UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the Fiscal Year Ended: December 31, 2009
Commission file number: 000-24003
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
State of Minnesota 41-1848181
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 East 7th Street, Suite 1300, St. Paul, Minnesota 55101
(Address of principal executive offices)
(651) 227-7333
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes [ ] No [X]
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 [X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
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 and post such
files). Yes [ ] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
As of June 30, 2009, there were 15,676.777 Units of limited
partnership interest outstanding and owned by nonaffiliates of
the registrant, which Units had an aggregate market value (based
solely on the price at which they were sold since there is no
ready market for such Units) of $15,676,777.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant has not incorporated any documents by reference
into this report.
PART I
ITEM 1. BUSINESS.
AEI Income & Growth Fund XXII Limited Partnership (the
"Partnership" or the "Registrant") is a limited partnership which
was organized pursuant to the laws of the State of Minnesota on
July 31, 1996. The registrant is comprised of AEI Fund
Management XXI, Inc. ("AFM") as Managing General Partner, Robert
P. Johnson, the President and sole director of AFM, as the
Individual General Partner, and purchasers of partnership units
as Limited Partners. The Partnership offered for sale up to
$24,000,000 of limited partnership interests (the "Units")
(24,000 Units at $1,000 per Unit) pursuant to a registration
statement effective January 10, 1997. The Partnership commenced
operations on May 1, 1997 when minimum subscriptions of 1,500
Limited Partnership Units ($1,500,000) were accepted. The
Partnership's offering terminated January 9, 1999 when the
extended offering period expired. The Partnership received
subscriptions for 16,917.222 Limited Partnership Units
($16,917,222).
The Partnership was organized to acquire existing and
newly constructed commercial properties located in the United
States, to lease such properties to tenants under net leases, to
hold such properties and to eventually sell such properties.
From subscription proceeds, the Partnership purchased twelve
properties, including partial interests in three properties, at a
total cost of $13,363,547. The balance of the subscription
proceeds was applied to organization and syndication costs,
working capital reserves and distributions, which represented a
return of capital. The properties are commercial, single tenant
buildings leased under net leases.
The Partnership's properties were purchased without any
indebtedness. The Partnership will not finance properties in the
future to obtain proceeds for new property acquisitions. If it
is required to do so, the Partnership may incur short-term
indebtedness, which may be secured by a portion of the
Partnership's properties, to finance day-to-day cash flow
requirements (including cash flow necessary to repurchase Units).
The amount of borrowings that may be secured by the properties is
limited in the aggregate to 10% of the purchase price of all
properties. The Partnership will not incur borrowings prior to
application of the proceeds from sale of the Units, will not
incur borrowings to pay distributions, and will not incur
borrowings while there is cash available for distributions.
The Partnership will hold its properties until the General
Partners determine that the sale or other disposition of the
properties is advantageous in view of the Partnership's
investment objectives. In deciding whether to sell properties,
the General Partners will consider factors such as potential
appreciation, net cash flow and income tax considerations. The
Partnership expects to sell some or all of its properties prior
to its final liquidation and to reinvest the proceeds from such
sales in additional properties. The Partnership reserves the
right, at the discretion of the General Partners, to either
distribute proceeds from the sale of properties to the Partners
or to reinvest such proceeds in additional properties, provided
that sufficient proceeds are distributed to the Limited Partners
to pay federal and state income taxes related to any taxable gain
recognized as a result of the sale. It is anticipated that the
Partnership will commence liquidation through the sale of its
remaining properties twelve to fifteen years after its formation,
although final liquidation may be delayed by a number of
circumstances, including market conditions and seller financing
of properties.
ITEM 1. BUSINESS. (Continued)
Leases
Although there are variations in the specific terms of the
leases, the following is a summary of the general terms of the
Partnership's leases. The properties are leased to various
tenants under net leases, classified as operating leases. Under
a net lease, the tenant is responsible for real estate taxes,
insurance, maintenance, repairs and operating expenses for the
property. For some leases, the Partnership is responsible for
repairs to the structural components of the building, the roof,
and the parking lot. At the time the properties were acquired,
the remaining primary lease terms varied from 13 to 20 years,
except for the Best Buy store, which had a remaining primary term
of 10.3 years. The leases provide the tenants with two to four
five-year renewal options subject to the same terms and
conditions as the primary term. The leases provide for base
annual rental payments, payable in monthly installments, and
contain rent clauses which entitle the Partnership to receive
additional rent in future years based on stated rent increases.
Property Activity During the Last Three Years
As of December 31, 2006, the Partnership owned a
significant interest in eight properties and a minor interest in
six properties with a total original cost of $10,993,750,
including acquisition expenses. During the year ended December
31, 2008, the Partnership sold two property interests and
received net sale proceeds of $2,171,839, which resulted in net
gains of $719,466. During the last three years, the Partnership
purchased additional property with property sales proceeds. One
property was purchased in 2007 for $1,403,874 and one property
was purchased in 2008 for $2,022,246. As of December 31, 2009,
the Partnership owned a significant interest in nine properties
and a minor interest in five properties with a total original
cost of $12,762,299, including acquisition expenses.
Major Tenants
During 2009, six tenants each contributed more than ten
percent of the Partnership's total rental revenue. The major
tenants in aggregate contributed 84% of total rental revenue in
2009. It is anticipated that, based on minimum rental payments
required under the leases, each major tenant will continue to
contribute more than ten percent of rental revenue in 2010 and
future years. Any failure of these major tenants could
materially affect the Partnership's net income and cash
distributions.
Competition
The Partnership is a minor factor in the commercial real
estate business. There are numerous entities engaged in the
commercial real estate business which have greater financial
resources than the Partnership. At the time the Partnership
elects to dispose of its properties, the Partnership will be in
competition with other persons and entities to find buyers for
its properties.
Employees
The Partnership has no direct employees. Management
services are performed for the Partnership by AEI Fund
Management, Inc., an affiliate of AFM.
ITEM 1A. RISK FACTORS.
Not required for a smaller reporting company.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not required for a smaller reporting company.
ITEM 2. PROPERTIES.
Investment Objectives
The Partnership's investment objectives are to acquire
existing or newly-developed commercial properties throughout the
United States that offer the potential for (i) regular cash
distributions of lease income; (ii) growth in lease income
through rent escalation provisions; (iii) preservation of capital
through all-cash transactions; (iv) capital growth through
appreciation in the value of properties; and (v) stable property
performance through long-term lease contracts. The Partnership
does not have a policy, and there is no limitation, as to the
amount or percentage of assets that may be invested in any one
property. However, to the extent possible, the General Partners
attempt to diversify the type and location of the Partnership's
properties.
Description of Properties
The Partnership's properties are commercial, single tenant
buildings. The properties were acquired on a debt-free basis and
are leased to various tenants under net leases, classified as
operating leases. The Partnership holds an undivided fee simple
interest in the properties.
The Partnership's properties are subject to the general
competitive conditions incident to the ownership of single tenant
investment real estate. Since each property is leased under a
long-term lease, there is little competition until the
Partnership decides to sell the property. At this time, the
Partnership will be competing with other real estate owners, on
both a national and local level, in attempting to find buyers for
the properties. In the event of a tenant default, the
Partnership would be competing with other real estate owners, who
have property vacancies, to attract a new tenant to lease the
property. The Partnership's tenants operate in industries that
are very competitive and can be affected by factors such as
changes in regional or local economies, seasonality and changes
in consumer preference.
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 2009.
Annual Annual
Purchase Property Lease Rent Per
Property Date Cost Tenant Payment Sq. Ft.
TGI Friday's Restaurant
Greensburg, PA Ohio Valley
(.8729%) 12/10/97 $ 14,580 Bistros, Inc. $ 1,546 $39.28
Hollywood Video Store Hollywood
Saraland, AL Entertainment
(3.08%) 1/26/99 $ 42,439 Corporation $ 4,469 $19.38
ITEM 2. PROPERTIES. (Continued)
Annual Annual
Purchase Property Lease Rent Per
Property Date Cost Tenant Payment Sq. Ft.
