UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended September 30, 2000 [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from N/A to N/A Commission File Number 0-28332 BRAUVIN NET LEASE V, INC. (Exact name of small business issuer in its charter) Maryland 36-3913066 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 30 North LaSalle Street, Chicago, Illinois 60602 (Address of principal executive offices) (Zip Code) (312)759-7660 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 . As of November 14, 2000, the registrant had 1,297,590 shares of Common Stock outstanding. Transitional Small Business Disclosure Format(check one) Yes No X . BRAUVIN NET LEASE V, INC. (a Maryland corporation) INDEX PART I - FINANCIAL INFORMATION Page Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . 3 Consolidated Balance Sheet at September 30, 2000 . . . . . . 4 Consolidated Statements of Operations, for the nine months ended September 30, 2000 and 1999. . . . . . . . 5 Consolidated Statements of Operations, for the three months ended September 30, 2000 and 1999 . . . . . . . 6 Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999. . . . . . . . 7 Notes to Consolidated Financial Statements . . . . . . . . . 8 Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . 16 PART II - OTHER INFORMATION Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .21 Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .21 Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .21 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .21 Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .21 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .21 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 BRAUVIN NET LEASE V, INC. (a Maryland corporation) PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements The following Consolidated Balance Sheet as of September 30, 2000, Consolidated Statements of Operations for the nine months ended September 30, 2000 and 1999, Consolidated Statements of Operations for the three months ended September 30, 2000 and 1999, and Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 for Brauvin Net Lease V, Inc. (the "Fund") are unaudited but reflect, in the opinion of the management, all adjustments necessary to make the consolidated financial statements not misleading. All such adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Fund's 1999 Annual Report on Form 10-KSB. BRAUVIN NET LEASE V, INC. (a Maryland corporation) CONSOLIDATED BALANCE SHEET (Unaudited) September 30, 2000 ASSETS Investment in real estate, at cost: Land $ 3,979,586 Buildings 7,632,199 11,611,785 Less accumulated depreciation (959,221) Net investment in real estate 10,652,564 Cash and cash equivalents 480,487 Tenant receivables 3,808 Deferred rent receivable 370,549 Total Assets $11,507,408 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $ 21,759 Rents received in advance 64,625 Due to affiliates 55,026 Total Liabilities 141,410 Stockholders' Equity: Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued -- Common stock, $.01 par value, 9,000,000 shares authorized; 1,298,515 shares issued and outstanding 12,983 Additional paid-in capital 11,626,050 Retained (deficit) (273,035) Total Stockholders' Equity 11,365,998 Total Liabilities and Stockholders' Equity $11,507,408 See notes to consolidated financial statements. BRAUVIN NET LEASE V, INC. (a Maryland corporation) CONSOLIDATED STATEMENTS OF OPERATIONS For the nine months ended September 30, (Unaudited) 2000 1999 INCOME Rental $1,019,229 $1,007,291 Interest and other 14,977 9,574 Total income 1,034,206 1,016,865 EXPENSES Directors fees 10,000 12,000 Advisory fees 131,250 131,250 Management fees 10,254 9,957 General and administrative 60,941 79,256 Bad debt expense 7,852 -- Depreciation and amortization 145,323 146,490 Total expenses 365,620 378,953 Net Income $ 668,586 $ 637,912 Net Income Per Share (based on average shares outstanding of 1,261,007 and 1,288,054, respectively for the nine months ended September 30, 2000 and 1999) $ 0.53 $ 0.50 See notes to consolidated financial statements. BRAUVIN NET LEASE V, INC. (a Maryland corporation) CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended September 30, (Unaudited) 2000 1999 INCOME Rental $339,714 $338,782 Interest and other 5,636 3,536 Total income 345,350 342,318 EXPENSES Directors fees 3,000 4,000 Advisory fees 43,750 43,750 Management fees 3,292 3,231 General and administrative 20,767 30,838 Depreciation and amortization 48,442 48,441 Total expenses 119,251 130,260 Net Income $226,099 $212,058 Net Income Per Share (based on average shares outstanding of 1,297,800 and 1,295,997, respectively for the three months ended September 30, 2000 and 1999) $ 0.17 $ 0.16 See notes to consolidated financial statements. BRAUVIN NET LEASE V, INC. (a Maryland corporation) CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, (Unaudited) 2000 1999 Cash Flows From Operating Activities: Net income $ 668,586 $ 637,912 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of organization costs - 1,167 Depreciation 