AEI Income & Growth Fund XXII Ltd Partnership Files 2023 10-K

TL;DR

<b>AEI Income & Growth Fund XXII Ltd Partnership filed its annual 10-K report for the fiscal year ending December 31, 2023.</b>

AI Summary

AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP (XAEIU) filed a Annual Report (10-K) with the SEC on March 22, 2024. Filed 10-K for fiscal year ended December 31, 2023. Registrant is AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP. Incorporated in the State of Minnesota. Principal executive offices located at 30 East 7th St, Suite 1300, St. Paul, MN 55101. No securities registered on any exchange; Limited Partnership Units registered under Section 12(g).

Why It Matters

For investors and stakeholders tracking AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP, this filing contains several important signals. This filing provides a comprehensive overview of the partnership's financial performance and operations for the past fiscal year. As a non-accelerated filer and smaller reporting company, this report is crucial for understanding its regulatory compliance and financial standing.

Risk Assessment

Risk Level: low — AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP shows low risk based on this filing. The filing is a standard annual report (10-K) for a non-accelerated filer, indicating no immediate or significant financial distress or unusual events requiring a higher risk assessment.

Analyst Insight

Review the full 10-K filing for detailed financial statements, risk factors, and management discussion to assess the partnership's performance and outlook.

Key Numbers

• 20231231 — Fiscal Year End (Reported fiscal year end date)
• 20240322 — Filing Date (Date the 10-K was filed)
• 000-24003 — Commission File Number (SEC commission file number for the registrant)
• 55101 — ZIP Code (Business address ZIP code)
• 6512277333 — Business Phone (Registrant's telephone number)

Key Players & Entities

• AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP (company) — Registrant name
• 20231231 (date) — Fiscal year end
• 20240322 (date) — Filing date
• 0001023458-24-000003 (filing_id) — Accession number
• MN (location) — State of incorporation
• 411848181 (irs_number) — IRS Employer Identification No.
• 30 East 7th St Suite 1300 (address) — Business address street
• ST PAUL (location) — Business address city

FAQ

Industry Context

The company operates in the Real Estate sector, specifically within real estate investment and development.

Regulatory Implications

The filing is made under the Securities Exchange Act of 1934, requiring annual reports from companies to ensure transparency for investors.

What Investors Should Do

1. Analyze the financial statements within the 10-K for revenue, net income, and asset details.
2. Review the 'Risk Factors' section for any disclosed operational or market risks.
3. Examine management's discussion and analysis (MD&A) for insights into business strategy and outlook.

Key Dates

• 2023-12-31: Fiscal Year End — Marks the end of the reporting period for the 10-K.
• 2024-03-22: Filing Date — Date the 10-K was officially submitted to the SEC.

Year-Over-Year Comparison

This is the annual 10-K filing for the fiscal year ended December 31, 2023, following the standard reporting requirements.

Key Financial Figures

• $11,749,372 — e is no ready market for such Units) of $11,749,372. DOCUMENTS INCORPORATED BY REFERENCE
• $24,000,000 — The Partnership offered for sale up to $24,000,000 of limited partnership interests (the "
• $1,000 — nterests (the "Units") (24,000 Units at $1,000 per Unit) pursuant to a registration st
• $1,500,000 — ons of 1,500 Limited Partnership Units ($1,500,000) were accepted. The Partnership's offer
• $16,917,222 — r 16,917.222 Limited Partnership Units ($16,917,222). The Partnership was organized to ac
• $13,363,547 — in three properties, at a total cost of $13,363,547. The balance of the subscription procee
• $8,593,064 — in five properties with a total cost of $8,593,064. During the year ended December 31, 202
• $2,200,747 — rests and received net sale proceeds of $2,200,747, which resulted in a net gain of $524,6
• $524,668 — 00,747, which resulted in a net gain of $524,668. During 2022, the Partnership expended
• $3,051,009 — . During 2022, the Partnership expended $3,051,009 to purchase one additional property int
• $8,686,532 — in four properties with a total cost of $8,686,532. Major Tenants During 2023, four te
• $12,458 — urities Act of 1933. Distributions of $12,458 and $12,513 were declared to the Genera
• $12,513 — of 1933. Distributions of $12,458 and $12,513 were declared to the General Partners a
• $409,097 — re declared to the General Partners and $409,097 and $404,595 were declared to the Limit
• $404,595 — o the General Partners and $409,097 and $404,595 were declared to the Limited Partners f

