SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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permitted by Rule 14a-6(e)(2))
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240.14a-12
AEI REAL ESTATE FUND XVI 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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pursuant to Exchange Act Rule 0-11 (Set forth the amount on
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offsetting fee was paid previously. Identify the previous filing
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AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
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
MARCH 1, 1998. 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 APRIL 17, 1998.
AEI Fund Management XVI, Inc., the Managing General Partner, and
Robert P. Johnson, the Individual General Partner (together, the
"General Partners") of AEI Real Estate Fund XVI Limited Partnership
(the "Fund") are recommending an amendment (the "Amendment") to the
Fund's Limited Partnership Agreement (the "Fund Agreement") the
Amendment would change Section 5.4 of the Fund Agreement to allow
proceeds from sale of Fund properties to be reinvested in
replacement properties until final liquidation of the Fund. The
Fund Agreement currently requires that reinvestments end November 6,
1997.
THE PROPOSED AMENDMENT WILL AFFECT YOUR INVESTMENT IN
THE FUND IN A NUMBER OF WAYS AND INVOLVE A NUMBER OF RISKS THAT ARE
DISCUSSED IN MORE DETAIL UNDER THE CAPTION SUMMARY-RISKS OF THE
AMENDMENT, INCLUDING THE FOLLOWING:
<bullet> Distributions of some sales proceeds will be delayed.
<bullet> The reinvestments could cause extension of the life of the Fund.
<bullet> The interests of the General Partners in approval of the
Amendment may conflict with the interests of Investors.
<bullet> Properties in which proceeds are reinvested will be
subject to many of the same risks of nonperformance as
the original properties.
<bullet> Investors will not be able to review in advance the
properties in which proceeds are reinvested.
Currently, the General Partners would be required to distribute
proceeds if a property is sold. Because this encouraged retention
of properties, the General Partners do not believe that this is in
the best interest of partners. The General Partners believe that
the Fund should be able to take advantage of property sales, when
available at attractive prices, without depleting the capital base
of the Fund. Approval of the Amendment would allow the Managing
General Partner to continue to reinvest proceeds from the sale of
properties in replacement properties until final liquidation of the
Fund. Accordingly, THE GENERAL PARTNERS RECOMMEND A VOTE "FOR" THE
PROPOSED AMENDMENT.
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 AMENDMENT.
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SUMMARY
The following summary is qualified by the more detailed discussion
set forth herein.
THE AMENDMENT
The General Partners are proposing an amendment to Section
5.4 of the Fund Agreement. The Amendment will
eliminate the requirement that the Fund distribute all proceeds
from sale of properties and allow reinvestment of such proceeds
until final liquidation of the Fund. Even if the Amendment is
approved, however, most, if not all, gain from sales activity
would continue to be distributed to Investors. The Amendment is
intended primarily to allow the Fund to reinvest the portion of
sales proceeds that constitutes the original investment in a
property, while distributing the "gain" (the excess of sales
proceeds over the original investment). Because the portion of
proceeds representing the original investment will be reinvested,
distributions of sales proceeds will initially decrease if the
Amendment is approved and will be delayed until liquidation of the
Partnership. See "Reasons for and Effects of the Amendment."
REASONS FOR THE AMENDMENT
The Fund may sell properties prior to final liquidation of the
Fund due to favorable market conditions, exercise of lease
purchase options, tenant restructuring or other reasons. Although
the General Partners cannot guarantee returns, they believe that
the Fund can generate favorable returns to Investors through the
acquisition of additional properties that can be resold. They
believe that the Fund should be in a position to reinvest the
proceeds from these and other sales into replacement net leased
properties.
BENEFITS TO INSIDERS
The General Partners may benefit from the Amendment in several
respects. If the Amendment is approved, the Fund will retain more
properties under management and the General Partners will receive
more reimbursements from the Fund. Further, to the extent funds
are reinvested and properties perform well, the likelihood that
the General Partners will receive a higher percentage of cash flow
may be increased. See "Reasons for the Amendment-Interests of the
General Partners."
VOTING/UNITS HELD BY GENERAL PARTNERS
The Amendment will require the affirmative vote of holders of a
majority of the outstanding Units. There were 13,879.40 Units
outstanding at February 1, 1998. The General Partners and their
affiliates held a total of 18 Units as of such date and intend to
vote all such Units in favor of the Amendment. See "Unit
Ownership of Principal Holders and General Partners."
