Aei Income & Growth Fund XXI LTD Partnership 10Q 2022 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2022

Commission File Number: 000-29274

AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

State of Minnesota		41-1789725
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

30 East 7^th Street, Suite 1300 St. Paul, Minnesota 55101		(651) 227-7333
(Address of principal executive offices)		(Registrant’s telephone number)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
NONE		NONE		NONE

Securities registered pursuant to Section 12(g) of the Act:

	Limited Partnership Units
	(Title of class)

Indicate by check mark whether the registrant (1) has 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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐ Large accelerated filer	☐ Accelerated filer
☒ Non-accelerated filer	☒ Smaller reporting company
☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of October 31, 2022, there were 17,076.71 Units of limited partnership interest outstanding and owned by nonaffiliates of the registrant.

AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

INDEX


				Page
Part I – Financial Information

	Item 1.	Financial Statements (unaudited):

		Balance Sheets as of September 30, 2022 and December 31, 2021		3

		Statements for the Periods ended September 30, 2022 and 2021:

			Income	4

			Cash Flows	5

			Changes in Partners’ Capital	6

		Condensed Notes to Financial Statements		7 - 10

	Item 2.	Management's Discussion and Analysis of Financial
			Condition and Results of Operations	10 - 17

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		17

	Item 4.	Controls and Procedures		18

Part II – Other Information

	Item 1.	Legal Proceedings		18

	Item 1A.	Risk Factors		18

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		19

	Item 3.	Defaults Upon Senior Securities		19

	Item 4.	Mine Safety Disclosures		19

	Item 5.	Other Information		19

	Item 6.	Exhibits		19

Signatures				20

AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

BALANCE SHEETS

ASSETS

		September 30,		December 31,
		2022		2021
		(unaudited)
Current Assets:
Cash	$	174,580	$	3,225,626
Rent Receivable		280		4,299
Total Current Assets		174,860		3,229,925

Real Estate Investments:
Land		3,447,470		1,910,004
Buildings		9,824,313		6,446,019
Acquired Intangible Lease Assets		864,490		443,785
Real Estate Held for Investment, at cost		14,136,273		8,799,808
Accumulated Depreciation and Amortization		(3,168,554)		(2,856,987)
Real Estate Held for Investment, Net		10,967,719		5,942,821
Real Estate Held for Sale		0		1,182,556
Total Real Estate Investments		10,967,719		7,125,377
Total Assets	$	11,142,579	$	10,355,302

LIABILITIES AND PARTNERS' CAPITAL

Current Liabilities:
Payable to AEI Fund Management, Inc.	$	176,064	$	50,930
Distributions Payable		173,234		173,233
Total Current Liabilities		349,298		224,163

Long-term Liabilities:
Acquired Below-Market Lease Intangibles, Net		27,026		33,107

Partners’ Capital :			��
General Partners		12,621		109
Limited Partners – 24,000 Units authorized; 17,076.71 and 17,429 Units issued and outstanding as of 9/30/2022 and 12/31/2021		10,753,634		10,097,923
Total Partners' Capital		10,766,255		10,098,032
Total Liabilities and Partners' Capital	$	11,142,579	$	10,355,302

The accompanying Condensed Notes to Financial Statements are an integral part of these statements.

AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

STATEMENTS OF INCOME

(unaudited)


		Three Months Ended September 30				Nine Months Ended September 30
		2022		2021		2022		2021

Rental Income	$	242,487	$	234,309	$	643,086	$	625,313

Expenses:
Partnership Administration – Affiliates		30,886		41,445		105,853		121,651
Partnership Administration and Property Management – Unrelated Parties		4,908		21,872		40,749		78,936
Depreciation and Amortization		128,059		101,555		311,567		281,584
Total Expenses		163,853		164,872		458,169		482,171

Operating Income		78,634		69,437		184,917		143,142

Other Income:
Interest Income		224		309		2,045		1,842
Gain on Sale of Real Estate		0		13,198		1,268,078		13,198
Total Other Income		224		13,507		1,270,123		15,040

Net Income	$	78,858	$	82,944	$	1,455,040	$	158,182

Net Income Allocated:
General Partners	$	1,724	$	830	$	20,380	$	1,582
Limited Partners		77,134		82,114		1,434,660		156,600
Total	$	78,858	$	82,944	$	1,455,040	$	158,182

Net Income per Limited Partnership Unit	$	4.52	$	4.58	$	83.44	$	8.59

Weighted Average Units Outstanding – Basic and Diluted		17,077		17,947		17,194		18,228

The accompanying Condensed Notes to Financial Statements are an integral part of these statements.

AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

(unaudited)


		Nine Months Ended September 30
		2022		2021
Cash Flows from Operating Activities:
Net Income	$	1,455,040	$	158,182

Adjustments to Reconcile Net Income To Net Cash Provided by Operating Activities:
Depreciation and Amortization		305,486		275,502
Gain on Sale of Real Estate		(1,268,078)		(13,198)
(Increase) Decrease in Rent Receivable		4,019		34,390
Increase (Decrease) in Payable to AEI Fund Management, Inc.		125,134		(26,943)
Increase (Decrease) in Unearned Rent		0		9,167
Total Adjustments		(833,439)		278,918
Net Cash Provided By (Used For) Operating Activities		621,601		437,100

Cash Flows from Investing Activities:
Investments in Real Estate		(5,336,465)		(2,545,860)
Proceeds from Sale of Real Estate		2,450,634		2,477,214
Net Cash Provided By (Used For) Investing Activities		(2,885,831)		(68,646)

Cash Flows from Financing Activities:
Distributions Paid to Partners		(517,173)		(397,569)
Repurchase of Partnership Units		(269,643)		(616,772)
Net Cash Provided By (Used For) Financing Activities		(786,816)		(1,014,341)

Net Increase (Decrease) in Cash		(3,051,046)		(645,887)

Cash, beginning of period		3,225,626		4,308,166

Cash, end of period	$	174,580	$	3,662,279

The accompanying Condensed Notes to Financial Statements are an integral part of these statements.

AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

(unaudited)

		General Partners		Limited Partners		Total	Limited Partnership Units Outstanding

Balance, December 31, 2020	$	11,472	$	11,450,831	$	11,462,303	18,791.14

Distributions Declared		(1,339)		(132,597)		(133,936)
Net Income		194		19,161		19,355

Balance, March 31, 2021		10,327		11,337,395		11,347,722	18,791.14

Distributions Declared		(1,298)		(128,399)		(129,697)
Repurchase of Partnership Units		(6,168)		(610,604)		(616,772)	(843.97)
Net Income		558		55,325		55,883

Balance, June 30, 2021		3,419		10,653,717		10,657,136	17,947.17

Distributions Declared		(1,768)		(175,097)		(176,865)
Net Income		830		82,114		82,944

Balance, September 30, 2021	$	2,481	$	10,560,734	$	10,563,215	17,947.17



Balance, December 31, 2021	$	109	$	10,097,923	$	10,098,032	17,429.00

Distributions Declared		(1,732)		(171,501)		(173,233)
Net Income		14,292		1,310,603		1,324,895

Balance, March 31, 2022		12,669		11,237,025		11,249,694	17,429.00

Distributions Declared		(1,707)		(169,000)		(170,707)
Repurchase of Partnership Units		(2,696)		(266,947)		(269,643)	(352.29)
Net Income		4,364		46,923		51,287

Balance, June 30, 2022		12,630		10,848,001		10,860,631	17,076.71

Distributions Declared		(1,733)		(171,501)		(173,234)
Net Income		1,724		77,134		78,858

Balance, September 30, 2022	$	12,621	$	10,753,634	$	10,766,255	17,076.71

The accompanying Condensed Notes to Financial Statements are an integral part of these statements.

AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

CONDENSED NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(unaudited)

(1) The condensed statements included herein have been prepared by the registrant, 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 United States Generally Accepted Accounting Principles (US GAAP) have been condensed or omitted pursuant to such rules and regulations, although the registrant 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 registrant’s latest annual report on Form 10K.

(2) Organization –

AEI Income & Growth Fund XXI Limited Partnership (“Partnership”) was formed to acquire and lease commercial properties to operating tenants. The Partnership's operations are managed by AEI Fund Management XXI, Inc. (“AFM”), the Managing General Partner. The Estate of Robert P. Johnson serves as the Individual General Partner. AFM is a wholly owned subsidiary of AEI Capital Corporation of which the Robert P. Johnson Trust and Patricia Johnson, own a majority interest. AEI Fund Management, Inc. (“AEI”), an affiliate of AFM, performs the administrative and operating functions for the Partnership.

