UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended June 30, 2004
[ ] Transition Report Pursuant to 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.
(Name of small business issuer as specified 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, including area code)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act of 1934 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, 2004, 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 Statement of Net Assets in Liquidation
as of June 30, 2004 (Liquidation Basis) 4
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2004 to
June 30, 2004 (Liquidation Basis) 5
Consolidated Statements of Operations for the
six months ended June 30, 2004 (Liquidation Basis)and
June 30, 2003 (Going Concern Basis) 6
Consolidated Statements of Operations for the
three months ended June 30, 2004 (Liquidation Basis)
and June 30, 2003 (Going Concern Basis) 7
Consolidated Statement of Cash Flow for the
six months ended June 30, 2003 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis or Plan
of Operation 22
Item 3. Controls and Procedures 26
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 2. Changes in Securities 27
Item 3. Defaults Upon Senior Securities. 27
Item 4. Submission of Matters to a Vote of Security
Holders 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 28
Signatures 29
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
The following Consolidated Statement of Net Assets in
Liquidation as of June 30, 2004 (Liquidation Basis), Consolidated
Statement of Changes in Net Assets in Liquidation for the period
January 1, 2004 to June 30, 2004 (Liquidation Basis),
Consolidated Statements of Operations for the six months ended
June 30, 2004 (Liquidation Basis) and June 30, 2003 (Going
Concern Basis), Consolidated Statements of Operations for the
three months ended June 30, 2004 (Liquidation Basis) and June 30,
2003 (Going Concern Basis) and Consolidated statement of Cash
Flow for the six months ended June 30, 2003 (Going Concern Basis)
for Brauvin Net Lease V, Inc. (the "Fund") are unaudited but
reflect, in the opinion of the management, all adjustments
necessary to present fairly the information required. All such
adjustments are of a normal recurring nature.
These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Fund's 2003 Annual Report on Form 10-KSB.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
JUNE 30, 2004 (LIQUIDATION BASIS)
(Unaudited)
ASSETS
Real estate held for sale $13,469,126
Cash and cash equivalents 576,417
Tenant Receivables 4,702
-----------
Total Assets 14,050,245
-----------
LIABILITIES
Accounts payable and accrued expenses 35,554
Deferred gain on sale of real estate 3,793,484
Prepaid rent 44,222
Reserve for estimated costs during
the period of liquidation 395,595
Tenant security deposits 9,794
Due to affiliates 2,076
-----------
Total Liabilities 4,280,725
-----------
Net Assets in Liquidation $ 9,769,520
===========
See accompanying notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR
THE PERIOD JANUARY 1, 2004 TO JUNE 30, 2004
(LIQUIDATION BASIS)
(Unaudited)
Net assets in liquidation at January 1, 2004 $9,671,560
Income from operations 613,134
Dividends (515,174)
----------
Net assets in liquidation at June 30, 2004 $9,769,520
==========
See accompanying notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 (LIQUIDATION BASIS)
AND JUNE 30, 2003 (GOING CONCERN BASIS)
(Unaudited)
June 30, June 30,
2004 2003
-------- --------
INCOME
Rental $646,538 $605,365
Other charges to tenants 5,962 --
Interest -- 6,022
-------- --------
Total income 652,500 611,387
-------- --------
EXPENSES
Directors' fees -- 6,000
Advisory fees -- 105,438
Management fees 6,453 6,432
Depreciation and Amortization -- 87,494
Real estate tax 4,702 --
General and administrative 28,211 53,296
-------- --------
Total expenses 39,366 258,660
-------- --------
Net income $613,134 $352,727
======== ========
Net income per Share
(Based on weighted
average shares outstanding
of 1,286,163) $ 0.48 $ 0.27
======== ========
See accompanying notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2004 (LIQUIDATION BASIS)
AND JUNE 30, 2003 (GOING CONCERN BASIS)
(Unaudited)
June 30, June 30,
2004 2003
-------- --------
INCOME
Rental $322,639 $303,851
Other charges to tenants 5,962 --
Interest -- 2,412
-------- --------
Total income 328,601 306,263
-------- --------
EXPENSES
Directors' fees -- 3,000
Advisory fees -- 69,189
Management fees 3,154 3,442
Depreciation and Amortization -- 43,468
Real Estate Tax 4,702 --
General and administrative 15,977 33,566
-------- --------
Total expenses 23,833 152,665
-------- --------
Net income $304,768 $153,598
======== ========
Net income per Share
(Based on weighted
average shares outstanding
of 1,286,163) $ 0.24 $ 0.12
======== ========
See accompanying notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
STATEMENT OF CASH FLOW FOR
THE SIX MONTHS ENDED JUNE 30, 2003
(GOING CONCERN BASIS)
(Unaudited)
Cash Flow From Operating Activities
Net Income $352,727
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 87,494
Amortization of acquired above
market lease 9,666
Changes in:
Tenant receivables 21,060
Deferred rent receivable (14,738)
Prepaid expenses 3,724
Accounts payable and
Accrued expenses (4,697)
Security deposits 9,794
Rents received in advance 877
Due to affiliates (30)
---------
Net cash provided by operating
activities 465,877
---------
Cash Flows From Investing Activities:
Purchase of property (956,568)
---------
Net cash used in investing activities (956,568)
---------
Cash Flows From Financing Activities:
Dividends (478,708)
---------
Net cash used in
financing activities (478,708)
---------
Net decrease in cash and
cash equivalents (969,399)
Cash and cash equivalents
at beginning of the period 1,559,500
Cash and cash equivalents ---------
at end of period $ 590,101
=========
See accompanying notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 year ended December 31, 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, 2004, 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
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.
