8-K: AEI Income & Growth Fund XXII Sells Arkansas Medical Clinic for $664,000, Realizing $35,000 Gain

AEI Income & Growth Fund XXII Limited Partnership sold a medical clinic in Lonoke, Arkansas, for approximately $664,000, resulting in a net gain of about $35,000.

Summary

• AEI Income & Growth Fund XXII Limited Partnership sold a St. Vincent Medical Clinic in Lonoke, Arkansas, to Grateful Holdings LLC on December 17, 2024.
• The sale resulted in net cash proceeds of approximately $664,000 for the Partnership.
• The transaction generated a net gain of approximately $35,000 for the Partnership.
• Pro forma adjustments, assuming the sale occurred on January 1, 2023, would have reduced Investments in Real Estate by $739,000 and increased Current Assets (cash) by $664,000.
• Partners Capital would have decreased by $75,000 under the pro forma scenario.
• For the year ended December 31, 2023, pro forma Income from Operations would have decreased by $49,896.
• This decrease in income from operations is due to a $147,430 decrease in rental income, a $84,844 decrease in depreciation expense, and a $12,690 decrease in property management expenses.
• For the six months ended June 30, 2023, pro forma Income from Operations would have decreased by $36,614.
• This decrease in income from operations is due to a $88,458 decrease in rental income, a $47,321 decrease in depreciation expense, and a $4,523 decrease in property management expenses.
• The pro forma adjustments would have reduced Net Income to $1,899 from $51,795 for the year ended December 31, 2023, and to a loss of $(1,172) from $35,442 for the six months ended June 30, 2023.
• This would have resulted in Net Income of $0.06 and $0.06 per Limited Partnership Unit outstanding for the year ended December 31, 2023 and the six months ended June 30, 2023, respectively.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. The sale generated a gain, but the pro forma analysis indicates a decrease in income, which is expected. The overall impact is not significantly positive or negative.

Positives

• The sale of the property generated a net gain of $35,000 for the Partnership.
• The Partnership successfully sold the property to an unrelated third party.

Negatives

• The pro forma analysis indicates a decrease in income from operations and net income due to the sale of the property.
• The pro forma net income per Limited Partnership Unit would have been $0.06 for both the year ended December 31, 2023 and the six months ended June 30, 2023.

Risks

• The sale of the property will result in a decrease in rental income for the Partnership.
• The pro forma analysis indicates a decrease in net income due to the sale of the property.

Future Outlook

The document does not provide specific forward-looking statements beyond the pro forma impact of the sale.

Management Comments

• The report was signed by Keith E. Petersen, Chief Financial Officer of AEI Fund Management XXI, Inc., the Managing General Partner of the Partnership.

Industry Context

The sale of a medical clinic is a common transaction in the real estate investment sector, particularly for funds that focus on income-producing properties. This sale indicates a potential shift in the Partnership's portfolio strategy.

Comparison to Industry Standards

• The sale of a single property for $664,000 is relatively small compared to larger real estate transactions by major REITs such as American Tower Corporation or Prologis.
• The net gain of $35,000 is a modest return on investment, which is typical for smaller property sales.
• The pro forma analysis shows a decrease in income from operations, which is expected when a property is sold, as it removes the rental income stream.
• The pro forma net income per unit of $0.06 is relatively low compared to the average returns of larger real estate investment funds.

Stakeholder Impact

• Shareholders will see a one-time gain from the sale, but a decrease in future rental income.
• The sale may impact the Partnership's overall portfolio strategy.

Next Steps

• The Partnership will likely re-invest the proceeds from the sale into other income-producing assets.
• The Partnership will need to adjust its financial statements to reflect the sale of the property.

Key Dates

Keywords

real estate, property sale, medical clinic, asset disposition, limited partnership, financial results, pro forma, net gain, Arkansas, Lonoke