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 three months ended March 31, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-14481
Brauvin Real Estate Fund L.P. 5
(Name of small business issuer as specified in its charter)
Delaware 36-3432071
(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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of class)
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 filling
requirements for the past 90 days. Yes X No .
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
INDEX
PART I
Page
Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . 3
Consolidated Statement of Net Assets in Liquidation
as of March 31, 2001 (Liquidation Basis) . . . . . . . . . . 4
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2000 to
March 31, 2000 (Liquidation Basis) . . . . . . . . . . . . . 5
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2001 to
March 31, 2001 (Liquidation Basis) . . . . . . . . . . . . . 6
Consolidated Statements of Operations for the
three months ended March 31, 2001 and 2000
(Liquidation Basis). . . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . 8
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . . . . . .17
PART II
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .24
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .24
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .24
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .24
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .24
Item 6. Exhibits, and Reports on Form 8-K. . . . . . . . . . . . . .24
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
The following Consolidated Statement of Net Assets in Liquidation
as of March 31, 2001 (Liquidation Basis), Consolidated Statement of
Changes in Net Assets in Liquidation for the period January 1, 2000
to March 31, 2000 (Liquidation Basis), Consolidated Statement of
Changes in Net Assets in Liquidation for the period January 1, 2001
to March 31, 2001 (Liquidation Basis) and Consolidated Statements
of Operations for the three months ended March 31, 2001 and 2000
(Liquidation Basis) for Brauvin Real Estate Fund L.P. 5 (the
"Partnership") are unaudited but reflect, in the opinion of the
management, all adjustments necessary to present fairly the
information required. All such adjustments are of a normal
recurring nature.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the
Partnership's 2000 Annual Report on Form 10-KSB.
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
MARCH 31, 2001 (LIQUIDATION BASIS)
(Unaudited)
ASSETS
Real estate held for sale $8,509,850
Cash and cash equivalents 843,717
Tenant receivable (net of an
allowance of $175,100) 71,557
Escrow deposits 287,687
Other Assets 6,856
Total Assets $9,719,667
LIABILITIES
Mortgage notes payable (Note 4) $5,887,903
Accounts payable and accrued expenses 119,145
Deferred gain on sale of real estate (Note 2) 1,202,185
Reserve for estimated costs during
the period of liquidation (Note 2) 190,315
Tenant security deposits 27,784
Due to affiliates (Note 5) 5,887
Total Liabilities 7,433,219
MINORITY INTEREST IN SABAL PALM
JOINT VENTURE 109,817
SHARE OF ACCUMULATED LOSSES IN EXCESS
OF INVESTMENT IN STRAWBERRY FIELDS
JOINT VENTURE 162,955
Net Assets in Liquidation $2,013,676
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN
LIQUIDATION (LIQUIDATION BASIS) FOR THE PERIOD
JANUARY 1, 2000 TO MARCH 31, 2000
(Unaudited)
Net assets at January 1, 2000
(Liquidation Basis) $1,544,831
Income from operations 105,603
Net assets in liquidation at March 31, 2000 $1,650,434
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN
LIQUIDATION (LIQUIDATION BASIS) FOR THE PERIOD
JANUARY 1, 2001 TO MARCH 31, 2001
(Unaudited)
Net assets at January 1, 2001 1,908,750
Income from operations 104,926
Net assets in liquidation at
March 31, 2001 $2,013,676
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2001 and 2000
(Liquidation Basis)
(Unaudited)
2001 2000
INCOME
Rental $308,332 $366,684
Interest 11,286 8,570
Other, primarily tenant
expense reimbursements 35,892 19,218
Total income 355,510 394,472
EXPENSES
Interest 121,943 125,514
Real estate taxes 33,950 33,827
Repairs and maintenance 18,330 13,186
Management fees (Note 5) 21,465 25,716
Other property operating 24,738 24,574
Bad debt expense 300 6,600
General and administrative 62,506 40,318
Total expenses 283,232 269,735
Income before minority
and equity interests 72,278 124,737
Minority interest's
share of Sabal Palm's
net income (2,977) (46,504)
Equity interest in
Strawberry Fields Joint
Venture's net income 35,625 27,370
Net income $104,926 $105,603
Net income allocated
to the General Partners $ 1,049 $ 1,056
Net income allocated
to the Limited Partners $103,877 $104,547
Net income per
Limited Partnership
Interest (9,914.5 units
outstanding) $ 10.48 $ 10.54
See accompanying notes to consolidated financial statements.