RISKS OF THE AMENDMENT
1. Deferred Cash Distributions. Rather than distributing all
net cash proceeds on sale of a property, the Amendment will allow
the Fund (if the General Partners determine, in their discretion,
that it is advantageous to the Fund) to reinvest such proceeds in
new properties (subject to a continuing obligation to distribute
to Investors cash proceeds adequate to pay the income tax
liability generated by sales of property). The distribution of
cash that is reinvested will be delayed until the Fund is finally
liquidated.
2. Risk of Extension of Fund Life. The General Partners intend
to reinvest sales proceeds in new properties that could be sold
again within a few years. The Amendment could render more
difficult the final sale of properties within the original
intended life of the Fund. The General Partners intend to
commence liquidation of the Fund by the year 2001, although the
sale of any particular property may be delayed based on market and
other conditions. The Amendment could have the effect of
extending the life of the Fund for several years and delaying the
ultimate distribution of its assets. The Fund Agreement provides
that the Fund must be liquidated, in any event, by the year 2038
(an arbitrary date).
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3. Real Estate Risks on Reinvestment. Proceeds will be
reinvested in new triple net leased commercial properties that are
subject to the same risks of performance as the properties
originally acquired by the Fund. The value of real estate is
subject to a number of factors beyond the control of the Fund,
including national economic conditions, changes in interest rates,
governmental rules and regulations and competition from other
forms of financing. If adverse changes in these general
conditions negatively affect market value, the final disposition
of the property and the distribution of cash to Investors may be
delayed or the disposition may result in a loss, or both. The
value of properties in which the Fund will invest will be affected
by the financial condition of the tenant. If a tenant is unable
to perform its lease obligations, the Fund may not be able to sell
the property or may be forced to sell the property at a loss.
Further, in the event of a bankruptcy of a tenant, the Fund might
not be able to obtain possession of the property for a
considerable period of time. See "Reasons For and Effects of the
Amendment."
4. Undesignated Properties. Investors will not be able to
review in advance the properties in which proceeds would be
reinvested.
5. Conflicts of Interest. The interests of the
General Partners in proposing the Amendment conflict with those of
Investors because the General Partners will receive more
reimbursements from the Fund if proceeds are reinvested than they
will if proceeds are not reinvested. The Managing General Partner
is reimbursed at its cost, which costs includes a portion of
salaries of its personnel and other overhead, for services it
provides to the Fund. Such reimbursements will decrease if cash
is distributed and fewer properties are under management in the
Fund. See "Reasons For and Effects of the Amendment-Interests of
the General Partner in the Amendment."
6. No Appraisal Rights. Investors will not have appraisal or
dissenters rights as a result of the Amendment. Accordingly,
Investors that disagree with the Amendment will not have the right
to require the Fund to pay out the value of their Units of limited
partnership interest. Instead, the 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.
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REASONS FOR AND EFFECTS OF THE AMENDMENT
GENERAL. If Investors approve the Amendment, the Fund will have
the opportunity, upon the sale or other disposition of properties
such as the properties described below, to reinvest the Net
Proceeds of Sale in additional triple net leased properties.
Under the terms of the Fund Agreement as amended in 1992, the net
proceeds from the sale of properties cannot be reinvested after
November 6, 1997. By consenting to the Amendment, Investors would
permit the Fund to acquire new properties with the net proceeds
from the sale of the properties (net of any distributions to
Investors) that occur prior to the final liquidation of the Fund.
Because proceeds will be reinvested, distributions of sales
proceeds will be decreased until further liquidation of the
properties in which the proceeds are reinvested, or until
liquidation of the Fund.
The Amendment is not intended to extend the life of the Fund.
The Prospectus pursuant to which the Units 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 Fund properties described below were acquired in
1987, 1988 and 1990 and it remains the intention of the General
Partners to commence liquidation of the Fund, depending on market
conditions and the benefits of continued ownership, by the year
2001.
The Amendment is being proposed for a number of reasons,
including the following:
<bullet> Without the Amendment, the Managing General Partner
will be required to forgo all attractive proposals it
receives to sell Fund properties if it desires to avoid
depleting the Fund's capital base.
<bullet> If the Amendment is approved, the Fund will be able
to (i) take advantage of any favorable purchase proposals
that are presented, (ii) seek out such proposals when
market conditions are favorable, and (iii) retain adequate
capital in the Fund to work toward the Fund's investment
objectives.