Arby's Restaurant
Homewood, AL RTM
(.5877%) 7/9/99 $ 8,184 Alabama, LLC $ 784 $40.96
KinderCare Daycare Center KinderCare Learning
Pearland, TX 7/14/99 $ 943,416 Centers, Inc. $101,199 $13.32
Hollywood
Hollywood Video Store Entertainment
Minot, ND 7/16/99 $1,330,000 Corporation $144,668 $19.27
KinderCare Daycare Center
Golden, CO KinderCare Learning
(1.9962%) 9/28/00 $ 33,528 Centers, Inc. $ 3,642 $21.29
KinderCare Daycare Center
Plainfield, IL KinderCare Learning
(.3154%) 5/14/01 $ 4,645 Centers, Inc. $ 489 $17.32
Johnny Carino's Restaurant
Longmont, CO Kona Restaurant
(50%) 12/30/03 $1,293,405 Group, Inc. $ 72,742 $22.46
Jared Jewelry Store
Sugar Land, TX Sterling Jewelers
(40%) 7/15/04 $1,533,966 Inc. $127,919 $52.29
Applebee's Restaurant
Johnstown, PA B.T.
(38%) 9/21/06 $1,031,187 Woodlipp,Inc. $ 74,370 $37.68
Advance Auto Parts Store
Indianapolis, IN Advance Stores
(65%) 12/21/06 $1,244,173 Company, Inc. $ 87,168 $19.16
Applebee's Restaurant
Crawfordsville, IN Apple Indiana
(60%) 12/29/06 $1,856,656 II LLC $133,933 $42.44
Tractor Supply Company Store
Grand Forks, ND Tractor Supply
(50%) 1/19/07 $1,403,874 Company $102,351 $ 9.28
Best Buy Store
Lake Geneva, WI Best Buy
(33%) 10/6/08 $2,022,246 Stores, L.P. $144,325 $14.40
ITEM 2. PROPERTIES. (Continued)
The properties listed above with a partial ownership
percentage are owned with affiliates of the Partnership and/or
unrelated third parties. The remaining interests in the Johnny
Carino's restaurant and the Jared Jewelry store are owned by AEI
Accredited Investor Fund 2002 Limited Partnership. The remaining
interest in the Applebee's restaurant in Johnstown, Pennsylvania
is owned by AEI Income & Growth Fund XXI Limited Partnership.
The remaining interest in the Advance Auto Parts store is owned
by AEI Income & Growth Fund 25 LLC. The remaining interest in
the Applebee's restaurant in Crawfordsville, Indiana is owned by
AEI Income & Growth Fund 26 LLC. The remaining interest in the
Tractor Supply Company store is owned by AEI Income & Growth Fund
24 LLC. The remaining interests in the Best Buy store are owned
by AEI Income & Growth Fund 24 LLC and AEI Income & Growth Fund
27 LLC. The remaining interests in the Hollywood Video store in
Saraland, Alabama, the TGI Friday's restaurant, the Arby's
restaurant and the KinderCare daycare centers in Golden, Colorado
and Plainfield, Illinois are owned by unrelated third parties.
The Partnership accounts for properties owned as tenants-
in-common with affiliated entities and/or unrelated third parties
using the proportionate consolidation method. Each tenant-in-
common owns a separate, undivided interest in the properties.
Any tenant-in-common that holds more than a 50% interest does not
control decisions over the other tenant-in-common interests. The
financial statements reflect only this Partnership's percentage
share of the properties' land, building and equipment,
liabilities, revenues and expenses.
At the time the properties were acquired, the remaining
primary lease terms varied from 13 to 20 years, except for the
Best Buy store, which had a remaining primary term of 10.3 years.
The leases provide the tenants with two to four five-year renewal
options subject to the same terms and conditions as the primary
term.
Pursuant to the lease agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they occupy. The General Partners believe the properties are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.
For tax purposes, the Partnership's properties are
depreciated under the Modified Accelerated Cost Recovery System
(MACRS). The largest depreciable component of a property is the
building which is depreciated, using the straight-line method,
over 39 years. The remaining depreciable components of a
property are personal property and land improvements which are
depreciated, using an accelerated method, over 5 and 15 years,
respectively. Since the Partnership has tax-exempt Partners, the
Partnership is subject to the rules of Section 168(h)(6) of the
Internal Revenue Code which requires a percentage of the
properties' depreciable components to be depreciated over longer
lives using the straight-line method. In general, the federal
tax basis of the properties for tax depreciation purposes is the
same as the basis for book depreciation purposes.
At December 31, 2009, all properties listed above were
100% occupied.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCK-
HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a) As of December 31, 2009, there were 736 holders of
record of the registrant's Limited Partnership Units. There is
no other class of security outstanding or authorized. The
registrant's Units are not a traded security in any market.
During the period covered by this report, the Partnership did not
sell any equity securities that are not registered under the
Securities Act of 1933.
Cash distributions of $24,208 and $23,712 were made to the
General Partners and $826,504 and $999,003 were made to the
Limited Partners for 2009 and 2008, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined, except as discussed below. These
distributions should not be compared with dividends paid on
capital stock by corporations.
As part of the Limited Partnership distributions discussed
above, the Partnership distributed net sale proceeds of $65,000
and $345,000 in 2009 and 2008, respectively. The distributions
reduced the Limited Partners' Adjusted Capital Contributions.
(b) Not applicable.
(c) Pursuant to Section 7.7 of the Partnership Agreement,
each Limited Partner has the right to present Units to the
Partnership for purchase by submitting notice to the Managing
General Partner during January or July of each year. The
purchase price of the Units is equal to 90% of the net asset
value per Unit, as of the first business day of January or July
of each year, as determined by the Managing General Partner in
accordance with the provisions of the Partnership Agreement.
Units tendered to the Partnership during January and July are
redeemed on April 1st and October 1st, respectively, of each year
subject to the following limitations. The Partnership will not
be obligated to purchase in any year any number of Units that,
when aggregated with all other transfers of Units that have
occurred since the beginning of the same calendar year (excluding
Permitted Transfers as defined in the Partnership Agreement),
would exceed 5% of the total number of Units outstanding on
January 1 of such year. In no event shall the Partnership be
obligated to purchase Units if, in the sole discretion of the
Managing General Partner, such purchase would impair the capital
or operation of the Partnership. During the last three months of
2009, the Partnership did not purchase any Units.
ITEM 6. SELECTED FINANCIAL DATA.
Not required for a smaller reporting company.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
This section contains "forward-looking statements" which
represent management's expectations or beliefs concerning future
events, including statements regarding anticipated application of
cash, expected returns from rental income, growth in revenue, the
sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward-
looking statements, should be evaluated in the context of a
number of factors that may affect the Partnership's financial
condition and results of operations, including the following:
Market and economic conditions which affect the value
of the properties the Partnership owns and the cash
from rental income such properties generate;
the federal income tax consequences of rental income,
deductions, gain on sales and other items and the
effects of these consequences for the Partners;
resolution by the General Partners of conflicts with
which they may be confronted;
the success of the General Partners of locating
properties with favorable risk return characteristics;
the effect of tenant defaults; and
the condition of the industries in which the tenants of
properties owned by the Partnership operate.
Application of Critical Accounting Policies
The preparation of the Partnership's financial statements
requires management to make estimates and assumptions that may
affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities. Management evaluates these estimates on an ongoing
basis, including those related to the carrying value of real
estate and the allocation by AEI Fund Management, Inc. of
expenses to the Partnership as opposed to other funds they
manage.
Prior to January 1, 2009, the Partnership purchased
properties and recorded them in the financial statements at cost
(including capitalized acquisition expenses). For acquisitions
completed on or after January 1, 2009, acquisition-related
transaction costs will be expensed as incurred as a result of the
Partnership adopting new guidance on business combinations that
expands the scope of acquisition accounting. 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 realizable value, an impairment loss is recorded
to reduce the carrying value of the property to its realizable
value. Changes in these assumptions or analysis may cause
material changes in the carrying value of the properties.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
AEI Fund Management, Inc. allocates expenses to each of
the funds they manage primarily on the basis of the number of
hours devoted by their employees to each fund's affairs. They
also allocate expenses at the end of each month that are not
directly related to a fund's operations based upon the number of
investors in the fund and the fund's capitalization relative to
other funds they manage. The Partnership reimburses these
expenses subject to detailed limitations contained in the
Partnership Agreement.
Management of the Partnership has discussed the
development and selection of the above accounting estimates and
the management discussion and analysis disclosures regarding them
with the managing partner of the Partnership.
