SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
1300 Minnesota World Trade Center
30 East 7th Street
St. Paul, Minnesota 55101
CONSENT STATEMENT
For Amendments to Limited Partnership Agreement
to Permit Reinvestment of Sales Proceeds and
Change Unit Repurchase Provisions
THIS CONSENT STATEMENT IS BEING MAILED TO INVESTORS ON OR ABOUT JULY
25, 1997. TO BE COUNTED, A PROPERLY SIGNED CONSENT FORM MUST BE RECEIVED
BY THE MANAGING GENERAL PARTNER AT 1300 MINNESOTA WORLD TRADE CENTER, 30
EAST 7TH STREET, ST. PAUL, MINNESOTA 55101, ON OR BEFORE SEPTEMBER 15,
1997.
AEI Fund Management XVII, Inc., the Managing General Partner of AEI
Real Estate Fund XVII Limited Partnership (the "Fund"), and Robert P.
Johnson, the Individual General Partner of the Fund (together, the
"General Partners") are recommending the following two amendments (the
"Amendments") to the Fund's Limited Partnership Agreement (the
"Partnership Agreement"):
(a) An amendment to change Section 5.4 of the Partnership Agreement
(the "Reinvestment Amendment") so that, at any time prior to the
final liquidation of the Fund, the proceeds from sales of Fund
properties can be reinvested in replacement net leased properties.
The Partnership Agreement currently provides that proceeds from
the sale of properties cannot be reinvested in new properties
after the end of the two-year period following the termination of
the offering of units of limited partnership interest in the Fund
(the "Units"); November 1, 1990.
(b) An amendment to Section 7.7 of the Partnership Agreement (the
"Repurchase Amendment") altering the Unit repurchase provisions of
the Partnership Agreement to allow repurchases to occur more
frequently and to allow the Managing General Partner to establish
a repurchase price that generally will be higher than the
repurchase price fixed under the formula currently set forth in
the Partnership Agreement, and providing that repurchases will be
made quarterly rather than once per year.
The General Partners believe that it is important for the Fund to be
able to take advantage of property sales, when available at attractive
prices, without depleting the capital base of the Fund. Approval of the
Reinvestment Amendment would allow the Managing General Partner to
continue to reinvest Fund proceeds from the sale of properties in
replacement properties until final liquidation of the Fund. Accordingly,
the General Partners recommend a vote "FOR" the proposed Reinvestment
Amendment.
The General Partners also believe that the Fund's current formula for
determining the purchase price of Units under Section 7.7 of the
Partnership Agreement no longer reflects a Unit valuation that is closely
related to market value, and that Investors should be permitted to
present Units for repurchase more frequently than once per year.
Approval of the Repurchase Amendment would provide an alternate valuation
formula that the General Partners believe more accurately reflects the
pricing of Units in the secondary market. The provisions of Section 7.7,
as proposed to be amended, will provide that Investors will be entitled
to the price under the formula yielding the highest value. The amended
provisions will also provide for quarterly repurchases of Units and, if
approved, will be effective for repurchases starting in 1998.
Accordingly, the General Partners recommend a vote "FOR" the proposed
Repurchase Amendment.
The proposed Amendments will affect your investment in the Fund in a
number of ways and involve a number of Risks, including the following:
Reinvestment Amendment:
If the Reinvestment Amendment is approved, cash from sales of
properties, including approximately $4,300,000 of cash that would
otherwise be available for distribution absent approval of the Amendment,
may be reinvested until the liquidation of the Fund. There can be no
assurance that any properties in which proceeds are reinvested if the
Amendment is approved will generate enough cash flow to support
distributions in excess of what an Investor would receive from an
alternative investment outside the Fund if such proceeds were distributed
to Investors. See "Summary Risks of the Amendments Reinvestment
Amendment Deferred Cash Distributions."
The continuing reinvestments permitted by the Reinvestment
Amendment may make it more difficult to sell the Fund's properties within
the originally intended life of the Fund and therefore cause extension of
life of the Fund. See "Summary Risks of the Amendments Reinvestment
Amendment Risk of Extension of Fund Life."
The interests of the General Partners in approval of the
Reinvestment Amendment conflict with the interests of Investors because
if Fund proceeds are reinvested, the General Partners will receive more
aggregate reimbursements (but not necessarily profits) from the Fund, and
may have a greater opportunity to reach a distribution level that results
in payment of a promotional interest to the General Partners than they
would have if Fund proceeds were not reinvested. See "Summary Risks of
the Amendments Reinvestment Amendment General Partner Conflicts of
Interest."
If the Reinvestment Amendment is approved, Fund proceeds will
be reinvested in additional triple net leased commercial properties that
are subject to many of the same risks of nonperformance, (including risks
related to changing market values, tenant defaults and difficulty of
resale, among others) as the original properties. See "Summary Risks of
the Amendments Reinvestment Amendment Real Estate Risks on Reinvestment."
