SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: September 30, 1997
Commission file number: 333-5604
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Minnesota 41-1848181
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(612) 227-7333
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes [X] No
Transitional Small Business Disclosure Format:
Yes No [X]
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of September 30, 1997 and December 31, 1996
Statements for the Periods ended September 30, 1997:
Operations
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(Unaudited)
ASSETS
1997 1996
CURRENT ASSETS:
Cash and Cash Equivalents $ 3,878,086 $ 943
INVESTMENTS IN REAL ESTATE:
Property Acquisition Costs 54,895 0
----------- -----------
Total Assets $ 3,932,981 $ 943
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 92,336 $ 300
Distributions Payable 50,705 0
----------- -----------
Total Current Liabilities 143,041 300
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (1,033) 643
Limited Partners, $1,000 Unit value;
24,000 Units authorized; 4,597
Units issued and outstanding in 1997 3,790,973 0
----------- -----------
Total Partners' Capital 3,789,940 643
----------- -----------
Total Liabilities and Partners' Capital $ 3,932,981 $ 943
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30
(Unaudited)
1997
INCOME:
Investment Income $ 49,053
EXPENSES:
Partnership Administration - Affiliates 92,272
Partnership Administration - Unrelated Parties 249
-----------
Total Expenses 92,521
-----------
NET LOSS $ (43,468)
===========
NET LOSS ALLOCATED:
General Partners $ (435)
Limited Partners (43,033)
-----------
$ (43,468)
===========
NET LOSS PER LIMITED PARTNERSHIP UNIT
(2,545 weighted average Units outstanding) $ (16.91)
===========
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 PERIOD ENDED SEPTEMBER 30
(Unaudited)
1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (43,468)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Increase in Payable to AEI Fund Management, Inc. 92,036
-----------
Total Adjustments 92,036
-----------
Net Cash Used For
Operating Activities 48,568
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (54,895)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions from Limited Partners 4,596,787
Organization and Syndication Costs (689,518)
Increase in Distributions Payable 50,705
Distributions to Partners (74,504)
-----------
Net Cash Provided By
Financing Activities 3,883,470
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,877,143
CASH AND CASH EQUIVALENTS, beginning of period 943
-----------
CASH AND CASH EQUIVALENTS, end of period $ 3,878,086
===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD ENDED SEPTEMBER 30
(Unaudited)
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1996 $ 643 $ 0 $ 643 0
Capital Contributions 0 4,596,787 4,596,787 4,596.79
Organization and
Syndication Costs (60) (689,458) (689,518)
Distributions (1,181) (73,323) (74,504)
Net Loss (435) (43,033) (43,468)
--------- ---------- ---------- ---------
BALANCE, September 30, 1997 $ (1,033) $3,790,973 $3,789,940 4,596.79
========= ========== ========== =========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
(1) The condensed statements included herein have been prepared
by the Partnership, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of
operations for the interim period, on a basis consistent with
the annual audited statements. The adjustments made to these
condensed statements consist only of normal recurring
adjustments. Certain information, accounting policies, and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Partnership
believes that the disclosures are adequate to make the
information presented not misleading.
(2) Organization -
AEI Income & Growth Fund XXII Limited Partnership
(Partnership) was formed to acquire and lease commercial
properties to operating tenants. The Partnership's
operations are managed by AEI Fund Management XXI, Inc.
(AFM), the Managing General Partner of the Partnership.
Robert P. Johnson, the President and sole shareholder of
AFM, serves as the Individual General Partner of the
Partnership. An affiliate of AFM, AEI Fund Management,
Inc., performs the administrative and operating functions
for the Partnership.
The terms of the Partnership offering call for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. Under the terms of the
Restated Limited Partnership Agreement, 24,000 Limited
Partnership Units are available for subscription which, if
fully subscribed, will result in contributed Limited
PartnersO capital of $24,000,000. The Partnership commenced
operations on May 1, 1997 when minimum subscriptions of
1,500 Limited Partnership Units ($1,500,000) were accepted.
At September30, 1997, 4,596.787 Units ($4,596,787) were
subscribed and accepted by the Partnership. The General
Partners have contributed capital of $1,000.