145,323 145,323 Provision for doubtful accounts 7,852 - Changes in: Tenant receivables (7,734) (2,843) Deferred rent receivables (20,867) (50,067) Accounts payable and accrued expenses 7,197 (5,941) Rent received in advance (8,088) 46,408 Due to affiliates 18 (1,839) Net cash provided by operating activities 792,287 770,120 Cash Flows From Financing Activities: Issuance of stock, net of liquidations (19,942) 25,842 Selling commissions and other offering costs (30,306) (32,220) Dividends (721,663) (675,235) Net cash used in financing activities (771,911) (681,613) Net increase in cash and cash equivalents 20,376 88,507 Cash and cash equivalents at beginning of period 460,111 321,725 Cash and cash equivalents at end of period $480,487 $410,232 See notes to consolidated financial statements. BRAUVIN NET LEASE V, INC. (a Maryland corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Brauvin Net Lease V, Inc. (the "Fund") is a Maryland corporation formed on October 14, 1993, which operates as a real estate investment trust ("REIT") under federal tax laws. The Fund has acquired properties that are leased to creditworthy corporate operators of nationally or regionally established businesses primarily in the retail and family restaurant sectors. All of the leases are on a long-term "triple net" basis generally requiring the corporate tenant to pay both base annual rent with mandatory escalation clauses and all operating expenses. The Fund acquired properties subject to leases with a Country Harvest Buffet Restaurant during the year ended December 31, 1994; an On the Border Restaurant, a Blockbuster Video, a Chili's Restaurant, a Just for Feet and a Video Watch during the year ended December 31, 1995; a Pier 1 Imports and a Taylor Rental during the year ended December 31, 1996; and a Jiffy Lube and Firestone facility during the year ended December 31, 1997. The advisory agreement provides for Brauvin Realty Advisors V, L.L.C. (the "Advisor"), an affiliate of the Fund, to be the advisor to the Fund. The Fund registered the sale of up to 5,000,000 shares of common stock at $10.00 per share in an initial public offering filed with the Securities and Exchange Commission ("Registration Statement") and the issuance of 500,000 shares pursuant to the Fund's dividend reinvestment plan. On August 8, 1994, the Fund sold the minimum 120,000 shares required under its Registration Statement and commenced its real estate activities. The offering period for the sale of common stock terminated on February 25, 1996. At September 30, 2000, the Fund had sold 1,298,515 shares and the gross proceeds raised were $12,985,140, net of liquidations of $547,716, including $200,000 invested by the Advisor ("Initial Investment"), before reduction for selling commissions and other offering costs. SIGNIFICANT ACCOUNTING POLICIES Management's Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Accounting Method The accompanying consolidated financial statements have been prepared using the accrual method of accounting. Rental Income Rental income is recognized on a straight line basis over the life of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are credited or charged, as applicable, to deferred rent receivable. Federal Income Taxes For the year ended December 31, 2000, the Fund intends to be treated as a REIT under Internal Revenue Code Sections 856-860. A REIT will generally not be subject to federal income taxation to the extent that it distributes at least 95% of its taxable income to its shareholders and meets certain asset and income tests as well as other requirements. The Fund continues to qualify as a real estate investment trust and, accordingly, no provision has been made for Federal income taxes in the financial statements. Consolidation of Subsidiary The Fund owns a 100% interest in one qualified REIT subsidiary, Germantown Associates, Inc., which owns one Firestone/JiffyLube property. The accompanying financial statements have consolidated 100% of the assets, liabilities, operations and stockholder's equity of Germantown Associates, Inc. All significant intercompany accounts have been eliminated. Investment in Real Estate The Fund's rental properties are stated at cost including acquisition costs. Depreciation is recorded on a straight-line basis over the estimated economic lives of the properties which approximate 40 years. The Fund has performed an analysis of its long-lived assets, and the Fund's management determined that there were no events or changes in circumstances that indicated that the carrying amount of the assets may not be recoverable at September 30, 2000 or December 31, 1999. Accordingly, no impairment loss has been recorded in the accompanying financial statements for the nine months ended September 30, 2000 or the year ended December 31, 1999. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid instruments with an original maturity within three months from date of purchase and approximate their fair value. Estimated Fair Value of Financial Instruments Disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of Statement of Financial Accounting Standards No. 107, "Disclosure About Fair Value of Financial Instruments." The estimated fair value amounts have been determined by using available market information and appropriate valuation methodologies. However, considerable judgement is necessarily required in interpreting market data to develop estimates of fair value. The fair value estimates presented herein are based on information available to management as of September 30, 2000, but may not necessarily be indicative of the amounts that the Fund could realize in a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The carrying amounts of the following items are reasonable estimates of fair value: cash and cash equivalents; accounts payable and accrued expense; rents received in advance; and due to affiliates. (2) RELATED PARTY TRANSACTIONS The Fund is required to pay certain fees to the Advisor or its affiliates pursuant to various agreements set forth in the Prospectus and described below. Pursuant to the terms of the Selling Agreement, Brauvin Securities, Inc. ("BSI"), an affiliate of the Advisor, is entitled to placement charges of 5.50% of the gross proceeds of the Fund's offering, all of which will be reallowed to placement agents. In addition, BSI is entitled to a marketing and due diligence expense allowance fee equal to 0.50% of the gross proceeds to reimburse marketing and due diligence expenses, some portion of which may be reallowed to placement agents. Pursuant to the terms of the Advisory Agreement, the Advisor is entitled to a non-accountable expense allowance in an amount equal to 2.5% of the gross proceeds of the offering. Pursuant to the terms of the Advisory Agreement, the Advisor is entitled to receive acquisition fees for services rendered in connection with the selection or acquisition of any property however designated as real estate commissions, selection fees, development fees, or any fees of a similar nature. Such acquisition fees may not exceed the lesser of (a) such compensation as is customarily charged in arm's-length transactions by others rendering similar services as an ongoing business in the same geographic locale and for comparable properties or (b) 3.5% of the gross proceeds of the Fund's offering. The Fund will also reimburse the Advisor an amount estimated to be 0.75% of the gross proceeds of the offering in connection with any expenses attendant to the acquisition of properties whether or not acquired. Pursuant to the terms of the Advisory Agreement, the Advisor is entitled to an annual advisory fee, payable monthly, in an amount equal to 0.60% of the gross proceeds during the offering. Following the termination of the offering, the annual advisory fee is an amount equal to the greater of: (i) .60% of gross proceeds, or (ii) $175,000. Pursuant to the terms of the Management Agreement, Brauvin Management Company ("BMC"), an affiliate of the Advisor, provides leasing and re-leasing services to the Fund in connection with the management of the Fund's properties. The property management fee payable to an affiliate of the Advisor shall not exceed the lesser of: (a) fees which are competitive for similar services in the geographical area where the properties are located; or (b) 1% of the gross revenues of each property. Fees, commissions and other expenses incurred and payable to the Advisor or its affiliates for the nine months ended September 30, 2000 and 1999 were as follows: 2000 1999 Advisory fees $131,250 $131,250 Dividend reinvestment fees 223 948 Management fees 10,254 9,957 Nonaccountable fees 551 2,343 Reimbursable operating expense 4,368 5,789 $146,646 $150,287 As of September 30, 2000 the Fund made all payments to affiliates except for $53,914 for advisory fees and $1,112 for management fees. (3) DIVIDENDS Below is a table summarizing the dividends declared: Annualized Declaration Record Payment Dividend Date(a) Dates Date Rate Amount 1/29/98 10/1/97-12/31/97 2/15/98 7.0% $227,354 5/7/98 1/1/98-3/31/98 5/15/98 6.5% 206,711 8/6/98 4/1/98-6/30/98 8/15/98 6.75% 217,606 11/2/98 7/1/98-9/30/98 11/15/98 6.2% 202,531 2/15/99 10/1/98-12/31/98 2/15/99 6.9% 224,972 5/6/99 1/1/99-3/31/99 5/14/99 7.0% 223,602 8/5/99 4/1/99-6/30/99 8/15/99 7.0% 226,660 11/4/99 7/1/99-9/30/99 11/15/99 7.25% 236,848 1/27/00 10/1/99-12/31/99 2/15/00 7.25% 237,390 5/4/00 1/1/00-3/31/00 5/15/00 7.25% 233,673 8/10/00 4/1/00-6/30/00 8/15/00 7.75% 250,600 11/9/00 7/1/00-9/30/00 11/15/00 7.75% 253,498 (a) Dividends were declared on a daily basis. The dividend reinvestment plan ("Reinvestment Plan") is available to the stockholders so that stockholders, if they so elect, may have their distributions from the Fund invested in shares. Prior to the first quarter of 2000, the price per share purchased through the Reinvestment Plan was $10 per share with the purchase of partial shares allowed. The Fund has registered 200,000 shares for distribution solely in connection with the Reinvestment Plan. Funds raised through the Reinvestment Plan will be utilized to: (i) purchase shares from existing stockholders who