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, 2003
[ ] 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 15, 2003, 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, 2003. . . . . . . . . 4
Consolidated Statements of Operations for the
six months ended June 30, 2003 and 2002. . . . . . . . . . . 5
Consolidated Statements of Operations for the
three months ended June 30, 2003 and 2002. . . . . . . . . . 6
Consolidated Statements of Cash Flows for the
six months ended June 30, 2003 and 2002. . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . 8
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . . . . . 21
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . 25
PART II - OTHER INFORMATION
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
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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, 2003,
Consolidated Statements of Operations for the six months ended June
30, 2003 and 2002, Consolidated Statements of Operations for the
three months ended June 30, 2003 and 2002 and Consolidated
Statements of Cash Flows for the six months ended June 30, 2003 and
2002 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 consolidated financial statements and notes
thereto included in the Fund's 2002 Annual Report on Form 10-KSB.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30,
2003
ASSETS
Investment in real estate, at cost:
Land $ 3,965,746
Buildings 6,790,916
10,756,662
Less accumulated depreciation (1,008,997)
Net investment in real estate 9,747,665
Cash and cash equivalents 590,101
Intangibles assets, net 306,019
Tenant receivables 430
Deferred rent receivable 239,680
Prepaid expenses 2,280
Total Assets $10,886,175
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
expenses $ 25,123
Rents received in advance 48,419
Security deposits 9,794
Due to affiliates 1,137
Total Liabilities 84,473
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 11,526,203
Accumulated deficit (737,363)
Total Stockholders' Equity 10,801,702
Total Liabilities and Stockholders'
Equity $10,886,175
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)
2003 2002
INCOME
Rental $605,365 $ 426,205
Lease termination fee -- 200,000
Other charges to tenants -- 23,755
Interest and other 6,022 6,853
Total income 611,387 656,813
EXPENSES
Directors fees 6,000 6,000
Advisory fees 105,438 72,498
Management fees 6,432 7,108
General and administrative 53,296 62,934
Real estate taxes -- 24,383
Depreciation and amortization 87,494 86,945
Total expenses 258,660 259,868
Net income before property sale 352,727 396,945
Gain on sale of property -- 628,113
Net income $352,727 $1,025,058
Net income per share
(based on average shares
outstanding of 1,286,163) $ 0.27 $ 0.80
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)
2003 2002
INCOME
Rental $303,851 $ 86,449
Lease termination fee -- 200,000
Other charges to tenants -- 5,815
Interest and other 2,412 6,709
Total income 306,263 298,973
EXPENSES
Directors fees 3,000 3,000
Advisory fees 69,189 36,249
Management fees 3,442 3,385
General and administrative 33,566 40,523
Real estate taxes -- 6,443
Depreciation and amortization 43,468 38,504
Total expenses 152,665 128,104
Net income before property sale 153,598 170,869
Gain on sale of property -- 628,113
Net income $153,598 $798,982
Net income per share
(based on average shares
outstanding of 1,286,163) $ 0.12 $ 0.62
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)
2003 2002
Cash Flows From Operating Activities:
Net income $ 352,727 $1,025,058
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 87,494 86,945
Gain on sale of property -- (628,113)
Amortization of acquired above
market lease 9,666 --
Changes in:
Tenant receivables 21,060 15,415
Deferred rent receivable (14,738) 198,308
Prepaid expenses 3,724 4,340
Accounts payable and
accrued expenses (4,697) 15,328
Security deposits 9,794 --
Rents received in advance 877 (2,069)
Due to affiliates (30) (2,743)
Net cash provided by operating
activities 465,877 712,469
Cash Flows From Investing Activities:
Proceeds from the sale of property -- 3,850,038
Deposits on acquisition -- (50,011)
Purchase of property (956,568) --
Net cash (used in)provided from
investing activities (956,568) 3,800,027
Cash Flows From Financing Activities:
Dividends (478,708) (529,091)
Net cash used in
financing activities (478,708) (529,091)
Net (decrease)increase in cash
and cash equivalents (969,399) 3,983,405
Cash and cash equivalents at
beginning of period 1,559,500 298,835
Cash and cash equivalents at
end of period $ 590,101 $4,282,240
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; a Jiffy Lube and Firestone facility during the
year ended December 31, 1997; a Golden Corral Restaurant during
the year ended December 31, 2002; and three Dollar General stores
during the quarter ended June 30, 2003. The On the Border
Restaurant, and the Just for Feet property were sold during the
year ended December 31, 2002. The Chili's Restaurant in Birmingham,
Alabama was exchanged for a similar property located in Tucker,
Georgia during the year ended December 31, 2002.
