Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2010
Commission File Number: 000-17467
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
State of Minnesota 41-1603719
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 East 7th Street, Suite 1300, St. Paul, Minnesota 55101
(Address of principal executive offices)
(651) 227-7333
(Registrant's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has 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. [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (232.405 of this chapter)
during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
[ ] Yes [ ] No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). [ ]Yes [X] No
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
INDEX
Part I - Financial Information
Item 1. Financial Statements:
Statement of Net Assets Available for Liquidation
as of June 30, 2010 and December 31, 2009
Statement of Liquidating Activities for the
Periods ended June 30, 2010 and 2009
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 5. Other Information
Item 6. Exhibits
Signatures
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
STATEMENT OF NET ASSETS AVAILABLE FOR LIQUIDATION
JUNE 30, 2010 AND DECEMBER 31, 2009
2010 2009
ASSETS:
Cash $ 518,450 $ 684,637
Prepaid Expenses 4,301 0
Investments in Real Estate 856,000 856,000
----------- -----------
Total Assets 1,378,751 1,540,637
----------- -----------
LIABILITIES:
Payable to AEI Fund Management, Inc. 13,242 25,239
Real Estate Taxes Payable 0 7,083
Distributions Payable 34,354 34,354
----------- -----------
Total Liabilities 47,596 66,676
----------- -----------
NET ASSETS (PARTNERS' CAPITAL) IN LIQUIDATION,
including 19,557 Limited Partnership
Units outstanding $ 1,331,155 $ 1,473,961
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
STATEMENT OF LIQUIDATING ACTIVITIES
FOR THE PERIODS ENDED JUNE 30
Three Months Ended Six Months Ended
6/30/10 6/30/09 6/30/10 6/30/09
SOURCES OF ADDITIONAL CASH:
Rent $ 0 $ 28,504 $ 0 $ 57,007
Real Estate Tax Reimbursements 0 21,249 0 42,497
Interest Income 1,358 1,845 2,904 3,971
Proceeds from Sale of Real Estate 6,552 0 6,552 0
---------- ---------- ---------- ---------
Total Sources of
Additional Cash 7,910 51,598 9,456 103,475
---------- ---------- ---------- ---------
USES OF ADDITIONAL CASH:
Partnership Administration -
Affiliates 20,021 15,289 38,246 29,526
Partnership Administration and
Property Management -
Unrelated Parties 13,739 4,460 35,007 11,223
Real Estate Taxes Paid 14,548 47,252 19,533 47,252
Expenses Related to Sale of
Real Estate 4,341 0 9,848 0
Distributions to Partners 34,354 35,364 68,708 76,983
---------- ---------- ---------- ---------
Total Uses of Additional Cash 87,003 102,365 171,342 164,984
---------- ---------- ---------- ---------
DECREASE IN NET ASSETS
IN LIQUIDATION
BEFORE ADJUSTMENTS (79,093) (50,767) (161,886) (61,509)
---------- ---------- ---------- ---------
ADJUSTMENTS OF ESTIMATED VALUES:
Change in Net Realizable values of:
Real Estate 0 (132,000) 0 (132,000)
Prepaid Expenses (5,507) 0 0 0
Payable to
AEI Fund Management, Inc. 4,424 1,398 11,997 427
Real Estate Taxes Payable 7,270 26,003 7,083 4,755
Distributions Payable 0 0 0 6,255
---------- ---------- ---------- ---------
Total Adjustment of
Estimated Values 6,187 (104,599) 19,080 (120,563)
---------- ---------- ---------- ---------
DECREASE IN NET ASSETS
IN LIQUIDATION (72,906) (155,366) (142,806) (182,072)
BEGINNING NET ASSETS
IN LIQUIDATION 1,404,061 1,971,664 1,473,961 1,998,370
---------- ---------- ---------- ---------
ENDING NET ASSETS
IN LIQUIDATION $1,331,155 $1,816,298 $1,331,155 $1,816,298
========== ========== ========== =========
The accompanying Notes to Financial Statements are an integral
part of this statement.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
(1) The condensed statements included herein have been prepared
by the registrant, 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 registrant
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
registrant's latest annual report on Form 10-K.