Results of Operations
For the years ended December 31, 2009 and 2008, the
Partnership recognized rental income from continuing operations
of $992,686 and $891,852, respectively. In 2009, rental income
increased due to additional rent received from one property
acquisition in 2008 and a rent increase on one property. These
increases were partially offset by a reduction in rent for the
Johnny Carino's restaurant, as discussed below, and a reduction
in rent for the Hollywood Video stores due to a one-time rent
payment received in 2008.
For the years ended December 31, 2009 and 2008, the
Partnership incurred Partnership administration expenses from
affiliated parties of $166,135 and $177,075, 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 $23,070 and $34,596, 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.
In November 2007, Kona Restaurant Group, Inc. (KRG), the
tenant of the Johnny Carino's restaurant in Longmont, Colorado,
approached the Partnership with a request to adjust the rent on
the property to a market rental rate based on the restaurant's
performance and the current conditions in the market. In March
2008, after reviewing the financial statements for the restaurant
and KRG, the Partnership agreed to amend the Lease to reduce the
current annual rent for the property by 36% to $71,667. This
amount is scheduled to increase annually by 1.5%. In addition,
the amendment provides for additional rental payments if the
restaurant's sales exceed certain stated amounts. In August
2008, the Partnership received certification from Fired Up, Inc.,
the parent company of KRG and guarantor of the Lease, that it had
achieved certain expense and debt reduction measures required by
the amendment. As a result, the amendment will remain effective
for the remainder of the lease term.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On February 2, 2010, Hollywood Entertainment Corporation
(HEC), the tenant of the Hollywood Video stores in Minot, North
Dakota (100% ownership interest) and Saraland, Alabama (3.08%
ownership interest) filed for Chapter 11 bankruptcy
reorganization for the second time. In March 2010, HEC submitted
a written proposal requesting a 30% reduction in monthly rent for
the Minot store. The Partnership is gathering market information
about the site to prepare a counterproposal. With the exception
of rent for February 2010, rents are current for the Minot
property and the Partnership expects to continue to receive all
scheduled rents in future months unless the Lease is rejected by
HEC. If the Lease is assumed, HEC must comply with all Lease
terms. If the Lease is rejected, HEC would be required to return
possession of the property to the Partnership.
HEC closed the Saraland store and filed a motion with the
bankruptcy court to reject the Lease for this property. The
court approved the motion and HEC returned possession of the
property to the Partnership. The Partnership has listed the
property for sale or lease with a real estate broker in the
Saraland area. While the property is vacant, the Partnership is
responsible for real estate taxes and other costs associated with
maintaining the property. The Saraland property represents less
than 1% of the Partnership's property portfolio. The loss of
rent from this property will have only a minor effect on the
Partnership's operations and financial situation. The
Partnership has evaluated the leases and property values for both
properties and decided that there is no impairment loss at this
time.
For the years ended December 31, 2009 and 2008, the
Partnership recognized interest income of $5,182 and $37,869,
respectively. In 2009 interest income decreased due to the
Partnership having less money invested in a money market account
due to property acquisitions and lower money market rates in
2009.
Upon complete disposal of a property or classification of
a property as Real Estate Held for Sale, the Partnership includes
the operating results and sale of the property in discontinued
operations. In addition, the Partnership reclassifies the prior
periods' operating results of the property to discontinued
operations. For the year ended December 31, 2008, the
Partnership recognized income from discontinued operations of
$748,606, representing rental income less property management
expenses and depreciation of $29,140 and gain on disposal of real
estate of $719,466.
On February 27, 2008, the Partnership sold its 50%
interest in the Champps Americana restaurant in West Chester,
Ohio to an unrelated third party. The Partnership received net
sale proceeds of $2,057,022, which resulted in a net gain of
$668,133. At the time of sale, the cost and related accumulated
depreciation was $1,569,884 and $180,995, respectively.
On June 2, 2008, the Partnership sold its 7.3845% interest
in the KinderCare daycare center in DePere, Wisconsin to an
unrelated third party. The Partnership received net sale
proceeds of $114,817, which resulted in a net gain of $51,333.
The cost and related accumulated depreciation of the interest
sold was $87,687 and $24,203, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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 year ended December 31, 2009, the Partnership's
cash balances decreased $48,569 as a result of distributions paid
to the Partners in excess of cash generated from operating
activities. During the year ended December 31, 2008, the
Partnership's cash balances decreased $181,042 as a result of
cash used to purchase property and distributions paid to the
Partners in excess of cash generated from operating activities,
which were partially offset by cash generated from the sale of
property.
Net cash provided by operating activities increased from
$780,967 in 2008 to $841,290 in 2009 as a result of a increase in
total rental and interest income in 2009 and a decrease in
Partnership administration and property management expenses in
2009.
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 year ended December 31,
2008, the Partnership generated cash flow from the sale of real
estate of $2,171,839. During the same period, the Partnership
expended $2,022,246 to invest in real properties (inclusive of
acquisition expenses) as the Partnership reinvested cash
generated from property sales.
On October 6, 2008, the Partnership purchased a 33%
interest in a Best Buy store in Lake Geneva, Wisconsin for
$2,022,246. The property is leased to Best Buy Stores, L.P.
under a Lease Agreement with a remaining primary term of 10.3
years and initial annual rent of $144,325 for the interest
purchased. The remaining interests in the property were
purchased by AEI Income & Growth Fund 24 LLC and AEI Income &
Growth Fund 27 LLC, affiliates of the Partnership.
The Partnership's primary use of cash flow, other than
investment in real estate, is distribution and redemption
payments to Partners. The Partnership declares its regular
quarterly distributions before the end of each quarter and pays
the distribution in the first week after the end of each quarter.
The Partnership attempts to maintain a stable distribution rate
from quarter to quarter. Redemption payments are paid to
redeeming Partners on a semi-annual basis.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
For the years ended December 31, 2009 and 2008, the
Partnership declared distributions of $850,712 and $1,022,715,
respectively. Pursuant to the Partnership Agreement,
distributions of Net Cash Flow were allocated 97% to the Limited
Partners and 3% to the General Partners. Distributions of Net
Proceeds of Sale were allocated 99% to the Limited Partners and
1% to the General Partners. The Limited Partners received
distributions of $826,504 and $999,003 and the General Partners
received distributions of $24,208 and $23,712 for the periods,
respectively. In 2009, distributions were lower due to a
decrease in the distribution rate per Unit, effective January 1,
2009.
During 2009 and 2008, the Partnership distributed net sale
proceeds of $65,657 and $348,485 to the Limited and General
Partners as part of their quarterly distributions, which
represented a return of capital of $4.15 and $21.94 per Limited
Partnership Unit, respectively. The Partnership anticipates the
remaining net sale proceeds will either be reinvested in
additional property or distributed to the Partners in the future.
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 will not be obligated
to purchase in any year any number of Units that, when aggregated
with all other transfers of Units that have occurred since the
beginning of the same calendar year (excluding Permitted
Transfers as defined in the Partnership Agreement), would exceed
5% of the total number of Units outstanding on January 1 of such
year. In no event shall the Partnership be obligated to purchase
Units if, in the sole discretion of the Managing General Partner,
such purchase would impair the capital or operation of the
Partnership.
During 2009, the Partnership did not redeem any Units from
the Limited Partners. During 2008, seven Limited Partners
redeemed a total of 105.78 Partnership Units for $84,447 in
accordance with the Partnership Agreement. The Partnership
acquired these Units using Net Cash Flow from operations. In
prior years, a total of 63 Limited Partners redeemed 1,112.66
Partnership Units for $889,815. The redemptions increase the
remaining Limited Partner's ownership interest in the
Partnership. As a result of these redemption payments and
pursuant to the Partnership Agreement, the General Partners
received distributions of $2,612 in 2008.
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.
The Economy and Market Conditions
The impact of conditions in the current economy, including
the turmoil in the credit markets, has adversely affected many
real estate companies. However, the absence of mortgage
financing on the Partnership's properties eliminates the risks of
foreclosure and debt-refinancing that can negatively impact the
value and distributions of leveraged real estate companies.
Nevertheless, a prolonged economic downturn may adversely affect
the operations of the Partnership's tenants and their cash flows.
