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EXCEL - IDEA: XBRL DOCUMENT - AEI INCOME & GROWTH FUND 25 LLCFinancial_Report.xls
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:  June 30, 2011

Commission File Number:  000-50609

AEI INCOME & GROWTH FUND 25 LLC
(Exact name of registrant as specified in its charter)

State of Delaware
 
75-3074973
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
     
30 East 7th Street, Suite 1300
St. Paul, Minnesota 55101
 
(651) 227-7333
(Address of principal executive offices)
 
(Registrant’s telephone number)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has 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.     x Yes    o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     o Yes    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

o Large accelerated filer
o Accelerated filer
o Non-accelerated filer
x Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     o Yes    x No

 
 

 

AEI INCOME & GROWTH FUND 25 LLC

INDEX


   
Page
Part I – Financial Information
 
       
 
Item 1.
Financial Statements (unaudited):
 
       
   
Balance Sheet as of June 30, 2011 and December 31, 2010
3
       
   
Statements for the Periods ended June 30, 2011 and 2010:
 
         
     
Income
4
         
     
Cash Flows
5
         
     
Changes in Members' Equity (Deficit)
6
         
   
Notes to Financial Statements
7 - 9
       
 
Item 2.
Management's Discussion and Analysis of Financial
 
     
Condition and Results of Operations
10 - 13
       
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
14
       
 
Item 4.
Controls and Procedures
14
       
Part II – Other Information
 
       
 
Item 1.
Legal Proceedings
14
       
 
Item 1A.
Risk Factors
14
       
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
15
       
 
Item 3.
Defaults Upon Senior Securities
15
       
 
Item 5.
Other Information
15
       
 
Item 6.
Exhibits
16
       
Signatures
16

 
Page 2 of 16

 
AEI INCOME & GROWTH FUND 25 LLC
BALANCE SHEET

ASSETS

 
 
June 30,
   
December 31,
 
   
2011
   
2010
 
Current Assets:
           
Cash
  $ 2,592,823     $ 2,209,831  
                 
Real Estate Held for Investment:
               
Land
    10,774,559       10,774,559  
Buildings and Equipment
    23,091,445       23,091,445  
Accumulated Depreciation
    (5,326,856 )     (4,868,084 )
Real Estate Held for Investment, Net
    28,539,148       28,997,920  
Real Estate Held for Sale
    519,931       935,815  
Total Real Estate
    29,059,079       29,933,735  
Total Assets
  $ 31,651,902     $ 32,143,566  

LIABILITIES AND MEMBERS’ EQUITY

 
 
June 30,
   
December 31,
 
   
2011
   
2010
 
Current Liabilities:
           
Payable to AEI Fund Management, Inc.
  $ 93,468     $ 82,853  
Distributions Payable
    544,949       651,717  
Unearned Rent
    22,811       40,353  
Total Current Liabilities
    661,228       774,923  
                 
Members’ Equity (Deficit):
               
Managing Members
    616       1,925  
Limited Members, $1,000 per Unit;
   50,000 Units authorized; 42,435 Units issued;
   41,929 and 41,972 Units outstanding in
   2011 and 2010, respectively
    30,990,058       31,366,718  
Total Members’ Equity
    30,990,674       31,368,643  
Total Liabilities and Members’ Equity
  $ 31,651,902     $ 32,143,566  




The accompanying Notes to Financial Statements are an integral part of this statement.
 
 
Page 3 of 16

 
AEI INCOME & GROWTH FUND 25 LLC
STATEMENT OF INCOME


   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Rental Income
  $ 650,559     $ 628,699     $ 1,299,824     $ 1,245,375  
                                 
Expenses:
                               
LLC Administration – Affiliates
    92,913       90,050       182,576       176,287  
LLC Administration and Property
   Management – Unrelated Parties
    23,641       19,781       36,737       30,165  
Depreciation
    229,386       227,424       458,772       455,687  
Total Expenses
    345,940       337,255       678,085       662,139  
                                 
Operating Income
    304,619       291,444       621,739       583,236  
                                 
Other Income:
                               