Basis of Presentation
As a result of the November 6, 2003 Board of Directors
approval of the plan of liquidation and, in accordance with
generally accepted accounting principles, the Fund's financial
statements for periods subsequent to November 6, 2003 have been
prepared on the liquidation basis of accounting. Accordingly,
the carrying values of the assets are presented at their
estimated net realizable values and liabilities are presented at
estimated settlement amounts, including estimated costs
associated with carrying out the liquidation. Preparation of
financial statements on the liquidation basis of accounting
requires significant assumptions by management, including the
estimate of liquidation costs and the resolution of any
contingent liabilities. There may be differences between the
assumptions and the actual results because events and
circumstances frequently do not occur as expected. Those
differences, if any, could result in a change in the net assets
recorded in the statement of net assets as of June 30, 2004.
Accounting Method
The accompanying consolidated financial statements have been
prepared using the accrual method of accounting.
Rental Income
Prior to the preparation of the financial statements on the
liquidation basis of accounting, rental income was 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 were 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
Prior to the preparation of the financial statements on the
liquidation basis of accounting, the rental properties were
stated at cost including acquisition costs. Depreciation was
recorded on a straight-line basis over the estimated economic
lives of the properties, which approximated 40 years.
Subsequent to the adoption of the liquidation basis of
accounting, the Fund adjusted its investment in real estate to
estimated net realizable value, which is recorded as real estate
held for sale. Additionally, recording of depreciation was
suspended.
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, 2004.
Accordingly, no impairment loss has been recorded in the
accompanying financial statements for the period ended June 30,
2004.
In July 2001, the FASB issued Statement of Financial
Accounting Standards No. 141, "Business Combinations" ("SFAS
141"). SFAS 141 requires the purchase method of accounting for
business combinations initiated after June 30, 2001 and
eliminates the pooling-of-interests method. In July 2001, the
FASB issued Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"), which 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 to the Company's
acquisition during year 2002 has resulted in the recognition of
additional intangible assets (acquired in place lease origination
costs aggregating $125,000 and an above market lease in the
amount of $141,000). The intangible assets were being amortized
over the remaining term of the acquired lease (7.3 years).
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 143 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.
U.S. generally accepted accounting principles require that in
the period a component of an entity is either classified as held
for sale or disposed of, the statement of operations shall report
the results of operations of such components in "discontinued
operations" in the period in which they occur.
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.
The Fund maintains its cash in bank deposit accounts, which
at times, may exceed federally insured limits. The Fund has not
experienced any losses in such accounts. Management believes the
Fund is not exposed to any significant credit risk related to
cash and cash equivalents.
Tenant Receivable
Rent receivables are comprised of (a) billed but uncollected
amounts due for monthly rents and other charges and (b) estimated
unbilled amounts due for tenant reimbursement of common area
maintenance charges and property taxes. Receivables are recorded
at management's estimate of the amounts that will ultimately be
collected. An allowance for doubtful accounts is based on
specific identification of uncollectible accounts (if any) 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, 2004, 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.
In connection with the adoption of the liquidation basis of
accounting, assets were adjusted to their net realizable values
and liabilities were adjusted to estimated settlement amounts,
which approximate fair value at June 30, 2004.
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 2004 and 2003.
Recent Accounting Pronouncements
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 period ending March 31, 2004.
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. This interpretation was revised in December
2003 and shall, for calendar year end entities, be effective as
of December 31, 2003 for "special purpose entities" (as defined)
and as of December 31, 2004 for all other entities. The Fund
does not own any "special purpose entities" as defined.
In May 2003, FASB issued Statement of Financial Accounting
Standards No. 150, "Accounting for Certain Financial Instruments
with the Characteristics of both Liabilities and Equity" ("SFAS
150"), which is effective for all financial instruments entered
into or modified after May 31, 2003, and is otherwise effective
beginning July 1, 2003. SFAS 150 establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity.
The adoption of SFAS 145 and 150 and FIN 45 and 46 has not
had a significant impact on the Fund's financial statements.
(2) ADJUSTMENT TO LIQUIDATION BASIS
On November 7, 2003, in accordance with the liquidation basis
of accounting, assets were adjusted to their estimated net
realizable values and liabilities were adjusted to their
estimated settlement amounts, including estimated costs
associated with carrying out the liquidation. The net adjustment
required to convert from the going concern (historical cost)
basis to the liquidation basis of accounting was a decrease of
$1,047,432 which is included in the December 31, 2003 statement
of changes in net assets in liquidation. Significant changes in
the carrying value of assets and liabilities are summarized as
follows:
Increase in real estate held for sale (a) $ 3,793,484
Write-off of deferred rent receivable (253,568)
Write-off of intangible assets (283,864)
Increase in deferred gain on sale
of real estate (3,793,484)
Estimated liquidation costs (510,000)
-----------
Total adjustment to liquidation basis $(1,047,432)
===========
(a) Net of estimated closing costs.
