(4) Real Estate Investments –

The Company leases its properties to tenants under net leases, classified as operating leases. Under a net lease, the tenant is responsible for real estate taxes, insurance, maintenance, repairs and operating expenses for the property. For some leases, the Company is responsible for repairs to the structural components of the building, the roof and the parking lot. At the time the properties were acquired, the remaining primary lease terms varied from 10 to 20 years. The leases provide the tenants with three to four five-year renewal options subject to the same terms and conditions as the primary term. The lease for the Best Buy store was extended to end on January 19, 2023.

The Company's properties are commercial, single-tenant buildings. The building in Wichita, Kansas was constructed in 1996, renovated in 2001 and acquired in 2006. The Advance Auto Parts store was constructed in 2004 and acquired in 2006. The Starbucks restaurant was constructed and acquired in 2007. The Best Buy store was constructed in 1990, renovated in 1997 and acquired in 2008. The Fresenius Medical Center was constructed in 2012 and acquired in 2014. The Zales store was constructed in 1983, renovated in 2014 and acquired in 2015. The Dollar Tree store was constructed in 2015 and acquired in 2016. There have been no costs capitalized as improvements subsequent to the acquisitions, except for $30,000 of tenant improvements related to the Cellular Connection store.

The cost of the properties not held for sale and related accumulated depreciation at December 31, 2019 are as follows:


Property	Land		Buildings		Total		Accumulated Depreciation

Biomat USA / BigTime Fun, Wichita, KS	$	507,489	$	1,277,436	$	1,784,925	$	772,973
Advance Auto Parts, Middletown, OH		36,765		618,209		654,974		482,182
Cellular Connection, Bluffton, IN		344,008		836,108		1,180,116		411,296
Best Buy, Eau Claire, WI		803,535		2,158,403		2,961,938		750,658
Fresenius Medical Center, Chicago, IL		464,400		665,142		1,129,542		133,022
Zales, Enid, OK		440,000		903,630		1,343,630		173,191
Dollar Tree, West Point, MS		270,000		1,316,232		1,586,232		206,206
	$	2,866,197	$	7,775,160	$	10,641,357	$	2,929,528

For the years ended December 31, 2019 and 2018, the Company recognized depreciation expense of $317,780 and $400,732, respectively.

The following schedule presents the cost and related accumulated amortization of acquired lease intangibles not held for sale at December 31:


		2019				2018
		Cost		Accumulated Amortization		Cost		Accumulated Amortization
In-Place Lease Intangibles (weighted average life of 72 and 85 months, respectively)	$	735,546	$	268,246	$	633,712	$	196,500

Above-Market Lease Intangibles (weighted average life of 58 and 70 months, respectively)		72,606		35,986		72,606		28,410
Acquired Intangible Lease Assets	$	808,152	$	304,232	$	706,318	$	224,910

Acquired Below-Market Lease Intangibles (weighted average life of 69 and 81 months, respectively)	$	283,495	$	113,404	$	283,495	$	83,820

For the years ended December 31, 2019 and 2018, the value of in-place lease intangibles amortized to expense was $71,746 and $59,621, the decrease to rental income for above-market leases was $7,576 and $7,576, and the increase to rental income for below-market leases was $29,584 and $29,584, respectively.

For lease intangibles not held for sale at December 31, 2019, the estimated amortization for the next five years is as follows:


	Amortization Expense for In-Place Lease Intangibles		Decrease to Rental Income for Above-Market Leases		Increase to Rental Income for Below-Market Leases

2020	$	81,384	$	7,576	$	29,584
2021		81,384		7,576		29,584
2022		81,384		7,576		29,584
2023		63,716		7,576		29,584
2024		58,906		6,316		29,584
	$	366,774	$	36,620	$	147,920

The Company owns a 40% interest in a former Sports Authority store in Wichita, Kansas. On March 2, 2016, the tenant, TSA Stores, Inc., and its parent company, The Sports Authority, Inc., the guarantor of the lease, filed for Chapter 11 bankruptcy reorganization. In June 2016, the tenant filed a motion with the bankruptcy court to reject the lease for this store effective June 30, 2016, at which time the tenant returned possession of the property to the owners. As of December 31, 2019, the tenant owed $19,366 of past due rent, which was not accrued for financial reporting purposes. The owners listed the property for lease with a real estate broker in the Wichita area. While the property was vacant, the Company was responsible for its 40% share of real estate taxes and other costs associated with maintaining the property.

On September 21, 2017, the Company entered into a lease agreement with a primary term of 10 years with Biomat USA, Inc. (“Biomat”) as a replacement tenant for 28% of the square footage of the property. The tenant operates a Biomat USA Plasma Center in the space. The Company’s 40% share of annual rent, which commenced on June 18, 2018, is $37,071. Biomat agreed to pay for the costs to divide the building into two separate spaces, the costs of tenant improvements to remodel the Biomat space and 28% of the cost to replace the roof. In the second quarter of 2018, the Company recorded $54,219 as a property expense for its 40% share of the remaining cost to replace the roof. At December 31, 2017, the Company accrued its 40% share of lease commissions due to real estate brokers totaling $54,293 that were owed as part of the lease transaction. This amount was capitalized and will be amortized over the term of the lease.

