SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: June 30, 1998
Commission file number: 0-17467
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Minnesota 41-1603719
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(651) 227-7333
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes [X] No
Transitional Small Business Disclosure Format:
Yes No [X]
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of June 30, 1998 and December 31, 1997
Statements for the Periods ended June 30, 1998 and 1997:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE> AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
BALANCE SHEET
JUNE 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
ASSETS
1998 1997
CURRENT ASSETS:
Cash and Cash Equivalents $ 1,629,693 $ 2,615,163
Receivables 45,224 1,014
----------- -----------
Total current Assets 1,674,917 2,616,177
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 4,637,235 4,416,278
Buildings and Equipment 8,457,780 8,975,829
Construction in Progress 1,517,891 46,997
Property Acquisition Costs 36,652 52,844
Accumulated Depreciation (2,678,665) (2,778,790)
----------- -----------
11,970,893 10,713,158
Real Estate Held for Sale 199,644 199,644
----------- -----------
Net Investments in Real Estate 12,170,537 10,912,802
----------- -----------
Total Assets $13,845,454 $13,528,979
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 20,165 $ 45,489
Distributions Payable 203,479 168,778
Unearned Rent 63,551 0
----------- -----------
Total Current Liabilities 287,195 214,267
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (65,829) (68,265)
Limited Partners, $1,000 Unit value;
30,000 Units authorized; 23,389 Units issued;
22,419 and 22,556 Units outstanding in 1998
and 1997, respectively 13,624,088 13,382,977
----------- -----------
Total Partners' Capital 13,558,259 13,314,712
----------- -----------
Total Liabilities and Partners' Capital $13,845,454 $13,528,979
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED JUNE 30
(Unaudited)
Three Months Ended Six Months Ended
6/30/98 6/30/97 6/30/98 6/30/97
INCOME:
Rent $ 361,011 $ 310,378 $ 733,498 $ 618,491
Investment Income 49,703 64,692 87,151 125,464
---------- ---------- ---------- ----------
Total Income 410,714 375,070 820,649 743,955
---------- ---------- ---------- ----------
EXPENSES:
Partnership Administration -
Affiliates 69,099 76,507 135,420 135,368
Partnership Administration
and Property Management -
Unrelated Parties 11,057 27,751 33,590 55,076
Depreciation 81,976 83,778 169,032 167,755
---------- ---------- ---------- ----------
Total Expenses 162,132 188,036 338,042 358,199
---------- ---------- ---------- ----------
OPERATING INCOME 248,582 187,034 482,607 385,756
GAIN ON SALE OF REAL ESTATE 0 0 416,282 0
---------- ---------- ---------- ----------
NET INCOME $ 248,582 $ 187,034 $ 898,889 $ 385,756
========== ========== ========== ==========
NET INCOME ALLOCATED:
General Partners $ 2,487 $ 1,870 $ 8,990 $ 3,858
Limited Partners 246,095 185,164 889,899 381,898
---------- ---------- ---------- ----------
$ 248,582 $ 187,034 $ 898,889 $ 385,756
========== ========== ========== ==========
NET INCOME PER
LIMITED PARTNERSHIP UNIT
(22,419, 22,920, 22,487 and
22,920 weighted average Units
outstanding for the periods,
respectively) $ 10.98 $ 8.08 $ 39.57 $ 16.66
========== ========== ========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED JUNE 30
(Unaudited)
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 898,889 $ 385,756
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 169,032 167,755
Gain on Sale of Real Estate (416,282) 0
Increase in Receivables (44,210) 0
Decrease in Payable to
AEI Fund Management, Inc. (25,324) (74,888)
Increase in Security Deposit 0 12,646
Increase in Unearned Rent 63,551 54,707
----------- -----------
Total Adjustments (253,233) 160,220
----------- -----------
Net Cash Provided By
Operating Activities 645,656 545,976
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (1,861,481) 0
Proceeds from Sale of Real Estate 850,996 315,229
----------- -----------
Net Cash Provided By (Used For)
Investing Activities (1,010,485) 315,229
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable 34,701 (127,006)
Distributions to Partners (555,186) (674,493)
Redemption Payments (100,156) 0
----------- -----------
Net Cash Used For
Financing Activities (620,641) (801,499)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (985,470) 59,706
CASH AND CASH EQUIVALENTS, beginning of period 2,615,163 4,798,584
