10QSB 1 q21-900.txt 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: September 30, 2000 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.) 1300 Minnesota World Trade Center, St. Paul, Minnesota 55101 (Address of Principal Executive Offices) (651) 227-7333 (Issuer's telephone number) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Transitional Small Business Disclosure Format: Yes No [X] AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP INDEX PART I. Financial Information Item 1. Balance Sheet as of September 30, 2000 and December 31, 1999 Statements for the Periods ended September 30, 2000 and 1999: Income Cash Flows Changes in Partners' Capital Notes to Financial Statements Item 2. Management's Discussion and Analysis PART II.Other Information Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP BALANCE SHEET SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 (Unaudited) ASSETS 2000 1999 CURRENT ASSETS: Cash and Cash Equivalents $ 1,391,929 $ 2,412,278 Receivables 4,080 0 Short-Term Note Receivable 680,000 0 ----------- ----------- Total Current Assets 2,076,009 2,412,278 ----------- ----------- INVESTMENTS IN REAL ESTATE: Land 6,186,440 5,933,670 Buildings and Equipment 10,902,068 10,818,262 Property Acquisition Costs 28,083 14,304 Accumulated Depreciation (1,393,792) (1,194,034) ----------- ----------- Net Investments in Real Estate 15,722,799 15,572,202 ----------- ----------- Total Assets $17,798,808 $17,984,480 =========== =========== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Payable to AEI Fund Management, Inc. $ 64,871 $ 20,786 Distributions Payable 390,738 390,738 ----------- ----------- Total Current Liabilities 455,609 411,524 ----------- ----------- PARTNERS' CAPITAL (DEFICIT): General Partners (35,754) (33,456) Limited Partners, $1,000 Unit Value; 24,000 Units authorized and issued; 23,548 outstanding 17,378,953 17,606,412 ----------- ----------- Total Partners' Capital 17,343,199 17,572,956 ----------- ----------- Total Liabilities and Partners' Capital $17,798,808 $17,984,480 =========== =========== 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 SEPTEMBER 30 (Unaudited) Three Months Ended Nine Months Ended 9/30/00 9/30/99 9/30/00 9/30/99 INCOME: Rent $437,732 $465,581 $1,292,159 $1,420,395 Investment Income 39,911 7,444 95,510 14,045 -------- -------- ---------- ---------- Total Income 477,643 473,025 1,387,669 1,434,440 -------- -------- ---------- ---------- EXPENSES: Partnership Administration - Affiliates 69,897 57,109 201,130 175,086 Partnership Administration and Property Management - Unrelated Parties 15,904 22,472 62,395 66,748 Depreciation 116,351 127,276 353,409 384,696 -------- -------- ---------- ---------- Total Expenses 202,152 206,857 616,934 626,530 -------- -------- ---------- ---------- OPERATING INCOME 275,491 266,168 770,735 807,910 GAIN ON SALE OF REAL ESTATE 181,328 163,463 181,328 163,463 -------- -------- ---------- ---------- NET INCOME $456,819 $429,631 $ 952,063 $ 971,373 ======== ======== ========== ========== NET INCOME ALLOCATED: General Partners $ 4,569 $ 4,296 $ 9,521 $ 9,714 Limited Partners 452,250 425,335 942,542 961,659 -------- -------- ---------- ---------- $456,819 $429,631 $ 952,063 $ 971,373 ======== ======== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (23,548 and 23,829 weighted average Units outstanding in 2000 and 1999, respectively) $ 19.21 $ 17.85 $ 40.03 $ 40.36 ======== ======== ========== ========== 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 PERIODS ENDED SEPTEMBER 30 (Unaudited) 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 952,063 $ 971,373 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 353,409 384,696 Gain on Sale of Real Estate (181,328) (163,463) (Increase) Decrease in Receivables (4,080) 16,052 Increase (Decrease) in Payable to AEI Fund Management, Inc. 44,085 (20,835) ----------- ----------- Total Adjustments 212,086 216,450 ----------- ----------- Net Cash Provided By Operating Activities 1,164,149 1,187,823 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in Real Estate (1,335,340) (221,884) Proceeds from Sale of Real Estate 332,662 657,632 ----------- ----------- Net Cash Provided By (Used For) Investing Activities (1,002,678) 435,748 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in Distributions Payable 0 (60,200) Distributions to Partners (1,181,820) (1,212,501) ----------- ----------- Net Cash Used For Financing Activities (1,181,820) (1,272,701) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,020,349) 350,870 CASH AND CASH EQUIVALENTS, beginning of period 2,412,278 557,646 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 1,391,929 $ 908,516 =========== =========== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES: Note Receivable Acquired in Sale of Property $ 680,000 =========== 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 SEPTEMBER 30 (Unaudited) Limited Partnership General Limited Units Partners Partners Total Outstanding BALANCE, December 31, 1998 $(30,953) $17,854,240 $17,823,287 23,828.87 Distributions (12,125) (1,200,376) (1,212,501) Net Income 9,714 961,659 971,373 -------- ----------- ----------- ---------- BALANCE, September 30, 1999 $(33,364) $17,615,523 $17,582,159 23,828.87 ======== =========== =========== ========== BALANCE, December 