SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
(Name of Registrant as Specified in its Charter)
(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 an Amendment to Limited Partnership Agreement
to Change Unit Repurchase Provisions
THIS CONSENT STATEMENT IS BEING MAILED TO INVESTORS ON OR ABOUT
SEPTEMBER 2, 1997. 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 OCTOBER 17, 1997.
AEI Fund Management XVIII, Inc., the Managing General Partner of
AEI Real Estate Fund XVIII Limited Partnership (the "Fund"), and
Robert P. Johnson, the Individual General Partner of the Fund
(together, the "General Partners") are recommending the following
amendment (the "Repurchase Amendment") to the Fund's Limited
Partnership Agreement (the "Partnership Agreement"):
Amend Section 7.7 of the Partnership Agreement to alter the Unit
repurchase provisions to allow repurchases to occur more
frequently and to allow the Managing General Partner to establish
a repurchase price that generally will be higher than the
repurchase price fixed under the formula currently set forth in
the Partnership Agreement, and to provide that repurchases will
be made quarterly rather than once per year.
The General Partners believe that the Fund's current formula for
determining the purchase price of Units under Section 7.7 of the
Partnership Agreement no longer reflects a Unit valuation that is
closely related to market value, and that Investors should be
permitted to present Units for repurchase more frequently than once
per year. Approval of the Repurchase Amendment would provide an
alternate valuation formula that the General Partners believe more
accurately reflects the pricing of Units in the secondary market.
The provisions of Section 7.7, as proposed to be amended, will
provide that Investors will be entitled to the price under the
formula yielding the highest value. The amended provisions will
also provide for quarterly repurchases of Units and, if approved,
will be effective for repurchases starting in 1998. Accordingly,
the General Partners recommend a vote "FOR" the proposed Repurchase
Amendment.
The proposed Repurchase Amendment will affect your investment in
the Fund in a number of ways and involve a number of Risks,
including the following:
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The Fund is not required to repurchase Units in excess of 5% of
the Units outstanding in any year, and is not required to
repurchase Units if doing so would impair the Funds ability to
continue operations. The Repurchase Amendment will not alter
these limitations. There may be circumstances under which Fund
revenues and borrowings are insufficient to fully fund such
repurchases. See "Summary-Risks of the Repurchase
Amendment-Limitations on Repurchases."
Although the General Partners believe that the new alternative
repurchase price formula will generally yield a higher Unit
price than the existing formula, and Investors will be entitled
to the higher repurchase price determined under either formula,
there is no assurance that either formula price will pay an
Investor the market value of the Investor's Units. See
"Summary-Risks of the Repurchase Amendment-Valuation of Units."
The Fund will repurchase Units out of capital available
for distribution and the Partnership interests represented by
the repurchased Units will effectively be allocated among, and
will increase the percentage interests of, remaining partners.
To the extent that the Repurchase Amendment causes more Units to
be repurchased, it may, in the short-term, decrease the amount
of distributions to Investors.
Investors will not have appraisal or dissenters rights and
therefore will not have the right to require the Fund to pay them
the value of their Units of limited partner interest if they
disagree with the proposed Repurchase Amendment.
SUMMARY
The following summary is qualified by the more detailed discussion
set forth herein.
The Repurchase Amendment
The General Partners are proposing the Repurchase Amendment to
Section 7.7 of the Partnership Agreement. The Repurchase
Amendment will provide an alternative formula for valuation of
Units of limited partner interest in the Fund for purposes of the
Partnership Agreement's Unit repurchase provisions. It is
intended to increase the repurchase price over the existing
formula, but the existing formula will remain as an alternative,
and Investors will be entitled to the higher price yielded by
either formula. The Repurchase Amendment will also increase the
frequency of presentment opportunities from once per year to
quarterly, commencing in calendar year 1998.
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Reasons for the Repurchase Amendment
The General Partners believe that the current formula for
determining the purchase price of Units under Section 7.7 of the
Partnership Agreement no longer reflects a Unit valuation that
closely approximates market value. They believe that the proposed
new formula provides an alternate valuation that more accurately
reflects the pricing of Units in the secondary market. The
provisions of Section 7.7, as proposed to be amended, will provide
that the formula yielding the highest value will control. In
addition, the new provisions will provide for the repurchase of
Units quarterly rather than once per year, thus increasing, to a
limited extent, the liquidity of an investment in the Units.