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,629,693 $ 4,858,290
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED JUNE 30
(Unaudited)
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1996 $ (62,780) $13,925,996 $13,863,216 22,920.29
Distributions (6,745) (667,748) (674,493)
Net Income 3,858 381,898 385,756
--------- ----------- ------------ -----------
BALANCE, June 30, 1997 $ (65,667) $13,640,146 $13,574,479 22,920.29
========= =========== ============ ===========
BALANCE, December 31, 1997 $ (68,265) $13,382,977 $13,314,712 22,555.89
Distributions (5,552) (549,634) (555,186)
Redemption Payments (1,002) (99,154) (100,156) (137.20)
Net Income 8,990 889,899 898,889
--------- ----------- ----------- -----------
BALANCE, June 30, 1998 $ (65,829) $13,624,088 $13,558,259 22,418.69
========= =========== =========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
(1) The condensed statements included herein have been prepared
by the Partnership, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of
operations for the interim period, on a basis consistent with
the annual audited statements. The adjustments made to these
condensed statements consist only of normal recurring
adjustments. Certain information, accounting policies, and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Partnership
believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction
with the financial statements and the summary of significant
accounting policies and notes thereto included in the
Partnership's latest annual report on Form 10-KSB.
(2) Organization -
AEI Real Estate Fund XVII Limited Partnership (Partnership)
was formed to acquire and lease commercial properties to
operating tenants. The Partnership's operations are managed
by AEI Fund Management XVII, Inc. (AFM), the Managing
General Partner of the Partnership. Robert P. Johnson, the
President and sole shareholder of AFM, serves as the
Individual General Partner of the Partnership. An affiliate
of AFM, AEI Fund Management, Inc., (AEI) performs the
administrative and operating functions for the Partnership.
The terms of the Partnership offering call for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. The Partnership
commenced operations on February 10, 1988 when minimum
subscriptions of 2,000 Limited Partnership Units
($2,000,000) were accepted. The Partnership's offering
terminated on November 1, 1988 when the one-year offering
period expired. The Partnership received subscriptions for
23,388.7 Limited Partnership Units ($23,388,700).
Under the terms of the Limited Partnership Agreement, the
Limited Partners and General Partners contributed funds of
$23,388,700 and $1,000, respectively. During the operation
of the Partnership, any Net Cash Flow, as defined, which the
General Partners determine to distribute will be distributed
90% to the Limited Partners and 10% to the General Partners;
provided, however, that such distributions to the General
Partners will be subordinated to the Limited Partners first
receiving an annual, noncumulative distribution of Net Cash
Flow equal to 10% of their Adjusted Capital Contribution, as
defined, and, provided further, that in no event will the
General Partners receive less than 1% of such Net Cash Flow
per annum. Distributions to Limited Partners will be made
pro rata by Units.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
Any Net Proceeds of Sale, as defined, from the sale or
financing of the Partnership's properties which the General
Partners determine to distribute will, after provisions for
debts and reserves, be paid in the following manner: (i)
first, 99% to the Limited Partners and 1% to the General
Partners until the Limited Partners receive an amount equal
to: (a) their Adjusted Capital Contribution plus (b) an
amount equal to 6% of their Adjusted Capital Contribution
per annum, cumulative but not compounded, to the extent not
previously distributed from Net Cash Flow; (ii) next, 99% to
the Limited Partners and 1% to the General Partners until
the Limited Partners receive an amount equal to 14% of their
Adjusted Capital Contribution per annum, cumulative but not
compounded, to the extent not previously distributed; (iii)
next, to the General Partners until cumulative distributions
to the General Partners under Items (ii) and (iii) equal 15%
of cumulative distributions to all Partners under Items (ii)
and (iii). Any remaining balance will be distributed 85% to
the Limited Partners and 15% to the General Partners.
Distributions to the Limited Partners will be made pro rata
by Units.
