SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: September 30, 2001
Commission file number: 0-17467
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Minnesota 41-1603719
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(651) 227-7333
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) 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.
Yes [X] No
Transitional Small Business Disclosure Format:
Yes No [X]
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of September 30, 2001 and December 31, 2000
Statements for the Periods ended September 30, 2001 and 2000:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II.Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
(Unaudited)
ASSETS
2001 2000
CURRENT ASSETS:
Cash and Cash Equivalents $ 653,299 $ 1,673,908
Receivables 17,264 9,931
----------- -----------
Total Current Assets 670,563 1,683,839
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 4,583,794 4,259,223
Buildings and Equipment 9,608,650 9,291,882
Construction in Progress 364,885 218,268
Accumulated Depreciation (3,512,617) (3,283,284)
----------- -----------
11,044,712 10,486,089
Real Estate Held for Sale 0 50,000
----------- -----------
Net Investments in Real Estate 11,044,712 10,536,089
----------- -----------
Total Assets $11,715,275 $12,219,928
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 18,011 $ 46,408
Distributions Payable 287,957 290,614
Unearned Rent 21,299 5,456
----------- -----------
Total Current Liabilities 327,267 342,478
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (29,532) (82,637)
Limited Partners, $1,000 Unit value;
30,000 Units authorized; 23,389 Units issued;
20,567 and 20,944 Units outstanding
in 2001 and 2000, respectively 11,417,540 11,960,087
----------- -----------
Total Partners' Capital 11,388,008 11,877,450
----------- -----------
Total Liabilities and Partners' Capital $11,715,275 $12,219,928
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
Three Months Ended Nine Months Ended
9/30/01 9/30/00 9/30/01 9/30/00
INCOME:
Rent $ 391,393 $ 441,010 $ 1,260,860 $ 1,345,943
Investment Income 10,427 13,028 60,741 29,750
--------- --------- ----------- -----------
Total Income 401,820 454,038 1,321,601 1,375,693
--------- --------- ----------- -----------
EXPENSES:
Partnership Administration -
Affiliates 93,019 77,560 244,106 213,856
Partnership Administration
and Property Management -
Unrelated Parties 12,368 6,286 46,888 47,190
Depreciation 78,277 83,538 229,333 256,986
Real Estate Impairment 50,000 0 50,000 0
--------- --------- ----------- -----------
Total Expenses 233,664 167,384 570,327 518,032
--------- --------- ----------- -----------
OPERATING INCOME 168,156 286,654 751,274 857,661
GAIN ON SALE OF REAL ESTATE 0 91,119 0 91,119
--------- --------- ----------- -----------
NET INCOME $ 168,156 $ 377,773 $ 751,274 $ 948,780
========= ========= =========== ===========
NET INCOME ALLOCATED:
General Partners $ 29,682 $ 3,778 $ 65,513 $ 9,487
Limited Partners 138,474 373,995 685,761 939,293
--------- --------- ----------- -----------
$ 168,156 $ 377,773 $ 751,274 $ 948,780
========= ========= =========== ===========
NET INCOME PER
LIMITED PARTNERSHIP UNIT
(20,567, 21,060, 20,645
and 21,342, weighted average
Units outstanding for the
periods, respectively) $ 6.73 $ 17.76 $ 33.22 $ 44.01
========= ========= =========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 751,274 $ 948,780
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 229,333 256,986
Real Estate Impairment 50,000 0
Gain on Sale of Real Estate 0 (91,119)
Increase in Receivables (7,333) (21,417)
Increase (Decrease) in Payable to
AEI Fund Management, Inc. (28,397) 11,464
Increase in Unearned Rent 15,843 50,518
----------- -----------
Total Adjustments 259,446 206,432
----------- -----------
Net Cash Provided By
Operating Activities 1,010,720 1,155,212
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (787,956) (261,264)
Proceeds from Sale of Real Estate 0 1,087,826
----------- -----------
Net Cash Provided By (Used For)
Investing Activities (787,956) 826,562