(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 director of AFM, serves as the
Individual General Partner. AFM is a wholly owned
subsidiary of AEI Capital Corporation of which Mr. Johnson
is the majority shareholder. AEI Fund Management, Inc.
("AEI"), an affiliate of AFM, performs the administrative
and operating functions for the Partnership.
The terms of the Partnership offering called 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. 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 contribution.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
In September 2007, the Managing General Partner solicited by
mail a proxy statement seeking the consent of the Limited
Partners, as required by Section 6.1 of the Partnership
Agreement, to initiate the final disposition, liquidation
and distribution of all of the Partnership's properties and
assets within the next year. On October 16, 2007, the
proposal was approved with a majority of Units voted in
favor of the proposal. As a result, the Managing General
Partner is proceeding with the planned liquidation of the
Partnership. At this time, the Partnership anticipates that
it will sell its remaining property and liquidate prior to
December 31, 2010.
Financial Statement Presentation
Because liquidation was anticipated, the Partnership
changed its basis of accounting after September 30, 2005,
from the going concern basis to the liquidation basis.
Effective October 1, 2005, the Partnership measures its
assets and liabilities at the amounts of cash expected in
liquidation and reports changes in estimates when they
are known. The accounts of the Partnership are
maintained on the accrual basis of accounting for both
federal income tax purposes and financial reporting
purposes.
(3) Investments in Real Estate -
Effective with the decision to liquidate, the carrying
amounts of assets and liabilities were adjusted from their
historical bases to the amounts of cash expected from their
realization and settlement. Because of the expected short
liquidation period, the effects of discounting would not be
significant and have been ignored. At June 30, 2010 and
December 31, 2009, the estimated real estate values were
based upon a signed purchase agreement for one property and
comparable sales of similar properties for the other
property. It is reasonably possible that the amounts
expected to be realized in the liquidation process may
change in the near term.
On June 26, 2006, Timber Lodge Steakhouse, Inc. ("TLS"), the
tenant of the Timber Lodge restaurants filed for Chapter 11
bankruptcy reorganization. In September 2006, TLS submitted
a written proposal requesting rent concessions. In February
2007, the Partnership and other owners of the properties
signed Lease amendments to reduce the annual rent by 15% for
the Rochester property and 10% for the St. Cloud property.
As a result of these amendments, TLS submitted a request to
the bankruptcy court to assume the Leases. The request was
approved by the court. Through June 30, 2008, TLS paid all
rent due under the Leases as amended.
In August 2008, TLS completed an asset sale to Timberlodge
Steakhouse Acquisition, LLC ("TSA"), a subsidiary of Taher
Food Management, a Minneapolis-based food services company.
After the asset sale, TLS reported to its creditors that it
was insolvent and would be unable to pay amounts owed to
unsecured creditors. As a result, the Partnership was not
able to collect the July rent for the properties. In
exchange for a rent reduction of approximately 12%, TSA
entered into Lease amendments, effective August 1, 2008, for
both properties and assumed the responsibilities of the
tenant.
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
At June 30, 2009, based on an analysis of market conditions
in the area, the Partnership recognized a $132,000
adjustment to decrease the estimated net realizable value of
the properties. In September 2009, the tenant asked for a
further rent reduction of 25% on both properties. After
reviewing the tenant's financial statements and restaurant
performance, the Partnership verbally agreed to the
reduction, but only for one year. Based on the tenant's
financial information and additional analysis of market
conditions in the area, the Partnership recognized an
additional $323,000 adjustment to decrease the estimated net
realizable value of the properties at September 30, 2009.
At the end of November 2009, TSA closed the restaurants and
stopped paying rent and property expenses. The Partnership
commenced legal action against TSA to evict it from the
properties. In January 2010, the judge approved the
eviction action and the Partnership took possession of the
properties. As a result of the tenant's default, the
Partnership is paying for its share of the real estate taxes
and other costs associated with maintaining the properties.
The Partnership took additional legal action against TSA and
obtained a default judgment for damages due to its lease
default. Whether TSA has any assets to satisfy the judgment
is unknown at this time.
