10QSB 1 q193-02.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For the Quarter Ended: September 30, 2002 Commission file number: 0-19838 AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP (Exact Name of Small Business Issuer as Specified in its Charter) State of Minnesota 41-1677062 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1300 Minnesota World Trade Center, St. Paul, Minnesota 55101 (Address of Principal Executive Offices) (651) 227-7333 (Issuer's telephone number) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) 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. Yes [X] No Transitional Small Business Disclosure Format: Yes No [X] AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP INDEX PART I. Financial Information Item 1. Balance Sheet as of September 30, 2002 and December 31, 2001 Statements for the Periods ended September 30, 2002 and 2001: Income Cash Flows Changes in Partners' Capital Notes to Financial Statements Item 2. Management's Discussion and Analysis Item 3. Controls and Procedures PART II. Other Information Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures Certifications AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP BALANCE SHEET SEPTEMBER 30, 2002 AND DECEMBER 31, 2001 (Unaudited) ASSETS 2002 2001 CURRENT ASSETS: Cash and Cash Equivalents $ 3,814,586 $ 720,171 Receivables 0 25,115 ----------- ----------- Total Current Assets 3,814,586 745,286 ----------- ----------- INVESTMENTS IN REAL ESTATE: Land 5,415,956 6,026,643 Buildings and Equipment 9,242,523 9,748,310 Construction in Progress 0 460,119 Accumulated Depreciation (1,750,032) (1,835,922) ----------- ----------- Net Investments in Real Estate 12,908,447 14,399,150 ----------- ----------- Total Assets $16,723,033 $15,144,436 =========== =========== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Payable to AEI Fund Management, Inc. $ 84,018 $ 25,068 Distributions Payable 1,219,866 411,405 Unearned Rent 10,708 0 ----------- ----------- Total Current Liabilities 1,314,592 436,473 ----------- ----------- PARTNERS' CAPITAL (DEFICIT): General Partners 17,302 0 Limited Partners, $1,000 Unit Value; 30,000 Units authorized; 21,152 Units issued; 20,460 Units outstanding 15,391,139 14,707,963 ----------- ----------- Total Partners' Capital 15,408,441 14,707,963 ----------- ----------- Total Liabilities and Partners' Capital $16,723,033 $15,144,436 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP STATEMENT OF INCOME FOR THE PERIODS ENDED SEPTEMBER 30 (Unaudited) Three Months Ended Nine Months Ended 9/30/02 9/30/01 9/30/02 9/30/01 INCOME: Rent $ 485,753 $ 479,147 $1,534,927 $1,390,792 Investment Income 9,922 31,929 19,573 125,634 ---------- --------- ---------- ---------- Total Income 495,675 511,076 1,554,500 1,516,426 ---------- --------- ---------- ---------- EXPENSES: Partnership Administration - Affiliates 52,161 92,913 192,449 232,582 Partnership Administration and Property Management - Unrelated Parties 17,798 11,592 48,270 24,275 Depreciation 82,632 77,122 258,699 222,294 ---------- --------- ---------- ---------- Total Expenses 152,591 181,627 499,418 479,151 ---------- --------- ---------- ---------- OPERATING INCOME 343,084 329,449 1,055,082 1,037,275 GAIN ON SALE OF REAL ESTATE 1,740,592 0 1,740,592 0 ---------- --------- ---------- ---------- NET INCOME $2,083,676 $ 329,449 $2,795,674 $1,037,275 ========== ========= ========== ========== NET INCOME ALLOCATED: General Partners $ 31,134 $ 14,295 $ 38,254 $ 32,373 Limited Partners 2,052,542 315,154 2,757,420 1,004,902 ---------- --------- ---------- ---------- $2,083,676 $ 329,449 $2,795,674 $1,037,275 ========== ========= ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (20,460 and 20,523 weighted average Units outstanding in 2002 and 2001, respectively) $ 100.32 $ 15.36 $ 134.77 $ 48.96 ========== ========= ========== ========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS FOR THE PERIODS ENDED SEPTEMBER 30 (Unaudited) 2002 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 2,795,674 $ 1,037,275 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 258,699 222,294 Gain on Sale of Real Estate (1,740,592) 0 (Increase) Decrease in Receivables 25,115 (63,178) Increase (Decrease) in Payable to AEI Fund Management, Inc. 58,950 (6,688) Increase in Unearned Rent 10,708 10,399 ----------- ----------- Total Adjustments (1,387,120) 162,827 ----------- ----------- Net Cash Provided By Operating Activities 1,408,554 1,200,102 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in Real Estate (183,486) (2,087,966) Proceeds from Sale of Real Estate 3,156,082 0 Payments Received on Short-Term Notes Receivable 0 656,040 ----------- ----------- Net Cash Provided By (Used For) Investing Activities 2,972,596 (1,431,926) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in Distributions Payable 808,461 36,305 Distributions to Partners (2,095,196) (1,249,245) ----------- ----------- Net Cash Used For Financing Activities (1,286,735) (1,212,940) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,094,415 (1,444,764) CASH AND CASH EQUIVALENTS, beginning of period 720,171 2,341,682 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 3,814,586 $ 896,918 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL FOR THE PERIODS ENDED SEPTEMBER 30 (Unaudited) Limited