adequately designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in applicable rules and forms. (b) Changes in internal controls There were no significant changes made in the Partnership's internal controls during the most recent period covered by this report that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1.LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Partnership is a party or of which the Partnership's property is subject. ITEM 2.CHANGES IN SECURITIES None. ITEM 3.DEFAULTS UPON SENIOR SECURITIES None. ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5.OTHER INFORMATION None. ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits - Description 10.1 Purchase Agreement dated June 14, 2004 between the Partnership and Jaroslaw Paluha and Joseph A. Barraco relating to the Property at 3500 East Main Street, Farmington, New Mexico. 31.1 Certification of Chief Executive Officer of General Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer of General Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification of Chief Executive Officer and Chief Financial Officer of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. b. Reports filed on Form 8-K - None. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: August 10, 2004 AEI Income & Growth Fund XXI Limited Partnership By: AEI Fund Management XXI, Inc. Its: Managing General Partner By: /s/ Robert P Johnson Robert P. Johnson President (Principal Executive Officer) By: /s/ Patrick W Keene Patrick W. Keene Chief Financial Officer (Principal Accounting Officer) EX-10.1 3 farmpa.txt PURCHASE AGREEMENT Johnny Carino's Country Italian Restaurant Farmington, New Mexico This AGREEMENT, entered into effective as of the 14th of June, 2004. l. PARTIES. Seller is AEI Income & Growth Fund XXI Limited Partnership which owns an undivided 100% interest in the fee title to that certain real property legally described in the attached Exhibit "A" (the "Property") Buyers are Jaroslaw Paluha and Joseph A. Barraco. Seller wishes to sell and Buyer wishes to buy the Property. 2. PROPERTY. The Property to be sold to Buyer in this transaction consists of an undivided 100% percentage interest the Property. Seller owns no interest in any personalty in connection with the Property, except the items listed on exhibit B of the Lease Agreement and the same are hereby to be sold to Buyer in connection herewith. 3. PURCHASE PRICE. The purchase price for this percentage interest in the Property is $2,940,000.00, all cash. 4. TERMS. The purchase price for the Property will be paid by Buyer as follows: (A). When this agreement is executed, Buyer will pay $50,000 to Seller (which shall be deposited into escrow according to the terms hereof) (the "First Payment"). The First Payment will be credited against the purchase price when and if escrow closes and the sale is completed. (B). Buyer will deposit the balance of the purchase price, $2,890,000.00 (the Second Payment") into escrow in sufficient time to allow escrow to close on the closing date. 5. CLOSING DATE. Escrow shall close on or before 60 day from the Effective Date of this Agreement. 6. DUE DILIGENCE. Buyer will have 45 days from the Effective Date of this Agreement (the "Review Period") to conduct all of its inspections and due diligence and satisfy itself regarding the Property and this transaction. Buyer agrees to indemnify and hold Seller harmless for any loss or damage to the Property or persons caused by Buyer or its agents arising out of such physical inspections of the Property. Within ten days of the Effective Date of this Agreement, Seller shall provide (except as explained below, in Item A): A. One copy of a title insurance commitment for an Owner's Title insurance policy (see paragraph 8 below), will deliver to buyer as soon as third party title insurance company provides to Seller. B. A copy of a Certificate of Occupancy or other such document certifying completion and granting permission to permanently occupy the improvements on the Property as are in Seller's possession. C. A copy of an "as built" survey of the Property completed concurrent with Seller's acquisition of the Property, if available in Seller's possession. D. A copy of any Phase I Environmental Report on the Property. E. Lease, and any amendments or modifications thereto (as further set forth in paragraph 11(A) below) of the Property showing occupancy date, lease expiration date, rent, and Guarantees, if any, accompanied by such tenant financial statements as may have been provided most recently to Seller by the Tenant and/or Guarantors. After Closing the Seller will give the Buyer the original Lease, and Amendments thereto. Buyer may cancel this agreement for ANY REASON in its sole discretion by delivering a cancellation notice, return receipt requested, to Seller and escrow holder before the expiration of the Review Period. Such notice shall be deemed effective only upon receipt by Seller. If this Agreement is not