In March 2010, the Partnership reached an agreement to sell
the Rochester property to an unrelated third party. Based
on this agreement, the Partnership recognized a $51,000
adjustment to increase the estimated net realizable value of
the Rochester property at December 31, 2009. In June 2010,
the Partnership received a nonrefundable earnest deposit of
$6,552 from the buyer. For the six months ended June 30,
2010, the Partnership incurred expenses related to the sale
of property of $9,848. On July 27, 2010, the sale closed
with the Partnership receiving net proceeds of approximately
$834,000.
During the first six months of 2010 and 2009, the
Partnership distributed net sale proceeds of $68,708 and
$48,485 to the Limited and General Partners as part of their
quarterly distributions, which represented a return of
capital of $3.48 and $2.46 per Limited Partnership Unit,
respectively. The proceeds were generated from sales
completed prior to 2007.
(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 OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
This section contains "forward-looking statements" 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, the
sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward-
looking statements, should 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:
Market and economic conditions which affect the value
of the properties the Partnership owns and the cash
from rental income such properties generate;
the federal income tax consequences of rental income,
deductions, gain on sales and other items and the
effects of these consequences for the Partners;
resolution by the General Partners of conflicts with
which they may be confronted;
the effect of tenant defaults; and
the condition of the industries in which the tenants of
properties owned by the Partnership operate.
Application of Critical Accounting Policies
The preparation of the Partnership's financial statements
requires management to make estimates and assumptions that may
affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities. Management evaluates these estimates on an ongoing
basis, including those related to the carrying value of real
estate and the allocation by AEI Fund Management, Inc. of
expenses to the Partnership as opposed to other funds they
manage.
Effective October 1, 2005, the Partnership adopted the
liquidation basis of accounting because the General Partners
anticipated the liquidation of the Partnership during 2006. The
timetable for final disposition of the assets was delayed when
the tenant in two of the Partnership's remaining properties filed
for Chapter 11 bankruptcy reorganization on June 26, 2006. While
the tenant was in bankruptcy, the General Partners believed it
would have been difficult to find a buyer that would have paid a
fair value for the properties. In 2008, the tenant again
experienced financial difficulties which made it harder to sell
the properties. The General Partners now anticipate liquidation
to occur during 2010. In accordance with the liquidation basis
of accounting, assets are recorded at their estimated net
realizable value (the amount of cash expected to be received) and
liabilities are recorded at the amount estimated to be paid to
creditors and Partners. At June 30, 2010, the estimated real
estate values were based upon a signed purchase agreement for one
property and comparable sales of similar properties for the other
property. Any changes in these estimates could cause material
changes in the net assets in liquidation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
AEI Fund Management, Inc. allocates expenses to each of
the funds they manage primarily on the basis of the number of
hours devoted by their employees to each fund's affairs. They
also allocate expenses at the end of each month that are not
directly related to a fund's operations based upon the number of
investors in the fund and the fund's capitalization relative to
other funds they manage. The Partnership reimburses these
expenses subject to detailed limitations contained in the
Partnership Agreement.
Management of the Partnership has discussed the
development and selection of the above accounting estimates and
the management discussion and analysis disclosures regarding them
with the managing partner of the Partnership.
Results of Operations
For the six months ended June 30, 2010 and 2009, while in
the liquidation phase, the Partnership recognized rental income
of $0 and $57,007, respectively. In 2010, rental income
decreased due to the tenant of the Timber Lodge restaurants
defaulting on its rental obligations as discussed below. During
the same periods, the Partnership recognized interest income of
$2,904 and $3,971, respectively. Interest income decreased due
to the Partnership having less money invested in a money market
account in 2010, when compared to 2009.
Prior to defaulting on its lease obligations, the tenant
of the Timber Lodge restaurants was making additional monthly
payments to fund a real estate tax escrow account. During the
six months ended June 30, 2009, the Partnership received payments
of $42,497. The Partnership held the funds until real estate
taxes were due and then paid them directly to the taxing
authorities. At December 31, 2009, the real estate tax payable
represented the balance of the tenant's real estate tax payments
that had not been paid to the taxing authorities. Due to the
tenant's default, $4,985 of this balance was transferred to the
other tenant-in-common owners of the property and the
Partnership's share of the balance was used to pay for other
property expenses.