Investors will not be able to review in advance the properties
in which proceeds are reinvested. See "Summary Risks of the
Amendments Reinvestment Amendment Undesignated Properties."
Repurchase Amendment:
The Fund is not required to repurchase Units in excess of 5% of the Units
outstanding in any year, and is not required to repurchase Units if doing
so would impair the Funds ability to continue operations. The Repurchase
Amendment will not alter these limitations. There may be circumstances
under which Fund revenues and borrowings are insufficient to fully fund
such repurchases. See "Summary Risks of the Amendments Repurchase
Amendment Limitations on Repurchases."
Although the General Partners believe that the new alternative repurchase
price formula will generally yield a higher Unit price than the existing
formula, and Investors will be entitled to the higher repurchase price
determined under either formula, there is no assurance that either
formula price will pay an Investor the market value of the Investor's
Units. See "Summary Risks of the Amendments Repurchase
Amendment Valuation of Units."
The Fund will repurchase Units out of capital available for
distribution and the repurchased Units will effectively be allocated
among, and will increase the percentage interests of, remaining partners.
To the extent that the amendment causes more Units to be repurchased, it
may, in the short-term, decrease the amount of distributions to
Investors.
Investors will not have appraisal or dissenters rights and therefore will
not have the right to require the Fund to pay them the value of their
Units of limited partner interest if they disagree with the proposed
Amendments.
SUMMARY
The following summary is qualified by the more detailed discussion set
forth herein.
The Amendments. The General Partners are proposing an amendment to
Section 5.4 of the Partnership Agreement. This Amendment will eliminate
the requirement that the Fund distribute all proceeds from sale of
properties and allow reinvestment of such proceeds until final
liquidation of the Fund. Even if the Amendment is approved, however,
most, if not all, gain from sales activity would continue to be
distributed to Investors.
The General Partners are also proposing an amendment to Section 7.7 of
the Partnership Agreement. This Amendment will provide an alternative
formula for valuation of Units of limited partner interest in the Fund
for purposes of the Partnership Agreement's Unit repurchase provisions.
The Amendment is intended to increase the repurchase price over the
existing formula, but the existing formula will remain as an
alternative, and Investors will be entitled to the higher price yielded
by either formula. The Amendment will also increase the frequency of
presentment opportunities from once per year to quarterly, commencing in
calendar 1998.
Reasons for the Amendments. The Fund is holding approximately $4,300,000
of proceeds from the sale of properties and may sell other properties
prior to final liquidation of the Fund due to favorable market
conditions, exercise of lease purchase options, tenant restructuring or
other reasons. Although the General Partners cannot guarantee returns,
they believe that the Fund can generate favorable returns to Investors
through the acquisition of additional properties that can be resold.
They believe that the Fund should be in a position to reinvest the
proceeds from these and other sales into replacement net leased
properties.
The General Partners believe that the current formula for determining
the purchase price of Units under Section 7.7 of the Partnership
Agreement no longer reflects a Unit valuation that closely approximates
market value. They believe that the proposed new formula provides an
alternate valuation that more accurately reflects the pricing of Units
in the secondary market. The provisions of Section 7.7, as proposed to
be amended, will provide that the formula yielding the highest value
will control. In addition, the new provisions will provide for the
repurchase of Units quarterly rather than once per year, thus
increasing, to a limited extent, the liquidity of an investment in the
Units.
Risks of the Amendments. The Amendments will present several risks,
including the following:
Reinvestment Amendment:
1. Deferred Cash Distributions. Rather than distributing all net cash
proceeds on sale of a property, the Amendment will allow the Fund (if
the General Partners determine, in their discretion, that it is
advantageous to the Fund) to reinvest such proceeds in new
properties(subject to a continuing obligation to distribute to Investors
cash proceeds adequate to pay the income tax liability (at a tax rate of
35%) generated by sales of property). The distribution of cash that is
reinvested will be delayed until the Fund is finally liquidated.
Initially, investors will forego an immediate distribution of
approximately $187.60 per unit if the Reinvestment Amendment is approved
in return for the possibility of increased distributions and possible
appreciation in the future. There can be, of course, no assurance that
properties in which proceeds will be reinvested if the Reinvestment
Amendment is approved will generate periodic distributions in excess of
the return that could be obtained by Investors on an alternative
investment of distributed proceeds, or that such properties will
eventually be sold at a gain.
2. Risk of Extension of Fund Life. The General Partners intend to
reinvest sales proceeds in new properties that could be sold again
within a few years. The Reinvestment Amendment could render more
difficult the final sale of properties within the original intended life
of the Fund. The General Partners intend to commence liquidation of the
Fund by the year 2002, although the sale of any particular property may
be delayed based on market and other conditions. The Reinvestment
Amendment could have the effect of extending the life of the Fund for
several years and delaying the ultimate distribution of its assets. The
Partnership Agreement provides that the Fund must be liquidated, in any
event, by the year 2038 (an arbitrary date).
