SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: March 31, 2000
Commission file number: 0-17467
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Minnesota 41-1603719
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(651) 227-7333
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes [X] No
Transitional Small Business Disclosure Format:
Yes No [X]
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of March 31, 2000 and December 31, 1999
Statements for the Periods ended March 31, 2000 and 1999:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
BALANCE SHEET
MARCH 31, 2000 AND DECEMBER 31, 1999
(Unaudited)
ASSETS
2000 1999
CURRENT ASSETS:
Cash and Cash Equivalents $ 905,739 $ 785,486
Receivables 10,632 0
----------- -----------
Total Current Assets 916,371 785,486
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 4,482,806 4,482,806
Buildings and Equipment 10,389,784 10,389,784
Accumulated Depreciation (3,092,843) (3,004,630)
----------- -----------
11,779,747 11,867,960
Real Estate Held for Sale 753,296 753,296
----------- -----------
Net Investments in Real Estate 12,533,043 12,621,256
----------- -----------
Total Assets $13,449,414 $13,406,742
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 27,297 $ 40,494
Distributions Payable 289,544 268,512
Unearned Rent 76,181 0
----------- -----------
Total Current Liabilities 393,022 309,006
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (70,848) (70,434)
Limited Partners, $1,000 Unit value;
30,000 Units authorized; 23,389 Units issued;
21,658 outstanding 13,127,240 13,168,170
----------- -----------
Total Partners' Capital 13,056,392 13,097,736
----------- -----------
Total Liabilities and Partners' Capital $13,449,414 $13,406,742
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
2000 1999
INCOME:
Rent $ 452,688 $ 446,279
Investment Income 10,246 4,074
----------- -----------
Total Income 462,934 450,353
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 69,313 66,566
Partnership Administration and Property
Management - Unrelated Parties 33,804 15,908
Depreciation 88,213 101,840
----------- -----------
Total Expenses 191,330 184,314
----------- -----------
NET INCOME $ 271,604 $ 266,039
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 2,716 $ 2,660
Limited Partners 268,888 263,379
----------- -----------
$ 271,604 $ 266,039
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(21,658 and 21,948 weighted average Units
outstanding in 2000 and 1999) $ 12.42 $ 12.00
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 271,604 $ 266,039
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 88,213 101,840
(Increase) Decrease in Receivables (10,632) 8,989
Decrease in Payable to
AEI Fund Management, Inc. (13,197) (10,840)
Increase in Unearned Rent 76,181 61,902
----------- -----------
Total Adjustments 140,565 161,891
----------- -----------
Net Cash Provided By
Operating Activities 412,169 427,930
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate 0 (124,258)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Distributions Payable 21,032 64,157
Distributions to Partners (312,948) (290,980)
----------- -----------
Net Cash Used For
Financing Activities (291,916) (226,823)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 120,253 76,849
CASH AND CASH EQUIVALENTS, beginning of period 785,486 280,625
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 905,739 $ 357,474
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED MARCH 31
(Unaudited)
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1998 $(68,591) $13,350,706 $13,282,115 21,947.89
Distributions (2,909) (288,071) (290,980)
Net Income 2,660 263,379 266,039
-------- ----------- ----------- ----------
BALANCE, March 31, 1999 $(68,840) $13,326,014 $13,257,174 21,947.89
======== =========== =========== ==========
BALANCE, December 31, 1999 $(70,434) $13,168,170 $13,097,736 21,657.89
Distributions (3,130) (309,818) (312,948)
Net Income 2,716 268,888 271,604
-------- ----------- ----------- ----------
BALANCE, March 31, 2000 $(70,848) $13,127,240 $13,056,392 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
MARCH 31, 2000
(Unaudited)
(1) The condensed statements included herein have been prepared
by the Partnership, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of
operations for the interim period, on a basis consistent with
the annual audited statements. The adjustments made to these
condensed statements consist only of normal recurring
adjustments. Certain information, accounting policies, and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Partnership
believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction
with the financial statements and the summary of significant
accounting policies and notes thereto included in the
Partnership's latest annual report on Form 10-KSB.