<bullet> Without the Amendment, if a property is sold prior
to final liquidation of the Fund, the Fund's capital base,
and therefore its ability to generate the level of return
that was the objective when it was formed, will be reduced.
<bullet> If the Amendment is approved, cash proceeds from
the sale of a property may be reinvested in a new property
and, subject to the same risks of real estate investment
that were assumed when the Fund was formed, such new
property could generate continuing cash flow from rents and
potential gain on sale.
<bullet> Without the Amendment, an Investor wishing to apply
distributed sales proceeds (which constitute a return of a
portion of the Investor's original investment in the Fund)
to a similar investment such as an AEI fund would be forced
to purchase units in a new fund with distributed cash. Real
estate funds are initially offered subject to sales
commissions and organization expense that decrease the
amount invested in properties and, therefore, the asset
base that generates income and gain on an investment.
<bullet> If the Amendment is approved, no securities
brokerage commissions or other organizational expense will
be applied to the reinvestment in new properties of cash
from sale of properties.
The Fund incurs a significant amount of organization and
syndication expense at formation. The General Partners believe
that the Fund can generate the most favorable returns to Investors
only if the costs of forming the Fund, including commissions to
sales agents, filing fees and professional costs, can be amortized
against cash flow (primarily rents) from operation of all
properties over the intended life of the Fund (10 to 12 years
after purchase of properties). If a significant portion of the
real property assets of the Fund are sold in advance of the
originally intended liquidation date of the Fund, the income and
gain,
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if any, for the assets remaining may not be adequate to
generate the returns that were the original objective of the Fund.
The General Partners believe, based on recent investments in and
resales of properties by other real estate funds affiliated with
the General Partners, that the Fund can generate favorable returns
through the investment of sale proceeds in newly constructed
replacement properties that the Fund purchases at construction
cost and resells within a few years. When a fund commits to
purchase a property upon completion of construction it reduces the
developer's refinancing risk and facilitates the construction of
properties for operators, such as franchisees of restaurants,
whose principal goal is not real estate capital appreciation.
Because the property is purchased at construction cost, the risk
of development and construction, for which the developer is
normally compensated, inures to the benefit of the Fund-the market
value of properties when purchased will normally exceed the cost
of development. Because no securities brokerage commissions will
be paid in connection with capital that is reinvested, the entire
amount of reinvested proceeds can be applied to the purchase price
and acquisition expense and no additional organizational costs
that will affect overall return will be incurred. No assurances
can be given, however, that a new property acquired by the Fund
will produce favorable rentals, that such rentals will not be
interrupted by events outside the Managing General Partner's
control, or that the market value of any properties acquired will
exceed their cost immediately after acquisition or within the
several years the Fund proposes to hold the properties.
The Managing General Partner is currently evaluating a number of
properties for acquisition. Affiliates of the General Partners
have managed 13 public and 11 private real estate funds. As a
result of their activity in the sale-leaseback marketplace, the
General Partners have developed relationships with companies that,
either directly or through their franchisees, have a continuing
need for commercial real estate. The Managing General Partner
will not be obligated to obtain the consent of Investors as to the
type of property acquired if the 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. No property will be
acquired from the General Partners or their affiliates.
SALES OF PROPERTIES. The Amendment is being proposed at this
time to facilitate reinvestment of the net proceeds from possible
sales of properties after November 6, 1997. Although much of the
proceeds have been distributed, the Fund has reinvested some of
the proceeds from the seven properties described below. The sales
price and certain information about the gain generated by such
sales is set forth below:
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Applebee's Applebee's Jiffy Lube Jiffy Lube Sizzler Super 8 J.T. McCord's
Charleston, SC Columbia, SC Dallas, TX Garland, TX Cincinnati, OH Hot Springs, AK Irving, TX
Purchase
date 11/19/87 5/6/88 12/10/87 12/10/87 1/30/90 4/11/88 12/16/87
Percentage
of(1) 100% 58.12% 25% 50% 30.81% 50% 100%
Total Ownership
Interest
Sale date 12/15/94 7/28/95 10/25/95 10/25/95 1/23/97 3/29/96 12/22/97
Sales
price $ 1,626,781 $ 1,018,031 $ 162,500 $ 325,000 $ 158,660 $ 680,000 $ 792,500
Selling
expenses 13,494 27,578 1,282 2,558 9,459 16,614 50,865
Basis(2)
Book 921,762 552,537 125,513 241,943 365,501 448,369 850,779
Tax 935,628 568,603 128,325 248,096 367,890 464,919 1,030,793
Gain (loss)
Book 691,525 437,916 35,705 80,499 (216,300) 215,017 (109,144)
Tax 677,659 421,850 32,893 74,346 (218,689) 198,467 (289,158)
Tax gain (loss)
per unit 47 29 2 5 (15) 14 (20)
(1) The Fund owns partial interests in title to certain of the
properties, as indicated. The remaining interest was purchased
by an affiliated real estate fund managed by the General
Partners.