Filing Documents

• aei22-20231231.htm (10-K) — 537KB
• ex2231-1.htm (EX-31.1) — 8KB
• ex2231-2.htm (EX-31.2) — 8KB
• ex2232.htm (EX-32) — 8KB
• 0001023458-24-000003.txt (&nbsp;) — 2985KB
• aei22-20231231.xsd (EX-101.SCH) — 38KB
• aei22-20231231_def.xml (EX-101.DEF) — 135KB
• aei22-20231231_lab.xml (EX-101.LAB) — 227KB
• aei22-20231231_pre.xml (EX-101.PRE) — 128KB
• aei22-20231231_cal.xml (EX-101.CAL) — 34KB
• aei22-20231231_htm.xml (XML) — 318KB

BUSINESS

ITEM 1. BUSINESS. AEI Income & Growth Fund XXII Limited Partnership (the "Partnership" or the "Registrant") is a limited partnership which was organized pursuant to the laws of the State of Minnesota on July 31, 1996. The registrant is comprised of AEI Fund Management XXI, Inc. ("AFM") as Managing General Partner, the Estate of Robert P. Johnson, as the Individual General Partner, and purchasers of partnership units as Limited Partners. The Partnership offered for sale up to $24,000,000 of limited partnership interests (the "Units") (24,000 Units at $1,000 per Unit) pursuant to a registration statement effective January 10, 1997. The Partnership commenced operations on May 1, 1997 when minimum subscriptions of 1,500 Limited Partnership Units ($1,500,000) were accepted. The Partnership's offering terminated January 9, 1999 when the extended offering period ended. The Partnership received subscriptions for 16,917.222 Limited Partnership Units ($16,917,222). The Partnership was organized to acquire existing and newly constructed commercial properties located in the United States, to lease such properties to tenants under net leases, to hold such properties and to eventually sell such properties. From subscription proceeds, the Partnership purchased twelve properties, including partial interests in three properties, at a total cost of $13,363,547. The balance of the subscription proceeds was applied to organization and syndication costs, working capital reserves and distributions, which represented a return of capital. The properties are commercial, single tenant buildings leased under net leases. The Partnership's properties were purchased without any indebtedness. The Partnership will not finance properties in the future to obtain proceeds for new property acquisitions. If it is required to do so, the Partnership may incur short-term indebtedness, which may be secured by a portion of the Partnership's properties, to finance day-to-day cash flow requirements (inc

BUSINESS. (Continued)

ITEM 1. BUSINESS. (Continued) In June 2021, the Managing General Partner mailed a Consent Statement (Proxy) seeking the consent of the Limited Partners to continue the Partnership for an additional 60 months or to initiate the final disposition, liquidation and distribution of all of the Partnership's properties and assets. Approval of either proposal required the affirmative vote of holders of a majority of the outstanding units. On August 6, 2021, the votes were counted and neither proposal received the required majority vote. As a result, the Partnership will not liquidate and will continue in operation until the Limited Partners vote to authorize the sale of all of the Partnership's properties or December 31, 2046, as stated in the Limited Partnership Agreement. However, in approximately five years, the Managing General Partner expects to again submit the question to liquidate to a vote by the Limited Partners. Leases Although there are variations in the specific terms of the leases, the following is a summary of the general terms of the Partnership's leases. The properties are leased 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 Partnership 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 8 to 20 years, except for the DaVita facility in Hempstead, Texas, which had a remaining primary term of 7.75 years. The leases provide the tenants with two to five five-year renewal options subject to the same terms and conditions as the primary term, except for the Talecris Plasma Facility in Dallas, Texas, which has one 10-year renewal option. The leases provide for base annual rental payments, payable in monthly installments, and contain rent clauses wh

