SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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[X] Preliminary Proxy Statement
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Rule 14a-6(e)(2))
[ ] 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)
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[ ] No fee required.
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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):
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[ ] 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:
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4) Date Filed:
<PAGE>
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
JUNE 10, 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 AUGUST 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.
</PAGE> 1
<PAGE>
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."
</PAGE> 2
<PAGE>
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.
</PAGE> 3
<PAGE>
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.
</PAGE> 4
<PAGE>
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.
</PAGE> 5
<PAGE>
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.
</PAGE> 6
<PAGE>
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:
</PAGE> 7
<PAGE>
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.
</PAGE> 8
<PAGE>
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:
</PAGE> 9
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Applebee's<F1> Applebee's Applebee's Applebee's<F1> Jiffy Lube<F1> Jiffy Lube<F1> Car Wash Sizzler
Columbia, SC Hampton,VA Richmond, VA VA Beach Dallas, TX Garland, TX Phoenix, AR Cincinnati,OH
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<F2>
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>
<F1> Represents for the Columbia Applebee's 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.
<F2> 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.
</PAGE> 10
<PAGE>
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.
</PAGE> 11
<PAGE>
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 Cost Annual Rental 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
Childrens 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.
</PAGE> 12
<PAGE>
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.
</PAGE> 13
<PAGE>
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.
</PAGE> 14
<PAGE>
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 PartnershipOs information
processing systems if the amendment is approved, the amendment
will 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.
</PAGE> 15
<PAGE>
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 June 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
June 1, 1997 as the record date for the determination of the
Investors entitled to vote on the proposed Amendment; the close
of business on August 15, 1997 as the date by which Consent
Forms must be received by the Managing General Partner in order
to be counted; and August 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 August 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 June 10, 1997. Staff of the Managing General Partner will
be available by telephone to answer any questions concerning this
Consent.
</PAGE> 16
<PAGE>
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.
</PAGE> 17
<PAGE>
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 PartnershipOs
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.
</PAGE> 18
<PAGE>
(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.
</PAGE> 19
<PAGE>
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 August
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 an Amendment 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)
</PAGE> 20