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Brauvin Real Estate Fund L.P. 5 (the "Partnership") was organized
on June 28, 1985. The General Partners of the Partnership are
Brauvin Ventures, Inc. and Jerome J. Brault. On August 8, 1997,
Mr. Cezar M. Froelich resigned as an Individual General Partner
effective 90 days from August 14, 1997. Brauvin Ventures Inc. is
owned by A.G.E. Realty Corporation Inc. (50%) and by Messrs. Brault
(beneficially) (25%) and Froelich (25%). A. G. Edwards & Sons,
Inc. and Brauvin Securities, Inc., affiliates of the General
Partners, were the selling agents of the Partnership. The
Partnership is managed by an affiliate of the General Partners.
The Partnership was formed on June 28, 1985 and filed a
Registration Statement on Form S-11 with the Securities and
Exchange Commission which became effective on March 1, 1985. The
sale of the minimum of $1,200,000 of limited partnership interests
of the Partnership (the "Units") necessary for the Partnership to
commence operations was achieved on June 28, 1985. The
Partnership's offering closed on February 28, 1986. A total of
$9,914,500 of Units were subscribed for and issued between March 1,
1985 and February 28, 1986 pursuant to the Partnership's public
offering.
The Partnership has acquired directly or through joint ventures
the land and buildings underlying Crown Point, Strawberry Fields
and Sabal Palm shopping centers.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management's Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America 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 those estimates.
Basis of Presentation
As a result of the July 12, 1999 authorization by a majority of
the Limited Partners to sell the Partnership's properties the
Partnership has begun the liquidation process and, in accordance
with accounting principles generally accepted in the United States
of America, the Partnership's financial statements for periods
subsequent to July 12, 1999 have been prepared on a liquidation
basis. Accordingly, the carrying value of the assets is presented
at estimated net realizable amounts and all liabilities are
presented at estimated settlement amounts, including estimated
costs associated with carrying out the liquidation. Preparation of
the financial statements on a liquidation basis requires
significant assumptions by management, including the estimate of
liquidation costs and the resolution of any contingent liabilities.
There may be differences between the assumptions and the actual
results because events and circumstances frequently do not occur as
expected. Those differences, if any, could result in a change in
the net assets recorded in the statement of net assets as of March
31, 2001.
Accounting Method
The accompanying consolidated financial statements have been
prepared using the accrual method of accounting.
Federal Income Taxes
Under the provisions of the Internal Revenue Code, the
Partnership's income and losses are reportable by the partners on
their respective income tax returns. Accordingly, no provision is
made for Federal income taxes in the financial statements.
Consolidation of Special Purpose Entity
The Partnership has one special purpose entity ("SPE"),
Brauvin/Crown Point L.P., which is owned 99% by the Partnership
and 1% by an affiliate of the General Partners. Distributions from
the SPE are subordinated to the Partnership which effectively
precludes any distributions from the SPE to affiliates of the
General Partners. The creation of the SPE did not affect the
Partnership's economic ownership of the property. Furthermore,
this change in ownership structure had no material effect on the
financial statements of the Partnership.
Consolidation of Joint Venture Partnership
The Partnership owns a 53% interest in the Sabal Palm Joint
Venture which owns Sabal Palm Shopping Center. The accompanying
financial statements have consolidated 100% of the assets,
liabilities, operations and partners' capital of Sabal Palm Joint
Venture. The minority interests of the consolidated joint venture
is adjusted for the respective joint venture partner's share of
income or loss and any cash contributions from or distributions to
the joint venture partner, if any. All intercompany items and
transactions have been eliminated.