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (2,657) 21,893
Distributions to Partners (934,773) (938,841)
Redemption Payments (305,943) (473,881)
----------- -----------
Net Cash Used For
Financing Activities (1,243,373) (1,390,829)
----------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (1,020,609) 590,945
CASH AND CASH EQUIVALENTS, beginning of period 1,673,908 785,486
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 653,299 $ 1,376,431
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1999 $(70,434) $13,168,170 $13,097,736 21,657.89
Distributions (9,388) (929,453) (938,841)
Redemption Payments (4,739) (469,142) (473,881) (598.33)
Net Income 9,487 939,293 948,780
-------- ----------- ----------- ----------
BALANCE, September 30, 2000 $(75,074) $12,708,868 $12,633,794 21,059.56
======== =========== =========== ==========
BALANCE, December 31, 2000 $(82,637) $11,960,087 $11,877,450 20,944.36
Distributions (9,348) (925,425) (934,773)
Redemption Payments (3,060) (302,883) (305,943) (376.87)
Net Income 65,513 685,761 751,274
-------- ----------- ----------- ----------
BALANCE, September 30, 2001 $(29,532) $11,417,540 $11,388,008 20,567.49
======== =========== =========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(Unaudited)
(1) The condensed statements included herein have been prepared
by the Partnership, 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 Partnership
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
Partnership's latest annual report on Form 10-KSB.
(2) Organization -
AEI Real Estate Fund XVII Limited Partnership (Partnership)
was formed to acquire and lease commercial properties to
operating tenants. The Partnership's operations are managed
by AEI Fund Management XVII, Inc. (AFM), the Managing
General Partner. Robert P. Johnson, the President and sole
shareholder of AFM, serves as the Individual General Partner
and an affiliate of AFM, AEI Fund Management, Inc. (AEI),
performs the administrative and operating functions for the
Partnership.
The terms of the Partnership offering call for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. The Partnership
commenced operations on February 10, 1988 when minimum
subscriptions of 2,000 Limited Partnership Units
($2,000,000) were accepted. The offering terminated on
November 1, 1988 when the one-year offering period expired.
The Partnership received subscriptions for 23,388.7 Limited
Partnership Units ($23,388,700).
Under the terms of the Limited Partnership Agreement, the
Limited Partners and General Partners contributed funds of
$23,388,700 and $1,000, respectively. During operations,
any Net Cash Flow, as defined, which the General Partners
determine to distribute will be distributed 90% to the
Limited Partners and 10% to the General Partners; provided,
however, that such distributions to the General Partners
will be subordinated to the Limited Partners first receiving
an annual, noncumulative distribution of Net Cash Flow equal
to 10% of their Adjusted Capital Contribution, as defined,
and, provided further, that in no event will the General
Partners receive less than 1% of such Net Cash Flow per
annum. Distributions to Limited Partners will be made pro
rata by Units.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(Continued)
(2) Organization - (Continued)
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 6%
of their Adjusted Capital Contribution per annum, cumulative
but not compounded, to the extent not previously distributed
from Net Cash Flow; (ii) next, 99% to the Limited Partners
and 1% to the General Partners until the Limited Partners
receive an amount equal to 14% of their Adjusted Capital
Contribution per annum, cumulative but not compounded, to
the extent not previously distributed; (iii) next, to the
General Partners until cumulative distributions to the
General Partners under Items (ii) and (iii) equal 15% of
cumulative distributions to all Partners under Items (ii)
and (iii). Any remaining balance will be distributed 85% to
the Limited Partners and 15% to the General Partners.
Distributions to the Limited Partners will be made pro rata
by Units.
