Attached files
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: March 31, 2013
Commission File Number: 000-19838
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
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State of Minnesota
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41-1677062
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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30 East 7th Street, Suite 1300
St. Paul, Minnesota 55101
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(651) 227-7333
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(Address of principal executive offices)
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(Registrant’s telephone number)
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Not Applicable
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(Former name, former address and former fiscal year, if changed since last report)
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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). x 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.
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o Large accelerated filer
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o Accelerated filer
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o Non-accelerated filer
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x Smaller reporting company
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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 NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
INDEX
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Page
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Part I – Financial Information
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Item 1.
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Financial Statements (unaudited):
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Balance Sheet as of March 31, 2013 and December 31, 2012
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3
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Statements for the Three Months ended March 31, 2013 and 2012:
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Income
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4
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Cash Flows
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5
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Changes in Partners’ Capital
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6
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Notes to Financial Statements
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7 - 10
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Item 2.
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Management's Discussion and Analysis of Financial
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Condition and Results of Operations
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10 - 14
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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14
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Item 4.
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Controls and Procedures
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15
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Part II – Other Information
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Item 1.
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Legal Proceedings
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15
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Item 1A.
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Risk Factors
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15
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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15
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Item 3.
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Defaults Upon Senior Securities
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16
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Item 4.
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Mine Safety Disclosures
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16
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Item 5.
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Other Information
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16
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Item 6.
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Exhibits
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16
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Signatures
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16
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Page 2 of 16
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
BALANCE SHEET
ASSETS
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March 31,
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December 31,
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2013
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2012
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Current Assets:
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Cash
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$
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656,385
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$
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684,674
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Real Estate Held for Investment:
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Land
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501,902
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501,902
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Buildings and Equipment
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1,126,519
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1,126,519
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Accumulated Depreciation
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(273,085)
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(263,697)
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Real Estate Held for Investment, Net
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1,355,336
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1,364,724
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Real Estate Held for Sale
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467,000
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467,000
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Total Real Estate
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1,822,336
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1,831,724
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Total Assets
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$
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2,478,721
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$
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2,516,398
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LIABILITIES AND PARTNERS' CAPITAL
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Current Liabilities:
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Payable to AEI Fund Management, Inc.
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$
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14,441
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$
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10,314
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Distributions Payable
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65,147
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65,147
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Unearned Rent
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9,268
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0
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Total Current Liabilities
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88,856
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75,461
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Partners’ Capital:
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General Partners
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3,651
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4,162
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Limited Partners – 30,000 Units authorized;
20,166 Units issued and outstanding
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2,386,214
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2,436,775
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Total Partners' Capital
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2,389,865
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2,440,937
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Total Liabilities and Partners' Capital
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$
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2,478,721
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$
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2,516,398
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The accompanying Notes to Financial Statements are an integral part of this statement.
Page 3 of 16
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
STATEMENT OF INCOME
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Three Months Ended March 31
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2013
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2012
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Rental Income
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$
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28,565
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$
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28,114
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Expenses:
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Partnership Administration – Affiliates
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20,507
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25,644
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Partnership Administration and Property
Management – Unrelated Parties
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6,021
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7,230
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Depreciation
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9,388
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9,388
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Total Expenses
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35,916
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42,262
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Operating Loss
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(7,351)
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(14,148)
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Other Income:
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Interest Income
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472
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812
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Loss from Continuing Operations
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(6,879)
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(13,336)
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Income from Discontinued Operations
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20,954
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469,082
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Net Income
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$
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14,075
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$
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455,746
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Net Income Allocated:
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General Partners
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$
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141
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$
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4,557
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Limited Partners
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13,934
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451,189
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Total
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$
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14,075
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$
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455,746
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Income (Loss) per Limited Partnership Unit:
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Continuing Operations
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$
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(.34)
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$
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(.65)
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Discontinued Operations
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1.03
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23.02
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Total – Basic and Diluted
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$
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.69
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$
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22.37
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Weighted Average Units Outstanding –
Basic and Diluted
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20,166
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20,166
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The accompanying Notes to Financial Statements are an integral part of this statement.
Page 4 of 16
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
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Three Months Ended March 31
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2013
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2012
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Cash Flows from Operating Activities:
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Net Income
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$
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14,075
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$
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455,746
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Adjustments to Reconcile Net Income
To Net Cash Provided by Operating Activities:
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Depreciation
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9,388
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14,586
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Gain on Sale of Real Estate
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0
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(435,702)
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Increase (Decrease) in Payable to
AEI Fund Management, Inc.
