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, 1999
Commission file number: 24003
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Minnesota 41-1848181
(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 INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of September 30, 1999 and December 31, 1998
Statements for the Periods ended September 30, 1999 and 1998:
Operations
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
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
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
ASSETS
1999 1998
CURRENT ASSETS:
Cash and Cash Equivalents $ 376,518 $10,206,442
Receivables 0 46,634
----------- -----------
Total Current Assets 376,518 10,253,076
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 4,980,913 1,886,747
Buildings and Equipment 8,381,097 373,124
Construction in Progress 0 340,620
Property Acquisition Costs 0 460,047
Accumulated Depreciation (113,251) (16,693)
----------- -----------
Net Investments in Real Estate 13,248,759 3,043,845
----------- -----------
Total Assets $13,625,277 $13,296,921
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 18,683 $ 144,805
Distributions Payable 345,124 255,963
Unearned Rent 30,047 0
----------- -----------
Total Current Liabilities 393,854 400,768
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (35,925) (21,135)
Limited Partners, $1,000 Unit Value;
24,000 Units authorized; 16,808 and
13,948 Units issued and outstanding
in 1999 and 1998, respectively 13,267,348 12,917,288
----------- -----------
Total Partners' Capital 13,231,423 12,896,153
----------- -----------
Total Liabilities and Partners' Capital $13,625,277 $13,296,921
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
Three Months Ended Nine Months Ended
9/30/99 9/30/98 9/30/99 9/30/98
INCOME:
Rent $ 231,138 $ 39,918 $ 410,376 $ 74,463
Investment Income 44,905 118,024 268,716 315,280
--------- --------- --------- ---------
Total Income 276,043 157,942 679,092 389,743
--------- --------- --------- ---------
EXPENSES:
Partnership Administration -
Affiliates 40,511 50,591 125,014 158,561
Partnership Administration
and Property Management -
Unrelated Parties 5,790 1,020 17,948 12,056
Depreciation 64,862 4,006 96,558 12,018
--------- --------- --------- ---------
Total Expenses 111,163 55,617 239,520 182,635
--------- --------- ---------- ---------
NET INCOME $ 164,880 $ 102,325 $ 439,572 $ 207,108
========= ========= ========== =========
NET INCOME ALLOCATED:
General Partners $ 4,946 $ 3,069 $ 13,187 $ 6,213
Limited Partners 159,934 99,256 426,385 200,895
--------- --------- ---------- ---------
$ 164,880 $ 102,325 $ 439,572 $ 207,108
========= ========= ========== =========
NET INCOME (LOSS) PER
LIMITED PARTNERSHIP UNIT
(16,808, 12,894, 16,769 and
10,665 weighted average Units
outstanding for the periods,
respectively) $ 9.52 $ 7.70 $ 25.43 $ 18.84
========= ========= ========== =========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 439,572 $ 207,108
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 96,558 12,018
(Increase) Decrease in Receivables 46,634 (24,977)
Decrease in Payable
to AEI Fund Management, Inc. (126,122) (8,460)
Increase in Unearned Rent 30,047 5,637
----------- -----------
Total Adjustments 47,117 (15,782)
----------- -----------
Net Cash Provided By
Operating Activities 486,689 191,326
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (10,301,472) (770,979)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions from Limited Partners 972,059 6,292,182
Organization and Syndication Costs (143,785) (924,018)
Increase in Distributions Payable 89,161 127,689
Distributions to Partners (842,647) (574,691)
Redemption Payments (89,929) 0
----------- -----------
Net Cash Provided By (Used For)
Financing Activities (15,141) 4,921,162
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (9,829,924) 4,341,509
CASH AND CASH EQUIVALENTS, beginning of period 10,206,442 5,808,792
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 376,518 $10,150,301
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXII 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, 1997 $ (4,970) $ 6,313,317 $6,308,347 7,656.00
Capital Contributions 0 6,292,182 6,292,182 6,292.18
Organization and
Syndication Costs 0 (924,018) (924,018)
Distributions (17,240) (557,451) (574,691)
Net Income 6,213 200,895 207,108
--------- ----------- ----------- -----------
BALANCE, September 30, 1998 $(15,997) $11,324,925 $11,308,928 13,948.18
========= =========== =========== ===========
BALANCE, December 31, 1998 $(21,135) $12,917,288 $12,896,153 15,945.16
Capital Contributions 0 972,059 972,059 972.06
Organization and
Syndication Costs 0 (143,785) (143,785)
Redemptions (2,698) (87,231) (89,929) (109.04)
Distributions (25,279) (817,368) (842,647)
Net Income 13,187 426,385 439,572
--------- ----------- ----------- -----------
BALANCE, September 30, 1999 $(35,925) $13,267,348 $13,231,423 16,808.18
========= =========== =========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(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 Income & Growth Fund XXII 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 of the Partnership.