Investment in Joint Venture Partnership
The Partnership owns a 42% equity interest in a Strawberry Fields
Joint Venture (Note 6). Strawberry Fields is reported as an
investment in an affiliated joint venture. The accompanying
financial statements include the investment in Strawberry Fields
Joint Venture at estimated net realizable value using the equity
method of accounting on a liquidation basis.
Investment in Real Estate
Prior to the preparation of the financial statements on the
liquidation basis, the operating properties acquired by the
Partnership were stated at cost including acquisition costs,
leasing commissions, tenant improvements and net of impairment.
Depreciation and amortization expense is computed on a
straight-line basis over approximately 31.5 years and the term of
the applicable leases, respectively. All of the Partnership's
properties are subject to liens under first mortgages (see Note 4).
The Partnership records impairment to reduce the cost basis of
real estate to its estimated fair value when the real estate is
judged to have suffered an impairment that is other than temporary.
The Partnership has performed an analysis of its long-lived assets,
and the Partnership'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 March 31, 2001. See
note 2.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt
instruments with an original maturity within three months from date
of purchase.
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, "Disclosures 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 March 31, 2001, but may
not necessarily be indicative of the amounts that the Partnership
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.
In connection with the adoption of the liquidation basis of
accounting, assets were adjusted to net realizable value and
liabilities were adjusted to estimated settlement amounts, which
approximates their fair value at March 31, 2001.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"), which requires that all derivatives be recognized as
assets and liabilities in the balance sheet and be measured at fair
value. SFAS 133 also requires changes in fair value of derivatives
to be recorded each period in current earnings or comprehensive
income depending on the intended use of the derivatives. In June,
2000, the FASB issued SFAS 138, which amends the accounting and
reporting standards of SFAS 133 for certain derivatives and certain
hedging activities. SFAS 133 and SFAS 138 were required to be
adopted by the Partnership effective January 1, 2001. The adoption
of SFAS 133 and SFAS 138 did not have an impact on the financial
position, results of operations and cash flows of the Partnership.
(2) ADJUSTMENT TO LIQUIDATION BASIS
On July 12, 1999, in accordance with the liquidation basis of
accounting, assets were adjusted to estimated net realizable value
and liabilities were adjusted to estimated settlement amounts,
including estimated costs associated with carrying out the
liquidation. The net adjustment required to convert from the going
concern (historical cost) basis to the liquidation basis of
accounting was a decrease in assets of $300,940 which was included
in the December 31, 1999 statement of changes in net assets in
liquidation.
In the fourth quarter of 2000, the Partnership recorded a
reduction in real estate held for sale of $423,150 net of real
estate improvements of $82,440 related to other than temporary
decline in the value of real estate for the Crown Point property.
In management's judgement there are no adjustments in real estate
held for sale in 2001.
(3) PARTNERSHIP AGREEMENT
The Partnership Agreement (the "Agreement") provides that 99% of
the net profits and losses from operations of the Partnership for
each fiscal year shall be allocated to the Limited Partners and 1%
of net profits and losses from operations shall be allocated to the
General Partners. The net profit of the Partnership from the sale
or other disposition of a Partnership property shall be allocated
as follows: first, there shall be allocated to the General
Partners the greater of: (i) 1% of such net profits; or (ii) the
amount distributable to the General Partners as Net Sale Proceeds
from such sale or other disposition, as defined in the Partnership
Agreement; and second, all remaining profits shall be allocated to
the Limited Partners. The net loss of the Partnership from any
sale or other disposition of a Partnership property shall be
allocated as follows: 99% of such net loss shall be allocated to
the Limited Partners and 1% of such net loss shall be allocated to
the General Partners.
