UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended September 30, 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 November 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 September 30, 2003 . . . . . . 4
Consolidated Statements of Operations for the
nine months ended September 30, 2003 and 2002. . . . . . . . 5
Consolidated Statements of Operations for the
three months ended September 30, 2003 and 2002 . . . . . . . 6
Consolidated Statements of Cash Flows for the
nine months ended September 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 September 30,
2003, Consolidated Statements of Operations for the nine months
ended September 30, 2003 and 2002, Consolidated Statements of
Operations for the three months ended September 30, 2003 and 2002
and Consolidated Statements of Cash Flows for the nine months ended
September 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)
September 30,
2003
ASSETS
Investment in real estate, at cost:
Land $ 3,965,746
Buildings 6,790,916
10,756,662
Less accumulated depreciation (1,052,182)
Net investment in real estate 9,704,480
Cash and cash equivalents 526,684
Intangibles assets, net 294,941
Tenant receivables 23,788
Deferred rent receivable 246,624
Prepaid expenses 8,961
Total Assets $10,805,478
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
expenses $ 37,700
Rents received in advance 7,950
Security deposits 9,794
Due to affiliates 820
Total Liabilities 56,264
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 (789,851)
Total Stockholders' Equity 10,749,214
Total Liabilities and Stockholders'
Equity $10,805,478
See notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended September 30,
(Unaudited)
2003 2002
INCOME
Rental $931,494 $ 713,058
Lease termination fee -- 200,000
Other charges to tenants 23,788 41,319
Interest and other 6,022 11,660
Total income 961,304 966,037
EXPENSES
Directors fees 9,000 9,000
Advisory fees 141,647 108,747
Management fees 9,312 10,412
General and administrative 94,848 95,441
Real estate taxes 23,788 41,946
Depreciation and amortization 137,470 126,760
Total expenses 416,065 392,306
Net income before property sale 545,239 573,731
Gain on sale of property -- 628,113
Net income $545,239 $1,201,844
Net income per share
(based on average shares
outstanding of 1,286,163) $ 0.42 $ 0.93
See notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended September 30,
(Unaudited)
2003 2002
INCOME
Rental $326,129 $ 286,853
Other charges to tenants 23,788 17,564
Interest and other -- 4,807
Total income 349,917 309,224
EXPENSES
Directors fees 3,000 3,000
Advisory fees 36,209 36,249
Management fees 2,880 3,304
General and administrative 41,552 32,507
Real estate taxes 23,788 17,563
Depreciation and amortization 49,976 39,815
Total expenses 157,405 132,438
Net income $192,512 $ 176,786
Net income per share
(based on average shares
outstanding of 1,286,163) $ 0.15 $ 0.14
See notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30,
(Unaudited)
2003 2002
Cash Flows From Operating Activities:
Net income $ 545,239 $1,201,844
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 137,470 126,760
Gain on sale of property -- (628,113)
Amortization of acquired above
market lease 13,953 --
Changes in:
Tenant receivables (2,298) 31,305
Deferred rent receivable (21,682) 190,291
Prepaid expenses (2,957) (4,942)
Accounts payable and
accrued expense 7,880 4,346
Due from affiliates -- (14,110)
Prepaid rent (39,592) 18,334
Security deposits 9,794 --
Due to affiliates (347) (23,538)
Net cash provided by operating
activities 647,460 902,177
Cash Flows From Investing Activities:
Proceeds from the sale of property -- 3,850,038
Purchase of property (956,568) (2,187,519)
Net cash (used in)provided from
investing activities (956,568) 1,662,519
Cash Flows From Financing Activities:
Dividends (723,708) (1,274,091)
Net cash used in
financing activities (723,708) (1,274,091)
Net (decrease)increase in cash
and cash equivalents (1,032,816) 1,290,605
Cash and cash equivalents at
beginning of period 1,559,500 298,835
Cash and cash equivalents at
end of period $ 526,684 $1,589,440
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 September 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.
On November 6, 2003 the Board of Directors approved the adoption
of a plan of liquidation which contemplates the sale of all of the
Fund's assets within a twenty four month period.