cancelled as set forth above, the First Payment shall be non-refundable unless Seller shall default hereunder. If Buyer cancels this Agreement as permitted under this Section, except for any escrow cancellation fees and any liabilities under the first paragraph of section 6 of this Agreement (which will survive), Seller (after execution of such documents reasonably requested by Seller to evidence the termination hereof) shall return to Buyer its First Payment and Buyer will have absolutely no rights, claims or interest of any type in connection with the Property or this transaction, regardless of any alleged conduct by Seller or anyone else. Unless this Agreement is canceled by Buyer pursuant to the terms hereof, if Buyer fails to make the Second Payment Seller shall be entitled to retain the First Payment and Buyer irrevocably will be deemed to be in default under this Agreement. Seller then may, at its option, retain the First Payment and declare this Agreement null and void, in which event Buyer will be deemed to have canceled this Agreement and relinquish all rights in and to the Property, or Seller may exercise its rights under Section 14 hereof. If this Agreement is not canceled and the First Payment and the Second Payment is made when required, all of Buyer's conditions and contingencies will be deemed satisfied. 7. ESCROW. Escrow shall be opened by Seller and funds deposited in escrow upon acceptance of this Agreement by both parties. The escrow holder will be a nationally-recognized escrow company selected by Seller. A copy of this Agreement will be delivered to the escrow holder and will serve as escrow instructions together with the escrow holder's standard instructions and any additional instructions required by the escrow holder to clarify its rights and duties (and the parties agree to sign these additional instructions). If there is any conflict between these other instructions and this Agreement, this Agreement will control. 8. TITLE. Closing will be conditioned on the agreement of a title company selected by Seller to issue an Owner's policy of title insurance, dated as of the close of escrow, in an amount equal to the purchase price, insuring that Buyer will own insurable title to the Property subject only to: the title company's standard exceptions; current real property taxes and assessments; survey exceptions; the rights of parties in possession pursuant to the lease defined in paragraph 11 below; all matters of public record; and other items disclosed to Buyer during the Review Period. Buyer shall be allowed five (5) business days after receipt of said commitment for examination and the making of any objections to marketability thereto, said objections to be made in writing or deemed waived. If any objections are so made, Seller shall be allowed sixty (60) days to cure such objections and make such title marketable or, in the alternative, to obtain a commitment for insurable title insuring over Buyer's objections. If Seller shall decide to make no efforts to make title marketable, or is unable to make title marketable or obtain insurable title, (after execution by Buyer of such documents reasonably requested by Seller to evidence the termination hereof) Buyer's First Payment will be returned and this Agreement shall be null and void and of no further force and effect. Seller has no obligation to spend any funds or make any effort to satisfy Buyer's objections, if any. Pending satisfaction of Buyer's objections, the payments hereunder required shall be postponed, but upon satisfaction of Buyer's objections and within ten (10) days after written notice to the Buyer of satisfaction of Buyer's objections, the parties shall perform this Agreement according to its terms. 9. CLOSING COSTS. Seller will pay one-half of escrow fees, one half of the cost of obtaining a Standard Owner's Title Insurance Policy in the full amount of the purchase price, and the cost of the title commitment. Buyer will pay one half of the cost of obtaining a Standard Owners Title Insurance Policy in the full amount of the purchase price. Buyer will pay all recording fees, transfer taxes and clerk's fees imposed upon the recording of the deed, one-half of the escrow fees, and the cost of an update to the Survey in Sellers possession (if an update is required by Buyer.) Each party will pay its own attorney's fees and costs to document and close this transaction. 