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 June 30, 2001
[ ] 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 August 14, 2001, the registrant had 1,286,163 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 June 30, 2001. . . . . . . . . 4
Consolidated Statements of Operations, for the
six months ended June 30, 2001 and 2000. . . . . . . . . . . 5
Consolidated Statements of Operations, for the
three months ended June 30, 2001 and 2000. . . . . . . . . . 6
Consolidated Statements of Cash Flows for the
six months ended June 30, 2001 and 2000. . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . 8
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . . . . . 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .19
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .19
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .19
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .19
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .19
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
The following Consolidated Balance Sheet as of June 30, 2001,
Consolidated Statements of Operations for the six months ended June
30, 2001 and 2000, Consolidated Statements of Operations for the
three months ended June 30, 2001 and 2000, and Consolidated
Statements of Cash Flows for the six months ended June 30, 2001 and
2000 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 2000 Annual Report on Form 10-KSB.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30,
2001
ASSETS
Investment in real estate, at cost:
Land $ 3,979,586
Buildings 7,632,199
11,611,785
Less accumulated depreciation (1,104,542)
Net investment in real estate 10,507,243
Cash and cash equivalents 364,217
Tenant receivables 15,981
Deferred rent receivable 390,583
Total Assets $11,278,024
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
expenses $ 13,690
Rents received in advance 29,208
Due to affiliates 42,828
Total Liabilities 85,726
Stockholders' Equity:
Preferred stock, $.01 par value,
1,000,000 shares authorized;
none issued --
Common stock, $.01 par value,
9,000,000 shares authorized;
1,286,163 shares issued
and outstanding 12,862
Additional paid-in capital 11,524,404
Accumulated deficit (344,968)
Total Stockholders' Equity 11,192,298
Total Liabilities and Stockholders'
Equity $11,278,024
See notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended June 30,
(Unaudited)
2001 2000
INCOME
Rental $678,681 $679,515
Real estate tax reimbursement 15,981 --
Interest and other 8,724 9,341
Total income 703,386 688,856
EXPENSES
Directors fees 6,000 7,000
Advisory fees 77,499 87,500
Management fees 6,660 6,962
General and administrative 44,140 40,174
Real estate taxes 15,981 --
Bad debt expense (7,852) 7,852
Depreciation and amortization 96,881 96,881
Total expenses 239,309 246,369
Net Income $464,077 $442,487
Net Income Per Share
(based on average shares
outstanding of 1,292,900
and 1,291,173, respectively) $ 0.36 $ 0.34
See notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended June 30,
(Unaudited)
2001 2000
INCOME
Rental $338,784 $339,758
Real estate tax reimbursement 15,981 --
Interest and other 3,292 5,094
Total income 358,057 344,852
EXPENSES
Directors fees 3,000 3,000
Advisory fees 36,249 43,750
Management fees 3,209 3,673
General and administrative 23,745 21,739
Real estate taxes 15,981 --
Depreciation and amortization 48,440 48,440
Total expenses 130,624 120,602
Net Income $227,433 $224,250
Net Income Per Share
(based on average shares
outstanding of 1,286,163
and 1,296,841, respectively) $ 0.18 $ 0.17
See notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30,(Unaudited)
2001 2000
Cash Flows From Operating Activities:
Net income $ 464,077 $ 442,487
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 96,881 96,881
Bad debt expense (7,852) 7,852
Changes in:
Tenant receivables 4,822 (7,300)
Deferred rent receivables (13,078) (13,911)
Accounts payable and
accrued expenses (3,719) (1,165)
Rent received in advance (23,625) 11,375
Due to affiliates (12,001) 14,386
Net cash provided by operating
activities 505,505 550,605
Cash Flows From Financing Activities:
Liquidations, net of issuance of stock (115,456) (31,767)
Selling commissions and other
offering costs - (30,010)
Dividends (518,662) (471,063)
Net cash used in
financing activities (634,118) (532,840)
Net (decrease) increase in cash
and cash equivalents (128,613) 17,765
Cash and cash equivalents at
beginning of period 492,830 460,111
Cash and cash equivalents at
end of period $364,217 $477,876
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 June 30, 2001, the Fund had sold 1,286,163
shares and the gross proceeds raised were $12,881,903, net of
liquidations of $663,172, 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
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 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 ending December 31, 2001, 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 June 30, 2001. Accordingly,
no impairment loss has been recorded in the accompanying financial
statements for the six months ended June 30, 2001.
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
judgment 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 June 30, 2001, 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.
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 adopted by the Fund
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 Fund.