The Agreement provides that distributions of Operating Cash Flow,
as defined in the Agreement, shall be distributed 99% to the
Limited Partners and 1% to the General Partners. The receipt by
the General Partners of such 1% of Operating Cash Flow shall be
subordinated to the receipt by the Limited Partners of Operating
Cash Flow equal to a 10% per annum, cumulative, non-compounded
return on Adjusted Investment, as such term is defined in the
Agreement (the "Preferential Distribution"). In the event the full
Preferential Distribution is not made in any year (herein referred
to as a "Preferential Distribution Deficiency") and Operating Cash
Flow is available in following years in excess of the Preferential
Distribution for said years, then the Limited Partners shall be
paid such excess Operating Cash Flow until they have paid any
unpaid Preferential Distribution Deficiency from prior years. Net
Sale Proceeds, as defined in the Agreement, received by the
Partnership shall be distributed as follows: (a) first, to the
Limited Partners until such time as the Limited Partners have been
paid an amount equal to the amount of their Adjusted Investment;
(b) second, to the Limited Partners until such time as the Limited
Partners have been paid an amount equal to any unpaid Preferential
Distribution Deficiency; and (c) third, 85% of any remaining Net
Sale Proceeds to the Limited Partners, and the remaining 15% of the
Net Sale Proceeds to the General Partners. The Preferential
Distribution Deficiency at March 31, 2001 equaled $13,308,738.
(4) MORTGAGE NOTES PAYABLE
Mortgage notes payable at March 31, 2001 consist of the
following:
Interest Date
2001 Rate Due
Crown Point Shopping
Center (a) $2,830,937 7.55% 1/03
Sabal Palm Square
Shopping Center (b) 3,056,966 8.93% 4/02
$5,887,903
Each shopping center serves as collateral under its respective
nonrecourse debt obligation.
Maturities of the mortgage notes payable are as follows:
2001 112,752
2002 3,138,251
2003 2,636,900
$5,887,903
(a) On December 28, 1995, the acquisition loan balance was paid
in full when Crown Point was refinanced by NationsBanc Mortgage
Capital Corporation. The refinancing resulted in a $3,275,000 non-
recourse loan with a fixed interest rate of 7.55%, and amortization
based on a twenty year term with a maturity of January 1, 2003.
As a precondition to the financing, the successor lender required
that ownership of the property reside in a single purpose entity
("SPE"). To accommodate the lender's requirements, ownership of
the property was transferred to the SPE, Brauvin/Crown Point L.P.,
which is owned 99% by the Partnership and 1% by an affiliate of the
General Partners. Distributions of Brauvin/Crown Point L.P. are
subordinated to the Partnership which effectively precludes any
distributions from the SPE to affiliates of the General Partners.
The creation of Brauvin/Crown Point L.P. did not affect the
Partnership's economic ownership of the Crown Point property.
Furthermore, this change in ownership structure had no material
effect on the financial statements of the Partnership.
The carrying value of Crown Point at March 31, 2001 was
approximately $5,360,000.
(b) On February 19, 1987, the Partnership and its joint venture
partner obtained a first mortgage loan in the amount of $3,200,000
from an unaffiliated lender. The loan was payable with interest
only at 9.5% per annum until February 1992 and then required
payments of principal and interest based on a 30-year amortization
schedule. Sabal Palm was required to make a balloon mortgage
payment in February 1997. Prior to the scheduled maturity, the
lender granted Sabal Palm an extension until April 1, 1997.
On June 30, 1997, Sabal Palm obtained a first mortgage loan in
the amount of $3,200,000 (the "First Mortgage Loan") secured by its
real estate, from NationsBanc Mortgage Capital Corporation. The
First Mortgage Loan bears interest at the rate of 8.93% per annum,
is amortized over a 25-year period, requires monthly payments of
principal and interest of approximately $26,700 and matures on
March 26, 2002. A portion of the proceeds of the First Mortgage
Loan, approximately $3,077,000, was used to retire Sabal Palm's
existing mortgage from Lincoln National Pension Insurance Company.