If a tenant were to default on its lease obligations, the
Partnership's income would decrease, its distributions would
likely be reduced and the value of its properties might decline.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Historically, the Partnership has sold properties at a
gain and distributed the gain proceeds as part of its regular
quarterly distributions, and to make special distributions on
occasion. The remaining sales proceeds were reinvested in
additional properties. Beginning in the fourth quarter of 2008,
general economic conditions caused the volume of property sales
to slow dramatically for all real estate sellers. In 2010, the
Partnership will likely complete fewer property sales than it has
in the past. Until property sales occur, quarterly distributions
going forward will reflect the distribution of net core rental
income and capital reserves, if any. Distribution rates in 2010
are expected to be variable and less than pre-2009 distribution
rates until such time as economic conditions allow the
Partnership to, once again, begin selling properties at
acceptable prices and generating gains for distribution.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for a smaller reporting company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See accompanying index to financial statements.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Balance Sheet as of December 31, 2009 and 2008
Statements for the Years Ended December 31, 2009 and 2008:
Income
Cash Flows
Changes in Partners' Capital (Deficit)
Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners:
AEI Income & Growth Fund XXII Limited Partnership
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI Income
& Growth Fund XXII Limited Partnership (a Minnesota limited
partnership) as of December 31, 2009 and 2008, and the related
statements of income, cash flows and changes in partners' capital
for the years then ended. The Partnership's management is
responsible for these financial statements. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not
required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the company's internal control over
financial reporting. Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of AEI Income & Growth Fund XXII Limited Partnership as of
December 31, 2009 and 2008, and the results of its operations and
its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of
America.
/s/Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Certified Public Accountants
Minneapolis, Minnesota
March 29, 2010
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
2009 2008
CURRENT ASSETS:
Cash $ 590,840 $ 639,409
Receivables 0 5,261
----------- -----------
Total Current Assets 590,840 644,670
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 3,807,598 3,807,598
Buildings and Equipment 8,954,701 8,954,701
Accumulated Depreciation (1,603,038) (1,245,765)
----------- -----------
Net Investments in Real Estate 11,159,261 11,516,534
----------- -----------
Total Assets $11,750,101 $12,161,204
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 47,396 $ 37,336
Distributions Payable 212,575 251,722
Unearned Rent 34,665 17,359
----------- -----------
Total Current Liabilities 294,636 306,417
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (3,616) 7,050
Limited Partners, $1,000 per Unit;
24,000 Units authorized; 16,917 Units issued;
15,699 Units outstanding 11,459,081 11,847,737
----------- -----------
Total Partners' Capital 11,455,465 11,854,787
----------- -----------
Total Liabilities and Partners' Capital $11,750,101 $12,161,204
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31
2009 2008
RENTAL INCOME $ 992,686 $ 891,852
EXPENSES:
Partnership Administration - Affiliates 166,135 177,075
Partnership Administration and Property
Management - Unrelated Parties 23,070 34,596
Depreciation 357,273 305,636
----------- -----------
Total Expenses 546,478 517,307
----------- -----------
OPERATING INCOME 446,208 374,545
OTHER INCOME:
Interest Income 5,182 37,869
----------- -----------
INCOME FROM CONTINUING OPERATIONS 451,390 412,414
Income from Discontinued Operations 0 748,606
----------- -----------
NET INCOME $ 451,390 $ 1,161,020
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 13,542 $ 34,710
Limited Partners 437,848 1,126,310
----------- -----------
$ 451,390 $ 1,161,020
=========== ===========
INCOME PER LIMITED PARTNERSHIP UNIT:
Continuing Operations $ 27.89 $ 25.44
Discontinued Operations 0 46.19
----------- -----------
Total $ 27.89 $ 71.63
=========== ===========
Weighted Average Units Outstanding -
Basic and Diluted 15,699 15,725
=========== ===========
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 YEARS ENDED DECEMBER 31
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 451,390 $ 1,161,020
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 357,273 306,773
Gain on Sale of Real Estate 0 (719,466)
(Increase) Decrease in Receivables 5,261 (5,261)
Increase in Payable to
AEI Fund Management, Inc. 10,060 29,272
Increase in Unearned Rent 17,306 8,629
----------- -----------
Total Adjustments 389,900 (380,053)
----------- -----------
Net Cash Provided By
Operating Activities 841,290 780,967
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate 0 (2,022,246)
Proceeds from Sale of Real Estate 0 2,171,839
----------- -----------
Net Cash Provided By
Investing Activities 0 149,593
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions Paid to Partners (889,859) (1,024,543)
Redemption Payments 0 (87,059)
----------- -----------
Net Cash Used For
Financing Activities (889,859) (1,111,602)
----------- -----------
NET DECREASE IN CASH (48,569) (181,042)
CASH, beginning of year 639,409 820,451
----------- -----------
CASH, end of year $ 590,840 $ 639,409
=========== ===========
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 (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 2007 $ (1,336) $11,804,877 $11,803,541 15,804.56
Distributions Declared (23,712) (999,003) (1,022,715)
Redemption Payments (2,612) (84,447) (87,059) (105.78)
Net Income 34,710 1,126,310 1,161,020
--------- ----------- ----------- ----------
BALANCE, December 31, 2008 7,050 11,847,737 11,854,787 15,698.78
Distributions Declared (24,208) (826,504) (850,712)
Net Income 13,542 437,848 451,390
--------- ----------- ----------- ----------
BALANCE, December 31, 2009 $ (3,616) $11,459,081 $11,455,465 15,698.78
========= =========== =========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(1) 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. Robert P. Johnson,
the President and sole director of AFM, serves as the
Individual General Partner. AFM is a wholly owned
subsidiary of AEI Capital Corporation of which Mr. Johnson
is the majority shareholder. AEI Fund Management, Inc.
("AEI"), an affiliate of AFM, performs the administrative
and operating functions for the Partnership.
The terms of the Partnership offering called for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. The Partnership
commenced operations on May 1, 1997 when minimum
subscriptions of 1,500 Limited Partnership Units
($1,500,000) were accepted. The offering terminated January
9, 1999 when the extended offering period expired. The
Partnership received subscriptions for 16,917.222 Limited
Partnership Units. Under the terms of the Limited
Partnership Agreement, the Limited Partners and General
Partners contributed funds of $16,917,222 and $1,000,
respectively.
During operations, 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 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.
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of property, will be
allocated first in the same ratio in which, and to the
extent, Net Cash Flow is distributed to the Partners for
such year. Any additional profits will be allocated in the
same ratio as the last dollar of Net Cash Flow is
distributed. Net losses from operations will be allocated
99% to the Limited Partners and 1% to the General Partners.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(1) Organization - (Continued)
For tax purposes, profits arising from the sale, financing,
or other disposition of property will be allocated in
accordance with the Partnership Agreement as follows: (i)
first, to those partners with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Partners
and 1% to the General Partners until the aggregate balance
in the Limited Partners' capital accounts equals the sum of
the Limited Partners' Adjusted Capital Contributions plus an
amount equal to 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.
(2) Summary of Significant Accounting Policies -
Financial Statement Presentation
The accounts of the Partnership are maintained on the
accrual basis of accounting for both federal income tax
purposes and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
Significant items, subject to such estimates and
assumptions, include the carrying value of investments in
real estate and real estate held for sale.
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(2) Summary of Significant Accounting Policies - (Continued)
Cash Concentrations of Credit Risk
The Partnership's cash is deposited in one financial
institution and at times during the year it may exceed
FDIC insurance limits.
Receivables
Credit terms are extended to tenants in the normal course
of business. The Partnership performs ongoing credit
evaluations of its customers' financial condition and,
generally, requires no collateral.
Receivables are recorded at their estimated net
realizable value. The Partnership follows a policy of
providing an allowance for doubtful accounts; however,
based on historical experience, and its evaluation of the
current status of receivables, the Partnership is of the
belief that such accounts will be collectible in all
material respects and thus an allowance is not necessary.