Robert P. Johnson, the President and sole shareholder of
AFM, serves as the Individual General Partner of the
Partnership. An affiliate of AFM, AEI Fund Management,
Inc., 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. Under the terms of the
Restated Limited Partnership Agreement, 24,000 Limited
Partnership Units were available for subscription which, if
fully subscribed, would result in contributed Limited
Partners' capital of $24,000,000. 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 expired. The Partnership
received subscriptions for 16,917.222 Limited Partnership
Units ($16,917,222). The General Partners have contributed
capital of $1,000.
During the operation of the Partnership, any Net Cash Flow,
as defined, which the General Partners determine to
distribute will be distributed 97% to the Limited Partners
and 3% to the General Partners. Distributions to Limited
Partners will be made pro rata by Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of the Partnership's 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 9% 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.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
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 99% to the Limited Partners and 1% to the General
Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of the Partnership's 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 9% 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) Investments in Real Estate -
The Partnership leases its properties to various tenants
through triple net leases, which are classified as operating
leases. Under a triple net lease, the lessee is responsible
for all real estate taxes, insurance, maintenance, repairs
and operating expenses of the property. The initial Lease
terms are for 15 years, except the Champps Americana
restaurant and the Arby's restaurant which have Lease terms
of 20 years. The Leases have renewal options which may
extend the Lease term an additional 15 years, except the TGI
Friday's, Arby's and Tumbleweed restaurants which have
renewal options which may extend the Lease term an
additional 10 years and the Hollywood Video store in
Saraland, Alabama which has renewal options which may extend
the Lease term an additional 20 years. The Leases have rent
clauses which entitle the Partnership to receive additional
rent in future years based on stated rent increases.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
The Partnership's properties are all commercial, single-
tenant buildings. The cost of the property and related
accumulated depreciation at September 30, 1999 are as
follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
TGI Friday's, Greensburg, PA $ 295,020 $ 373,124 $ 668,144 $ 28,711
Hollywood Video, Saraland, AL 573,203 804,688 1,377,891 22,800
Champps Americana,
Centerville, OH 468,050 456,793 924,843 14,264
Arby's, Homewood, AL 748,169 644,423 1,392,592 7,322
Children's World, Abingdon, MD 208,416 843,356 1,051,772 7,028
Children's World, Houston, TX 124,577 767,642 892,219 6,397
Children's World, Pearland, TX 204,105 739,310 943,415 6,161
Children's World, DePere, WI 264,185 923,267 1,187,452 7,694
Hollywood Video, Minot, ND 619,597 710,403 1,330,000 5,920
Hollywood Video,
Muscle Shoals, AL 600,315 740,312 1,340,627 3,702
Tumbleweed, Ft. Wayne, IN 489,027 827,668 1,316,695 3,252
Marie Callender's- Henderson, NV 386,249 550,111 936,360 0
---------- ---------- ----------- ---------
$4,980,913 $8,381,097 $13,362,010 $113,251
========== ========== =========== =========
On June 29, 1998, the Partnership purchased a parcel of land
in Centerville, Ohio for $1,850,988. On August 28, 1998,
the Partnership assigned, for diversification purposes, 77%
of its interest in the property to three affiliated
partnerships. The land is leased to Americana Dining
Corporation (ADC) under a Lease Agreement with a primary
term of 20 years and annual rental payments of $29,801.
Effective December 25, 1998, the annual rent was increased
to $44,701. Simultaneously with the purchase of the land,
the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to ADC
for the construction of a Champps Americana restaurant on
the site. Initially, the Partnership charged interest on
the advances at a rate of 7.0%. Effective December 25,
1998, the interest rate was increased to 10.5%. On January
27, 1999, after the development was completed, the Lease
Agreement was amended to require annual rental payments of
$93,256. The Partnership's share of total acquisition
costs, including the cost of the land, was $924,843. The
remaining interests in the property are owned by AEI Real
Estate Fund XVII Limited Partnership, AEI Real Estate Fund
XVIII Limited Partnership and AEI Income & Growth Fund XXI
Limited Partnership, affiliates of the Partnership.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
On November 20, 1998, the Partnership purchased a parcel of
land in Homewood, Alabama for $696,000. The land is leased
to RTM Alabama, Inc. (RTM) under a Lease Agreement with a
primary term of 20 years and annual rental payments of
$46,980. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement
under which the Partnership advanced funds to RTM for the
construction of an Arby's restaurant on the site. The
Partnership charged interest on the advances at a rate of
6.75%. On July 9, 1999, after the development was
completed, the Lease Agreement was amended to require annual
rental payments of $87,135. Total acquisition costs,
including the cost of the land, were $1,392,592.