3. Real Estate Risks on Reinvestment. Proceeds will be reinvested in
new triple net leased commercial properties that are subject to the same
risks of performance as the properties originally acquired by the Fund.
The value of real estate is subject to a number of factors beyond the
control of the Fund, including national economic conditions, changes in
interest rates, governmental rules and regulations and competition from
other forms of financing. If adverse changes in these general
conditions negatively affect market value, the final disposition of the
property and the distribution of cash to Investors may be delayed or the
disposition may result in a loss, or both. The value of properties in
which the Fund will invest will be affected by the financial condition
of the tenant. If a tenant is unable to perform its lease obligations,
the Fund may not be able to sell the property and may be forced to sell
the property at a loss. Further, in the event of a bankruptcy of a
tenant, the Fund might not be able to obtain possession of the property
for a considerable period of time.
4. Undesignated Properties. Investors will not be able to review in
advance the properties in which proceeds would be reinvested.
5. General Partner Conflicts of Interest. The interests of the
General Partners in proposing the Reinvestment Amendment conflict with
those of the Investors because the General Partners will receive more
reimbursements from the Fund if proceeds are reinvested than they will
if proceeds were not reinvested. The Managing General Partner will be
reimbursed for the costs it incurs, including costs of its personnel, in
reinvesting the proceeds and managing the properties in which the
proceeds are reinvested. Such reimbursements will include the salaries
of personnel of the Managing General Partner for the time they spend on
such activities, plus a small portion (based on hours of employees spent
on Fund activities and the assets of the Fund as compared to all Funds
the General Partners manage) of other overhead, such as rental expense,
of the Managing General Partner. Reimbursements to the General Partners
for expenses incurred have averaged approximately $294,000 per year
during the past two years and aggregated approximately over $894,118
during the three years ended December 31, 1996. Such reimbursements
will decrease if cash is distributed and fewer properties are under
management in the Fund.
Repurchase Amendment:
1. Limitation on Repurchases. The Fund is not required to repurchase
in any calendar year Units aggregating in excess of 5% of the Units
outstanding in such year, and is not required to repurchase Units if
doing so would impair the Funds ability to continue operations. The
Repurchase Amendment will not alter these limitations. There may be
circumstances under which Fund revenues and borrowings are insufficient
to fully fund such repurchases.
2. Valuation of Units. Although the Fund's management believes that
the new alternative repurchase price formula will generally yield a
higher Unit price than the existing formula, and Investors will be
entitled to the higher repurchase price determined under either formula,
there is no assurance that either formula price will pay an Investor the
market value of the Investor's Units. The repurchase price will be
based on the value of the Fund's assets in new formula, which will in
turn be based on a number of factors that are somewhat judgmental. To
the extent the General Partners overvalue the Units that are repurchased
through such formula, the remaining Investors and the General Partners
will be disadvantaged.
3. Effects on Distributions. The Fund will repurchase Units out of
capital available for distribution and the repurchased Units will
effectively be allocated among, and will increase the percentage
interests of, remaining partners. To the extent that the amendment
causes more Units to be repurchased, it may, in the short-term, decrease
the amount of distributions to Investors.
General:
No Appraisal Rights. Investors will not have appraisal or dissenters
rights as a result of the Amendment. Accordingly, Investors that
disagree with the Amendment will not have the right to require the Fund
to pay out the value of their units of limited partnership interest.
Instead, the Amendment will be effective with respect to all Investors
if approved by holders of a majority of the Units and a dissenting
Investor would be required to find a different method of disposing of
his or her units, such as through the Fund's repurchase plan, or to hold
his or her units until liquidation of the Fund.
REASONS FOR AND EFFECTS OF THE AMENDMENTS
Reinvestment Amendment
General. If Investors approve the Reinvestment Amendment, the Fund
will have the opportunity, upon the sale or other disposition of
properties such as the properties described below, to reinvest the Net
Proceeds of Sale in additional triple net leased properties. Under the
original terms of the Partnership Agreement, reinvestment of the Net
Proceeds of Sale from the sale of properties is currently limited to a
period of two years, which expired in November 1990. By consenting to
the Reinvestment Amendment, Investors would permit the Fund to acquire
new properties with the Net Proceeds of Sale from the sale of the
properties (net of any distributions to Investors) that occur prior to
the final liquidation of the Fund.
The Reinvestment Amendment is not intended to extend the life of the
Fund. The Prospectus pursuant to which the Units were sold indicated
that the General Partners expected that most of the properties would be
sold or refinanced eight to twelve years after acquisition. The Fund
properties described below were acquired in 1988 and 1989 and it remains
the intention of the General Partners to sell the properties in which
sale proceeds are reinvested, depending on market conditions and the
benefits of continued ownership, by the year 2002.