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, 2003, the gross proceeds raised
were $12,881,903, net of liquidations of $663,172, and includes
$200,000 invested by the Advisor ("Initial Investment"), before
reduction for selling commissions and other offering costs.
SIGNIFICANT ACCOUNTING POLICIES
Management's Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Accounting Method
The accompanying consolidated financial statements have been
prepared using the accrual method of accounting.
Rental Income
Rental income is recognized on a straight line basis over the
life of the related leases. Differences between rental income
earned and amounts due per the respective lease agreements are
credited or charged, as applicable, to deferred rent receivable.
Federal Income Taxes
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
90% 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, 2003. Accordingly, no
impairment loss has been recorded in the accompanying financial
statements for the three months ended June 30, 2003.
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.
Rent Receivable
Rent receivables are comprised of (a) billed but uncollected
amounts due for monthly rents and other charges, (b) estimated
unbilled amounts due for tenant reimbursement of common area
maintenance charges and property taxes and (c) amounts due for
scheduled rent increases for which rentals have been earned and
will be collected in the future under the terms of the leases.
Receivables are recorded at management's estimate of the amounts
that will ultimately be collected. The allowance for doubtful
accounts is based on specific identification of uncollectible
accounts and the Fund's historical collection experience.
Estimated Fair Value of Financial Instruments
Disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments." The estimated fair value amounts
have been determined by using available market information and
appropriate valuation methodologies. However, considerable
judgement is necessarily required in interpreting market data to
develop estimates of fair value.
The fair value estimates presented herein are based on
information available to management as of June 30, 2003, 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; tenant
receivable; accounts payable and accrued expense; rents received in
advance; security deposits; and due to affiliates.
Derivatives and Hedging Instruments
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 Fund has no derivatives in 2003 and
2002.
Recent Accounting Pronouncements
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 July 30, 2001 and eliminates the
pooling-of-interests method. In June 2001, the FASB issued
Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"), which was 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
intangibles, reassessment of the useful lives of existing
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.
Implementation of SFAS 141 and 142 resulted in the recognition
of additional intangible assets (acquired in place lease
origination costs aggregating $125,000 at December 31, 2002 with an
additional $75,000 recognized in the second quarter of 2003 and an
above market lease in the amount of $141,000 (unchanged from
December 31, 2002)). The intangible assets are being amortized over
the remaining term of the acquired leases. For the six months
ended June 30, 2003, amortization expense includes $8,825 of
origination costs and rental revenue has been charged with $9,667
of amortization of the above market lease value.
Application of SFAS 141 and 142 to future acquisitions, if any,
could result in the recognition, upon acquisition, of additional
intangible assets (acquired in place lease origination costs and
acquired above market leases) and liabilities (acquired below
market leases) which would be amortized over the remaining term of
the leases.
In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations"
("SFAS 143"), which was effective for years beginning after June
15, 2002. SFAS requires recognition of a liability and associated
asset for the fair value of costs arising from legal obligations
associated with the retirement of tangible long-lived assets. The
asset is to be allocated to expense over its estimated useful life.
In August 2001, the FASB issued Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144"), which was effective
for fiscal years beginning after December 15, 2001. SFAS 144
supersedes FASB Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to Be Disposed Of"
("SFAS 121"). SFAS 144 retains the recognition and measurement
requirements of SFAS 121, but resolves significant SFAS 121
implementation issues. In addition, it applies to a segment of a
business accounted for as a discontinued operation.
In April 2002, FASB issued Statement of Financial Accounting
Standards No. 145, "Rescission of FASB Statements No. 4, 44,
Amendment of FASB No. 13, and Technical Corrections" ("SFAS 145").