In the second quarter of 1998, Winn-Dixie vacated its space at
the center. Winn-Dixie remains liable for rental payments under
its lease at Sabal Palm until April 2005.
On August 7, 2000 Sabal Palm was given official notice that
Walgreens will vacate the space prior to their lease termination of
April 30, 2025. The General Partners are considering potential
lease buyout and potential releasing strategies for these tenants.
The carrying value of Sabal Palm approximated $3,150,000 at March
31, 2001.
(5) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid or payable to the General Partners
or its affiliates for the three months ended March 31, 2001 and
2000 were as follows:
2001 2000
Management fees $21,465 $25,716
Reimbursable office
expenses 23,857 23,146
The Partnership believes the amounts paid to affiliates are
representative of amounts which would have been paid to independent
parties for similar services. As of March 31, 2001, the
Partnership had made all payments to affiliates, except for
management fees of $5,887.
(6) EQUITY INVESTMENT
The Partnership owns a 42% interest in Strawberry Fields Joint
Venture, located in West Palm Beach, Florida, and accounts for its
investment under the equity method. The following are condensed
financial statements for Strawberry Fields Joint Venture:
(Liquidation Basis)
March 31,
2001
Real estate held for sale $5,197,750
Other assets 122,921
5,320,671
Mortgage note payable 5,075,923
Deferred gain on the sale of
real estate 529,110
Other liabilities 102,054
5,707,087
Net liabilities in liquidation $ 386,416
For the three months ended March 31,
Liquidation Basis
2001 2000
Rental income $206,144 $205,144
Other income 24,330 19,776
230,474 224,920
Mortgage and
other interest 89,093 92,145
Operating and
administrative expenses 56,560 67,609
145,653 159,754
Net income $ 84,821 $ 65,166
The Partnership received three bids on Strawberry Fields during
the latter part of 1999. After negotiation the Joint Venture
accepted the high bid of $5.43 million and entered into a contract
for sale. However, the prospective purchaser terminated its
interest in the property during its due diligence period.
Subsequent to this deal falling away the Joint Venture received
another offer for $5.35 million. However, although the offer
exceeded the November, 1998 appraised value of $4.8 million, the
offer, after transaction costs, was below the mortgage balance at
the time. The Strawberry Joint Venture accepted the initial high
bid in part because the property's underlying mortgage loan was
coming due; and the Strawberry Lender indicated that it would not
extend the maturity. However, in the second quarter of 2000, the
Strawberry Joint Venture was successful in extending the loan for
a two year period. This extension allows the Partnership to
continue to market the property and seek a greater sales price.
This $5.35 million offer was assessed by management as an estimate
of net realizable value at March 31, 2001.
On January 27, 2000, the Partnership executed a contract to
sell Strawberry Fields to an unaffiliated third party in the
approximate amount of $5,430,000 subject to certain due diligence
contingencies. Subsequently, the potential purchaser rescinded its
offer.
In 2001, the Partnership received an offer to purchase
Strawberry Fields for $5.585 million. In addition, Syms exercised
its right of first refusal on the sale of the property.
Accordingly, the Partnership executed a purchase and sale agreement
with Syms for $5.585 million in the second quarter of 2001. The
contract still remains subject to certain contingencies.
Item 2. Management's Discussion and Analysis or Plan of
Operation.
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. Actual results
could differ materially from those projected in the forward-looking
statements. The Partnership undertakes no obligation to update
these forward-looking statements to reflect future events or
circumstances.
Liquidity and Capital Resources
The Partnership intends to satisfy its short-term liquidity
needs through cash flow from the properties. Mortgage notes
payable are expected to be satisfied through property sales.