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4,127
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28,457
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Increase (Decrease) in Unearned Rent
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9,268
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9,268
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Total Adjustments
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22,783
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(383,391)
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Net Cash Provided By
Operating Activities
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36,858
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72,355
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Cash Flows from Investing Activities:
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Proceeds from Sale of Real Estate
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0
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1,566,807
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Cash Flows from Financing Activities:
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Distributions Paid to Partners
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(65,147)
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(698,583)
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Net Increase (Decrease) in Cash
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(28,289)
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940,579
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Cash, beginning of period
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684,674
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1,252,742
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Cash, end of period
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$
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656,385
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$
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2,193,321
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The accompanying Notes to Financial Statements are an integral part of this statement.
Page 5 of 16
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
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General Partners
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Limited Partners
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Total
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Limited Partnership Units Outstanding
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Balance, December 31, 2011
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$
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1,264
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$
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3,830,235
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$
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3,831,499
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20,165.79
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Distributions Declared
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(829)
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(82,103)
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(82,932)
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Net Income
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4,557
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451,189
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455,746
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Balance, March 31, 2012
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$
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4,992
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$
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4,199,321
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$
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4,204,313
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20,165.79
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Balance, December 31, 2012
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$
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4,162
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$
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2,436,775
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$
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2,440,937
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20,165.79
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Distributions Declared
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(652)
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(64,495)
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(65,147)
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Net Income
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141
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13,934
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14,075
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Balance, March 31, 2013
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$
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3,651
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$
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2,386,214
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$
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2,389,865
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20,165.79
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The accompanying Notes to Financial Statements are an integral part of this statement.
Page 6 of 16
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2013
(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 Net Lease Income & Growth Fund XIX Limited Partnership (“Partnership”) was formed to acquire and lease commercial properties to operating tenants. The Partnership's operations are managed by AEI Fund Management XIX, 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 called for a subscription price of $1,000 per Limited Partnership Unit, payable on acceptance of the offer. The Partnership commenced operations on May 31, 1991 when minimum subscriptions of 1,500 Limited Partnership Units ($1,500,000) were accepted. The offering terminated February 5, 1993 when the extended offering period expired. The Partnership received subscriptions for 21,151.928 Limited Partnership Units. Under the terms of the Limited Partnership Agreement, the Limited Partners and General Partners contributed funds of $21,151,928, 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.
Page 7 of 16
AEI NET LEASE INCOME & GROWTH FUND XIX 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 12% 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 98% to the Limited Partners and 2% 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 12% 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 related to discontinued operations in the prior year’s financial statements have been reclassified to conform to 2013 presentation. These reclassifications had no effect on Partners’ capital, net income or cash flows.
(4) 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.
Page 8 of 16
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) Discontinued Operations –
In February 2012, the Partnership entered into an agreement to sell the Biaggi’s restaurant in Fort Wayne, Indiana to an unrelated third party. On March 29, 2012, the sale closed with the Partnership receiving net proceeds of $1,566,807, which resulted in a net gain of $435,702. At the time of sale, the cost and related accumulated depreciation was $1,379,347 and $248,242, respectively.
During 2012, the Partnership decided to sell the Champps Americana restaurant in Utica, Michigan and classified it as held for sale. In February 2013, Champps Operating Corporation, the tenant of the property, approached the Partnership with a request to adjust the rent on the property to a market rental rate based on the restaurant’s performance and the current conditions in the market. In April 2013, after reviewing financial information for the restaurant and the tenant, and analyzing the local real estate market for the property, the Partnership and the property’s other co-owners reached a verbal agreement to reduce the annual rent for the property by 63% to $90,880. The Partnership’s share of this rent is $25,446. The owners will have the right to replace Champps with a new tenant by giving 60 days’ notice to vacate the premises. Champps will have the right to match the terms of the new lease and remain in the premises. The agreement is contingent upon completion of an amendment to the Lease that is satisfactory to all parties. The Partnership anticipates that it will sell the property during 2013.
Based on its long-lived asset valuation analysis, the Partnership determined the Champps restaurant was impaired. As a result, in the fourth quarter of 2012, a charge to discontinued operations for real estate impairment of $264,277 was recognized, which was the difference between the carrying value at December 31, 2012 of $731,277 and the estimated fair value of $467,000. The charge was recorded against the cost of the land and building. At March 31, 2013 and December 31, 2012, the property was classified as Real Estate Held for Sale.
During the first three months of 2013 and 2012, the Partnership distributed net sale proceeds of $41,684 and $48,302 to the Limited and General Partners as part of their quarterly distributions, which represented a return of capital of $2.05 and $2.37 per Limited Partnership Unit, respectively.