Risks of the Repurchase Amendment
The Repurchase Amendment will present several risks, including
the following:
1. Limitation on Repurchases. The Fund is not required to
repurchase in any calendar year Units aggregating in excess of 5%
of the Units outstanding in such year, and is not required to
repurchase Units if doing so would impair the Funds ability to
continue operations. The Repurchase Amendment will not alter
these limitations. There may be circumstances under which Fund
revenues and borrowings are insufficient to fully fund such
repurchases.
2. Valuation of Units. Although the Fund's management believes
that the new alternative repurchase price formula will generally
yield a higher Unit price than the existing formula, and Investors
will be entitled to the higher repurchase price determined under
either formula, there is no assurance that either formula price
will pay an Investor the market value of the Investor's Units.
The repurchase price will be based on the value of the Fund's
assets under the new formula, which will in turn be based on a
number of factors that are somewhat judgmental. To the extent the
General Partners overvalue the Units that are repurchased through
such formula, the remaining Investors and the General Partners
will be disadvantaged.
3. Effects on Distributions. The Fund will repurchase Units out
of capital available for distribution and the Partnership
interests represented by the repurchased Units will effectively be
allocated among, and will increase the percentage interests of,
remaining partners. To the extent that the Repurchase Amendment
causes more Units to be repurchased, it may, in the short-term,
decrease the amount of distributions to Investors.
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4. No Appraisal Rights. Investors will not have appraisal or
dissenters rights as a result of the Repurchase Amendment.
Accordingly, Investors that disagree with the Repurchase Amendment
will not have the right to require the Fund to pay out the value
of their Units of limited partnership interest. Instead, the
Repurchase Amendment will be effective with respect to all
Investors if approved by holders of a majority of the Units and a
dissenting Investor would be required to find a different method
of disposing of his or her units, such as through the Fund's
repurchase plan, or to hold his or her units until liquidation of
the Fund.
REASONS FOR AND EFFECTS OF THE REPURCHASE AMENDMENT
General
Over the period of time since the Fund was formed, a limited
secondary market has developed for units of limited partnership
interest in real estate limited partnerships like the Fund.
Generally, this market is made by individuals and firms who match
willing sellers with buyers by posting sale proposals (but not
prices) and by maintaining a list of limited partner unitholders
who are willing to sell from time to time. In most cases, these
transactions are relatively time consuming and do not represent an
active market for such units. Accordingly, they may not represent
actual market value for the Units. In some cases, individuals
acquire units of limited partnership interest with the intent to
acquire control of partnerships for invested amounts significantly
less than the liquidation value of the partnerships' properties
and to then cause the liquidation of the partnerships at a profit
to themselves.
The development of this market has given Units held by Investors
a potential market value that may be different from and, in some
instances greater than, the Unit values currentlly established
under the terms of the current Unit repurchase provisions in
Section 7.7 of the Partnership Agreement. It has also provided
some liquidity of investment for holders of Units, because
although purchases in the secondary market remain subject to
restrictions under the terms of the Partnership Agreement (e.g.,
no more than 5% of the outstanding Units can change hands in any
one year), sales are not subject to the relatively limited annual
presentment period provided in the Partnership Agreement.
In order to offer Investors the opportunity to present their
Units to the Fund for repurchase more frequently, and at a price
that may more closely reflect the prices available in the
secondary market, the General Partners propose to amend Section
7.7 of the Partnership Agreement to provide an alternative
valuation formula and to allow for quarterly presentment of Units
for repurchase, rather than the current annual presentment period.
The provisions of Section 7.7, as proposed to be amended, will
provide that Investors will be entitled to the price under the
formula yielding the highest value. Because of changes that must
be made to the PartnershipOs information processing systems if the
Repurchase Amendment is approved, the Repurchase Amendment will be
effective commencing in calendar year 1998 for Units tendered for
repurchase during that year.