Accounts are considered past due if payment is not made
on a timely basis in accordance with the Partnership's
credit terms. Receivables considered uncollectible are
written off.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. In general, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return and the amount of distributable
Partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Revenue Recognition
The Partnership's real estate is leased under net leases,
classified as operating leases. The leases provide for
base annual rental payments payable in monthly
installments. The Partnership recognizes rental revenue
according to the terms of the individual leases. For
leases that contain stated rental increases, the
increases are recognized in the year in which they are
effective. Contingent rental payments are recognized
when the contingencies on which the payments are based
are satisfied and the rental payments become due under
the terms of the leases.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(2) Summary of Significant Accounting Policies - (Continued)
Investments in Real Estate
The Partnership purchases properties and records them at
cost. The Partnership compares the carrying amount of
its properties to the estimated probability-weighted
future undiscounted cash flows expected to result from
the property and its eventual disposition. If the sum of
the expected future cash flows is less than the carrying
amount of the property, the Partnership recognizes an
impairment loss by the amount by which the carrying
amount of the property exceeds the fair value of the
property.
Prior to January 1, 2009, the Partnership capitalized as
Investments in Real Estate certain costs incurred in the
review and acquisition of the properties. The costs were
allocated to the land, buildings and equipment. For
acquisitions completed on or after January 1, 2009,
acquisition-related transaction costs will be expensed as
incurred as a result of the Partnership adopting new
guidance on business combinations that expands the scope
of acquisition accounting.
The buildings and equipment of the Partnership are
depreciated using the straight-line method for financial
reporting purposes based on estimated useful lives of 25
years and 5 years, respectively.
Upon complete disposal of a property or classification of
a property as Real Estate Held for Sale, the Partnership
includes the operating results and sale of the property
in discontinued operations. In addition, the Partnership
reclassifies the prior periods' operating results of the
property to discontinued operations.
The Partnership accounts for properties owned as tenants-
in-common with affiliated entities and/or unrelated third
parties using the proportionate consolidation method.
Each tenant-in-common owns a separate, undivided interest
in the properties. Any tenant-in-common that holds more
than a 50% interest does not control decisions over the
other tenant-in-common interests. The financial
statements reflect only this Partnership's percentage
share of the properties' land, building and equipment,
liabilities, revenues and expenses.
The Partnership's properties are subject to environmental
laws and regulations adopted by various governmental
entities in the jurisdiction in which the properties are
located. These laws could require the Partnership to
investigate and remediate the effects of the release or
disposal of hazardous materials at these locations if
found. For each property, an environmental assessment is
completed prior to acquisition. In addition, the lease
agreements typically strictly prohibit the production,
handling, or storage of hazardous materials (except where
incidental to the tenant's business such as use of
cleaning supplies) in violation of applicable law to
restrict environmental and other damage. Environmental
liabilities are recorded when it is determined the
liability is probable and the costs can reasonably be
estimated. There were no environmental issues noted or
liabilities recorded at December 31, 2009 and 2008.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(2) Summary of Significant Accounting Policies - (Continued)
Fair Value Measurements
The Partnership adopted new guidance for measuring
financial assets and liabilities at fair value on a
recurring basis on January 1, 2008 and for certain
nonfinancial assets and liabilities measured on a
nonrecurring basis on January 1, 2009. The Partnership
has no assets or liabilities measured at fair value on a
recurring basis or nonrecurring basis that would require
disclosure under this new guidance.
Recently Adopted Pronouncements
In December 2007, the Financial Accounting Standards
Board issued updated guidance, which applies to all
transactions or events in which an entity obtains control
of one or more businesses. This guidance (i) establishes
the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities
assumed, (ii) requires expensing of most transaction
costs, and (iii) requires the acquirer to disclose to
investors and other users all of the information needed
to evaluate and understand the nature and financial
effect of the business combination. These provisions
were adopted by the Partnership on January 1, 2009. The
primary impact of adopting this guidance on the
Partnership's financial statements was the requirement to
expense transaction costs relating to its acquisition
activities in 2009.
Recently Issued Accounting Pronouncements
Management has reviewed recently issued, but not yet
effective, accounting pronouncements and does not expect
the implementation of these pronouncements to have a
significant effect on the Partnership's financial
statements.
(3) Related Party Transactions -
The Partnership owns the percentage interest shown below in
the following properties as tenants-in-common with the
affiliated entities listed: Johnny Carino's restaurant (50%
- AEI Accredited Investor Fund 2002 Limited Partnership);
Jared Jewelry store (40% - AEI Accredited Investor Fund 2002
Limited Partnership); Applebee's restaurant in Johnstown,
Pennsylvania (38% - AEI Income & Growth Fund XXI Limited
Partnership); Advance Auto Parts store (65% - AEI Income &
Growth Fund 25 LLC); Tractor Supply Company store (50% - AEI
Income & Growth Fund 24 LLC); Applebee's restaurant in
Crawfordsville, Indiana (60% - AEI Income & Growth Fund 26
LLC); and Best Buy store (33% - AEI Income & Growth Fund 24
LLC and AEI Income & Growth Fund 27 LLC).
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(3) Related Party Transactions - (Continued)
The Partnership owned a 50% interest in a Champps Americana
restaurant. AEI Net Lease Income & Growth Fund XX Limited
Partnership, an affiliate of the Partnership, owned a 50%
interest in this property until the property was sold to an
unrelated third party in 2008.
AEI received the following reimbursements for costs and
expenses from the Partnership for the years ended December
31:
2009 2008
a.AEI is reimbursed for costs incurred in providing services
related to managing the Partnership's operations and
properties, maintaining the Partnership's books, and
communicating with the Limited Partners. $ 166,135 $ 177,075
======== ========
b.AEI is reimbursed for all direct expenses it paid on the
Partnership's behalf to third parties related to Partnership
administration and property management. These
expenses included printing costs, legal and filing fees,
direct administrative costs, outside audit costs, taxes
insurance and other property costs. These amounts
included $0 and $486 of expenses related to Discontinued
Operations in 2009 and 2008, respectively. $ 23,070 $ 35,082
======== ========
c.AEI is reimbursed for costs incurred in providing
services and direct expenses related to the acquisition
of properties on behalf of the Partnership. $ 0 $ 31,026
======== ========
d.AEI is reimbursed for costs incurred in providing
services related to the sale of property. $ 0 $ 35,651
======== ========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a, b, c, and d.
This balance is non-interest bearing and unsecured and is to
be paid in the normal course of business.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
under net leases, classified as operating leases. Under a
net lease, the tenant is responsible for real estate taxes,
insurance, maintenance, repairs and operating expenses for
the property. For some leases, the Partnership is
responsible for repairs to the structural components of the
building, the roof, and the parking lot. At the time the
properties were acquired, the remaining primary lease terms
varied from 13 to 20 years, except for the Best Buy store,
which had a remaining primary term of 10.3 years. The
leases provide the tenants with two to four five-year
renewal options subject to the same terms and conditions as
the primary term.
The Partnership's properties are commercial, single-tenant
buildings. The TGI Friday's restaurant was constructed and
acquired in 1997. The Hollywood Video store in Saraland,
Alabama was constructed in 1998 and acquired in 1999. The
Arby's restaurant and the Hollywood Video store in Minot,
North Dakota were constructed and acquired in 1999. The
KinderCare daycare center in Pearland, Texas was constructed
in 1997 and acquired in 1999. The KinderCare daycare center
in Golden, Colorado was constructed and acquired in 2000.
The KinderCare daycare center in Plainfield, Illinois was
constructed and acquired in 2001. The Johnny Carino's
restaurant was constructed in 1999 and acquired in 2003.