BUSINESS. (Continued)

ITEM 1. BUSINESS. (Continued) Competition The Partnership is a minor factor in the commercial real estate business. There are numerous entities engaged in the commercial real estate business which have greater financial resources than the Partnership. At the time the Partnership elects to dispose of its properties, the Partnership will be in competition with other persons and entities to find buyers for its properties. Employees The Partnership has no direct employees. Management services are performed for the Partnership by AEI Fund Management, Inc. (Management Company), an affiliate of AFM. For the past two fiscal years the Management Company has not made any reductions to employee headcount, compensation plans or employee benefit plans. The Management Company believes the people who work for the Management Company are its most important resources and are critical to its continued success. The Management Company focuses significant attention toward attracting and retaining talented and experienced individuals to manage and support its operations. The Management Company's people are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. All of the Management Company's employees must adhere to a code of conduct that is outlined in AEI's employee handbook which sets standards for appropriate behavior which includes preventing, identifying, reporting and stopping any type of discrimination. Compensation and Benefits The Management Company believes its compensation package and benefits are competitive with others in its industry. In addition to base pay, all eligible employees participate in the Management Company bonus program. The Management Company also offers employees a broad range of benefits, including medical, dental and ancillary health benefits and paid parental leave. Workplace Safety and Wellness The safety and well-being of the Management Company's employees is its priority. The Management Company has imp

RISK FACTORS

ITEM 1A. RISK FACTORS. Not required for a smaller reporting company.

UNRESOLVED STAFF COMMENTS

ITEM 1B. UNRESOLVED STAFF COMMENTS. Not required for a smaller reporting company.

CYBERSECURITY

ITEM 1C. CYBERSECURITY. In the past two years and with the guidance of a qualified third-party, the Management Company has made improvements in the cybersecurity program across the entity, and has developed processes for deterring, detecting, evaluating, and responding to potential cybersecurity incidents. In doing so, the Management Company focuses on its employees, networks, applications and data with a cybersecurity plan, informed by nationally recognized frameworks. The Management Company's third-party advisor has performed cybersecurity risk assessments of its information technology security processes and implemented technologies to lessen risk. Using third party services, the Management Company monitors, scans, assesses, audits, and remediates identified vulnerabilities across its networks, as appropriate. Furthermore, recognizing that the Management Company's employees are an essential line of defense in cybersecurity, it requires employees to participate in training and testing programs through which it provides education on the risk of potential cybersecurity incidents, methods for identification of such incidents and appropriate responses. The Management Company's policies and processes are informed by industry standard practices regarding application security, access management, device protection, network management, and data loss prevention and recovery. The Management Company's cybersecurity incident response plan includes retention of external experts for prompt assistance following discovery of any material incident. This cybersecurity incident response plan is part of its ongoing cybersecurity vulnerability management, and it endeavors to maintain appropriate controls to identify, monitor, analyze and address potential cybersecurity incidents, including potential unauthorized access to its networks and applications, along with detection of potential unusual activity within its networks or applications. Any potential cybersecurity incident is im