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 90% to
the Limited Partners and 10% to the General Partners. In
the event no Net Cash Flow is distributed to the Limited
Partners, 90% of each item of income, gain or credit for
each respective year shall be allocated to the Limited
Partners, and 10% of each such item shall be allocated to
the General Partners. Net losses from operations will be
allocated 98% to the Limited Partners and 2% 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 14% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, to the General Partners
until cumulative allocations to the General Partners equal
15% of cumulative allocations. Any remaining balance will
be allocated 85% to the Limited Partners and 15% 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.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(Continued)
(3) Investments in Real Estate -
In January, 2000, Texas Sports City Cafe, Ltd. (Texas), the
lessee of the Sports City Cafe, notified the Partnership
that they were discontinuing the restaurant operations. The
Partnership negotiated to sell the property to an unrelated
third party, who assumed the restaurant operations from
Texas. On July 28, 2000, the sale closed with the
Partnership receiving net sale proceeds of $579,215, which
resulted in a net gain of $563. At the time of sale, the
cost and related accumulated depreciation was $831,343 and
$252,691, respectively.
Through December 31, 2000, the Partnership sold 28.7991% of
the Timber Lodge Steakhouse in St. Cloud, Minnesota, in
three separate transactions, to unrelated third parties.
The Partnership received total net sale proceeds of
$547,869, which resulted in a total net gain of $117,909.
The total cost and related accumulated depreciation of the
interests sold was $461,523 and $31,563, respectively. For
the nine months ended September 30, 2000, no gain was
recognized.
During 2000, the Partnership sold 34.4822% of the Timber
Lodge Steakhouse in Rochester, Minnesota, in three separate
transactions, to unrelated third parties. The Partnership
received total net sale proceeds of $757,988, which resulted
in a total net gain of $137,706. The total cost and related
accumulated depreciation of the interest sold was $658,875
and $38,593, respectively. For the nine months ended
September 30, 2000, the net gain was $90,556.
During the nine months ended September 30, 2001, the
Partnership distributed $210,109 of the net sale proceeds to
the Limited and General Partners as part of their regular
quarterly distributions which represented a return of
capital of $10.07 per Limited Partnership Unit. The
remaining net sale proceeds will either be re-invested in
additional property or distributed to the Partners in the
future.
On May 8, 2000, the Partnership purchased a 17% interest in
a parcel of land in Austin, Texas for $231,200. The land is
leased to Razzoo's, Inc. (RI) under a Lease Agreement with a
primary term of 15 years and annual rental payments of
$19,652. Effective October 4, 2000, the annual rent was
increased to $22,542. Simultaneously with the purchase of
the land, the Partnership entered into a Development
Financing Agreement under which the Partnership advanced
funds to RI for the construction of a Razzoo's restaurant on
the site. Initially, the Partnership charged interest on
the advances at a rate of 8.5%. Effective October 4, 2000
and April 15, 2001, the interest rate was increased to 9.75%
and 15.0%, respectively. On June 27, 2001, after the
development was completed, the Lease Agreement was amended
to require annual rental payments of $54,068. The
Partnership's share of the total acquisition costs,
including the cost of the land, was $545,266. The remaining
interests in the property are owned by AEI Real Estate Fund
XV Limited Partnership, AEI Net Lease Income & Growth Fund
XIX Limited Partnership, and AEI Income & Growth Fund XXII
Limited Partnership, affiliates of the Partnership.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(Continued)
(3) Investments in Real Estate - (Continued)
On April 27, 2001, the Partnership purchased a 28% interest
in a parcel of land in Utica, Michigan for $338,380. The
land is leased to Champps Entertainment, Inc. (Champps)
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $30,454. Simultaneously with the
purchase of the land, the Partnership entered into a
Development Financing Agreement under which the Partnership
will advance funds to Champps for the construction of a
Champps Americana restaurant on the site. Through September
30, 2001, the Partnership had advanced $364,885 for the
construction of the property and was charging interest on
the advances at a rate of 9.0%. The Partnership's share of
the total purchase price, including the cost of the land,
will be approximately $980,000. After the construction is
complete, the Lease Agreement will be amended to require
annual rental payments of approximately $105,000. The
remaining interest in the property are owned by AEI Net
Lease Income & Growth Fund XIX Limited Partnership and AEI
Net Lease Income & Growth Fund XX Limited Partnership,
affiliates of the Partnership.