Generally, the rescission of FASB No. 4, "Reporting Gains and
Losses from Extinguishment of Debt" would require that debt
extinguishment costs are to no longer be treated as extraordinary
items. The amendment to FASB No. 13, "Accounting for Leases"
requires sale-leaseback accounting for certain lease modifications
that have the economic effects that are similar to sale-leaseback
transactions. This statement is generally effective for the year
ending December 31, 2003.
In November 2002, FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others" (FIN 45).
FIN 45 elaborates on the disclosures to be made by a guarantor in
its interim and annual financial statements about its obligations
under certain guarantees that it has issued and clarifies that a
guarantor is required to recognize, at inception of the guarantee,
a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and measurement
provisions of FIN 45 are applicable to guarantees issued or
modified after December 31, 2002. The disclosure requirements of
FIN 45 are effective for periods ending after December 15, 2002.
In January 2003, FASB issued interpretation No. 46,
"Consolidation of Variable Interest Entities" (FIN 46). FIN 46
addresses consolidation by business enterprises of certain variable
interest entities in which the equity investors do not have the
characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other
parties. FIN 46 applies to variable interest entities created
after January 31, 2003 and to such entities in which the interest
was acquired prior to February 1, 2003 for fiscal years and interim
periods beginning after June 15, 2003.
The adoption of SFAS 143, 144, 145 and FIN 45 and 46 has not
had a significant impact on the Fund's 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, was entitled
to placement charges of 5.50% of the gross proceeds of the Fund's
offering, all of which were reallowed to placement agents. In
addition, BSI was 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
was 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 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. In 2002, the independent directors again reviewed
the Advisory Agreement, and the advisory fee was renewed for a one
year period at an annual amount of $145,000. The independent
directors reviewed the terms of the agreement in May of 2003, and
renewed it on the same terms for one year.
In November 2002, the independent directors approved a one-
time payment of $76,000 payable to the Advisor as an advisory fee
in connection with the acquisition of Golden Corral. In June 2003,
the independent directors approved a one-time payment of $32,900
payable to the Advisor as an advisory fee in connection with the
acquisition of Dollar General.
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 that 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,
2003 and 2002 were as follows:
2003 2002
Advisory fees $105,438 $72,498
Reimbursable office expenses 6,750 --
Management fees 6,432 7,108
$118,620 $ 79,606
As of June 30, 2003 the Fund made all payments to affiliates
except for $1,137 for management fees.
(3) DIVIDENDS
Below is a table summarizing the dividends declared since January
1, 2001:
Annualized
Declaration Record Payment Dividend
Date Dates Date Rate Amount
2/15/01 10/1/00-12/31/00 2/15/01 8.00% $262,106
5/10/01 1/1/01-3/31/01 5/15/01 8.00% 256,556
8/09/01 4/1/01-6/30/01 8/15/01 8.00% 256,528
11/15/01 7/1/01-9/30/01 11/15/01 9.98% 323,745
1/24/02 10/1/01-12/31/01 2/15/02 8.25% 267,452
5/08/02 1/1/02-3/31/02 5/15/02 8.25% 261,639
8/08/02 4/1/02-6/30/02 8/15/02 23.17% 745,000
11/12/02 7/1/02-9/30/02 11/15/02 5.44% 175,000
1/23/03 10/1/02-12/31/02 1/30/03(a) 6.94% 225,000
5/8/03 1/1/03-3/31/03 5/15/03 8.00% 253,708
8/7/03 4/1/03-6/30/03 8/15/03 7.46% 245,000
(a) An $80,000 payment was made on 1/30/03 and a $145,000 payment
was made on 1/31/03 for a total payment of $225,000.
A 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, 2003 there were approximately 68,797 shares purchased through
the Reinvestment Plan.
In accordance with the Fund's original investment objective,
during the first quarter of 2000, the Board of Directors approved
a plan to have the Fund'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 90% of REIT taxable income of the Fund. The Fund intends
to make annual distributions to satisfy all annual distribution
requirements.
Effective February 13, 2001, the Board of Directors
discontinued the Dividend Reinvestment Plan. Subsequently,
dividends have been paid in cash.
(4) CHILI'S PROPERTY EXCHANGE
In 2001, Brinker expressed a desire to close the facility
located in Birmingham, Alabama and exchange this property for a
better performing property that Brinker owned in Tucker, Georgia.