On November 25, 1998, the Partnership purchased a parcel of
land in Ft. Wayne, Indiana for $470,000. The land is leased
to Tumbleweed, Inc. (TWI) under a Lease Agreement with a
primary term of 15 years and annual rental payments of
$39,950. Effective March 24, 1999, the annual rent was
increased to $48,175. Simultaneously with the purchase of
the land, the Partnership entered into a Development
Financing Agreement under which the Partnership advanced
funds to TWI for the construction of a Tumbleweed restaurant
on the site. Initially, the Partnership charged interest on
the advances at a rate of 8.5%. Effective March 24, 1999,
the interest rate was increased to 10.25%. On August 31,
1999, after the development was completed, the Lease
Agreement was amended to require annual rental payments of
$130,941. Total acquisition costs, including the cost of
the land, were $1,316,695.
On January 26, 1999, the Partnership purchased a Hollywood
Video store in Saraland, Alabama for $1,377,891. The
property is leased to Hollywood Entertainment Corp. under a
Lease Agreement with a primary term of 15 years and annual
rental payments of $129,617.
On July 14, 1999, the Partnership purchased four ChildrenOs
World daycare centers located in Abingdon, Maryland,
Houston, Texas, Pearland, Texas and DePere, Wisconsin. The
properties were purchased for $1,051,772, $892,219, $943,415
and $1,187,452, respectively. The properties are leased to
ARAMARK Educational Resources, Inc. under Lease Agreements
with annual rental payments of $91,677, $79,093, $83,635 and
$106,157, respectively.
On July 16, 1999, the Partnership purchased a Hollywood
Video store in Minot, North Dakota for $1,330,000. The
property is leased to Hollywood Entertainment Corporation
under a Lease Agreement with a primary term of 15 years and
annual rental payments of $129,168.
On August 26, 1999, the Partnership purchased a Hollywood
Video store in Muscle Shoals, Alabama for $1,340,627. The
property is leased to Hollywood Entertainment Corporation
under a Lease Agreement with a primary term of 15 years and
annual rental payments of $129,659.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
On September 28, 1999, the Partnership purchased a 53%
interest in a Marie Callender's restaurant in Henderson,
Nevada for $936,360. The property is leased to Marie
Callender Pie Shops, Inc. under a Lease Agreement with a
primary term of 15 years and annual rental payments of
$85,595. The remaining interest in the property was
purchased by AEI Net Lease Income & Growth Fund XIX Limited
Partnership, an affiliate of the Partnership.
(4) 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
Results of Operations
For the nine months ended September 30, 1999 and 1998, the
Partnership recognized rental income of $410,376 and $74,463,
respectively. During the same periods, the Partnership also
earned $268,716 and $315,280, respectively, in investment income
from subscription proceeds which were invested in short-term
money market accounts. This investment income constituted 40%
and 81% respectively, of total income. The percentage of total
income represented by investment income declines as subscription
proceeds are invested in properties.
During the nine months ended September 30, 1999 and 1998,
the Partnership paid Partnership administration expenses to
affiliated parties of $125,014 and $158,561, respectively. These
administration expenses include initial start-up costs and
expenses associated with processing distributions, reporting
requirements and correspondence to the Limited Partners. The
administrative expenses decrease after completion of the offering
and acquisition phases of the Partnership's operations. During
the same period, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $17,948 and $12,056, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, insurance and other property costs.
The Partnership distributes all of its net income during
the offering and acquisition phases, and if net income after
deductions for depreciation is not sufficient to fund the
distributions, the Partnership may distribute other available
cash that constitutes capital for accounting purposes.
