AEI Healthcare Portfolio VII is a debt-free Delaware Statutory Trust holding three purpose-built, single-tenant outpatient medical office assets across Arizona, Texas, and Connecticut, net-leased to healthcare operators on terms running to 2037-2042. Contractual 2.0%-2.5% annual escalators and tenant-reimbursed insurance produce escalating net-lease income with minimal trust-level expense. The all-cash structure carries no refinancing or interest-rate exposure, positioning the offering as a core, income-oriented vehicle underpinned by secular outpatient-care migration and aging demographics.
40 ac, Bristol CT, lease to 2037). 9% national availability).
Thesis is durable, escalating net-lease income from investment-grade-equivalent healthcare credit, underpinned by secular outpatient-care migration and aging demographics. 5% escalators.
The properties are held free and clear with no mortgage, eliminating refinancing, maturity, rate-cap, and lender-foreclosure risk and removing the equal-or-greater-debt replacement requirement for 1031 investors. The structural trade-off is the absence of positive leverage.
The portfolio exhibits a credit barbell. Texas Children's Hospital (AA-/Fitch) and the UnitedHealth Group parent (AA-/Fitch, A/AM Best) supply investment-grade-equivalent corporate backing, while HonorHealth (A+/Fitch) is a single-state Arizona nonprofit system. Income is disproportionately weighted to Bristol, whose ~$1.15M gross rent is roughly 44% of in-place rent, concentrating cash flow in a single asset and a single tenant whose parent's Fitch outlook was revised to negative in July 2025 - a trajectory the static AA- marketing presentation omits.
Weighted average remaining lease term is 13.62 years across staggered expirations (Surprise 2042, Austin 2038, Bristol 2037). Duration is asymmetric: the long-dated HonorHealth lease carries the lowest escalator (2.0%), while the largest asset (Bristol) escalates 2.5% only through year 9 and then steps flat, capping income growth on the portfolio's biggest rent stream precisely as the projected disposition window approaches.
Real estate quality is high and recently delivered (2022-2024 vintage), purpose-built for outpatient use. The Austin asset's co-location one block from Texas Children's own hospital campus creates a mission-critical referral linkage that raises renewal probability and tenant switching costs; the Surprise asset is the sole urgent care within a 3.5-mile radius in a high-traffic retail corridor (71,024 VPD). These siting characteristics function as soft barriers to entry that support re-leasing economics.
The debt-free capital structure removes refinancing, maturity, rate-cap, and foreclosure risk entirely, and eliminates the equal-or-greater-debt replacement requirement for 1031 investors averse to boot-offsetting leverage. The structural cost is the absence of positive financial leverage, which mechanically caps levered IRR and is the primary reason the 5.00% going-in distribution sits below comparable leveraged net-lease DSTs.
The triple-net structure with tenant-reimbursed insurance and ~$1,400/year trust-level property expense insulates distributable cash from operating inflation. The qualifier is capital responsibility: the Trust retains certain capex obligations funded only from a modest reserve that declines from $371,000 to ~$67,764 by 2035, drawn down immediately by a $221,000 Connecticut transfer-tax charge in year 1, leaving limited capacity for unbudgeted tenant improvements and condition-assessment items.
The offering pairs institutional-grade healthcare net-lease credit with a defensive, unlevered balance sheet. Tenants are investment-grade-equivalent corporate operators on long-dated NNN leases (13.62-yr WALT) with contractual 2.0%-2.5% escalators, in demographically supported submarkets benefiting from outpatient-care migration, an aging cohort, and tight MOB supply. The debt-free structure removes refinance, maturity, cap-cost, and foreclosure exposure and offers a clean basis for 1031 capital seeking certainty of monthly income. The sponsor carries a ~40-year, 153-program operating history, including 57 full-cycle 1031 offerings averaging 6.37% annual cash-on-cash, and the distribution schedule escalates from 5.00% to 6.14% over the projected hold.