(2) Purchase price less depreciation.
The Fund purchased the Charleston Applebee's restaurant property
in November 1987 and the Columbia property in May 1988. Both of
the Applebee's were newly constructed properties purchased upon
completion of construction and leased under 20-year triple net
leases to Apple South, Inc. simultaneous with the purchases. Each
of the leases included an option to Apple South, Inc. to purchase
the properties commencing in the seventh lease year at a price
equal to the greater of fair market value or an increase of 5% per
year over the original purchase price. Apple South, Inc.
exercised the option with respect to both properties in 1995. The
sale price listed in the table above represents the contractual
purchase price based on the 5% escalation.
The two Jiffy Lube auto care centers listed above were purchased
by the Fund in December 1987 and leased, under a 20 year triple-
net lease, to Jiffy Lube International of Maryland, Inc. Although
the lease did not specifically provide a repurchase option to the
lessee, the Fund negotiated and completed a sale of these
properties to the lessee in October 1995.
The Super 8 Motel was purchased by the Fund in April 1988 and
simultaneously leased to Motel Developers, Inc. The lease
included an option to purchase the property, which was exercised
by the lessee in July 1995. Although the sale closed in March
1996, a portion of the gain on sale was recognized in 1995 based
on receipt in that year of nonrefundable deposits in connection
with the sale.
The Sizzler Restaurant was purchased by the Fund in January 1990
and simultaneously leased to Triple S Restaurants, Inc. In
January 1994, the restaurant was closed and listed for re-lease or
sale. In December 1996, the Fund accepted an offer from an
unaffiliated party to purchase the property at a price below the
Fund's basis. The offer was accepted after a review of the market
conditions in the area and the property management costs
associated with continuing to seek a new tenant for the property,
and the sale was completed in January 1997.
The J. T. McCord's restaurant was purchased by the Fund in
December, 1987 and simultaneously leased to Flagship, Inc. In
December, 1995, the restaurant was closed and listed for re-lease
or sale. In October, 1997, the Fund accepted an offer from an
unaffiliated party to purchase the property at a price below the
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Fund's basis. The offer was accepted after a review of the market
conditions in the area and the property management costs
associated with continuing to seek a new tenant for the property.
The sale was completed in December, 1997.
The Fund has distributed an aggregate of $1,755,800 ($ 122.85
per Unit) from the proceeds of these sales to cover the tax
liability of partners generated by the gains on sale. These
distributions of Net Proceeds on Sale, in the aggregate, reduced
the Adjusted Capital Contributions of Investors by $122.85 per
outstanding Unit.
In January 1996, the Fund also received $406,892 of insurance
proceeds, net of demolition and other costs, resulting from the
destruction by fire of a restaurant property in Indianapolis,
Indiana. These proceeds resulted in recognition of $88,207 of net
gain by the Fund. The Fund currently does not intend to rebuild
the property and has listed the land (which has a cost basis of
$253,747) for sale.