The Reinvestment Amendment is being proposed for a number of reasons,
including the following:
Without the Amendment, the Managing General Partner will
be required to forgo all attractive proposals it receives to sell
Fund properties if it desires to avoid depleting the Fund's
capital base;
If the Amendment is approved, the Fund will be able to
(i) take advantage of any favorable purchase proposals that are
presented, (ii) seek out such proposals when market conditions
are favorable, and (iii) retain adequate capital in the Fund to
work toward the Fund's investment objectives;
Without the Amendment, if a property is sold prior to
final liquidation of the Fund, the Fund's capital base, and
therefore its ability to generate the level of return that was
the objective when it was formed, will be reduced;
If the Amendment is approved, cash proceeds from the
sale of a property may be reinvested in a new property and,
subject to the same risks of real estate investment that were
assumed when the Fund was formed, such new property could
generate continuing cash flow from rents and potential gain on
sale;
Without the Amendment, an Investor wishing to retain a
similar investment in an AEI fund will be forced to purchase
units in a new fund with distributed cash and to incur sales
commissions and organization expense that will decrease his or
her ability to obtain gain on that reinvestment;
If the Amendment is approved, no securities brokerage
commissions or other organizational expense will be applied to
the reinvestment in new properties of cash from sale of
properties.
The General Partners believe that the Fund can generate the most
favorable returns to Investors only if the costs of forming the Funds,
including commissions to sales agents, filing fees and professional
costs, can be amortized over the intended life of the Fund. If a
significant portion of the real property assets of the Fund are sold in
advance of the originally intended liquidation date of the Fund, the
income and gain, if any, for the assets remaining may not be adequate to
generate the returns that were the original objective of the Fund.
The General Partners believe, based on recent investments in and
resales of properties by other real estate funds affiliated with the
General Partners, that the Fund can generate favorable returns through
the investment of sale proceeds in newly constructed replacement
properties that the Fund purchases at construction cost and resells
within a few years. When a fund commits to purchase a property upon
completion of construction it reduces the developer's refinancing risk
and facilitates the construction of properties for operators, such as
franchisees of restaurants, whose principal goal is not real estate
capital appreciation. Because the property is purchased at construction
cost, the risk of development and construction, for which the developer
is normally compensated, inures to the benefit of the Fund the market
value of properties when purchased will normally exceed the cost of
development. Because no securities brokerage commissions will be paid
in connection with capital that is reinvested, the entire amount of
reinvested proceeds can be applied to the purchase price and no
additional organizational costs that will affect overall return will be
incurred. No assurances can be given, however, that a new property
acquired by the Fund will produce favorable rentals, that such rentals
will not be interrupted by events outside the Managing General Partner's
control, or that the market value of any properties acquired will exceed
their cost immediately after acquisition or within the several years the
Fund proposes to hold the properties.
The Managing General Partner is currently evaluating a number of
properties for acquisition. Affiliates of the General Partners have
managed 11 public and 11 private real estate funds. As a result of
their activity in the sale-leaseback marketplace, the General Partners
have developed relationships with companies that, either directly or
through their franchisees, have a continuing need for commercial real
estate. The Managing General Partner will not be obligated to obtain
the consent of Investors as to the type of property acquired if the
Reinvestment Amendment is approved. Nevertheless, any property acquired
will comply with the investment objectives and policies set forth in the
Prospectus pursuant to which the Units were initially offered. Any
property acquired will be an existing commercial property that will be
acquired on a debt-free basis and will likely be leased to a single
tenant pursuant to a triple net lease in the franchise restaurant
industry. No property will be acquired from the General Partners or
their affiliates.
Sales of Properties. The Reinvestment Amendment is being proposed at
this time to facilitate reinvestment of the net proceeds from the sale
of properties completed during the past several years. Although much of
the proceeds have been distributed, the Fund has retained some of the
proceeds from the eight properties described below. The sales price and
certain information about the gain generated by such sales is set forth
below:
<TABLE>
<CAPTION>
Applebee's(1) Applebee's Applebee's Applebee's(1) Jiffy Lube(1) Jiffy Lube(1) Car Wash Sizzler
Columbia, SC Hampton,VA Richmond, VA VA Beach Dallas,TX Garland, TX Phoenix,AR Cincinnati, OH
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchase
date 5/6/88 7/22/88 9/20/88 10/21/88 3/1/88 3/1/88 2/9/89 1/30/90
Sale date 7/28/95 8/31/95 10/30/95 11/08/95 10/25/95 10/25/95 6/30/96 1/23/97
Sales
price $ 733,571 $1,758,877 $1,916,471 $1,515,529 $ 487,500 $ 325,000 $1,700,844 $ 335,214
Selling
expenses 18,026 11,750 11,033 18,916 3,847 2,558 10,000 19,875
Basis(2)
Book $ 408,378 $1,085,261 $1,159,145 $ 900,431 $ 370,668 $ 244,198 $1,343,620 $ 819,028
Tax $ 423,935 $1,074,473 $1,139,342 $ 914,508 $ 380,945 $ 251,572 $1,279,316 $ 834,141
Gain (loss)
Book $ 307,167 $ 661,866 $ 746,293 $ 596,182 $ 112,985 $ 78,244 $ 347,224 $ (593,689)
Tax $ 291,610 $ 672,654 $ 766,096 $ 582,105 $ 102,708 $ 70,870 $ 411,528 $ (518,802)
Tax gain
(loss)per
unit $ 12.59 $ 29.04 $ 33.15 $ 25.19 $ 4.44 $ 3.07 $ 17.81 $ (22.64)
</TABLE>
(1) Represents for the Columbia ApplebeeOs a 41.88% interest, for the
Virginia Beach Applebee's a 86.51% interest, for the Dallas Jiffy
Lube a 75.00% interest and for the Garland Jiffy Lube a 50.00%
interest in title to the properties. The remaining interest was
purchased by an affiliated Fund.
