AEI Fund XXI Net Income Soars 466% on Strategic Property Sale

TL;DR

**AEI Fund XXI's massive net income jump is a one-time win from a property sale, masking a dip in core rental income – don't get fooled by the headline number, dig deeper into their remaining portfolio.**

AI Summary

AEI Income & Growth Fund XXI Limited Partnership reported a significant increase in net income to $1,006,067 for the nine months ended September 30, 2025, a substantial rise from $177,740 in the same period of 2024. This surge was primarily driven by an $825,611 gain on the sale of its 40% interest in the Jared Jewelry property in Auburn Hills, Michigan, which closed on March 31, 2025, yielding net proceeds of $1,345,607. Rental income, however, decreased to $697,938 in 2025 from $749,550 in 2024, attributed to the property sale, partially offset by a rent increase on an existing property. Total expenses saw a slight decrease from $574,505 in 2024 to $527,196 in 2025, with affiliate administration expenses dropping to $86,168 from $121,129, while unrelated party administration and property management expenses increased to $92,355 from $69,150 due to timing of tax and audit services. The partnership also repurchased 1,095.87 Limited Partnership Units for $787,350 on April 1, 2025, increasing remaining limited partners' ownership. Cash increased to $585,421 as of September 30, 2025, from $240,059 at December 31, 2024.

Why It Matters

For investors, the substantial gain on the Jared Jewelry sale demonstrates effective asset management and value realization, significantly boosting net income and cash flow. However, the underlying decline in rental income post-sale highlights a potential challenge in maintaining operational revenue without further acquisitions or rent escalations, impacting long-term income stability. Employees of AEI Fund Management, Inc. continue to manage the partnership, with their compensation tied to administrative functions. Customers of the properties, like Jared Jewelry, are indirectly affected by ownership changes, though the filing doesn't indicate direct impact. The broader real estate market sees this as an example of a strategic disposition in a potentially softening commercial real estate environment, especially with rising interest rates.

Risk Assessment

Risk Level: medium — The partnership's reliance on property sales for significant income spikes, as evidenced by the $825,611 gain on sale driving the 466% net income increase, indicates a less predictable revenue stream than consistent rental income. The decline in rental income from $749,550 to $697,938 for the nine months ended September 30, 2025, following a property disposition, suggests a shrinking asset base for recurring revenue, posing a medium-term risk to sustained operational profitability.

Analyst Insight

Investors should scrutinize the partnership's remaining real estate portfolio and future acquisition strategy. Given the decline in rental income, evaluate the sustainability of distributions and the potential for further asset sales to drive returns, rather than relying solely on operational cash flow.

Financial Highlights

debt To Equity

N/A

revenue

$697,938

operating Margin

N/A

total Assets

N/A

total Debt

N/A

net Income

$1,006,067

eps

$60.36

gross Margin

N/A

cash Position

$585,421

revenue Growth

-6.9%

Revenue Breakdown

Key Numbers

• $1,006,067 — Net Income (Increased from $177,740 in 2024, primarily due to property sale.)
• $825,611 — Gain on Sale of Real Estate (Resulted from the sale of 40% interest in Jared Jewelry property.)
• $697,938 — Rental Income (Decreased from $749,550 in 2024 due to property sale.)
• $1,345,607 — Proceeds from Sale of Real Estate (Received from the sale of Jared Jewelry property on March 31, 2025.)
• $787,350 — Repurchase of Partnership Units (Used to repurchase 1,095.87 Units from 45 Limited Partners.)
• $585,421 — Cash, end of period (Increased from $240,059 at December 31, 2024.)
• 15,980.84 — Limited Partnership Units outstanding (Decreased from 17,076.71 due to unit repurchases.)
• $4.50 — Net Income per Limited Partnership Unit (3 months) (Slightly down from $4.67 in 2024 for the three months ended September 30.)
• $60.36 — Net Income per Limited Partnership Unit (9 months) (Significantly up from $10.30 in 2024 due to the property sale gain.)
• $922,000 — Expected Rental Income for 2025 (Based on scheduled rent for properties owned as of October 31, 2025.)