Interest Income
    4,097       3,643       8,541       6,769  
                                 
Income from Continuing Operations
    308,716       295,087       630,280       590,005  
                                 
Income from Discontinued Operations
    89,068       76,556       109,952       153,829  
                                 
Net Income
  $ 397,784     $ 371,643     $ 740,232     $ 743,834  
                                 
Net Income Allocated:
                               
Managing Members
  $ 21,963     $ 17,515     $ 32,236     $ 33,234  
Limited Members
    375,821       354,128       707,996       710,600  
Total
  $ 397,784     $ 371,643     $ 740,232     $ 743,834  
                                 
Income per LLC Unit:
                               
Continuing Operations
  $ 7.14     $ 6.82     $ 14.57     $ 13.63  
Discontinued Operations
    1.82       1.62       2.31       3.29  
Total
  $ 8.96     $ 8.44     $ 16.88     $ 16.92  
                                 
Weighted Average Units Outstanding –
      Basic and Diluted
    41,929       41,972       41,951       41,996  
                                 



The accompanying Notes to Financial Statements are an integral part of this statement.
 
 
Page 4 of 16

 
AEI INCOME & GROWTH FUND 25 LLC
STATEMENT OF CASH FLOWS


   
Six Months Ended June 30,
 
   
2011
   
2010
 
Cash Flows from Operating Activities:
           
Net Income
  $ 740,232     $ 743,834  
                 
Adjustments to Reconcile Net Income
To Net Cash Provided by Operating Activities:
               
Depreciation
    458,772       455,687  
Gain on Sale of Real Estate
    (73,257 )     (60,001 )
Increase (Decrease) in Payable to
   AEI Fund Management, Inc.
    10,615       (29,731 )
Increase (Decrease) in Unearned Rent
    (17,542 )     (44,797 )
Total Adjustments
    378,588       321,158  
Net Cash Provided By
   Operating Activities
    1,118,820       1,064,992  
                 
Cash Flows from Investing Activities:
               
Proceeds from Sale of Real Estate
    489,141       411,007  
                 
Cash Flows from Financing Activities:
               
Distributions Paid to Members
    (1,196,666 )     (1,089,900 )
Redemption Payments
    (28,303 )     (30,620 )
Net Cash Used For
   Financing Activities
    (1,224,969 )     (1,120,520 )
                 
Net Increase (Decrease) in Cash
    382,992       355,479  
                 
Cash, beginning of period
    2,209,831       1,410,759  
                 
Cash, end of period
  $ 2,592,823     $ 1,766,238  
                 







The accompanying Notes to Financial Statements are an integral part of this statement.
 
 
Page 5 of 16

 
AEI INCOME & GROWTH FUND 25 LLC
STATEMENT OF CHANGES IN MEMBERS' EQUITY (DEFICIT)


   
Managing Members
   
Limited Members
   
Total
   
Limited Member Units Outstanding
 
                         
Balance, December 31, 2009
  $ 859     $ 32,121,530     $ 32,122,389       42,019.28  
                                 
Distributions Declared
    (32,697 )     (1,057,202 )     (1,089,899 )        
                                 
Redemption Payments
    (918 )     (29,702 )     (30,620 )     (46.92 )
                                 
Net Income
    33,234       710,600       743,834          
                                 
Balance, June 30, 2010
  $ 478     $ 31,745,226     $ 31,745,704       41,972.36  
                                 
                                 
Balance, December 31, 2010
  $ 1,925     $ 31,366,718     $ 31,368,643       41,972.36  
                                 
Distributions Declared
    (32,696 )     (1,057,202 )     (1,089,898 )        
                                 
Redemption Payments
    (849 )     (27,454 )     (28,303 )     (42.99 )
                                 
Net Income
    32,236       707,996       740,232          
                                 
Balance, June 30, 2011
  $ 616     $ 30,990,058     $ 30,990,674       41,929.37  
                                 

















The accompanying Notes to Financial Statements are an integral part of this statement.
 
 
Page 6 of 16

 
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011

(1)  The condensed statements included herein have been prepared by the registrant, 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 registrant 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 registrant's latest annual report on Form 10-K.