For the six months ended June 30, 2010 and 2009, while in
the liquidation phase, the Partnership incurred Partnership
administration expenses from affiliated parties of $31,738 and
$29,099, respectively. These administration expenses include
costs associated with the management of the properties,
processing distributions, reporting requirements and
communicating with the Limited Partners. During the same
periods, the Partnership incurred Partnership administration and
property management expenses from unrelated parties of $41,968
and $11,223, respectively. These expenses represent direct
payments to third parties for legal and filing fees, direct
administrative costs, outside audit costs, taxes, insurance and
other property costs. These expenses were higher in 2010, when
compared to 2009, due to expenses related to the Timber Lodge
properties.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On June 26, 2006, Timber Lodge Steakhouse, Inc. ("TLS"),
the tenant of the Timber Lodge restaurants filed for Chapter 11
bankruptcy reorganization. In September 2006, TLS submitted a
written proposal requesting rent concessions. In February 2007,
the Partnership and other owners of the properties signed Lease
amendments to reduce the annual rent by 15% for the Rochester
property and 10% for the St. Cloud property. As a result of
these amendments, TLS submitted a request to the bankruptcy court
to assume the Leases. The request was approved by the court.
Through June 30, 2008, TLS paid all rent due under the Leases as
amended.
In August 2008, TLS completed an asset sale to Timberlodge
Steakhouse Acquisition, LLC ("TSA"), a subsidiary of Taher Food
Management, a Minneapolis-based food services company. After the
asset sale, TLS reported to its creditors that it was insolvent
and would be unable to pay amounts owed to unsecured creditors.
As a result, the Partnership was not able to collect the July
rent for the properties. In exchange for a rent reduction of
approximately 12%, TSA entered into Lease amendments, effective
August 1, 2008, for both properties and assumed the
responsibilities of the tenant.
At June 30, 2009, based on an analysis of market
conditions in the area, the Partnership recognized a $132,000
adjustment to decrease the estimated net realizable value of the
properties. In September 2009, the tenant asked for a further
rent reduction of 25% on both properties. After reviewing the
tenant's financial statements and restaurant performance, the
Partnership verbally agreed to the reduction, but only for one
year. Based on the tenant's financial information and additional
analysis of market conditions in the area, the Partnership
recognized an additional $323,000 adjustment to decrease the
estimated net realizable value of the properties at September 30,
2009.
At the end of November 2009, TSA closed the restaurants
and stopped paying rent and property expenses. The Partnership
commenced legal action against TSA to evict it from the
properties. In January 2010, the judge approved the eviction
action and the Partnership took possession of the properties. As
a result of the tenant's default, the Partnership is paying for
its share of the real estate taxes and other costs associated
with maintaining the properties. The Partnership took additional
legal action against TSA and obtained a default judgment for
damages due to its lease default. Whether TSA has any assets to
satisfy the judgment is unknown at this time.
In March 2010, the Partnership reached an agreement to
sell the Rochester property to an unrelated third party. Based
on this agreement, the Partnership recognized a $51,000
adjustment to increase the estimated net realizable value of the
Rochester property at December 31, 2009. In June 2010, the
Partnership received a nonrefundable earnest deposit of $6,552
from the buyer. For the six months ended June 30, 2010, the
Partnership incurred expenses related to the sale of property of
$9,848. On July 27, 2010, the sale closed with the Partnership
receiving net proceeds of approximately $834,000.
For the six months ended June 30, 2010 and 2009, the
Partnership recognized adjustments of estimated values of $19,080
and ($120,563), respectively, resulting from the application of
the liquidation basis of accounting and recording its assets at
estimated net realizable value and liabilities at the amount
estimated to be paid.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Management believes inflation has not significantly
affected income from operations. Leases may contain rent
increases, based on the increase in the Consumer Price Index over
a specified period, which will result in an increase in rental
income over the term of the leases. Inflation also may cause the
real estate to appreciate in value. However, inflation and
changing prices may have an adverse impact on the operating
margins of the properties' tenants, which could impair their
ability to pay rent and subsequently reduce the Net Cash Flow
available for distributions.
