SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: June 30, 1996
Commission file number: 0-18289
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Minnesota 41-1622463
(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)
(612) 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 XVIII LIMITED PARTNERSHIP
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of June 30, 1996 and December 31, 1995
Statements for the Periods ended June 30, 1996 and 1995:
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 XVIII LIMITED PARTNERSHIP
BALANCE SHEET
JUNE 30, 1996 AND DECEMBER 31, 1995
(Unaudited)
ASSETS
1996 1995
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,228,693 $ 2,332,974
Receivables 20,598 43,389
----------- -----------
Total Current Assets 2,249,291 2,376,363
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 5,542,321 5,370,160
Buildings and Equipment 11,394,306 11,065,109
Property Acquisition Costs 4,417 8,798
Accumulated Depreciation (2,068,002) (1,932,655)
----------- -----------
Net Investments in Real Estate 14,873,042 14,511,412
----------- -----------
Total Assets $17,122,333 $16,887,775
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 103,175 $ 49,968
Distributions Payable 323,837 406,381
Security Deposit 60,626 0
Unearned Rent 5,000 5,000
----------- -----------
Total Current Liabilities 492,638 461,349
----------- -----------
MINORITY INTEREST 264,118 76,319
PARTNERS' CAPITAL (DEFICIT):
General Partners (29,816) (29,971)
Limited Partners, $1,000 Unit value;
30,000 Units authorized; 22,783 issued;
22,078 Units outstanding 16,395,393 16,380,078
----------- -----------
Total Partners' Capital 16,365,577 16,350,107
----------- -----------
Total Liabilities and Partners' Capital $17,122,333 $16,887,775
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE PERIODS ENDED JUNE 30
(Unaudited)
Second Quarter Ended Six Months Ended
6/30/96 6/30/95 6/30/96 6/30/95
INCOME:
Rent $ 415,175 $ 487,371 $ 814,363 $ 974,033
Investment Income 24,573 194 53,890 1,495
--------- --------- --------- ---------
Total Income 439,748 487,565 868,253 975,528
--------- --------- --------- ---------
EXPENSES:
Partnership Administration-
Affiliates 54,374 57,484 121,243 128,475
Partnership Administration
and Property Management-
Unrelated Parties 71,697 22,089 99,347 43,869
Interest 0 3,876 0 6,115
Depreciation 107,802 117,191 211,399 234,381
--------- --------- --------- ---------
Total Expenses 233,873 200,640 431,989 412,840
--------- --------- --------- ---------
OPERATING INCOME 205,875 286,925 436,264 562,688
GAIN ON SALE OF REAL ESTATE 254,305 0 254,305 0
MINORITY INTEREST IN
OPERATING INCOME (5,687) (2,006) (7,714) (4,013)
--------- --------- --------- ---------
NET INCOME $ 454,493 $ 284,919 $ 682,855 $ 558,675
========= ========= ========= =========
NET INCOME ALLOCATED:
General Partners $ 4,545 $ 2,848 $ 6,829 $ 5,586
Limited Partners 449,948 282,071 676,026 553,089
--------- --------- --------- ---------
$ 454,493 $ 284,919 $ 682,855 $ 558,675
========= ========= ========= =========
NET INCOME PER
LIMITED PARTNERSHIP UNIT
(22,078 and 22,234 weighted average
Units outstanding in 1996 and 1995,
respectively) $ 20.38 $ 12.69 $ 30.62 $ 24.88
========= ========= ========= =========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED JUNE 30
(Unaudited)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 682,855 $ 558,675
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 211,399 234,381
Gain on Sale of Real Estate (254,305) 0
(Increase) Decrease in Receivables 22,791 (12,365)
Increase in Payable to
AEI Fund Management, Inc. 53,207 4,596
Increase in Security Deposit 60,626 0
Minority Interest (3,236) (862)
----------- -----------
Total Adjustments 90,482 225,750
----------- -----------
Net Cash Provided By
Operating Activities 773,337 784,425
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (1,089,986) 0
Proceeds from Sale of Real Estate 962,297 0
----------- -----------
Net Cash Used For
Investing Activities (127,689) 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (82,544) 59,272