Partnership General Limited Units Partners Partners Total Outstanding BALANCE, December 31, 2000 $(31,516) $15,035,571 $15,004,055 20,522.92 Distributions (12,492) (1,236,753) (1,249,245) Net Income 32,373 1,004,902 1,037,275 --------- ----------- ----------- ----------- BALANCE, September 30, 2001 $(11,635) $14,803,720 $14,792,085 20,522.92 ========= =========== =========== =========== BALANCE, December 31, 2001 $ 0 $14,707,963 $14,707,963 20,460.29 Distributions (20,952) (2,074,244) (2,095,196) Net Income 38,254 2,757,420 2,795,674 --------- ----------- ----------- ----------- BALANCE, September 30, 2002 $ 17,302 $15,391,139 $15,408,441 20,460.29 ========= =========== =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (Unaudited) (1) The condensed statements included herein have been prepared by the Partnership, 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 Partnership 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 Partnership's latest annual report on Form 10-KSB. (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 shareholder of AFM, serves as the Individual General Partner and an affiliate of AFM, AEI Fund Management, Inc. (AEI) performs the administrative and operating functions for the Partnership. The terms of the Partnership offering call 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. AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (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) Short-Term Note Receivable - On August 2, 2000, the Partnership received a Contract for Deed from an affiliate of the buyer of the Media Play store in Apple Valley, Minnesota. The Note bore interest at 9% and was secured by the land, building and equipment. As of December 31, 2000, the Partnership's share of outstanding principal due on the Note was $656,040. On January 16, 2001, the Partnership received the outstanding principal and accrued interest on the Note. AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (Continued) (4) Investments in Real Estate - On May 8, 2000, the Partnership purchased a 13% interest in a parcel of land in Austin, Texas for $176,800. The land is leased to Razzoo's, Inc. (RI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $15,028. Effective October 4, 2000, the annual rent was increased to $17,238. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to RI for the construction of a Razzoo's restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 8.5%. Effective October 4, 2000 and April 15, 2001, the interest rate was increased to 9.75% and 15.0%, respectively. On June 27, 2001, after the development was completed, the Lease Agreement was amended to require annual rental payments of $41,346. The Partnership's share of the total acquisition costs, including the cost of the land, was $417,939. The remaining interests in the property are owned by AEI Real Estate Fund XV Limited Partnership, AEI Real Estate Fund XVII Limited Partnership, and AEI Income & Growth Fund XXII Limited Partnership, affiliates of the Partnership. On June 30, 2000, the Partnership purchased a 16% interest in a parcel of land in Alpharetta, Georgia for $257,280. The land is leased to Razzoo's, Inc. (RI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $21,869. Effective November 26, 2000, the annual rent was increased to $25,085. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to RI for the construction of a Razzoo's restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 8.5%. Effective November 26, 2000 and January 31, 2001, the interest rate was increased to 9.75% and 15.0%, respectively. On July 11, 2001, after the development was completed, the Lease Agreement was amended to require annual rental payments of $59,157. The Partnership's share of the total acquisition costs, including the cost of the land, was $598,109. The remaining interests in the property are owned by AEI Real Estate Fund XVIII Limited Partnership, AEI Income & Growth Fund 23 LLC, and AEI Private Net Lease Millennium Fund Limited Partnership, affiliates of the Partnership. On February 2, 2001, the Partnership purchased a 52% interest in a parcel of land in San Antonio, Texas for $401,440. The land is leased to Kona Restaurant Group, Inc. (KRG) under a Lease Agreement with a primary term of 17 years and annual rental payments of $42,151. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership will advance funds to KRG for the construction of a Johnny Carino's restaurant on the site. The Partnership charged interest on the advances at a rate of 10.5%. On November 2, 2001, after the development was completed, the Lease Agreement was amended to require annual rental payments of $126,235. The Partnership's share of the total acquisition costs, including the cost of the land, was $1,194,932. The remaining interest in the property is owned by AEI Income & Growth Fund 23 LLC, an affiliate of the Partnership. AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (Continued) (4) Investments in Real Estate - (Continued) On April 27, 2001, the Partnership purchased a 28% interest in a parcel of land in Utica, Michigan for $338,380. The land is leased to Champps Entertainment, Inc. (Champps) under a Lease Agreement with a primary term of 20 years and annual rental payments of $30,454. Effective October 23, 2001, the annual rent was increased to $36,376. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to Champps for the construction of a Champps Americana restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 9.0%. Effective October 23, 2001, the interest rate was increased to 10.75%. On February 12, 2002, after the development was completed, the Lease Agreement was amended to require annual rental payments of $105,350. The Partnership's share of the total acquisition costs, including the cost of the land, was $963,874. The remaining interests in the property are owned by AEI Real Estate Fund XVII Limited Partnership and AEI Net Lease Income & Growth Fund XX Limited Partnership, affiliates of the Partnership. In June, 2002, the Partnership entered into an agreement to sell the Applebee's restaurant in Beaverton, Oregon to an unrelated third party. On August 1, 2002, the sale closed with the Partnership receiving net sale proceeds of $3,156,082, which resulted in a net gain of $1,740,592. At the time of sale, the cost and related accumulated depreciation was $1,760,079 and $344,589, respectively. In September 2002, the Partnership distributed $808,081 of the net sale proceeds to the Limited and General Partners, which represented a return of capital of $39.10 per Limited Partnership Unit. The remaining net sale proceeds will either be reinvested in additional property or distributed to the Partners in the future. (5) 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. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS The Management's Discussion and Analysis contains various "forward looking statements" within the meaning of federal securities laws 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, taxation levels, the sufficiency of cash to meet operating expenses, rates of distribution, and other matters. These, and other forward looking statements made by the Partnership, must 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: Market and economic conditions which affect the value of the properties the Partnership 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 affects of these consequences for the Partners; resolution by the General Partners of conflicts with which they may be confronted; the success of the General Partners 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 Partnership operate. The 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 real estate and the allocation by AEI Fund Management, Inc. of expenses to the Partnership as opposed to other funds they manage. The Partnership purchases properties and records them in the financial statements at the lower of cost or estimated realizable value. The Partnership initially records the properties at cost (including capitalized acquisition expenses). The Partnership is required to periodically evaluate the carrying value of properties to determine whether their realizable value has declined. For properties the Partnership will hold and operate, management determines whether impairment has occurred by comparing the property's probability-weighted 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 realizable value, an impairment loss is recorded to reduce the carrying value of the property to its realizable value. A change in these assumptions or analysis could cause material changes in the carrying value of the properties. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) 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 some 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 nine months ended September 30, 2002 and 2001, the Partnership recognized rental income of $1,534,927 and $1,390,792, respectively. During the same periods, the Partnership earned investment income of $19,573 and $125,634, respectively. In 2002, rental income increased as a result of additional rent received from four property acquisitions in 2002 and 2001 and rent increases on fourteen properties. These increases in rental income were partially offset by a decrease in rental income due to the sale of the Applebee's restaurnt. In 2002, investment income decreased due to the Partnership receiving less interest income from construction advances and having less money invested, due to property acquisitions, at lower money market interest rates. During the nine months ended September 30, 2002 and 2001, the Partnership paid Partnership administration expenses to affiliated parties of $192,449 and $232,582, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and correspondence to the Limited Partners. During the same periods, the Partnership incurred Partnership administration and property management expenses from unrelated parties of $48,270 and $24,275, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit and accounting costs, taxes, insurance and other property costs. As of September 30, 2002, the Partnership's annualized cash distribution rate was 8.5%, based on the Adjusted Capital Contribution. Distributions of Net Cash Flow to the General Partners are subordinated to the Limited Partners as required in the Partnership Agreement. As a result, 99% of distributions were allocated to Limited Partners and 1% to the General Partners. Inflation has had a minimal effect on 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. In addition, leases may contain rent clauses which entitle the Partnership to receive additional rent in future years if gross receipts for the property exceed certain specified amounts. Increases in sales volumes of the tenants, due to inflation and real sales growth, may 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. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Liquidity and Capital Resources During the nine months ended September 30, 2002, the Partnership's cash balances increased $3,094,415 mainly as a result of the sale of the Applebee's restaurant. Net cash provided by operating activities increased from $1,200,102 in 2001 to $1,408,554 in 2002 as the result of an increase in income and a decrease in Partnership administration expenses in 2002 and net timing differences in the collection of payments from the lessees and the payment of expenses. The major components of the Partnership's cash flow from investing activities are investments in real estate and proceeds from the sale of real estate. During the nine months ended September 30, 2002, the Partnership generated cash flow from the sale of real estate of $3,156,082. During the nine months ended September 30, 2002 and 2001, the Partnership expended $183,486 and $2,087,966, respectively, to invest in real properties (inclusive of acquisition expenses), as the Partnership reinvested cash generated from property sales. On May 8, 2000, the Partnership purchased a 13% interest in a parcel of land in Austin, Texas for $176,800. The land is leased to Razzoo's, Inc. (RI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $15,028. Effective October 4, 2000, the annual rent was increased to $17,238. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to RI for the construction of a Razzoo's restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 8.5%. Effective October 4, 2000 and April 15, 2001, the interest rate was increased to 9.75% and 15.0%, respectively. On June 27, 2001, after the development was completed, the Lease Agreement was amended to require annual rental payments of $41,346. The Partnership's share of the total acquisition costs, including the cost of the land, was $417,939. The remaining interests in the property are owned by AEI Real Estate Fund XV Limited Partnership, AEI Real Estate Fund XVII Limited Partnership, and AEI Income & Growth Fund XXII Limited Partnership, affiliates of the Partnership. On June 30, 2000, the Partnership purchased a 16% interest in a parcel of land in Alpharetta, Georgia for $257,280. The land is leased to Razzoo's, Inc. (RI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $21,869. Effective November 26, 2000, the annual rent was increased to $25,085. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to RI for the construction of a Razzoo's restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 8.5%. Effective November 26, 2000 and January 31, 2001, the interest rate was increased to 9.75% and 15.0%, respectively. On July 11, 2001, after the development was completed, the Lease Agreement was amended to require annual rental payments of $59,157. The Partnership's share of the total acquisition costs, including the cost of the land, was $598,109. The remaining interests in the property are owned by AEI Real Estate Fund XVIII Limited Partnership, AEI Income & Growth Fund 23 LLC, and AEI Private Net Lease Millennium Fund Limited Partnership, affiliates of the Partnership. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) On February 2, 2001, the Partnership purchased a 52% interest in a parcel of land in San Antonio, Texas for $401,440. The land is leased to Kona Restaurant Group, Inc. (KRG) under a Lease Agreement with a primary term of 17 years and annual rental payments of $42,151. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership will advance funds to KRG for the construction of a Johnny Carino's restaurant on the site. The Partnership charged interest on the advances at a rate of 10.5%. On November 2, 2001, after the development was completed, the Lease Agreement was amended to require annual rental payments of $126,235. The Partnership's share of the total acquisition costs, including the cost of the land, was $1,194,932. The remaining interest in the property is owned by AEI Income & Growth Fund 23 LLC, an affiliate of the Partnership. On April 27, 2001, the Partnership purchased a 28% interest in a parcel of land in Utica, Michigan for $338,380. The land is leased to Champps Entertainment, Inc. (Champps) under a Lease Agreement with a primary term of 20 years and annual rental payments of $30,454. Effective October 23, 2001, the annual rent was increased to $36,376. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to Champps for the construction of a Champps Americana restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 9.0%. Effective October 23, 2001, the interest rate was increased to 10.75%. On February 12, 2002, after the development was completed, the Lease Agreement was amended to require annual rental payments of $105,350. The Partnership's share of the total acquisition costs, including the cost of the land, was $963,874. The remaining interests in the property are owned by AEI Real Estate Fund XVII Limited Partnership and AEI Net Lease Income & Growth Fund XX Limited Partnership, affiliates of the Partnership. In June, 2002, the Partnership entered into an agreement to sell the Applebee's restaurant in Beaverton, Oregon to an unrelated third party. On August 1, 2002, the sale closed with the Partnership receiving net sale proceeds of $3,156,082, which resulted in a net gain of $1,740,592. At the time of sale, the cost and related accumulated depreciation was $1,760,079 and $344,589, respectively. In September 2002, the Partnership distributed $808,081 of the net sale proceeds to the Limited and General Partners, which represented a return of capital of $39.10 per Limited Partnership Unit. The remaining net sale proceeds will either be reinvested in additional property or distributed to the Partners in the future. The Partnership's primary use of cash flow is distribution and redemption 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. Redemption payments are paid to redeeming Partners in the fourth quarter of each year. Effective April 1, 2001, the Partnership's regular distribution rate was increased from 7.75% to 8.5%. The Partnership may acquire Units from Limited Partners who have tendered their Units to the Partnership. Such Units may be acquired at a discount. The Partnership is not obligated to purchase in any year more than 5% of the number of Units outstanding at the beginning of the year. In no event shall the Partnership be obligated to purchase Units if, in the sole discretion of the Managing General Partner, such purchase would impair the capital or operation of the Partnership. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) On October 1, 2002, six Limited Partners redeemed a total of 47.0 Partnership Units for $23,661 in accordance with the Partnership Agreement. The Partnership acquired these Units using Net Cash Flow from operations. In prior years, a total of fifty-six Limited Partners redeemed 691.64 Partnership Units for $480,224. The redemptions increase the remaining Limited Partners' ownership interest in the Partnership. The continuing rent payments from the properties, together with 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. ITEM 3. CONTROLS AND PROCEDURES (a) Evaluation of 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 its disclosure controls and procedures (as defined in Rule [13a-14(c)/15d-14(c)] under the Exchange Act) related to the Partnership as of a date (the "Evaluation Date") within 90 days prior to the filing date of this report. Based upon that evaluation, the President and Chief Financial Officer of the Managing General Partner concluded that, as of the Evaluation Date, the disclosure controls and procedures are effective in timely alerting them to the material information relating to the Partnership required to be included in periodic SEC filings. (b) Changes in internal controls There were no significant changes made in the Partnership's internal controls during the period covered by this report or, to the Managing General Partner's knowledge, in other factors that could significantly affect these controls subsequent to the date of their evaluation. 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 2.CHANGES IN SECURITIES None. ITEM 3.DEFAULTS UPON SENIOR SECURITIES None. ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5.OTHER INFORMATION None. PART II - OTHER INFORMATION (Continued) ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - Description 10.1 Purchase and Sale Agreement dated June 10, 2002 between the Partnership and BLW Properties, LLC relating to the property at 1220 NW 185th Avenue, Beaverton, Oregon (incorporated by reference to Exhibit 10.1of Form 8-K filed on August 5, 2002). 99.1 Certification of Chief Executive Officer of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of Chief Financial Officer of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports filed on Form 8-K - During the quarter ended September 30, 2002, the Partnership filed a Form 8-K dated August 5, 2002 reporting the disposition of the Applebee's restaurant in Beaverton, Oregon. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: November 1, 2002 AEI Net Lease Income & Growth Fund XIX Limited Partnership By: AEI Fund Management XIX, Inc. Its: Managing General Partner By: /s/ Robert P Johnson Robert P. Johnson President (Principal Executive Officer) By: /s/ Mark E Larson Mark E. Larson Chief Financial Officer (Principal Accounting Officer) CERTIFICATIONS I, Robert P. Johnson, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of AEI Net Lease Income & Growth Fund XIX Limited Partnership; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge; the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d- 14) for the registrant and have; a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: November 1, 2002 /s/ Robert P Johnson Robert P. Johnson, President AEI Fund Management XIX, Inc. Managing General Partner CERTIFICATIONS I, Mark E. Larson, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of AEI Net Lease Income & Growth Fund XIX Limited Partnership; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge; the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d- 14) for the registrant and have; a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: November 1, 2002 /s/ Mark E Larson Mark E. Larson, Chief Financial Officer AEI Fund Management XIX, Inc. Managing General Partner