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: September 30, 2016
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 (orfor 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 ☐ 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 (orfor such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ 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.
☐ ☐ Accelerated filer
☐ ☒ Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
AEI INCOME & GROWTH FUND 25 LLC
INDEX
PagePart I – Financial Information
Item 1. / Financial Statements:
Balance Sheets as of September30, 2016 and December31, 2015 / 3
Statements for the Periods ended September30, 2016 and 2015:
Income / 4
Cash Flows / 5
Changes in Members' Equity / 6
Notes to Financial Statements / 7 - 12
Item 2. / Management's Discussion and Analysis of Financial
Condition and Results of Operations / 12 - 18
Item 3. / Quantitative and Qualitative Disclosures About Market Risk / 18
Item 4. / Controls and Procedures / 18
Part II – Other Information
Item 1. / Legal Proceedings / 19
Item 1A. / Risk Factors / 19
Item 2. / Unregistered Sales of Equity Securities and Use of Proceeds / 19
Item 3. / Defaults Upon Senior Securities / 19
Item 4. / Mine Safety Disclosures / 19
Item 5. / Other Information / 19
Item 6. / Exhibits / 20
Signatures / 20
Page 2 of 20
AEI INCOME & GROWTH FUND 25 LLC
BALANCE SHEETS
ASSETS
September 30, / December 31,2016 / 2015
(unaudited)
Current Assets:
Cash / $ / 2,475,404 / $ / 1,780,591
Receivables / 7,748 / 0
Total Current Assets / 2,483,152 / 1,780,591
Real Estate Investments:
Land / 9,055,563 / 9,055,563
Buildings / 19,863,451 / 19,863,451
Acquired Intangible Lease Assets / 2,327,904 / 2,327,904
Real Estate Held For Investment, at cost / 31,246,918 / 31,246,918
Accumulated Depreciation and Amortization / (7,223,615 / ) / (6,468,464 / )
Real Estate Held for Investment, Net / 24,023,303 / 24,778,454
Real Estate Held for Sale / 0 / 650,000
Total Real Estate Investments / 24,023,303 / 25,428,454
Total Assets / $ / 26,506,455 / $ / 27,209,045
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:Payable to AEI Fund Management, Inc. / $ / 176,623 / $ / 129,171
Distributions Payable / 429,378 / 536,469
Unearned Rent / 60,236 / 15,485
Total Current Liabilities / 666,237 / 681,125
Long-term Liabilities:
Acquired Below-Market Lease Intangibles, Net / 76,588 / 86,725
Members' Equity:
Managing Members / 815 / 3,950
Limited Members – 50,000 Units authorized;
40,570 Units issued and outstanding
as of 9/30/16 and 12/31/15 / 25,762,815 / 26,437,245
Total Members' Equity / 25,763,630 / 26,441,195
Total Liabilities and Members' Equity / $ / 26,506,455 / $ / 27,209,045
The accompanying Notes to Financial Statements are an integral part of these statements.
Page 3 of 20
AEI INCOME & GROWTH FUND 25 LLC
STATEMENTS OF INCOME
(unaudited)
Three Months Ended September 30 / Nine Months Ended September 302016 / 2015 / 2016 / 2015
Rental Income / $ / 562,394 / $ / 635,476 / $ / 1,823,871 / $ / 1,843,926
Expenses:
LLC Administration – Affiliates / 73,249 / 86,733 / 231,442 / 271,009
LLC Administration and Property
Management – Unrelated Parties / 57,699 / 18,656 / 164,077 / 79,311
Property Acquisition / 0 / 815 / 0 / 139,639
Depreciation and Amortization / 234,075 / 239,009 / 702,225 / 679,576
Total Expenses / 365,023 / 345,213 / 1,097,744 / 1,169,535
Operating Income / 197,371 / 290,263 / 726,127 / 674,391
Other Income:
Gain on Sale of Real Estate / 0 / 0 / 0 / 424,001
Interest Income / 1,515 / 1,295 / 3,911 / 7,300
Total Other Income / 1,515 / 1,295 / 3,911 / 431,301
Income from Continuing Operations / 198,886 / 291,558 / 730,038 / 1,105,692
Income from Discontinued Operations / 93,580 / 122,248 / 95,373 / 85,086
Net Income / $ / 292,466 / $ / 413,806 / $ / 825,411 / $ / 1,190,778
Net Income Allocated:
Managing Members / $ / 24,956 / $ / 16,310 / $ / 40,944 / $ / 38,934
Limited Members / 267,510 / 397,496 / 784,467 / 1,151,844
Total / $ / 292,466 / $ / 413,806 / $ / 825,411 / $ / 1,190,778
Income per LLC Unit:
Continuing Operations / $ / 4.76 / $ / 6.81 / $ / 17.45 / $ / 26.09
Discontinued Operations / 1.83 / 2.90 / 1.89 / 2.01
Total – Basic and Diluted / $ / 6.59 / $ / 9.71 / $ / 19.34 / $ / 28.10
Weighted Average Units Outstanding –
Basic and Diluted / 40,570 / 40,922 / 40,570 / 40,989
The accompanying Notes to Financial Statements are an integral part of these statements.
