SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d)
Of The Securities Exchange Act Of 1934
For the Fiscal Year Ended: December 31, 1999
Commission file number: 0-17467
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
(Name of Small Business Issuer 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)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
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 past 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
Check if disclosure of delinquent filers in response to Rule 405
of Regulation S-B is not contained in this Form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Issuer's revenues for year ended December 31, 1999 were
$1,812,336.
As of February 29, 2000, there were 21,652.89 Units of limited
partnership interest in the registrant outstanding and owned by
nonaffiliates of the registrant, which Units had an aggregate
market value (based solely on the price at which they were sold
since there is no ready market for such Units) of $21,652,890.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant has not incorporated any documents by reference
into this report.
Transitional Small Business Disclosure Format:
Yes No [X]
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
AEI Real Estate Fund XVII Limited Partnership (the
"Partnership" or the "Registrant") is a limited partnership which
was organized pursuant to the laws of the State of Minnesota on
February 2, 1988. The registrant is comprised of AEI Fund
Management XVII, Inc. (AFM) as Managing General Partner, Robert
P. Johnson as the Individual General Partner, and purchasers of
partnership units as Limited Partners. The Partnership offered
for sale up to $30,000,000 of limited partnership interests (the
"Units") (30,000 Units at $1,000 per Unit) pursuant to a
registration statement effective November 2, 1987. 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 November 1, 1988 when the one-year offering period
expired. The Partnership received subscriptions for 23,388.7
Limited Partnership Units ($23,388,700).
The Partnership was organized to acquire, initially on a
debt-free basis, existing and newly constructed commercial
properties located in the United States, to lease such properties
to tenants under triple net leases, to hold such properties and
to eventually sell such properties. From subscription proceeds,
the Partnership purchased twenty properties, including partial
interests in eight properties, totaling $20,026,239. The balance
of the subscription proceeds was applied to organization and
syndication costs, working capital reserves and distributions,
which represented a return of capital. The properties are all
commercial, single tenant buildings leased under triple net
leases.
The Partnership will hold its properties until the General
Partners determine that the sale or other disposition of the
properties is advantageous in view of the Partnership's
investment objectives. In deciding whether to sell properties,
the General Partners will consider factors such as potential
appreciation, net cash flow and income tax considerations. In
addition, certain lessees have been granted options to purchase
properties after a specified portion of the lease term has
elapsed. It is anticipated that the Partnership will sell its
properties within twelve years after acquisition. Prior to
commencing the liquidation of the Partnership, the General
Partners may reinvest the proceeds from the sale of properties in
additional properties, provided that sufficient proceeds are
distributed to the Limited Partners to pay federal and state
income taxes related to any taxable gain recognized as a result
of the sale. At any time prior to selling the properties, the
Partnership may mortgage one or more of its properties in amounts
not exceeding 50% of the fair market value of the property.
Leases
Although there are variations in the specific terms of the
leases, the following is a summary of the general terms of the
Partnership's leases. The properties are leased to various
tenants under triple net leases, which are classified as
operating leases. Under a triple net lease, the lessee is
responsible for all real estate taxes, insurance, maintenance,
repairs and operating expenses for the property. The initial
lease terms are for 10 to 20 years. The leases provide for base
annual rental payments, payable in monthly installments, and
contain rent clauses which entitle the Partnership to receive
additional rent in future years based on stated rent increases or
if gross receipts for the property exceed certain specified
amounts, among other conditions.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Most of the leases provide the lessee with two to three
five-year renewal options subject to the same terms and
conditions as the initial lease. Certain lessees have been
granted options to purchase the property. Depending on the
lease, the purchase price is either determined by a formula, or
is the greater of the fair market value of the property or the
amount determined by a formula. In all cases, if the option were
to be exercised by the lessee, the purchase price would be
greater than the original cost of the property.
The Partnership owns a 65% interest in a 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 March, 1997, the property was
re-leased to Texas Sports City Cafe, Ltd. (Texas) under a triple
net lease agreement with a primary term of 12 years. In January,
2000, Texas notified the Partnership that they were discontinuing
the restaurant operations. The Partnership is negotiating to
sell the property for $900,000 to an unrelated third party, whom
has assumed the restaurant operations from Texas. The
Partnership's share of the sale proceeds would be $585,000. In
the fourth quarter of 1999, a charge to operations of $125,000
was recognized for real estate impairment, which was the
difference between the book value at December 31, 1999 of
$703,652 and the estimated net proceeds from the sale. The
charge was recorded against the cost of the building. The land
and building have been classified as Real Estate Held for Sale at
December 31, 1999.
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. 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. In December, 1998, the
Partnership re-analyzed the market conditions in the area and
determined the fair value of the Partnership's interest in the
land declined to approximately $175,000. In the fourth quarter
of 1998, a charge to operations for real estate impairment of
$25,000 was recognized, which is the difference between the book
value at December 31, 1998 of $200,000 and the estimated fair
value of $175,000.
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.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
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.
In the fourth quarter of 1999, the Partnership sold
13.5573% of its interest in the Timber Lodge Steakhouse in two
separate transactions to unrelated third parties. The
Partnership received total net sale proceeds of $258,624, which
resulted in a total net gain of $53,582. The total cost and
related accumulated depreciation of the interests sold was
$217,264 and $12,222, respectively. The majority of the net sale
proceeds will be reinvested in additional property in the future.
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 Operating Corporation. (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 advanced funds to Champps
for the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7.0%. Effective June 20, 1998, the
interest rate was increased to 10.50%. On September 3, 1998,
after the development was completed, the Lease Agreement was
amended to require annual rental payments of $133,356. The
Partnership's share of the total acquisition costs, including the
cost of the land, was $1,289,135. 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.
ITEM 1. DESCRIPTION OF BUSINESS. (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 advanced funds to TLS for the construction of a
Timber Lodge Steakhouse restaurant on the site. Initially, the
Partnership charged interest on the advances at a rate of 7.5%.
Effective May 14, 1998, the interest rate was increased to
10.535%. On September 3, 1998, after the development was
completed, the Lease Agreement was amended to require annual
rental payments of $198,363. Total acquisition costs, including
the cost of the land, were $1,910,768.
On August 28, 1998, the Partnership purchased a 14%
interest in a parcel of land in Centerville, Ohio for $259,139.
The land is leased to Americana Dining Corporation (ADC) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $18,140. Effective December 25, 1998, the annual
rent was increased to $27,209. Simultaneously with the purchase
of the land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to ADC for
the construction of a Champps Americana restaurant on the site.
Initially, the Partnership charged interest on the advances at a
rate of 7.0%. Effective December 25, 1998, the interest rate was
increased to 10.5%. On January 27, 1999, after the development
was completed, the Lease Agreement was amended to require annual
rental payments of $56,764. The Partnership's share of the total
purchase price, including the cost of the land, was $551,677.
The remaining interests in the property are owned by AEI Real
Estate Fund XVIII Limited Partnership, AEI Income & Growth Fund
XXI Limited Partnership and AEI Income & Growth Fund XXII Limited
Partnership, affiliates of the Partnership.
Major Tenants
During 1999, four of the Partnership's lessees each
contributed more than ten percent of the Partnership's total
rental revenue. The major tenants in aggregate contributed 67%
of the Partnership's total rental revenue in 1999. It is
anticipated that, based on the minimum rental payments required
under the leases, each major tenant will continue to contribute
more than ten percent of the Partnership's total rental revenue
in 2000 and future years. Any failure of these major tenants
could materially affect the Partnership's net income and cash
distributions.
Competition
The Partnership is a minor factor in the commercial real
estate business. There are numerous entities engaged in the
commercial real estate business which have greater financial
resources than the Partnership. At the time the Partnership
elects to dispose of its properties, the Partnership will be in
competition with other persons and entities to find buyers for
its properties.
Employees
The Partnership has no direct employees. Management
services are performed for the Partnership by AEI Fund
Management, Inc., an affiliate of AFM.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Year 2000 Compliance
The Year 2000 issue is the result of computer systems that
use two-digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership is not aware of any issues related to Year 2000
non compliance with AEI systems or the systems of the various
tenants.
ITEM 2. DESCRIPTION OF PROPERTIES.
Investment Objectives
The Partnership's investment objectives were to acquire
existing or newly-developed commercial properties throughout the
United States that offer the potential for (i) preservation and
protection of the Partnership's capital; (ii) partially tax-
deferred cash distributions from operations which may increase
through rent participation clauses or mandated rent increases;
and (iii) long-term capital gains through appreciation in value
of the Partnership's properties realized upon sale. The
Partnership does not have a policy, and there is no limitation,
as to the amount or percentage of assets that may be invested in
any one property. However, to the extent possible, the General
Partners attempt to diversify the type and location of the
Partnership's properties.
Description of Properties
The Partnership's properties are all commercial, single
tenant buildings. All the properties were acquired on a debt-
free basis and are leased to various tenants under triple net
leases, which are classified as operating leases. The
Partnership holds an undivided fee simple interest in the
properties. At any time prior to selling the properties, the
Partnership may mortgage one or more of its properties in amounts
not exceeding 50% of the fair market value of the property.
The Partnership's properties are subject to the general
competitive conditions incident to the ownership of single tenant
investment real estate. Since each property is leased under a
long-term lease, there is little competition until the
Partnership decides to sell the property. At this time, the
Partnership will be competing with other real estate owners, on
both a national and local level, in attempting to find buyers for
the properties. In the event of a tenant default, the
Partnership would be competing with other real estate owners, who
have property vacancies, to attract a new tenant to lease the
property. The Partnership's tenants operate in industries that
are very competitive and can be affected by factors such as
changes in regional or local economies, seasonality and changes
in consumer preference.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 1999.
Total Property Annual Annual
Purchase Acquisition Lease Rent Per
Property Date Costs Lessee Payment Sq. Ft.
Sports City Cafe Texas
Mesquite, TX Sports City
(65%) 2/12/88 $ 956,343 Cafe, Ltd. $ 60,255 $13.10
Cheddar's Restaurant
Indianapolis, IN
(50%) 2/16/88 $ 261,644 (1)
Jiffy Lube Auto Care Center
Dallas, TX Lone Star
(75%) 3/1/88 $ 454,624 Lubrication, Inc. $ 65,466 $32.70
Taco Cabana Restaurant Texas Taco
San Marcos, TX 11/15/88 $1,013,505 Cabana, L.P. $171,251 $46.05
Huntington
Denny's Restaurant Restaurants
Casa Grande, AZ 3/1/89 $ 721,420 Group, Inc. $113,308 $29.98
Children's World ARAMARK
Daycare Center Educational
St. Louis, MO 9/29/89 $ 950,627 Resources, Inc. $121,665 $16.64
Children's World ARAMARK
Daycare Center Educational
Merrimack, NH 9/29/89 $1,159,242 Resources, Inc. $148,951 $23.69
Children's World ARAMARK
Daycare Center Educational
Chino, CA 9/29/89 $1,305,518 Resources, Inc. $167,826 $23.57
Children's World ARAMARK
Daycare Center Educational
Palatine, IL 9/29/89 $ 801,098 Resources, Inc. $102,303 $16.57
Bennigan's Restaurant SDG
Cincinnati, OH 3/7/90 $1,898,768 Restaurants, LLC $ 79,591 $11.58
Heartland
Cheddar's Restaurant Restaurant
Davenport, IA 11/4/91 $1,530,934 Corporation $253,996 $34.32
Timber Lodge
Steakhouse Restaurant
St. Cloud, MN Timber Lodge
(17.2367%) 11/18/97 $ 493,492 Steakhouse, Inc. $ 29,403 $24.43
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
Total Property Annual Annual
Purchase Acquisition Lease Rent Per
Property Date Costs Lessee Payment Sq. Ft.
TGI Friday's Restaurant
Greensburg, PA Ohio Valley
(60%) 12/10/97 $1,009,045 Bistros, Inc. $102,622 $37.92
Champps
Americana Restaurant Champps
Troy, MI Operating
(26.05%) 9/3/98 $1,289,135 Corporation $133,356 $46.17
Timber Lodge
Steakhouse Restaurant Timber Lodge
Rochester, MN 9/3/98 $1,910,768 Steakhouse, Inc. $198,363 $28.41
Champps
Americana Restaurant
Centerville, OH Americana
(14%) 1/27/99 $ 551,677 Dining Corp. $ 56,764 $43.28
(1) The property was destroyed by fire and the land is listed for
sale.
The properties listed above with a partial ownership
percentage are owned with affiliates of the Partnership and/or
unrelated third parties. The remaining interest in the Jiffy
Lube, the Sports City Cafe and the Cheddar's restaurant land is
owned by AEI Real Estate Fund XVI Limited Partnership. The
remaining interests in the Timber Lodge Steakhouse restaurant in
St. Cloud, Minnesota are owned by unrelated third parties. The
remaining interest in the TGI Friday's restaurant is owned by AEI
Income & Growth Fund XXII Limited Partnership. The remaining
interests in the Champps Americana restaurant in Troy, Michigan
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. The remaining
interests in the Champps Americana restaurant in Centerville,
Ohio are owned by AEI Real Estate Fund XVIII Limited Partnership,
AEI Income & Growth Fund XXI Limited Partnership and AEI Income &
Growth Fund XXII Limited Partnership.
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated third
parties using the proportionate consolidation method. Each
tenant-in-common owns a separate, undivided interest in the
properties. Any tenant-in-common that holds more than a 50%
interest does not control decisions over the other tenant-in-
common interests. The financial statements reflect only this
Partnership's percentage share of the properties' land, building
and equipment, liabilities, revenues and expenses.
The initial Lease terms are for 20 years except for the
Taco Cabana and TGI Friday's restaurants and the Children's World
daycare centers, which have Lease terms of 15 years, the Sports
City Cafe, which has a Lease term of 12 years and the Bennigan's
restaurant, which has a Lease term of 10 years. Most of the
Leases have renewal options which may extend the Lease term an
additional 10 to 15 years.
Pursuant to the Lease Agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they occupy. The General Partners believe the properties are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
For tax purposes, the Partnership's properties are
depreciated under the Modified Accelerated Cost Recovery System
(MACRS). The largest depreciable component of a property is the
building which is depreciated, using the straight-line method,
over 31.5 years or 40 years depending on the date when it was
placed in service. The remaining depreciable components of a
property are personal property and land improvements which are
depreciated, using an accelerated method, over 5 and 15 years,
respectively. Since the Partnership has tax-exempt Partners, the
Partnership is subject to the rules of Section 168(h)(6) of the
Internal Revenue Code which requires a percentage of the
properties' depreciable components to be depreciated over longer
lives using the straight-line method. In general, the federal
tax basis of the properties for tax depreciation purposes is the
same as the basis for book depreciation purposes.
During the last five years or since the date of purchase,
if purchased after December 31, 1994, all properties were 100
percent occupied by the lessees noted except for the properties
discussed below. The Bennigan's restaurant was 100 percent
occupied by a prior lessee until January, 1994. The property was
re-leased to the current lessee in September 1995. The Sports
City Cafe was 100 percent occupied by a prior lessee until
December, 1995. The property was re-leased to the current lessee
on March 15, 1997. The Cheddar's property was 100 percent
occupied until January, 1996.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS.
As of December 31, 1999, there were 1,971 holders of
record of the registrant's Limited Partnership Units. There is
no other class of security outstanding or authorized. The
registrant's Units are not a traded security in any market.
However, 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 total 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.
During 1999, twenty-one Limited Partners redeemed a total
of 290 Partnership Units for $224,344 in accordance with the
Partnership Agreement. In prior years, a total of ninety-six
Limited Partners redeemed 1,440.9 Partnership Units for $936,524.
The redemptions increase the remaining Limited Partners'
ownership interest in the Partnership.
Cash distributions of $12,386 and $14,478 were made to the
General Partners and $1,001,920 and $988,173 were made to the
Limited Partners in 1999 and 1998, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined, except as discussed below. These
distributions should not be compared with dividends paid on
capital stock by corporations.
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS. (Continued)
As part of the Limited Partner distributions discussed
above, the Partnership distributed $62,752 of proceeds from
property sales in 1998. The distributions reduced the Limited
Partners' Adjusted Capital Contributions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
For the years ended December 31, 1999 and 1998 the
Partnership recognized rental income of $1,796,996 and
$1,555,446, respectively. During the same periods, the
Partnership earned investment income of $15,340 and $137,189,
respectively. In 1999, rental income increased as a result of
rent received from three property acquisitions in 1998 and 1999
and rent increases on eleven properties. These increases in
rental income were partially offset by a decrease in rent due to
property sales in 1998 and 1999 and a decrease in investment
income earned on the net proceeds prior to the purchase of the
additional properties.