(2) Organization -
AEI Real Estate Fund XVII Limited Partnership (Partnership)
was formed to acquire and lease commercial properties to
operating tenants. The Partnership's operations are managed
by AEI Fund Management XVII, Inc. (AFM), the Managing
General Partner. Robert P. Johnson, the President and sole
shareholder of AFM, serves as the Individual General Partner
and an affiliate of AFM, AEI Fund Management, Inc. (AEI),
performs the administrative and operating functions for the
Partnership.
The terms of the Partnership offering call for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. The Partnership
commenced operations on February 10, 1988 when minimum
subscriptions of 2,000 Limited Partnership Units
($2,000,000) were accepted. The offering terminated on
November 1, 1988 when the one-year offering period expired.
The Partnership received subscriptions for 23,388.7 Limited
Partnership Units ($23,388,700).
Under the terms of the Limited Partnership Agreement, the
Limited Partners and General Partners contributed funds of
$23,388,700 and $1,000, respectively. During operations,
any Net Cash Flow, as defined, which the General Partners
determine to distribute will be distributed 90% to the
Limited Partners and 10% to the General Partners; provided,
however, that such distributions to the General Partners
will be subordinated to the Limited Partners first receiving
an annual, noncumulative distribution of Net Cash Flow equal
to 10% of their Adjusted Capital Contribution, as defined,
and, provided further, that in no event will the General
Partners receive less than 1% of such Net Cash Flow per
annum. Distributions to Limited Partners will be made pro
rata by Units.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
Any Net Proceeds of Sale, as defined, from the sale or
financing of properties which the General Partners determine
to distribute will, after provisions for debts and reserves,
be paid in the following manner: (i) first, 99% to the
Limited Partners and 1% to the General Partners until the
Limited Partners receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal to 6%
of their Adjusted Capital Contribution per annum, cumulative
but not compounded, to the extent not previously distributed
from Net Cash Flow; (ii) next, 99% to the Limited Partners
and 1% to the General Partners until the Limited Partners
receive an amount equal to 14% of their Adjusted Capital
Contribution per annum, cumulative but not compounded, to
the extent not previously distributed; (iii) next, to the
General Partners until cumulative distributions to the
General Partners under Items (ii) and (iii) equal 15% of
cumulative distributions to all Partners under Items (ii)
and (iii). Any remaining balance will be distributed 85% to
the Limited Partners and 15% to the General Partners.
Distributions to the Limited Partners will be made pro rata
by Units.
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of property, will be
allocated first in the same ratio in which, and to the
extent, Net Cash Flow is distributed to the Partners for
such year. Any additional profits will be allocated 90% to
the Limited Partners and 10% to the General Partners. In
the event no Net Cash Flow is distributed to the Limited
Partners, 90% of each item of income, gain or credit for
each respective year shall be allocated to the Limited
Partners, and 10% of each such item shall be allocated to
the General Partners. Net losses from operations will be
allocated 98% to the Limited Partners and 2% to the General
Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of property will be allocated in
accordance with the Partnership Agreement as follows: (i)
first, to those Partners with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Partners
and 1% to the General Partners until the aggregate balance
in the Limited Partners' capital accounts equals the sum of
the Limited Partners' Adjusted Capital Contributions plus an
amount equal to 14% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, to the General Partners
until cumulative allocations to the General Partners equal
15% of cumulative allocations. Any remaining balance will
be allocated 85% to the Limited Partners and 15% to the
General Partners. Losses will be allocated 98% to the
Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the Partnership
or withdrawal by a General Partner, the General Partners
will contribute to the Partnership an amount equal to the
lesser of the deficit balances in their capital accounts or
1% of total Limited Partners' and General Partners' capital
contributions.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate -
In January, 2000, Texas Sports City Cafe, Ltd. (Texas), the
lessee of the Sports City Cafe, notified the Partnership
that they were discontinuing the restaurant operations. The
Partnership 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.
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.