(2) Purchase price less depreciation.
The Fund purchased four Applebee's restaurant properties in 1988. All
four of the Applebee's were newly constructed properties purchased upon
completion of construction and leased under 20-year triple net leases to
Apple South, Inc. simultaneous with purchase. Each of the leases
included an option to Apple South, Inc. to purchase the properties
commencing in the seventh lease year at a price equal to the greater of
fair market value or an increase of 5% per year over the original
purchase price. Apple South, Inc. exercised the option with respect to
all four properties in 1995. The sale price listed in the table above
represents the contractual purchase price based on the 5% escalation.
The two Jiffy Lube auto care centers listed above were purchased by
the Fund and simultaneously leased, under a 20 year triple-net lease, to
Jiffy Lube International of Maryland, Inc. on March 1, 1988. Although
the lease did not specifically provide a repurchase option to the
lessee, the Fund negotiated and completed a sale of these properties to
the lessee in October 1995.
The Danny's Family Car Wash located in Phoenix, Arizona was purchased
by the Fund in February 1989 and simultaneously leased to Apache Car
Wash, Inc. under a 20-year triple-net lease agreement. The lease
included an option to purchase the property commencing in the eighth
lease year, at a price equal to the greater of fair market value or an
increase of 4% per year over the original purchase price, which was
exercised by the lessee in early 1996.
The Sizzler Restaurant located in Cincinnati, Ohio was purchased by
the Fund in 1990 and simultaneously leased to Triple S Restaurants, Inc.
In January 1994, the restaurant was closed and listed for re-lease or
sale. In December 1996, the Fund accepted an offer from an unaffiliated
party to purchase the property at a price below the Fund's basis. The
offer was accepted after a review of the market conditions in the area
and the property management costs associated with continuing to seek a
new tenant for the property.
The Fund has distributed an aggregate of $4,594,080 ($197.94 per Unit)
from the proceeds of these sales. These distributions of Net Proceeds
on Sale, in the aggregate, reduced the Adjusted Capital Contributions of
Investors by $197.94 per outstanding Unit.
In January 1996, the Fund also received $406,282 of insurance
proceeds, net of demolition and other costs, resulting from the
destruction by fire of a restaurant property in Indianapolis, Indiana.
These proceeds resulted in recognition of $78,290 of net gain by the
Fund. The Fund currently does not intend to rebuild the property and
has listed the land (which has a cost basis of $261,644) for sale.
Properties Currently Held by the Fund. The Fund currently holds
interests in ten properties (excluding the land resulting from the fire
in Indianapolis, Indiana) as summarized below:
Property Acquisition Annual Rental
Cost Payments
Jiffy Lube Auto Care Center, Dallas, TX $ 454,624 $ 56,925
am/pm Market, Carson City, NV 703,871 106,361
Taco Cabana, San Marcos, TX 1,013,505 156,649
Denny's Restaurant, Casa Grande, AZ 721,420 104,759
Children's World, St. Louis, MO 950,627 114,347
Children's World, Merrimak, NH 1,159,242 139,991
Children's World, Chino, CA 1,305,518 157,730
Children's World, Palatine, IL 801,098 96,149
Cheddar's Restaurant, Davenport, IA 1,530,934 225,802
Bennigan's Restaurant, Cincinnati, OH 1,898,768 75,000
Sports City Cafe, Mesquite TX 956,343 32,500
Total $11,495,950 $1,266,213
Effects of Amendment. In the event Investors approve the Reinvestment
Amendment, the proceeds from the sale of the properties listed above
will be reinvested in new properties. It would be the objective of the
Fund to invest such proceeds in properties that generate rental payments
at rates similar to the initial rates for the operating properties
listed above.
If Investors do not approve the Reinvestment Amendment, Investors will
receive a distribution of approximately $4,300,000, or approximately
$187.60 per outstanding Unit, in the second quarter of 1997. This
distribution of Net Proceeds on Sale would reduce the Adjusted Capital
Contributions of Investors by an additional $187.60 per outstanding
Limited Partnership unit.
The eight properties that have been sold generated aggregate rental
revenues of $1,120,657 during the last full year of their operations.