The General Partners have determined to pursue the disposition
of the Partnership's assets. In 1999, the Partnership solicited
and received the votes of the Limited Partners to approve a sale of
all of the Partnership's properties, either on an individual or
group basis, and to subsequently liquidate the Partnership. The
solicitation, which was approved by the Limited Partners in the
third quarter of 1999, stated that the Partnership's properties may
be sold individually or in any combination provided that the total
sales price for the properties included in the transaction equals
or exceeds 70% of the aggregate appraised value for such
properties, which valuation was conducted by an independent third
party appraisal firm.
The Partnership intends to sell the properties under a closed
bid process which will include identification of target buyers with
proven financing ability and performance of certain evaluations of
the properties, such as environmental testing. Potential buyers
will be requested to sign confidentiality agreements to safeguard
the Partnership's confidential proprietary information. The
General Partners have determined that each bid must be all cash,
completely unconditional and accompanied by a substantial deposit.
To date over 250 potential purchasers have been contacted
regarding the sale of the properties. Of those contacted,
approximately 120 potential buyers have registered to receive
packages on one or more of the properties. In addition, the
properties are listed on the Internet at Loopnet.com, the largest
commercial real estate website in the nation.
The anchor tenant at Crown Point is Food City. The overall
occupancy level at Crown Point was 82% at March 31, 2001 compared
to 84% at December 31, 2000 and 82% at March 31, 2000.
On December 28, 1995, the loan balance of the acquisition
financing was paid in full when Crown Point was refinanced with
NationsBanc Mortgage Capital Corporation. The refinancing resulted
in a $3,275,000 non-recourse loan with a fixed interest rate of
7.55% and a maturity of January 1, 2003.
During the second quarter of 2001, the Partnership received an
offer to purchase the property in excess on $5.0 million. The
Partnership is currently negotiating this offer further. There can
be no assurance that this offer and negotiation will lead to a
successful sale. The carrying value of this property on March 31,
2001 is approximately $5,360,000 based on management's best
estimate of the current market for this property. The Partnership
continues to market the properties for sale.
The General Partners believe that a contributing factor in the
below appraised value offers, that the Partnership has received, is
that a significant tenant that occupied approximately 17% of the
center vacated during the end of 1999. The General Partners
believe this drop in occupancy is reflected in the two offers
received.
In order to combat this development, the Partnership
reconfigured the vacated space into three smaller units. One of
the units has since been leased and we are currently marketing the
other two spaces. Once these have been released, we anticipate we
will receive more attractive offers.
The Strawberry Joint Venture secured a replacement tenant,
Syms, a national discount clothing retailer, to sublease the Kroger
space at Strawberry Fields. Syms opened for business in October
1992 and has signed a sublease for the remainder of the original
lease term which expires March 31, 2005. Customer traffic at
Strawberry Fields has increased with the draw of Syms, making
vacant space more marketable. The Strawberry Joint Venture is
aggressively marketing the property having engaged a prominent
local brokerage firm to assist the Strawberry Joint Venture's on-
site leasing representative in the marketing of the shopping
center. The occupancy rate at Strawberry Fields at March 31, 2001
was 87% compared to 89% at December 31, 2000 and 90% at March 31,
2000.
Effective October 1, 1998, the Strawberry Joint Venture and the
Strawberry Lender agreed to modify and extend the first mortgage
loan. As of October 1, 1998 and through the extended maturity
date, April 1, 2002, the interest rate was reduced from 9% to 7%
with principal amortization changed from a ten year period to an
eighteen year period.
In the second and fourth quarters of 1998, the Partnership
recorded an impairment of $1,564,101 and $504,935, respectively,
related to other than temporary declines in the value of real
estate for the Strawberry Fields property. These impairments were
allocated to land and building based on the original acquisition
percentages.
The Partnership received three bids on Strawberry Fields
during the latter part of 1999. After negotiation the Joint
Venture accepted the high bid of $5.43 million and entered into a
contract for sale. However, the prospective purchaser terminated
its interest in the property during its due diligence period.