In January, 1996, the Cheddar's restaurant in Indianapolis,
Indiana was destroyed by a fire. The property will not be
rebuilt and the Partnership listed the land for sale. As of
December 31, 2000, based on an analysis of market conditions
in the area, it was determined the fair value of the
Partnership's interest in the land was approximately
$50,000. In the fourth quarter of 2000, a charge to
operations for real estate impairment of $124,644 was
recognized, which is the difference between the book value
at December 31, 2000 of $174,644 and the estimated fair
value of $50,000. In the third quarter of 2001, the
Partnership recognized an additional real estate impairment
of $50,000 to write down the book value of the land to zero.
As of December 31, 2000, based on analysis of market
conditions, it was determined the fair value of the
Bennigan's restaurant was approximately $700,000. In the
fourth quarter of 2000, a charge to operations for real
estate impairment of $639,576 was recognized, which is the
difference between the book value at December 31, 2000 of
$1,339,576 and the estimated market value of $700,000. The
charge was recorded against the cost of the land and
building.
On November 2, 2001, the Partnership sold the Bennigan's
restaurant to an unrelated third party. The Partnership
received net sale proceeds of approximately $710,000, which
resulted in a net gain of approximately $28,000.
In May, 2001, Huntington Restaurants Group, Inc. (HRG), the
lessee of the Denny's Restaurant in Casa Grande, Arizona,
notified the Partnership that it was experiencing financial
problems and would not make the lease payments while they
worked out a plan which would enable them to continue
operations without seeking bankruptcy protection. Through
September 30, 2001, HRG owed $40,851 for past due rent,
which has not been accrued. The Partnership is reviewing
its available options, which include allowing HRG to remain
in the property while they develop a work-out plan or
replacing them with a new lessee.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(Continued)
(4) Payable to AEI Fund Management -
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.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the nine months ended September 30, 2001 and 2000 the
Partnership recognized rental income of $1,260,860 and
$1,345,943, respectively. During the same periods, the
Partnership earned investment income of $60,741 and $29,750,
respectively. In 2001, rental income decreased mainly as a
result of the loss from the Denny's restaurant and the property
sales discussed below. These decreases in rental income were
partially offset by rent received from two property acquisitions
in 2000 and 2001, and rent increases on seven properties. In
2001, additional investment income was earned on the net proceeds
from property sales.
In January, 1996, the Cheddar's restaurant in
Indianapolis, Indiana was destroyed by a fire. The property will
not be rebuilt and the Partnership listed the land for sale. As
of December 31, 2000, based on an analysis of market conditions
in the area, it was determined the fair value of the
Partnership's interest in the land was approximately $50,000. In
the fourth quarter of 2000, a charge to operations for real
estate impairment of $124,644 was recognized, which is the
difference between the book value at December 31, 2000 of
$174,644 and the estimated fair value of $50,000. In the third
quarter of 2001, the Partnership recognized an additional real
estate impairment of $50,000 to write down the book value of the
land to zero.
As of December 31, 2000, based on analysis of market
conditions, it was determined the fair value of the Bennigan's
restaurant was approximately $700,000. In the fourth quarter of
2000, a charge to operations for real estate impairment of
$639,576 was recognized, which is the difference between the book
value at December 31, 2000 of $1,339,576 and the estimated market
value of $700,000. The charge was recorded against the cost of
the land and building.
On November 2, 2001, the Partnership sold the Bennigan's
restaurant to an unrelated third party. The Partnership received
net sale proceeds of approximately $710,000, which resulted in a
net gain of approximately $28,000.