The Partnership owns a 65% interest in a 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 March, 1997, the property was
re-leased to Texas Sports City Cafe, Ltd. (Texas) under a triple
net lease agreement with a primary term of 12 years. In January,
2000, Texas notified the Partnership that they were discontinuing
the restaurant operations. The Partnership is negotiating to
sell the property for $900,000 to an unrelated third party, whom
has assumed the restaurant operations from Texas. The
Partnership's share of the sale proceeds would be $585,000. In
the fourth quarter of 1999, a charge to operations of $125,000
was recognized for real estate impairment, which was the
difference between the book value at December 31, 1999 of
$703,652 and the estimated net proceeds from the sale. The
charge was recorded against the cost of the building. The land
and building have been classified as Real Estate Held for Sale at
December 31, 1999.
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. 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. In December, 1998, the
Partnership re-analyzed the market conditions in the area and
determined the fair value of the Partnership's interest in the
land declined to approximately $175,000. In the fourth quarter
of 1998, a charge to operations for real estate impairment of
$25,000 was recognized, which is the difference between the book
value at December 31, 1998 of $200,000 and the estimated fair
value of $175,000.
During the years ended December 31, 1999 and 1998, the
Partnership paid Partnership administration expenses to
affiliated parties of $252,841 and $262,114, 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 $34,389 and $46,076, 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
As of December 31, 1999, the Partnership's annualized cash
distribution rate was 6.5%, 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.
The Year 2000 issue is the result of computer systems that
use two-digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership is not aware of any issues related to Year 2000
non compliance with AEI systems or the systems of the various
tenants.
Liquidity and Capital Resources
During 1999, the Partnership's cash balance increased
$504,861 mainly as a result of the Partnership distributing less
cash to the Partners than it generated from operating activities.
Net cash provided by operating activities increased from
$1,360,480 in 1998 to $1,545,090 in 1999 mainly as a result of an
increase in income and a decrease in expenses in 1999.
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. In 1999 and 1998, the Partnership
generated cash flow from the sale of real estate of $258,624 and
$850,996, respectively. During the same periods, the Partnership
expended $124,258 and $3,133,862, respectively, to invest in real
properties (inclusive of acquisition expenses) as the Partnership
reinvested the cash generated from property sales.
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 1998, the Partnership distributed $63,386 of the
net sale proceeds to the Limited and General Partners which
represented a return of capital of $2.82 per Limited Partnership
Unit.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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 Operating Corporation (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 advanced funds to Champps
for the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7.0%. Effective June 20, 1998, the
interest rate was increased to 10.50%. On September 3, 1998,
after the development was completed, the Lease Agreement was
amended to require annual rental payments of $133,356. The
Partnership's share of the total acquisition costs, including the
cost of the land, was $1,289,135. 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 advanced funds to TLS for the construction of a
Timber Lodge Steakhouse restaurant on the site. Initially, the
Partnership charged interest on the advances at a rate of 7.5%.
Effective May 14, 1998, the interest rate was increased to
10.535%. On September 3, 1998, after the development was
completed, the Lease Agreement was amended to require annual
rental payments of $198,363. Total acquisition costs, including
the cost of the land, were $1,910,768.
On August 28, 1998, the Partnership purchased a 14%
interest in a parcel of land in Centerville, Ohio for $259,139.
The land is leased to Americana Dining Corporation (ADC) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $18,140. Effective December 25, 1998, the annual
rent was increased to $27,209. Simultaneously with the purchase
of the land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to ADC for
the construction of a Champps Americana restaurant on the site.
Initially, the Partnership charged interest on the advances at a
rate of 7.0%. Effective December 25, 1998, the interest rate was
increased to 10.5%. On January 27, 1999, after the development
was completed, the Lease Agreement was amended to require annual
rental payments of $56,764. The Partnership's share of the total
purchase price, including the cost of the land, was $551,677.
The remaining interests in the property are owned by AEI Real
Estate Fund XVIII Limited Partnership, AEI Income & Growth Fund
XXI Limited Partnership and AEI Income & Growth Fund XXII Limited
Partnership, affiliates of the Partnership.
In the fourth quarter of 1999, the Partnership sold
13.5573% of its interest in the Timber Lodge Steakhouse in two
separate transactions to unrelated third parties. The
Partnership received total net sale proceeds of $258,624, which
resulted in a total net gain of $53,582. The total cost and
related accumulated depreciation of the interests sold was
$217,264 and $12,222, respectively. The majority of the net sale
proceeds will be reinvested in additional property in the future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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. Beginning in 1998,
redemption payments were 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.
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.
During 1999, twenty-one Limited Partners redeemed a total
of 290 Partnership Units for $224,344 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, a total of
ninety-six Limited Partners redeemed 1,440.9 Partnership Units
for $936,524. 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
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.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying index to financial statements.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet as of December 31, 1999 and 1998
Statements for the Years Ended December 31, 1999 and 1998:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
REPORT OF INDEPENDENT AUDITORS
To the Partners:
AEI Real Estate Fund XVII Limited Partnership
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI Real
Estate Fund XVII Limited Partnership (a Minnesota limited
partnership) as of December 31, 1999 and 1998 and the related
statements of income, cash flows and changes in partners' capital
for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of AEI Real Estate Fund XVII Limited Partnership as of December
31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota Boulay, Heutmaker, Zibell & Co. P.L.L.P.
January 25, 2000 Certified Public Accountants
<PAGE>
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1999 1998
CURRENT ASSETS:
Cash and Cash Equivalents $ 785,486 $ 280,625
Receivables 0 8,989
----------- -----------
Total Current Assets 785,486 289,614
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 4,482,806 4,933,769
Buildings and Equipment 10,389,784 10,819,889
Construction in Progress 0 161,848
Property Acquisition Costs 0 6,433
Accumulated Depreciation (3,004,630) (2,870,126)
----------- -----------
11,867,960 13,051,813
Real Estate Held for Sale 753,296 174,644
----------- -----------
Net Investments in Real Estate 12,621,256 13,226,457
----------- -----------
Total Assets $13,406,742 $13,516,071
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 40,494 $ 29,499
Distributions Payable 268,512 204,457
----------- -----------
Total Current Liabilities 309,006 233,956
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (70,434) (68,591)
Limited Partners, $1,000 Unit value;
30,000 Units authorized; 23,389 Units issued;
21,658 and 21,948 outstanding in
1999 and 1998, respectively 13,168,170 13,350,706
----------- -----------
Total Partners' Capital 13,097,736 13,282,115
----------- -----------
Total Liabilities and Partners' Capital $13,406,742 $13,516,071
=========== ===========
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 YEARS ENDED DECEMBER 31
1999 1998
INCOME:
Rent $ 1,796,996 $ 1,555,446
Investment Income 15,340 137,189
----------- -----------
Total Income 1,812,336 1,692,635
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 252,841 262,114
Partnership Administration and Property
Management - Unrelated Parties 34,389 46,076
Depreciation 399,417 360,493
Real Estate Impairment 125,000 25,000
----------- -----------
Total Expenses 811,647 693,683
----------- -----------
OPERATING INCOME 1,000,689 998,952
GAIN ON SALE OF REAL ESTATE 53,582 416,282
----------- -----------
NET INCOME $ 1,054,271 $ 1,415,234
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 10,543 $ 14,152
Limited Partners 1,043,728 1,401,082
----------- -----------
$ 1,054,271 $ 1,415,234
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(21,802 and 22,269 weighted average Units outstanding
in 1999 and 1998, respectively) $ 47.87 $ 62.92
=========== ===========
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 YEARS ENDED DECEMBER 31
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,054,271 $ 1,415,234
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 399,417 360,493
Real Estate Impairment 125,000 25,000
Gain on Sale of Real Estate (53,582) (416,282)
(Increase) Decrease in Receivables 8,989 (7,975)
Increase (Decrease) in Payable to
AEI Fund Management, Inc. 10,995 (15,990)
----------- -----------
Total Adjustments 490,819 (54,754)
----------- -----------
Net Cash Provided By
Operating Activities 1,545,090 1,360,480
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (124,258) (3,133,862)
Proceeds from Sale of Real Estate 258,624 850,996
----------- -----------
Net Cash Provided By (Used For)
Investing Activities 134,366 (2,282,866)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Distributions Payable 64,055 35,679
Distributions to Partners (1,012,040) (998,154)
Redemption Payments (226,610) (449,677)
----------- -----------
Net Cash Used For
Financing Activities (1,174,595) (1,412,152)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 504,861 (2,334,538)
CASH AND CASH EQUIVALENTS, beginning of period 280,625 2,615,163
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 785,486 $ 280,625
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 YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1997 $(68,265) $13,382,977 $13,314,712 22,555.89
Distributions (9,981) (988,173) (998,154)
Redemption Payments (4,497) (445,180) (449,677) (608.00)
Net Income 14,152 1,401,082 1,415,234
--------- ----------- ----------- ----------
BALANCE, December 31, 1998 (68,591) 13,350,706 13,282,115 21,947.89
Distributions (10,120) (1,001,920) (1,012,040)
Redemption Payments (2,266) (224,344) (226,610) (290.00)
Net Income 10,543 1,043,728 1,054,271
--------- ----------- ----------- -----------
BALANCE, December 31, 1999 $(70,434) $13,168,170 $13,097,736 21,657.89
========= =========== =========== ===========
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
DECEMBER 31, 1999 AND 1998
(1) Organization -
AEI Real Estate Fund XVII Limited Partnership (Partnership)
was formed to acquire and lease commercial properties to
operating tenants. The Partnership's operations are managed
by AEI Fund Management XVII, Inc. (AFM), the Managing
General Partner. Robert P. Johnson, the President and sole
shareholder of AFM, serves as the Individual General Partner
and an affiliate of AFM, AEI Fund Management, Inc. (AEI),
performs the administrative and operating functions for the
Partnership.
The terms of the Partnership offering call for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. The Partnership
commenced operations on February 10, l988 when minimum
subscriptions of 2,000 Limited Partnership Units
($2,000,000) were accepted. The offering terminated on
November 1, 1988 when the one-year offering period expired.
The Partnership received subscriptions for 23,388.7 Limited
Partnership Units ($23,388,700).
Under the terms of the Limited Partnership Agreement, the
Limited Partners and General Partners contributed funds of
$23,388,700 and $1,000, respectively. During operations,
any Net Cash Flow, as defined, which the General Partners
determine to distribute will be distributed 90% to the
Limited Partners and 10% to the General Partners; provided,
however, that such distributions to the General Partners
will be subordinated to the Limited Partners first receiving
an annual, noncumulative distribution of Net Cash Flow equal
to 10% of their Adjusted Capital Contribution, as defined,
and, provided further, that in no event will the General
Partners receive less than 1% of such Net Cash Flow per
annum. Distributions to Limited Partners will be made pro
rata by Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of properties which the General Partners determine
to distribute will, after provisions for debts and reserves,
be paid in the following manner: (i) first, 99% to the
Limited Partners and l% 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.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) Organization - (Continued)
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of property, will be
allocated first in the same ratio in which, and to the
extent, Net Cash Flow is distributed to the Partners for
such year. Any additional profits will be allocated 90% to
the Limited Partners and 10% to the General Partners. In the
event no Net Cash Flow is distributed to the Limited
Partners, 90% of each item of income, gain or credit for
each respective year shall be allocated to the Limited
Partners, and 10% of each such item shall be allocated to
the General Partners. Net losses from operations will be
allocated 98% to the Limited Partners and 2% to the General
Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of property will be allocated in
accordance with the Partnership Agreement as follows: (i)
first, to those partners with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Partners
and 1% to the General Partners until the aggregate balance
in the Limited Partners' capital accounts equals the sum of
the Limited Partners' Adjusted Capital Contributions plus an
amount equal to 14% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, to the General Partners
until cumulative allocations to the General Partners equal
15% of cumulative allocations. Any remaining balance will
be allocated 85% to the Limited Partners and 15% to the
General Partners. Losses will be allocated 98% to the
Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(2) Summary of Significant Accounting Policies -
Financial Statement Presentation
The accounts of the Partnership are maintained on the
accrual basis of accounting for both federal income tax
purposes and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate.
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested
in money market accounts, certificates of deposit,
federal agency notes and commercial paper with a term of
three months or less.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
Partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under triple net
leases classified as operating leases. The Partnership
recognizes rental revenue on the accrual basis according
to the terms of the individual leases. For leases which
contain cost of living increases, the increases are
recognized in the year in which they are effective.
Real estate is recorded at the lower of cost or estimated
net realizable value. The Partnership compares the
carrying amount of its properties to the estimated future
cash flows expected to result from the property and its
eventual disposition. If the sum of the expected future
cash flows is less than the carrying amount of the
property, the Partnership recognizes an impairment loss
by the amount by which the carrying amount of the
property exceeds the fair value of the property.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings and equipment.
The buildings and equipment of the Partnership are
depreciated using the straight-line method for financial
reporting purposes based on estimated useful lives of 30
years and 10 years respectively.
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated
third parties using the proportionate consolidation
method. Each tenant-in-common owns a separate, undivided
interest in the properties. Any tenant-in-common that
holds more than a 50% interest does not control decisions
over the other tenant-in-common interests. The financial
statements reflect only this Partnership's percentage
share of the properties' land, building and equipment,
liabilities, revenues and expenses.
(3) Related Party Transactions -
The Partnership owns a 65% interest in a Sports City Cafe, a
75% interest in a Jiffy Lube and a 50% interest in a parcel
of land in Indianapolis, Indiana. The remaining interests
in these properties are owned by AEI Real Estate Fund XVI
Limited Partnership, an affiliate of the Partnership. The
Partnership owns a 60% interest in a TGI Friday's
restaurant. The remaining interest in this property is
owned by AEI Income & Growth Fund XXII Limited Partnership,
an affiliate of the Partnership. The Partnership owns a
26.05% interest in the Champps Americana restaurant in Troy,
Michigan. The remaining interests in this 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. The Partnership owns a 14% interest in the
Champps Americana restaurant in Centerville, Ohio. The
remaining interests in this property are owned by AEI Real
Estate Fund XVIII Limited Partnership, AEI Income & Growth
Fund XXI Limited Partnership and AEI Income & Growth Fund
XXII Limited Partnership, affiliates of the Partnership. As
of December 31, 1999, the Partnership owns a 17.2367%
interest in the Timber Lodge Steakhouse in St. Cloud,
Minnesota. The remaining interests in this property are
owned by unrelated third parties. AEI Institutional Net
Lease Fund '93 Limited Partnership, an affiliate of the
Partnership, owned a 38.412% interest in this property until
the interest was sold, in a series of transactions, to
unrelated third parties in 1998 and 1999. AEI Real Estate
Fund XV Limited Partnership owned a 30.794% interest in this
property until the interest was sold, in a series of
transactions, to unrelated third parties in 1999.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(3) Related Party Transactions - (Continued)
AEI and AFM received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 31
1999 1998
a.AEI and AFM are reimbursed for all costs
incurred in connection with managing the
Partnership's operations, maintaining the
Partnership's books and communicating
the results of operations to the Limited
Partners. $ 252,841 $ 262,114
======== ========
b.AEI and AFM are reimbursed for all direct
expenses they have paid on the Partnership's
behalf to third parties. These expenses included
printing costs, legal and filing fees, direct
administrative costs, outside audit and
accounting costs, taxes, insurance and other
property costs. $ 34,389 $ 46,076
======== ========
c.AEI is reimbursed for all property acquisition
costs incurred by it in acquiring properties on
behalf of the Partnership. The amounts are net
of financing and commitment fees and expense
reimbursements received by the Partnership from
the lessees in the amount of $10,679 and $116,678
for 1999 and 1998, respectively. $ (6,076) $ (53,539)
========= =========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a, b and c. This
balance is non-interest bearing and unsecured and is to be
paid in the normal course of business.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through triple net leases, which are classified as operating
leases. Under a triple net lease, the lessee is responsible
for all real estate taxes, insurance, maintenance, repairs
and operating expenses of the property. The initial Lease
terms are for 20 years except for the Taco Cabana and TGI
Friday's restaurants and the Children's Worlds daycare
centers, which have Lease terms of 15 years, the Sports City
Cafe, which has a Lease term of 12 years and the Bennigan's
restaurant, which has a Lease term of 10 years. Most of the
leases have renewal options which may extend the Lease term
an additional 10 to 15 years. The Leases contain rent
clauses which entitle the Partnership to receive additional
rent in future years based on stated rent increases or if
gross receipts for the property exceed certain specified
amounts, among other conditions. Certain lessees have been
granted options to purchase the property. Depending on the
lease, the purchase price is either determined by a formula,
or is the greater of the fair market value of the property
or the amount determined by a formula. In all cases, if the
option were to be exercised by the lessee, the purchase
price would be greater than the original cost of the
property.