Income is concentrated in three single-tenant assets, with Bristol/United Healthcare alone at ~44% of rent, rendering any single vacancy binary to portfolio cash flow. The master tenant is thinly capitalized - funded by a $500,000 demand promissory note (not cash) from an affiliate, with projected Y1 net income of only ~$2,013 - so a subtenant payment interruption would rapidly exhaust the master tenant's cushion and the trust's limited reserves. The Bristol escalator caps at year 9 and steps flat, flattening growth on the largest asset into the disposition window, where that lease (2037 expiry) leaves only ~1.5 years of residual term at a 2035 exit - a material re-leasing/rollover overhang on the highest-rent asset at the point of valuation. The UNH parent's Fitch outlook turned negative in July 2025, and the Bristol lessee is an operating subsidiary rather than the rated parent. Reserve adequacy is thin post the $221,000 CT transfer-tax draw, and a one-month UNH rent abatement (August 2026) dampens Y1 collections.
The analysis below is Baker 1031's educational opinion — not investment, tax, or legal advice, a recommendation, or a guarantee, and it does not replace the offering's Private Placement Memorandum (PPM), which governs in all respects. Read the PPM and consult your own CPA and attorney before investing.
This is a low-beta, income-oriented core net-lease vehicle whose return is almost entirely a function of contractual escalators and terminal value, given the absence of leverage and any value-add component. The 5.00% to 6.14% distribution ramp is mechanically supported by the lease schedule, but the early-year spread between subtenant rent collected and master-lease rent paid is razor-thin, concentrating execution risk in the thinly capitalized master tenant. The debt-free design is genuinely defensive in a higher-for-longer regime, sidestepping the leveraged-net-lease maturity wall and cap-cost repricing, but the same feature suppresses yield - the 5.00% going-in sits below AEI's own operating-program current yield (5.48%) and full-cycle average (6.37%), implying reliance on escalators and exit pricing compression to reach target total return. The dominant underwriting sensitivity is terminal value: with no amortization and a fixed escalator schedule, investor IRR is governed by the year-10 disposition pricing against a portfolio whose largest asset will carry only short residual lease term at exit, while Austin (2038) and Surprise (2042) provide longer-dated support to residual value. Feasibility of the projected distributions is reasonable on a contractual basis; the credible variance is in capital-event timing and exit pricing rather than in-place income.
The analysis below is Baker 1031's educational opinion — not investment, tax, or legal advice, a recommendation, or a guarantee, and it does not replace the offering's Private Placement Memorandum (PPM), which governs in all respects. Read the PPM and consult your own CPA and attorney before investing.
| Metric | This Offering | Market Avg. | Assessment |
|---|---|---|---|
| Avg. Income | 5.54% | 6.41% | Below Average |
| Income Growth | 22.80% | 15.43% | Above Average |
| Peak Income | 6.14% | 7.03% | Below Average |
AEI Capital Corporation
AEI is among the longest-tenured names in the net-lease 1031 space, tracing its lineage to 1970 and to what it describes as one of the earliest securitized fractional-ownership structures. The firm's franchise is built on debt-free, all-cash ownership of single-tenant retail, restaurant and healthcare properties leased to credit-quality operators—a conservative posture that strips refinancing and foreclosure risk out of the capital stack and has carried it through multiple real estate cycles. With decades of completed full-cycle programs behind it, AEI markets stability and longevity over scale or sector breadth, a profile that resonates with risk-averse exchangers prioritizing capital preservation over yield.
Learn More About AEI Capital Corporation →Documents for this offering. Available to signed-in investors.
Securities offered through Aurora Securities, Inc. (CRD #46147 / SEC #8-51322), member FINRA / SIPC; Baker 1031 Investments, LLC is independent of Aurora Securities, Inc. and is not a registered broker-dealer or investment adviser. This is not an offer to sell or a solicitation of an offer to buy any security; any offer is made solely by the confidential private placement memorandum (PPM), which qualifies all information herein in its entirety. Delaware Statutory Trust interests are speculative, illiquid securities offered under Rule 506(c) of Regulation D and sold only to investors whose accredited-investor status has been verified; offering documents and subscription materials are provided only after that verification. They involve substantial risk, including possible loss of the entire investment.
Distributions, yields, the cap-rate equivalent, DSCR, occupancy, and benchmark figures are sponsor estimates or projections, are not guaranteed, and may differ materially from actual results. Any tax-adjusted yield assumes a 40% effective rate for non-1031 cash investors and is not tax advice. No tax, legal, or investment advice is provided — consult your own CPA and attorney. Past performance does not guarantee future results.