(4) Payable to AEI Fund Management -
AEI Fund Management, Inc. performs the administrative and
operating functions for the Partnership. The payable to AEI
Fund Management represents the balance due for those
services. This balance is non-interest bearing and
unsecured and is to be paid in the normal course of
business.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the three months ended March 31, 2000 and 1999, the
Partnership recognized rental income of $452,688 and $446,279,
respectively. During the same periods, the Partnership earned
investment income of $10,246 and $4,074, respectively. In 2000,
rental income increased as a result of rent increases on ten
properties which were partially offset by a decrease in rent due
to property sales in 1999. In 2000, additional investment income
was earned on the net proceeds from property sales.
In January, 2000, Texas Sports City Cafe, Ltd. (Texas),
the lessee of the Sports City Cafe, notified the Partnership that
they were discontinuing the restaurant operations. The
Partnership 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.
During the three months ended March 31, 2000 and 1999, the
Partnership paid Partnership administration expenses to
affiliated parties of $69,313 and $66,566, respectively. These
administration expenses include costs associated with the
management of the properties, processing distributions, reporting
requirements and correspondence to the Limited Partners. During
the same periods, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $33,804 and $15,908, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, taxes, insurance and other property costs.
As of March 31, 2000, the Partnership's annualized cash
distribution rate was 7.0%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement. As a result, 99% of distributions and
income were allocated to Limited Partners and 1% to the General
Partners.
Inflation has had a minimal effect on income from
operations. It is expected that increases in sales volumes of
the tenants, due to inflation and real sales growth, will result
in an increase in rental income over the term of the leases.
Inflation also may cause the Partnership's real estate to
appreciate in value. However, inflation and changing prices may
also have an adverse impact on the operating margins of the
properties' tenants which could impair their ability to pay rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.
Liquidity and Capital Resources
During the three months ended March 31, 2000, the
Partnership's cash balances increased $120,253 as the Partnership
distributed less cash to the Partners than it generated from
operating activities. Net cash provided by operating activities
decreased from $427,930 in 1999 to $412,169 in 2000 due to an
increase in expenses in 2000 and net timing differences in the
collection of payments from the lessees and the payment of
expenses, which were partially offset by an increase in income in
2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
The major components of the Partnership's cash flow from
investing activities are investments in real estate and proceeds
from the sale of real estate. For the three months ended March
31, 1999, the Partnership expended $124,258 to invest in real
properties (inclusive of acquisition expenses) as the Partnership
reinvested the cash generated from property sales.
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.
The Partnership's primary use of cash flow is distribution
and redemption payments to Partners. The Partnership declares
its regular quarterly distributions before the end of each
quarter and pays the distribution in the first week after the end
of each quarter. The Partnership attempts to maintain a stable
distribution rate from quarter to quarter. Redemption payments
are paid to redeeming Partners on a quarterly basis. Effective
January 1, 2000, the Partnership's distribution rate was
increased from 6.5% to 7.0%. As a result, distributions were
higher during the first three months of 2000, when compared to
the same period in 1999.
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the number of Units
outstanding at the beginning of the year. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
On April 1, 2000, thirty-one Limited Partners redeemed a
total of 349 Partnership Units for $272,807 in accordance with
the Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, a total of
117 Limited Partners redeemed 1,730.9 Partnership Units for
$1,160,868. The redemptions increase the remaining Limited
Partners' ownership interest in the Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
The continuing rent payments from the properties, together
with cash generated from property sales, should be adequate to
fund continuing distributions and meet other Partnership
obligations on both a short-term and long-term basis.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
contains various "forward looking statements" within the meaning
of federal securities laws which represent management's
expectations or beliefs concerning future events, including
statements regarding anticipated application of cash, expected
returns from rental income, growth in revenue, taxation levels,
the sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements made by the Partnership, must be evaluated in
the context of a number of factors that may affect the
Partnership's financial condition and results of operations,
including the following:
<BULLET> Market and economic conditions which affect
the value of the properties the Partnership owns and
the cash from rental income such properties generate;
<BULLET> the federal income tax consequences of rental
income, deductions, gain on sales and other items and
the affects of these consequences for investors;
<BULLET> resolution by the General Partners of
conflicts with which they may be confronted;
<BULLET> the success of the General Partners of
locating properties with favorable risk return
characteristics;
<BULLET> the effect of tenant defaults; and
<BULLET> the condition of the industries in which the
tenants of properties owned by the Partnership operate.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the Partnership is a party or of which the Partnership's
property is subject.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II - OTHER INFORMATION
(Continued)
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
Description
10.1 Occupancy Agreement dated February
17, 2000 between the Partnership, AEI
Real Estate Fund XVI Limited Partnership,
Nick Mehmeti and Duncan Burch relating to
the property at 3808 Towne Crossing
Boulevard, Mesquite, Texas.