(2)  Organization –

AEI Income & Growth Fund 25 LLC (“Company”), a Limited Liability Company, was formed on June 24, 2002 to acquire and lease commercial properties to operating tenants.  The Company's operations are managed by AEI Fund Management XXI, Inc. (“AFM”), the Managing Member.  Robert P. Johnson, the President and sole director of AFM, serves as the Special Managing Member.  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 Company.

The terms of the offering called for a subscription price of $1,000 per LLC Unit, payable on acceptance of the offer.  The Company commenced operations on September 11, 2003 when minimum subscriptions of 1,500 LLC Units ($1,500,000) were accepted.  The offering terminated May 12, 2005, when the extended offering period expired.  The Company received subscriptions for 42,434.763 Units.  Under the terms of the Operating Agreement, the Limited Members and Managing Members contributed funds of $42,434,763 and $1,000, respectively.  The Company shall continue until December 31, 2053, unless dissolved, terminated and liquidated prior to that date.

During operations, any Net Cash Flow, as defined, which the Managing Members determine to distribute will be distributed 97% to the Limited Members and 3% to the Managing Members.  Distributions to Limited Members will be made pro rata by Units.

Any Net Proceeds of Sale, as defined, from the sale or financing of properties which the Managing Members determine to distribute will, after provisions for debts and reserves, be paid in the following manner: (i) first, 99% to the Limited Members and 1% to the Managing Members until the Limited Members receive an amount equal to: (a) their Adjusted Capital Contribution plus (b) an amount equal to 7% of their Adjusted Capital Contribution per annum, cumulative but not compounded, to the extent not previously distributed from Net Cash Flow; (ii) any remaining balance will be distributed 90% to the Limited Members and 10% to the Managing Members.  Distributions to the Limited Members will be made pro rata by Units.
 
 
Page 7 of 16

 
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
(Continued)

(2)  Organization – (Continued)

For tax purposes, profits from operations, other than profits attributable to the sale, exchange, financing, refinancing or other disposition of property, will be allocated 97% to the Limited Members and 3% to the Managing Members.  Net losses from operations will be allocated 99% to the Limited Members and 1% to the Managing Members.

For tax purposes, profits arising from the sale, financing, or other disposition of property will be allocated in accordance with the Operating Agreement as follows: (i) first, to those Members with deficit balances in their capital accounts in an amount equal to the sum of such deficit balances; (ii) second, 99% to the Limited Members and 1% to the Managing Members until the aggregate balance in the Limited Members' capital accounts equals the sum of the Limited Members' Adjusted Capital Contributions plus an amount equal to 7% of their Adjusted Capital Contributions per annum, cumulative but not compounded, to the extent not previously allocated; (iii) third, the balance of any remaining gain will then be allocated 90% to the Limited Members and 10% to the Managing Members.  Losses will be allocated 99% to the Limited Members and 1% to the Managing Members.

The Managing Members are not required to currently fund a deficit capital balance.  Upon liquidation of the Company or withdrawal by a Managing Member, the Managing Members will contribute to the Company an amount equal to the lesser of the deficit balances in their capital accounts or 1.01% of the total capital contributions of the Limited Members over the amount previously contributed by the Managing Members.

(3)  Investments in Real Estate –

On October 20, 2010, the Company purchased a 21% interest in a Scott & White Clinic in College Station, Texas for $771,868.  The Company incurred $16,922 of acquisition expenses related to the purchase that were expensed.  The property is leased to Scott & White Healthcare under a Lease Agreement with a remaining primary term of 9.7 years (as of the date of purchase) and initial annual rent of $64,680 for the interest purchased.  The remaining interests in the property were purchased by AEI Net Lease Income & Growth Fund XX Limited Partnership and AEI Income & Growth Fund XXI Limited Partnership, affiliates of the Company.

(4)  Payable to AEI Fund Management, Inc. –

AEI Fund Management, Inc. performs the administrative and operating functions for the Company.  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.