The Partnership's properties are all commercial, single-
tenant buildings. The Sports City Cafe was constructed in
1984. All other properties, except for the Champps
Americana restaurant in Centerville, Ohio, were constructed
in the year they were acquired. The Partnership acquired
the Cheddar's restaurant in 1991. The Timber Lodge
Steakhouse in St. Cloud, Minnesota and TGI Friday's
restaurant were acquired in 1997. The Champps Americana
restaurant in Troy, Michigan and the Timber Lodge Steakhouse
in Rochester, Minnesota were acquired in 1998. The land for
the Champps Americana restaurant in Centerville, Ohio was
acquired in 1998 and construction of the restaurant was
completed in 1999. The remaining properties were acquired
during 1988 and 1989. There have been no costs capitalized
as improvements subsequent to the acquisitions.
The cost of the properties not held for sale and the related
accumulated depreciation at December 31, 1999 are as
follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Jiffy Lube, Dallas, TX $ 193,479 $ 261,145 $ 454,624 $ 123,966
Taco Cabana, San Marcos, TX 279,727 733,778 1,013,505 354,687
Denny's, Casa Grande, AZ 216,812 504,608 721,420 213,377
Children's World,
St. Louis, MO 203,446 747,181 950,627 297,142
Children's World,
Merrimack, NH 282,530 876,712 1,159,242 339,698
Children's World, Chino, CA 357,793 947,725 1,305,518 376,800
Children's World,
Palatine, IL 135,945 665,153 801,098 260,460
Bennigan's, Cincinnati, OH 666,298 1,232,470 1,898,768 521,087
Cheddar's, Davenport, IA 524,026 1,006,908 1,530,934 338,360
Timber Lodge Steakhouse,
St. Cloud, MN 60,214 216,015 276,229 15,935
TGI Friday's, Greensburg, PA 445,546 563,499 1,009,045 39,762
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) Investments in Real Estate - (Continued)
Buildings and Accumulated
Property Land Equipment Total Depreciation
Champps Americana,
Troy, MI 416,519 872,616 1,289,135 40,393
Timber Lodge Steakhouse,
Rochester, MN 421,275 1,489,493 1,910,768 73,815
Champps Americana,
Centerville, OH 279,196 272,481 551,677 9,148
---------- ----------- ----------- ---------
$4,482,806 $10,389,784 $14,872,590 $3,004,630
========== =========== =========== =========
The Partnership owns a 65% interest in a 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 March, 1997, the
property was re-leased to Texas Sports City Cafe, Ltd.
(Texas) under a triple net lease agreement with a primary
term of 12 years. In January, 2000, Texas notified the
Partnership that they were discontinuing the restaurant
operations. The Partnership is negotiating to sell the
property for $900,000 to an unrelated third party, whom has
assumed the restaurant operations from Texas. The
Partnership's share of the sale proceeds would be $585,000.
In the fourth quarter of 1999, a charge to operations of
$125,000 was recognized for real estate impairment, which
was the difference between the book value at December 31,
1999 of $703,652 and the estimated net proceeds from the
sale. The charge was recorded against the cost of the
building. The land and building have been classified as
Real Estate Held for Sale at December 31, 1999.
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. 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. In December, 1998, the Partnership re-
analyzed the market conditions in the area and determined
the fair value of the Partnership's interest in the land
declined to approximately $175,000. In the fourth quarter
of 1998, a charge to operations for real estate impairment
of $25,000 was recognized, which is the difference between
the book value at December 31, 1998 of $200,000 and the
estimated fair value of $175,000.
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.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) Investments in Real Estate - (Continued)
During 1998, the Partnership distributed $63,386 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 $2.82 per Limited Partnership Unit.
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 Operating Corporation
(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 advanced funds to Champps for
the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7.0%. Effective June 20, 1998, the
interest rate was increased to 10.50%. On September 3,
1998, after the development was completed, the Lease
Agreement was amended to require annual rental payments of
$133,356. The Partnership's share of the total acquisition
costs, including the cost of the land, was $1,289,135.
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
advanced funds to TLS for the construction of a Timber Lodge
Steakhouse restaurant on the site. Initially, the
Partnership charged interest on the advances at a rate of
7.5%. Effective May 14, 1998, the interest rate was
increased to 10.535%. On September 3, 1998, after the
development was completed, the Lease Agreement was amended
to require annual rental payments of $198,363. Total
acquisition costs, including the cost of the land, were
$1,910,768.
On August 28, 1998, the Partnership purchased a 14% interest
in a parcel of land in Centerville, Ohio for $259,139. The
land is leased to Americana Dining Corporation (ADC) under a
Lease Agreement with a primary term of 20 years and annual
rental payments of $18,140. Effective December 25, 1998,
the annual rent was increased to $27,209. Simultaneously
with the purchase of the land, the Partnership entered into
a Development Financing Agreement under which the
Partnership advanced funds to ADC for the construction of a
Champps Americana restaurant on the site. Initially, the
Partnership charged interest on the advances at a rate of
7.0%. Effective December 25, 1998, the interest rate was
increased to 10.5%. On January 27, 1999, after the
development was completed, the Lease Agreement was amended
to require annual rental payments of $56,764. The
Partnership's share of the total purchase price, including
the cost of the land, was $551,677.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) Investments in Real Estate - (Continued)
In the fourth quarter of 1999, the Partnership sold 13.5573%
of its interest in the Timber Lodge Steakhouse in two
separate transactions to unrelated third parties. The
Partnership received total net sale proceeds of $258,624,
which resulted in a total net gain of $53,582. The total
cost and related accumulated depreciation of the interests
sold was $217,264 and $12,222, respectively. The majority
of the net sale proceeds will be reinvested in additional
property in the future.
The minimum future rentals on the Leases for years
subsequent to December 31, 1999 are as follows:
2000 $ 1,813,661
2001 1,837,568
2002 1,867,166
2003 1,883,300
2004 1,617,468
Thereafter 11,068,979
-----------
$20,088,142
===========
There were no contingent rents recognized in 1999 or 1998.
(5) Major Tenants -
The following schedule presents rent revenue from individual
tenants, or affiliated groups of tenants, who each
contributed more than ten percent of the Partnership's total
rent revenue for the years ended December 31:
1999 1998
Tenants Industry
ARAMARK Educational
Resources, Inc. Child Care $ 530,359 $ 521,100
Timber Lodge Steakhouse, Inc. Restaurant 248,384 N/A
Heartland Restaurant
Corporation Restaurant 245,042 235,617
Champps Americana Group Restaurant 188,055 N/A
Texas Taco Cabana L.P. Restaurant N/A 162,122
---------- ----------
Aggregate rent revenue of major tenants $1,211,840 $ 918,839
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 67% 59%
========== ==========
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(6) Partners' Capital -
Cash distributions of $12,386 and $14,478 were made to the
General Partners and $1,001,920 and $988,173 were made to
the Limited Partners for the years ended December 31, 1999
and 1998, respectively. The Limited Partners' distributions
represent $45.96 and $44.37 per Limited Partnership Unit
outstanding using 21,802 and 22,269 weighted average Units
in 1999 and 1998. The distributions represent $37.51 and
$42.82 per Unit of Net Income and $8.45 and $1.55 and per
Unit of return of contributed capital in 1999 and 1998,
respectively.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $62,752 of proceeds from
property sales in 1998. The distributions reduced the
Limited Partners' Adjusted Capital Contributions.
Distributions of Net Cash Flow to the General Partners
during 1999 and 1998 were subordinated to the Limited
Partners as required in the Partnership Agreement. As a
result, 99% of distributions and income were allocated to
the Limited Partners and 1% to the General Partners.
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.
During 1999, twenty-one Limited Partners redeemed a total of
290 Partnership Units for $224,344 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In 1998, fifty-one
Limited Partners redeemed a total of 608 Partnership Units
for $445,180. The redemptions increase the remaining
Limited Partners' ownership interest in the Partnership.
After the effect of redemptions and the return of capital
from the sale of property, the Adjusted Capital
Contribution, as defined in the Partnership Agreement, is
$817.43 per original $1,000 invested.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(7) Income Taxes -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the years ended December 31:
1999 1998
Net Income for Financial
Reporting Purposes $1,054,271 $1,415,234
Depreciation for Tax Purposes Under
Depreciation for Financial
Reporting Purposes 45,931 58,241
Property Expenses for Tax Purposes
(Over) Under Expenses for Financial
Reporting Purposes (4,844) 464
Real Estate Impairment Loss
Not Recognized for Tax Purposes 125,000 25,000
Gain on Sale of Real Estate for
Tax Purposes Under Gain for
Financial Reporting Purposes (68) (41,122)
----------- -----------
Taxable Income to Partners $1,220,290 $1,457,817
=========== ===========
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(7) Income Taxes - (Continued)
The following is a reconciliation of Partners' capital for
financial reporting purposes to Partners' capital reported
for federal income tax purposes for the years ended December
31:
1999 1998
Partners' Capital for
Financial Reporting Purposes $13,097,736 $13,282,115
Adjusted Tax Basis of Investments
in Real Estate Over Net
Investments in Real Estate for
Financial Reporting Purposes 588,058 417,195
Property Expenses for Tax Purposes
Under Expenses for Financial
Reporting Purposes 33,065 37,909
Syndication Costs
Treated as Reduction of Capital
for Financial Reporting Purposes 3,149,157 3,149,157
----------- -----------
Partners' Capital for
Tax Reporting Purposes $16,868,015 $16,886,376
=========== ===========
(8) Fair Value of Financial Instruments -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, are as follows at
December 31:
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 326 $ 326 $ 326 $ 326
Money Market Funds 785,160 785,160 280,299 280,299
--------- --------- --------- ---------
Total Cash and
Cash Equivalents $ 785,486 $ 785,486 $ 280,625 $ 280,625
========= ========= ========= =========
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The registrant is a limited partnership and has no
officers, directors, or direct employees. The General Partners
of the registrant are Robert P. Johnson and AFM. The General
Partners manage and control the Partnership's affairs and have
general responsibility and the ultimate authority in all matters
affecting the Partnership's business. The director and officers
of AFM are as follows:
Robert P. Johnson, age 55, is Chief Executive Officer,
President and Director and has held these positions since the
formation of AFM in July, 1987, and has been elected to continue
in these positions until December, 2000. From 1970 to the
present, he has been employed exclusively in the investment
industry, specializing in tax-advantaged limited partnership
investments. In that capacity, he has been involved in the
development, analysis, marketing and management of public and
private investment programs investing in net lease properties as
well as public and private investment programs investing in
energy development. Since 1971, Mr. Johnson has been the
president, a director and a registered principal of AEI
Securities, Inc. (formerly AEI Incorporated), which is registered
with the Securities and Exchange Commission as a securities
broker-dealer, is a member of the National Association of
Securities Dealers, Inc. (NASD) and is a member of the Security
Investors Protection Corporation (SIPC). Mr. Johnson has been
president, a director and the principal shareholder of AEI Fund
Management, Inc., a real estate management company founded by
him, since 1978. Mr. Johnson is currently a general partner or
principal of the general partner in fifteen other limited
partnerships.
Mark E. Larson, age 47, is Executive Vice President,
Treasurer and Chief Financial Officer and has been elected to
continue in these positions until December, 2000. Mr. Larson has
been Treasurer since the formation of AFM in July, 1987,
Executive Vice President since December, 1987 and Chief Financial
Officer since January, 1990. In January, 1993, Mr. Larson was
elected to serve as Secretary of AFM and will continue to serve
until December, 2000. Mr. Larson has been employed by AEI Fund
Management, Inc. and affiliated entities since 1985. From 1979
to 1985, Mr. Larson was with Apache Corporation as manager of
Program Accounting responsible for the accounting and reports for
approximately 46 public partnerships. Mr. Larson is responsible
for supervising the accounting functions of AFM and the
registrant.
ITEM 10. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative and management services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information pertaining to
the ownership of the Units by each person known by the
Partnership to beneficially own 5% or more of the Units, by each
General Partner, and by each officer or director of the Managing
General Partner as of February 29, 2000:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
AEI Fund Management XVII, Inc. 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Robert P. Johnson 5 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Mark E. Larson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
* Less than 1%
The persons set forth in the preceding table hold sole voting
power and power of disposition with respect to all of the Units
set forth opposite their names. The General Partners know of no
holders of more than 5% of the outstanding Units.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The registrant, AFM and its affiliates have common
management and utilize the same facilities. As a result, certain
administrative expenses are allocated among these related
entities. All of such activities and any other transactions
involving the affiliates of the General Partner of the registrant
are governed by, and are conducted in conformity with, the
limitations set forth in the Limited Partnership Agreement of the
registrant.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. (Continued)
The following table sets forth the forms of compensation,
distributions and cost reimbursements paid by the registrant to
the General Partners or their Affiliates in connection with the
operation of the Fund and its properties through the period from
inception through December 31, 1999.
Person or Entity Amount Incurred From
Receiving Form and Method Inception (February 10, 1988)
Compensation of Compensation To December 31, 1999
AEI Securities, Inc. Selling Commissions equal to 8% of $2,338,870
(formerly AEI proceeds plus a 2% nonaccountable
Incorporated) expense allowance, most of which was
reallowed to Participating Dealers.
General Partners and Reimbursement at Cost for other $ 815,886
Affiliates Organization and Offering Costs.
General Partners and Reimbursement at Cost for all $ 806,457
Affiliates Acquisition Expenses
General Partners 1% of Net Cash Flow in any fiscal $ 192,787
year until the Limited Partners have
received annual, non-cumulative
distributions of Net Cash Flow equal
to 10% of their Adjusted Capital
Contributions and 10% of any remaining
Net Cash Flow in such fiscal year.
General Partners and Reimbursement at Cost for all $3,140,503
Affiliates Administrative Expenses attributable
to the Fund, including all expenses
related to management and disposition
of the Fund's properties and all other
transfer agency, reporting, partner
relations and other administrative
functions.
General Partners 15% of distributions of Net Proceeds $ 57,423
of Sale other than distributions
necessary to restore Adjusted Capital
Contributions and provide a 6%
cumulative return to Limited Partners.
The General Partners will receive
only 1% of distributions of Net Proceeds
of Sale until the Limited Partners have
received an amount equal to: (a) their
Adjusted Capital Contributions, plus
(b) an amount equal to 14% of their
Adjusted Capital Contributions per annum,
cumulative but not compounded, less (c)
all previous cash distributions to the
Limited Partners.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. (Continued)
The limitations included in the Partnership Agreement
require that the cumulative reimbursements to the General
Partners and their affiliates for administrative expenses not
allowed under the NASAA Guidelines ("Guidelines") will not exceed
the sum of (i) the front-end fees allowed by the Guidelines less
the front-end fees paid, (ii) the cumulative property management
fees allowed but not paid, (iii) any real estate commission
allowed under the Guidelines, and (iv) 10% of Net Cash Flow less
the Net Cash Flow actually distributed. The reimbursements not
allowed under the Guidelines include a controlling person's
salary and fringe benefits, rent and depreciation. As of
December 31, 1999, the cumulative reimbursements to the General
Partners and their affiliates did not exceed these amounts.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A.
A. Exhibits -
Description
3.1 Certificate of Limited
Partnership (incorporated by reference to
Exhibit 3.1 of the registrant's
Registration Statement on Form S-11 filed
with the Commission on July 30, 1987 [File
No. 33-16159]).
3.2 Limited Partnership
Agreement (incorporated by reference to
Exhibit 3.2 of the registrant's
Registration Statement on Form S-11 filed
with the Commission on July 30, 1987 [File
No. 33-16159]).
10.1 Assignment dated March 1,
1988 between the Partnership and Fund XVI
of the Net Lease Agreement dated July 23,
1987 assigned to Fund XVI by Westmoreland
Real Estate, Inc. (incorporated by
reference to Exhibit 10.4 of Form 10-K
filed with the Commission on July 28, 1992)
10.2 Net Lease Agreement dated
November 14, 1988 between the Partnership
and Taco Cabana, Inc. relating to the
property at 135 Long Street, San Marcos,
Texas (incorporated by reference to Exhibit
10.11 of Form 10-K filed with the
Commission on July 28, 1992).
10.3 Net Lease Agreement dated
September 29, 1989 between the Partnership
and Children's World Learning Centers, Inc.
relating to the property at 12790 Fee Fee
Road, St. Louis, Missouri (incorporated by
reference to Exhibit 10.15 of Form 10-K
filed with the Commission on July 28,
1992).