As of September 30, 1999, the Partnership's cash
distribution rate was 6.0% on an annualized basis. Pursuant to
the Partnership Agreement, distributions of Net Cash Flow were
allocated 97% to the Limited Partners and 3% to the General
Partners.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Since the Partnership has only recently purchased its real
estate, inflation has had a minimal effect on income from
operations. The Leases may contain cost of living increases
which will result in an increase in rental income over the term
of the Leases. Inflation also may cause the Partnership's real
estate to appreciate in value. However, inflation and changing
prices may also have an adverse impact on the operating margins
of the properties' tenants which could impair their ability to
pay rent and subsequently reduce the Partnership's Net Cash Flow
available for distributions.
The Year 2000 issue is the result of computer systems that
use two digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and has
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership intends to monitor and communicate with
tenants regarding Year 2000 compliance, although there can be no
assurance that the systems of the various tenants will be Year
2000 compliant.
Liquidity and Capital Resources
The Partnership's primary sources of cash are from
proceeds from the sale of Units, investment income, rental income
and proceeds from the sale of property. Its primary uses of cash
are investment in real properties, payment of expenses involved
in the sale of units, the organization of the Partnership, the
acquisition of properties, the management of properties, the
administration of the Partnership, and the payment of
distributions.
The Partnership Agreement requires that no more than 15%
of the proceeds from the sale of Units be applied to expenses
involved in the sale of Units (including Commissions) and that
such expenses, together with acquisition expenses, not exceed 20%
of the proceeds from the sale of Units. To the extent
organization and offering expenses actually incurred exceed 15%
of proceeds, they are borne by the General Partners.
During the offering of Units, the Partnership's primary
source of cash flow will be from the sale of Limited Partnership
Units. 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. From January 10, 1997 to May 1, 1997, the
minimum number of Limited Partnership Units (1,500) needed to
form the Partnership were sold and on May 1, 1997, a total of
1,629.201 Units ($1,629,201) were transferred into the
Partnership. The Partnership's offering terminated January 9,
1999 when the extended offering period expired. The Partnership
received subscriptions for 16,917.222 Limited Partnership Units
($16,917,222). From subscription proceeds, the Partnership paid
organization and syndication costs (which constitute a reduction
of capital) of $2,454,693.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Before the acquisition of properties, cash flow from
operating activities is not significant. Net income, after
adjustment for depreciation, is lower during the first few years
of operations as administrative expenses remain high and a large
amount of the Partnership's assets remain invested on a short-
term basis in lower-yielding cash equivalents. Net income will
become the largest component of cash flow from operating
activities and the largest component of cash flow after the
completion of the acquisition phase.
The Partnership Agreement requires that all proceeds from
the sale of Units be invested or committed to investment in
properties by the later of two years after the date of the
Prospectus or six months after termination of the offer and sale
of Units. While the Partnership is purchasing properties, cash
flow from investing activities (investment in real property) will
remain negative and will constitute the principal use of the
Partnership's available cash flow.
On June 29, 1998, the Partnership purchased a parcel of
land in Centerville, Ohio for $1,850,988. On August 28, 1998,
the Partnership assigned, for diversification purposes, 77% of
its interest in the property to three affiliated partnerships.
The land is leased to Americana Dining Corporation (ADC) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $29,801. Effective December 25, 1998, the annual
rent was increased to $44,701. Simultaneously with the purchase
of the land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to ADC for
the construction of a Champps Americana restaurant on the site.
Initially, the Partnership charged interest on the advances at a
rate of 7.0%. Effective December 25, 1998, the interest rate was
increased to 10.5%. On January 27, 1999, after the development
was completed, the Lease Agreement was amended to require annual
rental payments of $93,256. The Partnership's share of total
acquisition costs, including the cost of the land, was $924,843.
The remaining interests in the property are owned by AEI Real
Estate Fund XVII Limited Partnership, AEI Real Estate Fund XVIII
Limited Partnership and AEI Income & Growth Fund XXI Limited
Partnership, affiliates of the Partnership.
On November 20, 1998, the Partnership purchased a parcel
of land in Homewood, Alabama for $696,000. The land is leased to
RTM Alabama, Inc. (RTM) under a Lease Agreement with a primary
term of 20 years and annual rental payments of $46,980.
Simultaneously with the purchase of the land, the Partnership
entered into a Development Financing Agreement under which the
Partnership advanced funds to RTM for the construction of an
Arby's restaurant on the site. The Partnership charged interest
on the advances at a rate of 6.75%. On July 9, 1999, after the
development was completed, the Lease Agreement was amended to
require annual rental payments of $87,135. Total acquisition
costs, including the cost of the land, were $1,392,592.