 
Page 8 of 16

 
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
(Continued)

(5)  Discontinued Operations –

During 2010, the Company sold 47.0843% of the Applebee’s restaurant in Macedonia, Ohio, in six separate transactions, to unrelated third parties.  The Company received total net sale proceeds of $1,571,988, which resulted in a net gain of $218,688.  The cost and related accumulated depreciation of the interests sold was $1,475,997 and $122,697, respectively.  For the six months ended June 30, 2010, the net gain was $60,001.

During 2011, the Company sold an additional 14.4695% of the Applebee’s restaurant in Macedonia, Ohio, in three separate transactions, to unrelated third parties.  The Company received net sale proceeds of $489,141, which resulted in a net gain of $73,257.  The cost and related accumulated depreciation of the interests sold was $453,589 and $37,705, respectively.  The Company is attempting to sell its remaining 18.0894% interest in the property.  At June 30, 2011 and December 31, 2010, the property was classified as Real Estate Held for Sale with a carrying value of $519,931 and $935,815, respectively.

The financial results for this property 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 June 30,
   
Six Months Ended June 30,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Rental Income
  $ 15,925     $ 44,847     $ 36,809     $ 94,475  
Property Management Expenses
    (114 )     (112 )     (114 )     (647 )
Gain on Disposal of Real Estate
    73,257       31,821       73,257       60,001  
Income from Discontinued Operations
  $ 89,068     $ 76,556     $ 109,952     $ 153,829  

(6)  Fair Value Measurements –

As of June 30, 2011, the Company had no assets or liabilities measured at fair value on a recurring basis or nonrecurring basis.

 
Page 9 of 16

 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This section contains "forward-looking statements" 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, the sufficiency of cash to meet operating expenses, rates of distribution, and other matters.  These, and other forward-looking statements, should be evaluated in the context of a number of factors that may affect the Company’s financial condition and results of operations, including the following:

 
Market and economic conditions which affect the value of the properties the Company 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 effects of these consequences for Members;
 
resolution by the Managing Members of conflicts with which they may be confronted;
 
the success of the Managing Members 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 Company operate.

Application of Critical Accounting Policies

The preparation of the Company’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 investments in real estate and the allocation by AEI Fund Management, Inc. of expenses to the Company as opposed to other funds they manage.

The Company purchases properties and records them in the financial statements at cost (not including acquisition expenses).  The Company tests long-lived assets for recoverability when events or changes in circumstances indicate that the carrying value may not be recoverable.  For properties the Company will hold and operate, management determines whether impairment has occurred by comparing the property’s probability-weighted future undiscounted 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 net realizable value, an impairment loss is recorded to reduce the carrying value of the property to its net realizable value.  Changes in these assumptions or analysis may cause material changes in the carrying value of the properties.

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 Company reimburses these expenses subject to detailed limitations contained in the Operating Agreement.

 
Page 10 of 16

 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

Management of the Company has discussed the development and selection of the above accounting estimates and the management discussion and analysis disclosures regarding them with the managing member of the Company.

Results of Operations

For the six months ended June 30, 2011 and 2010, the Company recognized rental income from continuing operations of $1,299,824 and $1,245,375, respectively.  In 2011, rental income increased due to additional rent received from one property acquisition in 2010 and rent increases on five properties.  Based on the scheduled rent for the properties owned as of July 31, 2011, the Company expects to recognize rental income from continuing operations of approximately $2,598,000 in 2011.

For the six months ended June 30, 2011 and 2010, the Company incurred LLC administration expenses from affiliated parties of $182,576 and $176,287, respectively.  These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and communicating with the Limited Members.  During the same periods, the Company incurred LLC administration and property management expenses from unrelated parties of $36,737 and $30,165, respectively.  These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit costs, taxes, insurance and other property costs.

For the six months ended June 30, 2011 and 2010, the Company recognized interest income of $8,541 and $6,769, respectively.  In 2011, interest income increased due to the Company having more money invested in a money market account due to property sales.