10.2 Purchase Agreement dated April 5,
2000 between the Partnership, AEI Real
Estate Fund XVI Limited Partnership, Nick
Mehmeti and Duncan Burch relating to the
property at 3808 Towne Crossing
Boulevard, Mesquite, Texas.
27 Financial Data Schedule for period
ended March 31, 2000.
b. Reports filed on Form 8-K - None.
SIGNATURES
In accordance with the requirements of the Exchange Act,
the Registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: May 5, 2000 AEI Real Estate Fund XVII
Limited Partnership
By: AEI Fund Management XVII, Inc.
Its: Managing General Partner
By: /s/ Robert P. Johnson
Robert P. Johnson
President
(Principal Executive Officer)
By: /s/ Mark E. Larson
Mark E. Larson
Chief Financial Officer
(Principal Accounting Officer)
OCCUPANCY AGREEMENT
3808 Towne Crossing Boulevard, Mesquite, TX ("Leased Premises")
AEI Real Estate Fund XVI Limited Partnership
AEI Real Estate Fund XVII Limited Partnership
THIS AGREEMENT, effective as of February 17, 2000, by
and between AEI Real Estate Fund XVI Limited Partnership and
AEI Real Estate Fund XVII Limited Partnership ("Lessor") and
Nick Mehmeti and Duncan Burch ("Buyers").
Whereas Buyers and Lessor have entered into a Purchase
Agreement for the Leased Premises, subject to a Lease
(attached hereto dated effective as of March 15, 1997 by
and between Texas Sports City Cafe', LTD. and Lessor, which
Lease is currently in default; and
Whereas, Buyers wish to use and occupy the Leased
Premises during their due diligence period under the
Purchase Agreement and have in fact been so occupying the
Leased Premises since February 17, 2000;
Now, therefore, the parties hereto wish to evidence
their respective understanding and expectation arising out
of Buyers use and occupancy of the Leased Premises.
1. Buyer will immediately obtain insurance on the Leased
Premises in the amounts and under the terms specified by the
Lease as if Buyers were the Lessee thereunder, and will
provide Lessor with a binder to prove it. Insurance must be
maintained while the Buyer is occupying the Leased Premises.
2. Buyer will pay $6,000 per month due and payable on the
15th of every month for each month or portion thereof Buyer
is in occupancy of the Leased Premises. The rent will be pro-
rated for February from Thursday, February 17, 2000. Rent is
due in advance on the fifteenth of each month.
3. Taxes will be paid by Buyer while occupying our site.
Taxes will be pro-rated beginning Thursday, February 17,
2000 to the date of sale or termination of Buyer's occupancy
of the Leased Premises, whichever is earlier. The pro-rated
taxes will be due and payable at closing, or upon
termination of the Buyer's occupancy of the Leased Premises.
Buyer is responsible for all utilities and maintenance of
the Leased Premises under the same terms and conditions as
set forth in the Lease from Thursday, February 17, 2000
until the date Buyer purchases the Leased Premises or
vacates the Leased Premises.
Buyer acknowledges and agrees that Buyer's rights to use
and occupancy of the Leased Premises are subject to the
Lease, and the assertion of Lessee's rights thereunder,
over which Lessor has no control. While the Lease is in
default, and Buyer is in compliance with the terms hereof,
Lessor shall make no efforts to terminate the Lease nor
terminate Buyer's right to occupancy, subject to the terms
hereof. However, termination of the Purchase Agreement
shall operate to terminate this Occupancy Agreement, and a
default under this Occupancy Agreement by Buyer shall be
grounds for termination of the Purchase Agreement.