10. REAL ESTATE TAXES, SPECIAL ASSESSMENTS AND PRORATIONS. (A). Because the Property is subject to a net lease (as further set forth in paragraph 11(A)(1), the parties acknowledge that there shall be no need for a real estate tax proration. However, Seller warrants that all real estate taxes and installments of special assessments due and payable in all years prior to the year of Closing have been paid in full. Unpaid real estate taxes and unpaid levied and pending special assessments existing on the date of Closing shall be the responsibility of Buyer, pro-rated, however, to the date of closing for the period prior to closing, which shall be the responsibility of Seller if Tenant shall not pay the same. Buyer shall likewise pay all taxes due and payable in the year after Closing and any unpaid installments of special assessments payable therewith and thereafter, if such unpaid levied and pending special assessments and real estate taxes are not paid by any tenant of the Property. (B). All income and all operating expenses from the Property, if any, shall be prorated between the parties and adjusted by them as of the date of Closing. Seller shall be entitled to all income earned, and shall be responsible for all expenses incurred, prior to the date of Closing. Buyer shall be entitled to all income earned and shall be responsible for all operating expenses of the Property incurred on and after the date of closing. 11. SELLER'S REPRESENTATION AND AGREEMENTS. (A). Seller represents and warrants as of this date that: 1. Except for the Lease Agreement in existence between AEI Income & Growth Fund XXI Limited Partnership (as Lessor) and SFG Farmington-I Limited Partnership ("Tenant"), dated October 31, 2002, the First Amendment to Net Lease Agreement dated May 28, 2003, and the Second Amendment to Net Lease Agreement dated February 25, 2004 (the "Lease"), Seller is not aware of any leases of the Property. 2. If the Lease contains a Right of First Refusal to the benefit of the Lessee for the duration of the Lease, including any renewal terms, then Seller's obligations hereunder are contingent upon Seller successfully obtaining Lessee's waiver of such right of first refusal with respect to this transaction. 3. It is not aware of any pending litigation or condemnation proceedings against the Property or Seller's interest in the Property. 4. Except as previously disclosed to Buyer and as permitted in paragraph (b) below, Seller is not aware of any contracts Seller has executed that would be binding on Seller after the closing date. (B). Provided that Buyer performs its obligations as required, Seller agrees that it will not enter into any new contracts that would materially affect the Property and be binding on Seller after the Closing Date without Buyer's prior consent, which will not be unreasonably withheld. 12. DISCLOSURES. (A). Seller has not received any notice of any material, physical, or mechanical defects of the Property, including without limitation, the plumbing, heating, air conditioning, and ventilating, electrical system. To the best of Seller's knowledge without inquiry, all such items are in good operating condition and repair and in compliance with all applicable governmental, zoning, and land use laws, ordinances, regulations and requirements. If Seller shall receive any notice to the contrary prior to Closing, Seller will inform Buyer prior to Closing. (B). Seller has not received any notice that the use and operation of the Property is not in full compliance with applicable building codes, safety, fire, zoning, and land use laws, and other applicable local, state and federal laws, ordinances, regulations and requirements. If Seller shall receive any such notice prior to Closing, Seller will inform Buyer prior to Closing. (C). Seller knows of no facts, nor has Seller failed to disclose to Buyer any fact known to Seller, which would prevent the Tenant from using and operating the Property after the Closing in the manner in which the Property has been used and operated prior to the date of this Agreement. If Seller shall receive any notice to the contrary prior to Closing, Seller will inform Buyer prior to Closing. (D). Seller has not received any notice that the Property is in violation of any federal, state or local law, ordinance, or regulations relating to industrial hygiene or the environmental conditions on, under, or about the Property, including, but not limited to, soil, and groundwater conditions. To the best of Seller's knowledge, there is no proceeding or inquiry by any governmental authority with respect to the presence of Hazardous Materials on the Property or the migration of Hazardous Materials from or to other property. Buyer agrees that Seller will have no liability of any type to Buyer or Buyer's successors, assigns, or affiliates in connection with any Hazardous Materials on or in connection with the Property either before or after the Closing Date, except such Hazardous Materials on or in connection with the Property arising out of Seller's gross negligence or intentional misconduct. If Seller shall receive any notice to the contrary prior to Closing, Seller will inform Buyer prior to Closing. (E). BUYER AGREES THAT IT SHALL BE PURCHASING THE PROPERTY IN ITS PRESENT CONDITION, "AS IS, WHERE IS", AND SELLER HAS NO OBLIGATIONS TO CONSTRUCT OR REPAIR ANY IMPROVEMENTS THEREON OR TO PERFORM ANY OTHER ACT REGARDING THE PROPERTY, EXCEPT AS EXPRESSLY PROVIDED HEREIN. (F). BUYER ACKNOWLEDGES