Equity Method Investment

9 Months Ended

Sep. 30, 2014

Equity Method Investments, Policy [Policy Text Block]

(4) Equity Method Investment –

On August 29, 2014, to facilitate the sale of its Applebee’s restaurant in Indianapolis, Indiana, the Company contributed the property via a limited liability company to AEI Net Lease Portfolio DST (“ANLP”), a Delaware statutory trust (“DST”), in exchange for 28.3% of the Class B ownership interests in ANLP. A second property owned by an affiliate of the Company, along with a third property owned jointly by two other affiliated entities, were also contributed to ANLP in exchange for 71.7% of the Class B ownership interests in ANLP. In addition, cash was contributed for working capital. A DST is a recognized mechanism for selling property to investors who are looking for replacement real estate to complete like-kind exchanges under Section 1031 of the Internal Revenue Code. As investors purchase Class A ownership interests in ANLP, the proceeds received will be used to redeem, on a one-for-one basis, the Class B ownership interests of the Company and affiliated entities. From August 29, 2014 to September 30, 2014, ANLP sold 45.737% of its Class A ownership interests to investors and redeemed 45.737% of the Class B ownership interests from the Company and affiliated entities. During October 2014, ANLP sold the remaining 54.263% of its Class A ownership interests to investors and redeemed 54.263% of the Class B ownership interests from the Company and affiliated entities.

The investment in ANLP is recorded using the equity method of accounting in the accompanying financial statements. Under the equity method, the investment in ANLP is stated at cost and adjusted for the Company’s share of net income or losses and reduced by proceeds received from the sale of the Class B ownership interests of ANLP as well as distributions from net rental income. As of September 30, 2014, the investment balance consists of the following:

Real Estate Contributed	$	2,371,502
Cash Contributed		42,273
Net Income – Rental Activity		14,920
Net Income – Gain on Sale of Real Estate		615,646
Distributions from Net Rental Income		(14,920)
Proceeds from Sale of Class B Interests		(1,626,480)
Equity Method Investment	$	1,402,941

- Definition

Disclosure of accounting policy for the equity method of accounting for investments in common stock or other interests including unconsolidated subsidiaries, corporate joint ventures, noncontrolling interests in real estate ventures, limited partnerships, and limited liability companies. The accounting policy may include information such as: (1) initially recording an investment in the stock of an investee at cost; (2) adjusting the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee after the date of acquisition; and (3) adjustments to reflect the investor's share of changes in the investee's capital (dividends). This disclosure may also include a detailed description of the policy for determining the amount of equity method losses recognized after an investment has been reduced to zero as a result of previous losses, reasons for not using the equity method when the investor company owns 20 percent or more of the voting stock of the investee's company (including identification of the significant investee), reasons for using the equity method when the ownership percentage is less than 20 percent, and discussion of recognition of equity method losses when an investor's total investment in an investee includes, in addition to an investment in common stock, other investments such as preferred stock and loans to the investee. An entity also may describe how such investments are assessed for impairment.

+ References+ Details