SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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AEI Real Estate Fund XVIII Limited Partnership
(Name of Registrant as Specified in its Charter)
[Insert Name]
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
1300 Minnesota World Trade Center
30 East 7th Street
St. Paul, Minnesota 55101
CONSENT STATEMENT
For Amendment to Limited Partnership Agreement
to Permit Reinvestment of Sales Proceeds
THIS CONSENT STATEMENT IS BEING MAILED TO INVESTORS ON OR ABOUT
JUNE , 1996. TO BE COUNTED, A PROPERLY SIGNED CONSENT FORM MUST
BE RECEIVED BY THE MANAGING GENERAL PARTNER AT 1300 MINNESOTA WORLD
TRADE CENTER, 30 EAST 7TH STREET, ST. PAUL, MINNESOTA 55101, ON OR
BEFORE July 31, 1996.
AEI Fund Management XVIII, Inc., the managing general partner
(the "Managing General Partner"), of AEI Real Estate Fund XVIII
Limited Partnership (the "Partnership") is recommending an
amendment (the "Amendment") to the Partnership's Limited
Partnership Agreement (the "Partnership Agreement") to enable the
Partnership to reinvest the Net Proceeds of Sale of Partnership
properties until the final liquidation of the Partnership. The
Partnership Agreement currently provides that proceeds from sale of
properties may be reinvested until five years after the termination
of the offering of units in the Partnership--until December 5,
1995. Approval of this Amendment would allow the Partnership to
continue to reinvest proceeds from sale of properties, including
the sale of the Partnership's interest in two Taco Cabana
Restaurants currently being considered, in other properties until
liquidation of the Partnership. This Amendment is not intended to
extend the life of the Partnership.
The proposed Amendment will affect your investment in the
Partnership in a number of ways, including the following:
Rather than distributing all net cash proceeds on sale of
a property, the Amendment will allow the Partnership (if
the Managing General Partner determines, in its
discretion, that it is advantageous to the Partnership)
to reinvest such proceeds in new properties, subject to a
continuing obligation to distribute to limited partners
("Investors") as much cash proceeds as is necessary to
pay the income tax liability (at a rate equal to the
maximum effective rate for federal income taxes)
generated by the sale of property. There can be no
assurance that distributions will be adequate to cover
income tax liabilities generated by the gain on sale of
any properties, or that reinvested proceeds will generate
significant returns.
Proceeds will be reinvested in additional triple net
leased commercial properties that are subject to the same
risks of performance or nonperformance, (including risks
related to changing market values, tenant defaults,
difficulty of resale, among others) as the properties
originally acquired by the Partnership.
Investors will not be able to review in advance the
properties in which proceeds are reinvested.
The Managing General Partner will be reimbursed for
the costs it incurs, including costs of its personnel, in
reinvesting the proceeds and managing the properties in
which the proceeds are reinvested.
The Managing General Partner recommends a vote "FOR" the
proposed Amendment.
SUMMARY
The following summary is qualified in its entirety by the more
detailed discussion of the proposed Amendment set forth herein and
in the text of the proposed Amendment.
The Amendment: The Managing General Partner is
proposing an Amendment to Section 5.4 of the
Partnership Agreement that would eliminate the
requirement that the Partnership distribute
all Net Proceeds of Sale of properties and
allow reinvestment of such proceeds until
final liquidation of the Partnership.
Reasons for the The Partnership holds a number of properties
Amendment: which may be sold prior to final liquidation
of the Partnership due to favorable
market conditions, exercise of lease purchase
options, tenant restructuring or other
reasons. Although the Managing General
Partner cannot guarantee returns, it believes
it can continue to generate favorable returns
to Investors by reinvestment of such proceeds
in additional properties. The Partnership has
sold a Taco Cabana Restaurant in New
Braunfels, Texas and has entered into an
agreement to sell a Taco Cabana Restaurant in
San Antonio, Texas, and would like to be in a
position to reinvest the proceeds from such
sales.
Effects of the The Amendment will result in reinvestment of
Amendment--Risks: Net Proceeds of Sale. The reinvestment will
involve many of the same risks as the initial
investment of Partnership subscription
proceeds, including risks related to
investment in real estate in general (such as
changing market values, tenant defaults, and
difficulty of resale, among others), the
inability of Investors to review properties
before purchase, certain expenses payable to
the Managing General Partner and federal
income tax risks.