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
property, will be allocated first in the same ratio in
which, and to the extent, Net Cash Flow is distributed to
the Partners for such year. Any additional profits will be
allocated 90% to the Limited Partners and 10% to the General
Partners. In the event no Net Cash Flow is distributed to
the Limited Partners, 90% of each item of Partnership
income, gain or credit for each respective year shall be
allocated to the Limited Partners, and 10% of each such item
shall be allocated to the General Partners. Net losses from
operations will be allocated 98% to the Limited Partners and
2% to the General Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of the Partnership's property will be
allocated in accordance with the Partnership Agreement as
follows: (i) first, to those Partners with deficit balances
in their capital accounts in an amount equal to the sum of
such deficit balances; (ii) second, 99% to the Limited
Partners and 1% to the General Partners until the aggregate
balance in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital Contributions
plus an amount equal to 14% of their Adjusted Capital
Contributions per annum, cumulative but not compounded, to
the extent not previously allocated; (iii) third, to the
General Partners until cumulative allocations to the General
Partners equal 15% of cumulative allocations. Any remaining
balance will be allocated 85% to the Limited Partners and
15% to the General Partners. Losses will be allocated 98%
to the Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the Partnership
or withdrawal by a General Partner, the General Partners
will contribute to the Partnership an amount equal to the
lesser of the deficit balances in their capital accounts or
1% of total Limited Partners' and General Partners' capital
contributions.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate -
The Partnership owns a 65% interest in a J.T. McCord's
restaurant in Mesquite, Texas. In December, 1995, the
Partnership took possession of the property after the lessee
was unable to perform under the terms of the Lease. In
July, 1996, the Partnership entered into an agreement to
sell the property to an unrelated third party. In
September, 1996, the Agreement was terminated by the
purchaser. The property was listed for sale or lease until
March, 1997 when it was re-leased to Texas Sports City Cafe,
Ltd. under a triple net lease agreement with a primary term
of 12 years which may be renewed for up to two consecutive
five-year periods. The Partnership's share of the annual
base rent is $32,500 for the first lease year and $58,500
for the second lease year, with rent increases in each
subsequent lease year of either three percent of the prior
year's rent or three percent of gross receipts in years two
and three and six percent of gross receipts thereafter, to
the extent they exceed the base rent. While the property
was being re-leased, the Partnership was responsible for the
real estate taxes and other costs required to maintain the
property.
In January, 1996, the Cheddar's restaurant in Indianapolis,
Indiana was destroyed by a fire. The Partnership reached an
agreement with the tenant and insurance company which called
for termination of the Lease, demolition of the building and
payment to the Partnership of $407,282 for the building and
equipment and $49,688 for lost rent. The property will not
be rebuilt and the Partnership listed the land for sale.
The Partnership recognized net disposition proceeds of
$406,892 which resulted in a net gain of $78,290. At the
time of disposition, the cost and related accumulated
depreciation was $512,433 and $183,831, respectively. As of
December 31, 1997, based on an analysis of market conditions
in the area, it was determined the fair value of the
Partnership's interest in the land was approximately
$200,000. In the fourth quarter of 1997, a charge to
operations for real estate impairment of $62,000 was
recognized, which is the difference between the book value
at December 31, 1997 of $261,644 and the estimated fair
value of $200,000.
The Partnership owned a 65.09% interest in the Sizzler
restaurant at the King's Island Theme Park near Cincinnati,
Ohio. In January, 1994, the Partnership closed the
restaurant and listed it for sale or lease. On January 23,
1997, the Partnership sold its interest in the property to
an unrelated third party. The Partnership received net
sales proceeds of $315,229, which resulted in a net loss of
$503,600, which was recognized as a real estate impairment
in the fourth quarter of 1996. Prior to the sale, the
Partnership was responsible for the real estate taxes and
other costs required to maintain the property.
On February 20, 1998, the Partnership sold the am/pm Mini
Market in Carson City, Nevada to an unrelated third party.
The Partnership received net sale proceeds of $850,996,
which resulted in a net gain of $416,282. At the time of
sale, the cost and related accumulated depreciation was
$703,871 and $269,157, respectively.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
During the first six months of 1998 and 1997, the
Partnership distributed $12,622 and $120,981 of the net sale
proceeds to the Limited and General Partners as part of
their regular quarterly distributions, which represented a
return of capital of $0.55 and $5.23 per Limited Partnership
Unit, respectively. In June, 1997, the Managing General
Partner filed a proxy statement to propose an Amendment to
the Limited Partnership Agreement that would allow the
Partnership to reinvest the majority of the sales proceeds
in additional properties. The Amendment passed with a
majority of Units voting in favor of the Amendment.