On August 27, 2019, the Company entered into a lease agreement with a primary term of 10 years with BigTime Fun Center, LLC as a replacement tenant for 57% of the square footage of the property. The tenant will operate an indoor sports entertainment center in the space. The Company’s 40% share of annual rent, which commenced on February 23, 2020, is $78,000. As part of the agreement, the Company will pay a tenant improvement allowance of $64,000 when certain conditions are met by the tenant. In September 2019, the Company paid $32,760 to a real estate broker for its 40% share of the lease commission due as part of the lease transaction. This amount was capitalized and will be amortized over the term of the lease.

The Company owned a 27% interest in a Dick’s Sporting Goods store in Fredericksburg, Virginia. The remaining interests in the property were owned by three affiliates of the Company. On January 31, 2019, the lease term ended, and the tenant returned possession of the property to the owners. While the property was vacant, the Company was responsible for its 27% share of real estate taxes and other costs associated with maintaining the property. The owners listed the property for lease with a real estate broker in the Fredericksburg area. The annual rent from this property represented approximately 24% of the total annual rent of the Company’s property portfolio. The loss of rent and increased expenses related to this property decreased the Company’s cash flow. Consequently, beginning with the first quarter of 2019, the Company reduced its regular quarterly cash distribution rate from $0.0949 per Unit to $0.0527 per Unit.

Based on its long-lived asset valuation analysis, the Company determined the former Dick’s Sporting Goods store was impaired. As a result, in the fourth quarter of 2018, a charge to operations for real estate impairment of $830,973 was recognized, which was the difference between the carrying value at December 31, 2018 of $2,423,973 and the estimated fair value of $1,593,000. Based on its long-lived asset valuation analysis, in the first quarter of 2019, the Company recognized an additional real estate impairment of $611,623 to decrease the carrying value to the estimated fair value of $972,000. The charges were recorded against the cost of the land and building.

In October 2019, after marketing the property for lease for many months, the Company decided to sell its 27% interest in the former Dick’s Sporting Goods store. In the third quarter of 2019, as a result of deciding to sell the property, the Company recognized an additional real estate impairment of $298,990 to decrease the carrying value to the estimated fair value of $661,500. The charges were recorded against the cost of the land and building. In November 2019, the Company entered into an agreement to sell the property to an unrelated third party. On December 27, 2019, the sale closed with the Company receiving net proceeds of $663,277, which resulted in a net gain of $1,777. At the time of sale, the cost and related accumulated depreciation was $1,385,017 and $723,517, respectively.

In December 2018, the Company decided to sell the Applebee’s restaurant in Crawfordsville, Indiana. In January 2019, the Company entered into an agreement to sell the property to an unrelated third party. On April 8, 2019, the sale closed with the Company receiving net proceeds of $1,242,457, which resulted in a net gain of $436,887. At the time of sale, the cost and related accumulated depreciation was $1,237,771 and $432,201, respectively. At December 31, 2018, the property was classified as Real Estate Held for Sale with a carrying value of $805,570.

On June 6, 2019, the Company purchased an additional 16% joint-venture interest in the Best Buy store in Eau Claire, Wisconsin for $1,009,850 from AEI Income & Growth Fund 23 LLC (“Fund 23”), an affiliate of the Company. The purchase price of the property interest was based upon the property’s fair market value as determined by an independent, third-party, commercial property appraiser. The property interest became available because Fund 23 is in the process of liquidating its property portfolio. The Company now owns a 46% interest in the Best Buy property. The Company allocated $69,074 of the purchase price to Acquired Intangible Lease Assets, representing in-place lease intangibles. The annual rent for the additional 16% interest that was purchased is $83,627.

The Company owns a 55% interest in an Advance Auto Parts store in Middletown, Ohio. The remaining interest in the property is owned by an affiliate of the Company. On July 31, 2019, the lease term ended, and the tenant returned possession of the property to the owners. While the property is vacant, the Company is responsible for its 55% share of real estate taxes and other costs associated with maintaining the property. The owners have listed the property for sale or lease with a real estate broker in the Middletown area. The annual rent from this property represented approximately 11% of the total annual rent of the Company’s property portfolio. The loss of rent and increased expenses related to this property will decrease the Company’s cash flow. However, at this time, the Company does not anticipate the need to further reduce its regular quarterly cash distribution rate.

Based on its long-lived asset valuation analysis, the Company determined the Advance Auto store was impaired. As a result, in the second quarter of 2019, a charge to operations for real estate impairment of $367,315 was recognized, which was the difference between the carrying value at June 30, 2019 of $546,065 and the estimated fair value of $178,750. The charge was recorded against the cost of the land and building.

For properties owned as of December 31, 2019, the minimum future rent payments required by the leases are as follows:

2020	$	707,146
2021		721,158
2022		723,729
2023		468,850
2024		430,122
Thereafter		918,624
	$	3,969,629

There were no contingent rents recognized in 2019 and 2018.