10.4 Net Lease Agreement dated
September 29, 1989 between the Partnership
and Children's World Learning Centers, Inc.
relating to the property at 325 Daniel
Webster Highway, Merrimack, New Hampshire
(incorporated by reference to Exhibit 10.16
of Form 10-K filed with the Commission on
July 28, 1992).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.5 Net Lease Agreement dated
September 29, 1989 between the Partnership
and Children's World Learning Centers, Inc.
relating to the property at 14635 Pipeline
Avenue South, Chino, California
(incorporated by reference to Exhibit 10.17
of Form 10-K filed with the Commission on
July 28, 1992).
10.6 Net Lease Agreement dated
September 29, 1989 between the Partnership
and Children's World Learning Centers, Inc.
relating to the property at 838 N. Quentin
Road, Palatine, Illinois (incorporated by
reference to Exhibit 10.18 of Form 10-K
filed with the Commission on July 28,
1992).
10.7 Net Lease Agreement dated
November 1, 1991 between the Partnership
and Heartland Restaurant Corporation
relating to the property at 1221 E.
Kimberly, Davenport, Iowa (incorporated by
reference to Exhibit 10.21 of Form 10-K
filed with the Commission on July 28,
1992).
10.8 Amendment to Lease dated
January 2, 1995 between the Partnership and
Huntington Restaurants Group, Inc. relating
to the property at 1851 E. Florence
Boulevard, Casa Grande, Arizona
(incorporated by reference to Exhibit 10.27
of Form 10-K filed with the Commission on
March 30, 1995).
10.9 Net Lease Agreement dated
September 21, 1995 between the Partnership
and FFT Cincinnati, Ltd. relating to the
property at 9035 Fields Ertel Road,
Cincinnati, Ohio (incorporated by reference
to Exhibit 10.2 of Form 10-QSB filed with
the Commission on November 2, 1995).
10.10 Net Lease Agreement
dated March 15, 1997 between the
Partnership, AEI Real Estate Fund XVI
Limited Partnership, and Texas Sports City
Cafe, Ltd. relating to the property at 3808
Towne Crossing Boulevard, Mesquite, Texas
(incorporated by reference to Exhibit 10.17
of Form 10-KSB filed with the Commission on
March 24, 1997).
10.11 Net Lease Agreement
dated November 18, 1997 between the
Partnership, AEI Real Estate Fund XV
Limited Partnership, AEI Institutional Net
Lease Fund '93 Limited Partnership and
Timber Lodge Steakhouse, Inc. relating to
the property at 3590 Second Street South,
St. Cloud, Minnesota (incorporated by
reference to Exhibit 10.20 of Form 10-KSB
filed with the Commission on March 23,
1998).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.12 Net Lease Agreement
dated December 10, 1997 between the
Partnership, AEI Income & Growth Fund XXII
Limited Partnership and Ohio Valley
Bistros, Inc. relating to the property at
#1507, Rural Route #6, Greensburg,
Pennsylvania (incorporated by reference to
Exhibit 10.21 of Form 10-KSB filed with the
Commission on March 23, 1998).
10.13 Net Lease Agreement
dated December 23, 1997 between the
Partnership, AEI Net Lease Income & Growth
Fund XIX Limited Partnership, AEI Real
Estate Fund XVIII Limited Partnership, AEI
Real Estate Fund XV Limited Partnership and
Champps Entertainment, Inc. relating to the
property at 301 West Big Beaver Road, Troy,
Michigan (incorporated by reference to
Exhibit 10.23 of Form 10-KSB filed with the
Commission on March 23, 1998).
10.14 Net Lease Agreement
dated January 15, 1998 between the
Partnership and Timber Lodge Steakhouse,
Inc. relating to the property at 4140
Frontage Road Northwest, Rochester,
Minnesota (incorporated by reference to
Exhibit 10.25 of Form 10-KSB filed with the
Commission on March 23, 1998).
10.15 First Amendment to Net Lease
Agreement dated September 3, 1998 between
the Partnership, AEI Net Lease Income &
Growth Fund XIX Limited Partnership, AEI
Real Estate Fund XVIII Limited Partnership,
AEI Real Estate Fund XV Limited Partnership
and Champps Entertainment, Inc. relating to
the property at 301 West Big Beaver Road,
Troy, Michigan (incorporated by reference
to Exhibit 10.2 of Form 8-K filed with the
Commission on September 15, 1998).
10.16 First Amendment to Net Lease
Agreement dated September 3, 1998 between
the Partnership and Timber Lodge
Steakhouse, Inc. relating to the property
at 4140 Frontage Road Northwest, Rochester,
Minnesota (incorporated by reference to
Exhibit 10.4 of Form 8-K filed with the
Commission on September 15, 1998).
10.17 Assignment of the Development
Financing Agreement and Net Lease Agreement
dated August 27, 1998 between the
Partnership, AEI Real Estate Fund XVIII
Limited Partnership, AEI Income & Growth
Fund XXI Limited Partnership, AEI Income &
Growth Fund XXII Limited Partnership, and
Americana Dining Corporation relating to
the property at 7880 Washington Village
Drive, Centerville, Ohio (incorporated by
reference to Exhibit 10.1 of Form 10-QSB
filed with the Commission on November 9,
1998).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.18 Development Financing Agreement
dated June 29, 1998 between AEI Income &
Growth Fund XXII Limited Partnership and
Americana Dining Corporation relating to
the property at 7880 Washington Village
Drive, Centerville, Ohio (incorporated by
reference to Exhibit 10.2 of Form 10-QSB
filed with the Commission on November 9,
1998).
10.19 Net Lease Agreement dated June
29, 1998 between AEI Income & Growth Fund
XXII Limited Partnership and Americana
Dining Corporation relating to the property
at 7880 Washington Village Drive,
Centerville, Ohio (incorporated by
reference to Exhibit 10.3 of Form 10-QSB
filed with the Commission on November 9,
1998).
10.20 First Amendment to Net Lease
Agreement dated January 27, 1999 between
the Partnership, AEI Real Estate Fund XVIII
Limited Partnership, AEI Income & Growth
Fund XXI Limited Partnership, AEI Income &
Growth Fund XXII Limited Partnership and
Americana Dining Corp. relating to the
property at 7880 Washington Village Drive,
Centerville, Ohio (incorporated by
reference to Exhibit 10.29 of Form 10-KSB
filed with the Commission on March 15,
1999).
10.21 Purchase Agreement dated November
18, 1999 between the Partnership and AEI
Real Estate Fund XV Limited Partnership and
Kilduff 1996 Revocable Trust dated June 20,
1996 relating to the property at 3950
Second Street South, St. Cloud, Minnesota.
10.22 Property Co-Tenancy Ownership
Agreement dated November 19, 1999 between
the Partnership and Kilduff 1996 Revocable
Trust dated June 20, 1996 relating to the
property at 3950 Second Street South, St.
Cloud, Minnesota.
10.23 Purchase Agreement dated December
6, 1999 between the Partnership and William
Jay and Georgeann McNaughtan relating to
the property at 3950 Second Street South,
St. Cloud, Minnesota.
10.24 Property Co-Tenancy Ownership
Agreement dated December 9, 1999 between
William Jay McNaughtan and Georgeann
McNaughtan relating to the property at 3950
Second Street South, St. Cloud, Minnesota.
27 Financial Data Schedule for
year ended December 31, 1999.
B. Reports on Form 8-K and Form 8-K/A - None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AEI REAL ESTATE FUND XVII
Limited Partnership
By: AEI Fund Management XVII, Inc.
Its Managing General Partner
March 10, 2000 By: /s/ Robert P. Johnson
Robert P. Johnson, President and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Name Title Date
/s/ Robert P. Johnson President (Principal Executive Officer) March 10, 2000
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 10, 2000
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
PURCHASE AGREEMENT
Timber Lodge Steakhouse - St. Cloud, MN
This AGREEMENT, entered into effective as of the 18th of
November, 1999.
l. PARTIES. Seller is AEI Real Estate Fund XV Limited Partnership
which presently owns an undivided 7.7342% and AEI Real Estate
Fund XVII Limited Partnership which presently owns an undivided
30.7940% and interest in the fee title to that certain real
property legally described in the attached Exhibit "A" (the
"Entire Property") Buyer is Marshall M. Kilduff, Trustee, and
Pat S. Kilduff, Trustee, of the Kilduff 1996 Revocable Trust,
dated June 20, 1996, ("Buyer"). Seller wishes to sell and Buyer
wishes to buy a portion as Tenant in Common of Seller's interest
in the Entire Property.
2. PROPERTY. The Property to be sold to Buyer in this transaction
consists of an undivided 9.5671 percentage interest (hereinafter,
simply the "Property") as Tenant in Common in the Entire
Property. (Fund XV selling 7.7342% and Fund XVII selling
1.8329%.)
3. PURCHASE PRICE The purchase price for this percentage
interest in the Entire Property is $182,400, all cash. (Fund XV
receiving $147,455.14 and Fund XVII receiving $34,944.86)
4. TERMS. The purchase price for the Property will be paid by
Buyer as follows:
(a) When this agreement is executed, Buyer will pay $5,000
to Seller (which shall be deposited into escrow according to
the terms hereof) (the "First Payment"). The First Payment
will be credited against the purchase price when and if
escrow closes and the sale is completed.
(b) Buyer will deposit the balance of the purchase price,
$177,400 (the "Second Payment") into escrow in sufficient
time to allow escrow to close on the closing date.
5. CLOSING DATE. Escrow shall close on or before November 30,
1999.
6. DUE DILIGENCE. Buyer will have until the expiration of the
tenth business day (The "Review Period") after delivery of each
of following items, to be supplied by Sellers, to conduct all of
its inspections and due diligence and satisfy itself regarding
each item, the Property, and this transaction. Buyer agrees to
indemnify and hold Sellers harmless for any loss or damage to the
Entire Property or persons caused by Buyer or its agents arising
out of such physical inspections of the Entire Property.
(a) The original and one copy of a title insurance
commitment for an Owner's Title insurance policy (see
paragraph 8 below).
(b) A copy of a Certificate of Occupancy or other such
document certifying completion and granting permission to
permanently occupy the improvements on the Entire Property
as are in Seller's possession.
(c) A copy of an "as built" survey of the Entire Property
done concurrent with Seller's acquisition of the Property.
(d) Lease (as further set forth in paragraph 11(a) below) of
the Entire Property showing occupancy date, lease expiration
date, rent, and Guarantys, if any, accompanied by such
tenant financial statements as may have been provided most
recently to Seller by the Tenant and/or Guarantors.
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
It is a contingency upon Seller's obligations hereunder that two
(2) copies of Co-Tenancy Agreement in the form attached hereto
duly executed by Buyer and AEI Real Estate Fund XVII Limited
Partnership and dated on escrow closing date be delivered to the
Seller on the closing date.
Buyer may cancel this agreement for ANY REASON in its sole
discretion by delivering a cancellation notice, return receipt
requested, to Seller and escrow holder before the expiration of
the Review Period. Such notice shall be deemed effective only
upon receipt by Seller. If this Agreement is not cancelled as
set forth above, the First Payment shall be non-refundable unless
Seller shall default hereunder.
If Buyer cancels this Agreement as permitted under this
Section, except for any escrow cancellation fees and any
liabilities under the first paragraph of section 6 of this
agreement (which will survive), Buyer (after execution of such
documents reasonably requested by Seller to evidence the
termination hereof) shall be returned its First Payment, and
Buyer will have absolutely no rights, claims or interest of any
type in connection with the Property or this transaction,
regardless of any alleged conduct by Sellers or anyone else.
Unless this Agreement is canceled by Buyer pursuant to the
terms hereof, if Buyer fails to make the Second Payment, Seller
shall be entitled to retain the First Payment and Buyer
irrevocably will be deemed to be in default under this Agreement.
Seller may, at its option, retain the First Payment and declare
this Agreement null and void, in which event Buyer will be deemed
to have canceled this Agreement and relinquish all rights in and
to the Property or Sellers may exercise its rights under Section
14 hereof. If this Agreement is not canceled and the Second
Payment is made when required, all of Buyer's conditions and
contingencies will be deemed satisfied.
7. ESCROW. Escrow shall be opened by Seller and funds deposited
in escrow upon acceptance of this Agreement by both parties. The
escrow holder will be a nationally-recognized escrow company
selected by Seller. A copy of this Agreement will be delivered to
the escrow holder and will serve as escrow instructions together
with the escrow holder's standard instructions and any additional
instructions required by the escrow holder to clarify its rights
and duties (and the parties agree to sign these additional
instructions). If there is any conflict between these other
instructions and this Agreement, this Agreement will control.
8. TITLE. Closing will be conditioned on the agreement of a
title company selected by Seller to issue an Owner's policy of
title insurance, dated as of the close of escrow, in an amount
equal to the purchase price, insuring that Buyer will own
insurable title to the Property subject only to: the title
company's standard exceptions; current real property taxes and
assessments; survey exceptions; the rights of parties in
possession pursuant to the lease defined in paragraph 11 below;
and other items of record disclosed to Buyer during the Review
Period.
Buyer shall be allowed five (5) days after receipt of said
commitment for examination and the making of any objections to
marketability thereto, said objections to be made in writing or
deemed waived. If any objections are so made, the Seller shall
be allowed eighty (80) days to make such title marketable or in
the alternative to obtain a commitment for insurable title
insuring over Buyer's objections. If Sellers shall decide to
make no efforts to make title marketable, or is unable to make
title marketable or obtain insurable title, (after execution by
Buyer of such documents reasonably requested by Seller to
evidence the termination hereof) Buyer's First Payment shall be
returned and this Agreement shall be null and void and of no
further force and effect. Seller has no obligation to spend any
funds or make any effort to satisfy Buyer's objections, if any.
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
Pending satisfaction of Buyer's objections, the payments
hereunder required shall be postponed, but upon satisfaction of
Buyer's objections and within ten (10) days after written notice
of satisfaction of Buyer's objections to the Buyer, the parties
shall perform this Agreement according to its terms.
9. CLOSING COSTS. Seller will pay one-half of escrow fees, the
cost of the title commitment and any brokerage commissions
payable. The Buyer will pay the cost of issuing a Standard
Owners Title Insurance Policy in the full amount of the purchase
price, if Buyer shall decide to purchase the same. Buyer will
pay all recording fees, one-half of the escrow fees, and the cost
of an update to the Survey in Seller possession (if an update is
required by Buyer.) Each party will pay its own attorney's fees
and costs to document and close this transaction.
10. REAL ESTATE TAXES, SPECIAL ASSESSMENTS AND PRORATIONS.
(a) Because the Entire Property (of which the Property is a
part) is subject to a triple net lease (as further set forth
in paragraph 11(a)(i), the parties acknowledge that there
shall be no need for a real estate tax proration. However,
Seller represents that to the best of its knowledge, all
real estate taxes and installments of special assessments
due and payable in all years prior to the year of Closing
have been paid in full. Unpaid real estate taxes and unpaid
levied and pending special assessments existing on the date
of Closing shall be the responsibility of Buyer and Seller
in proportion to their respective Tenant in Common
interests, pro-rated, however, to the date of closing for
the period prior to closing, which shall be the
responsibility of Seller if Tenant shall not pay the same.
Seller and Buyer shall likewise pay all taxes due and
payable in the year after Closing and any unpaid
installments of special assessments payable therewith and
thereafter, if such unpaid levied and pending special
assessments and real estate taxes are not paid by any tenant
of the Entire Property.
(b) All income and all operating expenses from the Entire
Property shall be prorated between the parties and adjusted
by them as of the date of Closing. Seller shall be entitled
to all income earned and shall be responsible for all
expenses incurred prior to the date of Closing, and Buyer
shall be entitled to its proportionate share of all income
earned and shall be responsible for its proportionate share
of all operating expenses of the Entire Property incurred on
and after the date of closing.
11. SELLER'S REPRESENTATION AND AGREEMENTS.
(a) Seller represents and warrants as of this date that:
(i) Except for the Lease Agreement in existence between AEI
Real Estate Fund XV Limited Partnership, AEI Real Estate
Fund XVII Limited Partnership, and Institutional Net Lease
Fund '93 Limited Partnership (as "Landlord") and Timber
Lodge Steakhouse, Inc. ("Tenant"), dated November 18, 1997,
Seller is not aware of any leases of the Property. The
above referenced lease agreement has an option to purchase
in favor of the Tenant as set forth in paragraph 33 of said
lease agreement.
(ii) It is not aware of any pending litigation or
condemnation proceedings against the Property or Seller's
interest in the Property.
(iii) Except as previously disclosed to Buyer and as
permitted in paragraph (b) below, Seller is not aware of any
contracts Seller has executed that would be binding on Buyer
after the closing date.