In October, 1997, the Partnership entered into a Development
Financing Commitment under which the Partnership would
advance funds for the construction of a Timber Lodge
Steakhouse restaurant in Rockford, Illinois. The purchase
price was approximately $1,620,000. The property would have
been leased to Timber Lodge Steakhouse, Inc. under a Lease
Agreement with a primary term of 20 years and annual rental
payments of approximately $174,000. In January, 1998, the
Commitment was terminated by mutual agreement of the
parties.
On November 18, 1997, the Partnership purchased a 30.794%
interest in a Timber Lodge Steakhouse in St. Cloud,
Minnesota for $493,492. The property is leased to Timber
Lodge Steakhouse, Inc. under a Lease Agreement with a
primary term of 20 years and annual rental payments of
$51,537. The remaining interests in the property are owned
by AEI Real Estate Fund XV Limited Partnership and AEI
Institutional Net Lease Fund '93 Limited Partnership,
affiliates of the Partnership.
On December 10, 1997, the Partnership purchased a 60.0%
interest in a TGI Friday's restaurant in Greensburg,
Pennsylvania for $1,009,045. The property is leased to Ohio
Valley Bistros, Inc. under a Lease Agreement with a primary
term of 15 years and annual rental payments of $101,475.
The remaining interest in the property was purchased by AEI
Income & Growth Fund XXII Limited Partnership, an affiliate
of the Partnership.
On December 23, 1997, the Partnership purchased a 26.05%
interest in a parcel of land in Troy, Michigan for $393,620.
The land is leased to Champps Entertainment, Inc. (Champps)
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $27,553. Effective June 20, 1998,
the annual rent was increased to $41,330. Simultaneously
with the purchase of the land, the Partnership entered into
a Development Financing Agreement under which the
Partnership will advance funds to Champps for the
construction of a Champps Americana restaurant on the site.
Through June 30, 1998, the Partnership had advanced $454,224
for the construction of the property and was charging
interest on the advances at a rate of 7%. Effective June
20, 1998, the interest rate was increased to 10.50%. The
Partnership's share of the total purchase price, including
the cost of the land, will be approximately $1,172,250.
After the construction is complete, the Lease Agreement will
be amended to require annual rental payments of
approximately $123,000. The remaining interests in the
property are owned by AEI Real Estate Fund XV Limited
Partnership, AEI Real Estate Fund XVIII Limited Partnership
and AEI Net Lease Income & Growth Fund XIX Limited
Partnership, affiliates of the Partnership.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
On January 15, 1998, the Partnership purchased a parcel of
land in Rochester, Minnesota for $406,778. The land is
leased to Timber Lodge Steakhouse, Inc. (TLS) under a Lease
Agreement with a primary term of 20 years and annual rental
payments of $30,133. Effective May 14, 1998, the annual
rent was increased to $42,327. Simultaneously with the
purchase of the land, the Partnership entered into a
Development Financing Agreement under which the Partnership
will advance funds to TLS for the construction of a Timber
Lodge Steakhouse restaurant on the site. Through June 30,
1998, the Partnership had advanced $1,063,667 for the
construction of the property and was charging interest on
the advances at a rate of 7.5%. Effective May 14, 1998, the
interest rate was increased to 10.535%. The total purchase
price, including the cost of the land, will be approximately
$1,860,000. After the construction is complete, the Lease
Agreement will be amended to require annual rental payments
of approximately $196,000.
During 1997 and the first six months of 1998, the
Partnership incurred net costs of $64,184 relating to the
review of potential property acquisitions. Of these costs,
$27,532 have been capitalized and allocated to land,
building and equipment. The remaining costs of $36,652 have
been capitalized and will be allocated to property
acquisitions in future periods.