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Effects of Repurchase Amendment
Although the General Partners believe that the new alternative
repurchase price formula will generally yield a higher Unit price
than the existing formula, and Investors will be entitled to the
higher repurchase price determined under either formula, there is
no assurance that either formula price will pay an Investor the
market value of the Investor's Units. Moreover, the Fund is not
required to repurchase in any calendar year Units aggregating in
excess of 5% of the Units outstanding in such year, and is not
required to repurchase Units if doing so would impair the Funds
ability to continue operations. The Repurchase Amendment will not
alter these limitations. There may be circumstances under which
Fund revenues and borrowings are insufficient to fully fund such
repurchases.
Repurchases by the Fund, under either the existing or amended
repurchase provisions, are made out of cash available for
distribution and increase the percentage interests in income,
gain, deduction and distributions of the Fund of remaining
Investors, pro rata among such Investors based on their interests
before the repurchases. Although the Repurchase Amendment does
not allow the General Partners to establish a repurchase price
that is below the purchase price currently available under the
Partnership Agreement, it does allow the General Partners to
establish a repurchase price that is higher. To the extent that
the repurchase price established by the General Partners exceeds
the actual economic value (a theoretical value) of the Units that
are repurchased, the overall economic value afforded the General
Partners and the remaining Investors by their interest in the Fund
will be diminished. The General Partners believe that the current
formula establishes a price that is generally below the actual
value of the Units and that the price established by matching
services is also below the actual value. Accordingly, the General
Partners believe that the Repurchase Amendment will allow
repurchases at a higher price, thereby benefiting both withdrawing
and remaining Investors.
VOTING UNITS
Voting by Investors with respect to the Repurchase Amendment is
based upon ownership of Fund Units ("Voting Units"). As of August
1, 1997, there were 21,764.38333 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 Voting Units owned by the General Partners.
The Managing General Partner holds 20 Units and the Individual
General Partner holds 49 units as limited partners in the Fund.
No other affiliate of the General Partners holds any interest as a
limited partner in the Fund.
In order for the proposed Repurchase Amendment to be adopted, a
majority of the Voting Units must be voted in favor of the
Repurchase Amendment.
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PROCEDURES FOR VOTING
Accompanying this Consent Statement is a Consent Form for each
Investor with respect to his/her unit ownership in the Fund. By
checking the appropriate box, each Investor can indicate whether
he/she votes FOR or AGAINST or ABSTAINS as to the proposed
Repurchase Amendment. If any Investor returns a Consent Form duly
signed without checking any box, he/she will be deemed to have
voted FOR the Repurchase Amendment.
An Investor who votes against, or abstains with respect to, the
Repurchase Amendment does not have appraisal or similar rights
under Minnesota law.
The Managing General Partner has fixed the close of business on
August 1, 1997 as the record date for the determination of the
Investors entitled to vote on the proposed Repurchase Amendment;
the close of business on October 17,1997 as the date by which
Consent Forms must be received by the Managing General Partner in
order to be counted; and October 20, 1997 as the date on which the
consents are to be counted. An Investor may revoke his/her or its
consent at any time prior to October 20, 1997, 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 Fund. The solicitations will be made by the mails.
This Consent Statement is being first mailed to Investors on or
about September 2, 1997. Staff of the Managing General Partner will
be available by telephone to answer any questions concerning this
Consent.
INCORPORATION BY REFERENCE
The information included in the Fund's Annual Report on Form 10-
KSB for the year ended December 31, 1996 is hereby incorporated by
reference. A copy of such Report is being delivered to each
Investor 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 Partnership
Agreement that would be made by the proposed Repurchase Amendment
are shown below. Existing provisions proposed to be omitted are
lined through and enclosed in brackets. New Provisions are
printed in bold type. If approved, the Repurchase Amendment will
be effective for Units tendered in calendar year 1998 and after.