Distributions to Partners (667,385) (920,519)
Increase in Line of Credit 0 26,500
----------- -----------
Net Cash Used For
Financing Activities (749,929) (834,747)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (104,281) (50,322)
CASH AND CASH EQUIVALENTS, beginning of period 2,332,974 103,469
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,228,693 $ 53,147
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid During the Year $ 0 $ 6,115
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIODS ENDED JUNE 30
(Unaudited)
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1994 $ (27,119) $16,662,415 $16,635,296 22,233.80
Distributions (9,205) (911,314) (920,519)
Net Income 5,586 553,089 558,675
--------- ----------- ----------- -----------
BALANCE, June 30, 1995 $ (30,738) $16,304,190 $16,273,452 22,233.80
========= =========== =========== ===========
BALANCE, December 31, 1995 $ (29,971) $16,380,078 $16,350,107 22,077.80
Distributions (6,674) (660,711) (667,385)
Net Income 6,829 676,026 682,855
--------- ----------- ----------- -----------
BALANCE, June 30, 1996 $ (29,816) $16,395,393 $16,365,577 22,077.80
========= =========== ========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(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 XVIII Limited Partnership (Partnership)
was formed to acquire and lease commercial properties to
operating tenants. The Partnership's operations are managed
by AEI Fund Management XVIII, Inc. (AFM), the Managing
General Partner of the Partnership. Robert P. Johnson, the
President and sole shareholder of AFM, serves as the
Individual General Partner of the Partnership. An affiliate
of AFM, AEI Fund Management, Inc., 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 15, 1989 when minimum
subscriptions of 1,500 Limited Partnership Units
($1,500,000) were accepted. The Partnership's offering
terminated December 4, 1990 when the extended offering
period expired. The Partnership received subscriptions for
22,783.05 Limited Partnership Units ($22,783,050).
Under the terms of the Limited Partnership Agreement, the
Limited Partners and General Partners contributed funds of
$22,783,050, and $1,000, respectively. During the operation
of the Partnership, any Net Cash Flow, as defined, which the
General Partners determine to distribute will be distributed
90% to the Limited Partners and 10% to the General Partners;
provided, however, that such distributions to the General
Partners will be subordinated to the Limited Partners first
receiving an annual, noncumulative distribution of Net Cash
Flow equal to 10% of their Adjusted Capital Contribution, as
defined, and, provided further, that in no event will the
General Partners receive less than 1% of such Net Cash Flow
per annum. Distributions to Limited Partners will be made
pro rata by Units.
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
Any Net Proceeds of Sale, as defined, from the sale or
financing of the Partnership's properties which the General
Partners determine to distribute will, after provisions for
debts and reserves, be paid in the following manner: (i)
first, 99% to the Limited Partners and 1% to the General
Partners until the Limited Partners receive an amount equal
to: (a) their Adjusted Capital Contribution plus (b) an
amount equal to 6% of their Adjusted Capital Contribution
per annum, cumulative but not compounded, to the extent not
previously distributed from Net Cash Flow; (ii) next, 99% to
the Limited Partners and 1% to the General Partners until
the Limited Partners receive an amount equal to 14% of their
Adjusted Capital Contribution per annum, cumulative but not
compounded, to the extent not previously distributed; (iii)
next, to the General Partners until cumulative distributions
to the General Partners under Items (ii) and (iii) equal 15%
of cumulative distributions to all Partners under Items (ii)
and (iii). Any remaining balance will be distributed 85% to
the Limited Partners and 15% to the General Partners.
Distributions to the Limited Partners will be made pro rata
by Units.