In May, 2001, Huntington Restaurants Group, Inc. (HRG),
the lessee of the Denny's Restaurant in Casa Grande, Arizona,
notified the Partnership that it was experiencing financial
problems and would not make the lease payments while they worked
out a plan which would enable them to continue operations without
seeking bankruptcy protection. Through September 30, 2001, HRG
owed $40,851 for past due rent, which has not been accrued. The
Partnership is reviewing its available options, which include
allowing HRG to remain in the property while they develop a work-
out plan or replacing them with a new lessee.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
During the nine months ended September 30, 2001 and 2000,
the Partnership paid Partnership administration expenses to
affiliated parties of $244,106 and $213,856, respectively. These
administration expenses include costs associated with the
management of the properties, processing distributions, reporting
requirements and correspondence to the Limited Partners. During
the same periods, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $46,888 and $47,190, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, taxes, insurance and other property costs.
As of September 30, 2001, the Partnership's annualized
cash distribution rate was 7.0%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement. As a result, 99% of distributions and
income were allocated to Limited Partners and 1% to the General
Partners.
Inflation has had a minimal effect on income from
operations. It is expected that increases in sales volumes of
the tenants, due to inflation and real sales growth, will result
in an increase in rental income over the term of the leases.
Inflation also may cause the Partnership's real estate to
appreciate in value. However, inflation and changing prices may
also have an adverse impact on the operating margins of the
properties' tenants which could impair their ability to pay rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.
Liquidity and Capital Resources
During the nine months ended September 30, 2001, the
Partnership's cash balances decreased $1,020,609 as a result of
cash used to purchase property and the Partnership distributed
more cash to the Partners than it generated from operating
activities. Net cash provided by operating activities decreased
from $1,155,212 in 2000 to $1,010,720 in 2001 due to a decrease
in income and an increase in Partnership administration expenses
in 2001 and net timing differences in the collection of payments
from the lessees 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, 2000, the Partnership generated cash flow from the
sale of real estate of $1,087,826. During the nine months ended
September 30, 2001 and 2000, the Partnership expended $787,956
and $261,264, respectively, to invest in real properties
(inclusive of acquisition expenses) as the Partnership reinvested
cash generated from property sales.
In January, 2000, Texas Sports City Cafe, Ltd. (Texas),
the lessee of the Sports City Cafe, notified the Partnership that
they were discontinuing the restaurant operations. The
Partnership negotiated to sell the property to an unrelated third
party, who assumed the restaurant operations from Texas. On July
28, 2000, the sale closed with the Partnership receiving net sale
proceeds of $579,215, which resulted in a net gain of $563. At
the time of sale, the cost and related accumulated depreciation
was $831,343 and $252,691, respectively.
Through December 31, 2000, the Partnership sold 28.7991%
of the Timber Lodge Steakhouse in St. Cloud, Minnesota, in three
separate transactions, to unrelated third parties. The
Partnership received total net sale proceeds of $547,869, which
resulted in a total net gain of $117,909. The total cost and
related accumulated depreciation of the interests sold was
$461,523 and $31,563, respectively. For the nine months ended
September 30, 2000, no gain was recognized.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
During 2000, the Partnership sold 34.4822% of the Timber
Lodge Steakhouse in Rochester, Minnesota, in three separate
transactions, to unrelated third parties. The Partnership
received total net sale proceeds of $757,988, which resulted in a
total net gain of $137,706. The total cost and related
accumulated depreciation of the interest sold was $658,875 and
$38,593, respectively. For the nine months ended September 30,
2000, the net gain was $90,556.
During the nine months ended September 30, 2001, the
Partnership distributed $210,109 of the net sale proceeds to the
Limited and General Partners as part of their regular quarterly
distributions which represented a return of capital of $10.07 per
Limited Partnership Unit. The remaining net sale proceeds will
either be re-invested in additional property or distributed to
the Partners in the future.