The Jared Jewelry store was constructed in 2001 and acquired
in 2004. The Applebee's restaurants were constructed in
1996 and acquired in 2006. The Advance Auto Parts store was
constructed in 2005 and acquired in 2006. The Tractor
Supply Company store was constructed in 2005 and acquired in
2007. The Best Buy store was constructed and acquired in
2008. There have been no costs capitalized as improvements
subsequent to the acquisitions.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(4) Investments in Real Estate - (Continued)
The cost of the properties and related accumulated
depreciation at December 31, 2009 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
TGI Friday's, Greensburg, PA $ 6,439 $ 8,141 $ 14,580 $ 4,002
Hollywood Video, Saraland, AL 17,654 24,785 42,439 10,861
Arby's, Homewood, AL 4,396 3,788 8,184 1,786
KinderCare, Pearland, TX 204,105 739,311 943,416 309,275
Hollywood Video, Minot, ND 619,597 710,403 1,330,000 297,185
KinderCare, Golden, CO 7,684 25,844 33,528 9,564
KinderCare, Plainfield, IL 1,313 3,332 4,645 1,148
Johnny Carino's, Longmont, CO 560,383 733,022 1,293,405 175,926
Jared Jewelry, Sugar Land, TX 503,837 1,030,129 1,533,966 224,911
Applebee's, Johnstown, PA 264,557 766,630 1,031,187 100,939
Advance Auto Parts,
Indianapolis, IN 537,914 706,259 1,244,173 85,926
Applebee's, Crawfordsville, IN 506,030 1,350,626 1,856,656 162,075
Tractor Supply,
Grand Forks, ND 238,547 1,165,327 1,403,874 137,897
Best Buy, Lake Geneva, WI 335,142 1,687,104 2,022,246 81,543
---------- ---------- ----------- ---------
$3,807,598 $8,954,701 $12,762,299 $1,603,038
========== ========== =========== =========
In November 2007, Kona Restaurant Group, Inc. (KRG), the
tenant of the Johnny Carino's restaurant in Longmont,
Colorado, approached the Partnership with a request to
adjust the rent on the property to a market rental rate
based on the restaurant's performance and the current
conditions in the market. In March 2008, after reviewing
the financial statements for the restaurant and KRG, the
Partnership agreed to amend the Lease to reduce the current
annual rent for the property by 36% to $71,667. This amount
is scheduled to increase annually by 1.5%. In addition, the
amendment provides for additional rental payments if the
restaurant's sales exceed certain stated amounts. In August
2008, the Partnership received certification from Fired Up,
Inc., the parent company of KRG and guarantor of the Lease,
that it had achieved certain expense and debt reduction
measures required by the amendment. As a result, the
amendment will remain effective for the remainder of the
lease term.
On October 6, 2008, the Partnership purchased a 33% interest
in a Best Buy store in Lake Geneva, Wisconsin for
$2,022,246. The property is leased to Best Buy Stores, L.P.
under a Lease Agreement with a remaining primary term of
10.3 years and initial annual rent of $144,325 for the
interest purchased.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(4) Investments in Real Estate - (Continued)
On February 2, 2010, Hollywood Entertainment Corporation
(HEC), the tenant of the Hollywood Video stores in Minot,
North Dakota (100% ownership interest) and Saraland, Alabama
(3.08% ownership interest) filed for Chapter 11 bankruptcy
reorganization for the second time. In March 2010, HEC
submitted a written proposal requesting a 30% reduction in
monthly rent for the Minot store. The Partnership is
gathering market information about the site to prepare a
counterproposal. With the exception of rent for February
2010, rents are current for the Minot property and the
Partnership expects to continue to receive all scheduled
rents in future months unless the Lease is rejected by HEC.
If the Lease is assumed, HEC must comply with all Lease
terms. If the Lease is rejected, HEC would be required to
return possession of the property to the Partnership.
HEC closed the Saraland store and filed a motion with the
bankruptcy court to reject the Lease for this property. The
court approved the motion and HEC returned possession of the
property to the Partnership. The Partnership has listed the
property for sale or lease with a real estate broker in the
Saraland area. While the property is vacant, the
Partnership is responsible for real estate taxes and other
costs associated with maintaining the property. The
Saraland property represents less than 1% of the
Partnership's property portfolio. The loss of rent from
this property will have only a minor effect on the
Partnership's operations and financial situation. The
Partnership has evaluated the leases and property values for
both properties and decided that there is no impairment loss
at this time.
The Partnership owns a .8729% interest in a TGI Friday's
restaurant, a 3.08% interest in a Hollywood Video store in
Saraland, Alabama, a .5877% interest in an Arby's
restaurant, a 1.9962% interest in a KinderCare daycare
center in Golden, Colorado and a .3154% interest in a
KinderCare daycare center in Plainfield, Illinois. The
remaining interests in these properties are owned by
unrelated third parties, who own the properties with the
Partnership as tenants-in-common.
For properties owned as of December 31, 2009, the minimum
future rent payments required by the leases are as follows:
2010 $ 1,001,179
2011 1,020,980
2012 1,037,679
2013 1,032,713
2014 875,632
Thereafter 5,809,046
-----------
$10,777,229
===========
There were no contingent rents recognized in 2009 and 2008.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(5) Major Tenants -
The following schedule presents rent revenue from individual
tenants, or affiliated groups of tenants, who each
contributed more than ten percent of the Partnership's total
rent revenue for the years ended December 31:
Tenants Industry 2009 2008
Apple American Group Restaurant $ 208,303 $ 208,303
Hollywood
Entertainment Corporation Retail 147,647 155,151
Best Buy Stores, L.P. Retail 144,325 N/A
Sterling Jewelers Inc. Retail 127,919 127,919
Tractor Supply Company Retail 102,352 102,351
KinderCare Learning Centers, Inc. Child Care 99,963 99,747
--------- ---------
Aggregate rent revenue of major tenants $ 830,509 $ 693,471
========= =========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 84% 75%
========= =========
(6) Discontinued Operations -
On February 27, 2008, the Partnership sold its 50% interest
in the Champps Americana restaurant in West Chester, Ohio to
an unrelated third party. The Partnership received net sale
proceeds of $2,057,022, which resulted in a net gain of
$668,133. At the time of sale, the cost and related
accumulated depreciation was $1,569,884 and $180,995,
respectively.
On June 2, 2008, the Partnership sold its 7.3845% interest
in the KinderCare daycare center in DePere, Wisconsin to an
unrelated third party. The Partnership received net sale
proceeds of $114,817, which resulted in a net gain of
$51,333. The cost and related accumulated depreciation of
the interest sold was $87,687 and $24,203, respectively.
During 2009 and 2008, the Partnership distributed net sale
proceeds of $65,657 and $348,485 to the Limited and General
Partners as part of their quarterly distributions, which
represented a return of capital of $4.15 and $21.94 per
Limited Partnership Unit, respectively. The Partnership
anticipates the remaining net sale proceeds will either be
reinvested in additional property or distributed to the
Partners in the future.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(6) Discontinued Operations - (Continued)
The financial results for these properties are reflected as
Discontinued Operations in the accompanying financial
statements. The following are the results of discontinued
operations for the years ended December 31:
2009 2008
Rental Income $ 0 $ 30,763
Property Management Expenses 0 (486)
Depreciation 0 (1,137)
Gain on Disposal of Real Estate 0 719,466
--------- ---------
Income from Discontinued Operations $ 0 $ 748,606
========= =========
(7) Partners' Capital -
For the years ended December 31, 2009 and 2008, the
Partnership declared distributions of $850,712 and
$1,022,715, respectively. The Limited Partners received
distributions of $826,504 and $999,003 and the General
Partners received distributions of $24,208 and $23,712 for
the years, respectively. The Limited Partners'
distributions represent $52.65 and $63.53 per Limited
Partnership Unit outstanding using 15,699 and 15,725
weighted average Units in 2009 and 2008, respectively. The
distributions represent $27.89 and $63.53 per Unit of Net
Income and $24.76 and $-0- per Unit of return of contributed
capital in 2009 and 2008, respectively.
As part of the Limited Partners' distributions discussed
above, the Partnership distributed net sale proceeds of
$65,000 and $345,000 in 2009 and 2008, respectively. The
distributions reduced the Limited Partners' Adjusted Capital
Contributions.
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 will not be
obligated to purchase in any year any number of Units that,
when aggregated with all other transfers of Units that have
occurred since the beginning of the same calendar year
(excluding Permitted Transfers as defined in the Partnership
Agreement), would exceed 5% of the total number of Units
outstanding on January 1 of such year. In no event shall
the Partnership be obligated to purchase Units if, in the
sole discretion of the Managing General Partner, such
purchase would impair the capital or operation of the
Partnership.
During 2009, the Partnership did not redeem any Units from
the Limited Partners. During 2008, seven Limited Partners
redeemed a total of 105.78 Partnership Units for $84,447 in
accordance with the Partnership Agreement. The Partnership
acquired these Units using Net Cash Flow from operations.
The redemptions increase the remaining Limited Partner's
ownership interest in the Partnership. As a result of these
redemption payments and pursuant to the Partnership
Agreement, the General Partners received distributions of
$2,612 in 2008.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(7) Partners' Capital - (Continued)
After the effect of redemptions and the return of capital
from the sale of property, the Adjusted Capital
Contribution, as defined in the Partnership Agreement, is
$919.36 per original $1,000 invested.