Key Players & Entities

• AEI Income & Growth Fund XXI Limited Partnership (company) — registrant
• AEI Fund Management XXI, Inc. (company) — Managing General Partner
• AEI Fund Management, Inc. (company) — affiliate performing administrative and operating functions
• Jared Jewelry (company) — property sold by the partnership
• Robert P. Johnson (person) — Estate serves as Individual General Partner
• Patricia Johnson (person) — owns majority interest in AEI Capital Corporation
• Auburn Hills, Michigan (location) — location of the sold Jared Jewelry property
• $1,006,067 (dollar_amount) — Net Income for nine months ended September 30, 2025
• $825,611 (dollar_amount) — Gain on Sale of Real Estate
• $1,345,607 (dollar_amount) — Net proceeds from sale of Jared Jewelry property

FAQ

Risk Factors

• Market and Economic Conditions [medium — market]: Market and economic conditions can affect property values and rental income. Higher interest rates and inflation may impact tenants' ability to pay rent, potentially reducing net cash flow.
• Tenant Defaults [medium — operational]: The success of the Partnership is subject to the risk of tenant defaults, which would directly impact rental income and cash flow.
• Property Management and Administration [low — operational]: Expenses related to property management and administration, both from affiliated and unrelated parties, can fluctuate. Unrelated party expenses increased due to timing of tax and audit services.
• Interest Rate Fluctuations [low — financial]: While not explicitly detailed as a risk, higher interest rates are mentioned as a factor impacting tenants and potentially the Partnership's financial condition.
• Tax Consequences [low — legal]: The federal income tax consequences of rental income, deductions, and gains on sales can affect the Partners.
• Tenant Industry Conditions [medium — operational]: The condition of the industries in which the tenants operate can influence their ability to meet lease obligations.

Industry Context

The real estate investment trust (REIT) and private real estate fund industry is sensitive to market and economic conditions, including interest rates and inflation. Rental income is a primary driver of revenue, while property appreciation and capital gains from sales contribute to overall profitability. Management's ability to identify favorable risk-return properties and manage tenant relationships is crucial for success.

Regulatory Implications

The Partnership operates under US GAAP, requiring specific accounting policies for property valuation, depreciation, and revenue recognition. Management must also consider federal income tax consequences for partners related to income and gains. Compliance with partnership agreements and reporting requirements is essential.

What Investors Should Do

1. Monitor rental income trends excluding one-time gains.
2. Evaluate the impact of unit repurchases on ownership.
3. Assess the Partnership's exposure to market and economic risks.
4. Review the allocation of expenses between affiliated and unrelated parties.

Key Dates

• 2025-03-31: Sale of 40% interest in Jared Jewelry property closed — Generated a significant gain of $825,611 and net proceeds of $1,345,607, boosting net income for the period.
• 2025-04-01: Repurchase of 1,095.87 Limited Partnership Units — Reduced the number of outstanding units, increasing the ownership percentage for remaining partners and utilizing cash generated from operations and property sale.
• 2025-09-30: End of reporting period for 10-Q — Reflects increased cash balance of $585,421, up from $240,059 at year-end 2024.
• 2024-09-30: Prior year reporting period — Net income was $177,740, significantly lower than the current period, highlighting the impact of the property sale.

Glossary

US GAAP

Generally Accepted Accounting Principles in the United States, the standard framework of guidelines for financial accounting. (Ensures the financial statements are prepared consistently and comparably.)

Carrying Value

The value of an asset as recorded on a company's balance sheet, typically its historical cost less accumulated depreciation or amortization. (Used in impairment testing to determine if an asset's value has declined below its recorded amount.)

Net Realizable Value

The estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. (Used to assess impairment for properties held for sale.)

Intangible Lease Assets

Assets representing the value of above-market leases or direct costs associated with obtaining a new tenant, amortized over the lease term. (Affects the recognition of rental income and expenses over time.)

Limited Partnership Units

The ownership stakes in the AEI Income & Growth Fund XXI Limited Partnership. (The number of units outstanding impacts earnings per unit and partner ownership percentages.)

Year-Over-Year Comparison

Revenue from rental income decreased by 6.9% to $697,938 for the nine months ended September 30, 2025, compared to $749,550 in the prior year, primarily due to a property sale. However, net income saw a substantial increase to $1,006,067 from $177,740, largely driven by an $825,611 gain on the sale of real estate. Total expenses decreased slightly, with affiliate administration costs down but unrelated party expenses up due to timing. Cash position significantly improved to $585,421 from $240,059.