31, 1999 $(33,456) $17,606,412 $17,572,956 23,548.50 Distributions (11,819) (1,170,001) (1,181,820) Net Income 9,521 942,542 952,063 -------- ----------- ----------- ---------- BALANCE, September 30, 2000 $(35,754) $17,378,953 $17,343,199 23,548.50 ======== =========== =========== ========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (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 shareholder of AFM, serves as the Individual General Partner and an affiliate of AFM, AEI Fund Management, Inc. (AEI), 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 ($24,000,000) 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 SEPTEMBER 30, 2000 (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) Short-Term Note Receivable - On August 2, 2000, the Partnership received a Contract for Deed from an affiliate of the buyer of the Media Play store in Apple Valley, Minnesota. The Note bears interest at 9% and is due December 2, 2000. The Note is secured by the land, building and equipment. As of September 30, 2000, the Partnership's share of outstanding principal due on the Note is $680,000. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (Continued) (4) Investments in Real Estate - During the third and fourth quarters of 1999, the Partnership sold 85.0382% of its interest in the Arby's restaurant in four separate transactions to unrelated third parties. The Partnership received total net sale proceeds of $881,682 which resulted in a total net gain of $220,469. The total cost and related accumulated depreciation of the interest sold was $731,056 and $69,843, respectively. On October 26, 1999, the Partnership sold the Caribou Coffee store to an unrelated third party. The Partnership received net sale proceeds of $1,553,867, which resulted in a net gain of $301,764. At the time of sale, the cost and related accumulated depreciation of the property was $1,310,597 and $58,494, respectively. On August 2, 2000, the Media Play store was sold to an unrelated third party for $2,500,000. The sale agreement required $500,000 in cash and a $2,000,000 contract for deed, which bears interest at 9%. The contract for deed assisted the buyer in closing on the property, prior to obtaining long-term financing, and is due on December 2, 2000. The Partnership's share of the net sale proceeds was $820,651, which resulted in a net gain of $129,813. At the time of sale, the cost and related accumulated depreciation was $833,860 and $143,022. On September 28, 2000, the Partnership sold 3.3219% of its interest in the Champps Americana restaurant in Schaumburg, Illinois to an unrelated third party. The Partnership received net sale proceeds of $192,011 which resulted in a net gain of $51,515. The cost and related accumulated depreciation of the interest sold was $151,124 and $10,628, respectively. Subsequent to September 30, 2000, the Partnership sold an additional 2.9495% of its interest in the Champps Americana restaurant in Schaumburg, Illinois to an unrelated third party. The Partnership received net sale proceeds of approximately $167,000 which resulted in a net gain of approximately $43,000. During the first nine months of 2000 and 1999, the Partnership distributed $55,577 and $19,895 of the net sale proceeds to the Limited and General Partners as part of their regular quarterly distributions which represented a return of capital of $2.34 and $0.83 per Limited Partnership Unit, respectively. The remaining net sale proceeds will either be reinvested in additional property or distributed to the Partners in the future. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (Continued) (4) Investments in Real Estate - (Continued) On August 28, 1998, the Partnership purchased a 25% interest in a parcel of land in Centerville, Ohio for $462,747. The land is leased to Americana Dining Corporation (ADC) under a Lease Agreement with a primary term of 20 years and annual rental payments of $32,392. Effective December 25, 1998, the annual rent was increased to $48,588. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to ADC for the construction of a Champps Americana restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 7%. Effective December 25, 1998, the interest rate was increased to 10.5%. On January 27, 1999, after the development was completed, the Lease Agreement was amended to require annual rental payments of $101,365. The Partnership's share of the total acquisition costs, including the cost of the land, was $984,426. The remaining interests in the Fund property are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate Fund XVIII Limited Partnership and AEI Income & Growth Fund XXII Limited Partnership, affiliates of the Partnership. On March 8, 2000, the Partnership purchased a parcel of land in Fort Wayne, Indiana for $549,000. The land is leased to Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $48,038. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to TWI for the construction of a Tumbleweed restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 8.75%. Effective July 5, 2000, the interest rate was increased to 9.875%. On September 11, 2000, after the development was completed, the Lease Agreement was amended to require annual rental payments of $132,621. Total acquisition costs, including the cost of the land, were $1,321,561. The Partnership has incurred net costs of $28,083 relating to the review of potential property acquisitions which have been capitalized and will be allocated to properties acquired in future periods. (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. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations For the nine months ended September 30, 2000 and 1999, the Partnership recognized rental income of $1,292,159 and $1,420,395, respectively. During the same periods, the Partnership earned investment income of $95,510 and $14,045, respectively. In 2000, rental income decreased mainly as a result of property sales in 1999. This decrease in rental income was partially offset by additional rent received from one property acquisition in 2000, rent increases on three properties and by an increase in investment income earned on the sale proceeds prior to the purchase of additional property. During the nine months ended September 30, 2000 and 1999, the Partnership paid Partnership administration expenses to affiliated parties of $201,130 and $175,086, 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 $62,395 and $66,748, 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. As of September 30, 2000, the Partnership's cash distribution rate was 6.5% on an annualized basis. Distributions of Net Cash Flow to the General Partners were subordinated to the Limited Partners as required in the Partnership Agreement. As a result, 99% of distributions and income were allocated to Limited Partners and 1% to the General Partners. Inflation has had a minimal effect on income from operations. The Leases contain cost of living increases which will result in an increase in rental income over the term of the Leases. Inflation also may cause the Partnership's real estate to appreciate in value. However, inflation and changing prices may also have an adverse impact on the operating margins of the properties' tenants which could impair their ability to pay rent and subsequently reduce the Partnership's Net Cash Flow available for distributions. Liquidity and Capital Resources During the nine months ended September 30, 2000, the Partnership's cash balances decreased $1,020,349 mainly as a result of cash used to purchase property which was partially offset by cash generated from the sale of property. Net cash provided by operating activities decreased from $1,187,823 in 1999 to $1,164,149 in 2000 as a result of a decrease in income and an increase in expenses in 2000, which were partially offset by 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 nine months ended September 30, 2000 and 1999, the Partnership generated cash flow from the sale of real estate of $332,662 and $657,632, respectively. During the same periods, the Partnership expended $1,335,340 and $221,884, respectively, to invest in real properties (inclusive of acquisition expenses) as the Partnership reinvested the cash generated from property sales. During the third and fourth quarters of 1999, the Partnership sold 85.0382% of its interest in the Arby's restaurant in four separate transactions to unrelated third parties. The Partnership received total net sale proceeds of $881,682 which resulted in a total net gain of $220,469. The total cost and related accumulated depreciation of the interest sold was $731,056 and $69,843, respectively. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) On October 26, 1999, the Partnership sold the Caribou Coffee store to an unrelated third party. The Partnership received net sale proceeds of $1,553,867, which resulted in a net gain of $301,764. At the time of sale, the cost and related accumulated depreciation of the property was $1,310,597 and $58,494, respectively. On August 2, 2000, the Media Play store was sold to an unrelated third party for $2,500,000. The sale agreement required $500,000 in cash and a $2,000,000 contract for deed, which bears interest at 9%. The contract for deed assisted the buyer in closing on the property, prior to obtaining long-term financing, and is due on December 2, 2000. The Partnership's share of the net sale proceeds was $820,651, which resulted in a net gain of $129,813. At the time of sale, the cost and related accumulated depreciation was $833,860 and $143,022. On September 28, 2000, the Partnership sold 3.3219% of its interest in the Champps Americana restaurant in Schaumburg, Illinois to an unrelated third party. The Partnership received net sale proceeds of $192,011 which resulted in a net gain of $51,515. The cost and related accumulated depreciation of the interest sold was $151,124 and $10,628, respectively. Subsequent to September 30, 2000, the Partnership sold an additional 2.9495% of its interest in the Champps Americana restaurant in Schaumburg, Illinois to an unrelated third party. The Partnership received net sale proceeds of approximately $167,000 which resulted in a net gain of approximately $43,000. During the first nine months of 2000 and 1999, the Partnership distributed $55,577 and $19,895 of the net sale proceeds to the Limited and General Partners as part of their regular quarterly distributions which represented a return of capital of $2.34 and $0.83 per Limited Partnership Unit, respectively. On August 28, 1998, the Partnership purchased a 25% interest in a parcel of land in Centerville, Ohio for $462,747. The land is leased to Americana Dining Corporation (ADC) under a Lease Agreement with a primary term of 20 years and annual rental payments of $32,392. Effective December 25, 1998, the annual rent was increased to $48,588. