Your 1031 DST Authority
AEI Healthcare Portfolio VII DST
Offering Overview
Three purpose-built, single-tenant outpatient medical office assets held debt-free in a DST: HonorHealth Complete Care (12,000 SF, Surprise AZ, Phoenix MSA, lease to 2042), Texas Children's Pavilion for Women (12,642 SF, Cedar Park/Austin TX, co-located one block from the tenant's own hospital campus, lease to 2038), and a United Healthcare/ProHealth Physicians clinic (26,547 SF on 6.40 ac, Bristol CT, lease to 2037). Submarkets are infill/Sun Belt growth corridors with strong daytime traffic and household incomes ($78k–$125k) and constrained MOB supply (~6.9% national availability).
The thesis is durable, escalating net-lease income from investment-grade-equivalent healthcare credit, underpinned by secular outpatient-care migration and aging demographics. The operating strategy is passive triple-net ownership through an affiliated master tenant, with insurance fully tenant-reimbursed and de minimis trust-level expense; income growth is driven entirely by contractual 2.0%–2.5% escalators.
Investment Highlights
- 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.
Forecasted Cash Flow
Projected annual cash-on-cash distributions with the corresponding tax-equivalent yield over the ten-year hold, based on the sponsor's underwriting assumptions.
Illustrative projections only — targeted distributions are not guaranteed and actual results will vary. Tax-equivalent yield assumes depreciation shelter of distributed income.
Analyst Notes
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 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.
Pros
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.
Cons
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, and that lease (2037 expiry) leaves only ~1.5 years of residual term at a 2035 exit — a material re-leasing overhang on the highest-rent asset at valuation. The UNH parent's Fitch outlook turned negative in July 2025, reserves are thin post the $221,000 CT transfer-tax draw, and a one-month UNH rent abatement (August 2026) dampens Y1 collections.
Features
Financing
This offering is unleveraged — the DST holds its assets debt-free (0% loan-to-value), so no mortgage financing applies. There is no refinancing, maturity, rate-cap, or foreclosure risk, and 1031 investors are not required to replace debt.
Benchmark Comparison
| Metric | This Offering | Benchmark | Difference |
|---|---|---|---|
| Average Yield | 5.54% | 5.80% | −4.42% |
| Max Yield | 6.14% | 6.20% | −0.97% |
| 10-Yr Income Growth | 23% | 12.24% | +86.35% |
Benchmark reflects the average of comparable net-lease DST offerings. Differences are relative to the benchmark.
Offering Documents
About the Sponsor
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.
This page describes a specific Delaware Statutory Trust offering (AEI Healthcare Portfolio VII DST) and is provided for informational purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any security. Any offering is made solely to verified accredited investors and only by means of a confidential private placement memorandum (PPM).
All figures shown — including minimum investment, cash-flow projections, tax-equivalent yield, loan-to-value, and hold period — reflect the sponsor's current estimates and assumptions and are not guarantees of future performance. Tax-equivalent yield depends on each investor's tax circumstances; projected distributions may not be achieved and actual results will vary. Sponsor track record, benchmark data, and full-cycle averages describe prior programs and are not indicative of the results of this offering.
An investment in a DST is speculative, illiquid, and involves a high degree of risk, including the possible loss of the entire amount invested. There is no public market for these interests, distributions are not guaranteed, and investors have no control over property operations. 1031 exchange and tax treatment depend on each investor's individual circumstances and on tax laws that are subject to change; consult your own tax and legal advisors.
Tax-equivalent yield represents the pre-tax yield a fully taxable investment would need to generate in order to match the after-tax cash flow of this offering. It assumes that a portion of distributions is sheltered by depreciation and other deductions, and it depends entirely on each investor's individual tax bracket, state of residence, and holding structure. It is illustrative only and is not a projection of return. Cap rate equivalent is the implied capitalization rate (net operating income divided by purchase price) shown solely for comparison to direct real estate; it is not a distribution rate, a yield, or a measure of investor return.
This offering and all terms shown are subject to change, withdrawal, or cancellation at any time without notice, and availability is not guaranteed. Nothing on this page creates a commitment or reservation. An investment is confirmed only upon the sponsor's acceptance of fully executed subscription documents; no other communication, indication of interest, or reservation constitutes a binding investment.