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REPURCHASE AMENDMENT
SECTION 7.7-RIGHT TO PRESENT UNITS FOR PURCHASE
7.7 Right to Present Units for Purchase.(a) [Beginning in
calendar year 1990,] Each Limited Partner shall have the right,
subject to the provisions of this Section 7.7, to present such
Partner's Units to the Partnership for purchase by submitting to
the Managing General Partner [written] notice
[(postmarked after September 1 but before October 1 of such year)]
on a form supplied by the Partnership (a "Redemption Notice")
specifying the number of Units he or she wishes repurchased. The
Managing General Partner shall establish on each of January 1,
April 1, July 1, and October 1 of each year (the "Pricing Dates"),
and shall make available to Limited Partners upon request, a
repurchase price (the "Repurchase Price") for Units, determined in
accordance with the formula set forth below, that shall apply to all
Units tendered for repurchase during the calendar quarter following
such Pricing Date. [On December 1 of each year,] Subject
to the limitations set forth below, the Managing General Partner shall
cause the Partnership to purchase on January 1, April 1, July 1,
and October 1 of each year (a "Repurchase Date"), at a Repurchase
Price equal to the Repurchase Price established for the quarter in
which the Redemption Notice was received by the Partnership, the
Units of Limited Partners [who have tendered their Units to the
Partnership] from which the Partnership has received a Notice
of Redemption at least sixty days prior to such Repurchase Date. [For
purchases in 1992 and each year thereafter,] The Repurchase Price
shall be equal to [the tendering Limited Partner's Adjusted
Capital Contribution on October 1 of the year of purchase
multiplied by seventy-five percent (75%) for purchases in calendar
year 1990 and ninety percent (90%) for purchases in calendar year
1991. For purchases in 1992 and in each year thereafter, the
purchase price shall be equal to] the greater of (i) ninety
percent (90%) of the Net Value of the Partnership's assets on the
Pricing Date divided by the number of Units outstanding on such
Pricing Date, or (ii) one hundred percent (100%) of the tendering
Limited Partner's Adjusted Capital Contribution on [October 1,]
such Pricing Date, less fifty percent (50%) of all Net Cash Flow
previously distributed to such Limited Partner throughout the term
of the Partnership. The Partnership will not be obligated to
purchase in any year more than five percent (5%) of the total
number of Units outstanding on January 1 of such year. In the
event requests for purchase of Units received in any given year
exceed the five percent (5%) limitation, the Units to be purchased
will be determined based on the postmark date of the written
notice of Limited Partners tendering Units. The Managing General
Partner may suspend repurchases during any period after the
Partnership has distributed Net Proceeds of Sale and during which
the Managing General Partner reasonably believes that the
Repurchase Price does not appropriately reflect the Net Value of
the Partnership's remaining assets less liabilities. Any Units
tendered but not selected for purchase in any given year will be
considered for purchase in subsequent years only if the Limited
Partner retenders his or her Units. 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 nor shall the Partnership purchase any
Units in violation of applicable legal requirements.
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(b) For purposes of all calculations pursuant to
Article V of this agreement, any Net Cash Flow or Net Proceeds of
Sale used to repurchase Units or to repay borrowings that were
used to repurchase Units shall be deemed distributed to the
remaining Limited Partners pro rata based on the ratio of the
number of Units owned to all Units outstanding after such
repurchase. For purposes of the formula in subsection (a)(ii)
above, "Net Value" means the aggregate value of the Partnership's
assets less the Partnership's liabilities and less the Managing
General Partner's reasonable estimate of distributions of Net
Proceeds of Sale for the period after the Pricing Date but before
the Repurchase Date, as determined by the Managing General
Partner, after taking into account (i) the present value of future
net cash flow from rental income on the Fund's properties, (ii)
the price at which Units of the Partnership have been purchased,
and (iii) such other factors as the General Partners deem
relevant.
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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 "Fund"), hereby consents (unless
otherwise directed below) to the proposals identified below to
adopt an amendment to Section 7.7 of the Partnership Agreement
(the "Repurchase Amendment"), as more fully described in the
accompanying Consent Statement. By voting for the Repurchase
Amendment, 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 Repurchase Amendment to the Partnership Agreement and
any corresponding amendment to the Fund's 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 October 17,
1997.
Adoption of the Repurchase Amendment to Section 7.7 of the
Partnership Agreement
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The Fund Units held by the signing Limited Partner will be
voted as directed. They will be voted "FOR" the an Repurchase
Amendment if no box is checked.
Please sign exactly as your name appears below. When Fund
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: , 1997
Signature (if held jointly)
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