(8) Income Taxes -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the years ended December 31:
2009 2008
Net Income for Financial Reporting Purposes $ 451,390 $1,161,020
Depreciation for Tax Purposes Under
Depreciation for Financial Reporting Purposes 110,077 94,360
Income Accrued for Tax Purposes Over
Income for Financial Reporting Purposes 18,797 2,615
Gain on Sale of Real Estate for Tax Purposes
Under Gain for Financial Reporting Purposes 0 (52,661)
--------- ----------
Taxable Income to Partners $ 580,264 $1,205,334
========= ==========
The following is a reconciliation of Partners' capital for
financial reporting purposes to Partners' capital reported
for federal income tax purposes for the years ended December
31:
2009 2008
Partners'Capital for Financial Reporting Purposes $11,455,465 $11,854,787
Adjusted Tax Basis of Investments in Real Estate
Over Net Investments in Real Estate
for Financial Reporting Purposes 545,587 435,510
Income Accrued for Tax Purposes Over
Income for Financial Reporting Purposes 36,155 17,358
Syndication Costs Treated as Reduction
of Capital for Financial Reporting Purposes 2,418,726 2,418,726
---------- ----------
Partners' Capital for Tax Reporting Purposes $14,455,933 $14,726,381
========== ==========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9AT.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) Internal Control Over Financial Reporting.
(i) Management's Report on Internal Control Over Financial
Reporting. The Managing General Partner, through its management,
is responsible for establishing and maintaining adequate internal
control over our financial reporting, as defined in Rule 13a-
15(f) under the Exchange Act, and for performing an assessment of
the effectiveness of our internal control over financial
reporting as of December 31, 2009. Internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Our
system of internal control over financial reporting includes
those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
Partnership; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Partnership
are being made only in accordance with authorizations of
management of the Managing General Partner; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
Partnership's assets that could have a material effect on the
financial statements.
Management of the Managing General Partner performed an
assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2009 based upon criteria
in Internal Control-Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission ("COSO").
Based on our assessment, management of the Managing General
Partner determined that our internal control over financial
reporting was effective as of December 31, 2009 based on the
criteria in Internal Control-Integrated Framework issued by the
COSO.
ITEM 9AT.CONTROLS AND PROCEDURES. (Continued)
This annual report does not include an attestation report
of our registered public accounting firm regarding internal
control over financial reporting. Management's report was not
subject to attestation by our registered public accounting firm
pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in
this annual report.
(ii) 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.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The registrant is a limited partnership and has no
officers, directors, or direct employees. The General Partners
manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters
affecting the Partnership's business. The General Partners are
AEI Fund Management XXI, Inc. (AFM), the Managing General
Partner, and Robert P. Johnson, Chief Executive Officer,
President and sole director of AFM, the Individual General
Partner. AFM is a wholly owned subsidiary of AEI Capital
Corporation of which Mr. Johnson is the majority shareholder.
AFM has only one senior financial executive, its Chief Financial
Officer. The Chief Financial Officer reports directly to Mr.
Johnson and is accountable for his actions to Mr. Johnson.
Although Mr. Johnson and AFM require that all of their personnel,
including the Chief Financial Officer, engage in honest and
ethical conduct, ensure full, fair, accurate, timely, and
understandable disclosure, comply with all applicable
governmental laws, rules and regulations, and report to Mr.
Johnson any deviation from these principles, because the
organization is composed of only approximately 35 individuals,
because the management of a partnership by an entity that has
different interests in distributions and income than investors
involves numerous conflicts of interest that must be resolved on
a daily basis, and because the ultimate decision maker in all
instances is Mr. Johnson, AFM has not adopted a formal code of
conduct. Instead, the materials pursuant to which investors
purchase Units disclose these conflicts of interest in detail and
Mr. Johnson, as the CEO and sole director of AFM, resolves
conflicts to the best of his ability, consistent with his
fiduciary obligations to AFM and the fiduciary obligations of AFM
to the Partnership. The director and officers of AFM are as
follows:
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
(Continued)
Robert P. Johnson, age 65, is Chief Executive Officer,
President and sole director and has held these positions since
the formation of AFM in August 1994, and has been elected to
continue in these positions until December 2010. From 1970 to
the present, he has been employed exclusively in the investment
industry, specializing in limited partnership investments. In
that capacity, he has been involved in the development, analysis,
marketing and management of public and private investment
programs investing in net lease properties as well as public and
private investment programs investing in energy development.
Since 1971, Mr. Johnson has been the president, a director and a
registered principal of AEI Securities, Inc., which is registered
with the SEC as a securities broker-dealer, is a member of the
Financial Industry Regulatory Authority (FINRA) and is a member
of the Security Investors Protection Corporation (SIPC). Mr.
Johnson has been president, a director and the principal
shareholder of AEI Fund Management, Inc., a real estate
management company founded by him, since 1978. Mr. Johnson is
currently a general partner or principal of the general partner
in ten limited partnerships and a managing member in five LLCs.
Patrick W. Keene, age 50, is Chief Financial Officer,
Treasurer and Secretary and has held these positions since
January 22, 2003 and has been elected to continue in these
positions until December 2010. Mr. Keene has been employed by
AEI Fund Management, Inc. and affiliated entities since 1986.
Prior to being elected to the positions above, he was Controller
of the various entities. From 1982 to 1986, Mr. Keene was with
KPMG Peat Marwick Certified Public Accountants, first as an
auditor and later as a tax manager. Mr. Keene is responsible for
all accounting functions of AFM and the registrant.
Since Mr. Johnson serves as the Individual General Partner
of the Partnership, as well as the sole director of AFM, all of
the duties that might be assigned to an audit committee are
assigned to Mr. Johnson. Mr. Johnson is not an audit committee
financial expert, as defined. As an officer and majority owner,
through a parent company, of AFM, and as the Individual General
Partner, Mr. Johnson is not a "disinterested director" and may be
subject to a number of conflicts of interests in his capacity as
sole director of AFM.
Before the independent auditors are engaged, Mr. Johnson,
as the sole director of AFM, approves all audit-related fees, and
all permissible nonaudit fees, for services of our auditors.
Section 16(a) Beneficial Ownership Reporting Compliance
Under federal securities laws, the directors and officers
of the General Partner of the Partnership, and any beneficial
owner of more than 10% of a class of equity securities of the
Partnership, are required to report their ownership of the
Partnership's equity securities and any changes in such ownership
to the Securities and Exchange Commission (the "Commission").
Specific due dates for these reports have been established by the
Commission, and the Partnership is required to disclose in this
Annual Report on 10-K any delinquent filing of such reports and
any failure to file such reports during the fiscal year ended
December 31, 2009. Based upon information provided by officers
and directors of the General Partner, all officers, directors and
10% owners filed all reports on a timely basis in the 2009 fiscal
year.
ITEM 11. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative, property management,
and property sales services. The amount and nature of such
payments are detailed in Item 13 of this annual report on Form 10-
K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth information pertaining to
the ownership of the Units by each person known by the
Partnership to beneficially own 5% or more of the Units, by each
General Partner, and by each officer or director of the Managing
General Partner as of February 28, 2010:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
AEI Fund Management XXI, Inc. 22 0.14%
Robert P. Johnson 0 0.00%
Patrick W. Keene 0 0.00%
Address for all: 1300 Wells Fargo Place, 30 East 7th Street,
St. Paul, Minnesota 55101
Andrea B. Currier 824.74227 5.25%
P.O. Box E, The Plains, Virginia 20198
The persons set forth in the preceding table hold sole voting
power and power of disposition with respect to all of the Units
set forth opposite their names.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.
The registrant, AFM and its affiliates have common
management and utilize the same facilities. As a result, certain
administrative expenses are allocated among these related
entities. All of such activities and any other transactions
involving the affiliates of the General Partner of the registrant
are governed by, and are conducted in conformity with, the
limitations set forth in the Limited Partnership Agreement of the
registrant. Reference is made to Note 3 of the Financial
Statements, as presented, and is incorporated herein by
reference, for details of related party transactions for the
years ended December 31, 2009 and 2008.