Liquidity and Capital Resources
On October 16, 2007, the Limited Partners approved a
proposal to initiate the final disposition, liquidation and
distribution of all of the Partnership's properties and assets.
As a result, the Managing General Partner is proceeding with the
planned liquidation of the Partnership. At this time, the
Partnership anticipates that it will sell its remaining property
and liquidate prior to December 31, 2010.
During the six months ended June 30, 2010, while in the
liquidation phase, the Partnership's Net Assets in Liquidation
decreased $142,806 as a result of Partnership administration,
property management and property sale expenses and cash
distributions of net sale proceeds paid to the Partners. During
the six months ended June 30, 2009, while in the liquidation
phase, the Partnership's Net Assets in Liquidation decreased
$182,072 as a result of distributions paid to the Partners in
excess of cash generated from operating activities and a decrease
in the estimated net realizable value of property.
One of the Partnership's primary uses of cash is
distribution 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.
For the six months ended June 30, 2010 and 2009, the
Partnership declared distributions of $68,708 and $70,728,
respectively. The Limited Partners received distributions of
$68,021 and $68,021 and the General Partners received
distributions of $687 and $2,707 for the periods, respectively.
During the first six months of 2010 and 2009, the Partnership
distributed net sale proceeds of $68,708 and $48,485 to the
Limited and General Partners as part of their quarterly
distributions, which represented a return of capital of $3.48 and
$2.46 per Limited Partnership Unit, respectively. The proceeds
were generated from sales completed prior to 2007.
With the tenant of the Partnership's two remaining
properties failing to pay rent, the Partnership's only source of
income is interest earned on its cash reserve. This income will
not be sufficient to pay the Partnership's administrative
expenses and the property management expenses related to the
properties. Therefore, the Partnership will need to use a
portion of its cash reserve to pay these expenses until the
properties are sold and the Partnership is liquidated. Future
distributions declared, if any, prior to the final liquidating
distribution, will also be paid from the cash reserve. The cash
reserve should be adequate to meet the Partnership's obligations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The Economy and Market Conditions
The impact of conditions in the current economy, including
the turmoil in the credit markets, has adversely affected many
real estate investment funds. However, the absence of mortgage
financing on the Partnership's properties eliminates the risks of
foreclosure and debt-refinancing that can negatively impact the
value and distributions of leveraged real estate investment
funds. Beginning in the fourth quarter of 2008, general economic
conditions caused the volume of property sales to slow
dramatically for all real estate sellers. These conditions may
make it more difficult for the Partnership to sell its remaining
properties at acceptable prices, which it must do in order to
complete its liquidation.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures.
Under the supervision and with the participation of
management, including its President and Chief Financial Officer,
the Managing General Partner of the Partnership evaluated the
effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based
upon that evaluation, the President and Chief Financial Officer
of the Managing General Partner concluded that, as of the end of
the period covered by this report, our disclosure controls and
procedures were effective in ensuring that information required
to be disclosed by us in the reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in applicable rules and forms
and that such information is accumulated and communicated to
management, including the President and Chief Financial Officer
of the Managing General Partner, in a manner that allows timely
decisions regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting.
During the most recent period covered by this report,
there has been no change in our internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act)
that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
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 1A. RISK FACTORS.
Not required for a smaller reporting company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
(a) None.
(b) Not applicable.
(c) Pursuant to Section 7.7 of the Partnership Agreement,
as amended, each Limited Partner has the right to present Units
to the Partnership for purchase by submitting notice to the
Managing General Partner. The purchase price of the Units is
equal to 90% of the net asset value per Unit as determined by the
Managing General Partner in accordance with the provisions of the
Partnership Agreement. Units tendered to the Partnership are
redeemed at the purchase price established for the quarter in
which the Partnership received a notice at least 60 days prior to
the repurchase dates of January 1st, April 1st, July 1st and
October 1st subject to the following limitations. 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 the period covered by this report, the
Partnership did not purchase any Units.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
31.1 Certification of Chief Executive Officer of General
Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer of General
Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief
Financial Officer of General Partner pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements 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.
Dated: August 11, 2010 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/ PATRICK W KEENE
Patrick W. Keene
Chief Financial Officer
(Principal Accounting Officer)