have notified the Fund of their desire to sell their shares or held for subsequent redemptions; or (ii) purchase additional properties. The stockholders electing to participate in the Reinvestment Plan will be charged a service charge, in an amount equal to 1% of their distributions, which will be paid to an affiliate of the Advisor to defray the administrative costs of the Reinvestment Plan. At September 30, 2000, there were approximately 64,512 shares purchased through the Reinvestment Plan and approximately 54,772 shares liquidated. In accordance with the Company's original investment objective, during the first quarter of 2000, the Board of Directors approved a plan to have the Company's shares listed on the OTC Bulletin Board under the symbol "yyBNL". Accordingly, the future price of all additional shares of stock purchased (or redeemed) under the Reinvestment Plan will now be based on market activity. Specifically, the Board of Directors approved the Reinvestment price to be based on the weighted average of actual trades in the 30 days prior to the end of each quarter, or to the extent there is no activity, the average of the bid/ask price during the period. The Board of Directors, in their sole discretion, may amend or suspend the plan at any time they determine, provided that such amendment or suspension is in the best interest of the Fund. In order to qualify as a REIT, the Fund is required to distribute dividends to its Stockholders in an amount at least equal to 95% of REIT taxable income of the Fund. The Fund intends to make quarterly distributions to satisfy all annual distribution requirements. Item 2. Management's Discussion and Analysis or Plan of Operations. General Certain statements in this Quarterly Report that are not historical fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Without limiting the foregoing, words such as "anticipates," "expects," "intends," "plans" and similar expressions are intended to identify forward-looking statements. These statements are subject to a number of risks and uncertainties, including, without limitation, tenant defaults which could materially decrease the Fund's rental income. Actual results could differ materially from those projected in the forward-looking statements. The Fund undertakes no obligation to update these forward-looking statements to reflect future events or circumstances. Year 2000 The "Year 2000" problem concerns the inability of computer technology systems to correctly identify and process date sensitive information beyond December 31, 1999. Many computers automatically add the "19" prefix to the last two digits the computer reads for the year when date information is needed in computer software programs. Thus when a date beginning on January 1, 2000 is entered into a computer, the computer may interpret this date as the year "1900" rather than "2000". The computer information technology systems which support the Fund consist of a network of personal computers linked to a server built using hardware and software from mainstream suppliers. These systems do not have equipment that contains embedded microprocessors, which may also pose a potential Year 2000 problem. Additionally, there is no internally generated software coding to correct as all of the software is purchased and licensed from external providers. The Fund utilizes two main software packages that contain date sensitive information: (i) accounting and (ii) investor relations. In 1997, a program was initiated and completed to convert from the existing accounting software to a new software program that is Year 2000 compliant. In 1998, the investor relations software was also updated to a new software program that is Year 2000 compliant. All costs associated with these conversions were expensed by the Fund as incurred, and were not material. Management does not believe that any further expenditures will be necessary for the systems to be Year 2000 compliant. Also in 1997, management of the Fund initiated formal communications with all of its significant third party vendors, service providers and financial institutions to determine the extent to which the Fund is vulnerable to those third parties failure to remedy their own Year 2000 issue. There can be no guarantee that the systems of these third parties will be timely converted and would not have an adverse effect on the Fund. The most reasonably likely worst case scenario for the Fund with respect to the Year 2000 issue would have been the inability of certain tenants to timely make their rental payments beginning in January 2000. This could result in the Fund temporarily suffering a depletion of the Fund's cash reserves as expenses will need to be paid while the cash flows from revenues are delayed. The Fund has no formal Year 2000 contingency plan. The Fund has not experienced any material adverse impact on its operations or its relationships with tenants, vendors or others. Liquidity and Capital Resources As of September 30, 2000, the Fund had received $11,639,033 in connection with the sale of shares, net of selling