THAT, HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY AND SUCH FINANCIAL INFORMATION CONCERNING THE LESSEE AND ANY GUARANTORS OF THE LEASE AS BUYER OR ITS ADVISORS SHALL REQUEST AND AS MAY BE IN SELLER'S POSSESSION, BUYER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY REPRESENTATIONS OR INFORMATION PROVIDED BY SELLER OR TO BE PROVIDED BY SELLER, EXCEPT AS SET FORTH HEREIN. BUYER FURTHER ACKNOWLEDGES THAT THE INFORMATION PROVIDED, OR TO BE PROVIDED, BY SELLER WITH RESPECT TO THE PROPERTY, THE PROPERTY AND TO THE LESSEE AND ANY GUARANTORS OF LEASE, WAS OBTAINED FROM A VARIETY OF SOURCES AND SELLER HAS NOT (A) MADE INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION, AND (B) MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION, EXCEPT AS HEREIN SET FORTH. THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS - WHERE IS" BASIS AND BUYER EXPRESSLY ACKNOWLEDGES THAT, IN CONSIDERATION OF THE AGREEMENTS OF SELLER HEREIN, EXCEPT AS OTHERWISE SPECIFIED HEREIN IN PARAGRAPH 11(A) AND (B) ABOVE AND THIS PARAGRAPH 12, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, SUITABILITY FOR LEASE, SUITABILITY FOR COMMERCIAL PURPOSES, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, IN RESPECT OF THE PROPERTY. The provisions (D) - (F) above shall survive Closing. 13. CLOSING. (A). Before the closing date, Seller will deposit into escrow an executed special warranty deed warranting title against lawful claims by, through, or under a conveyance from Seller, but not further or otherwise, conveying insurable title of the Property to Buyer, subject to the exceptions contained in paragraph 8 above. Seller will also deliver an Estoppel Certificate certified by Seller (or if available, by Lessee) as to the absence of known defaults by Lessee and Lessor under the Lease (B). On or before the closing date, Buyer will deposit into escrow the balance of the Purchase Price when required under Section 4 and any additional funds required of Buyer (pursuant to this agreement or any other agreement executed by Buyer) to close escrow. Both parties will deliver to the escrow holder any other documents reasonably required by the escrow holder to close escrow. (C). On the closing date, if escrow is ready to close, the escrow holder will: record the deed in the official records of the county where the Property is located; cause the title company to commit to issue the title policy; immediately deliver to Seller the portion of the purchase price deposited into escrow by cashier's check or wire transfer (less debits and prorations, if any); deliver to Seller and Buyer a signed counterpart of the escrow holder's certified closing statement and take all other actions necessary to close escrow. 14. DEFAULTS. If Buyer defaults, Buyer will forfeit all rights and claims and Seller will be relieved of all obligations and will be entitled to retain all monies heretofore paid by the Buyer. In addition, Seller shall retain all remedies available to Seller at law or in equity. If Seller shall default, Buyer irrevocably waives any rights to file a lis pendens, a specific performance action or any other claim, action or proceeding of any type in connection with the Property or this or any other transaction involving the Property, and will not do anything to affect title to the Property or hinder, delay or prevent any other sale, lease or other transaction involving the Property (any and all of which will be null and void), unless: it has paid the First Payment, deposited the balance of the Second Payment for the Purchase Price into escrow, performed all of its other obligations and satisfied all conditions under this Agreement, and unconditionally notified Seller that it stands ready to tender full performance, purchase the Property and close escrow as per this Agreement, regardless of any alleged default or misconduct by Seller. However, in the event of the default or breach by Seller of any of its obligations, covenants, representations or warranties under this Agreement, Buyer shall be entitled to all of its out-of-pocket expenses incurred in connection with such default or breach (including the Deposit and all interest accrued thereon), and Buyer shall have the right to pursue any other remedy available to it at law or equity, including the specific performance of this Agreement. Provided, however, that in no event shall Seller be liable for any punitive, consequential or speculative damages arising out of any default by Seller hereunder. 