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
property, will be allocated first in the same ratio in
which, and to the extent, Net Cash Flow is distributed to
the Partners for such year. Any additional profits will be
allocated 90% to the Limited Partners and 10% to the General
Partners. In the event no Net Cash Flow is distributed to
the Limited Partners, 90% of each item of Partnership
income, gain or credit for each respective year shall be
allocated to the Limited Partners, and 10% of each such item
shall be allocated to the General Partners. Net losses from
operations will be allocated 98% to the Limited Partners and
2% to the General Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of the Partnership's property will be
allocated in accordance with the Partnership Agreement as
follows: (i) first, to those Partners with deficit balances
in their capital accounts in an amount equal to the sum of
such deficit balances; (ii) second, 99% to the Limited
Partners and 1% to the General Partners until the aggregate
balance in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital Contributions
plus an amount equal to 14% of their Adjusted Capital
Contributions per annum, cumulative but not compounded, to
the extent not previously allocated; (iii) third, to the
General Partners until cumulative allocations to the General
Partners equal 15% of cumulative allocations. Any remaining
balance will be allocated 85% to the Limited Partners and
15% to the General Partners. Losses will be allocated 98%
to the Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate -
In 1995, the Partnership elected early adoption of the
Statement of Financial Accounting Standards No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of." This standard requires the
Partnership to compare 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 Statement requires the
Partnership to recognize an impairment loss by the amount by
which the carrying amount of the property exceeds the fair
value of the property. Adoption of this Statement is not
expected to have a material effect on the Partnership's
financial statements.
The Partnership owns a 4.1022% interest in a Sizzler
restaurant in Cincinnati, Ohio, a 93.2478% interest in a
Sizzler restaurant in Springboro, Ohio, and a 100% interest
in a Sizzler restaurant in Fairfield, Ohio. In January,
1994 and June, 1994, the Partnership closed the restaurants
in Cincinnati and Springboro, respectively, and listed them
for sale or lease. While the properties are being re-leased
or sold, the Partnership is responsible for the real estate
taxes and other costs required to maintain the properties.
On July 15, 1994, the Partnership re-leased the Sizzler in
Fairfield to Fairfield Foods, Inc. (Fairfield) under a Lease
Agreement with a primary term of 20 years and annual rental
payments based on a percentage of sales. Fairfield was not
able to profitably operate the restaurant and closed the
restaurant. The Partnership is reviewing the available
options, which include selling or re-leasing the property.
No rents were collected from the Sizzler restaurants in the
first six months of 1996 and 1995. The total amount of rent
not collected in 1996 and 1995 was $196,614 and $190,887,
respectively, for the three properties. These amounts were
not accrued for financial reporting purposes.
In August, 1995, the lessee of the two Rally's properties
filed for reorganization. After reviewing the operating
results of the lessee, the Partnership agreed to amend the
Leases of the two properties. Effective December 1, 1995,
the Partnership amended the Leases to reduce the base rent
from the current annual rent of $47,498 and $48,392 to
$15,000 for each property. The Partnership could receive
additional rent in the future equal to 6.5% of the amount by
which gross receipts exceed $275,000. The lessee has agreed
to pay all post-petition rents due and the Partnership's
related administrative and legal expenses. The Partnership
is owed $29,128 of pre-petition rent, which was not accrued
for financial reporting purposes due to the uncertainty of
collection.
On June 17, 1994, the Partnership sold a 7.0591% interest in
the Applebee's restaurant in Destin, Florida to an unrelated
third party. The Partnership owns the Destin property as
tenants-in-common with the unrelated third party. The
management of the property is governed by a co-tenancy
agreement between the Partnership and the unrelated third
party, which grants the Partnership the authority to control
the management of the property. The Partnership accounts
for its interest under the full consolidation method whereby
the unrelated third party's interest in the property is
reflected in the Partnership's financial statements as a
minority interest.
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Investments in Real Estate - (Continued)
On July 6, 1995, the Partnership sold the Cheddar's
restaurant in Columbus, Ohio, to the lessee. The
Partnership received net sale proceeds of $1,259,320, which
resulted in a net gain of $105,291. At the time of sale,
the cost and related accumulated depreciation was $1,306,191
and $152,162, respectively.
On September 1, 1995, the Partnership sold the Applebee's
restaurant in Memphis, Tennessee, to the lessee. The
Partnership received net sale proceeds of $1,444,822, which
resulted in a net gain of $465,562. At the time of sale,
the cost and related accumulated depreciation was $1,126,919
and $147,659, respectively.