REASONS FOR AND EFFECTS OF THE AMENDMENT
General
If Investors approve the Amendment of the Partnership
Agreement, the Partnership would have the opportunity, upon the
sale or other disposition of properties such as the Taco Cabana
Restaurants described below, to reinvest the Net Proceeds of Sale
in additional triple net leased properties. Under the original
terms of the Partnership Agreement, reinvestment of the Net
Proceeds of Sale from the sale of properties was limited to a
period of five years after termination of sale of units in the
Partnership, which period expired December 5, 1995. By consenting
to the Amendment of the Partnership Agreement, Investors would
permit the Partnership to acquire new properties with the Net
Proceeds of Sale from the sale of the Taco Cabana properties (net
of any distributions to Investors) or any other sale of
Partnership property that occurs prior to the final liquidation
of the Partnership.
The Amendment is not intended to extend the life of the
Partnership. The Prospectus pursuant to which the units of
limited partnership interest were sold indicated that the General
Partners expected that most of the properties would be sold or
refinanced eight to twelve years after acquisition. The Taco
Cabana properties described below were acquired in 1990 and 1992
and it remains the intention to sell the properties in which sale
proceeds are reinvested, depending market conditions and the
benefits of continued ownership, by the year 2004. The Managing
General Partner believes that it can generate favorable returns
through the investment of proceeds in newly constructed
properties that it purchases at construction cost and the resale
of those properties within several years. There can, however, be
no assurance that favorable returns will be achieved.
The Managing General Partner believes that, if allowed to
reinvest the Net Proceeds of Sale remaining after a distribution
to Investors to cover income taxes (at a rate equal to the
maximum effective rate for federal income taxes), it can acquire
properties that will continue to generate attractive net rental
income for the Partnership. Because no commissions will be paid
in connection with reinvestment, the entire amount of reinvested
proceeds can be applied to the purchase price and expenses
associated with acquisition of newly acquired properties. Recent
acquisitions by the General Partners for other real estate
limited partnerships that have investment objectives
substantially identical to the Partnership have produced rental
rates of 10.5% to 12.5% of the purchase price of the properties.
No assurances can be given, however, that a property acquired by
the Partnership will produce similar rentals, or that such
rentals will not be interrupted by events outside the Managing
General Partners' control.
The Managing General Partner of the Partnership is currently
evaluating a number of properties for acquisition, including
properties owned or being developed by companies that lease
properties from other partnerships managed by the General
Partners. The Managing General Partner will not be obligated to
obtain the consent of Investors as to the type of property
acquired if this Amendment is approved. Nevertheless, any
property acquired will comply with the investment objectives and
policies set forth in the Prospectus pursuant to which the Units
were initially offered. Any property acquired will be an
existing commercial property that will be acquired on a debt-free
basis and will likely be leased to a single tenant pursuant to a
triple-net lease in the franchise restaurant industry. No
property will be acquired from the General Partners or their
Affiliates.
Sale of Properties
The Partnership has sold a Taco Cabana Restaurant in New
Braunfels, Texas and has entered into an agreement to sell a Taco
Cabana Restaurant located in San Antonio. The Partnership
purchased the San Antonio restaurant property on December 29,
1990 and the New Braunfels property on May 1, 1992. Both
properties are leased to Texas Taco Cabana LP under a 15-year,
non-cancelable triple-net lease agreement. The total cost of the
San Antonio property to the Partnership was $1,406,426 and the
total cost of the New Braunfels property was $784,045.
The Partnership has an outstanding letter of intent to sell
the San Antonio Restaurant for $1,873,300 and has sold the New
Braunfels property for $1,053,000. The Partnership's adjusted
basis, after depreciation, for the San Antonio property is
$710,345 and for the New Braunfels property was $1,301,911.
Accordingly, the sale of these properties will generate aggregate
taxable gain of approximately $738,000, or $33.43 per outstanding
limited partnership unit.
If the Investors approve the Amendment, the Partnership will
distribute approximately $295,000, or approximately $13.36 per
outstanding Limited Partnership Unit, of the Net Proceeds of Sale
to cover income tax liabilities generated by the sale. The
distribution of Net Proceeds on Sale would reduce the Adjusted
Capital Contributions of Investors by $13.36 per outstanding
limited partnership unit. The remainder of the proceeds would be
reinvested in new properties.
In the event Investors do not approve the Amendment,
Investors will receive a distribution of approximately
$2,615,000, or approximately $118.44 per outstanding limited
partnership unit, from sale of the these properties. The Net
Proceeds of Sale not distributed will be retained by the
Partnership as working capital reserves. The distribution of Net
Proceeds on Sale would reduce the Adjusted Capital Contributions
of Investors by $118.44 per outstanding limited partnership unit.
These two properties generated rental revenues of $292,603
during the year ended December31, 1995. If the proceeds from its
sale are distributed, rather than reinvested, future Partnership
revenues, and therefore cash distributions to investors, will be
reduced by a corresponding amount.
