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EX-32 - AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIPex32-22.txt
EX-31.2 - AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIPex31-222.txt
EX-31.1 - AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIPex31-122.txt

                          UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549

                            FORM 10-Q

        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934

       For the quarterly period ended:  September 30, 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)

                       Not Applicable
 (Former name, former address and former fiscal year, if changed
                       since last report)

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.      [X] Yes  [ ]  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  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 Exchange  Act). [ ] Yes  [X] No


        AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP

                              INDEX


Part I - Financial Information

 Item 1. Financial Statements (unaudited):

         Balance Sheet as of September 30, 2009 and December  31, 2008

         Statements for the Periods ended September 30, 2009 and 2008:

           Income

           Cash Flows

           Changes in Partners' Capital (Deficit)

         Notes to Financial Statements

 Item 2. Management's Discussion and Analysis  of  Financial Condition
           and Results of Operations

 Item 3. Quantitative and Qualitative Disclosures About Market Risk

 Item 4. Controls and Procedures

Part II - Other Information

 Item 1.  Legal Proceedings

 Item 1A.  Risk Factors

 Item 2. Unregistered Sales of Equity Securities and  Use  of Proceeds

 Item 3. Defaults Upon Senior Securities

 Item 4. Submission of Matters to a Vote of Security  Holders

 Item 5. Other Information

 Item 6. Exhibits

Signatures


AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP BALANCE SHEET SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 ASSETS 2009 2008 CURRENT ASSETS: Cash $ 603,623 $ 639,409 Receivables 0 5,261 ----------- ----------- Total Current Assets 603,623 644,670 ----------- ----------- INVESTMENTS IN REAL ESTATE: Land 3,807,598 3,807,598 Buildings and Equipment 8,954,701 8,954,701 Accumulated Depreciation (1,513,497) (1,245,765) ----------- ----------- Net Investments in Real Estate 11,248,802 11,516,534 ----------- ----------- Total Assets $11,852,425 $12,161,204 =========== =========== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Payable to AEI Fund Management, Inc. $ 31,897 $ 37,336 Distributions Payable 212,887 251,722 Unearned Rent 45,427 17,359 ----------- ----------- Total Current Liabilities 290,211 306,417 ----------- ----------- PARTNERS' CAPITAL (DEFICIT): General Partners (717) 7,050 Limited Partners, $1,000 per Unit; 24,000 Units authorized; 16,917 Units issued; 15,699 Units outstanding 11,562,931 11,847,737 ----------- ----------- Total Partners' Capital 11,562,214 11,854,787 ----------- ----------- Total Liabilities and Partners' Capital $11,852,425 $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 PERIODS ENDED SEPTEMBER 30 Three Months Ended Nine Months Ended 9/30/09 9/30/08 9/30/09 9/30/08 RENTAL INCOME $ 248,791 $ 211,275 $ 743,873 $ 646,435 EXPENSES: Partnership Administration - Affiliates 37,219 38,521 114,836 117,601 Partnership Administration and Property Management - Unrelated Parties 2,748 6,298 19,684 29,345 Depreciation 89,542 72,671 267,732 218,013 --------- --------- --------- ---------- Total Expenses 129,509 117,490 402,252 364,959 --------- --------- --------- ---------- OPERATING INCOME 119,282 93,785 341,621 281,476 OTHER INCOME: Interest Income 1,232 13,014 3,943 35,191 --------- --------- --------- ---------- INCOME FROM CONTINUING OPERATIONS 120,514 106,799 345,564 316,667 Income from Discontinued Operations 0 0 0 748,606 --------- --------- --------- ---------- NET INCOME $ 120,514 $ 106,799 $ 345,564 $1,065,273 ========= ========= ========= ========== NET INCOME ALLOCATED: General Partners $ 3,615 $ 6,316 $ 10,367 $ 28,087 Limited Partners 116,899 100,483 335,197 1,037,186 --------- --------- --------- ---------- $ 120,514 $ 106,799 $ 345,564 $1,065,273 ========= ========= ========= ========== INCOME PER LIMITED PARTNERSHIP UNIT: Continuing Operations $ 7.45 $ 6.40 $ 21.35 $ 19.52 Discontinued Operations 0 0 0 46.40 --------- --------- --------- ---------- Total $ 7.45 $ 6.40 $ 21.35 $ 65.92 ========= ========= ========= ========== Weighted Average Units Outstanding 15,699 15,699 15,699 15,734 ========= ========= ========= ========== 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 NINE MONTHS ENDED SEPTEMBER 30 2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 345,564 $ 1,065,273 Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities: Depreciation 267,732 219,150 Gain on Sale of Real Estate 0 (719,466) (Increase) Decrease in Receivables 5,261 (9,676) Increase (Decrease) in Payable to AEI Fund Management, Inc. (5,439) 2,080 Increase in Unearned Rent 28,068 6,545 ----------- ----------- Total Adjustments 295,622 (501,367) ----------- ----------- Net Cash Provided By Operating Activities 641,186 563,906 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from Sale of Real Estate 0 2,171,839 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions Paid to Partners (676,972) (769,193) Redemption Payments 0 (87,059) ----------- ----------- Net Cash Used For Financing Activities (676,972) (856,252) ----------- ----------- NET INCREASE (DECREASE) IN CASH (35,786) 1,879,493 CASH, beginning of period 639,409 820,451 ----------- ----------- CASH, end of period $ 603,623 $ 2,699,944 =========== =========== 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 NINE MONTHS ENDED SEPTEMBER 30 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 (17,052) (750,001) (767,053) Redemption Payments (2,612) (84,447) (87,059) (105.78) Net Income 28,087 1,037,186 1,065,273 -------- ----------- ----------- ---------- BALANCE, September 30, 2008 $ 7,087 $12,007,615 $12,014,702 15,698.78 ======== =========== =========== ========== BALANCE, December 31, 2008 $ 7,050 $11,847,737 $11,854,787 15,698.78 Distributions Declared (18,134) (620,003) (638,137) Net Income 10,367 335,197 345,564 -------- ----------- ----------- ---------- BALANCE, September 30, 2009 $ (717) $11,562,931 $11,562,214 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 SEPTEMBER 30, 2008 (1) The condensed statements included herein have been prepared by the registrant, 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 registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in the registrant's latest annual report on Form 10-K. (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. 