On November 25, 1998, the Partnership purchased a parcel
of land in Ft. Wayne, Indiana for $470,000. The land is leased
to Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary
term of 15 years and annual rental payments of $39,950.
Effective March 24, 1999, the annual rent was increased to
$48,175. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement under
which the Partnership advanced funds to TWI for the construction
of a Tumbleweed restaurant on the site. Initially, the
Partnership charged interest on the advances at a rate of 8.5%.
Effective March 24, 1999, the interest rate was increased to
10.25%. On August 31, 1999, after the development was completed,
the Lease Agreement was amended to require annual rental payments
of $130,941. Total acquisition costs, including the cost of the
land, were $1,316,695.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
On January 26, 1999, the Partnership purchased a Hollywood
Video store in Saraland, Alabama for $1,377,891. The property is
leased to Hollywood Entertainment Corp. under a Lease Agreement
with a primary term of 15 years and annual rental payments of
$129,617.
On July 14, 1999, the Partnership purchased four
ChildrenOs World daycare centers located in Abingdon, Maryland,
Houston, Texas, Pearland, Texas and DePere, Wisconsin. The
properties were purchased for $1,051,772, $892,219, $943,415 and
$1,187,452, respectively. The properties are leased to ARAMARK
Educational Resources, Inc. under Lease Agreements with annual
rental payments of $91,677, $79,093, $83,635 and $106,157,
respectively.
On July 16, 1999, the Partnership purchased a Hollywood
Video store in Minot, North Dakota for $1,330,000. The property
is leased to Hollywood Entertainment Corporation under a Lease
Agreement with a primary term of 15 years and annual rental
payments of $129,168.
On August 26, 1999, the Partnership purchased a Hollywood
Video store in Muscle Shoals, Alabama for $1,340,627. The
property is leased to Hollywood Entertainment Corporation under a
Lease Agreement with a primary term of 15 years and annual rental
payments of $129,659.
On September 28, 1999, the Partnership purchased a 53%
interest in a Marie Callender's restaurant in Henderson, Nevada
for $936,360. The property is leased to Marie Callender Pie
Shops, Inc. under a Lease Agreement with a primary term of 15
years and annual rental payments of $85,595. The remaining
interest in the property was purchased by AEI Net Lease Income &
Growth Fund XIX Limited Partnership, an affiliate of the
Partnership.
After completion of the acquisition phase, 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.
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.
On July 1, 1999, four Limited Partners redeemed a total of
109.04 Partnership Units for $87,231 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. The redemptions increase
the remaining Limited Partners' ownership interest in the
Partnership.
The continuing rent payments from the properties should be
adequate to fund continuing distributions and meet other
Partnership obligations on both a short-term and long-term basis.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing 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:
<BULLET> Market and economic conditions which affect
the value of the properties the Partnership owns and
the cash from rental income such properties generate;
<BULLET> the federal income tax consequences of rental
income, deductions, gain on sales and other items and
the affects of these consequences for investors;
<BULLET> resolution by the General Partners of
conflicts with which they may be confronted;
<BULLET> the success of the General Partners of
locating properties with favorable risk return
characteristics;
<BULLET> the effect of tenant defaults; and
<BULLET> the condition of the industries in which the
tenants of properties owned by the Partnership operate.
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 First Amendment to Sale and Purchase
Agreement and Escrow Instructions dated
July 8, 1999 between AEI Fund Management,
Inc. and Marie Callender Pie Shops, Inc.
relating to the property at Warm Springs
Road, Henderson, Nevada (incorporated by
reference to Exhibit 10.2 of Form 10-QSB
filed with the Commission on July 30,
1999).
10.2 Assignment of Purchase and Sale
Agreement and Escrow Instructions dated
July 23, 1999 between the Partnership,
AEI Net Lease Income & Growth Fund XIX
Limited Partnership and AEI Fund
Management, Inc. and Marie Callender Pie
Shops, Inc. relating to the property at
Warm Springs Road, Henderson, Nevada
(incorporated by reference to Exhibit
10.3 of Form 10-QSB filed with the
Commission on July 30, 1999).
10.3 Purchase and Sale Agreement and
Escrow Instructions dated May 20, 1999
between AEI Fund Management, Inc. and
ARAMARK Educational Resources, Inc.
relating to the properties at 3325
Trellis Lane, Abingdon, Maryland, 2325
County Road 90, Pearland, Texas, 1553
Arcadian Drive, DePere, Wisconsin, and
18035 Forest Heights Drive, Houston,
Texas (incorporated by reference to
Exhibit 10.3 of Form 8-K filed with the
Commission on July 26, 1999).