In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations" ("SFAS 141"). SFAS 141
requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. In July 2001, the FASB issued
Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"), which is effective January
1, 2002. SFAS 142 requires, among other things, the discontinuance
of goodwill amortization. In addition, the standard includes
provisions for the reclassification of certain existing recognized
intangibles as goodwill, reassessment of the useful lives of
existing recognized intangibles, reclassification of certain
intangibles out of previously reported goodwill and the
identification of reporting units for purposes of assessing
potential future impairments of goodwill. The Fund does not
believe that the adoption of SFAS 141 and SFAS 142 will have a
significant impact on its financial statements.
(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 until the fifth anniversary
of the termination of the offering, 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.
In February 2001, the independent board of directors reviewed
the Advisory Agreement, and modified the annual amount of the
advisory fee to $145,000. The $145,000 represents approximately
1.4% of invested assets. The independent board of directors will
continue to review the advisory fee amount on an annual basis.
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 six months ended June 30,
2001 and 2000 were as follows:
2001 2000
Advisory fees $77,499 $87,500
Dividend
reinvestment fees -- 104
Management fees 6,660 6,962
Nonaccountable fees -- 256
Reimbursable operating
expense 5,441 4,368
$89,600 $99,190
As of June 30, 2001 the Fund made all payments to affiliates
except for $41,914 for advisory fees and $914 for management fees.
(3) DIVIDENDS
Below is a table summarizing the dividends declared:
Annualized
Declaration Record Payment Dividend
Date(a) Dates Date Rate Amount
1/28/99 10/1/98-12/31/98 2/15/99 6.9% $224,972
5/6/99 1/1/99-3/31/99 5/15/99 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% 253,621
2/15/01 10/1/00-12/31/00 2/15/01 8.0% 262,106
5/10/01 1/1/01-3/31/01 5/15/01 8.0% 256,556
8/09/01 4/1/01-6/30/01 8/15/01 8.0% 256,528
(a) Dividends were declared on a daily basis.
The dividend reinvestment plan ("Reinvestment Plan") was
available to the stockholders so that stockholders, if they so
elected, may have their distributions from the Fund invested in
shares. Until the third anniversary of the termination of the
offering the price per share purchased through the Reinvestment
Plan shall equal $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 were
charged a service charge, in an amount equal to 1% of their
distributions, which was paid to an affiliate of the Advisor to
defray the administrative costs of the Reinvestment Plan. At June
30, 2001, there were approximately 68,797 shares purchased through
the Reinvestment Plan and approximately 69,204 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".
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.
Effective February 13, 2001, the Board determined it is in the
best interest of the Company to discontinue the Dividend
Reinvestment Plan at this time. Shareholder participation in the
Plan had declined to approximately 3.9% of the total number of
investors in the Company. The board concluded that the significant
majority of shareholders would benefit from the termination through
the elimination of the potential for the dilution of existing
shareholders as well as the elimination of the costs associated
with the Plan. Accordingly, all future dividends will be paid in
cash.
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.
Liquidity and Capital Resources
As of June 30, 2001, the Fund had received $12,881,903 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
$663,172.
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 - 6 months - 2001 Compared to 2000
The Fund generated net income of $464,000 for the six months
ended June 30, 2001 as compared to net income of $442,000 for the
six months ended June 30, 2000.
Total income for the six months ended June 30, 2001 was
$703,000 as compared to $689,000 for the same six month period in
2000, an increase of $14,000. The $14,000 increase was due
primarily to a $16,000 increase in real estate tax reimbursement
income.
For the six months ended June 30, 2001, total expenses were
$239,000 as compared to $246,000 for the same six month period in
2000, a decrease of $7,000. The decrease is due to a decrease in
bad debt expense of $16,000. Bad debt expense decreased as a
result of the Fund receiving payment in 2001 that management had
estimated in 2000 to be uncollectible. Advisory fees also
decreased by $10,000 as a result of the modification by the Board
of Directors in February, 2001. Offsetting the decreases in total
expenses was an increase in real estate tax expense in the amount
of $16,000.
Results of Operations - 3 months - 2001 Compared to 2000
The Fund generated net income of $227,000 for the three months
ended June 30, 2001 as compared to net income of $224,000 for the
three months ended June 30, 2000.
Total income for the three months ended June 30, 2001 was
$358,000 as compared to $345,000 for the same three month period in
2000, an increase of $13,000. The $13,000 increase was due to an
increase in real estate tax reimbursement income of $16,000 offset
by a decrease in interest and other income of $2,000.
For the three months ended June 30, 2001, total expenses were
$131,000 as compared to $121,000 for the same three month period in
2000, an increase of $10,000. The increase is primarily due to an
increase in real estate tax expense of $16,000 offset by a decrease
of $8,000 of advisory fees 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.
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: August 14, 2001
BY: /s/Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
DATE: August 14, 2001