(b) Provided that Buyer performs its obligations when
required, Seller agrees that it will not enter into any new
contracts that would materially affect the Property and be
binding
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
on Buyer after the Closing Date without Buyer's prior
consent, which will not be unreasonably withheld. However,
Buyer acknowledges that Seller retains the right both prior
to and after the Closing Date to freely transfer all or a
portion of Seller's remaining undivided interest in the
Entire Property, provided such sale shall not encumber the
Property being purchased by Buyer in violation of the terms
hereof or the contemplated Co-Tenancy Agreement.
12. DISCLOSURES.
(a) Seller has not received any notice of any material,
physical, or mechanical defects of the Entire Property,
including without limitation, the plumbing, heating, air
conditioning, ventilating, electrical system. To the best of
Seller's knowledge without inquiry, all such items are in
good operating condition and repair and in compliance with
all applicable governmental, zoning, and land use laws,
ordinances, regulations and requirements. If Seller shall
receive any notice to the contrary prior to Closing, Seller
will inform Buyer prior to Closing.
(b) Seller has not received any notice that the use and
operation of the Entire Property is not in full compliance
with applicable building codes, safety, fire, zoning, and
land use laws, and other applicable local, state and federal
laws, ordinances, regulations and requirements. If Seller
shall receive any notice to the contrary prior to Closing,
Seller will inform Buyer prior to Closing.
(c) Seller knows of no facts nor has Seller failed to
disclose to Buyer any fact known to Seller which would
prevent the Tenant from using and operating the Entire
Property after the Closing in the manner in which the Entire
Property has been used and operated prior to the date of
this Agreement. If Seller shall receive any notice to the
contrary prior to Closing, Seller will inform Buyer prior to
Closing.
(d) Seller has not received any notice that the Entire
Property is in violation of any federal, state or local law,
ordinance, or regulations relating to industrial hygiene or
the environmental conditions on, under, or about the Entire
Property, including, but not limited to, soil, and
groundwater conditions. To the best of Seller's knowledge,
there is no proceeding or inquiry by any governmental
authority with respect to the presence of Hazardous
Materials on the Entire Property or the migration of
Hazardous Materials from or to other property. Buyer agrees
that Seller will have no liability of any type to Buyer or
Buyer's successors, assigns, or affiliates in connection
with any Hazardous Materials on or in connection with the
Entire Property after the Closing Date. Seller shall
indemnify Buyer for any liability arising due to Hazardous
Materials on or in connection with the Entire Property prior
to the Closing Date. If Seller shall receive any notice to
the contrary prior to Closing, Seller will inform Buyer
prior to Closing.
(e) Buyer agrees that it shall be purchasing the Property
in its then present condition, as is, where is, and Seller
has no obligations to construct or repair any improvements
thereon or to perform any other act regarding the Property,
except as expressly provided herein.
(f) Buyer acknowledges that, having been given the
opportunity to inspect the Entire Property and such
financial information on the Lessee and Guarantors of the
Lease as Buyer or its advisors shall request, if in Seller's
possession, Buyer is relying solely on its own investigation
of the Property and not on any information provided by
Seller or to be provided except as set forth herein. Buyer
further acknowledges that the information provided and to be
provided by Seller with respect to the Property, the Entire
Property and to the Lessee and Guarantors of Lease was
obtained from a variety of sources and Seller neither (a)
has made independent investigation or verification of such
information,
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
or (b) makes any representations as to the accuracy or
completeness of such information except as herein set forth.
The sale of the Property as provided for herein is made on
an "AS IS" basis, and Buyer expressly acknowledges that, in
consideration of the agreements of Seller herein, except as
otherwise specified herein in paragraph 11(a) and (b) above
and this paragraph 12, Seller makes no Warranty or
representation, Express or Implied, or arising by operation
of law, including, but not limited to, any warranty of
condition, habitability, tenantability, suitability for
commercial purposes, merchantability, or fitness for a
particular purpose, in respect of the Property.
The provisions (d) - (f) above shall survive Closing.
13. CLOSING.
(a) Before the closing date, Seller will deposit into
escrow an executed special warranty deed warranting title
against lawful claims by, through, or under a conveyance
from Seller, but not further or otherwise, conveying
insurable title of the Property to Buyer, subject to the
exceptions contained in paragraph 8 above.
(b) On or before the closing date, Buyer will deposit into
escrow: the balance of the purchase price when required
under Section 4; any additional funds required of Buyer,
(pursuant to this agreement or any other agreement executed
by Buyer) to close escrow. Both parties will sign and
deliver to the escrow holder any other documents reasonably
required by the escrow holder to close escrow.
(c) On the closing date, if escrow is in a position to
close, the escrow holder will: record the deed in the
official records of the county where the Property is
located; cause the title company to commit to issue the
title policy; immediately deliver to Seller the portion of
the purchase price deposited into escrow by cashier's check
or wire transfer (less debits and prorations, if any);
deliver to Seller and Buyer a signed counterpart of the
escrow holder's certified closing statement and take all
other actions necessary to close escrow.
14. DEFAULTS. If Buyer defaults, Buyer will forfeit all rights
and claims and Seller will be relieved of all obligations and
will be entitled to retain all monies heretofore paid by the
Buyer. In addition, Seller shall retain all remedies available
to Seller at law or in equity.
If Seller shall default, Buyer irrevocably waives any rights
to file a lis pendens, a specific performance action or any other
claim, action or proceeding of any type in connection with the
Property or this or any other transaction involving the Property,
and will not do anything to affect title to the Property or
hinder, delay or prevent any other sale, lease or other
transaction involving the Property (any and all of which will be
null and void), unless: it has paid the First Payment, deposited
the balance of the Second Payment for the purchase price into
escrow, performed all of its other obligations and satisfied all
conditions under this Agreement, and unconditionally notified
Seller that it stands ready to tender full performance, purchase
the Property and close escrow as per this Agreement, regardless
of any alleged default or misconduct by Seller. Provided,
however, that in no event shall Seller be liable for any
punitive, consequential or speculative damages arising out of any
default by Seller hereunder.
15. BUYER'S REPRESENTATIONS AND WARRANTIES.
a. Buyer represents and warrants to Seller as follows:
(i) In addition to the acts and deeds recited herein and
contemplated to be performed, executed, and delivered by
Buyer, Buyer shall perform, execute and deliver or cause to
be performed, executed, and delivered at the Closing or
after the Closing, any and all further
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
acts, deeds and assurances as Seller or the Title Company
may require and be reasonable in order to consummate the
transactions contemplated herein.
(ii) Buyer has all requisite power and authority to
consummate the transaction contemplated by this Agreement
and has by proper proceedings duly authorized the execution
and delivery of this Agreement and the consummation of the
transaction contemplated hereby.
(iii) To Buyer's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the
transaction contemplated hereby will violate or be in
conflict with (a) any applicable provisions of law, (b) any
order of any court or other agency of government having
jurisdiction hereof, or (c) any agreement or instrument to
which Buyer is a party or by which Buyer is bound.
16. DAMAGES, DESTRUCTION AND EMINENT DOMAIN.
(a) If, prior to closing, the Property or any part thereof
be destroyed or further damaged by fire, the elements, or
any cause, due to events occurring subsequent to the date of
this Agreement to the extent that the cost of repair exceeds
$10,000.00, this Agreement shall become null and void, at
Buyer's option exercised, if at all, by written notice to
Seller within ten (10) days after Buyer has received written
notice from Seller of said destruction or damage. Seller,
however, shall have the right to adjust or settle any
insured loss until (i) all contingencies set forth in
Paragraph 6 hereof have been satisfied, or waived; and (ii)
any ten-day period provided for above in this Subparagraph
16a for Buyer to elect to terminate this Agreement has
expired or Buyer has, by written notice to Seller, waived
Buyer's right to terminate this Agreement. If Buyer elects
to proceed and to consummate the purchase despite said
damage or destruction, there shall be no reduction in or
abatement of the purchase price, and Seller shall assign to
Buyer the Seller's right, title, and interest in and to all
insurance proceeds (pro-rata in relation to the Entire
Property) resulting from said damage or destruction to the
extent that the same are payable with respect to damage to
the Property, subject to rights of any Tenant of the Entire
Property.
If the cost of repair is less than $10,000.00, Buyer shall
be obligated to otherwise perform hereinunder with no
adjustment to the Purchase Price, reduction or abatement,
and Seller shall assign Seller's right, title and interest
in and to all insurance proceeds pro-rata in relation to the
Entire Property, subject to rights of any Tenant of the
Entire Property.
(b) If, prior to closing, the Property, or any part
thereof, is taken by eminent domain, this Agreement shall
become null and void, at Buyer's option. If Buyer elects to
proceed and to consummate the purchase despite said taking,
there shall be no reduction in, or abatement of, the
purchase price, and Seller shall assign to Buyer the
Seller's right, title, and interest in and to any award
made, or to be made, in the condemnation proceeding pro-rata
in relation to the Entire Property, subject to rights of any
Tenant of the Entire Property.
In the event that this Agreement is terminated by Buyer as
provided above in Subparagraph 16a or 16b, the First Payment
shall be immediately returned to Buyer (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof).
17. BUYER'S 1031 TAX FREE EXCHANGE.
While Seller acknowledges that Buyer is purchasing the
Property as "replacement property" to accomplish a tax free
exchange, Buyer acknowledges that Seller has made no
representations, warranties, or agreements to Buyer or Buyer's
agents that the transaction contemplated by the Agreement will
qualify for such tax treatment, nor has there been any
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
reliance thereon by Buyer respecting the legal or tax
implications of the transactions contemplated hereby. Buyer
further represents that it has sought and obtained such third
party advice and counsel as it deems necessary in regards to the
tax implications of this transaction.
Buyer wishes to novate/assign the ownership rights and
interest of this Purchase Agreement to San Francisco Bay Exchange
Service which will act as Accommodator to perfect the 1031
exchange by preparing an agreement of exchange of Real Property
whereby San Francisco Bay Exchange Service will be an independent
third party purchasing the ownership interest in subject property
from Seller and selling the ownership interest in subject
property to Buyer under the same terms and conditions as
documented in this Purchase Agreement. Buyer asks the Seller,
and Seller agrees to cooperate in the perfection of such an
exchange if at no additional cost or expense to Seller or delay
in time. Buyer hereby indemnifies and holds Seller harmless from
any claims and/or actions resulting from said exchange. Pursuant
to the direction of San Francisco Bay Exchange Service, Seller
will deed the Property to Buyer.
18. CANCELLATION
If any party elects to cancel this Contract because of any
breach by another party or because escrow fails to close by
the agreed date, the party electing to cancel shall deliver
to escrow agent a notice containing the address of the party
in breach and stating that this Contract shall be cancelled
unless the breach is cured within 10 days following the
delivery of the notice to the escrow agent. Within three
days after receipt of such notice, the escrow agent shall
send it by United States Mail to the party in breach at the
address contained in the Notice and no further notice shall
be required. If the breach is not cured within the 10 days
following the delivery of the notice to the escrow agent,
this Contract shall be cancelled.
19. MISCELLANEOUS.
(a) This Agreement may be amended only by written agreement
signed by both Seller and Buyer, and all waivers must be in
writing and signed by the waiving party. Time is of the
essence. This Agreement will not be construed for or
against a party whether or not that party has drafted this
Agreement. If there is any action or proceeding between the
parties relating to this Agreement the prevailing party will
be entitled to recover attorney's fees and costs. This is
an integrated agreement containing all agreements of the
parties about the Property and the other matters described,
and it supersedes any other agreements or understandings.
Exhibits attached to this Agreement are incorporated into
this Agreement.
(b) If this escrow has not closed by November 30, 1999,
through no fault of Seller, Seller may either, at its
election, extend the closing date or exercise any remedy
available to it by law, including terminating this
Agreement.
(c) Funds to be deposited or paid by Buyer must be good and
clear funds in the form of cash, cashier's checks or wire
transfers.
(d) All notices from either of the parties hereto to the
other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified
mail, return receipt requested, postage prepaid, or by a
nationally recognized courier service guaranteeing overnight
delivery to the party at his or its address set forth below,
or to such other address as such party may hereafter
designate by written notice to the other party.
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
If to Sellers:
Attention: Robert P. Johnson
AEI Real Estate Fund XV Limited Partnership &
AEI Real Estate Fund XVII Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
If to Buyer:
Marshall M. Kilduff, Trustee
Pat S. Kilduff, Trustee
321 Lake Street
San Francisco, CA 94108
When accepted, this offer will be a binding agreement for
valid and sufficient consideration which will bind and benefit
Buyer, Seller and their respective successors and assigns. Buyer
is submitting this offer by signing a copy of this offer and
delivering it to Seller. Seller has five (5) business days from
receipt within which to accept this offer.
This Agreement shall be governed by, and interpreted in
accordance with, the laws of the state of Minnesota.
IN WITNESS WHEREOF, the Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
BUYER: Marshall M. Kilduff, Trustee, and Pat S. Kilduff,
Trustee, of the Kilduff 1996 Revocable Trust, dated June 20, 1996
By:/s/ Marshall M Kilduff Trustee
Marshall M. Kilduff, Trustee
By:/s/ Pat S Kilduff Trustee
Pat S. Kilduff, Trustee
WITNESS: /s/ Sheldon Zimmerman
Sheldon Zimmerman
(Print Name)
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
SELLER:
AEI Real Estate Fund XV Limited Partnership
By: AEI Fund Management 86-A, Inc., its
corporate general partner
By:/s/ Robert P Johnson
Robert P. Johnson, President
AND
AEI Real Estate Fund XVII Limited Partnership
By: AEI Fund Management XVII, Inc., its
corporate general partner
By:/s/ Robert P Johnson
Robert P.Johnson, President
WITNESS:
(as to both signatures)
/s/ Jill Rayburn
Jill Rayburn
(Print Name)
Buyer Initial: /s/ PSM /s/ MMK
Purchase Agreement for Timber Lodge-St. Cloud, MN
EXHIBIT A
That part of Lot Two (2), Block One (1) Fischer
Additions, a duly recorded plat in the office of the County
Recorder/Registar of titles in Stearns County, Minnesota,
lying North of a line drawn parallel with and 327.20 feet
Southerly of, as measured at right angles to, the most
Northerly line of said Lot Two (2); together with the rights
of ingress, egress, utilites easements and such other rights
which constitute an interest in real property as created in
that certain Easement and Maintenance Agreement dated Dec.
10, 1996, file of record Dec. 13, 1996 as Document No.
835857, and in torrens as Document No. 24060.
PROPERTY CO-TENANCY
OWNERSHIP AGREEMENT
(Timber Lodge Steakhouse - St. Cloud, MN)
THIS CO-TENANCY AGREEMENT,
Made and entered into as of the 19th day of November , 1999, by
and between Marshall M. Kilduff, Trustee, and Pat S. Kilduff,
Trustee, of the Kilduff 1996 Revocable Trust, dated June 20,
1996, (hereinafter called "Kilduff"), and AEI Real Estate Fund
XVII Limited Partnership (hereinafter called "Fund XVII")
Kilduff, Fund XVII (and any other Owner in Fee where the context
so indicates) being hereinafter sometimes collectively called "Co-
Tenants" and referred to in the neuter gender).
WITNESSETH:
WHEREAS, Fund XVII presently owns an undivided 28.9611% interest
in and to, and Kilduff presently owns an undivided 9.5671%
interest in and to, and Kathleen DeVoe Hans presently owns an
undivided 11.9502% interest in and to, and Kenneth F. Cairns
presently owns an undivided 5.2581% interest in and to, and VTA
Building Company presently owns an undivided 11.9502% interest in
and to, and the Catharine C. Whittenburg Testamentary Trust for
J.A. Whittenburg IV or assigns presently owns an undivided
11.9502% interest in and to, and Charles R. Amos and Sharon L.
Amos, Trustees of the Charles R. and Sharon L. Amos Family Trust
Dated March 21, 1995, presently owns an undivided 10.8030%
interest in and to, and W. E. and Hazel Mason of the Mason Living
Trust presently own an undivided 9.5601% interest in and to the
land, situated in the City of St. Cloud, County of Stearns, and
State of MN, (legally described upon Exhibit A attached hereto
and hereby made a part hereof) and in and to the improvements
located thereon (hereinafter called "Premises");
WHEREAS, The parties hereto wish to provide for the orderly
operation and management of the Premises and Kilduff's interest
by Fund XVII; the continued leasing of space within the Premises;
for the distribution of income from and the pro-rata sharing in
expenses of the Premises.