PROPERTIES CURRENTLY HELD BY THE FUND. The Fund currently holds
interests in 14 properties (excluding the land resulting from the
fire in Indianapolis, Indiana) as summarized below:
Property Acquisition Cost Annual Rental
Payments
Creative Years Early Learning Center,
Houston, TX $ 483,128 $ 45,529
Grand Rapids Teachers Credit Union,
Wyoming MI 626,239 32,370
Arby's Restaurant, Grand Rapids, MI 652,880 24,000
Fuddruckers Restaurant, Omaha, NE 1,151,543 145,081
Children's World Daycare Center, Sterling
Heights, MI 729,486 105,117
Jiffy Lube Auto Care Center, Dallas, TX 154,891 21,822
JEMCARE (Arkansas Lane), Arlington, TX 450,475 41,796
Zapata's Cantina and Cafe, Waco, TX 674,285 29,752
J.T. McCord's Restaurant, Mesquite TX 520,109 17,500
JEMCARE (Matlock Avenue), Arlington, TX 603,641 45,907
Cheddar's Restaurant, Indianapolis, IN 253,747 (2)
Fuddruckers Restaurant, St. Louis, MO(1) 761,053 92,164
Applebee's Restaurant, Slidell, LA 746,465 111,288
Applebee's Restaurant, Victoria, TX 1,335,555 151,110
Caribou Coffee, Atlanta GA 1,235,000 142,025
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Total $10,378,497 $1,005,461
============ ===========
(1) The Fund has accepted a purchase offer of $761,500 for this property.
The sale is not anticipated to occur until April 1998.
(2) This property was destroyed by fire and the vacant land is listed for sale.
EFFECTS OF AMENDMENT. In the event Investors approve the
Amendment, a portion of the proceeds from properties sold or
otherwise disposed of will be reinvested rather than distributed.
The Fund will not change its investment objectives or policies
and, accordingly, new properties in which such proceeds are
invested will consist primarily of single tenant, triple net
leased properties that are purchased without indebtedness, many of
which are leased to tenants in the restaurant industry. See
"Amendment-General" above. If the proceeds are reinvested, the
rental revenues generated by the Fund would be increased and
distributions from rental revenues will be higher than they will
if proceeds are not reinvested. Distribution of sales proceeds
would be reduced or delayed until liquidation of the Fund.
Accordingly, the General Partners believe approval of the
Amendment will result in a more steady rate of distribution during
the life of the Fund with a large distribution at the end of the
life of the Fund.
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If investors do not approve the Amendment, investors will
receive a distribution of approximately $741,000, or approximately
$52.85 per outstanding unit, in the second quarter of 1998. This
distribution of Net Proceeds on Sale would reduce the adjusted
capital contributions of investors by an additional $52.85 per
outstanding limited partnership unit.
INTERESTS OF THE GENERAL PARTNERS IN THE AMENDMENT. In
accordance with, and subject to the limitations in, the Fund
Agreement, the General Partners will be reimbursed for any costs
(including a proportionate amount of employee salary, benefit and
overhead expense) they incur in completing any property
acquisition and in connection with management of the property.
Generally, costs are allocated to the Fund based on the daily time
sheets of employees. The Managing General Partner establishes an
hourly charge for each employee based on their salaries, benefit
expense and overhead expense (the portion of rental, depreciation
and other office charges necessary to maintain the employee) and
the Fund is charged for the amount of time spent by the employee
on Fund activities multiplied by the time charge. If the
Amendment 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 the Fund, and the scope
of the Fund's operations, will be reduced and the Managing General
Partner will have to deploy its employees in other activities.
Such reduced operations can be expected to reduce the amount of
reimbursements that the General Partners receive from the Fund.
Reimbursements to the General Partners by the Fund for expenses
incurred have averaged approximately $213,000 per year during the
past two years and aggregated approximately over $665,000 during
the three years ended December 31, 1996. Such reimbursements will
decrease if cash is distributed and fewer properties are under
management in the Fund.
Further, the General Partners receive more than 1% of Fund cash
flow only to the extent the Fund has generated a 10% return to
Investors, and share in sales proceeds only to the extent the Fund
has paid cumulative distributions to Investors equal to their
Adjusted Capital Contributions plus a 14% cumulative return. To
the extent that proceeds are reinvested, the properties perform
well, and these returns can be achieved, the General Partners may
receive up to 10% of the cash flow remaining after payment of the
10% return to Investors and up to 15% of sales proceeds remaining
after payment of the 14% cumulative return to Investors.
UNIT OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth information pertaining to the
ownership of the Units by each person known by the Fund to
beneficially own 5% or more of the Units, by each General
Partner, and by each officer or director of the Managing General
Partners as of February 1, 1998:
NAME AND ADDRESS NUMBER OF PERCENT
OF BENEFICIAL OWNER UNITS HELD OF CLASS
AEI Fund Management XVI, Inc. 10 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
AEI Fund Management, Inc. ** 2 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Robert P. Johnson 6 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Mark E. Larson 0 0
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
* Less than 1%
** A corporation controlled by Mr. Johnson and that provides
administrative services to the Fund.