Neither the registrant, nor the Managing General Partner
of the registrant, has a board of directors consisting of any
members who are "independent." The sole director of the Managing
General Partner, Robert P. Johnson, is also the Individual
General Partner of the registrant, and is the Chief Executive
Officer, and indirectly the principal owner, of the Managing
General Partner. Accordingly, there is no disinterested board,
or other functioning body, that reviews related party
transactions, or the transactions between the registrant and the
General Partners, except as performed in connection with the
audit of its financial statements.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE. (Continued)
The limitations included in the Partnership Agreement
require that the cumulative reimbursements to the General
Partners and their affiliates for certain expenses will not
exceed an amount equal to the sum of (i) 20% of gross offering
proceeds, (ii) 5% of Net Cash Flow for property management, (iii)
3% of Net Proceeds of Sale, and (iv) 10% of Net Cash Flow less
the Net Cash Flow actually distributed to the General Partners.
The cumulative reimbursements subject to this limitation are
reimbursements for (i) organization and offering expenses,
including commissions, (ii) acquisition expenses, (iii) services
provided in the sales effort of properties, and (iv) expenses of
controlling persons and overhead expenses directly attributable
to the forgoing services or attributable to administrative
services. As of December 31, 2009, these cumulative
reimbursements to the General Partners and their affiliates did
not exceed the limitation amount.
The following table sets forth the forms of compensation,
distributions and cost reimbursements paid by the registrant to
the General Partners or their Affiliates in connection with the
operation of the Fund and its properties for the period from
inception through December 31, 2009.
Person or Entity Amount Incurred From
Receiving Form and Method Inception (July 31, 1996)
Compensation of Compensation To December 31, 2009
AEI Securities, Inc. Selling Commissions equal to 8% of $1,691,722
proceeds plus a 2% nonaccountable
expense allowance, most of which was
reallowed to Participating Dealers.
General Partners and Reimbursement at Cost for other $ 762,880
Affiliates Organization and Offering Costs.
General Partners and Reimbursement at Cost for all $ 503,997
Affiliates Acquisition Expenses.
General Partners and Reimbursement at Cost for providing $2,187,840
Affiliates administrative services to the Fund,
including all expenses related to
management of the Fund's properties
and all other transfer agency,
reporting, partner relations and
other administrative functions.
General Partners and Reimbursement at Cost for providing $ 531,993
Affiliates services related to the disposition
of the Fund's properties.
General Partners 3% of Net Cash Flow in any fiscal year.$ 357,405
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE. (Continued)
Person or Entity Amount Incurred From
Receiving Form and Method Inception (July 31, 1996)
Compensation of Compensation To December 31, 2009
General Partners 1% of distributions of Net Proceeds $ 25,095
of Sale until Limited Partners have
received an amount equal to (a)their
Adjusted Capital Contributions, plus
(b) an amount equal to 9% of their
Adjusted Capital Contributions per
annum, cumulative but not compounded,
to the extent not previously
distributed. 10% of distributions of
Net Proceeds of Sale thereafter.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The following is a summary of the fees billed to the
Partnership by Boulay, Heutmaker, Zibell & Co. P.L.L.P. for
professional services rendered for the years ended December 31,
2009 and 2008:
Fee Category 2009 2008
Audit Fees $ 14,425 $ 14,200
Audit-Related Fees 0 0
Tax Fees 0 0
All Other Fees 0 0
--------- --------
Total Fees $ 14,425 $ 14,200
========= ========
Audit Fees - Consists of fees billed for professional services
rendered for the audit of the Partnership's annual financial
statements and review of the interim financial statements
included in quarterly reports, and services that are normally
provided by Boulay, Heutmaker, Zibell & Co. P.L.L.P. in
connection with statutory and regulatory filings or engagements.
Audit-Related Fees - Consists of fees billed for assurance and
related services that are reasonably related to the performance
of the audit or review of financial statements and are not
reported under "Audit Fees." These services include consultations
concerning financial accounting and reporting standards.
Tax Fees - Consists of fees billed for professional services for
federal and state tax compliance, tax advice and tax planning.
All Other Fees - Consists of fees for products and services other
than the services reported above.
Policy for Preapproval of Audit and Permissible Non-Audit
Services of Independent Auditors
Before the Independent Auditors are engaged by the
Partnership to render audit or non-audit services, the engagement
is approved by Mr. Johnson acting as the Partnership's audit
committee.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) (1) A list of the financial statements contained
herein is set forth on page 14.
(a) (2) Schedules are omitted because of the absence of
conditions under which they are required or because
the required information is presented in the
financial statements or related notes.
(a) (3) The Exhibits filed in response to Item 601 of
Regulation S-K are listed below.
3.1 Certificate of Limited Partnership (incorporated by
reference to Exhibit 3.1 of the registrant's Registration
Statement on Form SB-2 filed September 13, 1996 [File No.
333-5604]).
3.2 Restated Limited Partnership Agreement to the
Prospectus (incorporated by reference to Exhibit A of
Amendment No. 2 of the registrant's Registration Statement
on Form SB-2 filed August 21, 1997 [File No. 333-5604]).
10.1 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
July 29, 1999).
10.2 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
July 26, 1999).
10.3 Net Lease Agreement dated December 30, 2003 between the
Partnership, AEI Accredited Investor Fund 2002 Limited
Partnership and Kona Restaurant Group, Inc. relating to the
Property at 2033 Ken Pratt Boulevard., Longmont, Colorado
(incorporated by reference to Exhibit 10.23 of Form 10-KSB
filed March 30, 2004).
10.4 Assignment and Assumption of Lease dated July 15, 2004
between the Partnership, AEI Accredited Investor Fund 2002
Limited Partnership and Transugar Limited Partnership
relating to the Property at 16010 Kensington Drive, Sugar
Land, Texas (incorporated by reference to Exhibit 10.2 of
Form 8-K filed July 30, 2004).
10.5 Net Lease Agreement dated September 21, 2006 between
the Partnership, AEI Income & Growth Fund XXI Limited
Partnership and B.T. Woodlipp, Inc. relating to the Property
at 425 Galleria Drive, Johnstown, Pennsylvania (incorporated
by reference to Exhibit 10.3 of Form 10-QSB filed November
14, 2006).
10.6 Assignment and Assumption of Lease dated December 29,
2006 between the Partnership, AEI Income & Growth Fund 26
LLC and AEI Fund Management XVII, Inc. relating to the
Property at 1516 South Washington Street, Crawfordsville,
Indiana (incorporated by reference to Exhibit 10.1 of Form 8-
K filed January 8, 2007).
10.7 Assignment and Assumption of Lease dated January 19,
2007 between the Partnership, AEI Income & Growth Fund 24
LLC and AEI Fund Management, Inc. relating to the Property
at 4460 32nd Avenue South, Grand Forks, North Dakota
(incorporated by reference to Exhibit 10.2 of Form 8-K filed
January 25, 2007).
10.8 Assignment and Assumption of Purchase and Sale
Agreement dated September 24, 2008 between the Partnership,
AEI Income & Growth Fund 24 LLC, AEI Income & Growth Fund 27
LLC and AEI Fund Management, Inc. relating to the Property
at 700 North Edwards Boulevard, Lake Geneva, Wisconsin
(incorporated by reference to Exhibit 10.1 of Form 8-K filed
October 10, 2008).
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. (Continued)
10.9 Assignment and Assumption of Lease dated October 6,
2008 between the Partnership, AEI Income & Growth Fund 24
LLC, AEI Income & Growth Fund 27 LLC and Ryan Companies US,
Inc. relating to the Property at 700 North Edwards
Boulevard, Lake Geneva, Wisconsin (incorporated by reference
to Exhibit 10.2 of Form 8-K filed October 10, 2008).
31.1 Certification of Chief Executive 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.
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.
32 Certification of Chief Executive Officer and Chief
Financial Officer of General Partner pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AEI INCOME & GROWTH FUND XXII
Limited Partnership
By: AEI Fund Management XXI, Inc.
Its Managing General Partner
March 29, 2010 By:/s/ ROBERT P JOHNSON
Robert P. Johnson, President
and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Name Title Date
/s/ROBERT P JOHNSON President (Principal Executive Officer) March 29, 2010
Robert P. Johnson and Sole Director of Managing General
Partner
/s/PATRICK W KEENE Chief Financial Officer and Treasurer March 29, 2010
Patrick W. Keene (Principal Accounting Officer)