The Fund and Brinker agreed to this exchange and in the second
quarter of 2002, the like kind property exchange was completed. As
a result of this exchange the base rent remains the same, but the
percentage rent breakpoint was reduced by approximately $200,000
and the Fund's percentage of revenue in excess of the breakpoint
was reduced from 6% to 4.75%. The Fund's expenses related to this
transaction were primarily related to legal and title fees. These
expenses were recorded as general and administrative expenses.
(5) PROPERTY SALES
On April 29, 2002, the Fund sold the On The Border Restaurant
property to an unaffiliated third party for a sales price of
$1,385,000 (exclusive of an additional $200,000 tenant lease buyout
fee). The net proceeds received including the buyout was
approximately $1,475,000.
On May 16, 2002, the Fund sold the Just For Feet property to an
unaffiliated third party for a sales price of $2,675,000. The net
proceeds received was approximately $2,575,000.
(6) PROPERTY ACQUISITION
On July 19, 2002, with the approval of the Fund's Board of
Directors and in accordance with the Fund's acquisition guidelines,
the Fund purchased a 9,611 square foot restaurant building situated
on a two acre parcel located in Bradenton, Florida for
approximately $2,174,000 plus closing costs (the "Bradenton
Property").
The Bradenton Property has been leased to Corral of Bradenton
LP, which operates a Golden Corral Restaurant, under a triple net
lease, for a remaining term ending October 19, 2019. The lease
requires Corral of Bradenton LP to pay base rent each month in the
amount of $19,227 beginning August 1, 2002 with periodic rental
increases starting November 1, 2002.
On June 18, 2003, with the approval of the Fund's Board of
Directors and in accordance with the Fund's acquisition guidelines,
the Fund purchased three Dollar General stores located in Lake
Charles, Houma and Chauvin, Louisiana for approximately $940,000
plus closing costs.
The Lake Charles property has been leased to Dolgencorp, Inc.
which operates a Dollar General store, under a triple net lease,
for a remaining term ending January 31, 2013. The lease requires
Dolgencorp, Inc. to pay base rent each month in the amount of
$3,000.
The Houma property has been leased to Dolgencorp, Inc. which
operates a Dollar General store, under a triple net lease, for a
remaining term ending February 28, 2013. The lease requires
Dolgencorp, Inc. to pay base rent each month in the amount of
$3,000.
The Chauvin property has been leased to Dolgencorp, Inc. which
operates a Dollar General store, under a triple net lease, for a
remaining term ending January 31, 2013. The lease requires
Dolgencorp, Inc. to pay base rent each month in the amount of
$2,850.
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, 2003, the Fund had received $11,539,065 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 90% REIT taxable income test
The Fund is required, under the Internal Revenue Code, to make
distributions of an amount not less than 90% of its REIT taxable
income during the year.
Property sales
On April 29, 2002, the Fund sold the On The Border Restaurant
property to an unaffiliated third party for a sales price of
$1,385,000 (exclusive of an additional $200,000 tenant lease buyout
fee). The net proceeds received including the buyout was
approximately $1,467,000.
On May 16, 2002, the Fund sold the Just For Feet property to an
unaffiliated third party for a sales price of $2,675,000. The net
proceeds received was approximately $2,575,000.
The Fund has replaced the sold properties in accordance with
the acquisition guidelines of the Fund.
Property Purchases
On July 19, 2002, with the approval of the Fund's Board of
Directors and in accordance with the Fund's acquisition guidelines,
the Fund purchased a 9,611 square foot restaurant building situated
on a two acre parcel located in Bradenton, Florida for a gross
purchase price of $2,174,000. The current lease at this property
expires in October 2019, and has two 10 year options. The lease
requires a minimum base rent each month in the amount of $19,227
beginning August 1, 2002 plus periodic increases every three years
beginning November 1, 2002. Additionally, the Fund will receive
a percentage of gross sales above a certain sales level.
On June 18, 2003, with the approval of the Fund's Board of
Directors and in accordance with the Fund's acquisition guidelines,
the Fund purchased three Dollar General stores located in Lake
Charles, Houma and Chauvin, Louisiana for approximately $940,000
plus closing costs.
The Lake Charles property has been leased to Dolgencorp, Inc.
which operates a Dollar General store, under a triple net lease,
for a remaining term ending January 31, 2013. The lease requires
Dolgencorp, Inc. to pay base rent each month in the amount of
$3,000.