Future Fund revenues, and therefore cash distributions to Investors,
will be reduced because of the distribution of sales proceeds.
Distributions would be further reduced if the remaining sales proceeds
were distributed to the Investors. Further, if proceeds are distributed
rather than reinvested, the Fund will be dependent in the future on the
approximately $1,266,213 of cash flow generated from rental payments
from operating properties for payment of expenses and to fund
distributions.
Interests of the General Partners. In accordance with, and subject to
the limitations in, the Partnership Agreement, the General Partners will
be reimbursed for any costs (including a proportionate amount of
employee salary, benefit and overhead expense) they incur in completing
any property acquisition and in connection with management of the
property. Generally, costs are allocated to the Fund based on the daily
time sheets of employees. The Managing General Partner establishes an
hourly charge for each employee based on their salaries, benefit expense
and overhead expense (the portion of rental, depreciation and other
office charges necessary to maintain the employee) and the Fund is
charged for the amount of time spent by the employee on Fund activities
multiplied by the time charge. If the Reinvestment Amendment is not
approved, and the proceeds from the sale of the properties are not
reinvested, the amount of capital under management by the General
Partners through the Fund, and the scope of the Fund's operations, will
be reduced and the Managing General Partner will have to deploy its
employees in other activities. Such reduced operations can be expected
to reduce the amount of reimbursements that the General Partners receive
from the Fund. Reimbursements to the General Partners by the Fund for
expenses incurred have averaged approximately $294,000 per year during
the past two years and aggregated approximately over $894,118 during the
three years ended December 31, 1996. Such reimbursements will decrease
if cash is distributed and fewer properties are under management in the
Fund.
Further, the General Partners receive more than 1% of Fund cash flow
only to the extent the Fund has generated a 10% return to Investors, and
share in sales proceeds only to the extent the Fund has paid cumulative
distributions to Investors equal to their Adjusted Capital Contributions
plus a 14% cumulative return. To the extent that proceeds are
reinvested, the properties perform well, and these returns can be
achieved, the General Partners may receive increased compensation.
The Individual General Partner holds 30 units as a limited partner in
the Fund. No other affiliate of the General Partners holds any interest
as a limited partner in the Fund.
Repurchase Amendment
General. Over the period of time since the Fund was formed, a limited
secondary market has developed for units of limited partnership interest
in real estate limited partnerships like the Fund. Generally, this
market is made by individuals and firms who match willing sellers with
buyers by posting sale proposals (but not prices) and by maintaining a
list of Unit holders who are willing to sell from time to time. In most
cases, these transactions are relatively time consuming and do not
represent an active market in the Units. Accordingly, they may not
represent actual market value for the Units. In some cases, individuals
acquire Units with the intent to acquire control of partnerships for
invested amounts significantly less than the liquidation value of the
partnerships' properties and to then cause the liquidation of the
partnerships at a profit to themselves.
The development of this market has given Units held by Investors a
potential market value that may be different than and, in some instances
greater than, the Unit values established under the terms of the Unit
repurchase provisions (Section 7.7) of the Partnership Agreement. It
has also provided some liquidity of investment for holders of Units,
because although purchases in the secondary market remain subject to
restrictions under the terms of the Partnership Agreement (e.g., no more
than 5% of the outstanding Units can change hands in any one year),
sales are not subject to the relatively limited annual presentment
period provided in the Partnership Agreement.
In order to offer Investors the opportunity to present their Units to
the Fund for repurchase more frequently, and at a price that may more
closely reflect the prices available in the secondary market, the
General Partners propose to amend Section 7.7 of the Partnership
Agreement to provide an alternative valuation formula and to allow for
quarterly presentment of Units for repurchase, rather than the current
annual presentment period. The provisions of Section 7.7, as proposed
to be amended, will provide that Investors will be entitled to the price
under the formula yielding the highest value. Because of changes that
must be made to the Partnership's information processing systems if the
amendment is approved, the amendment ill be effective commencing in
calendar 1998 for Units tendered for repurchase during that year.
Effects of Amendment. Although the General Partners believe that the
new alternative repurchase price formula will generally yield a higher
Unit price than the existing formula, and Investors will be entitled to
the higher repurchase price determined under either formula, there is no
assurance that either formula price will pay an Investor the market
value of the Investor's Units. Moreover, the Fund is not required to
repurchase in any calendar year Units aggregating in excess of 5% of the
Units outstanding in such year, and is not required to repurchase Units
if doing so would impair the Funds ability to continue operations. The
Repurchase Amendment will not alter these limitations. There may be
circumstances under which Fund revenues and borrowings are insufficient
to fully fund such repurchases.