PROPERTIES

ITEM 2. PROPERTIES. Investment Objectives The Partnership's investment objectives are to acquire existing or newly-developed commercial properties throughout the United States that offer the potential for (i) regular cash distributions of lease income; (ii) growth in lease income through rent escalation provisions; (iii) preservation of capital through all-cash transactions; (iv) capital growth through appreciation in the value of properties; and (v) stable property performance through long-term lease contracts. The Partnership does not have a policy, and there is no limitation, as to the amount or percentage of assets that may be invested in any one property. However, to the extent possible, the General Partners attempt to diversify the properties by tenant and geographic location. Description of Properties The Partnership's properties are commercial, single tenant buildings. The properties were acquired on a debt-free basis and are leased to tenants under net leases, classified as operating leases. The Partnership holds an undivided fee simple interest in the properties. The Partnership's properties are subject to the general competitive conditions incident to the ownership of single tenant investment real estate. Since each property is leased under a longterm lease, there is little competition until the Partnership decides to sell the property. At this time, the Partnership will be competing with other real estate owners, on both a national and local level, in attempting to find buyers for the properties. In the event of a tenant default, the Partnership would be competing with other real estate owners, who have property vacancies, to attract a new tenant to lease the property. The Partnership's tenants operate in industries that are competitive and can be affected by factors such as changes in regional or local economies, seasonality and changes in consumer preference. 6

PROPERTIES. (Continued)

ITEM 2. PROPERTIES. (Continued) The following table is a summary of the properties that the Partnership acquired and owned as of December 31, 2023. Property Purchase Date Original Property Cost Tenant Annual Lease Payment Annual Rent Per Sq. Ft. Advance Auto Parts Store Indianapolis, IN (65%) 12/21/06 $ 1,244,173 Advance Stores Company, Inc. $ 81,861 $ 17.99 St. Vincent Medical Clinic Lonoke, AR 6/6/13 $ 1,680,000 (1) None (2) Talecris Plasma Facility Dallas, TX (50%) 7/31/20 $ 2,746,350 Talecris Plasma Resources, Inc. $ 204,882 $ 40.65 DaVita Dialysis Hempstead, TX 9/22/22 $ 3,051,009 Bollinger Dialysis, LLC $ 182,209 $ 26.56 (1) Does not include acquisition costs that were expensed. (2) This property is vacant and listed for sale and lease. The properties listed above with a partial ownership percentage are owned with the following affiliated entities: Advance Auto Parts store in Indianapolis, Indiana (AEI Income & Growth Fund 25 LLC) and Talecris Plasma Facility in Dallas, Texas (AEI Income & Growth Fund 25 LLC). The Partnership accounts for properties owned as tenants-in-common with affiliated entities and/or unrelated third parties using the proportionate consolidation method. Each tenant-in-common owns a separate, undivided interest in the properties. Any tenant-in-common that holds more than a 50% interest does not control decisions over the other tenant-in-common interests. The financial statements reflect only this Partnership's percentage share of the properties' land, building, liabilities, revenues and expenses. At the time the properties were acquired, the remaining primary lease terms varied from 8 to 20 years, except for the DaVita facility in Hempstead, Texas which had a remaining primary term of 7.75 years. The leases provide the tenants with two to five five-year renewal options subject to the same terms and conditions as the primary

PROPERTIES. (Continued)

ITEM 2. PROPERTIES. (Continued) Pursuant to the lease agreements, the tenants are required to provide proof of adequate insurance coverage on the properties they occupy. The General Partners believe the properties are adequately covered by insurance and consider the properties to be well-maintained and sufficient for the Partnership's operations. For tax purposes, the Partnership's properties are depreciated under the Modified Accelerated Cost Recovery System (MACRS). The largest depreciable component of a property is the building which is depreciated using the straight-line method over 39 years. The remaining depreciable component of a property is land improvements which are depreciated using an accelerated method over 15 years. Since the Partnership has tax-exempt Partners, the Partnership is subject to the rules of Section 168(h)(6) of the Internal Revenue Code which requires a percentage of the properties' depreciable components to be depreciated over longer lives using the straight-line method. In general, the federal tax basis of the properties for tax depreciation purposes equals the book depreciable cost of the properties plus the amortizable cost of the related intangible lease assets, except for properties purchased during 2009 through 2017. For those properties, acquisition expenses that were expensed for book purposes were capitalized and added to the basis of the property for tax depreciation purposes. At December 31, 2023, nearly all properties listed above were 100% occupied. The only exception is the property in Lonoke, Arkansas that is vacant.

