10-Q: AEI Income & Growth Fund XXII Reports Q1 Loss Amid Liquidation

AEI Income & Growth Fund XXII Limited Partnership reported a net loss of $3,559 for Q1 2026, a worsening from the prior year, as it proceeds with its final liquidation process.

Summary

• Net loss for the three months ended March 31, 2026, was $3,559, compared to a net loss of $1,727 for the same period in 2025.
• Rental income decreased to $96,729 in Q1 2026 from $111,056 in Q1 2025, primarily due to the sale of one property in July 2025.
• Net cash provided by operating activities significantly decreased to $993 in Q1 2026 from $46,477 in Q1 2025.
• The Managing General Partner has decided to begin the final liquidation process by disposing of the Partnership's assets.
• Total Partners' Capital decreased from $5,031,293 as of December 31, 2025, to $4,960,475 as of March 31, 2026.
• Distributions declared to partners totaled $67,259 in Q1 2026, with Limited Partners receiving $5.92 per Unit, entirely as a return of capital.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative report given the worsening net loss, significant decline in operating cash flow, and the ongoing liquidation process which signals the end of the fund's operational life and limits future growth prospects.

Positives

• Operating loss improved to $(5,475) in Q1 2026 from $(7,101) in Q1 2025, driven by lower administration and property management expenses.
• Partnership administration expenses from affiliated parties decreased to $18,376 in Q1 2026 from $20,868 in Q1 2025.
• Partnership administration and property management expenses from unrelated parties decreased to $28,423 in Q1 2026 from $34,822 in Q1 2025.
• Management believes continuing rent payments and cash from property sales should be adequate to fund distributions and meet other Partnership obligations.

Negatives

• Net loss for Q1 2026 worsened to $3,559 from $1,727 in Q1 2025.
• Rental income decreased by $14,327 in Q1 2026 compared to Q1 2025, primarily due to the sale of one property in July 2025.
• Net cash provided by operating activities decreased significantly from $46,477 in Q1 2025 to $993 in Q1 2026.
• Interest income decreased to $1,916 in Q1 2026 from $5,374 in Q1 2025.
• Cash balance decreased by $33,823 in Q1 2026, a larger decrease than the $22,743 decrease in Q1 2025.
• All distributions to Limited Partners were a return of capital, indicating no net income contribution to distributions.

Risks

• Market and economic conditions may affect the value of properties and the cash from rental income such properties generate.
• Federal income tax consequences of rental income, deductions, gain on sales, and other items can affect the Partners.
• Conflicts faced by the General Partner may impact operations.
• The success of the General Partner in locating properties with favorable risk-return characteristics (relevant for future asset disposition).
• Tenant defaults could adversely affect the Partnership's financial condition.
• The condition of the industries in which the tenants of properties owned by the Partnership operate.
• Current economic factors, higher interest rates, and inflation in the U.S. and globally may impact tenants and operating partners.
• 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.

Future Outlook

The Partnership expects to recognize approximately $389,000 in rental income for the full year 2026 based on scheduled rent for properties owned as of April 30, 2026. Management believes that continuing rent payments from properties, along with cash generated from future property sales, should be sufficient to fund ongoing distributions and meet other Partnership obligations on both a short-term and long-term basis. The Managing General Partner has decided to begin the final liquidation process by disposing of its assets.

Management Comments

• The Managing General Partner has decided to begin the final liquidation process by disposing of its assets in accordance with the terms of the Partnership Agreement.
• Management believes inflation has not significantly affected income from operations.
• Management believes 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.
• 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.

Industry Context

StockSavvy.ai notes that the real estate investment limited partnership sector, particularly those in liquidation, often faces challenges in maintaining stable income and cash flow as assets are divested. The decrease in rental income and operating cash flow for AEI Income & Growth Fund XXII Limited Partnership aligns with the expected trajectory of a fund undergoing liquidation, where asset sales reduce the income-generating base. The mention of higher interest rates and inflation impacting tenants is a broader industry concern affecting commercial real estate, potentially pressing rental income and property values across the market.

Comparison to Industry Standards

• StockSavvy.ai observes that for a limited partnership in the process of liquidation, a decline in rental income and operating cash flow is generally expected as properties are sold off.
• The reported net loss and the fact that distributions are entirely a return of capital are typical for such a phase, as the focus shifts from income generation to asset realization and capital return.
• Specific comparable companies or projects are not provided in the filing, making direct quantitative comparisons difficult.
• The operational efficiency improvements (lower administration expenses) are a positive sign of cost management during a wind-down phase, which is a common best practice in similar liquidation scenarios.

Management Changes

Corporate Governance

Legal Proceedings

• No material pending legal proceedings to which the Partnership is a party or of which the Partnership's property is subject.

Related Party Transactions

• Payable to AEI Fund Management, Inc. (an affiliate of AFM) for administrative and operating functions. The balance due was $20,729 as of March 31, 2026.
• Partnership administration expenses from affiliated parties were $18,376 for the three months ended March 31, 2026.

Stakeholder Impact

• Shareholders (Limited Partners) are experiencing a decrease in total partners' capital and receiving distributions solely as a return of capital, indicating the fund is winding down and not generating distributable income. Unit repurchases are available but limited.
• Management and employees have seen a change in the Chief Financial Officer role, indicating a transition in key personnel.
• Tenants are subject to broader economic conditions, higher interest rates, and inflation, which could impair their ability to pay rent.

Next Steps

• Continue the final liquidation process by disposing of assets in accordance with the Partnership Agreement.
• Repurchase tendered Units on April 1st and October 1st of each year, subject to limitations.

Key Dates

Recommendation

The Partnership is in the process of liquidation, which inherently means a finite lifespan and a focus on asset disposition rather than growth. The Q1 2026 results show a worsening net loss and a substantial decline in operating cash flow, with distributions being entirely a return of capital. While cost management is evident, the overall financial trajectory is negative, consistent with a wind-down scenario. Investors seeking income or capital appreciation should look elsewhere, as this fund is returning capital and ceasing operations.

Keywords

real estate investment, limited partnership, SEC filing, quarterly report, commercial properties, liquidation, rental income, net loss, cash flow, distributions, property management, asset disposition, AEI Fund Management