10.4 Assignment of Purchase and Sale
Agreement and Escrow Instructions dated
June 16, 1999 between the Partnership,
AEI Fund Management, Inc. and ARAMARK
Educational Resources, Inc. relating to
the properties at 3325 Trellis Lane,
Abingdon, Maryland, 2325 County Road 90,
Pearland, Texas, 1553 Arcadian Drive,
DePere, Wisconsin, and 18035 Forest
Heights Drive, Houston, Texas
(incorporated by reference to Exhibit
10.4 of Form 8-K filed with the
Commission on July 26, 1999).
10.5 First Amendment to Net Lease
Agreement dated July 9, 1999 between the
Partnership and RTM Alabama, Inc.
relating to the property at 159 State
Farm Parkway, Homewood, Alabama
(incorporated by reference to Exhibit
10.2 of Form 8-K filed with the
Commission on July 20, 1999).
10.6 Net Lease Agreement dated July 14,
1999 between the Partnership and ARAMARK
Educational Resources, Inc. relating to
the property at 3325 Trellis Lane,
Abingdon, Maryland (incorporated by
reference to Exhibit 10.5 of Form 8-K
filed with the Commission on July 26,
1999).
PART II - OTHER INFORMATION
(Continued)
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K (Continued)
a. Exhibits -
Description
10.7 Net Lease Agreement dated July 14,
1999 between the Partnership and ARAMARK
Educational Resources, Inc. relating to
the property at 2325 County Road 90
Pearland, Texas (incorporated by
reference to Exhibit 10.6 of Form 8-K
filed with the Commission on July 26,
1999).
10.8 Net Lease Agreement dated July 14,
1999 between the Partnership and ARAMARK
Educational Resources, Inc. relating to
the property at 1553 Arcadian Drive,
DePere, Wisconsin (incorporated by
reference to Exhibit 10.7 of Form 8-K
filed with the Commission on July 26,
1999).
10.9 Net Lease Agreement dated July 14,
1999 between the Partnership and ARAMARK
Educational Resources, Inc. relating to
the property at 18035 Forest Heights
Drive, Houston, Texas (incorporated by
reference to Exhibit 10.8 of Form 8-K
filed with the Commission on July 26,
1999).
10.10 Assignment and Assumption of
Lease dated June 29, 1999 between the
Partnership and Magnum Video I, Inc.
relating to the property at 1700 South
Broadway, Minot, North Dakota
(incorporated by reference to Exhibit
10.9 of Form 8-K filed with the
Commission on July 26, 1999).
10.11 Assignment of Lease dated
August 26, 1999 between the Partnership
and NOM Muscle Shoals, Ltd. relating to
the property at 1304 Woodward Avenue,
Muscle Shoals, Alabama.
10.12 First Amendment to Net Lease
Agreement dated August 31, 1999, between
the Partnership and Tumbleweed, Inc.
relating to the property at 6040 Lima
Road, Fort Wayne, Indiana (incorporated
by reference to Exhibit 10.1 of Form 8-K
filed with the Commission on September 1,
1999).
10.13 Lease Agreement dated September
28, 1999 between the Partnership, AEI Net
Lease Income & Growth Fund XIX Limited
Partnership and Marie Callender Pie
Shops, Inc. relating to the property at
530 North Stephanie Street, Henderson,
Nevada.
27 Financial Data Schedule for period
ended September 30, 1999.
PART II - OTHER INFORMATION
(Continued)
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K (Continued)
b. Reports filed on Form 8-K -
During the quarter ended September
30, 1999, the Partnership filed
three Form 8-K's:
On July 20, 1999, the
Partnership filed a Form 8-K
reporting the acquisition of an
Arby's restaurant in Homewood,
Alabama.
On July 26, 1999, the
Partnership filed a Form 8-K,
reporting the acquisition of
Children's World daycare centers in
Abingdon, Maryland, Houston, Texas,
Pearland, Texas and DePere,
Wisconsin. Also, the acquisition
of a Hollywood Video store in
Minot, North Dakota.
On September 1, 1999, the
Partnership filed a Form 8-K,
reporting the acquisition of a
Hollywood Video store in Muscle
Shoals, Alabama, and a Tumbleweed
restaurant in Fort Wayne, Indiana.
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 8, 1999 AEI Income & Growth Fund XXII
Limited Partnership
By: AEI Fund Management XXI, 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)