In January 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. On March 3, 2021, the votes were counted and neither proposal received the required majority vote. As a result, the Managing General Partner will continue the operations of the Partnership for an additional 60 months at which time it will ask the Limited Partners to vote on the same two proposals.

AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

CONDENSED NOTES TO FINANCIAL STATEMENTS

(3) Recently Issued Accounting Pronouncements –

In April 2020, the Financial Accounting Standards Board (FASB) issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under existing lease guidance, the Partnership would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant or if a lease concession was under the enforceable rights and obligations within the existing lease agreement. The Lease Modification Q&A clarifies that entities may elect to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under current lease guidance. Instead, an entity that elects not to evaluate whether a concession directly related to COVID-19 is a modification can then elect whether to apply the modification guidance.

Other accounting standards that have been issued or proposed by the FASB are currently not applicable to the Partnership or are not expected to have a significant impact on the Partnership’s financial positions, results of operations and cash flows.

(4) Real Estate Investments –

The Partnership owned a 30% interest in the Gander Mountain store in Champaign, Illinois. The remaining interests in the property were owned by affiliates of the Partnership. On March 10, 2017, Gander Mountain Company filed for Chapter 11 reorganization and announced it was closing the store, following a liquidation sale of its onsite assets. In June 2017, the tenant filed a motion with the bankruptcy court to reject the lease for this store effective June 30, 2017. At this time, the tenant returned possession of the property to the owners and the Partnership became responsible for its 30% share of real estate taxes and other costs associated with maintaining the property. The tenant paid rent through June 2017.

On August 11, 2020, the Partnership entered into a lease agreement with a primary term of 10 years with Burlington Coat Factory of Texas, Inc. (“Burlington”) as a replacement tenant for 62% of the square footage of the property. The tenant’s obligations under the lease were guaranteed by Burlington Coat Factory Warehouse Corporation. The tenant was to operate a Burlington retail store in the space. The Partnership’s 30% share of annual rent was $102,980 and commenced on May 7, 2021. The Partnership was responsible for paying its 30% share of the buildout of the space, which was $612,992. As part of the agreement, the Partnership paid a tenant improvement allowance of $66,201 that was capitalized. The Partnership paid its 30% share of lease commissions due to real estate brokers totaling $63,443 that were owed as part of the lease transaction. This amount was capitalized and was to be amortized over the term of the lease.

AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

CONDENSED NOTES TO FINANCIAL STATEMENTS

(4) Real Estate Investments – (Continued)

On February 5, 2021, the Partnership entered into a lease agreement with a primary term of 10 years with Five Below, Inc. as a replacement tenant for 38% of the square footage of the property. The tenant operated a Five Below retail store in the space. The Partnerships 30% share of the annual rent was $62,093 and commenced on August 27, 2021. The Partnership was responsible for its 30% share of the buildout of the space, which was $250,988. As part of the agreement, the Partnership paid a tenant improvement allowance of $21,995 that was capitalized. The Partnership paid its 30% share of lease commissions due to real estate brokers totaling $40,804 that were due as part of the lease transaction. This amount was capitalized and was to be amortized over the term of the lease.

In August 2021, the Partnership entered into an agreement to sell its 30% interest in the Burlington Coat Factory and Five Below in Champaign, Illinois to an unrelated third party. On September 28, 2021, the sale closed with the Partnership receiving net proceeds of $2,477,214, which resulted in a net gain of $13,198. At the time of the sale, the cost and related accumulated depreciation was $3,178,923 and $714,907, respectively.

On May 14, 2021, the Partnership purchased an Advance Auto Parts store in Chelsea, Alabama for $1,802,200. The Partnership allocated $158,736 of the purchase price to Acquired Intangible Lease Assets, representing in-place lease intangibles. The property is leased to Advance Stores Company, Incorporated under a lease agreement with a remaining primary term of 10.4 years (as of the date of purchase) and annual rent of $110,000.

In December 2021, the Partnership entered into an agreement to sell its 50% interest in the Jared Jewelry store in Hanover, Maryland to an unrelated third party. On February 14, 2022, the sale closed with the Partnership receiving net proceeds of $2,450,634, which resulted in a net gain of $1,268,078. At the time of sale, the cost and related accumulated depreciation was $1,989,135 and $806,579, respectively.