NOW THEREFORE, in consideration of the purchase by Kilduff of an
undivided interest in and to the Premises, for at least One
Dollar ($1.00) and other good and valuable consideration by the
parties hereto to one another in hand paid, the receipt and
sufficiency of which are hereby acknowledged, and of the mutual
covenants and agreements herein contained, it is hereby agreed by
and between the parties hereto, as follows:
1. The operation and management of the Premises shall be
delegated to Fund XVII, or its designated agent, successors or
assigns. Provided, however, if Fund XVII shall sell all of its
interest in the Premises, the duties and obligations of Fund XVII
respecting management of the Premises as set forth herein,
including but not limited to paragraphs 2, 3, and 4 hereof, shall
be exercised by the holder or holders of a majority undivided co-
tenancy interest in the Premises. Except as hereinafter expressly
provided to the contrary, each of the parties hereto agrees to be
bound by the decisions of Fund XVII with respect to all
administrative, operational and management matters of the
property comprising the Premises, including but not limited to
the management of the net lease agreement for the Premises.
Kilduff hereto hereby designates Fund XVII as its sole and
exclusive agent to deal with, and Fund XVII retains the sole
right to deal with, any property agent or tenant and to negotiate
and enter into, on terms and provisions satisfactory to Fund
XVII, monitor, execute and enforce the terms of leases of space
within the Premises, including but not limited to any amendments,
consents to assignment, sublet, releases or modifications to
leases or guarantees of lease or easements affecting the
Premises, on behalf
Co-Tenant Initial: /s/ PSK /s/ MMK
Co-Tenancy Agreement for Timber Lodge-St. Cloud, MN
of Kilduff. As long as Fund XVII owns an interest in the
Premises, only Fund XVII may obligate Kilduff with respect to any
expense for the Premises.
As further set forth in paragraph 2 hereof, Fund XVII agrees to
require any lessee of the Premises to name Kilduff as an insured
or additional insured in all insurance policies provided for, or
contemplated by, any lease on the Premises. Fund XVII shall use
its best efforts to obtain endorsements adding Co-Tenants to said
policies from lessee within 30 days of commencement of this
agreement. In any event, Fund XVII shall distribute any insurance
proceeds it may receive, to the extent consistent with any lease
on the Premises, to the Co-Tenants in proportion to their
respective ownership of the Premises.
2. Income and expenses shall be allocated among the Co-Tenants
in proportion to their respective share(s) of ownership. Shares
of net income shall be pro-rated for any partial calendar years
included within the term of this Agreement. Fund XVII may offset
against, pay to itself and deduct from any payment due to under
this Agreement, and may pay to itself the amount of Kilduff's
share of any reasonable expenses of the Premises which are not
paid by Kilduff to Fund XVII or its assigns, within ten (10) days
after demand by Fund XVII. In the event there is insufficient
operating income from which to deduct Kilduff's unpaid share of
operating expenses, Fund XVII may pursue any and all legal
remedies for collection.
Operating Expenses shall include all normal operating expense,
including but not limited to: maintenance, utilities, supplies,
labor, management, advertising and promotional expenses, salaries
and wages of rental and management personnel, leasing commissions
to third parties, a monthly accrual to pay insurance premiums,
real estate taxes, installments of special assessments and for
structural repairs and replacements, management fees, legal fees
and accounting fees, but excluding all operating expenses paid by
tenant under terms of any lease agreement of the Premises.
Kilduff has no requirement to, but has, nonetheless elected to
retain, and agrees to annually reimburse, Fund XVII in the amount
of $570 for the expenses, direct and indirect, incurred by Fund
XVII in providing Kilduff with quarterly accounting and
distributions of Kilduff's share of net income and for tracking,
reporting and assessing the calculation of Kilduff's share of
operating expenses incurred from the Premises. This invoice
amount shall be pro-rated for partial years and Kilduff
authorizes Fund XVII to deduct such amount from Kilduff's share
of revenue from the Premises. Kilduff may terminate this
agreement in this paragraph respecting accounting and
distributions at any time and attempt to collect its share of
rental income directly from the tenant; however, enforcement of
all other provisions of the lease remains the sole right of Fund
XVII pursuant to Section 1 hereof. Fund XVII agrees to perform
its obligation under this paragraph throughout the term of this
agreement.
3. Full, accurate and complete books of account shall be kept
in accordance with generally accepted accounting principles at
Fund XVII's principal office, and each Co-Tenant shall have
access to such books and may inspect and copy any part thereof
during normal business hours. Within ninety (90) days after the
end of each calendar year during the term hereof, Fund XVII shall
prepare an accurate income statement for the ownership of the
Premises for said calendar year and shall furnish copies of the
same to all Co-Tenants. Quarterly, as its share, Kilduff shall be
entitled to receive 9.5671% of all items of income and expense
generated by the Premises. Upon receipt of said accounting, if
the payments received by each Co-Tenant pursuant to this
Paragraph 3 do not equal, in the aggregate, the amounts which
each are entitled to receive proportional to its share of
ownership with respect to said calendar year pursuant to
Paragraph 2 hereof, an appropriate adjustment shall be made so
that each Co-Tenant receives the amount to which it is entitled.
Co-Tenant Initial: /s/ PSK /s/ MMK
Co-Tenancy Agreement for Timber Lodge-St. Cloud, MN
4. If Net Income from the Premises is less than $0.00 (i.e.,
the Premises operates at a loss), or if capital improvements,
repairs, and/or replacements, for which adequate reserves do not
exist, need to be made to the Premises, the Co-Tenants, upon
receipt of a written request therefor from Fund XVII, shall,
within fifteen (15) business days after receipt of notice, make
payment to Fund XVII sufficient to pay said net operating losses
and to provide necessary operating capital for the premises and
to pay for said capital improvements, repairs and/or
replacements, all in proportion to their undivided interests in
and to the Premises.
5. Co-Tenants may, at any time, sell, finance, or otherwise
create a lien upon their interest in the Premises but only upon
their interest and not upon any part of the interest held, or
owned, by any other Co-Tenant. All Co-Tenants reserve the right
to escrow proceeds from a sale of their interests in the Premises
to obtain tax deferral by the purchase of replacement property.
6. If any Co-Tenant shall be in default with respect to any of
its obligations hereunder, and if said default is not corrected
within thirty (30) days after receipt by said defaulting Co-
Tenant of written notice of said default, or within a reasonable
period if said default does not consist solely of a failure to
pay money, the remaining Co-Tenant(s) may resort to any available
remedy to cure said default at law, in equity, or by statute.
7. This Co-Tenancy agreement shall continue in full force and
effect and shall bind and inure to the benefit of the Co-Tenant
and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns until November
30, 2032 or upon the sale of the entire Premises in accordance
with the terms hereof and proper disbursement of the proceeds
thereof, whichever shall first occur. Unless specifically
identified as a personal contract right or obligation herein,
this agreement shall run with any interest in the Property and
with the title thereto. Once any person, party or entity has
ceased to have an interest in fee in any portion of the Entire
Property, it shall not be bound by, subject to or benefit from
the terms hereof; but its heirs, executors, administrators,
personal representatives, successors or assigns, as the case may
be, shall be substituted for it hereunder.
8. Any notice or election required or permitted to be given or
served by any party hereto to, or upon any other, shall be given
to all known Co-Tenants and deemed given or served in accordance
with the provisions of this Agreement, if said notice or
elections addressed as follows;
If to Fund XVII:
AEI Real Estate Fund XVII Limited Partnership
1300 Minnesota World Trade Center
30 E. Seventh Street
St. Paul, Minnesota 55101
If to Kilduff:
Marshall M. Kilduff, Trustee
Pat S. Kilduff, Trustee
321 Lake Street
San Francisco, CA 94118-1320
If to Hans:
Kathleen DeVoe Hans
310 Desert Meadow Court
Reno, NV 89502
Co-Tenant Initial: /s/ PSK /s/ MMK
Co-Tenancy Agreement for Timber Lodge-St. Cloud, MN
If to Cairns:
Kenneth F. Cairns
24600 SE Ladd Hill Road
Sherwood, OR 97140
If to VTA :
VTA Building Company
12825 Falcon Drive
Apple Valley, MN 55124
If to Amos:
Charles R. Amos and Sharon L. Amos, Trustees
30033 Knoll View Drive
Rancho Palos Verdes, CA 90275
If to Mason:
Mason Living Trust
136 Baltusrol Road
Franklin, TN 37069
If to Whittenburg
The Catharine C. Whittenburg Testamentary Trust for
J. A. Whittenburg IV or Assigns
Post Office Box 26
Amarillo, TX 79105
Each mailed notice or election shall be deemed to have been given
to, or served upon, the party to which addressed on the date the
same is deposited in the United States certified mail, return
receipt requested, postage prepaid, or given to a nationally
recognized courier service guaranteeing overnight delivery as
properly addressed in the manner above provided. Any party hereto
may change its address for the service of notice hereunder by
delivering written notice of said change to the other parties
hereunder, in the manner above specified, at least ten (10) days
prior to the effective date of said change.
9. This Agreement shall not create any partnership or joint
venture among or between the Co-Tenants or any of them, and the
only relationship among and between the Co-Tenants hereunder
shall be that of owners of the premises as tenants in common
subject to the terms hereof.
10. The unenforceability or invalidity of any provision or
provisions of this Agreement as to any person or circumstances
shall not render that provision, nor any other provision hereof,
unenforceable or invalid as to any other person or circumstances,
and all provisions hereof, in all other respects, shall remain
valid and enforceable.
11. In the event any litigation arises between the parties
hereto relating to this Agreement, or any of the provisions
hereof, the party prevailing in such action shall be entitled to
receive from the losing party, in addition to all other relief,
remedies and damages to which it is otherwise entitled, all
reasonable costs and expenses, including reasonable attorneys'
fees, incurred by the prevailing party in connection with said
litigation.
Co-Tenant Initial: /s/ PSK /s/ MMK
Co-Tenancy Agreement for Timber Lodge-St. Cloud, MN
IN WITNESS WHEREOF, The parties hereto have caused this Agreement
to be executed and delivered, as of the day and year first above
written.
Kilduff
By:/s/ Marshall M Kilduff Trustee
Marshall M. Kilduff, Trustee
By:/s/ Pat S Kilduff Trustee
Pat S. Kilduff, Trustee
STATE OF CALIFORNIA)
) ss
COUNTY OF SAN DIEGO )
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 17th day of
November, 1999, Marshall Kilduff & Pat Kilduff who executed the
foregoing instrument in said capacity.
/s/ June B Slayer
Notary Public [notary seal]
Fund XVII AEI Real Estate Fund XVII Limited Partnership
By: AEI Fund Management XVII, Inc., its corporate general partner
By:/s/ Robert P Johnson
Robert P. Johnson, President
WITNESS:
/s/ Jill Rayburn
Jill Rayburn
(Print Name)
State of Minnesota )
) ss.
County of Ramsey )
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 19th day of
November, 1999, Robert P. Johnson, President of AEI Fund
Management XVII, Inc., corporate general partner of AEI Real
Estate Fund XVII Limited Partnership who executed the foregoing
instrument in said capacity and on behalf of the corporation in
its capacity as corporate general partner, on behalf of said
limited partnership.
/s/ Linda A Bisdorf
Notary Public
Co-Tenant Initial: /s/ PSK /s/ MMK [notary seal]
Co-Tenancy Agreement for Timber Lodge-St. Cloud, MN
EXHIBIT A
That part of Lot Two (2), Block One (1) Fischer
Additions, a duly recorded plat in the office of the
County Recorder/Registar of titles in Stearns County,
Minnesota, lying North of a line drawn parallel with and
327.20 feet Southerly of, as measured at right angles to,
the most Northerly line of said Lot Two (2); together with
the rights of ingress, egress, utilites easements and such
other rights which constitute an interest in real property
as created in that certain Easement and Maintenance
Agreement dated Dec. 10, 1996, file of record Dec. 13,
1996 as Document No. 835857, and in torrens as Document
No. 24060.
PURCHASE AGREEMENT
Timber Lodge Steakhouse - St. Cloud, MN
This AGREEMENT, entered into effective as of the 6th of December,
1999.
l. PARTIES. Seller is AEI Real Estate Fund XVII Limited
Partnership which presently owns an undivided 28.9611% and
interest in the fee title to that certain real property legally
described in the attached Exhibit "A" (the "Entire Property")
Buyer is William Jay McNaughtan and Georgeann McNaughtan, married
with rights of survivorship ("Buyer"). Seller wishes to sell and
Buyer wishes to buy a portion as Tenant in Common of Seller's
interest in the Entire Property.
2. PROPERTY. The Property to be sold to Buyer in this transaction
consists of an undivided 11.7244 percentage interest
(hereinafter, simply the "Property") as Tenant in Common in the
Entire Property.
3. PURCHASE PRICE The purchase price for this percentage
interest in the Entire Property is $250,000 all cash.
4. TERMS. The purchase price for the Property will be paid by
Buyer as follows:
(a) When this agreement is executed, Buyer will pay $5,000
to Seller (which shall be deposited into escrow according to
the terms hereof) (the "First Payment"). The First Payment
will be credited against the purchase price when and if
escrow closes and the sale is completed.
(b) Buyer will deposit the balance of the purchase price,
$245,000 (the "Second Payment") into escrow in sufficient
time to allow escrow to close on the closing date.
5. CLOSING DATE. Escrow shall close on or before December 15,
1999.
6. DUE DILIGENCE. Buyer will have until the expiration of the
tenth business day (The "Review Period") after delivery of each
of following items, to be supplied by Sellers, to conduct all of
its inspections and due diligence and satisfy itself regarding
each item, the Property, and this transaction. Buyer agrees to
indemnify and hold Sellers harmless for any loss or damage to the
Entire Property or persons caused by Buyer or its agents arising
out of such physical inspections of the Entire Property.
(a) The original and one copy of a title insurance
commitment for an Owner's Title insurance policy (see
paragraph 8 below).
(b) A copy of a Certificate of Occupancy or other such
document certifying completion and granting permission to
permanently occupy the improvements on the Entire Property
as are in Seller's possession.
(c) A copy of an "as built" survey of the Entire Property
done concurrent with Seller's acquisition of the Property.
(d) Lease (as further set forth in paragraph 11(a) below) of
the Entire Property showing occupancy date, lease expiration
date, rent, and Guarantys, if any, accompanied by such
tenant financial statements as may have been provided most
recently to Seller by the Tenant and/or Guarantors.
Buyer Initial: /s/ WJM /s/ GM
Purchase Agreement for Timber Lodge-St. Cloud, MN
It is a contingency upon Seller's obligations hereunder that two
(2) copies of Co-Tenancy Agreement in the form attached hereto
duly executed by Buyer and AEI Real Estate Fund XVII Limited
Partnership and dated on escrow closing date be delivered to the
Seller on the closing date.
Buyer may cancel this agreement for ANY REASON in its sole
discretion by delivering a cancellation notice, return receipt
requested, to Seller and escrow holder before the expiration of
the Review Period. Such notice shall be deemed effective only
upon receipt by Seller. If this Agreement is not cancelled as
set forth above, the First Payment shall be non-refundable unless
Seller shall default hereunder.
If Buyer cancels this Agreement as permitted under this
Section, except for any escrow cancellation fees and any
liabilities under the first paragraph of section 6 of this
agreement (which will survive), Buyer (after execution of such
documents reasonably requested by Seller to evidence the
termination hereof) shall be returned its First Payment, and
Buyer will have absolutely no rights, claims or interest of any
type in connection with the Property or this transaction,
regardless of any alleged conduct by Sellers or anyone else.
Unless this Agreement is canceled by Buyer pursuant to the
terms hereof, if Buyer fails to make the Second Payment, Seller
shall be entitled to retain the First Payment and Buyer
irrevocably will be deemed to be in default under this Agreement.
Seller may, at its option, retain the First Payment and declare
this Agreement null and void, in which event Buyer will be deemed
to have canceled this Agreement and relinquish all rights in and
to the Property or Sellers may exercise its rights under Section
14 hereof. If this Agreement is not canceled and the Second
Payment is made when required, all of Buyer's conditions and
contingencies will be deemed satisfied.
7. ESCROW. Escrow shall be opened by Seller and funds deposited
in escrow upon acceptance of this Agreement by both parties. The
escrow holder will be a nationally-recognized escrow company
selected by Seller. A copy of this Agreement will be delivered to
the escrow holder and will serve as escrow instructions together
with the escrow holder's standard instructions and any additional
instructions required by the escrow holder to clarify its rights
and duties (and the parties agree to sign these additional
instructions). If there is any conflict between these other
instructions and this Agreement, this Agreement will control.