LEGAL PROCEEDINGS

ITEM 3. LEGAL PROCEEDINGS. None.

MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. PART II

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCK-

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCK- HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. (a) As of December 31, 2023, there were 567 holders of record of the registrant's Limited Partnership Units. There is no other class of security outstanding or authorized. The registrant's Units are not a traded security in any market. During the period covered by this report, the Partnership did not sell any equity securities that are not registered under the Securities Act of 1933. Distributions of $12,458 and $12,513 were declared to the General Partners and $409,097 and $404,595 were declared to the Limited Partners for 2023 and 2022, respectively. The distributions were made on a quarterly basis and represented Net Cash Flow, as defined, except as discussed below. These distributions should not be compared with dividends paid on capital stock by corporations. 8

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCK-

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCK- HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. (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 January or July of each year. The purchase price of the Units is equal to 90% of the net asset value per Unit, as of the first business day of January or July of each year, as determined by the Managing General Partner in accordance with the provisions of the Partnership Agreement. Units tendered to the Partnership during January and July may be repurchased on April 1 st and October 1 st , respectively, of each year subject to the following limitations. The Partnership will not be obligated to purchase in any year any number of Units that, when aggregated with all other transfers of Units that have occurred since the beginning of the same calendar year (excluding Permitted Transfers as defined in the Partnership Agreement), would exceed 5% of the total number of Units outstanding on January 1 of such 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. During the last three months of 2023, the Partnership did not purchase any Units. Other Information Effective April 11, 2016, the Financial Industry Regulatory Authority ("FINRA") implemented Rule 2310, a revised rule that requires securities broker-dealers to report on customer account statements the value of investment units of non-traded securities, such as REITs, LLCs and Limited Partnerships, provided that the per unit value is derived using methodology set forth by the rule. At December 31, 2023, the estimated value of the Partnership's Units was $650 per Unit. The Managing General Partner is the party responsible for

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCK-

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCK- HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. The per Unit value was the aggregate estimated value of the Partnership's assets less the Partnership's liabilities, and less the value attributable to the interest of the General Partners, divided by the number of Units outstanding. The Partnership's cash, receivables and liabilities were valued at face value as of September 30, 2023. Each of the Partnership's properties were valued by dividing their annual rental income as of December 1, 2023 by a capitalization rate the Managing General Partner believed, based upon the aforementioned valuation process, to be representative of the retail market for the sale of each property. The resulting value for each property was reviewed to determine that it also reflected circumstances that may have been unique to each specific property. For recently acquired properties, an appraisal report received at or near the time of acquisition from an independent commercial property appraiser was used to determine the value of the property. The appraisal report is used to value the property for approximately one year after the date of acquisition. The valuations were estimates only, and were based on a number of assumptions which may not be accurate or complete. In addition, property values are subject to change and could decline after the date of the valuations. Accordingly, this estimated value should not be viewed as the amount at which a Limited Partner may be able to sell units, or the fair market value of the Partnership properties, nor does it represent the amount of net proceeds Limited Partners would receive if the Partnership properties were sold and the proceeds distributed in a liquidation of the Partnership. The following table provides a breakdown of each major asset type, liabilities and the number of Units that were used to calculate the estimated value per Unit, using the methodology described a

Properties

Properties $ 7,610,000 $ 9,971,000 Cash 269,000 341,000 Current liabilities (165,000) (286,000) Value attributable to the interest of the General Partners (77,000) (100,000) Value attributable to the interest of the Limited Partners $ 7,637,000 $ 9,926,000 Limited Partnership Units outstanding 11,749 11,749

(Reserved)

ITEM 6. (Reserved) 10

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

ITEM 7. 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: — 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 effects 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. Application of Critical Accounting Policies The Partnership's financial statements have been prepared in accordance with US GAAP. Preparing the financial statements requires management to u

View Full Filing

View this 10-K filing on SEC EDGAR