On March 22, 2022, the Partnership purchased a 40% interest of the Memorial Hospital property in Diamondhead, Mississippi for $1,610,422. The Partnership allocated $114,052 of the purchase price to Acquired Lease Assets, representing in-place intangibles. The property is leased to Memorial Hospital at Gulfport, Incorporated under a lease agreement with a remaining primary term of 5.3 years (as of date of purchase) and annual rent of $100,320 scheduled to increase annually at 2%.

AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

CONDENSED NOTES TO FINANCIAL STATEMENTS

(4) Real Estate Investments – (Continued)

On May 11, 2022, the Partnership purchased an additional 46% joint-venture interest in the Best Buy store in Eau Claire, Wisconsin for $3,726,043 from AEI Income & Growth Fund 26 LLC, an affiliate of the Partnership. The purchase price of the property was based upon the property’s fair market value as determined by an independent third party, commercial property appraiser. The property interest became available because AEI Income & Growth Fund 26 LLC was in the process of liquidating its property portfolio. The Partnership now owns 100% interest in the property. The Partnership allocated $306,653 of the purchase price to Acquired Intangible Lease Assets, representing in-place lease intangibles. The annual rent for the additional 46% interest that was purchased is $240,432.

(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.

(6) Partners’ Capital –

For the nine months ended September 30, 2022 and 2021, the Partnership declared distributions of $517,174 and $440,498, respectively. The Limited Partners were allocated distributions of $512,002 and $436,093 and the General Partners were allocated distributions of $5,172 and $4,405 for the periods, respectively. The Limited Partners' distributions represented $29.78 and $23.92 per Limited Partnership Unit outstanding using 17,194 and 18,228 weighted average Units in 2022 and 2021, respectively. The distributions represented $29.78 and $8.59 per Unit of Net Income and $0 and $15.33 per Unit of contributed capital in 2022 and 2021, respectively.

On April 1, 2022, the Partnership repurchased a total of 352.29 Units for $266,947 from 30 Limited Partners in accordance with the Partnership Agreement. On April 1, 2021, the Partnership repurchased a total of 843.97 Units for $610,604 from 36 Limited Partners. The Partnership acquired these Units using net sales proceeds. As a result of these repurchases and pursuant to the Partnership Agreement, the General Partners received distributions of $2,696 and $6,168 in 2022 and 2021, respectively.

(7) Fair Value Measurements –

As of September 30, 2022 and December 31, 2021, the Partnership had no assets or liabilities measured at fair value on a recurring basis or nonrecurring basis.

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 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 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 reported operations, will be affected if management’s estimates or assumptions prove inaccurate.

Management of the Partnership evaluates the following accounting estimates on an ongoing basis, and has discussed the development and selection of these estimates and the management discussion and analysis disclosures regarding them with the managing partner of the Partnership.

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 leases and the value of 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 as an adjustment of rental income over the remaining term of the respective leases. Below market lease values will be amortized 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 of in-place leases will include estimated direct costs associated with obtaining a new tenant, and opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease. Direct costs associated with obtaining a new tenant may include commissions, tenant improvements, and other direct costs and are estimated, in part, by management’s consideration of current market costs to execute a similar lease. These direct costs will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. The value of opportunity costs will be calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. These intangibles will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.

The determination of the relative fair values of the assets and liabilities acquired will require the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount and capitalization rates, interest rates and other variables. If management’s estimates or assumptions prove inaccurate, the result would be an inaccurate allocation of purchase price, which could impact the amount of reported net income.

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 the outbreak and continuing effect of the coronavirus (COVID-19) in the U.S. and globally, our tenants and operating partners may be impacted.

Results of Operations

For the nine months ended September 30, 2022 and 2021, the Partnership recognized rental income of $643,086 and $625,313, respectively. In 2022, rental income increased due to the purchase of two properties in 2022 and one property in 2021, which was partially offset by the sale of one property in 2022. Based on the scheduled rent for the properties owned as of October 31, 2022, the Partnership expects to recognize rental income of approximately $883,000 in 2022.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

In July 2021, the Partnership entered into an agreement with the tenant of the Jared Jewelry store in Hanover, Maryland to extend the lease term seven years to end on January 31, 2029. As part of the agreement, the annual rent decreased from $224,340 to $167,500 effective February 1, 2022.