Nothing herein shall grant Buyers any rights to the Leased
Premises except as set forth herein, or in the Lease, nor
shall Lessor be obligated to Buyers or be deemed to have
made any representations to Buyers respecting the Leased
Premises, except as set forth herein or in the Purchase
Agreement.
Executed As of March 29, 2000 Executed As of March 29, 2000
/s/ Nick Mehmeti /s/ Duncan Burch
Nick Mehmeti Duncan Burch
Executed As of April 5, 2000
AEI Real Estate Fund XVI Limited Partnership
By: AEI Fund Management XVI, Inc.
By:/s/ Robert P Johnson
Robert P. Johnson, President
Executed As of April 5, 2000
AEI Real Estate Fund XVII Limited Partnership
By: AEI Fund Management XVII, Inc.
By:/s/ Robert P Johnson
Robert P. Johnson, President
Occupancy Agreement, Mesquite, Tx.
PURCHASE AGREEMENT
THIS AGREEMENT, entered into effective as of this 5th day of
April, 2000.
1. PARTIES. The buyer is Nick Mehmeti and Duncan Burch or
related assigns, (such assignment to be effective only if buyer
shall remain liable for the full performance of Buyer hereunder),
("Buyer"), and the seller is AEI Real Estate Fund XVI Limited
Partnership and AEI Real Estate Fund XVII Limited Partnership
("Seller").
2. PROPERTY. The Property consists of the real property
legally described on Exhibit A attached hereto, all buildings and
improvements, and fixtures on the land, (including, but not
limited to, that certain building and related improvements)
appurtenances, mineral and similar rights (to the extent owned by
Seller), and personal property, if any, presently owned by Seller
and used by Seller in connection with the land or the
improvements, all of Seller's interest in all leases, prepaid
rents, security deposits and other contract rights, guaranties
and warranties or other rights related to the use and operation
of the Property and all assignable governmental licenses and
permits.
3. PURCHASE PRICE. The purchase price for the Property is
$900,100, all cash.
4. TERMS. The purchase price for the Property will be
paid by Buyer as follows:
When this agreement is executed, Buyer
will pay $50,100 to Seller by depositing the same
into escrow with the escrowee set forth in
paragraph 7 hereof (the "First Payment"). The
First Payment will be forwarded to the Seller per
paragraph 7 hereof, and credited against the
purchase price when and if escrow closes and the
sale is completed. One Hundred Dollars of such
First Payment shall be considered Option
Consideration and be immediately non-refundable
even if this Agreement is terminated for any
reason.
(b) Buyer will deposit the balance of the
purchase price, $850,000, (the "Final Payment")
into escrow in sufficient time to allow escrow to
close on the closing date.
5. CLOSING DATE. Escrow is scheduled to close (i.e., the
deed will be recorded and the purchase price transferred to
Seller) the later of May 15, 2000, or ninety days after the date
the last party to sign this agreement has signed, such earlier
time as the parties may mutually agree. Time is of the essence.
6. DUE DILIGENCE. Buyer will have until the latter of (i)
sixty (60) days after the full execution of this Agreement by
both parties hereto, or (ii) sixty (60) days after delivery of
each of the following items (the "Due Diligence Period") to
conduct all of its inspections and due diligence and satisfy
itself regarding each item, the Property and this transaction.
a. The original and one copy of a title insurance
commitment for an TLTA owner's title insurance policy
(see paragraph 8 below)
b. Copies of such "as built" plans and specifications
for the Property as Seller can locate after diligent
search.
c. Copies of an "as built" survey of the Property
done concurrent with Seller's acquisition of the
Property.
d. Copies of any and all existing soil tests and
environmental tests previously done by or for Seller
relating to the Property.
Seller shall provide Buyer access to the Property from time
to time, after Seller shall have coordinated the same with the
present occupant of the Property, for the purpose of conducting
inspections thereof including mechanical, structural, electrical
and other physical inspections. Buyer has until the end of the
Due Diligence Period to complete such physical inspection.
