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 nine months ended September 30, 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 September 30, 2001 (Liquidation Basis) . . . . . . . . 4
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2001 to
September 30, 2001 (Liquidation Basis) . . . . . . . . . . . 5
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2000 to
September 30, 2000 (Liquidation Basis) . . . . . . . . . . . 6
Consolidated Statements of Operations for the
nine months ended September 30, 2001 and 2000
(Liquidation Basis). . . . . . . . . . . . . . . . . . . . . 7
Consolidated Statements of Operations for the
three months ended September 30, 2001 and 2000
(Liquidation Basis). . . . . . . . . . . . . . . . . . . . . 8
Notes to Consolidated Financial Statements . . . . . . . . . 9
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . . . . . .19
PART II
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .26
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .26
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .26
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .26
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .26
Item 6. Exhibits, and Reports on Form 8-K. . . . . . . . . . . . . .26
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
The following Consolidated Statement of Net Assets in Liquidation
as of September 30, 2001 (Liquidation Basis), Consolidated
Statement of Changes in Net Assets in Liquidation for the period
January 1, 2001 to September 30, 2001 (Liquidation Basis),
Consolidated Statement of Changes in Net Assets in Liquidation for
the period January 1, 2000 to September 30, 2000 (Liquidation
Basis), Consolidated Statements of Operations for the nine months
ended September 30, 2001 and 2000 (Liquidation Basis) and
Consolidated Statements of Operations for the three months ended
September 30, 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
SEPTEMBER 30, 2001 (LIQUIDATION BASIS)
(Unaudited)
ASSETS
Real estate held for sale (Note 2) $8,136,133
Cash and cash equivalents 815,094
Tenant receivable (net of an
allowance of $202,400) 85,300
Escrow deposits 352,749
Other assets 34,571
INVESTMENT IN STRAWBERRY FIELDS
JOINT VENTURE 175,034
Total Assets 9,598,881
LIABILITIES
Mortgage notes payable (Note 4) 5,813,962
Accounts payable and accrued expenses 221,583
Deferred gain on sale of real estate (Note 2) 942,835
Reserve for estimated costs during
the period of liquidation (Note 2) 190,315
Tenant security deposits 28,081
Due to affiliates (Note 5) 5,042
Total Liabilities 7,201,818
MINORITY INTEREST IN SABAL PALM
JOINT VENTURE 58,599
Net Assets in Liquidation $2,338,464
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN
LIQUIDATION FOR THE PERIOD
JANUARY 1, 2001 TO SEPTEMBER 30, 2001 (LIQUIDATION BASIS)
(Unaudited)
Net assets in liquidation at January 1, 2001 $1,908,750
Income from operations 429,714
Net assets in liquidation at
September 30, 2001 $2,338,464
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN
LIQUIDATION FOR THE PERIOD
JANUARY 1, 2000 TO SEPTEMBER 30, 2000 (LIQUIDATION BASIS)
(Unaudited)
Net assets in liquidation at
January 1, 2000 $1,544,831
Income from operations 259,206
Net assets in liquidation at
September 30, 2000 $1,804,037
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended September 30, 2001 and 2000
(Liquidation Basis)
(Unaudited)
2001 2000
INCOME
Rental $831,895 $864,441
Interest 24,942 34,445
Other, primarily tenant
expense reimbursements 105,747 123,111
Total income 962,584 1,021,997
EXPENSES
Interest 365,868 375,215
Real estate taxes 102,294 101,484
Repairs and maintenance 54,772 22,027
Management fees (Note 5) 57,934 66,736
Other property operating 58,324 62,440
Bad debt expense 27,600 800
General and administrative 187,666 167,131
Total expenses 854,458 795,833
Income before minority
and equity interests 108,126 226,164
Minority interest's
share of Sabal Palm's
net loss (income) 62,342 (44,446)
Equity interest in
Strawberry Fields Joint
Venture's net income 373,613 77,488
Income before adjustment
to liquidation basis 544,081 259,206
Adjustment to liquidation
basis (114,367) --
Net income $429,714 $ 259,206
Net income allocated
to the General Partners $ 4,297 $ 2,592
Net income allocated
to the Limited Partners $425,417 $ 256,614
Net income per
Limited Partnership
Interest (9,914.5 units
outstanding) $ 42.91 $ 25.88
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended September 30, 2001 and 2000
(Liquidation Basis)
(Unaudited)
2001 2000
INCOME
Rental $256,787 $257,697
Interest 5,575 12,564
Other, primarily tenant
expense reimbursements 35,559 89,907
Total income 297,921 360,168
EXPENSES
Interest 121,953 124,907
Real estate taxes 34,986 33,829
Repairs and maintenance 16,511 5,672
Management fees (Note 5) 17,160 22,673
Other property operating 17,802 20,308
Bad debt expense 27,100 1,800
General and administrative 81,838 64,897
Total expenses 317,350 274,086
(Loss) income before minority
and equity interests (19,429) 86,082
Minority interest's
share of Sabal Palm's
net loss (income) 64,361 (6,856)
Equity interest in
Strawberry Fields Joint
Venture's net income 312,557 26,317
Income before adjustment
to liquidation basis 357,489 105,543
Adjustment to liquidation
basis (114,367) --
Net income $243,122 $105,543
Net income allocated
to the General Partners $ 2,431 $ 1,055
Net income allocated
to the Limited Partners $240,691 $104,488
Net income per
Limited Partnership
Interest (9,914.5 units
outstanding) $ 24.28 $ 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
September 30, 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 except for items
discussed in note 2, there were no events or changes in
circumstances that indicated that the carrying amount of the assets
may not be recoverable at September 30, 2001.