Subsequent to this deal falling away the Joint Venture received
another offer for $5.35 million. However, although the offer
exceeded the November, 1998 appraised value of $4.8 million, the
offer, after transaction costs, was below the mortgage balance at
the time. The Strawberry Joint Venture accepted the initial high
bid in part because the property's underlying mortgage loan was
coming due; and the Strawberry Lender indicated that it would not
extend the maturity. However, in the second quarter of 2000, the
Strawberry Joint Venture was successful in extending the loan for
a two year period. This extension allows the Partnership to
continue to market the property and seek a greater sales price.
This $5.35 million offer was assessed by management as an estimate
of net realizable value at March 31, 2001 and December 31, 2000.
In 2001, the Partnership received an offer to purchase
Strawberry Fields for $5.585 million. In addition, Syms exercised
its right of first refusal on the sale of the property.
Accordingly, the Partnership executed a purchase and sale agreement
with Syms for $5.585 million in the second quarter of 2001. The
contract still remains subject to certain contingencies.
Sabal Palm was required to make a balloon mortgage payment in
February 1997. Prior to the scheduled maturity of the First
Mortgage Loan, the lender granted Sabal Palm an extension until
April 1, 1997. On June 30, 1997, Sabal Palm obtained a first
mortgage loan in the amount of $3,200,000 (the "First Mortgage
Loan") secured by its real estate, from NationsBanc Mortgage
Capital Corporation. The First Mortgage Loan bears interest at the
rate of 8.93% per annum, is amortized over a 25-year period,
requires monthly payments of principal and interest of
approximately $26,700 and matures on March 26, 2002. A portion of
the proceeds of the First Mortgage Loan, approximately $3,077,000
was used to retire Sabal Palm's existing mortgage from Lincoln
National Pension Insurance Company.
In the second quarter of 1998, Winn-Dixie vacated its space at
the center. Winn-Dixie remains liable for rental payments under
its lease at Sabal Palm until April 2005.
On August 7, 2000 Sabal Palm was given official notice that
Walgreens will vacate the space prior to their lease termination of
April 30, 2025. The General Partners are considering potential
lease buyout and potential releasing strategies for these tenants.
In the fourth quarter of 1998, Sabal Palm recorded an
impairment of $1,499,958 related to an other than temporary decline
in the value of real estate for Sabal Palm. This impairment has
been allocated to the land and building based on the original
acquisition percentages.
In total, Sabal Palm has received six offers on the property
ranging in price from $2.5 million to $3.4 million. After
negotiation Sabal Palm accepted the highest offer and completed
negotiating the sale contract in June 2000. The buyer had a 60 day
due diligence period. The buyer terminated the contract within the
due diligence period.
In September 2000, Sabal Palm completed negotiating a new
contract for the sale of the property. The new sale price is
$3,360,000. The $3.36 million proposed sales price exceeded the
November, 1998 appraised value of $3.25 million. The potential
purchaser had a 60 day due diligence period. This buyer also
terminated the contract within the due diligence period. This
$3.36 million offer was assessed by management as an estimate of
net realizable value on March 31, 2001 and December 31, 2000.
As a result of the two dark anchor spaces representing more
than 55,000 square feet of space or 62% of the property this center
has proved very difficult to sell. The Partnership is continuing
to market this property for sale. In addition, the Partnership is
reviewing a number of potential possibilities to sublease either or
both of the dark anchors. However, Winn-Dixie and Walgreens have
been selective in their review of potential subtenants so as to
restrict potential competition.
As a result of the July 1999 authorization by a majority of the
Limited Partners to sell the Partnership's properties, the
Partnership has begun the liquidation process and, in accordance
with accounting principles generally accepted in the United States
of America, the Partnership's financial statements for periods
subsequent to July 12, 1999 have been prepared on a liquidation
basis. Accordingly, the carrying value of the assets is presented
at estimated net realizable amounts and all liabilities are
presented at estimated settlement amounts, including estimated
costs associated with carrying out the liquidation. Preparation of
the financial statements on a liquidation basis requires
significant assumptions by management, including the estimate of
liquidation costs and the resolution of any contingent liabilities.