Risks of Reinvestment
The reinvestment of proceeds from the sale of these
properties, like the original investment in properties by the
Partnership, is subject to a number of risks, including the
following:
Investors will not be able to review in advance the
properties in which proceeds are reinvested;
Investors will not receive the cash generated from
property sales until final liquidation of the Partnership
and will have only limited rights to present their units
for repurchase before then;
Investors will be taxed on the full amount of gain
generated from sale of properties but will receive
distributions designed to cover potential tax effects at
an assumed average blended tax rate that may not match
their tax obligations;
Proceeds will be reinvested in additional triple net
leased commercial properties that are subject to the same
risks of nonperformance, (including risks related to
changing market values, tenant defaults, difficulty of
resale, among others) as the original properties;
The General Partners may receive more aggregate
reimbursements from the Partnership if proceeds are
reinvested than they would if proceeds were not
reinvested.
Although the General Partners intend to reinvest any Net
Proceeds of Sale in properties that will further the objectives
of preserving capital, creating a favorable return through cash
distributions from rentals, and appreciation realized on resale,
there can be no assurances that such objectives will be achieved
or that the ultimate distribution of Net Proceeds of Sale will be
larger when the new properties are eventually sold.
Interest of the General Partner
Neither the General Partners, nor any of their affiliates,
will receive any fees for reinvestment of the Net Proceeds of
Sale or in connection with the acquisition of any property. The
General Partners will be reimbursed for any costs they incur in
completing any acquisition and in connection with management of
the property in accordance with, and subject to the limitations
in the Partnership Agreement. To the extent that the Amendment
to the Partnership Agreement is not approved, and the proceeds
from the sale of the properties are not reinvested, the amount of
capital under management by the General Partners through this
Partnership, and the scope of the Partnership's operations, will
be reduced. Such reduced operations can be expected to reduce
the aggregate amount of reimbursements that the General Partners
receive from the Partnership.
The Managing General Partner holds 20 Units and the
Individual General Partner holds 26 units as a limited partner in
the Partnership. No other Affiliate of the General Partners
holds any interest as a limited partner in the Partnership.
Voting Units
Voting by Investors on an Amendment of the Partnership
Agreement is based upon Partnership units ("Voting Units"). As
of June 1, 1996, there were 22,077.8 Voting Units outstanding.
Each Voting Unit is entitled to one vote. Fractions of Voting
Units will be included in the total.
To the best of the Managing General Partner's knowledge,
there is no beneficial owner holding five percent or more of the
Voting Units including the General Partners.
In order for the proposed Amendment to be adopted, a
majority of the Voting Units must be voted in favor of the
Amendment.
Procedures for Voting
Accompanying this Consent Statement is a Consent Form for
each Investor with respect to his/her unit ownership in the
Partnership. By checking the appropriate box, each Investor can
indicate whether he/she votes FOR or AGAINST or ABSTAINS as to
the proposed Amendment. If any Investor returns a Consent Form
duly signed without checking any box, he/she will be deemed to
have voted FOR the Amendment.
An Investor who votes against, or abstains, does not have
appraisal or similar rights under Minnesota law.
The Managing General Partner has fixed the close of business
on June 1, 1996 as the record date for the determination of the
Investors entitled to vote on the proposed Amendment; the close
of business on July 31, 1996 as the date by which Consent Forms
must be received by the Managing General Partner in order to be
counted; and August 1, 1996 as the date on which the consents are
to be counted. An Investor may revoke his/her/its consent at any
time prior to July 31, 1996, provided written revocation is
received by the Managing General Partner prior to that date.
The cost of solicitation of consents of the Investors will
be borne by the Partnership. The solicitations will be made by
the mails. This Consent Statement was first mailed to Investors
on June, 1996. Staff of the Managing General Partner will be
available by telephone to answer any questions concerning this
Consent.
Incorporation By Reference
The information included under the captions "Financial
Statements and Notes to Financial Statements," "Selected
Financial Data" and Management's Discussion and Analysis of
Financial Condition and Results of operations" of the
Partnership's Annual Report on Form 10-KSB for the year ended
December 31, 1995 and Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1996 is hereby incorporated by reference.
Copies of such sections are being delivered to you with this
consent statement.
BY ORDER OF THE BOARD OF DIRECTORS
OF AEI FUND MANAGEMENT XVIII, INC.
Robert P. Johnson, President
Exhibit A
PROPOSED AMENDMENT OF
LIMITED PARTNERSHIP AGREEMENT OF
AEI REAL ESTATE FUND XVIII
Changes in the existing provisions of the Limited
Partnership Agreement that would be made by the proposed
Amendment are shown below. Existing provisions proposed to be
omitted are enclosed in brackets. New matter is printed in bold.
The amendment would alter only the first sentence of section 5.4.