SIGNIFICANT ACCOUNTING POLICIES
Management's Use of Estimates
The preparation of financial statements in conformity with
U.S. 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 September 30, 2003.
Accordingly, no impairment loss has been recorded in the
accompanying financial statements for the nine months ended
September 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. 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, 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; deferred rent 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 nine months
ended September 30, 2003, amortization expense includes $15,619 of
origination costs and rental revenue has been charged with $13,953
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 commencing with financial
statements issued after December 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 nine months ended September
30, 2003 and 2002 were as follows:
2003 2002
Advisory fees $141,647 $108,747
Reimbursable office expenses 28,805 12,669
Management fees 9,312 10,412
$179,764 $ 131,828
As of September 30, 2003 the Fund made all payments to affiliates
except for $820 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
11/06/03 7/1/03-9/30/03 11/15/03 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
September 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 September 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.
Adoption of a Plan of Liquidiation
On November 6, 2003, the Board of Directors approved a Plan of
Liquidation for the Fund. The Plan of Liquidation contemplates the
sale of all of the Fund's assets, either individually or in a
group, within a twenty four month period.
Limitation on Total Operating Expenses
For the twelve month period ended September 30, 2003, the
Fund's Total Operating Expenses exceeded the greater of 2% of the
Average Invested Assets of the Fund or 25% of the Fund's Net
Income. The Independent Directors determined that the Fund's Total
Operating Expenses are justifiable based on the gains that have
been achieved in prior periods and the redeployment of property
sale proceeds at slightly lower investment returns than the
original property investments. In addition, the Independent
Directors discussed that as a result of carrying out the Plan of
Liquidation the Fund's Total Operating Expenses will likely exceed
the stated percentages as a result of a declining asset base and
declining revenues. The Independent Directors will continue to
review Total Operating Expenses on a quarterly basis.
Results of Operations - 9 months - 2003 Compared to 2002
The Fund generated net income of $545,000 for the nine months
ended September 30, 2003 as compared to net income of $1,202,000
for the nine months ended September 30, 2002.
Total income for the nine months ended September 30, 2003 was
$961,000 as compared to $966,000 for the same nine month period in
2002, a decrease of $5,000. The $5,000 decrease was due to a
decrease in lease termination fees of $200,000, a decrease in other
charges to tenants of $18,000 related to real estate taxes, and a
decrease in interest and other income of $5,000, partially offset
by an increase in rental income of $218,000. In 2002, rental
income was affected by the reversal of deferred rental income as a
result of the two property sales.
For the nine months ended September 30, 2003, total expenses
were $416,000 as compared to $392,000 for the same nine month
period in 2002, an increase of $24,000. The increase is the result
of an increase in advisory fees of $33,000, and an increase in
depreciation and amortization of $11,000, offset by a decrease in
general and administrative expense of $1,000 and a decrease in real
estate tax expense of $18,000 corresponding to the decrease in
other charges to tenants of $18,000. Management fees also
decreased $1,000.
Results of Operations - 3 months - 2003 Compared to 2002
The Fund generated net income of $192,000 for the three months
ended September 30, 2003 as compared to net income of $177,000 for
the three months ended September 30, 2002.
Total income for the three months ended September 30, 2003 was
$350,000 as compared to $309,000 for the same three month period in
2002, an increase of $40,000. The $40,000 increase was primarily
due to an increase in rental income of $39,000. Rental income
increased as a result of receiving income from additional
properties purchased to replace the two sold properties in 2002.
Other charges to tenants increased $6,000 and interest and other
income decreased $5,000.
For the three months ended September 30, 2003, total expenses
were $157,000 as compared to $132,000 for the same three month
period in 2002, an increase of $25,000. The increase is primarily
due to an increase in depreciation and amortization $10,000 as a
result of owning more properties during 2003 when compared to 2002.
Additionally impacting expense was an increase in general and
administrative expense of $9,000, and an increase in real estate
tax expense of $6,000 corresponding to the increase in other
charges to tenants of $6,000.
Item 3. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The 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 Fund's 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 Fund's
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.
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: November 14, 2003
BY: /s/Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
DATE: November 14, 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: November 14, 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: November 14, 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 September
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: November 14, 2003
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
DATE: November 14, 2003