There may be differences between the assumptions and the actual
results because events and circumstances frequently do not occur as
expected. Those differences, if any, could result in a change in
the net assets recorded in the statement of net assets as of March
31, 2001.
The General Partners expect to distribute proceeds from
operating cash flow, if any, and from the sale of real estate to
Limited Partners in a manner that is consistent with the investment
objectives of the Partnership. Management of the Partnership
believes that cash needs may arise from time to time which will
have the effect of reducing distributions to Limited Partners to
amounts less than would be available from refinancing or sale
proceeds. These cash needs include, among other things,
maintenance of working capital reserves in compliance with the
Agreement as well as payments for major repairs, tenant
improvements and leasing commissions in support of real estate
operations.
Results of Operations
The Partnership's revenue and expenses are affected primarily
by the operations of the properties. Property operations, and in
particular the components of income, demand for space and rental
rates are, to a large extent, determined by local and national
market conditions.
These conditions have generally adversely impacted the
Partnership's property economics. Rental and occupancy rates have
generally been below where they were when the properties were
acquired.
The General Partners conduct an in-depth assessment of each
property's physical condition as well as a demographic analysis to
assess opportunities for increasing occupancy and rental rates and
decreasing operating costs. In all instances, decisions concerning
restructuring of loan terms, reversions and subsequent operation of
the property are made with the intent of maximizing the potential
proceeds to the Partnership and, therefore, return of investment
and income to Limited Partners.
In certain instances and under limited circumstances,
management of the Partnership entered into negotiations with
lenders for the purpose of restructuring the terms of loans to
provide for debt service levels that could be supported by
operations of the properties. When negotiations are unsuccessful,
management of the Partnership considers the possibility of
reverting the properties to the first mortgage lender. Foreclosure
proceedings may require 6 to 24 months to conclude.
An affiliate of the Partnership and the General Partners is
assigned responsibility for day-to-day management of the
properties. The affiliate receives a combined management and
leasing fee which cannot exceed 6% of gross revenues generated by
the properties. Management fee rates are determined by the extent
of services provided by the affiliate versus services that may be
provided by third parties, i.e., independent leasing agents. In
all instances, fees paid by the Partnership to the property
management affiliate are, in the General Partners opinion,
comparable to fees that would be paid to independent third parties.
Results of Operations - Three months ended March 31, 2001 and 2000
(Liquidation Basis)
As a result of the Partnership's adoption of the liquidation
basis of accounting, and in accordance with accounting principles
generally accepted in the United States of America, the
Partnership's financial statements for periods subsequent to July
12, 1999 have been prepared on a liquidation basis.
The Partnership generated net income of $105,000 for the period
ended March 31, 2001 as compared to net income of $106,000 for the
same period in 2000.
Total income for the period ended March 31, 2001 was $356,000
as compared to $394,000 for the same period in 2000. The $38,000
decrease in total income was primarily a result of a $58,000
decrease in rental income offset by a $17,000 increase in other
income. Rental income decreased primarily as a result of a decline
in percentage rents earned which related to a vacated anchor
tenant.
Total expenses for the period ended March 31, 2001 were
$283,000 as compared to $270,000 for the same period in 2000. The
$13,000 increase in expense is the result of a $22,000 increase in
general and administrative expense primarily due to a $12,000
increase in tax expense and a $6,000 increase in insurance expense.
Partially offsetting the increase in general and administrative
expense is a decline of $6,000 in bad debt expense.
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.
None.
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.
BY: Brauvin Ventures, Inc.
Corporate General Partner of
Brauvin Real Estate Fund L.P. 5
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors and President
DATE: May 18, 2001
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
And Treasurer
DATE: May 18, 2001