Key Financial Figures

• $697,938 — Partnership recognized rental income of $697,938 and $749,550, respectively. In 2025, re
• $749,550 — ecognized rental income of $697,938 and $749,550, respectively. In 2025, rental income d
• $922,000 — ecognize rental income of approximately $922,000 in 2025. 11 ITEM 2. MANAGEMENT'S DIS
• $86,168 — ion expenses from affiliated parties of $86,168 and $121,129, respectively. These admin
• $121,129 — from affiliated parties of $86,168 and $121,129, respectively. These administration exp
• $92,355 — ment expenses from unrelated parties of $92,355 and $69,150, respectively. These expens
• $69,150 — s from unrelated parties of $92,355 and $69,150, respectively. These expenses represent
• $1,345,607 — e Partnership receiving net proceeds of $1,345,607, which resulted in a net gain of $825,6
• $825,611 — 45,607, which resulted in a net gain of $825,611. At the time of sale, the cost basis of
• $1,466,048 — nd related accumulated depreciation was $1,466,048 and $946,052, respectively. For the n
• $946,052 — mulated depreciation was $1,466,048 and $946,052, respectively. For the nine months en
• $9,714 — rtnership recognized interest income of $9,714 and $2,695, respectively. Management
• $2,695 — ecognized interest income of $9,714 and $2,695, respectively. Management believes in
• $345,362 — e Partnership's cash balances increased $345,362 as a result of cash received from the s
• $14,143 — e Partnership's cash balances increased $14,143 as a result of distributions paid to th

Filing Documents

• aei21-20250930.htm (10-Q) — 324KB
• ex2131-1.htm (EX-31.1) — 8KB
• ex2131-2.htm (EX-31.2) — 8KB
• ex2132.htm (EX-32) — 9KB
• 0000931755-25-000020.txt ( ) — 1357KB
• aei21-20250930.xsd (EX-101.SCH) — 13KB
• aei21-20250930_def.xml (EX-101.DEF) — 52KB
• aei21-20250930_lab.xml (EX-101.LAB) — 118KB
• aei21-20250930_pre.xml (EX-101.PRE) — 72KB
• aei21-20250930_cal.xml (EX-101.CAL) — 19KB
• aei21-20250930_htm.xml (XML) — 74KB

– Financial Information

Part I – Financial Information Item 1. Condensed Financial Statements (unaudited): Balance Sheets as of September 30, 2025 and December 31, 2024 3 Income 4 Cash Flows 5 Changes in Partners' Capital 6 Condensed Notes to Financial Statements 7 - 8 Item 2.

Management's Discussion and Analysis of Financial

Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 13 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 14 Item 4.

Controls and Procedures

Controls and Procedures 14

– Other Information

Part II – Other Information Item 1.

Legal Proceedings

Legal Proceedings 15 Item 1A.

Risk Factors

Risk Factors 15 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15 Item 3. Defaults Upon Senior Securities 16 Item 4. Mine Safety Disclosures 16 Item 5. Other Information 16 Item 6. Exhibits 16

Signatures

Signatures 16 2 AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP BALANCE SHEETS ASSETS September 30, December 31, 2025 2024 (unaudited) Current Assets: Cash $ 585,421 $ 240,059 Real Estate Investments: Land 3,166,803 3,447,796 Buildings 8,640,560 9,825,615 Acquired Intangible Lease Assets 864,490 864,490 Real Estate Held for Investment, at Cost 12,671,853 14,137,901 Accumulated Depreciation and Amortization ( 3,723,882 ) ( 4,321,261 ) Real Estate Held for Investment, Net 8,947,971 9,816,640 Total Assets $ 9,533,392 $ 10,056,699 LIABILITIES AND PARTNERS' CAPITAL Current Liabilities: Payable to AEI Fund Management, Inc. $ 75,366 $ 89,055 Distributions Payable 165,758 173,233 Unearned Rent 0 55 Total Current Liabilities 241,124 262,343 Long-term Liabilities: Acquired Below-Market Lease Intangibles, Net 2,702 8,783 Partners' Capital : General Partner 8,162 3,776 Limited Partners – 24,000 Units authorized; 15,980.84 and 17,076.71 Units issued and outstanding as of 9/30/2025 and 12/31/2024, respectively 9,281,404 9,781,797 Total Partners' Capital 9,289,566 9,785,573 Total Liabilities and Partners' Capital $ 9,533,392 $ 10,056,699 The accompanying Condensed Notes to Financial Statements are an integral part of these statements. 3 AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP (unaudited) Three Months Ended September 30 Nine Months Ended September 30 2025 2024 2025 2024 Rental Income $ 224,062 $ 250,044 $ 697,938 $ 749,550 Expenses: Partnership Administration – Affiliates 28,318 35,681 86,168 121,129 Partnership Administration and Property Management – Unrelated Parties 9,358 6,749 92,355 69,150 Depreciation and Amortization 116,222 128,075 348,673 384,226 Total Expenses 153,898 170,505 527,196 574,505 Operating Income