Buyer shall indemnify Seller from and against any and all
losses, claims, causes of action, liabilities, and costs to the
extent caused by the actions of Buyer, its agents, employees,
contractors, or invitees, during any such entry upon the
Property. The foregoing duty of indemnification shall include
the duty to pay all reasonable attorney's fees incurred by the
Seller in responding to or defending any such claims or
proceedings.
Buyer may cancel this agreement for ANY REASON in its sole
discretion by delivering a cancellation notice by certified mail,
return receipt requested, or by overnight delivery service to
Seller and escrow holder before the expiration of the Due
Diligence Period. Such notice shall be deemed effective only
upon receipt by Seller.
If Buyer cancels this Agreement as permitted under this
Section, except for any escrow cancellation fees and any
liabilities under Sections 15(a) of this Agreement (which will
survive), Buyer (after execution of such documents reasonably
requested by Seller to evidence the termination hereof) shall be
returned the First Payment only if the reason for termination
shall be the existence of a non-curable objection to the
marketability of title or the presence of Hazardous Substances on
the Property as revealed by a Phase I Environmental report
prepared by a third party environmental engineer. Upon
termination of this Agreement by Buyer, 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 Seller or anyone else. Otherwise Buyer
may terminate this Agreement during the Due Diligence Period, but
its First Payment in its entirety shall be non-refundable.
Upon the expiration of the Due Diligence Period, Buyer
shall have been deemed to have waived its right to terminate this
Agreement based upon the items received by Buyer and its
inspection of the property during the Due Diligence Period.
Buyer shall have ten (10) business days, from written notice to
Buyer, to review any adverse material changes in any of the due
diligence items received prior to the Closing Date to terminate
this Agreement. Except for the foregoing, 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. The escrow holder will be an agent for a
nationally-recognized title insurance company of Chicago Title
Insurance Company ("the Escrowee"), with offices in or near
Mesquite, Texas. 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.
Escrow will be deemed opened only upon Seller's execution of this
Agreement.
8. TITLE. Closing will be conditioned on the agreement of
the Escrowee to issue an TLTA 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; other items of record; other items disclosed to Buyer
during the Due Diligence Review Period.
Buyer shall be allowed ten (10) business days after receipt
of said commitment for examination and for the making of any
objections thereto, said objections to be made in writing or
deemed waived. If any objections are so made, the Seller shall
be allowed fifty (50) days to remove or cure such objection to
Buyer's satisfaction and make such title marketable. If Seller
shall decide to make no efforts to make title marketable, or is
unable to make title marketable, (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.
Pending correction of title, the payments hereunder required
shall be postponed, but upon correction of title and within ten
(10) days after written notice of correction to the Buyer, the
parties shall perform this agreement according to its terms.
Seller shall pay for the cost of issuing the title commitment and
shall pay the owner's title insurance premium for an Owner's
policy.
9. CLOSING COSTS. Subject to paragraph 4(c) above, Seller
will pay the deed stamp taxes and one-half of escrow fees, title
insurance premium and any brokerage commissions payable and
commissioned by Seller. Buyer will pay all recording fees, one-
half of the escrow fees, the costs of a survey or survey update
(if required by Buyer). Each party will pay its own attorneys'
fees and costs to document and close of this transaction.
10. REAL ESTATE TAXES, SPECIAL ASSESSMENTS AND PRORATIONS.
(a) The property shall be subject to an
occupancy agreement between Buyer and Seller,
which occupancy agreement shall address the
payment of taxes and installments of special
assessments due and payable during the period
prior to the date of closing. Buyer shall be
responsible for a prorata share of real estate
taxes from February 17, 2000, regardless of the
date of closing, and Seller shall be responsible
for real estate taxes prior thereto, reserving
unto Seller the right to pursue the former
occupant for the same. However, Seller represents
that 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, or shall be as of closing. Unpaid levied
and pending special assessments existing on the
date of Closing shall be pro-rated between Buyer
and Seller as of the date of Closing. Buyer shall
pay all taxes due and payable in the year after
Closing and any unpaid installments of special
assessments payable therewith and thereafter.
(b) The property shall be subject to an
occupancy agreement between Buyer and Seller,
which occupancy agreement shall address the
payment of rent and responsibility for expenses of
maintenance during the period prior to closing.