Page 4 of 20
AEI INCOME & GROWTH FUND 25 LLC
STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended September 302016 / 2015
Cash Flows from Operating Activities:
Net Income / $ / 825,411 / $ / 1,190,778
Adjustments to Reconcile Net Income
To Net Cash Provided by Operating Activities:
Depreciation and Amortization / 745,014 / 705,033
Gain on Sale of Real Estate / (99,867 / ) / (424,001 / )
(Increase) Decrease in Receivables / (7,748 / ) / 0
Increase (Decrease) in Payable to
AEI Fund Management, Inc. / 47,452 / (28,133 / )
Increase (Decrease) in Unearned Rent / 44,751 / 44,064
Total Adjustments / 729,602 / 296,963
Net Cash Provided By (Used For)
Operating Activities / 1,555,013 / 1,487,741
Cash Flows from Investing Activities:
Investments in Real Estate / 0 / (3,456,892 / )
Proceeds from Sale of Real Estate / 749,867 / 1,550,344
Net Cash Provided By (Used For)
Investing Activities / 749,867 / (1,906,548 / )
Cash Flows from Financing Activities:
Distributions Paid to Members / (1,610,067 / ) / (1,627,137 / )
Repurchase of LLC Units / 0 / (132,451 / )
Net Cash Provided By (Used For)
Financing Activities / (1,610,067 / ) / (1,759,588 / )
Net Increase (Decrease) in Cash / 694,813 / (2,178,395 / )
Cash, beginning of period / 1,780,591 / 4,182,911
Cash, end of period / $ / 2,475,404 / $ / 2,004,516
The accompanying Notes to Financial Statements are an integral part of these statements.
Page 5 of 20
AEI INCOME & GROWTH FUND 25 LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
(unaudited)
Managing Members / Limited Members / Total / Limited Member Units OutstandingBalance, December 31, 2014 / $ / 13,000 / $ / 28,085,778 / $ / 28,098,778 / 41,121.89
Distributions Declared / (43,839 / ) / (1,585,799 / ) / (1,629,638 / )
Repurchase of LLC Units / (3,973 / ) / (128,478 / ) / (132,451 / ) / (199.52 / )
Net Income / 38,934 / 1,151,844 / 1,190,778
Balance, September 30, 2015 / $ / 4,122 / $ / 27,523,345 / $ / 27,527,467 / 40,922.37
Balance, December 31, 2015 / $ / 3,950 / $ / 26,437,245 / $ / 26,441,195 / 40,569.95
Distributions Declared / (44,079 / ) / (1,458,897 / ) / (1,502,976 / )
Net Income / 40,944 / 784,467 / 825,411
Balance, September 30, 2016 / $ / 815 / $ / 25,762,815 / $ / 25,763,630 / 40,569.95
The accompanying Notes to Financial Statements are an integral part of these statements.
Page 6 of 20
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2016
(unaudited)
(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 United States Generally Accepted Accounting Principles (US GAAP) 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 Form10K.
(2) Organization –
AEI Income & Growth Fund 25 LLC ("Company"), a Limited Liability Company, was formed on June24, 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 September11, 2003 when minimum subscriptions of 1,500 LLC Units ($1,500,000) were accepted. The offering terminated May12, 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 December31, 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.
Page 7 of 20
AEI INCOME & GROWTH FUND 25 LLC
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization – (Continued)
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.
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.