(4) Payable to AEI Fund Management -
AEI Fund Management, Inc. performs the administrative and
operating functions for the Partnership. The payable to AEI
Fund Management represents the balance due for those
services. This balance is non-interest bearing and
unsecured and is to be paid in the normal course of
business.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the six months ended June 30, 1998 and 1997, the
Partnership recognized rental income of $733,498 and $618,491,
respectively. During the same periods, the Partnership earned
investment income of $87,151 and $125,464, respectively. In
1998, rental income increased as a result of rent received from
four property acquisitions in 1997 and 1998, rent received from
re-leasing the restaurant in Mesquite, Texas, and rent increases
on nine properties. These increases in rental income were
partially offset by a decrease in rent due to a property sale in
1998 and a decrease in investment income earned on the net
proceeds prior to the purchase of the additional properties.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
The Partnership owns a 65% interest in a J.T. McCord's
restaurant in Mesquite, Texas. In December, 1995, the
Partnership took possession of the property after the lessee was
unable to perform under the terms of the Lease. In July, 1996,
the Partnership entered into an agreement to sell the property to
an unrelated third party. In September, 1996, the Agreement was
terminated by the purchaser. The property was listed for sale or
lease until March, 1997 when it was re-leased to Texas Sports
City Cafe, Ltd. under a triple net lease agreement with a primary
term of 12 years which may be renewed for up to two consecutive
five-year periods. The Partnership's share of the annual base
rent is $32,500 for the first lease year and $58,500 for the
second lease year, with rent increases in each subsequent lease
year of either three percent of the prior year's rent or three
percent of gross receipts in years two and three and six percent
of gross receipts thereafter, to the extent they exceed the base
rent. While the property was being re-leased, the Partnership
was responsible for the real estate taxes and other costs
required to maintain the property.
The Partnership owned a 65.09% interest in the Sizzler
restaurant at the King's Island Theme Park near Cincinnati, Ohio.
In January, 1994, the Partnership closed the restaurant and
listed it for sale or lease. On January 23, 1997, the
Partnership sold its interest in the property to an unrelated
third party. The Partnership received net sales proceeds of
$315,229, which resulted in a net loss of $503,600, which was
recognized as a real estate impairment in the fourth quarter of
1996. Prior to the sale, the Partnership was responsible for the
real estate taxes and other costs required to maintain the
property.
During the six months ended June 30, 1998 and 1997, the
Partnership paid Partnership administration expenses to
affiliated parties of $135,420 and $135,368, respectively. These
administration expenses include costs associated with the
management of the properties, processing distributions, reporting
requirements and correspondence to the Limited Partners. During
the same periods, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $33,590 and $55,076, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, taxes, insurance and other property costs.
As of June 30, 1998, the Partnership's annualized cash
distribution rate was 7.44%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement. As a result, 99% of distributions and
income were allocated to Limited Partners and 1% to the General
Partners.
Inflation has had a minimal effect on income from
operations. It is expected that increases in sales volumes of
the tenants, due to inflation and real sales growth, will result
in an increase in rental income over the term of the leases.
Inflation also may cause the Partnership's real estate to
appreciate in value. However, inflation and changing prices may
also have an adverse impact on the operating margins of the
properties' tenants which could impair their ability to pay rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. AEI is currently analyzing its
computer hardware and software systems to determine what, if any,
resources need to be dedicated regarding Year 2000 issues. The
Partnership does not anticipate any significant operational
impact or incurring material costs as a result of AEI becoming
Year 2000 compliant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Liquidity and Capital Resources
During the six months ended June 30, 1998, the
Partnership's cash balances decreased $985,470 mainly as a result
of the reinvestment of net sale proceeds in additional
properties. Net cash provided by operating activities increased
from $545,976 in 1997 to $645,656 in 1998 as a result of an
increase in income and a decrease in expenses in 1998.
The major components of the Partnership's cash flow from
investing activities are investments in real estate and proceeds
from the sale of real estate. For the six months ended June 30,
1998 and 1997, the Partnership generated cash flow from the sale
of real estate of $850,996 and $315,229, respectively. During
the same periods, the Partnership expended $1,861,481 and $-0-,
respectively, to invest in real properties (inclusive of
acquisition expenses) as the Partnership reinvested the cash
generated from the property sales.