Subject to such agreement and terms therein to the
contrary, all income and all operating expenses
from the 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
not allocated to Buyer under the Occupancy
Agreement incurred prior to the date of Closing,
and Buyer shall be entitled to all income earned
and shall be responsible for all operating
expenses of the Property incurred on and after the
date of closing, except as otherwise set forth
herein or in the Occupancy Agreement. To the
extent any of said items cannot be determined at
Closing after reasonable efforts, Seller and Buyer
shall compute such prorations as soon as possible
after Closing and settle such adjustment as of the
Closing date.
11. SELLER'S COVENANTS, REPRESENTATIONS AND AGREEMENTS.
(a) Seller represents and warrants as of this date
that:
(i) Except for the Net Lease
Agreement with Sports City Cafe and its
sublessees or concessionaires, there are no
other leases of the property.
(ii) It is not aware of any pending
litigation, condemnation, or rezoning
proceedings against the Property or Seller's
interest in the Property.
It is not aware of any
contracts it has executed that would be
binding on Buyer after the closing date.
Seller is validly existing and
duly qualified to transact business in the
State of Texas.
To the best of Seller's
knowledge the Property is not subject to any
claim, demand, suit, unfiled lien or other
proceeding of any kind which affects or may
affect the Property.
There are no leasing
commissions, fees or other compensation owed
in connection with the leasing of the
Property.
Seller agrees that as long as
Buyer abides by the terms of the Occupancy
Agreement, Seller will not enter into any new
contracts or amend or modify any current
leases (except to the extent that the
existing Lease may be considered modified by
the Occupancy Agreement) 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.
Seller is not a "foreign
person" which would subject Buyer to the
withholding tax provisions of Section 1445 of
the Internal Revenue Code.
To Seller's best knowledge,
the Property and all business operations
thereon are in compliance with all applicable
federal, state and local statutes, laws and
regulations.
Seller is not aware of, and
has received no notice of, the presence,
disposal, leakage or migration on to the
Property of any hazardous waste or toxic
substances regulated by any federal, state or
local governmental authorities which may be
in violation of any applicable law, rule or
regulation.
In addition to the acts and
deeds recited herein and contemplated to be
performed, executed, and delivered by Seller,
Seller 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 Buyer or the Title Company may
require and Seller deems to be reasonable in
order to consummate the transactions
contemplated herein.
Seller 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.
To Seller'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 Seller is a party or by which Seller is
bound.
(b) All covenants, representations and warranties
of Seller contained herein are true and correct as
of the date hereof and shall be true and correct
as of the date of Closing.
12. DISCLAIMER. Seller and Buyer acknowledge and agree
that Seller acquired the Property through a sale\leaseback with a
prior tenant. Seller has been an absentee landlord.
Consequently, Seller has little, if any, knowledge of the
physical characteristics of the Property.
Accordingly, except as otherwise specifically stated in this
Agreement, Seller hereby specifically disclaims any warranty,
guaranty, or representation, oral or written, past, present, or
future of, as to, or concerning (i) the nature and condition of
the Property, including, without limitation, the water, soil, and
geology, and the suitability thereof and of the Property for any
and all activities and uses which Buyer may elect to conduct
thereon; (ii) except for the warranty contained in the Deed to be
delivered by Seller at the Closing, the nature and extent of any
right of way, Lease, possession, lien, encumbrance, license,
reservation, condition, or otherwise, and (iii) the compliance of
the Property or its operation with any laws, ordinances, or
regulations of any government or other body.
Buyer acknowledges that having been given the opportunity to
inspect the Property, Buyer is relying solely on its own
investigation of the Property and not on any information
provided or to be provided by Seller except as set forth herein.
Buyer further acknowledges that the information provided and to
be provided with respect to the Property by Seller 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. 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, Seller makes no
Warranty or representation, Express or Implied, or arising by
operation of law, including, but not limited to, any warranty or
condition, habitability, tenantability, suitability for
commercial purposes, merchantability, or fitness for a particular
purpose, in respect of the Property.