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

ITEM 2. 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 Partner of conflicts with which they may be confronted; — the success of the General Partner 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 use judgment in the application of these accounting policies, including making estimates and assumptions. These judgments will affect the reported amounts of the Partnership's assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and will affect the reported amounts of revenue and expenses during the reporting periods. It is possible that the carrying amount of the Partnership's assets and liabilities, or the results of repo

MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) Allocation of Purchase Price of Acquired Properties Upon acquisition of real properties, the Partnership records them in the financial statements at cost. The purchase price is allocated to tangible assets, consisting of land and building, and to identified intangible assets and liabilities, which may include the value of above market and below market in-place leases. The allocation of the purchase price is based upon the relative fair value of each component of the property. Although independent appraisals may be used to assist in the determination of fair value, in many cases these values will be based upon management's assessment of each property, the selling prices of comparable properties and the discounted value of cash flows from the asset. The fair values of above market and below market in-place leases will be recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) an estimate of fair market lease rates for the corresponding in-place leases measured over a period equal to the non-cancelable term of the lease including any bargain renewal periods. The above market and below market lease values will be capitalized as intangible lease assets or liabilities. Above market lease values will be amortized on a straight-line basis as an adjustment of rental income over the remaining term of the respective leases. Below market lease values will be amortized on a straight-line basis as an adjustment of rental income over the remaining term of the respective leases, including any bargain renewal periods. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market and below market in-place lease values relating to that lease would be recorded as an adjustment to rental income. The fair values

MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) Carrying Value of Properties Properties are carried at original cost, less accumulated depreciation and amortization. The Partnership tests long-lived assets for recoverability when events or changes in circumstances indicate that the carrying value may not be recoverable. For properties the Partnership will hold and operate, management determines whether impairment has occurred by comparing the property's probability-weighted future undiscounted 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 net realizable value, an impairment loss is recorded to reduce the carrying value of the property to its net realizable value. Changes in these assumptions or analysis may cause material changes in the carrying value of the properties. Allocation of Expenses 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 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. Factors Which May Influence Results of Operations The Partnership is not aware of any material trends or uncertainties, other than national economic conditions affecting real estate generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues and investment property value. However, due to current economic factors, higher interest rates, and inflation in the US and globally, our tenants and opera

MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) For the nine months ended September 30, 2025 and 2024, the Partnership incurred Partnership administration expenses from affiliated parties of $86,168 and $121,129, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and communicating with the Limited Partners. These expenses were lower in 2025, when compared to 2024, mainly due to a decrease in property related management expenses. During the same periods, the Partnership incurred Partnership administration and property management expenses from unrelated parties of $92,355 and $69,150, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit costs, taxes, insurance and other property costs. These expenses were higher in 2025, when compared to 2024, mainly due to timing of tax and audit services. In January 2025, the Partnership entered into an agreement to sell its 40% interest in the Jared Jewelry in Auburn Hills, Michigan to an unrelated third party. On March 31, 2025, the sale closed with the Partnership receiving net proceeds of $1,345,607, which resulted in a net gain of $825,611. At the time of sale, the cost basis of the property and related accumulated depreciation was $1,466,048 and $946,052, respectively. For the nine months ended September 30, 2025 and 2024, the Partnership recognized interest income of $9,714 and $2,695, respectively. Management believes inflation has not significantly affected 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. Inflation also may cause the real estate to appreciate in value. However, inflation and changing prices may have an adverse impact on the operating mar

MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) 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, 2025, the Partnership generated cash flow from the sale of real estate of $1,345,607. During the nine months ended September 30, 2024, the Partnership did not complete any property acquisitions or property sales. The Partnership's primary use of cash flow, other than investment in real estate, is distribution payments to Partners and cash used to repurchase Units. 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. The Partnership may repurchase tendered Units on April 1st and October 1st of each year subject to limitations. For the nine months ended September 30, 2025 and 2024, the Partnership declared distributions of $706,771 and $519,699, which were distributed 99% to the Limited Partners and 1% to the General Partner, respectively. The Limited Partners were allocated declared distributions of $699,703 and $514,503 and the General Partner was allocated declared distributions of $7,068 and $5,196 for the periods ended September 30, 2025 and 2024, respectively. The Partnership may repurchase Units from Limited Partners who have tendered their Units to the Partnership. Such Units may be acquired at a discount. 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

QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not required for a smaller reporting company.

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES. (a) 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 our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based upon that evaluation, the President and Chief Financial Officer of the Managing General Partn

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