The Houma property has been leased to Dolgencorp, Inc. which
operates a Dollar General store, under a triple net lease, for a
remaining term ending February 28, 2013. The lease requires
Dolgencorp, Inc. to pay base rent each month in the amount of
$3,000.
The Chauvin property has been leased to Dolgencorp, Inc. which
operates a Dollar General store, under a triple net lease, for a
remaining term ending January 31, 2013. The lease requires
Dolgencorp, Inc. to pay base rent each month in the amount of
$2,850.
Chili's Property Exchange
In 2001, Brinker expressed a desire to close the facility
located in Birmingham, Alabama and exchange this property for a
better performing property that Brinker owned in Tucker, Georgia.
In the second quarter of 2002, the Fund agreed to this exchange.
As a result of this exchange the base rent remains the same, but
the percentage rent breakpoint was reduced by approximately
$200,000 and the Fund's percentage of revenue in excess of the
breakpoint was reduced from 6% to 4.75%. The former property did
not generate any percentage rent. However, the Fund anticipates
that the exchanged property will generate percentage rents.
Results of Operations - 6 months - 2003 Compared to 2002
The Fund generated net income of $353,000 for the six months
ended June 30, 2003 as compared to net income of $1,025,000 for the
six months ended June 30, 2002.
Total income for the six months ended June 30, 2003 was
$611,000 as compared to $657,000 for the same six month period in
2002, a decrease of $46,000. The $46,000 decrease was due to a
increase in rental income of $179,000, offset by a decrease in
other charges to tenants of $24,000 related to real estate taxes
and a decrease in lease termination fees of $200,000. In 2002,
rental income was affected by the reversal of deferred rental
income as a result of the two property sales. The charge to
tenants for real estate tax was not billed in the first six months
of 2003, however real estate tax was billed to the tenants in the
first six month period of 2002.
For the six months ended June 30, 2003, total expenses were
$259,000 as compared to $260,000 for the same six month period in
2002, a decrease of $1,000. The decrease is the result of an
increase in advisory fees of $33,000 offset by a decrease in
general and administrative expense of $10,000 and a decrease in
real estate tax expense of $24,000 corresponding to the decrease
in other charges to tenants of $24,000.
Results of Operations - 3 months - 2003 Compared to 2002
The Fund generated net income of $154,000 for the three months
ended June 30, 2003 as compared to net income of $799,000 for the
three months ended June 30, 2002.
Total income for the three months ended June 30, 2003 was
$306,000 as compared to $299,000 for the same three month period in
2002, an increase of $7,000. The $7,000 increase was primarily
due to an increase in rental income of $217,000 offset by a
decrease in lease termination fees of $200,000. In 2002, rental
income was affected by the reversal of deferred rental income as a
result of the two property sales. Other charges to tenants
decreased $6,000 and interest and other income decreased $4,000.
For the three months ended June 30, 2003, total expenses were
$153,000 as compared to $128,000 for the same three month period in
2002, an increase of $25,000. The increase is primarily due to an
increase in advisory fees of $33,000 offset by a decrease in real
estate tax expense of $6,000 corresponding to the decrease in
other charges to tenants of $6,000 and a $7,000 decrease in general
and administrative expense. Depreciation expense increased $5,000.
Item 3. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have
reviewed and evaluated the effectiveness of the Funds disclosure
controls and procedures (as defined in Exchange Act Rules 240.13a-
14(c) and 15d-14(c)) as of a date within 90 days before the filing
date of this quarterly report. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that
the Funds current disclosure controls and procedures are effective
and timely, providing all material information relating to the Fund
required to be disclosed in reports filed or submitted under the
Exchange Act.
Changes in Internal Controls
There have not been any significant changes in the Funds
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.
We are not aware of any significant deficiencies or material
weaknesses, therefore no corrective actions were taken.
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.