During the first six months of 1996 and the year 1995, the
Partnership distributed $91,473 and $691,021 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 $4.10 and $30.90 per Limited
Partnership Unit, respectively. The majority of the
remaining net proceeds will be reinvested in additional
properties.
On April 10, 1996, the Partnership purchased an 85.0%
interest in a Tractor Supply Company store in Bristol,
Virginia for $1,094,367. The property is leased to Tractor
Supply Company under a Lease Agreement with a primary term
of 14 years and annual rental payments of $116,686. The
remaining interest in the property was purchased by the
Individual General Partner of the Partnership.
In November, 1995, the Partnership entered into an Agreement
to purchase approximately a 40% interest in a Champps
Americana restaurant in Columbus, Ohio. The purchase price
for the entire property will be approximately $2,200,000.
The property will be leased to Americana Dining Corporation
under a Lease Agreement with a primary term of 20 years and
annual rental payments of approximately $242,000. AEI
Income & Growth Fund XXI Limited Partnership, an affiliate
of the Partnership, is expected to acquire the remaining
interest. The Partnership has incurred net costs of $4,417
related to the acquisition of the property. The costs have
been capitalized and will be allocated to land, building and
equipment.
On May 10, 1996, the Partnership sold the Taco Cabana
restaurant in New Braunfels, Texas to an unrelated third
party. The Partnership received net sale proceeds of
$962,297, which resulted in a net gain of $254,305. At the
time of sale, the cost and related accumulated depreciation
of the property was $784,044 and $76,052, respectively.
Pursuant to the Partnership Agreement, net sale proceeds may
be reinvested in additional properties until a date five
years after the date on which the offer and sale of Units is
terminated. This period expired on December 4, 1995. As a
result, the Managing General Partner is in the process of
preparing 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
from the sale of the Taco Cabana restaurant in additional
properties.
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(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.
(5) Security Deposit -
In February, 1996, the Partnership called a letter of credit
for $109,393 related to the Taco Cabana restaurant in
Brownsville, Texas. The Partnership applied a portion of
the funds to satisfy rents and real estate taxes due. As of
June 30, 1996, the Partnership was holding $60,626 as a
security deposit until the lessee renews the letter of
credit.
(6) Line of Credit -
In September, 1994, the Partnership established a $150,000
unsecured line of credit at Fidelity Bank of Edina,
Minnesota. On January 5, 1995, the line of credit was
increased to $300,000. The line of credit bears interest at
the prime rate plus one percent on the outstanding balance,
which is due on demand, but in any event no later than
January 5, 1996. The line of credit was established to
provide short-term financing to cover any temporary cash
deficits. In January, 1996, the line of credit expired. In
the first six months of 1995, interest expense related to
the line of credit was $6,115.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the six months ended June 30, 1996 and 1995, the
Partnership recognized rental income of $814,363 and $974,033,
respectively. During the same periods, the Partnership earned
investment income of $53,890 and $1,495, respectively. In 1996,
rental income decreased mainly as a result of the property sales
and Rally's situation discussed below. The decrease in rental
income was partially offset by rental income received from the
Tractor Supply Company store, rent increases on eleven properties
and additional investment income earned on the net proceeds from
the property sales.
The Partnership owns a 4.1022% interest in a Sizzler
restaurant in Cincinnati, Ohio, a 93.2478% interest in a Sizzler
restaurant in Springboro, Ohio, and a 100% interest in a Sizzler
restaurant in Fairfield, Ohio. In January, 1994 and June, 1994,
the Partnership closed the restaurants in Cincinnati and
Springboro, respectively, and listed them for sale or lease.
While the properties are being re-leased or sold, the Partnership
is responsible for the real estate taxes and other costs required
to maintain the properties.
On July 15, 1994, the Partnership re-leased the Sizzler in
Fairfield to Fairfield Foods, Inc. (Fairfield) under a Lease
Agreement with a primary term of 20 years and annual rental
payments based on a percentage of sales. Fairfield was not able
to profitably operate the restaurant and closed the restaurant.