Repurchases by the Fund, under either the existing or amended
repurchase provisions, are made out of cash available for distribution
and increase the percentage interests in income, gain, deduction and
distributions of the Fund of remaining Investors, pro rata among such
Investors based on their interests before the repurchases. Although the
Repurchase Amendment does not allow the General Partners to establish a
repurchase price that is below the purchase price currently available
under the Partnership Agreement, it does allow the General Partners to
establish a repurchase price that is higher. To the extent that the
repurchase price established by the General Partners exceeds the actual
economic value (a theoretical value) of the Units that are repurchased,
the overall economic value afforded the General Partners and the
remaining Investors by their interest in the Fund will be diminished.
The General Partners believe that the current formula establishes a
price that is far below the actual value of the Units and that the price
established by matching services is far below the actual value.
Accordingly, the General Partners believe that the Repurchase Amendment
will allow repurchases at a higher price than the repruchase price, but
a price that is below the net asset value of the Fund. Accordingly, the
General Partners believe that such amendment may benefit both Investors
who desire to withdraw by providing a higher price and remaining
Investors by puirchasing units at less than net asset value.
VOTING UNITS
Voting by Investors with respect to an amendment of the Partnership
Agreement is based upon ownership of Fund Units ("Voting Units"). As of
July 1, 1997, there were 22,920 Voting Units outstanding. Each Voting
Unit is entitled to one vote. Fractions of Voting Units will be
included in the total.
To the best of the Managing General Partner's knowledge, there is no
beneficial owner holding five percent or more of the Voting Units,
including Voting Units owned by the General Partners. In order for the
proposed Amendments to be adopted, a majority of the Voting Units must
be voted in favor of each Amendment.
PROCEDURES FOR VOTING
Accompanying this Consent Statement is a Consent Form for each
Investor with respect to his/her unit ownership in the Fund. By
checking the appropriate box, each Investor can indicate whether he/she
votes FOR or AGAINST or ABSTAINS as to the proposed Amendments. If any
Investor returns a Consent Form duly signed without checking any box,
he/she will be deemed to have voted FOR the Amendment.
An Investor who votes against, or abstains with respect to, the
Amendments does not have appraisal or similar rights under Minnesota
law.
The Managing General Partner has fixed the close of business on July
1, 1997 as the record date for the determination of the Investors
entitled to vote on the proposed Amendment; the close of business on
September 15, 1997 as the date by which Consent Forms must be received
by the Managing General Partner in order to be counted; and September
16, 1997 as the date on which the consents are to be counted. An
Investor may revoke his/her or its consent at any time prior to
September 15, 1997, provided written revocation is received by the
Managing General Partner prior to that date.
The cost of solicitation of consents of the Investors will be borne by
the Fund. The solicitations will be made by the mails. This Consent
Statement is being first mailed to Investors on or about July 25, 1997.
Staff of the Managing General Partner will be available by telephone to
answer any questions concerning this Consent.
INCORPORATION BY REFERENCE
The information included under the captions "Financial Statements and
Notes to Financial Statements" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the Fund's Annual
Report on Form 10-KSB for the year ended December 31, 1996 is hereby
incorporated by reference. Copies of such sections are being delivered
to Investors with this Consent Statement.
BY ORDER OF THE BOARD OF DIRECTORS
OF AEI FUND MANAGEMENT XVII, INC.
Robert P. Johnson, President
Exhibit A
PROPOSED AMENDMENTS OF
LIMITED PARTNERSHIP AGREEMENT OF
AEI REAL ESTATE FUND XVII
Changes in the existing provisions of the Limited Partnership
Agreement that would be made by the proposed Reinvestment Amendment and
the proposed Repurchase Amendment are shown below. Existing provisions
proposed to be omitted are lined through and enclosed in brackets. New
Provisions are printed in bold type. If approved, the Reinvestment
Amendment will be effecitve immediately, while the Repurchase Amendment
will be effective for Units tendered in calendar 1998 and after.
REINVESTMENT AMENDMENT
SECTION 5.4 DISTRIBUTION OF NET PROCEEDS OF SALE
5.4 Distribution of Net Proceeds of Sale. Upon financing,
refinancing, sale or other disposition of any of the Properties, Net
Proceeds of Sale may be reinvested in additional properties until [a
date 24 months after the date on which the offer and sale of units
pursuant to the Prospectus is terminated], the General Partner
determines that it is in the best interests of the Fund to begin
liquidation of the Fund; provided, however, that sufficient cash is
distributed to the Limited Partners to pay state and federal income
taxes (assuming Limited Partners are taxable at a marginal rate of 28%
for federal income tax purposes or such greater rate as is the maximum
effective rate for federal income taxation applicable to individuals)
created as a result of such transaction.