An annual meeting of stockholders was held on June
5, 2003. The following is a list of directors whose term of office
was retained:
Jerome J. Brault
James L. Brault
Michael K. Huff
Gregory S. Kobus
Kenneth S. Nelson
The selection of Alschuler, Melvoin and Glasser LLP
as independent accountants for the fund year ended December 31,
2003 was submitted for vote. There were 746,275.0951 shares voted
"FOR" the ratification and 5,266.8685 shares voted "Against", and
16,713.9830 shares abstained. Based on the number of shares voted
"FOR", Alschuler, Melvoin and Glasser LLP was retained as
independent accountants.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports On Form 8-K.
Exhibit 99. Certification of Officers
SIGNATURES
Pursuant to the the requirements of the Securities Exchange Act of
1934, the registrant has duly 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 19, 2003
BY: /s/Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
DATE: August 19, 2003
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
OF
BRAUVIN NET LEASE V, INC.
I, Jerome J. Brault, Chief Executive Officer of the Company,
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
BRAUVIN NET LEASE V, INC;
2. Based on my knowledge, this report does not contain any untrue
statement of material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the consolidated financial condition,
results of operations and statement of changes in net assets
in liquidation of the small business issuer as of, and for,
the periods presented in this report;
4. The small business issuer's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)for the small business issue and have:
a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that
material information relating to the small business
issuer, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b) Designed such internal control over financial
reporting, or caused such internal control over
financial reporting to be designed under ourt
supervision, to provide reasonable assurance
regarding the reliability of financial reporting and
the preparation of financial statements for external
purposes in accordance with generally accepted
accounting principles
c) Evaluated the effectiveness of the small business
issuer's disclosure controls and procedures and
presented in this report our conclusions about the
effectiveness of the disclosure controls and
procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the small
business issuer's internal control over financial
reporting that occurred during the small business
issuer's most recent fiscal quarter (the small
business issuer's fourth quarter in the case of an
annual report) that has materially affected, or is
reasonably likely to materially affect, the small
business issuer's internal control over financial
reporting; and
5. The small business issuer's other certifying officer and I
have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the small
business issuer's auditors and the audit committee of small
business issuer's board of directors (or persons performing
the equivalent function):
a) All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
aversely affect the small business issuer's ability
to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the small business issuer's internal
controls over financial reporting.
BY:/s/ Jerome J. Brault
Jerome J. Brault
Chief Executive Officer
DATE: August 19, 2003
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
OF
BRAUVIN NET LEASE V, INC.
I, Thomas E. Murphy, Chief Financial Officer of the Company,
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Brauvin Net Lease V, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the consolidated financial condition,
results of operations and statement of changes in net assets
in liquidation of the small business issuer as of, and for,
the periods presented in this report;
4. The small business issuer's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)for the small business issue and have:
a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that
material information relating to the small business
issuer, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b) Designed such internal control over financial
reporting, or caused such internal control over
financial reporting to be designed under ourt
supervision, to provide reasonable assurance
regarding the reliability of financial reporting and
the preparation of financial statements for external
purposes in accordance with generally accepted
accounting principles
c) Evaluated the effectiveness of the small business
issuer's disclosure controls and procedures and
presented in this report our conclusions about the
effectiveness of the disclosure controls and
procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the small
business issuer's internal control over financial
reporting that occurred during the small business
issuer's most recent fiscal quarter (the small
business issuer's fourth quarter in the case of an
annual report) that has materially affected, or is
reasonably likely to materially affect, the small
business issuer's internal control over financial
reporting; and
5. The small business issuer's other certifying officer and I
have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the small
business issuer's auditors and the audit committee of small
business issuer's board of directors (or persons performing
the equivalent function):
a) All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
aversely affect the small business issuer's ability
to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the small business issuer's internal
controls over financial reporting.
BY: BRAUVIN NET LEASE V, INC.
BY:/s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
DATE: August 19, 2003
Exhibit 99
SECTION 906 CERTIFICATION
The following statement is provided by the undersigned to accompany
the Quarterly Report on Form 10-QSB for the quarter ended June 30,
2003, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not be deemed filed pursuant to any provisions of the
Securities Exchange Act of 1934 or any other securities law:
Each of the undersigned certifies that the foregoing Report on Form
10-QSB fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m) and that the
information contained in the Form 10-QSB fairly presents, in all
material respects, the financial condition and results of
operations of BRAUVIN NET LEASE V, INC.
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chief Executive Officer
DATE: August 19, 2003
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
DATE: August 19, 2003