The Partnership is reviewing the available options, which include
selling or re-leasing the property.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
No rents were collected from the Sizzler restaurants in
the first six months of 1996 and 1995. The total amount of rent
not collected in 1996 and 1995 was $196,614 and $190,887,
respectively, for the three properties. These amounts were not
accrued for financial reporting purposes.
In August, 1995, the lessee of the two Rally's properties
filed for reorganization. After reviewing the operating results
of the lessee, the Partnership agreed to amend the Leases of the
two properties. Effective December 1, 1995, the Partnership
amended the Leases to reduce the base rent from the current
annual rent of $47,498 and $48,392 to $15,000 for each property.
The Partnership could receive additional rent in the future equal
to 6.5% of the amount by which gross receipts exceed $275,000.
The lessee has agreed to pay all post-petition rents due and the
Partnership's related administrative and legal expenses. The
Partnership is owed $29,128 of pre-petition rent, which was not
accrued for financial reporting purposes due to the uncertainty
of collection.
In February, 1996, the Partnership called a letter of
credit for $109,393 related to the Taco Cabana restaurant in
Brownsville, Texas. The Partnership applied a portion of the
funds to satisfy rents and real estate taxes due. As of June 30,
1996, the Partnership was holding $60,626 as a security deposit
until the lessee renews the letter of credit.
During the six months ended June 30, 1996 and 1995, the
Partnership paid Partnership administration expenses to
affiliated parties of $121,243 and $128,475, 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 $99,347 and $43,869, 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. The increase
in these expenses in 1996, when compared to the same period in
1995, is the result of expenses incurred in 1996 related to the
Sizzler situation discussed above.
As of June 30, 1996, the Partnership's annualized cash
distribution rate was 6.0%, 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Liquidity and Capital Resources
During the six months ended June 30, 1996, the
Partnership's cash balances decreased $104,281. Net income
before depreciation and gain on sale decreased by approximately
$153,000 in the first six months of 1996, when compared to the
same period in 1995. This was due to a decrease in revenues as a
result of the property sales discussed below and an increase in
expenses in 1996. This decrease was partially offset by net
timing differences in the collection of payments from the lessees
and the payment of expenses so that net cash provided by
operating activities decreased by only $11,088 from 1995 to 1996.
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 the six months ended June 30,
1996, the Partnership generated cash flow from the sale of real
estate, as discussed below, of $962,297. During the same period,
the Partnership expended $1,089,986 to invest in real properties
(inclusive of acquisition expenses) as the Partnership reinvested
the cash generated from the property sales.
On July 6, 1995, the Partnership sold the Cheddar's
restaurant in Columbus, Ohio, to the lessee. The Partnership
received net sale proceeds of $1,259,320, which resulted in a net
gain of $105,291. At the time of sale, the cost and related
accumulated depreciation was $1,306,191 and $152,162,
respectively.
On September 1, 1995, the Partnership sold the Applebee's
restaurant in Memphis, Tennessee, to the lessee. The Partnership
received net sale proceeds of $1,444,822, which resulted in a net
gain of $465,562. At the time of sale, the cost and related
accumulated depreciation was $1,126,919 and $147,659,
respectively.
During the first six months of 1996 and the year 1995, the
Partnership distributed $91,473 and $691,021 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 $4.10 and $30.90 per Limited Partnership Unit,
respectively. The majority of the remaining net proceeds will be
reinvested in additional properties.
On April 10, 1996, the Partnership purchased an 85.0%
interest in a Tractor Supply Company store in Bristol, Virginia
for $1,094,367. The property is leased to Tractor Supply Company
under a Lease Agreement with a primary term of 14 years and
annual rental payments of $116,686. The remaining interest in
the property was purchased by the Individual General Partner of
the Partnership.