15. BUYER'S REPRESENTATIONS AND WARRANTIES. (A). Buyer represents and warrants to Seller as follows: (1). In addition to the acts and deeds recited herein and contemplated to be performed, executed, and delivered by Buyer, Buyer shall perform, execute and deliver or cause to be performed, executed, and delivered at the Closing or after the Closing, any and all further acts, deeds and assurances as Seller or the Title Company may require and be reasonable in order to consummate the transactions contemplated herein. (2). Buyer has all requisite power and authority to consummate the transaction contemplated by this Agreement and has by proper proceedings duly authorized the execution and delivery of this Agreement and the consummation of the transaction contemplated hereby. (3). To Buyer's knowledge, neither the execution and delivery of this Agreement nor the consummation of the transaction contemplated hereby will violate or be in conflict with (a) any applicable provisions of law, (b) any order of any court or other agency of government having jurisdiction hereof, or (c) any agreement or instrument to which Buyer is a party or by which Buyer is bound. 16. DAMAGES, DESTRUCTION AND EMINENT DOMAIN. (A). If, prior to closing, the Property or any part thereof be destroyed or further damaged by fire, the elements, or any cause, due to events occurring subsequent to the date of this Agreement to the extent that the cost of repair exceeds $10,000.00, this Agreement shall become null and void, at Buyer's option exercised, if at all, by written notice to Seller within ten (10) days after Buyer has received written notice from Seller of said destruction or damage. Seller, however, shall have the right to adjust or settle any insured loss until (i) all contingencies set forth in Paragraph 6 hereof have been satisfied, or waived; and (ii) any ten-day period provided for above in this Subparagraph 16a for Buyer to elect to terminate this Agreement has expired or Buyer has, by written notice to Seller, waived Buyer's right to terminate this Agreement. If Buyer elects to proceed and to consummate the purchase despite said damage or destruction, there shall be no reduction in or abatement of the purchase price, and Seller shall assign to Buyer the Seller's right, title, and interest in and to all insurance proceeds (pro-rata in relation to the Property) resulting from said damage or destruction to the extent that the same are payable with respect to damage to the Property, subject to rights of any Tenant of the Property. If the cost of repair is less than $10,000.00, Buyer shall be obligated to otherwise perform hereinunder with no adjustment to the Purchase Price, reduction or abatement, and Seller shall assign Seller's right, title and interest in and to all insurance proceeds pro-rata in relation to the Property, subject to rights of any Tenant of the Property. (B). If, prior to closing, the Property, or any part thereof, is taken by eminent domain, this Agreement shall become null and void at Buyer's option. If Buyer elects to proceed to consummate the purchase despite said taking, there shall be no reduction in, or abatement of, the purchase price, and Seller shall assign to Buyer the Seller's right, title, and interest in and to any award made, or to be made, in the condemnation proceeding pro-rata in relation to the Property, subject to rights of any Tenant of the Property. In the event that this Agreement is terminated by Buyer as provided above in Subparagraph 16A or 16B, the First Payment shall be immediately returned to Buyer (after execution by Buyer of such documents reasonably requested by Seller to evidence the termination hereof.) 17. 1031 EXCHANGE. If Buyer is purchasing the Property as "replacement property" to for purposes of a tax free exchange, Buyer acknowledges that Seller has made no representations, warranties, or agreements to Buyer or Buyer's agents that the transaction contemplated by the Agreement will qualify for such tax treatment, nor has there been any reliance thereon by Buyer respecting the legal or tax implications of the transactions contemplated hereby. Buyer further represents that it has sought and obtained such third party advice and counsel as it deems necessary in regards to the tax implications of this transaction. Buyer wishes to novate/assign the ownership rights and interest of this Purchase Agreement to First American Exchange Company, LLC who will act as Accommodator to perfect the 1031 exchange by preparing an agreement of exchange of Real Property whereby First American Exchange Company, LLC will be an independent third party purchasing the ownership interest in subject property from Seller and selling the ownership interest in subject property to Buyer under the same terms and conditions as documented in this Purchase Agreement. Buyer asks the Seller, and Seller agrees to cooperate in the perfection of such an exchange if at no additional cost or expense to Seller or delay in time. Buyer hereby indemnifies and holds Seller harmless from any claims and/or actions resulting from said exchange. Pursuant to the direction of First American Exchange Company, LLC, Seller will deed the property to Buyer. 