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 September 30, 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 September 30, 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 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.
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 Partnership does not
believe that the adoption of SFAS 141 and SFAS 142 will have a
significant impact on its financial statements.
Reclassifications
Certain items in the 2000 financial statements have been
reclassified to conform with the 2001 presentation.
(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.
In the second quarter of 2001, the Partnership recorded
reductions in real estate held for sale and deferred gain of
$259,350 related to other than temporary decline in the value of
real estate for the Crown Point property.
In the third quarter of 2001, the Partnership recorded a
reduction in real estate held for sale and an increase in the
adjustment to liquidation basis in the amount of $114,367 related
to other than temporary decline in the value of real estate for the
Sabal Palm property.
(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 September 30, 2001 equaled $13,804,464.
(4) MORTGAGE NOTES PAYABLE
Mortgage notes payable at September 30, 2001 consist of the
following:
Interest Date
2001 Rate Due
Crown Point Shopping
Center (a) $2,778,079 7.55% 1/03
Sabal Palm
Shopping Center (b) 3,035,883 8.93% 4/02
$5,813,962
Each shopping center serves as collateral under its respective
nonrecourse debt obligation.
Maturities of the mortgage notes payable are as follows:
2001 $ 38,827
2002 3,138,251
2003 2,636,884
$5,813,962
(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 September 30, 2001 was
approximately $5,100,000.
(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. Winn-Dixie failed to
timely pay its rental obligation for November and is currently in
default.
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 $3,036,000 at
September 30, 2001.
(5) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid or payable to the General Partners
or its affiliates for the nine months ended September 30, 2001 and
2000 were as follows:
2001 2000
Management fees $57,934 $66,736
Reimbursable office
expenses 67,957 67,973
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 September 30, 2001, the
Partnership had made all payments to affiliates, except for
management fees of $5,042.
(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)
September 30,
2001
Total assets $434,366
Total liabilities 16,047
Net assets in liquidation $418,319
For the nine months ended September 30,
Liquidation Basis
2001 2000
Rental income $ 458,587 $618,561
Other income 782,538 52,759
1,241,125 671,320
Mortgage and
other interest 197,377 274,193
Operating and
administrative expenses 154,191 212,633
351,568 486,826
Net income $ 889,557 $184,494
In 2001, the Strawberry Joint Venture 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 Strawberry Joint Venture executed a purchase and
sale agreement with Syms for $5.585 million in the second quarter
of 2001.
On July 20, 2001, Strawberry Fields was sold to Syms for the
contract price. At closing Strawberry Joint Venture received net
sales proceeds of approximately $299,000.
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.
On June 20, 2001, the General Partners received an unsolicited
tender offer to purchase up to 4,950 of the outstanding Limited
Partnership Units of the Partnership for $100 per Unit. The offer
was made by a group that currently beneficially owns the economic
interests with respect to approximately 14.5% of the outstanding
Units. The offer period expired on August 17, 2001. Subsequent to
August 17, 2001 the tender offer was increased to $120 per unit and
the term was extended to October 1, 2001. The General Partners
remained neutral as to the particular merits and risks associated
with this tender offer to the Limited Partners. As of October 1,
2001, 404 units were transferred as a result of this tender offer.
Upon completion of the Offer, the Purchasers held an aggregate of
approximately 1,842 Units, or approximately 19% of the total
outstanding Units.
The General Partners further informed the Limited Partners
that, for those investors who are primarily interested in
liquidating their Units immediately, the tender offer provided such
an opportunity.