The financial results for these properties are reflected as Discontinued Operations in the accompanying financial statements. The following are the results of discontinued operations for the three months ended March 31:
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2013
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2012
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Rental Income
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$
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21,110
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$
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38,598
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Property Management Expenses
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(156)
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(20)
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Depreciation
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0
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(5,198)
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Gain on Disposal of Real Estate
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0
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435,702
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Income from Discontinued Operations
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$
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20,954
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$
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469,082
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Page 9 of 16
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(6) Fair Value Measurements –
Fair value, as defined by United States Generally Accepted Accounting Principles (“US GAAP”), is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. US GAAP establishes a hierarchy in determining the fair value of an asset or liability. The fair value hierarchy has three levels of inputs, both observable and unobservable. US GAAP requires the utilization of the lowest possible level of input to determine fair value. Level 1 inputs include quoted market prices in an active market for identical assets or liabilities. Level 2 inputs are market data, other than Level 1 inputs, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data.
At March 31, 2013, the Partnership had no financial assets or liabilities measured at fair value on a recurring basis or nonrecurring basis that would require disclosure under this pronouncement.
The Champps restaurant in Utica, Michigan, with a carrying amount of $731,277 at December 31, 2012, was written down to its fair value of $467,000 after completing our long-lived asset valuation analysis. The resulting impairment charge of $264,277 was included in earnings for the fourth quarter of 2012. The fair value of the property was based upon comparable sales of similar properties, which are considered Level 2 inputs in the valuation hierarchy.
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 Partnership's financial condition and results of operations, including the following:
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—
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Market and economic conditions which affect the value of the properties the Partnership owns and the cash from rental income such properties generate;
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—
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the federal income tax consequences of rental income, deductions, gain on sales and other items and the effects of these consequences for the Partners;
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—
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resolution by the General Partners of conflicts with which they may be confronted;
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—
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the effect of tenant defaults; and
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—
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the condition of the industries in which the tenants of properties owned by the Partnership operate.
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Page 10 of 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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 investments in real estate and the allocation by AEI Fund Management, Inc. of expenses to the Partnership as opposed to other funds they manage.
The Partnership purchased properties and recorded them in the financial statements at cost (including capitalized acquisition expenses), as all the properties were purchased prior to January 1, 2009. The Partnership tests long-lived assets for recoverability when events or changes in circumstances indicate that the carrying value may not be recoverable. For properties the Partnership 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 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 three months ended March 31, 2013 and 2012, the Partnership recognized rental income from continuing operations of $28,565 and $28,114 respectively. Based on the scheduled rent for the properties owned as of April 30, 2013, the Partnership expects to recognize rental income from continuing operations of approximately $114,000 in 2013.
Page 11 of 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
For the three months ended March 31, 2013 and 2012, the Partnership incurred Partnership administration expenses from affiliated parties of $20,507 and $25,644, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and communicating with the Limited Partners. As the Partnership’s asset base decreases due to property sales, it is allocated a smaller share of expenses that are allocated by AEI Fund Management, Inc. based on the relative assets of the funds under management. During the same periods, the Partnership incurred Partnership administration and property management expenses from unrelated parties of $6,021 and $7,230, 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 three months ended March 31, 2013 and 2012, the Partnership recognized interest income of $472 and $812, respectively.
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 of the property to discontinued operations. For the three months ended March 31, 2013, the Partnership recognized income from discontinued operations of $20,954, representing rental income less property management expenses. For the three months ended March 31, 2012, the Partnership recognized income from discontinued operations of $469,082, representing rental income less property management expenses and depreciation of $33,380 and gain on disposal of real estate of $435,702.
In February 2012, the Partnership entered into an agreement to sell the Biaggi’s restaurant in Fort Wayne, Indiana to an unrelated third party. On March 29, 2012, the sale closed with the Partnership receiving net proceeds of $1,566,807, which resulted in a net gain of $435,702. At the time of sale, the cost and related accumulated depreciation was $1,379,347 and $248,242, respectively.
During 2012, the Partnership decided to sell the Champps Americana restaurant in Utica, Michigan and classified it as held for sale. In February 2013, Champps Operating Corporation, the tenant of the property, approached the Partnership with a request to adjust the rent on the property to a market rental rate based on the restaurant’s performance and the current conditions in the market. In April 2013, after reviewing financial information for the restaurant and the tenant, and analyzing the local real estate market for the property, the Partnership and the property’s other co-owners reached a verbal agreement to reduce the annual rent for the property by 63% to $90,880. The Partnership’s share of this rent is $25,446. The owners will have the right to replace Champps with a new tenant by giving 60 days’ notice to vacate the premises. Champps will have the right to match the terms of the new lease and remain in the premises. The agreement is contingent upon completion of an amendment to the Lease that is satisfactory to all parties. The Partnership anticipates that it will sell the property during 2013.