During the operation of the Partnership, any Net Cash Flow,
as defined, which the General Partners determine to
distribute will be distributed 97% to the Limited Partners
and 3% to the General Partners. Distributions to Limited
Partners will be made pro rata by Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of the Partnership's properties which the General
Partners determine to distribute will, after provisions for
debts and reserves, be paid in the following manner: (i)
first, 99% to the Limited Partners and 1% to the General
Partners until the Limited Partners receive an amount equal
to: (a) their Adjusted Capital Contribution plus (b) an
amount equal to 9% of their Adjusted Capital Contribution
per annum, cumulative but not compounded, to the extent not
previously distributed from Net Cash Flow; (ii) any
remaining balance will be distributed 90% to the Limited
Partners and 10% to the General Partners. Distributions to
the Limited Partners will be made pro rata by Units.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
property, will be allocated first in the same ratio in
which, and to the extent, Net Cash Flow is distributed to
the Partners for such year. Any additional profits will be
allocated in the same ratio as the last dollar of Net Cash
Flow is distributed. Net losses from operations will be
allocated 99% to the Limited Partners and 1% to the General
Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of the Partnership's property will be
allocated in accordance with the Partnership Agreement as
follows: (i) first, to those partners with deficit balances
in their capital accounts in an amount equal to the sum of
such deficit balances; (ii) second, 99% to the Limited
Partners and 1% to the General Partners until the aggregate
balance in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital Contributions
plus an amount equal to 9% of their Adjusted Capital
Contributions per annum, cumulative but not compounded, to
the extent not previously allocated; (iii) third, the
balance of any remaining gain will then be allocated 90% to
the Limited Partners and 10% to the General Partners.
Losses will be allocated 98% to the Limited Partners and 2%
to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(3) 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.
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. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Summary of Significant Accounting Policies - (Continued)
The tax return, the qualification of the Partnership as
such for tax purposes, 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 with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
All of the properties to be purchased by the Partnership
will be leased under long-term triple net leases.
The building and equipment of the Partnership will be
depreciated using the straight-line method for financial
reporting purposes based on estimated useful lives of 25
years and 5 years, respectively.
(4)Investments in Real Estate -
In October, 1997, the Partnership entered into an agreement
to purchase a 40% interest in a TGI Friday's restaurant in
Greensburg, Pennsylvania. The purchase price for the entire
property will be approximately $1,650,000. The property
will be leased to Ohio Valley Bistros, Inc. under a Lease
Agreement with a primary term of 15 years and annual rental
payments of approximately $169,000. An affiliate of the
Partnership is expected to acquire the remaining interest.
(5) Payable to AEI Fund Management, Inc. -
AEI Fund Management, Inc. performs the administrative and
operating functions for the Partnership. The payable to AEI
Fund Management represents the balance due for those
services. This balance is non-interest bearing and
unsecured and is to be paid in the normal course of
business.
(6) Fair Value of Financial Instruments -
The carrying value of certain assets and liabilities
approximates fair value.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the nine months ended September 30, 1997, the
Partnership earned $49,053 in investment income from subscription
proceeds which were invested in a short-term money market
account. This investment income constituted 100% of total income
for the period. The percentage of total income represented by
investment income declines as subscription proceeds are invested
in properties.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
During the first nine months of 1997, the Partnership paid
Partnership administration expenses to affiliated parties of
$92,272. These administration expenses include initial start-up
costs and administrative expenses associated with processing
distributions, reporting requirements and correspondence to the
Limited Partners. During the same period, the Partnership
incurred Partnership administration expenses from unrelated
parties of $249. These expenses represent direct payments to
third parties for legal and filing fees, direct administrative
costs, outside audit and accounting costs, and other costs. The
administrative expenses decrease after completion of the offering
and acquisition phases of the Partnership's operations.
The Partnership distributes all of its net income during
the offering and acquisition phases, and if net income after
deductions for depreciation is not sufficient to fund the
distributions, the Partnership may distribute other available
cash that constitutes capital for accounting purposes.
As of September 30, 1997, the Partnership's cash
distribution rate was 7.0% on an annualized basis. Pursuant to
the Partnership Agreement, distributions of Net Cash Flow were
allocated 97% to the Limited Partners and 3% to the General
Partners.
Liquidity and Capital Resources
The Partnership's primary sources of cash will be proceeds
from the sale of Units, investment income, rental income and
proceeds from the sale of property. Its primary uses of cash
will be investment in real properties, payment of expenses
involved in the sale of units, the organization of the
Partnership, the management of properties, the administration of
the Partnership, and the payment of distributions.