In December 2021, the Partnership entered into an agreement to sell its 50% interest in the Jared Jewelry store in Hanover, Maryland to an unrelated third party. On February 14, 2022, the sale closed with the Partnership receiving net proceeds of approximately $2,451,000, which resulted in a net gain of approximately $1,268,000. At the time of sale, the cost and related accumulated depreciation was $1,989,135 and $806,579, respectively.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

For the nine months ended September 30, 2022 and 2021, the Partnership incurred Partnership administration expenses from affiliated parties of $105,853 and $121,651, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and communicating with the Limited Partners. During the same periods, the Partnership incurred Partnership administration and property management expenses from unrelated parties of $40,749 and $78,936, 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.

For the nine months ended September 30, 2022 and 2021, the Partnership recognized interest income of $2,045 and $1,842, 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 margins of the properties' tenants, which could impair their ability to pay rent and subsequently reduce the Net Cash Flow available for distributions.

Liquidity and Capital Resources

During the nine months ended September 30, 2022, the Partnership's cash balances decreased $3,051,046 as a result of cash used to purchase real estate, distributions paid to the Partners, and cash used to repurchase units in excess of cash generated from operating activities, which was partially offset by cash received from the sale of real estate. During the nine months ended September 30, 2021, the Partnership's cash balances decreased $645,887 primarily as a result of distributions paid to the Partners, cash used to repurchase units in excess of cash generated from operating activities, and cash used for property and lease acquisition costs. These were partially offset by cash generated from the sale of a property.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

Net cash provided by operating activities increased from $437,100 in 2021 to $621,601 in 2022 as a result of an increase in total rental income and interest income, a decrease in Partnership administration and property management expenses, and by net timing differences in the collection of payments from tenants 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, 2022 and 2021, the Partnership generated cash flow from the sale of real estate of $2,450,634 and $2,477,214, respectively. During the same period, the Partnership expended $5,336,465 and $2,545,860 to invest in real properties.

In December 2021, the Partnership entered into an agreement to sell its 50% interest in the Jared Jewelry store in Hanover, Maryland to an unrelated third party. On February 14, 2022, the sale closed with the Partnership receiving net proceeds of approximately $2,451,000, which resulted in a net gain of approximately $1,268,000. At the time of sale, the cost and related accumulated depreciation was $1,989,135 and $806,579, respectively.

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, 2022 and 2021, the Partnership declared distributions of $517,174 and $440,498, respectively, which were distributed 99% to the Limited Partners and 1% to the General Partners. The Limited Partners were allocated distributions of $512,002 and $436,093 and the General Partners were allocated distributions of $5,172 and $4,405 for the periods, respectively.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

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 to purchase Units if, in the sole discretion of the Managing General Partner, such purchase would impair the capital or operation of 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.

Off-Balance Sheet Arrangements

As of September 30, 2022 and December 31, 2021, the Partnership had no material off-balance sheet arrangements that had or are reasonably likely to have current or future effects on its financial condition, results of operations, liquidity or capital resources.

ITEM 3. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for a smaller reporting company.

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 Partner concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to management, including the President and Chief Financial Officer of the Managing General Partner, in a manner that allows timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting.

During the most recent period covered by this report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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 1A. RISK FACTORS.

Not required for a smaller reporting company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES & USE OF PROCEEDS.

(a) None.

(b) Not applicable.

(c) Pursuant to Section 7.7 of the Partnership Agreement, as amended, 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 95% 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 more than 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 period covered by this report, the Partnership did not purchase any Units.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

31.1

Certification of President of General Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer of General Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of President and Chief Financial Officer of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Dated: November 11, 2022	AEI Income & Growth Fund XXI
	Limited Partnership
	By:	AEI Fund Management XXI, Inc.
	Its:	Managing General Partner



	By:	/s/ Marni Nygard
		Marni J. Nygard
		President
		(Principal Executive Officer)



	By:	/s/ Keith Petersen
		Keith E. Petersen
		Chief Financial Officer
		(Principal Accounting Officer)

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Readability	8th grade Avg

Aei Income & Growth Fund XXI LTD Partnership (XXAAU) 10-Q2022 Q3 Quarterly report

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