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The persons set forth in the preceding table hold sole voting power
and power of disposition with respect to all of the Units set
forth opposite their names. The General Partners know of no
holders of more than 5% of the outstanding Units.
VOTE REQUIRED AND PROCEDURES FOR VOTING
Voting by Investors with respect to an amendment of the Fund
Agreement is based upon ownership of limited partner Units
("Units"). As of February 1, 1998, there were 13,879.40 Units
outstanding. Each Unit is entitled to one vote. Fractions of
Units will be included in the total.
In order for the proposed Amendment to be adopted, a majority of
the Units must be voted in favor of the Amendment. Because an
abstention would not be counted as a vote for an amendment, it
would have the effect of a vote against an amendment. The General
Partners intend to vote all 18 Units controlled by them in favor
of the Amendment.
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
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 with
respect to, the Amendment does not have appraisal or similar
rights under Minnesota law.
The Managing General Partner has fixed the close of business on
February 1, 1998 as the record date for the determination of the
Investors entitled to vote on the proposed Amendment, the close of
business on April 17, 1998 as the date by which Consent Forms must
be received by the Managing General Partner in order to be
counted, and April 20, 1998 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 April 17, 1998, 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 March 1, 1998. Staff of the Managing General Partner will
be available by telephone to answer any questions concerning this
Consent.
INCORPORATION BY REFERENCE/FORWARD LOOKING STATEMENTS
The information included in the Fund's Annual Report on Form 10-
KSB for the year ended December 31, 1996 and the Fund's 10-QSBs
for the quarters ended March 31, 1997, June 30, 1997 and September
30, 1997 is hereby incorporated by reference. A copy of such
Reports are being delivered to each Investor with this Consent
Statement.
Such incorporated documents, and this Consent Statement, contain
statements that are intended as "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Act"). The words or phrases "expects", "will
continue", "should", "is anticipated", "believes", "estimate",
"hopes", or expressions of a similar nature denote forward looking
statements. Those statements are subject to risks and
uncertainties that could cause actual results to differ materially
from the results presently anticipated or projected. The Fund
cautions readers not to place undue reliance on such forward
looking statements and all readers should consider carefully risks
that may effect the attainment of those statements, including the
risks summarized above under "Summary-Risks of the Amendment."
BY ORDER OF THE BOARD OF DIRECTORS
OF AEI FUND MANAGEMENT XVI, INC.
Robert P. Johnson, President
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Exhibit A
PROPOSED AMENDMENT OF
LIMITED PARTNERSHIP AGREEMENT OF
AEI REAL ESTATE FUND XVI
Changes in the existing provisions of the Partnership
Agreement that would be made by the proposed Amendment are shown
below. Existing provisions proposed to be omitted are lined
through and enclosed in brackets. New Provisions are printed in
bold type. Only the portion of Section 5.4 that will be changed
by the Amendment is shown. If approved, the Amendment will be
effective immediately.
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 120 months 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
FUND TO BEGIN LIQUIDATION OF THE FUND; provided, however, that
sufficient cash is distributed to the Limited Partners to pay
state and federal income taxes (assuming Limited Partners are
taxable at the lesser of (i) a 40% rate on ordinary income and a
16% rate on capital gain income or (ii) the maximum marginal rates
then in effect) created as a result of such transaction.
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IMPORTANT IMPORTANT
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
CONSENT OF LIMITED PARTNERS
This consent is solicited by the Board
of Directors of AEI Fund Management XVI, Inc.,
The Managing General Partner
The undersigned, a Limited Partner of AEI Real Estate Fund
XVI Limited Partnership (the "Fund"), hereby consents (unless
otherwise directed below) to the proposal identified below to
adopt an Amendment (the "Amendment") to Section 5.4 of the Limited
Partnership Agreement (the "Partnership Agreement"), as more
fully described in the accompanying Consent Statement. By voting
for the Amendment the undersigned hereby appoints AEI Fund
Management XVI, Inc. as his/her/its attorney-in-fact with power
to sign and acknowledge on the undersigned's behalf any
instrument that may be necessary to evidence the Amendment 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 April 15,
1998.
1. Adoption of the Amendment to Section 5.4 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 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: , 1998
Signature (if held jointly)
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