On May 8, 2000, the Partnership purchased a 17% interest
in a parcel of land in Austin, Texas for $231,200. The land is
leased to Razzoo's, Inc. (RI) under a Lease Agreement with a
primary term of 15 years and annual rental payments of $19,652.
Effective October 4, 2000, the annual rent was increased to
$22,542. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement under
which the Partnership advanced funds to RI for the construction
of a Razzoo's restaurant on the site. Initially, the Partnership
charged interest on the advances at a rate of 8.5%. Effective
October 4, 2000 and April 15, 2001, the interest rate was
increased to 9.75% and 15.0%, respectively. On June 27, 2001,
after the development was completed, the Lease Agreement was
amended to require annual rental payments of $54,068. The
Partnership's share of the total acquisition costs, including the
cost of the land, was $545,266. The remaining interests in the
property are owned by AEI Real Estate Fund XV Limited
Partnership, AEI Net Lease Income & Growth Fund XIX Limited
Partnership, and AEI Income & Growth Fund XXII Limited
Partnership, affiliates of the Partnership.
On April 27, 2001, the Partnership purchased a 28%
interest in a parcel of land in Utica, Michigan for $338,380.
The land is leased to Champps Entertainment, Inc. (Champps) under
a Lease Agreement with a primary term of 20 years and annual
rental payments of $30,454. Simultaneously with the purchase of
the land, the Partnership entered into a Development Financing
Agreement under which the Partnership will advance funds to
Champps for the construction of a Champps Americana restaurant on
the site. Through September 30, 2001, the Partnership had
advanced $364,885 for the construction of the property and was
charging interest on the advances at a rate of 9.0%. The
Partnership's share of the total purchase price, including the
cost of the land, will be approximately $980,000. After the
construction is complete, the Lease Agreement will be amended to
require annual rental payments of approximately $105,000. The
remaining interests in the property are owned by AEI Net Lease
Income & Growth Fund XIX Limited Partnership and AEI Net Lease
Income & Growth Fund XX Limited Partnership, affiliates of the
Partnership.
The Partnership's primary use of cash flow 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 quarterly basis.
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 is not obligated to
purchase in any year more than 5% of the number of Units
outstanding at the beginning of the 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.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
On January 1, 2001, sixteen Limited Partners redeemed a
total of 220.83 Partnership Units for $176,650 in accordance with
the Partnership Agreement. On April 1, 2001, seven Limited
Partners redeemed a total of 78.33 Partnership Units for $63,207.
On July 1, 2001, seven Limited Partners redeemed a total of 77.7
Partnership Units for $63,026 in accordance with the Partnership
Agreement. The Partnership acquired these Units using Net Cash
Flow from operations. In prior years, a total of 179 Limited
Partners redeemed 2,444.34 Partnership Units for $1,721,632. The
redemptions increase the remaining Limited Partners' ownership
interest in the Partnership.
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.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
contains various "forward looking statements" within the meaning
of federal securities laws 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, taxation levels,
the sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements made by the Partnership, must 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
affects of these consequences for investors;
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.
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 2.CHANGES IN SECURITIES
None.
PART II - OTHER INFORMATION
(Continued)
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.OTHER INFORMATION
None.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
Description
10.1 Purchase Agreement dated August 20, 2001 between the
Partnership and Mark D. Ayer relating to the property at
9035 Fields Ertel Road, Cincinnati, Ohio.
b. Reports filed on Form 8-K - None.
SIGNATURES
In accordance with the requirements of the Exchange Act,
the Registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: November 8, 2001 AEI Real Estate Fund XVII
Limited Partnership
By: AEI Fund Management XVII, Inc.
Its: Managing General Partner
By: /s/Robert P. Johnson
Robert P. Johnson
President
(Principal Executive Officer)
By: /s/Mark E. Larson
Mark E. Larson
Chief Financial Officer
(Principal Accounting Officer)