10-Q: AEI Income & Growth Fund XXII Limited Partnership Reports Net Loss for Q2 2024

AEI Income & Growth Fund XXII Limited Partnership reports a net loss of $22,402 for the three months ended June 30, 2024, compared to a net income of $35,442 for the same period in 2023.

Summary

• AEI Income & Growth Fund XXII Limited Partnership reported a net loss of $22,402 for the three months ended June 30, 2024, compared to a net income of $35,442 for the same period in 2023.
• For the six months ended June 30, 2024, the Partnership reported a net loss of $34,977, compared to a net income of $53,246 for the same period in 2023.
• Rental income decreased to $219,039 for the six months ended June 30, 2024, from $283,801 for the same period in 2023, due to one property being vacated in 2023, partially offset by a rent increase in another property.
• The Partnership expects to recognize approximately $440,000 in rental income in 2024 based on scheduled rent as of July 31, 2024.
• Distributions declared to partners were $138,440 for the six months ended June 30, 2024, compared to $213,928 for the same period in 2023.
• The Partnership's cash balance decreased by $73,511 during the six months ended June 30, 2024, due to distributions exceeding cash generated from operating activities.
• As of July 31, 2024, there were 11,749.37 Units of limited partnership interest outstanding and owned by nonaffiliates.

Sentiment

Score: 4

Explanation: The report indicates a negative trend with decreased rental income, a net loss, and reduced distributions. While management expresses confidence in meeting obligations, the overall financial performance is concerning.

Positives

• The Partnership expects to recognize approximately $440,000 in rental income in 2024.
• Interest income increased due to higher money market interest rates.

Negatives

• The Partnership experienced a net loss of $22,402 for the three months ended June 30, 2024, a decrease from the $35,442 net income in the same period of 2023.
• Rental income for the six months ended June 30, 2024, was $219,039, down from $283,801 in the same period of 2023.
• Distributions to partners decreased from $213,928 in the first six months of 2023 to $138,440 in the first six months of 2024.
• The Partnership's cash balance decreased by $73,511 during the first six months of 2024.

Risks

• Market and economic conditions could affect property values and rental income.
• Federal income tax consequences could impact partners.
• Tenant defaults could negatively affect the Partnership's financial condition.
• 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.
• Higher interest rates and inflation in the U.S. and globally may impact tenants and operating partners.

Future Outlook

Based on the scheduled rent for the properties owned as of July 31, 2024, the Partnership expects to recognize rental income of approximately $440,000 in 2024.

Management Comments

• Management believes inflation has not significantly affected income from operations.
• 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.

Industry Context

The Partnership's performance is subject to broader economic trends affecting the real estate market, including interest rates, inflation, and tenant financial health.

Comparison to Industry Standards

• It's difficult to compare this specific partnership to industry standards without knowing the specific types of commercial properties it holds and their locations.
• However, similar real estate partnerships or REITs (Real Estate Investment Trusts) are often benchmarked against indices like the MSCI US REIT Index or the FTSE NAREIT All Equity REITs Index.
• These indices provide a broad measure of the performance of publicly traded REITs and can be used to assess the relative performance of AEI Income & Growth Fund XXII Limited Partnership.
• Given the decrease in rental income and the net loss, the partnership's performance appears to be lagging behind broader market trends, especially considering the general increase in property values and rental rates in many sectors over the past year.
• Companies like Simon Property Group (SPG) or Prologis (PLD), which focus on retail and industrial properties respectively, could be considered as very broad comparables, though their scale and public listing make direct comparisons challenging.

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.

Related Party Transactions

• 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.
• AFM is a wholly owned subsidiary of AEI Capital Corporation of which the Credit Trust fbo Patricia Johnson and Patricia Johnson own a majority interest.

Stakeholder Impact

• Limited partners experienced decreased distributions compared to the previous year.
• Tenants may face challenges due to economic factors, potentially impacting their ability to pay rent.

Key Dates

Keywords

real estate, limited partnership, rental income, distributions, financial performance, commercial properties, AEI Income & Growth Fund XXII