8. TITLE. Closing will be conditioned on the agreement of a
title company selected by Seller to issue an Owner's policy of
title insurance, dated as of the close of escrow, in an amount
equal to the purchase price, insuring that Buyer will own
insurable title to the Property subject only to: the title
company's standard exceptions; current real property taxes and
assessments; survey exceptions; the rights of parties in
possession pursuant to the lease defined in paragraph 11 below;
and other items of record disclosed to Buyer during the Review
Period.
Buyer shall be allowed five (5) days after receipt of said
commitment for examination and the making of any objections to
marketability thereto, said objections to be made in writing or
deemed waived. If any objections are so made, the Seller shall
be allowed eighty (80) days to make such title marketable or in
the alternative to obtain a commitment for insurable title
insuring over Buyer's objections. If Sellers shall decide to
make no efforts to make title marketable, or is unable to make
title marketable or obtain insurable title, (after execution by
Buyer of such documents reasonably requested by Seller to
evidence the termination hereof) Buyer's First Payment shall be
returned and this Agreement shall be null and void and of no
further force and effect. Seller has no obligation to spend any
funds or make any effort to satisfy Buyer's objections, if any.
Pending satisfaction of Buyer's objections, the payments
hereunder required shall be postponed, but upon satisfaction of
Buyer's objections and within ten (10) days after written
Buyer Initial: /s/ WJM /s/ GM
Purchase Agreement for Timber Lodge-St. Cloud, MN
notice of satisfaction of Buyer's objections to the Buyer, the
parties shall perform this Agreement according to its terms.
9. CLOSING COSTS. Seller will pay one-half of escrow fees, the
cost of the title commitment and any brokerage commissions
payable. The Buyer will pay the cost of issuing a Standard
Owners Title Insurance Policy in the full amount of the purchase
price, if Buyer shall decide to purchase the same. Buyer will
pay all recording fees, one-half of the escrow fees, and the cost
of an update to the Survey in Seller possession (if an update is
required by Buyer.) Each party will pay its own attorney's fees
and costs to document and close this transaction.
10. REAL ESTATE TAXES, SPECIAL ASSESSMENTS AND PRORATIONS.
(a) Because the Entire Property (of which the Property is a
part) is subject to a triple net lease (as further set forth
in paragraph 11(a)(i), the parties acknowledge that there
shall be no need for a real estate tax proration. However,
Seller represents that to the best of its knowledge, all
real estate taxes and installments of special assessments
due and payable in all years prior to the year of Closing
have been paid in full. Unpaid real estate taxes and unpaid
levied and pending special assessments existing on the date
of Closing shall be the responsibility of Buyer and Seller
in proportion to their respective Tenant in Common
interests, pro-rated, however, to the date of closing for
the period prior to closing, which shall be the
responsibility of Seller if Tenant shall not pay the same.
Seller and Buyer shall likewise pay all taxes due and
payable in the year after Closing and any unpaid
installments of special assessments payable therewith and
thereafter, if such unpaid levied and pending special
assessments and real estate taxes are not paid by any tenant
of the Entire Property.
(b) All income and all operating expenses from the Entire
Property shall be prorated between the parties and adjusted
by them as of the date of Closing. Seller shall be entitled
to all income earned and shall be responsible for all
expenses incurred prior to the date of Closing, and Buyer
shall be entitled to its proportionate share of all income
earned and shall be responsible for its proportionate share
of all operating expenses of the Entire Property incurred on
and after the date of closing.
11. SELLER'S REPRESENTATION AND AGREEMENTS.
(a) Seller represents and warrants as of this date that:
(i) Except for the Lease Agreement in existence between AEI
Real Estate Fund XV Limited Partnership, AEI Real Estate
Fund XVII Limited Partnership, and Institutional Net Lease
Fund '93 Limited Partnership (as "Landlord") and Timber
Lodge Steakhouse, Inc. ("Tenant"), dated November 18, 1997,
Seller is not aware of any leases of the Property. The
above referenced lease agreement has an option to purchase
in favor of the Tenant as set forth in paragraph 33 of said
lease agreement.
(ii) It is not aware of any pending litigation or
condemnation proceedings against the Property or Seller's
interest in the Property.
(iii) Except as previously disclosed to Buyer and as
permitted in paragraph (b) below, Seller is not aware of any
contracts Seller has executed that would be binding on Buyer
after the closing date.
(b) Provided that Buyer performs its obligations when
required, Seller agrees that it will not enter into any new
contracts that would materially affect the Property and be
binding on Buyer after the Closing Date without Buyer's
prior consent, which will not be unreasonably withheld.
However, Buyer acknowledges that Seller retains the right
both
Buyer Initial: /s/ WJM /s/ GM
Purchase Agreement for Timber Lodge-St. Cloud, MN
prior to and after the Closing Date to freely transfer all
or a portion of Seller's remaining undivided interest in the
Entire Property, provided such sale shall not encumber the
Property being purchased by Buyer in violation of the terms
hereof or the contemplated Co-Tenancy Agreement.
12. DISCLOSURES.
(a) Seller has not received any notice of any material,
physical, or mechanical defects of the Entire Property,
including without limitation, the plumbing, heating, air
conditioning, ventilating, electrical system. To the best of
Seller's knowledge without inquiry, all such items are in
good operating condition and repair and in compliance with
all applicable governmental, zoning, and land use laws,
ordinances, regulations and requirements. If Seller shall
receive any notice to the contrary prior to Closing, Seller
will inform Buyer prior to Closing.
(b) Seller has not received any notice that the use and
operation of the Entire Property is not in full compliance
with applicable building codes, safety, fire, zoning, and
land use laws, and other applicable local, state and federal
laws, ordinances, regulations and requirements. If Seller
shall receive any notice to the contrary prior to Closing,
Seller will inform Buyer prior to Closing.
(c) Seller knows of no facts nor has Seller failed to
disclose to Buyer any fact known to Seller which would
prevent the Tenant from using and operating the Entire
Property after the Closing in the manner in which the Entire
Property has been used and operated prior to the date of
this Agreement. If Seller shall receive any notice to the
contrary prior to Closing, Seller will inform Buyer prior to
Closing.
(d) Seller has not received any notice that the Entire
Property is in violation of any federal, state or local law,
ordinance, or regulations relating to industrial hygiene or
the environmental conditions on, under, or about the Entire
Property, including, but not limited to, soil, and
groundwater conditions. To the best of Seller's knowledge,
there is no proceeding or inquiry by any governmental
authority with respect to the presence of Hazardous
Materials on the Entire Property or the migration of
Hazardous Materials from or to other property. Buyer agrees
that Seller will have no liability of any type to Buyer or
Buyer's successors, assigns, or affiliates in connection
with any Hazardous Materials on or in connection with the
Entire Property after the Closing Date. Seller shall
indemnify Buyer for any liability arising due to Hazardous
Materials on or in connection with the Entire Property prior
to the Closing Date. If Seller shall receive any notice to
the contrary prior to Closing, Seller will inform Buyer
prior to Closing.
(e) Buyer agrees that it shall be purchasing the Property
in its then present condition, as is, where is, and Seller
has no obligations to construct or repair any improvements
thereon or to perform any other act regarding the Property,
except as expressly provided herein.
(f) Buyer acknowledges that, having been given the
opportunity to inspect the Entire Property and such
financial information on the Lessee and Guarantors of the
Lease as Buyer or its advisors shall request, if in Seller's
possession, Buyer is relying solely on its own investigation
of the Property and not on any information provided by
Seller or to be provided except as set forth herein. Buyer
further acknowledges that the information provided and to be
provided by Seller with respect to the Property, the Entire
Property and to the Lessee and Guarantors of Lease was
obtained from a variety of sources and Seller neither (a)
has made independent investigation or verification of such
information, or (b) makes any representations as to the
accuracy or completeness of such information except as
herein set forth. The sale of the Property as provided for
herein is made on an
Buyer Initial: /s/ WJM /s/ GM
Purchase Agreement for Timber Lodge-St. Cloud, MN
"AS IS" basis, and Buyer expressly acknowledges that, in
consideration of the agreements of Seller herein, except as
otherwise specified herein in paragraph 11(a) and (b) above
and this paragraph 12, Seller makes no Warranty or
representation, Express or Implied, or arising by operation
of law, including, but not limited to, any warranty of
condition, habitability, tenantability, suitability for
commercial purposes, merchantability, or fitness for a
particular purpose, in respect of the Property.
The provisions (d) - (f) above shall survive Closing.
13. CLOSING.
(a) Before the closing date, Seller will deposit into
escrow an executed special warranty deed warranting title
against lawful claims by, through, or under a conveyance
from Seller, but not further or otherwise, conveying
insurable title of the Property to Buyer, subject to the
exceptions contained in paragraph 8 above.
(b) On or before the closing date, Buyer will deposit into
escrow: the balance of the purchase price when required
under Section 4; any additional funds required of Buyer,
(pursuant to this agreement or any other agreement executed
by Buyer) to close escrow. Both parties will sign and
deliver to the escrow holder any other documents reasonably
required by the escrow holder to close escrow.
(c) On the closing date, if escrow is in a position to
close, the escrow holder will: record the deed in the
official records of the county where the Property is
located; cause the title company to commit to issue the
title policy; immediately deliver to Seller the portion of
the purchase price deposited into escrow by cashier's check
or wire transfer (less debits and prorations, if any);
deliver to Seller and Buyer a signed counterpart of the
escrow holder's certified closing statement and take all
other actions necessary to close escrow.
14. DEFAULTS. If Buyer defaults, Buyer will forfeit all rights
and claims and Seller will be relieved of all obligations and
will be entitled to retain all monies heretofore paid by the
Buyer. In addition, Seller shall retain all remedies available
to Seller at law or in equity.
If Seller shall default, Buyer irrevocably waives any rights
to file a lis pendens, a specific performance action or any other
claim, action or proceeding of any type in connection with the
Property or this or any other transaction involving the Property,
and will not do anything to affect title to the Property or
hinder, delay or prevent any other sale, lease or other
transaction involving the Property (any and all of which will be
null and void), unless: it has paid the First Payment, deposited
the balance of the Second Payment for the purchase price into
escrow, performed all of its other obligations and satisfied all
conditions under this Agreement, and unconditionally notified
Seller that it stands ready to tender full performance, purchase
the Property and close escrow as per this Agreement, regardless
of any alleged default or misconduct by Seller. Provided,
however, that in no event shall Seller be liable for any
punitive, consequential or speculative damages arising out of any
default by Seller hereunder.
15. BUYER'S REPRESENTATIONS AND WARRANTIES.
a. Buyer represents and warrants to Seller as follows:
(i) In addition to the acts and deeds recited herein and
contemplated to be performed, executed, and delivered by
Buyer, Buyer shall perform, execute and deliver or cause to
be performed, executed, and delivered at the Closing or
after the Closing, any and all further acts, deeds and
assurances as Seller or the Title Company may require and be
reasonable in order to consummate the transactions
contemplated herein.
Buyer Initial: /s/ WJM /s/ GM
Purchase Agreement for Timber Lodge-St. Cloud, MN
(ii) Buyer has all requisite power and authority to
consummate the transaction contemplated by this Agreement
and has by proper proceedings duly authorized the execution
and delivery of this Agreement and the consummation of the
transaction contemplated hereby.
(iii) To Buyer's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the
transaction contemplated hereby will violate or be in
conflict with (a) any applicable provisions of law, (b) any
order of any court or other agency of government having
jurisdiction hereof, or (c) any agreement or instrument to
which Buyer is a party or by which Buyer is bound.
16. DAMAGES, DESTRUCTION AND EMINENT DOMAIN.
(a) If, prior to closing, the Property or any part thereof
be destroyed or further damaged by fire, the elements, or
any cause, due to events occurring subsequent to the date of
this Agreement to the extent that the cost of repair exceeds
$10,000.00, this Agreement shall become null and void, at
Buyer's option exercised, if at all, by written notice to
Seller within ten (10) days after Buyer has received written
notice from Seller of said destruction or damage. Seller,
however, shall have the right to adjust or settle any
insured loss until (i) all contingencies set forth in
Paragraph 6 hereof have been satisfied, or waived; and (ii)
any ten-day period provided for above in this Subparagraph
16a for Buyer to elect to terminate this Agreement has
expired or Buyer has, by written notice to Seller, waived
Buyer's right to terminate this Agreement. If Buyer elects
to proceed and to consummate the purchase despite said
damage or destruction, there shall be no reduction in or
abatement of the purchase price, and Seller shall assign to
Buyer the Seller's right, title, and interest in and to all
insurance proceeds (pro-rata in relation to the Entire
Property) resulting from said damage or destruction to the
extent that the same are payable with respect to damage to
the Property, subject to rights of any Tenant of the Entire
Property.
If the cost of repair is less than $10,000.00, Buyer shall
be obligated to otherwise perform hereinunder with no
adjustment to the Purchase Price, reduction or abatement,
and Seller shall assign Seller's right, title and interest
in and to all insurance proceeds pro-rata in relation to the
Entire Property, subject to rights of any Tenant of the
Entire Property.
(b) If, prior to closing, the Property, or any part
thereof, is taken by eminent domain, this Agreement shall
become null and void, at Buyer's option. If Buyer elects to
proceed and to consummate the purchase despite said taking,
there shall be no reduction in, or abatement of, the
purchase price, and Seller shall assign to Buyer the
Seller's right, title, and interest in and to any award
made, or to be made, in the condemnation proceeding pro-rata
in relation to the Entire Property, subject to rights of any
Tenant of the Entire Property.
In the event that this Agreement is terminated by Buyer as
provided above in Subparagraph 16a or 16b, the First Payment
shall be immediately returned to Buyer (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof).
17. BUYER'S 1033 TAX FREE EXCHANGE.
While Seller acknowledges that Buyer is purchasing the
Property as "replacement property" to accomplish a tax free
exchange, Buyer acknowledges that Seller has made no
representations, warranties, or agreements to Buyer or Buyer's
agents that the transaction contemplated by the Agreement will
qualify for such tax treatment, nor has there been any reliance
thereon by Buyer respecting the legal or tax implications of the
transactions
Buyer Initial: /s/ WJM /s/ GM
Purchase Agreement for Timber Lodge-St. Cloud, MN
contemplated hereby. Buyer further represents that it has sought
and obtained such third party advice and counsel as it deems
necessary in regards to the tax implications of this transaction.
18. CANCELLATION
If any party elects to cancel this Contract because of any
breach by another party or because escrow fails to close by
the agreed date, the party electing to cancel shall deliver
to escrow agent a notice containing the address of the party
in breach and stating that this Contract shall be cancelled
unless the breach is cured within 10 days following the
delivery of the notice to the escrow agent. Within three
days after receipt of such notice, the escrow agent shall
send it by United States Mail to the party in breach at the
address contained in the Notice and no further notice shall
be required. If the breach is not cured within the 10 days
following the delivery of the notice to the escrow agent,
this Contract shall be cancelled.
19. MISCELLANEOUS.
(a) This Agreement may be amended only by written agreement
signed by both Seller and Buyer, and all waivers must be in
writing and signed by the waiving party. Time is of the
essence. This Agreement will not be construed for or
against a party whether or not that party has drafted this
Agreement. If there is any action or proceeding between the
parties relating to this Agreement the prevailing party will
be entitled to recover attorney's fees and costs. This is
an integrated agreement containing all agreements of the
parties about the Property and the other matters described,
and it supersedes any other agreements or understandings.
Exhibits attached to this Agreement are incorporated into
this Agreement.
(b) If this escrow has not closed by December 15, 1999,
through no fault of Seller, Seller may either, at its
election, extend the closing date or exercise any remedy
available to it by law, including terminating this
Agreement.
(c) Funds to be deposited or paid by Buyer must be good and
clear funds in the form of cash, cashier's checks or wire
transfers.
(d) All notices from either of the parties hereto to the
other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified
mail, return receipt requested, postage prepaid, or by a
nationally recognized courier service guaranteeing overnight
delivery to the party at his or its address set forth below,
or to such other address as such party may hereafter
designate by written notice to the other party.
Buyer Initial: /s/ WJM /s/ GM
Purchase Agreement for Timber Lodge-St. Cloud, MN
If to Sellers:
Attention: Robert P. Johnson
AEI Real Estate Fund XV Limited Partnership &
AEI Real Estate Fund XVII Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
If to Buyer:
William Jay and Georgeann McNaughtan
1695 E. Center Street
Heber City, UT 84032
When accepted, this offer will be a binding agreement for
valid and sufficient consideration which will bind and benefit
Buyer, Seller and their respective successors and assigns. Buyer
is submitting this offer by signing a copy of this offer and
delivering it to Seller. Seller has five (5) business days from
receipt within which to accept this offer.