The remainder of such section would remain unaltered.
SECTION 5.4 DISTRIBUTION OF NET PROCEEDS OF SALE
5.4 Distribution of Net Proceeds of Sale. Upon financing,
refinancing, sale or other disposition of any of the Properties,
Net Proceeds of Sale may be reinvested in additional properties
until [a date five years after the date on which the offer and
sale of units pursuant to the Prospectus is terminated], THE
GENERAL PARTNER DETERMINES THAT IT IS IN THE BEST INTERESTS OF
THE PARTNERSHIP TO BEGIN LIQUIDATION OF THE PARTNERSHIP;
provided, however, that sufficient cash is distributed to the
Limited Partners to pay state and federal income taxes (assuming
Limited Partners are taxable at a marginal rate of 28% for
federal income tax purposes or such greater rate as is the
maximum effective rate for federal income taxation applicable to
individuals) created as a result of such transaction.
IMPORTANT IMPORTANT
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
CONSENT OF LIMITED PARTNERS
This consent is solicited by the Board
of Directors of AEI Fund Management XVIII, Inc.,
The Managing General Partner
The undersigned, a Limited Partner of AEI Real Estate Fund
XVIII Limited Partnership (the "Partnership"), hereby consents
(unless otherwise directed below) to the proposal identified
below to adopt an Amendment to Section 5.4 of the Limited
Partnership Agreement of the Partnership (the "Partnership
Agreement"), as more fully described in the Consent Statement
(the "Proposal"). By voting for the Proposal, the undersigned
hereby appoints AEI Fund Management XVIII, Inc. as its attorney-
in-fact with power to sign and acknowledge on its behalf any
instrument that may be necessary to evidence the Amendment to the
Partnership Agreement and any corresponding Amendment to the
Certificate of Limited Partnership.
Please date and sign this Consent below and return it in the
enclosed, postage paid envelope. To be counted, this Consent
must be received not later than the close of business on July 31,
1996.
Adoption of Amendment to Section 5.4 of the Partnership Agreement
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The Partnership Units held by the signing Limited Partner
will be voted as directed. They will be voted "FOR" the Proposal
if no box is checked.
Please sign exactly as your name appears below. When
Partnership units are held by joint tenants, both owners should
sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS CONSENT.
Dated: , 1996
Signature (if held jointly)
June 5,1996
Dear AEI Fund XVIII Investor:
The enclosed Consent Statement proposes an amendment to the Partnership
Agreement that will, if approved by a majority of the Partners, allow this
Fund to reinvest proceeds from property sales into replacement net leased
properties. When a Fund such as this is orginally organized, it is intended
that the properties acquired will be held for an extended period of time--
usually 10-12 years. That provides time for the distribution of income
from rents and time for the property to potentially appreciate in value.
From time to time, however, it is advantageous for the Fund to sell a
property earlier than anticipated if a substantial gain can be realized.
That is excatly what has occurred with your Taco Cabana property located
in New Braunfels, Texas.
Your Fund's Partnership Agreement requires the distribution of ALL
of the proceeds from any sale of properties. For the reasons outlined
in the enclosed Consent Statement, we believe that it would be advantageous
for your Fund to be able to sell certain of its properties, distribute a
portion of any profits realized, and reinvest the balance of such proceeds
into replacement properties, until the final liquidation of the Fund
occurs. We believe this will maximize your profit potential and avoid
an erosion of the Fund's asset base. To facilitate this, we are proposing
an amendment to the Partnership Agreement.
The amendment will affect your investment in a number of ways,
including the folowing:
Rather than distributin proceeds from the sale of properties,
the amendment will allow the Fund to reinvest all of those
proceeds, other than an amount distributed to cover partner
income tax liabilities (at an assumed rate);
The General Partner will continue to be reimbursed for the
costs of managing the properties in which the proceeds are
reinvested, while it would no longer receive those
reimbursements if the proceeds were distributed;
The reinvestment of proceeds will involve many of the same
risks as the initial investment of Partnership subscription
proceeds, including risks related to investment in real estate
in general (such as changing market values, tenant defaults,
and difficulty of resale, among others), the inability of
Investors to review properties before puchase, certain
expenses payable to the Managing General Partner and federal
income tax risks.
Your General Partner believes this is in the best interest for you
and your Fund and recommends you vote "FOR" this proposed Amendment.
Please vote "FOR" on the Consent Statement vote form and return it in
the prepaid envelope today. If you have any questions regarding your
Fund, or this Consent Statement, please call AEI Investment Services
at 1-800-328-3519.
Thank you for your immediate attention to this matter.
Sincerely,
/s/ Robert P. Johnson
Robert P. Johnson
General Partner