The Partnership Agreement requires that no more than 15%
of the proceeds from the sale of Units be applied to expenses
involved in the sale of Units (including Commissions) and that
such expenses, together with acquisition expenses, not exceed 20%
of the proceeds from the sale of Units. As set forth under the
caption "Estimated Use of Proceeds" of the Prospectus, the
General Partners anticipate that 15% of such proceeds will be
applied to cover organization and offering expenses if only the
minimum proceeds are obtained and that 14% of such proceeds will
be applied to such expenses if the maximum proceeds are obtained.
To the extent organization and offering expenses actually
incurred exceed 15% of proceeds, they are borne by the General
Partners.
During the offering of Units, the Partnership's primary
source of cash flow will be from the sale of Limited Partnership
Units. The Partnership commenced its offering of Limited
Partnership Units to the public through a registration statement
which became effective January 10, 1997 and will continue until
January 9, 1998, subject to extension to January 9, 1999 if all
24,000 Limited Partnership Units are not sold before then. From
January 10, 1997 to May 1, 1997, the minimum number of Limited
Partnership Units (1,500) needed to form the Partnership were
sold on May 1, 1997, a total of 1,629.201 Units ($1,629,201) were
transferred into the Partnership. Through September 30, 1997,
the Partnership raised a total of $4,596,787 from the sale of
4,596.787 Units. From subscription proceeds, the Partnership
paid organization and syndication costs (which constitute a
reduction of capital) of $689,518.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Before the acquisition of all such properties, cash flow
from operating activities is not significant. Net income, after
adjustment for depreciation, is lower during the first few years
of operations as administrative expenses remain high and a large
amount of the Partnership's assets remain invested on a short-
term basis in lower-yielding cash equivalents. Net income will
become the largest component of cash flow from operating
activities and the largest component of cash flow after the
completion of the acquisition phase.
The Partnership Agreement requires that all proceeds from
the sale of Units be invested or committed to investment in
properties by the later of two years after the date of the
Prospectus or six months after termination of the offer and sale
of Units. While the Partnership is purchasing properties, cash
flow from investing activities (investment in real property) will
remain negative and will constitute the principal use of the
Partnership's available cash flow.
In October, 1997, the Partnership entered into an
agreement to purchase a 40% interest in a TGI Friday's restaurant
in Greensburg, Pennsylvania. The purchase price for the entire
property will be approximately $1,650,000. The property will be
leased to Ohio Valley Bistros, Inc. under a Lease Agreement with
a primary term of 15 years and annual rental payments of
approximately $169,000. An affiliate of the Partnership is
expected to acquire the remaining interest.
After completion of the acquisition phase, the
Partnership's primary use of cash flow is distribution and
redemption payments to Partners. The Partnership declares its
regular quarterly distributions before the end of each quarter
and pays the distribution in the first week after the end of each
quarter. The Partnership attempts to maintain a stable
distribution rate from quarter to quarter.
Until capital is invested in properties, the Partnership
will remain extremely liquid. After completion of property
acquisitions, the Partnership will attempt to maintain a cash
reserve of only approximately 1% of subscription proceeds.
Because properties are purchased for cash and leased under triple-
net leases, this is considered adequate to satisfy most
contingencies.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the Partnership is a party or of which the Partnership's
property is subject.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II - OTHER INFORMATION
(Continued)
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
Description
10.1 Sale and Leaseback Financing
Commitment dated May 13, 1997 between AEI
Fund Management, Inc. and Ohio Valley
Bistros, Inc. relating to the sale and
leaseback of a TGI Friday's restaurant at
#1507, Rural Route #6, Greensburg,
Pennsylvania.
10.2 Assignment of Sale and Leaseback
Financing Commitment dated November 4,
1997, between the Partnership and AEI
Fund Management, Inc. relating to the
sale and leaseback of a TGI Friday's
restaurant at #1507, Rural Route #6,
Greensburg, Pennsylvania.
27 Financial Data Schedule for period
ended September 30, 1997.
b. Reports filed on Form 8-K - None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: November 7, 1997 AEI Income & Growth Fund XXII
Limited Partnership
By: AEI Fund Management XXI, Inc.
Its: Managing General Partner
By: /s/ Robert P Johnson
Robert P. Johnson
President
(Principal Executive Officer)
By: /s/ Mark E Larson
Mark E. Larson
Chief Financial Officer
(Principal Accounting Officer)