In January, 1996, the Cheddar's restaurant in
Indianapolis, Indiana was destroyed by a fire. The Partnership
reached an agreement with the tenant and insurance company which
called for termination of the Lease, demolition of the building
and payment to the Partnership of $407,282 for the building and
equipment and $49,688 for lost rent. The property will not be
rebuilt and the Partnership listed the land for sale. The
Partnership recognized net disposition proceeds of $406,892 which
resulted in a net gain of $78,290. At the time of disposition,
the cost and related accumulated depreciation was $512,433 and
$183,831, respectively. As of December 31, 1997, based on an
analysis of market conditions in the area, it was determined the
fair value of the Partnership's interest in the land was
approximately $200,000. In the fourth quarter of 1997, a charge
to operations for real estate impairment of $62,000 was
recognized, which is the difference between the book value at
December 31, 1997 of $261,644 and the estimated fair value of
$200,000.
On February 20, 1998, the Partnership sold the am/pm Mini
Market in Carson City, Nevada to an unrelated third party. The
Partnership received net sale proceeds of $850,996, which
resulted in a net gain of $416,282. At the time of sale, the
cost and related accumulated depreciation was $703,871 and
$269,157, respectively.
During the first six months of 1998 and 1997, the
Partnership distributed $12,622 and $120,981 of the net sale
proceeds to the Limited and General Partners as part of their
regular quarterly distributions, which represented a return of
capital of $0.55 and $5.23 per Limited Partnership Unit,
respectively. In June, 1997, the Managing General Partner filed
a proxy statement to propose an Amendment to the Limited
Partnership Agreement that would allow the Partnership to
reinvest the majority of the sales proceeds in additional
properties. The Amendment passed with a majority of Units voting
in favor of the Amendment.
In October, 1997, the Partnership entered into a
Development Financing Commitment under which the Partnership
would advance funds for the construction of a Timber Lodge
Steakhouse restaurant in Rockford, Illinois. The purchase price
was approximately $1,620,000. The property would have been
leased to Timber Lodge Steakhouse, Inc. under a Lease Agreement
with a primary term of 20 years and annual rental payments of
approximately $174,000. In January, 1998, the Commitment was
terminated by mutual agreement of the parties.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
On November 18, 1997, the Partnership purchased a 30.794%
interest in a Timber Lodge Steakhouse in St. Cloud, Minnesota for
$493,492. The property is leased to Timber Lodge Steakhouse,
Inc. under a Lease Agreement with a primary term of 20 years and
annual rental payments of $51,537. The remaining interests in
the property are owned by AEI Real Estate Fund XV Limited
Partnership and AEI Institutional Net Lease Fund '93 Limited
Partnership, affiliates of the Partnership.
On December 10, 1997, the Partnership purchased a 60.0%
interest in a TGI Friday's restaurant in Greensburg, Pennsylvania
for $1,009,045. The property is leased to Ohio Valley Bistros,
Inc. under a Lease Agreement with a primary term of 15 years and
annual rental payments of $101,475. The remaining interest in
the property was purchased by AEI Income & Growth Fund XXII
Limited Partnership, an affiliate of the Partnership.
On December 23, 1997, the Partnership purchased a 26.05%
interest in a parcel of land in Troy, Michigan for $393,620. The
land is leased to Champps Entertainment, Inc. (Champps) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $27,553. Effective June 20, 1998, the annual rent
was increased to $41,330. Simultaneously with the purchase of
the land, the Partnership entered into a Development Financing
Agreement under which the Partnership will advance funds to
Champps for the construction of a Champps Americana restaurant on
the site. Through June 30, 1998, the Partnership had advanced
$454,224 for the construction of the property and was charging
interest on the advances at a rate of 7%. Effective June 20,
1998, the interest rate was increased to 10.50%. The
Partnership's share of the total purchase price, including the
cost of the land, will be approximately $1,172,250. After the
construction is complete, the Lease Agreement will be amended to
require annual rental payments of approximately $123,000. The
remaining interests in the property are owned by AEI Real Estate
Fund XV Limited Partnership, AEI Real Estate Fund XVIII Limited
Partnership and AEI Net Lease Income & Growth Fund XIX Limited
Partnership, affiliates of the Partnership.
On January 15, 1998, the Partnership purchased a parcel of
land in Rochester, Minnesota for $406,778. The land is leased to
Timber Lodge Steakhouse, Inc. (TLS) under a Lease Agreement with
a primary term of 20 years and annual rental payments of $30,133.