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to ADC for the construction of a Champps Americana restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 7%. Effective December 25, 1998, the interest rate was increased to 10.5%. On January 27, 1999, after the development was completed, the Lease Agreement was amended to require annual rental payments of $101,365. The Partnership's share of the total acquisition costs, including the cost of the land, was $984,426. The remaining interests in the Fund property are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate Fund XVIII Limited Partnership and AEI Income & Growth Fund XXII Limited Partnership, affiliates of the Partnership. On March 8, 2000, the Partnership purchased a parcel of land in Fort Wayne, Indiana for $549,000. The land is leased to Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $48,038. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to TWI for the construction of a Tumbleweed restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 8.75%. Effective July 5, 2000, the interest rate was increased to 9.875%. On September 11, 2000, after the development was completed, the Lease Agreement was amended to require annual rental payments of $132,621. Total acquisition costs, including the cost of the land, were $1,321,561. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) The Partnership's primary use of cash flow is distribution and redemption payments to Partners. The Partnership declares its regular quarterly distributions before the end of each quarter and pays the distribution in the first week after the end of each quarter. The Partnership attempts to maintain a stable distribution rate from quarter to quarter. Redemption payments are paid to redeeming Partners in the fourth quarter of each year. Effective April 1, 1999, the Partnership's distribution rate was reduced from 7.0% to 6.5%. As a result, distributions were higher during the first nine months of 1999 when compared to the same period in 2000. The Partnership may acquire Units from Limited Partners who have tendered their Units to the Partnership. Such Units may be acquired at a discount. The Partnership is not obligated to purchase in any year more than 5% of the number of Units outstanding at the beginning of the year. In no event shall the Partnership be obligated to purchase Units if, in the sole discretion of the Managing General Partner, such purchase would impair the capital or operation of the Partnership. On October 1, 2000, twelve Limited Partners redeemed a total of 226.32 Partnership Units for $186,379 in accordance with the Partnership Agreement. The Partnership acquired these Units using Net Cash Flow from operations. In prior years, thirteen Limited Partners redeemed a total of 451.47 Partnership Units for $393,500. The redemptions increase the remaining Limited Partners' ownership interest in the Partnership. 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. Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 The foregoing Management's Discussion and Analysis contains various "forward looking statements" within the meaning of federal securities laws which represent management's expectations or beliefs concerning future events, including statements regarding anticipated application of cash, expected returns from rental income, growth in revenue, taxation levels, the sufficiency of cash to meet operating expenses, rates of distribution, and other matters. These, and other forward looking statements made by the Partnership, must be evaluated in the context of a number of factors that may affect the Partnership's financial condition and results of operations, including the following: 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 investors; 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. 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 First Amendment to Net Lease Agreement dated September 11, 2000 between the Partnership and Tumbleweed, Inc. relating to the property at 8607 US Highway 24 West, Fort Wayne, Indiana. 10.2 Second Amendment to Net Lease Agreement dated September 11, 2000 between the Partnership and Tumbleweed, Inc. relating to the property at 8607 US Highway 24 West, Fort Wayne, Indiana. 10.3 Purchase Agreement dated September 26, 2000 between the Partnership, Net Lease Income & Growth Fund 84-A Limited Partnership and Garden Ridge Development LLC relating to the property at 955 Golf Road, Schaumburg, Illinois. 10.4 Purchase Agreement dated October 12, 2000 between the Partnership and the Neal Goldman Revocable Trust relating to the property at 955 Golf Road, Schaumburg, Illinois. 27 Financial Data Schedule for period ended September 30, 2000. b. Reports filed on Form 8-K - None. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: November 7, 2000 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/ Mark E. Larson Mark E. Larson Chief Financial Officer (Principal Accounting Officer)