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 85% at September 30, 2001
compared to 84% at December 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
several offers to purchase the Crown Point Shopping Center, the
most attractive offer is at a purchase price of $5,250,000. 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 September
30, 2001 is approximately $5,100,000 based on management's best
estimate of the current market for this property. The Partnership
continues to market this property 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. In addition, the property's
anchor tenant (which occupies more than 50% of the center) has
expressed a desire to either expand and materially renovate its
existing facility or seek another location at its lease expiration
in 2004. The General Partners believe this drop in occupancy is
reflected in the offers received to date.
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.
In 2001, the Strawberry Joint Venture 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 Strawberry Joint Venture executed a purchase and
sale agreement with Syms for $5.585 million in the second quarter
of 2001.
On July 20, 2001, Strawberry Fields was sold to Syms for the
contract price. At closing Strawberry Joint Venture received net
sales proceeds of approximately $299,000.
The Sabal Palm 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. Winn-Dixie failed to
timely pay its rental obligation for November and is currently in
default.
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 was
$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.
As a result of the two dark, (but paying rent), 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 have Winn-Dixie "buy out" their remaining lease
obligation at a discount and to use the proceeds to split its space
into smaller more leaseable units in an effort to sublease either
or both of the dark anchors. In addition, the Partnership has
approached the lender regarding allowing Winn-Dixie to buy out
their lease and a potential extension of the loan maturity. In the
third quarter the Partnership received notification that the lender
would not agree to the Partnership's request. As a result of the
lender rejecting the Partnerships request and Winn-Dixie's current
lease default, in the third quarter of 2001, Sabal Palm recorded an
adjustment to liquidation basis of $114,367 related to an other
than temporary decline in the value of real estate for Sabal Palm.
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
September 30, 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 - Nine months ended September 30, 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 $430,000 for the period
ended September 30, 2001 as compared to net income of $259,000 for
the same period in 2000. Net income increased primarily as a result
of the increase in the equity interest in Strawberry joint venture
of $296,000 as a result of the sale of Strawberry in July.
Total income for the period ended September 30, 2001 was
$963,000 as compared to $1,022,000 for the same period in 2000.
The $59,000 decrease in total income was primarily a result of a
$33,000 decrease in rental income , a $9,000 decrease in interest
income and a $17,000 decrease in other income. Rental income
decreased primarily as a result of a decline in percentage rents
earned which related to a vacated anchor tenant at Sabal Palm.
Interest income decreased as a result of the decline in interest
rates. The decrease in other income was the result of a correction
in the year 2000 relating to prior year's billings for certain
tenants at the Partnership's shopping centers.
Total expenses for the period ended September 30, 2001 were
$854,000 as compared to $796,000 for the same period in 2000. The
$58,000 increase in expense is the result of a $33,000 increase in
repairs and maintenance expense, a $27,000 increase in bad debt
expense, a $20,000 increase in general and administrative expense
offset by a decrease in interest expense of $9,000, a decrease in
management fees of $9,000 and a decrease in operating expense of
$4,000. Repairs and maintenance expense increased primarily due to
roof repairs at Sabal Palm and parking lot repairs at Crown Point.
Bad debt increased as a result of the uncollectible rents billed
at the Sabal Palm shopping center. General and administrative
expense increased primarily as a result of an increase in
insurance expense and franchise taxes, offset by a decrease in
legal and professional fees. Interest expense decreased primarily
as a result of lower outstanding balances on the mortgages for
Crown Point and Sabal Palm. Management fees decreased primarily as
a result of lower rental income.
Results of Operations - Three months ended September 30, 2001 and
2000 (Liquidation Basis)
The Partnership generated net income of $243,000 for the period
ended September 30, 2001 as compared to net income of $106,000 for
the same period in 2000.
Total income for the period ended September 30, 2001 was
$298,000 as compared to $360,000 for the same period in 2000. The
$62,000 decrease in total income was a result of an $54,000
decrease in other income and an $7,000 decrease in interest income
and a $1,000 decrease in rental income. The decrease in other
income was the result of a correction in the year 2000 relating to
prior year's billings for certain tenants at the Partnership's
shopping centers.
Total expenses for the period ended September 30, 2001 were
$317,000 as compared to $274,000 for the same period in 2000. The
$43,000 increase in expense is the result of a $25,000 increase in
bad debt expense, an $11,000 increase in repairs and maintenance
expense and a $16,000 increase in general and administrative
expense offset by a $3,000 decrease in interest expense, a $6,000
decrease in management fees and a $3,000 decrease in operating
expense. Repairs and maintenance expense increased primarily due
to roof repairs at Sabal Palm and parking lot repairs at Crown
Point. Bad debt expense increased as a result of uncollectible
rents at Sabal Palm. General and administrative expense increased
primarily as a result of an increase in insurance expense and
franchise tax expense. Management fees decreased primarily as a
result of lower rental income.
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: November 20, 2001
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
And Treasurer
DATE: November 20, 2001