Page 12 of 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Based on its long-lived asset valuation analysis, the Partnership determined the Champps restaurant was impaired. As a result, in the fourth quarter of 2012, a charge to discontinued operations for real estate impairment of $264,277 was recognized, which was the difference between the carrying value at December 31, 2012 of $731,277 and the estimated fair value of $467,000. The charge was recorded against the cost of the land and building. At March 31, 2013 and December 31, 2012, the property was classified as Real Estate Held for Sale.
Previously, the Partnership decided to discontinue the reinvestment of proceeds from property sales in additional properties. As a result, the Partnership's rental income and operating income will decrease in the future as the Partnership sells its remaining properties.
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 three months ended March 31, 2013, the Partnership’s cash balances decreased $28,289 as a result of distributions paid to the Partners in excess of cash generated from operating activities. During the three months ended March 31, 2012, the Partnership’s cash balances increased $940,579 as a result of cash generated from the sale of property, which was partially offset by distributions paid to the Partners in excess of cash generated from operating activities.
Net cash provided by operating activities decreased from $72,355 in 2012 to $36,858 in 2013 as a result of a decrease in total rental and interest income in 2013 and net timing differences in the collection of payments from the tenants and the payment of expenses, which were partially offset by a decrease in Partnership administration and property management expenses in 2013.
During the three months ended March 31, 2012, the Partnership generated cash flow from the sale of real estate of $1,566,807.
The Partnership's primary use of cash flow is distribution 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
For the three months ended March 31, 2013 and 2012, the Partnership declared distributions of $65,147 and $82,932, respectively, which were distributed 99% to the Limited Partners and 1% to the General Partners. The Limited Partners received distributions of $64,495 and $82,103 and the General Partners received distributions of $652 and $829 for the periods, respectively. In June 2012, the Partnership declared a special distribution of net sale proceeds of $1,313,131. In 2013, regular distributions were declared on a capital balance that was reduced by the special distribution of net sale proceeds in 2012. As a result, distributions declared in 2013 were lower than distributions declared in 2012. In December 2011, the Partnership declared a special distribution of net sale proceeds of $606,061, which was paid in the first week of January 2012. As a result, distributions paid in 2012 were higher that distributions paid in 2013.
During the first three months of 2013 and 2012, the Partnership distributed net sale proceeds of $41,684 and $48,302 to the Limited and General Partners as part of their quarterly distributions, which represented a return of capital of $2.05 and $2.37 per Limited Partnership Unit, respectively.
The continuing rent payments from the properties, together with the Partnership's cash reserve and 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.
The Economy and Market Conditions
The impact of conditions in the economy over the last few years, including the turmoil in the credit markets, has adversely affected many real estate investment funds. However, the absence of mortgage financing on the Partnership'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 Partnership's tenants and their cash flows. If a tenant were to default on its lease obligations, the Partnership's income would decrease, its distributions would likely be reduced and the value of its properties might decline.
Off-Balance Sheet Arrangements
As of March 31, 2013 and December 31, 2012, the Partnership had no material off-balance sheet arrangements that had or are reasonably likely to have current or future effects on its financial condition, results of operations, liquidity or capital resources.
ITEM 3. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for a smaller reporting company.
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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 General Partner of the Partnership 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 General Partner 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 General Partner, 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 Partnership is a party or of which the Partnership's property is subject.
ITEM 1A. RISK FACTORS.
Not required for a smaller reporting company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES & USE OF PROCEEDS.
(a) None.
(b) Not applicable.
(c) Pursuant to Section 7.7 of the Partnership Agreement, each Limited Partner has the right to present Units to the Partnership for purchase by submitting notice to the Managing General Partner during September of each year. The purchase price of the Units is based on a formula specified in the Partnership Agreement. As of December 31, 2007, the formula results in a purchase price of $-0-. Therefore, the Partnership will no longer purchase Units from Limited Partners under this provision of the Partnership Agreement. During the period covered by this report, the Partnership did not purchase any Units by any other arrangement.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
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31.1
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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.
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31.2
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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.
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32
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Certification of Chief Executive Officer and Chief Financial Officer of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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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.
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Dated: May 13, 2013
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AEI Net Lease Income & Growth Fund XIX
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Limited Partnership
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By:
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AEI Fund Management XIX, Inc.
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Its:
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Managing General Partner
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By:
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/s/ ROBERT P JOHNSON
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Robert P. Johnson
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President
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(Principal Executive Officer)
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By:
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/s/ PATRICK W KEENE
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Patrick W. Keene
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Chief Financial Officer
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(Principal Accounting Officer)
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