commissions and other offering costs, including $200,000 paid by the Advisor for a share of stock as disclosed in the Prospectus and liquidations of $547,716. The Fund acquired one property during the year ended December 31, 1994 for $900,000 plus closing costs, acquired five properties during the year ended December 31, 1995 for $6,511,400 plus closing costs, acquired two properties during the year ended December 31, 1996 for $2,025,000 plus closing costs and acquired one property during the year ended December 31, 1997 for $1,450,000 plus closing costs. Upon the acquisition of the property purchased during the year ended December 31, 1997, the Fund has invested all the proceeds of the offering allocable to investments in real estate. The Fund has no material capital commitments. In the opinion of management of the Fund, each property is adequately covered by insurance. Compliance with 95% REIT taxable income test The Fund is required, under the Code, to make distributions of an amount not less than 95% of its REIT taxable income during the year. In accordance with the Fund's intent to maintain its qualification as a REIT under the Code, the Fund intends to manage its dividend distributions to approximate earnings during the year to which they relate. Results of Operations for the nine months ended September 30, 2000 and 1999. (Amounts rounded to nearest $000's) The Fund generated net income of $669,000 for the nine months ended September 30, 2000 as compared to net income of $638,000 for the same nine month period in 1999. The reason for the $31,000 increase in net income is set forth below. Total income for the nine months ended September 30, 2000 was $1,034,000, as compared to $1,017,000 for the same nine month period in 1999, an increase of $17,000. The increase was a result of an increase in rental income from several tenants. For the nine months ended September 30, 2000, total expenses were $365,000 as compared to $379,000 for the same nine month period in 1999, a decrease of $14,000. The decrease was due to a decrease of general and administrative expenses of $18,000, and a decrease of directors fees of $2,000. This was partially offset by an increase in bad debt expense of $8,000. Bad debt expense increased during the period ended September 30, 2000 as a result of the Just For Feet tenant filing for Chapter 11 bankruptcy protection in November 1999. Since filing for bankruptcy protection, Just For Feet neglected to pay the December scheduled rent increase per the terms of the lease, therefore, the Fund has determined that this amount is uncollectible. Further, in March of 2000, the Fund received notice that the lease for this property had been purchased by Footstar. Footstar is operating the property and has continued to make all ongoing rental payments to the Fund. The tenant of the On The Border property discontinued its operations on May 29, 1996. Brinker Texas, L.P., the property's lease guarantor (and a wholly-owned subsidiary of Brinker International), has stated its intention to honor the lease and cooperate with the Fund to cause the property to be re-occupied. In addition the adjacent highway is in the process of being widened which has resulted in the condemnation of a portion of the frontage of the parcel owned by the Fund. Per the purchase contract the monetary damages from this condemnation were paid to HMG/Courtland Properties, the developer of the property (the "Developer"). The Fund was compensated with an adjacent piece of land owned by the Developer. The Fund is working with Brinker International, in order to locate a subtenant or purchaser for this location. The Fund does not currently anticipate that this situation will adversely affect the Fund's cash flow, as rent is currently being paid on the lease. Results of Operations for the three months ended September 30, 2000 and 1999. (Amounts rounded to nearest $000's) The Fund generated net income of $226,000 for the three months ended September 30, 2000 as compared to net income of $212,000 for the three months ended September 30, 1999. Total income for the three months ended September 30, 2000 was $345,000 as compared to $342,000 for the same three month period in 1999, an increase of $3,000. The $3,000 increase was due to an increase in rental income of $1,000 and an increase of other income of $2,000. For the three months ended September 30, 2000, total expenses were $119,000 as compared to $130,000 for the same three month period in 1999, a decrease of $11,000. The decrease is primarily due to a decrease of general and administrative expenses of $10,000, due mainly to a decrease in legal and professional fees. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings. None. 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. Exhibit 27. Financial Data Schedule SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BRAUVIN NET LEASE V, INC. BY: /s/ James L. Brault James L. Brault Executive Vice President and Secretary DATE: November 14, 2000 BY: /s/Thomas E. Murphy Thomas E. Murphy Chief Financial Officer DATE: November 14, 2000