Effective May 14, 1998, the annual rent was increased to $42,327.
Simultaneously with the purchase of the land, the Partnership
entered into a Development Financing Agreement under which the
Partnership will advance funds to TLS for the construction of a
Timber Lodge Steakhouse restaurant on the site. Through June 30,
1998, the Partnership had advanced $1,063,667 for the
construction of the property and was charging interest on the
advances at a rate of 7.5%. Effective May 14, 1998, the interest
rate was increased to 10.535%. The total purchase price,
including the cost of the land, will be approximately $1,860,000.
After the construction is complete, the Lease Agreement will be
amended to require annual rental payments of approximately
$196,000.
The Partnership's primary use of cash flow is distribution
and redemption payments to Partners. The Partnership declares
its regular quarterly distributions before the end of each
quarter and pays the distribution in the first week after the end
of each quarter. The Partnership attempts to maintain a stable
distribution rate from quarter to quarter. Redemption payments
are paid to redeeming Partners on a quarterly basis. The
redemption payments generally are funded with cash that would
normally be paid as part of the regular quarterly distributions.
As a result, total distributions and distributions payable have
fluctuated from year to year due to cash used to fund redemption
payments.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the number of Units
outstanding at the beginning of the year. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
On April 1, 1998, fourteen Limited Partners redeemed a
total of 137.20 Units for $99,154 in accordance with the
Partnership Agreement. On July 1, 1998, eighteen Limited
Partners redeemed a total of 259.20 Units for $187,324. The
Partnership acquired these Units using Net Cash Flow from
operations. In prior years, a total of forty-five Limited
Partners redeemed 832.9 Partnership Units for $491,344. The
redemptions increase the remaining Limited Partners' ownership
interest in the Partnership.
The continuing rent payments from the properties, together
with cash generated from the property sales, should be adequate
to fund continuing distributions and meet other Partnership
obligations on both a short-term and long-term basis.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
contains various "forward looking statements" within the meaning
of federal securities laws which represent management's
expectations or beliefs concerning future events, including
statements regarding anticipated application of cash, expected
returns from rental income, growth in revenue, taxation levels,
the sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements made by the Partnership, must be evaluated in
the context of a number of factors that may affect the
Partnership's financial condition and results of operations,
including the following:
<bullet> Market and economic conditions which affect the value
of the properties the Partnership owns and the cash
from rental income such properties generate;
<bullet> the federal income tax consequences of rental income,
deductions, gain on sales and other items and the
affects of these consequences for investors;
<bullet> resolution by the General Partners of conflicts with
which they may be confronted;
<bullet> the success of the General Partners of locating
properties with favorable risk return characteristics;
<bullet> the effect of tenant defaults; and
<bullet> the condition of the industries in which the tenants of
properties owned by the Partnership operate.
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the Partnership is a party or of which the Partnership's
property is subject.
ITEM 2.CHANGES IN SECURITIES
None.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.OTHER INFORMATION
None.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
Description
27 Financial Data Schedule for period
ended June 30, 1998.
b. Reports filed on Form 8-K - None.
SIGNATURES
In accordance with the requirements of the Exchange Act,
the Registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: August 3, 1998 AEI Real Estate Fund XVII
Limited Partnership
By: AEI Fund Management XVII, Inc.
Its: Managing General Partner
By: /s/ Robert P Johnson
Robert P. Johnson
President
(Principal Executive Officer)
By: /s/ Mark E Larson
Mark E. Larson
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000819577
<NAME> AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,629,693
<SECURITIES> 0
<RECEIVABLES> 45,224
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,674,917
<PP&E> 14,849,202
<DEPRECIATION> (2,678,665)
<TOTAL-ASSETS> 13,845,454
<CURRENT-LIABILITIES> 287,195
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13,558,259
<TOTAL-LIABILITY-AND-EQUITY> 13,845,454
<SALES> 0
<TOTAL-REVENUES> 820,649
<CGS> 0
<TOTAL-COSTS> 338,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 898,889
<INCOME-TAX> 0
<INCOME-CONTINUING> 898,889
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 898,889
<EPS-PRIMARY> 39.57
<EPS-DILUTED> 39.57
</TABLE>