In November, 1995, the Partnership entered into an
Agreement to purchase approximately a 40% interest in a Champps
Americana restaurant in Columbus, Ohio. The purchase price for
the entire property will be approximately $2,200,000. The
property will be leased to Americana Dining Corporation under a
Lease Agreement with a primary term of 20 years and annual rental
payments of approximately $242,000. AEI Income & Growth Fund XXI
Limited Partnership, an affiliate of the Partnership, is expected
to acquire the remaining interest. The Partnership has incurred
net costs of $4,417 related to the acquisition of the property.
The costs have been capitalized and will be allocated to land,
building and equipment.
On May 10, 1996, the Partnership sold the Taco Cabana
restaurant in New Braunfels, Texas to an unrelated third party.
The Partnership received net sale proceeds of $962,297, which
resulted in a net gain of $254,305. At the time of sale, the
cost and related accumulated depreciation of the property was
$784,044 and $76,052, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Pursuant to the Partnership Agreement, net sale proceeds
may be reinvested in additional properties until a date five
years after the date on which the offer and sale of Units is
terminated. This period expired on December 4, 1995. As a
result, the Managing General Partner is in the process of
preparing 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 from the sale of the
Taco Cabana restaurant in additional properties.
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 in the fourth quarter of each
year. 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. In the first six months
of 1995, the Partnership made distributions at an 8.0% rate which
resulted in distributions to the Partners of $920,519. Effective
January 1, 1996, the distribution rate was reduced to 6.0% which
resulted in distributions of $687,385 to the Partners for the
first six months of 1996.
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 1995, ten Limited Partners redeemed a total of 156
Partnership Units for $119,235 in accordance with the Partnership
Agreement. The Partnership acquired these Units using Net Cash
Flow from operations. In prior years, a total of thirty-six
Limited Partners redeemed 549 Partnership Units for $483,397.
The redemptions increase the remaining Limited Partners'
ownership interest in the Partnership.
In September, 1994, the Partnership established a $150,000
unsecured line of credit at Fidelity Bank of Edina, Minnesota.
On January 5, 1995, the line of credit was increased to $300,000.
The line of credit bears interest at the prime rate plus one
percent on the outstanding balance, which is due on demand, but
in any event no later than January 5, 1996. The line of credit
was established to provide short-term financing to cover any
temporary cash deficits. In January, 1996, the line of credit
expired. In the first six months of 1995, interest expense
related to the line of credit was $6,115.
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.
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.
PART II - OTHER INFORMATION
(Continued)
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
Description
10.1 Sale and Leaseback
Financing Commitment Agreement dated
September 21, 1995 and Amendment to Sale
and Leaseback Financing Commitment
Agreement dated October 18, 1995 between
AEI Fund Management, Inc. and Tractor
Supply Company, Inc. relating to the
property at Old Airport Road and I-81,
Bristol, Virginia (incorporated by
reference to Exhibit 10.1 of Form 10-QSB
filed with the Commission on November 2,
1995).
10.2 Net Lease Agreement dated
April 10, 1996 between the Partnership,
Robert P. Johnson and Tractor Supply
Company relating to the property at Old
Airport Road and I-81, Bristol, Virginia
(incorporated by reference to Exhibit
10.2 of Form 8-K filed with the
Commission on April 17, 1996).
10.3 Purchase Agreement dated
May 3, 1996 between the Partnership and
the Givens Family Trust relating to the
property at 811 I-H North, New Braunfels,
Texas (incorporated by reference to
Exhibit 10.1 of Form 8-K filed with the
Commission on May 21, 1996).
27 Financial Data Schedule
for period ended June 30, 1996.
b. Reports filed on Form 8-K - During the quarter ended
June 30, 1996, the Partnership
filed a Form 8-K, dated April
10, 1996, reporting the
acquisition of the Tractor
Supply Company store in
Bristol, Virginia.
During the quarter ended
June 30, 1996, the Partnership
filed a Form 8-K, dated May 10,
1996, reporting the disposition
of the Taco Cabana restaurant
in New Braunfels, Texas.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: August 14, 1996 AEI Real Estate Fund XVIII
Limited Partnership
By: AEI Fund Management XVIII, 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)
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<NAME> AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,228,693
<SECURITIES> 0
<RECEIVABLES> 20,598
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