Upon complete disposal of a property or classification of a property as Real Estate Held for Sale, the Company includes the operating results and sale of the property in discontinued operations.  In addition, the Company reclassifies the prior periods’ operating results of the property to discontinued operations.  For the six months ended June 30, 2011, the Company recognized income from discontinued operations of $109,952, representing rental income less property management expenses of $36,695 and gain on disposal of real estate of $73,257.  For the six months ended June 30, 2010, the Company recognized income from discontinued operations of $153,829 representing rental income less property management expenses of $93,828 and gain on disposal of real estate of $60,001.

During 2010, the Company sold 47.0843% of the Applebee’s restaurant in Macedonia, Ohio, in six separate transactions, to unrelated third parties.  The Company received total net sale proceeds of $1,571,988, which resulted in a net gain of $218,688.  The cost and related accumulated depreciation of the interests sold was $1,475,997 and $122,697, respectively.  For the six months ended June 30, 2010, the net gain was $60,001.

 
Page 11 of 16

 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

During 2011, the Company sold an additional 14.4695% of the Applebee’s restaurant in Macedonia, Ohio, in three separate transactions, to unrelated third parties.  The Company received net sale proceeds of $489,141, which resulted in a net gain of $73,257.  The cost and related accumulated depreciation of the interests sold was $453,589 and $37,705, respectively.  The Company is attempting to sell its remaining 18.0894% interest in the property.  At June 30, 2011 and December 31, 2010, the property was classified as Real Estate Held for Sale with a carrying value of $519,931 and $935,815, respectively.

Management believes inflation has not significantly affected 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.  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, 2011, the Company's cash balances increased $382,992 as a result of cash generated from the sale of property, which was partially offset by distributions and redemption payments paid to the Members in excess of cash generated from operating activities.  During the six months ended June 30, 2010, the Company's cash balances increased $355,479 as a result of cash generated from the sale of property, which was partially offset by distributions and redemption payments paid to the Members in excess of cash generated from operating activities.

Net cash provided by operating activities increased from $1,064,992 in 2010 to $1,118,820 in 2011 as a result of net timing differences in the collection of payments from the tenants and the payment of expenses, which were partially offset by a decrease in total rental and interest income in 2011 and an increase in LLC administration and property management expenses in 2011.

The major components of the Company'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, 2011 and 2010, the Company generated cash flow from the sale of real estate of $489,141 and $411,007, respectively.

On October 20, 2010, the Company purchased a 21% interest in a Scott & White Clinic in College Station, Texas for $771,868.  The property is leased to Scott & White Healthcare under a Lease Agreement with a remaining primary term of 9.7 years (as of the date of purchase) and initial annual rent of $64,680 for the interest purchased.  The remaining interests in the property were purchased by AEI Net Lease Income & Growth Fund XX Limited Partnership and AEI Income & Growth Fund XXI Limited Partnership, affiliates of the Company.

 
Page 12 of 16

 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

The Company's primary use of cash flow, other than investment in real estate, is distribution and redemption payments to Members.  The Company 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 Company attempts to maintain a stable distribution rate from quarter to quarter.  Redemption payments are paid to redeeming Members on a semi-annual basis.

For the six months ended June 30, 2011 and 2010, the Company declared distributions of $1,089,898 and $1,089,899, respectively.  Pursuant to the Operating Agreement, distributions of Net Cash Flow were allocated 97% to the Limited Members and 3% to the Managing Members.  Distributions of Net Proceeds of Sale were allocated 99% to the Limited Members and 1% to the Managing Members.  The Limited Members received distributions of $1,057,202 and $1,057,202 and the Managing Members received distributions of $32,696 and $32,697 for the periods, respectively.  In December 2010, the Company declared a special distribution of net sale proceeds of $106,768, which resulted in a higher distribution payable at December 31, 2010.

The Company may acquire Units from Limited Members who have tendered their Units to the Company.  Such Units may be acquired at a discount.  The Company will not be obligated to purchase in any year more than 2% of the total number of Units outstanding on January 1 of such year.  In no event shall the Company be obligated to purchase Units if, in the sole discretion of the Managing Member, such purchase would impair the capital or operation of the Company.