18. CANCELLATION If any party elects to cancel this Contract because of any breach by another party or because escrow fails to close by the agreed date, the party electing to cancel shall deliver to escrow agent a notice containing the address of the party in breach and stating that this Contract shall be cancelled unless the breach is cured within 13 days following the delivery of the notice to the escrow agent. Within three days after receipt of such notice, the escrow agent shall send it by United States Mail to the party in breach at the address contained in the Notice and no further notice shall be required. If the breach is not cured within the 13 days following the delivery of the notice to the escrow agent, this Contract shall be cancelled. 19. MISCELLANEOUS. (A). This Agreement may be amended only by written agreement signed by both Seller and Buyer and all waivers must be in writing and signed by the waiving party. Time is of the essence. This Agreement will not be construed for or against a party whether or not that party has drafted this Agreement. If there is any action or proceeding between the parties relating to this Agreement the prevailing party will be entitled to recover attorney's fees and costs. This is an integrated agreement containing all agreements of the parties about the Property and the other matters described and it supersedes any other agreements or understandings. Exhibits attached to this Agreement are incorporated into this Agreement. (B). If this escrow has not closed by the Closing Date through no fault of Seller, Seller may, at its election, extend the closing date or exercise any remedy available to it by law, including terminating this Agreement. (C). Funds to be deposited or paid by Buyer must be good and clear funds in the form of cash, cashier's checks or wire transfers. (D). All notices from either of the parties hereto to the other shall be in writing and shall be considered to have been duly given or served if sent by first class certified mail, return receipt requested, postage prepaid, or by a nationally recognized courier service guaranteeing overnight delivery to the party at his or its address set forth below, or to such other address as such party may hereafter designate by written notice to the other party. If to Seller: AEI Income & Growth Fund XXI Limited Partnership 30 East Seventh Street Suite 1300 St. Paul, MN 55101 If to Buyer: Jaroslaw Paluha and Joseph A. Barraco 53 Oakmont Drive Rancho Mirage, CA 92270 When accepted, this offer will be a binding agreement for valid and sufficient consideration which will bind and benefit Buyer, Seller and their respective successors and assigns. Buyer is submitting this offer by signing a copy of this offer and delivering it to Seller. Seller has five (5) business days from receipt within which to accept this offer. This Agreement shall be governed by, and interpreted in accordance with, the laws of the state of New Mexico. IN WITNESS WHEREOF, the Seller and Buyer have executed this Agreement effective as of the day and year above first written. BUYERS: Jaroslaw Paluha Joseph A. Barraco By:/s/ Jaroslaw Paluha By: /s/ Joseph A Barraxo Jaroslaw Paluha Joseph A. Barraco SELLER: AEI Income & Growth Fund XXI Limited Partnership, a Minnesota limited partnership By: AEI Fund Management XXI, Inc., a Minnesota corporation By:/s/ Robert P Johnson Robert P. Johnson, its President EX-31.1 4 e3112-04.txt Exhibit 31.1 CERTIFICATIONS I, Robert P. Johnson, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of AEI Income & Growth Fund XXI Limited Partnership; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge; the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal control over financial reporting; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. Dated: August 10, 2004 /s/ Robert P Johnson Robert P. Johnson, President AEI Fund Management XXI, Inc. Managing General Partner EX-31.2 5 e3122-04.txt Exhibit 31.2 CERTIFICATIONS I, Patrick W. Keene, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of AEI Income & Growth Fund XXI Limited Partnership; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge; the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal control over financial reporting; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. Dated: August 10, 2004 /s/ Patrick W Keene Patrick W. Keene, Chief Financial Officer AEI Fund Management XXI, Inc. Managing General Partner EX-32 6 e322-04.txt Exhibit 32 CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of AEI Income & Growth Fund XXI Limited Partnership (the "Partnership") on Form 10-QSB for the period ended June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Robert P. Johnson, President of AEI Fund Management XXI, Inc., the Managing General Partner of the Partnership, and Patrick W. Keene, Chief Financial Officer of AEI Fund Management XXI, Inc., each certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/ Robert P Johnson Robert P. Johnson, President AEI Fund Management XXI, Inc. Managing General Partner August 10, 2004 /s/ Patrick W Keene Patrick W. Keene, Chief Financial Officer AEI Fund Management XXI, Inc. Managing General Partner August 10, 2004 -----END PRIVACY-ENHANCED MESSAGE-----