BUYER AGREES THAT IT SHALL BE PURCHASING THE PROPERTY IN ITS
THEN PRESENT CONDITION, AS IS, WHERE IS, AND SELLER HAS NO
OBLIGATION TO CONSTRUCT OR REPAIR ANY IMPROVEMENTS THEREON, OR TO
PERFORM ANY OTHER ACT REGARDING THE PROPERTY, EXCEPT AS EXPRESSLY
PROVIDED HEREIN.
13. CLOSING.
Before the closing date, Seller will
deposit into escrow: an executed special warranty
deed conveying fee simple, insurable title of the
Property to Buyer; and
the original Sports City Cafe Lease
and all amendments thereto;
Lien waiver affidavit
Form 10995
FIRPTA Certificate
Delivery of original warranties
pertaining to the improvements if any
warranties be in Seller's possession,
permits/licenses, keys, if any, in Seller's
possession.
Certified copy of Partnership
Agreement for the Seller
(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 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. DEFAULT. If Buyer defaults and Seller has fully
performed all obligations of Seller hereunder and satisfied all
conditions to Closing to be performed by Seller, Buyer will
forfeit all rights and claims and Seller will be relieved of all
obligations and will be entitled as its sole and exclusive
remedy, to retain all monies heretofore paid by the Buyer as
liquidated damages, actual damages being difficult if not
impossible to calculate and the parties having made a good faith
effort to determine the same.
If Seller shall default, Buyer irrevocably waives any right
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 and Second
Payment, performed all of its other obligations and satisfied
all conditions under this Agreement within the required time
periods, 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 Buyer deems to 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,
(ii) any order of any court or other agency of
government having jurisdiction hereof, or (iii) any
agreement or instrument to which Buyer is a party or by
which Buyer is bound.
16. DAMAGE, 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, 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 resulting from said
damage or destruction to the extent that the same are
payable with respect to damage to the Property, and are
so payable to Seller under the Sports City Cafe Lease.
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 all the Seller's right,
title and interest in and to any award made, or to be
made, in the condemnation proceeding.
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. MISCELLANEOUS.
(a) This Agreement may be amended only by a
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 thirty
(30) days after the end of the Due Diligence
Period, through no fault of Seller, Seller may
either, at its election, extend the closing date,
exercise any remedy available to it by law, or
terminate this Agreement .
(c) Funds to be deposited or paid by Buyer
will be good and clear funds in the form of cash,
cashier's checks or wire transfers.
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.
Further Conditions to Closing:
Seller has complied with and
otherwise performed each of the covenants and
obligations of Seller set forth herein;
No adverse change to the title
or to the environmental condition of the
Property occurs after the Due Diligence
Period.
All representations, warranties and
covenants contained herein shall, as applicable,
survive the Closing and delivery of the deed for a
period of one (1) year.
This Agreement shall be governed by end
construed in accordance with the laws of the State
of Texas.
This Agreement may be executed in
multiple counterparts, each of which shall be an
original copy and together which shall constitute
one instrument.
Notices:
If to Seller:
Attention: Robert P. Johnson
AEI Fund Management XVI, Inc.
1300 Minnesota World Trade Center
Saint Paul, Minnesota 55101
Facsimile: (651) 227-7705
If to Buyer:
Attention:
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, and tendering the $50,100 First
Payment to the Escrowee. Seller has five (5) business days
within which to accept this offer.
IN WITNESS WHEREOF, the Seller and Buyer have executed this
Agreement effective as of the day and year first above written.
BUYER:
/s/ Nick Mehmeti
Nick Mehmeti
/s/ Duncan Burch
Duncan Burch
Accepted and agreed this 5th day of April, 2000.
SELLER:
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP, a
Minnesota limited partnership
By: AEI Fund Management XVI, Inc., its
corporate general partner
By: /s/ Robert P Johnson
Robert P Johnson, President
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP, a
Minnesota limited partnership
By: AEI Fund Management XVII, Inc., its
corporate general partner
By: /s/ Robert P Johnson
Robert P Johnson, President
Purchase Agreement, Mesquite, Texas Property, 3808 Towne Crossing
Boulevard
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<NAME> AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
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