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. 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 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 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) Investments in Real Estate - 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. AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Continued) (3) Investments in Real Estate - (Continued) 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. (4) 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. (5) 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. Through March 31, 2008, the Partnership recognized a net gain of $657,433. In the second quarter of 2008, the Partnership recorded a $10,700 adjustment to the expenses of the sale. 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 the first nine months of 2009 and 2008, the Partnership distributed net sale proceeds of $50,505 and $297,980 to the Limited and General Partners as part of their quarterly distributions, which represented a return of capital of $3.19 and $18.76 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 (Continued) (5) 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 periods ended September 30: Three Months Ended Nine Months Ended 9/30/09 9/30/08 9/30/09 9/30/08 Rental Income $ 0 $ 0 $ 0 $ 30,763 Property Management Expenses 0 0 0 (486) Depreciation 0 0 0 (1,137) Gain on Disposal of Real Estate 0 0 0 719,466 -------- -------- -------- --------- Income from Discontinued Operations $ 0 $ 0 $ 0 $ 748,606 ======== ======== ======== ========= (6) 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 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. (7) Subsequent Events - The Partnership has evaluated subsequent events through November 10, 2009, the date which the financial statements were available to be issued. Subsequent events, if any, were disclosed in the appropriate note in the Notes to Financial Statements. ITEM 2. 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 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 2. 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 nine months ended September 30, 2009 and 2008, the Partnership recognized rental income from continuing operations of $743,873 and $646,435, 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. For the nine months ended September 30, 2009 and 2008, the Partnership incurred Partnership administration expenses from affiliated parties of $114,836 and $117,601, 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 $19,684 and $29,345, 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. For the nine months ended September 30, 2009 and 2008, the Partnership recognized interest income of $3,943 and $35,191, 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. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) 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 nine months ended September 30, 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. Through March 31, 2008, the Partnership recognized a net gain of $657,433. In the second quarter of 2008, the Partnership recorded a $10,700 adjustment to the expenses of the sale. 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. 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 nine months ended September 30, 2009, the Partnership's cash balances decreased $35,786 as a result of distributions paid to the Partners in excess of cash generated from operating activities. During the nine months ended September 30, 2008, the Partnership's cash balances increased $1,879,493 as a result of cash generated from the sale of property, which was partially offset by distributions paid to the Partners in excess of cash generated from operating activities. Net cash provided by operating activities increased from $563,906 in 2008 to $641,186 in 2009 as a result of a increase in total rental and interest income in 2009, a decrease in Partnership administration and property management expenses in 2009 and by net timing differences in the collection of payments from the tenants and the payment of expenses. 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 nine months ended September 30, 2008, the Partnership generated cash flow from the sale of real estate of $2,171,839. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) 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. For the nine months ended September 30, 2009 and 2008, the Partnership declared distributions of $638,137 and $767,053, 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 $620,003 and $750,001 and the General Partners received distributions of $18,134 and $17,052 for the periods, respectively. In 2009, distributions were lower due to a decrease in the distribution rate per Unit, effective January 1, 2009. During the first nine months of 2009 and 2008, the Partnership distributed net sale proceeds of $50,505 and $297,980 to the Limited and General Partners as part of their quarterly distributions, which represented a return of capital of $3.19 and $18.76 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. On April 1, 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. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) 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. 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 2009, 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 2009 are expected to be variable and less than recent 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not required for a smaller reporting company. ITEM 4. 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. ITEM 4. CONTROLS AND PROCEDURES. (Continued) (b) 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. 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 1A. RISK FACTORS. Not required for a smaller reporting company. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. (a) None. (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 period covered by this report, the Partnership did not purchase any Units. 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. 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 the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: November 10, 2009 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/ PATRICK W KEENE Patrick W. Keene Chief Financial Officer (Principal Accounting Officer