On April 1, 2011, two Limited Members redeemed a total of 42.99 Units for $27,454 in accordance with the Operating Agreement.  On April 1, 2010, two Limited Members redeemed a total of 46.92 Units for $29,702 in accordance with the Operating Agreement.  The Company acquired these Units using Net Cash Flow from operations.  In prior years, eight Limited Members redeemed a total of 415.48 Units for $305,680.  The redemptions increase the remaining Limited Members’ ownership interest in the Company.  As a result of these redemption payments and pursuant to the Operating Agreement, the Managing Members received distributions of $849 and $918 in 2011 and 2010, respectively.

The continuing rent payments from the properties, together with cash generated from property sales, should be adequate to fund continuing distributions and meet other Company obligations on both a short-term and long-term basis.

The Economy and Market Conditions

The impact of conditions in the current economy, including the turmoil in the credit markets, has adversely affected many real estate investment funds.  However, the absence of mortgage financing on the Company’s properties eliminates the risks of foreclosure and debt-refinancing that can negatively impact the value and distributions of leveraged real estate investment funds.  Nevertheless, a prolonged economic downturn may adversely affect the operations of the Company’s tenants and their cash flows.  If a tenant were to default on its lease obligations, the Company’s income would decrease, its distributions would likely be reduced and the value of its properties might decline.

 
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ITEM 3.  QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for a smaller reporting company.

ITEM 4.  CONTROLS AND PROCEDURES.

(a)  Disclosure Controls and Procedures.

Under the supervision and with the participation of management, including its President and Chief Financial Officer, the Managing Member of the Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)).  Based upon that evaluation, the President and Chief Financial Officer of the Managing Member concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to management, including the President and Chief Financial Officer of the Managing Member, in a manner that allows timely decisions regarding required disclosure.

(b)  Changes in Internal Control Over Financial Reporting.

During the most recent period covered by this report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

There are no material pending legal proceedings to which the Company is a party or of which the Company's property is subject.

ITEM 1A.  RISK FACTORS.

Not required for a smaller reporting company.

 
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ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES & USE OF PROCEEDS.

(a) None.

(b) Not applicable.

(c) Pursuant to Section 7.7 of the Operating Agreement, each Limited Member has the right to present Units to the Company for purchase by submitting notice to the Managing Member during January or July of each year.  The purchase price of the Units is equal to 80% of the net asset value per Unit, as of the first business day of January or July of each year, as determined by the Managing Member in accordance with the provisions of the Operating Agreement.  Units tendered to the Company during January and July are redeemed on April 1st and October 1st, respectively, of each year subject to the following limitations.  The Company will not be obligated to purchase in any year more than 2% of the total number of Units outstanding on January 1 of such year.  In no event shall the Company be obligated to purchase Units if, in the sole discretion of the Managing Member, such purchase would impair the capital or operation of the Company.

Small Business Issuer Purchases of Equity Securities

               
Total Number of Units
   
Maximum Number
 
   
Total Number
   
Average
   
Purchased as Part of
   
of Units that May Yet
 
   
of Units
   
Price Paid
   
Publicly Announced
   
Be Purchased Under
 
Period
 
Purchased
   
per Unit
   
Plans or Programs
   
the Plans or Programs
 
                         
4/1/11 to 4/30/11
    42.99     $ 638.61       505.40 (1)     (2 )
                                 
5/1/11 to 5/31/11
    --       --       --       --  
                                 
6/1/11 to 6/30/11
    --       --       --       --  

(1)  
The Company’s repurchase plan is mandated by the Operating Agreement as included in the prospectus related to the original offering of the Units.
(2)  
The Operating Agreement contains annual limitations on repurchases described in the paragraph above and has no expiration date.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 5.  OTHER INFORMATION.

None.

 
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ITEM 6.  EXHIBITS.

31.1
Certification of Chief Executive Officer of Managing Member 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 Managing Member 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 Managing Member pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Dated:  August 12, 2011
AEI Income & Growth Fund 25 LLC
 
By:
AEI Fund Management XXI, Inc.
 
Its:
Managing Member
     
     
     
 
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)


 
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