REPURCHASE AMENDMENT
SECTION 7.7 RIGHT TO PRESENT UNITS FOR PURCHASE
7.7 Right to Present Units for Purchase. (a) Beginning in 1988,
each Limited Partner shall have the right, subject to the provisions of
this Section 7.7, to present such Partner's Units to the Partnership for
purchase by submitting to the Managing General Partner [written] notice
[(postmarked after July 1 but before October 1 of such year)] on a form
supplied by the Partnership (a "Redemption Notice") specifying the
number of Units he or she wishes repurchased. The Managing General
Partner shall establish on each of January 1, April 1, July 1, and
October 1 of each year (the "Pricing Dates"), and shall make available
to Limited Partners upon request, a repurchase price (the "Repurchase
Price") for Units, determined in accordance with the formulae set forth
below, that shall apply to all Units tendered for repurchase during the
calendar quarter following such Pricing Date. The Repurchase Price
shall be equal to the greater of (i) ninety percent (90%) of the Net
Value of the Partnership's assets on the Pricing Date divided by the
number of Units outstanding on such Pricing Date, or [the tendering
Limited Partner's Adjusted Capital Contribution on October 1, of the
year of purchase multiplied by seventy-five percent (75%) for purchases
in calendar year 1989 and ninety percent (90%) for purchases in calendar
year 1990. For purchases in 1991 and in each year thereafter, the
purchase price shall be equal to] (ii) one hundred percent (100%) of the
tendering Limited Partner's Adjusted Capital Contribution on [October
1,] such Pricing Date, less fifty percent (50%) of all Net Cash Flow
previously distributed to such Limited Partner throughout the term of
the Partnership. Subject to the limitations set forth below, the
Managing General Partner shall cause the Partnership to purchase on
January 1, April 1, July 1, and October 1 of each year (a "Repurchase
Date"), at a Repurchase Price equal to the Repurchase Price established
for the quarter in which the Redemption Notice was received by the
Partnership, the Units of Limited Partners from which the Partnership
has received a Notice of Redemption at least sixty days prior to such
Repurchase Date. The Partnership will not be obligated to purchase in
any year more than five percent (5%) of the total number of Units
outstanding on January 1 of such year. In the event requests for
purchase of Units received in any given year exceed the five percent
(5%) limitation, the Units to be purchased will be determined based on
the postmark date of the written notice of Limited Partners tendering
Units. The Managing General Partner may suspend repurchases during any
period after the Partnership has distributed Net Proceeds of Sale and
during which the Managing General Partner reasonably believes that the
Repurchase Price does not appropriately reflect the Net Value of the
Partnership's remaining assets less liabilities. Any Units tendered but
not selected for purchase in any given year will be considered for
purchase in subsequent years only if the Limited Partner retenders his
or her Units. 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 nor shall the Partnership purchase any Units in violation of
applicable legal requirements.
(b) For purposes of all calculations pursuant to Article V of
this agreement, any Net Cash Flow or Net Proceeds of Sale used to
repurchase Units or to repay borrowings that were used to repurchase
Units shall be deemed distributed to the remaining Limited Partners pro
rata based on the ratio of the number of Units owned to all Units
outstanding after such repurchase. For purposes of the formula in
subsection (a)(ii) above, "Net Value" means the aggregate value of the
Partnership's assets less the Partnership's liabilities and less the
Managing General Partner's reasonable estimate of distributions of Net
Proceeds of Sale for the period after the Pricing Date but before the
Repurchase Date, as determined by the Managing General Partner, after
taking into account (i) the present value of future net cash flow from
rental income on the Fund's properties, (ii) the price at which Units of
the Partnership have been purchased, and (iii) such other factors as the
General Partners deem relevant.
IMPORTANT IMPORTANT
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
CONSENT OF LIMITED PARTNERS
This consent is solicited by the Board
of Directors of AEI Fund Management XVII, Inc.,
The Managing General Partner
The undersigned, a Limited Partner of AEI Real Estate Fund XVII
Limited Partnership (the "Fund"), hereby consents (unless otherwise
directed below) to the proposals identified below to adopt (i) an
Amendment to Section 5.4 of the Limited Partnership Agreement (the
"Partnership Agreement") of the Fund (the "Reinvestment Amendment"), and
(ii) an Amendment to Section 7.7 of the Partnership Agreement (the
"Repurchase Amendment"), as more fully described in the accompanying
Consent Statement (together, the "Amendments"). By voting for the
Amendments, or either of them, the undersigned hereby appoints AEI Fund
Management XVII, Inc. as its attorney-in-fact with power to sign and
acknowledge on its behalf any instrument that may be necessary to
evidence either Amendment to the Partnership Agreement and any
corresponding Amendment to the Fund's Certificate of Limited
Partnership.
Please date and sign this Consent below and return it in the
enclosed, postage paid envelope. To be counted, this Consent must be
received not later than the close of business on September 15, 1997.
1. Adoption of the Reinvestment Amendment to Section 5.4 of the
Partnership Agreement
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Adoption of the Repurchase Amendment to Section 7.7 of the
Partnership Agreement
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The Fund Units held by the signing Limited Partner will be voted as
directed. They will be voted "FOR" the Amendments if no box is checked.
Please sign exactly as your name appears below. When Fund Units
are held by joint tenants, both owners should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS CONSENT.
Dated: , 1997
Signature (if held jointly)