This Agreement shall be governed by, and interpreted in
accordance with, the laws of the state of Minnesota.
IN WITNESS WHEREOF, the Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
BUYER: William Jay McNaughtan and Georgeann McNaughtan,
married with rights of survivorship
By:/s/ William Jay McNaughtan
William Jay McNaughtan
By:/s/ Georgeann McNaughtan
Georgeann McNaughtan
WITNESS:
(as to both signers)
/s/ Sherman I Smoot
Sherman I Smoot
(Print name)
Buyer Initial: /s/ WJM /s/ GM
Purchase Agreement for Timber Lodge-St. Cloud, MN
SELLER:
AEI Real Estate Fund XVII Limited Partnership
By: AEI Fund Management XVII, Inc., its
corporate general partner
By: /s/ Robert P Johnson
Robert P. Johnson,
President
WITNESS:
(as to both signatures)
/s/ Jill Rayburn
Jill Rayburn
(Print Name)
Buyer Initial: /s/ WJM /s/ GM
Purchase Agreement for Timber Lodge-St. Cloud, MN
EXHIBIT A
That part of Lot Two (2), Block One (1) Fischer
Additions, a duly recorded plat in the office of the County
Recorder/Registar of titles in Stearns County, Minnesota,
lying North of a line drawn parallel with and 327.20 feet
Southerly of, as measured at right angles to, the most
Northerly line of said Lot Two (2); together with the rights
of ingress, egress, utilites easements and such other rights
which constitute an interest in real property as created in
that certain Easement and Maintenance Agreement dated Dec.
10, 1996, file of record Dec. 13, 1996 as Document No.
835857, and in torrens as Document No. 24060.
PROPERTY CO-TENANCY
OWNERSHIP AGREEMENT
(Timber Lodge Steakhouse - St. Cloud, MN)
THIS CO-TENANCY AGREEMENT,
Made and entered into as of the 9th day of December, 1999, by and
between William Jay McNaughtan and Georgeann McNaughtan, married
with rights of survivorship, (hereinafter called "McNaughtan"),
and AEI Real Estate Fund XVII Limited Partnership (hereinafter
called "Fund XVII") (McNaughtan, Fund XVII (and any other Owner
in Fee where the context so indicates) being hereinafter
sometimes collectively called "Co-Tenants" and referred to in the
neuter gender).
WITNESSETH:
WHEREAS, Fund XVII presently owns an undivided 17.2367% interest
in and to, and McNaughtan presently owns an undivided 11.7244%
interest in and to, and Marshall M. Kilduff and Pat S. Kilduff,
Trustees of the Kilduff 1996 Revocable Trust presently own an
undivided 9.5671% interest in and to, and Kathleen DeVoe Hans
presently owns an undivided 11.9502% interest in and to, and
Kenneth F. Cairns presently owns an undivided 5.2581% interest in
and to, and VTA Building Company presently owns an undivided
11.9502% interest in and to, and the Catharine C. Whittenburg
Testamentary Trust for J.A. Whittenburg IV or assigns presently
owns an undivided 11.9502% interest in and to, and Charles R.
Amos and Sharon L. Amos, Trustees of the Charles R. and Sharon L.
Amos Family Trust Dated March 21, 1995, presently owns an
undivided 10.8030% interest in and to, and W. E. and Hazel Mason
of the Mason Living Trust presently own an undivided 9.5601%
interest in and to the land, situated in the City of St. Cloud,
County of Stearns, and State of MN, (legally described upon
Exhibit A attached hereto and hereby made a part hereof) and in
and to the improvements located thereon (hereinafter called
"Premises");
WHEREAS, The parties hereto wish to provide for the orderly
operation and management of the Premises and McNaughtan's
interest by Fund XVII; the continued leasing of space within the
Premises; for the distribution of income from and the pro-rata
sharing in expenses of the Premises.
NOW THEREFORE, in consideration of the purchase by McNaughtan of
an undivided interest in and to the Premises, for at least One
Dollar ($1.00) and other good and valuable consideration by the
parties hereto to one another in hand paid, the receipt and
sufficiency of which are hereby acknowledged, and of the mutual
covenants and agreements herein contained, it is hereby agreed by
and between the parties hereto, as follows:
1. The operation and management of the Premises shall be
delegated to Fund XVII, or its designated agent, successors or
assigns. Provided, however, if Fund XVII shall sell all of its
interest in the Premises, the duties and obligations of Fund XVII
respecting management of the Premises as set forth herein,
including but not limited to paragraphs 2, 3, and 4 hereof, shall
be exercised by the holder or holders of a majority undivided co-
tenancy interest in the Premises. Except as hereinafter expressly
provided to the contrary, each of the parties hereto agrees to be
bound by the decisions of Fund XVII with respect to all
administrative, operational and management matters of the
property comprising the Premises, including but not limited to
the management of the net lease agreement for the Premises.
McNaughtan hereto hereby designates Fund XVII as its sole and
exclusive agent to deal with, and Fund XVII retains the sole
right to deal with, any property agent or tenant and to negotiate
and enter into, on terms and provisions satisfactory to Fund
XVII, monitor, execute and enforce the terms of leases of space
within the Premises, including but not limited to any amendments,
consents to assignment, sublet, releases
Co-Tenant Initial: /s/ WJM /s/ GM
Co-Tenancy Agreement for Timber Lodge-St. Cloud, MN
or modifications to leases or guarantees of lease or easements
affecting the Premises, on behalf of McNaughtan. As long as Fund
XVII owns an interest in the Premises, only Fund XVII may
obligate McNaughtan with respect to any expense for the Premises.
As further set forth in paragraph 2 hereof, Fund XVII agrees to
require any lessee of the Premises to name McNaughtan as an
insured or additional insured in all insurance policies provided
for, or contemplated by, any lease on the Premises. Fund XVII
shall use its best efforts to obtain endorsements adding Co-
Tenants to said policies from lessee within 30 days of
commencement of this agreement. In any event, Fund XVII shall
distribute any insurance proceeds it may receive, to the extent
consistent with any lease on the Premises, to the Co-Tenants in
proportion to their respective ownership of the Premises.
2. Income and expenses shall be allocated among the Co-Tenants
in proportion to their respective share(s) of ownership. Shares
of net income shall be pro-rated for any partial calendar years
included within the term of this Agreement. Fund XVII may offset
against, pay to itself and deduct from any payment due to under
this Agreement, and may pay to itself the amount of McNaughtan's
share of any reasonable expenses of the Premises which are not
paid by McNaughtan to Fund XVII or its assigns, within ten (10)
days after demand by Fund XVII. In the event there is
insufficient operating income from which to deduct McNaughtan's
unpaid share of operating expenses, Fund XVII may pursue any and
all legal remedies for collection.
Operating Expenses shall include all normal operating expense,
including but not limited to: maintenance, utilities, supplies,
labor, management, advertising and promotional expenses, salaries
and wages of rental and management personnel, leasing commissions
to third parties, a monthly accrual to pay insurance premiums,
real estate taxes, installments of special assessments and for
structural repairs and replacements, management fees, legal fees
and accounting fees, but excluding all operating expenses paid by
tenant under terms of any lease agreement of the Premises.
McNaughtan has no requirement to, but has, nonetheless elected to
retain, and agrees to annually reimburse, Fund XVII in the amount
of $700 for the expenses, direct and indirect, incurred by Fund
XVII in providing McNaughtan with quarterly accounting and
distributions of McNaughtan's share of net income and for
tracking, reporting and assessing the calculation of McNaughtan's
share of operating expenses incurred from the Premises. This
invoice amount shall be pro-rated for partial years and
McNaughtan authorizes Fund XVII to deduct such amount from
McNaughtan's share of revenue from the Premises. McNaughtan may
terminate this agreement in this paragraph respecting accounting
and distributions at any time and attempt to collect its share of
rental income directly from the tenant; however, enforcement of
all other provisions of the lease remains the sole right of Fund
XVII pursuant to Section 1 hereof. Fund XVII agrees to perform
its obligation under this paragraph throughout the term of this
agreement.
3. Full, accurate and complete books of account shall be kept
in accordance with generally accepted accounting principles at
Fund XVII's principal office, and each Co-Tenant shall have
access to such books and may inspect and copy any part thereof
during normal business hours. Within ninety (90) days after the
end of each calendar year during the term hereof, Fund XVII shall
prepare an accurate income statement for the ownership of the
Premises for said calendar year and shall furnish copies of the
same to all Co-Tenants. Quarterly, as its share, McNaughtan shall
be entitled to receive 11.7244% of all items of income and
expense generated by the Premises. Upon receipt of said
accounting, if the payments received by each Co-Tenant pursuant
to this Paragraph 3 do not equal, in the aggregate, the amounts
which each are entitled to receive proportional to its share of
ownership with respect to said calendar year pursuant to
Paragraph 2 hereof, an appropriate adjustment shall be made so
that each Co-Tenant receives the amount to which it is entitled.
Co-Tenant Initial: /s/ WJM /s/ GM
Co-Tenancy Agreement for Timber Lodge-St. Cloud, MN
4. If Net Income from the Premises is less than $0.00 (i.e.,
the Premises operates at a loss), or if capital improvements,
repairs, and/or replacements, for which adequate reserves do not
exist, need to be made to the Premises, the Co-Tenants, upon
receipt of a written request therefor from Fund XVII, shall,
within fifteen (15) business days after receipt of notice, make
payment to Fund XVII sufficient to pay said net operating losses
and to provide necessary operating capital for the premises and
to pay for said capital improvements, repairs and/or
replacements, all in proportion to their undivided interests in
and to the Premises.
5. Co-Tenants may, at any time, sell, finance, or otherwise
create a lien upon their interest in the Premises but only upon
their interest and not upon any part of the interest held, or
owned, by any other Co-Tenant. All Co-Tenants reserve the right
to escrow proceeds from a sale of their interests in the Premises
to obtain tax deferral by the purchase of replacement property.
6. If any Co-Tenant shall be in default with respect to any of
its obligations hereunder, and if said default is not corrected
within thirty (30) days after receipt by said defaulting Co-
Tenant of written notice of said default, or within a reasonable
period if said default does not consist solely of a failure to
pay money, the remaining Co-Tenant(s) may resort to any available
remedy to cure said default at law, in equity, or by statute.
7. This Co-Tenancy agreement shall continue in full force and
effect and shall bind and inure to the benefit of the Co-Tenant
and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns until November
30, 2032 or upon the sale of the entire Premises in accordance
with the terms hereof and proper disbursement of the proceeds
thereof, whichever shall first occur. Unless specifically
identified as a personal contract right or obligation herein,
this agreement shall run with any interest in the Property and
with the title thereto. Once any person, party or entity has
ceased to have an interest in fee in any portion of the Entire
Property, it shall not be bound by, subject to or benefit from
the terms hereof; but its heirs, executors, administrators,
personal representatives, successors or assigns, as the case may
be, shall be substituted for it hereunder.
8. Any notice or election required or permitted to be given or
served by any party hereto to, or upon any other, shall be given
to all known Co-Tenants and deemed given or served in accordance
with the provisions of this Agreement, if said notice or
elections addressed as follows;
If to Fund XVII:
AEI Real Estate Fund XVII Limited Partnership
1300 Minnesota World Trade Center
30 E. Seventh Street
St. Paul, Minnesota 55101
If to McNaughtan:
William Jay McNaughtan and Georgeann McNaughtan
1695 E. Center Street
Heber City, UT 84032
Co-Tenant Initial: /s/ WJM /s/ GM
Co-Tenancy Agreement for Timber Lodge-St. Cloud, MN
If to Kilduff:
Marshall M. Kilduff, Trustee
Pat S. Kilduff, Trustee
321 Lake Street
San Francisco, CA 94118-1320
If to Hans:
Kathleen DeVoe Hans
310 Desert Meadow Court
Reno, NV 89502
If to Cairns:
Kenneth F. Cairns
24600 SE Ladd Hill Road
Sherwood, OR 97140
If to VTA :
VTA Building Company
12825 Falcon Drive
Apple Valley, MN 55124
If to Amos:
Charles R. Amos and Sharon L. Amos, Trustees
30033 Knoll View Drive
Rancho Palos Verdes, CA 90275
If to Mason:
Mason Living Trust
136 Baltusrol Road
Franklin, TN 37069
If to Whittenburg:
The Catharine C. Whittenburg Testamentary Trust for
J. A. Whittenburg IV or Assigns
Post Office Box 26
Amarillo, TX 79105
Each mailed notice or election shall be deemed to have been given
to, or served upon, the party to which addressed on the date the
same is deposited in the United States certified mail, return
receipt requested, postage prepaid, or given to a nationally
recognized courier service guaranteeing overnight delivery as
properly addressed in the manner above provided. Any party hereto
may change its address for the service of notice hereunder by
delivering written notice of said change to the other parties
hereunder, in the manner above specified, at least ten (10) days
prior to the effective date of said change.
Co-Tenant Initial: /s/ WJM /s/ GM
Co-Tenancy Agreement for Timber Lodge-St. Cloud, MN
9. This Agreement shall not create any partnership or joint
venture among or between the Co-Tenants or any of them, and the
only relationship among and between the Co-Tenants hereunder
shall be that of owners of the premises as tenants in common
subject to the terms hereof.
10. The unenforceability or invalidity of any provision or
provisions of this Agreement as to any person or circumstances
shall not render that provision, nor any other provision hereof,
unenforceable or invalid as to any other person or circumstances,
and all provisions hereof, in all other respects, shall remain
valid and enforceable.
11. In the event any litigation arises between the parties
hereto relating to this Agreement, or any of the provisions
hereof, the party prevailing in such action shall be entitled to
receive from the losing party, in addition to all other relief,
remedies and damages to which it is otherwise entitled, all
reasonable costs and expenses, including reasonable attorneys'
fees, incurred by the prevailing party in connection with said
litigation.
IN WITNESS WHEREOF, The parties hereto have caused this Agreement
to be executed and delivered, as of the day and year first above
written.
McNaughtan
By:/s/ William Jay McNaughtan
William Jay McNaughtan
, By:/s/ Georgeann McNaughtan
Georgeann McNaughtan
WITNESS:
(as to both signers)
/s/ Sherman Smoot
Sherman Smoot
(Print Name)
STATE OF UTAH)
) ss
COUNTY OF WASATCH)
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 6 day of December,
1999, William Jay McNaughtan and Georgeann McNaughtan who
executed the foregoing instrument in said capacity.
/s/ Lyle Gertsch
Notary Public
[notary seal]
Co-Tenant Initial: /s/ WJM /s/ GM
Co-Tenancy Agreement for Timber Lodge-St. Cloud, MN
Fund XVII AEI Real Estate Fund XVII Limited Partnership
By: AEI Fund Management XVII, Inc., its corporate general partner
By:/s/ Robert P Johnson
Robert P. Johnson, President
WITNESS:
/s/ Jill Rayburn
Jill Rayburn
(Print Name)
State of Minnesota )
) ss.
County of Ramsey )
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 9th day of November,
1999, Robert P. Johnson, President of AEI Fund Management XVII,
Inc., corporate general partner of AEI Real Estate Fund XVII
Limited Partnership who executed the foregoing instrument in said
capacity and on behalf of the corporation in its capacity as
corporate general partner, on behalf of said limited partnership.
/s/ Linda A Bisdorf
Notary Public
[notary seal]
Co-Tenant Initial: /s/ WJM /s/ GM
Co-Tenancy Agreement for Timber Lodge-St. Cloud, MN
EXHIBIT A
That part of Lot Two (2), Block One (1) Fischer
Additions, a duly recorded plat in the office of the County
Recorder/Registar of titles in Stearns County, Minnesota,
lying North of a line drawn parallel with and 327.20 feet
Southerly of, as measured at right angles to, the most
Northerly line of said Lot Two (2); together with the rights
of ingress, egress, utilites easements and such other rights
which constitute an interest in real property as created in
that certain Easement and Maintenance Agreement dated Dec.
10, 1996, file of record Dec. 13, 1996 as Document No.
835857, and in torrens as Document No. 24060.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000819577
<NAME> AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 785,486
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 785,486
<PP&E> 16,003,577
<DEPRECIATION> (3,257,321)
<TOTAL-ASSETS> 13,531,742
<CURRENT-LIABILITIES> 309,006
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13,222,736
<TOTAL-LIABILITY-AND-EQUITY> 13,531,742
<SALES> 0
<TOTAL-REVENUES> 1,812,336
<CGS> 0
<TOTAL-COSTS> 686,647
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,179,271
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,179,271
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,179,271
<EPS-BASIC> 53.55
<EPS-DILUTED> 53.55
</TABLE>