(3) 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 cumulative 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 May of 2004, and renewed it in both instances on the
same terms for one year.
In November 2002, the independent directors approved a one-
time payment of approximately $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 approximately $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 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,
2004 and 2003 were as follows:
2004 2003
------- --------
Advisory fees $72,498 $105,438
Reimbursable office expenses 8,100 6,750
Management fees 6,453 6,432
------- --------
$87,051 $118,620
======= ========
As of June 30, 2004 the Fund made all payments to affiliates
except for $1,257 for management fees and $819 for reissue fees.
(4) DIVIDENDS
Below is a table summarizing the dividends declared since
January 1, 2002:
Annualized
Declaration Record Payment Dividend
Date Dates Date(a) Rate Amount
- -------- ---------------- -------- ------- --------
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 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
1/29/04 10/1/03-12/31/03 2/15/04 8.00% 259,347
5/6/04 1/1/04-3/31/04 5/15/04 8.00% 255,827
8/5/04 4/1/04-6/30/04 8/15/04 8.00% 255,657
(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, 2004 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.
(5) PROPERTY ACQUISITION
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.
(6) SUBSEQUENT EVENT
The Fund has entered into a contract to sell the Firestone
and Jiffy Lube properties in one transaction. The terms of the
contract allows the potential purchaser a thirty five day due
diligence period and if the properties are accepted by the
potential purchaser closing will follow within thirty days
thereafter. In addition, the Fund has reached an agreement in
principle for the sale of the Chili's property. The Chili's
purchase and sale agreement is currently being negotiated.
However, there can be no assurance that either of the
contemplated transactions will close.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
Item 2. Management's Discussion and Analysis or Plan of
Operation.
General
Certain statements in this Quarterly Report that are not
historical fact constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. Without limiting the foregoing, words such as
"anticipates," "expects," "intends," "plans" and similar
expressions are intended to identify forward-looking statements.
These statements are subject to a number of risks and
uncertainties, 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, 2004, 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 $1,475,000.
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.
The Fund has replaced the sold properties in accordance with
the acquisition guidelines of the Fund.
The Fund has entered into a contract to sell the Firestone
and Jiffy Lube properties in one transaction. The terms of the
contract allows the potential purchaser a thirty five day due
diligence period and if the properties are accepted by the
potential purchaser closing will follow within thirty days
thereafter. In addition, the Fund has reached an agreement in
principle for the sale of the Chili's property. The Chili's
purchase and sale agreement is currently being negotiated.
However, there can be no assurance that either of the
contemplated transactions will close.
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 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.
Adoption of a Plan of Liquidation
The Fund is a finite-life REIT and, in accordance with the
investment objectives and policies detailed in the Fund's
Prospectus and the Fund's organizational documents, the Fund
expected to sell all of its assets and liquidate after a period
of ownership from 7 to 9 years, beginning, generally, anytime
between 2002 and 2004. Further, the Fund is subject to
increasing administrative costs related to compliance with state
and federal regulatory requirements, including the costs of
maintaining our status as a publicly traded company, which are
not economical given the Fund's relatively small size.
Accordingly, on November 6, 2003, the Board of Directors
unanimously approved a Plan of Liquidation and voted to recommend
that the stockholders approve the Plan of Liquidation. The
Stockholders voted to approve the plan of liquidation at the
Annual Meeting. The Plan of Liquidation provides that the Fund
will seek to sell all of its assets within a twenty-four month
period to an unaffiliated third party or parties and, subject to
payment of the Fund's liabilities, distribute the net proceeds
thereof to the stockholders, wind down the Fund's business and
dissolve. To date, the Fund entered into two letters of intent
to sell three of its properties. However, since agreement for
the sale of the majority of the Fund's properties have not yet
been reached, the material terms of the liquidation are still to
be finally determined.
As a result of the Board of Directors' approval of the Plan
of Liquidation, and in accordance with generally accepted
accounting principles, the Fund's financial statements for
periods subsequent to November 6, 2003 have been prepared on the
liquidation basis of accounting. Accordingly, the carrying
values of the assets are presented at net realizable values and
liabilities are presented at estimated settlement amounts,
including estimated costs associated with carrying out the
liquidation. Preparation of the financial statements on the
liquidation basis of accounting requires significant assumptions
by management, including the estimate of liquidation costs and
the resolution of any contingent liabilities. There may be
differences between the assumptions and the actual results
because events and circumstances frequently do not occur as
expected. Those differences, if any, could result in a change in
the net assets recorded in the consolidated statement of net
assets as of June 30, 2004.
Limitation on Total Operating Expenses
For the twelve month period ended December 31, 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.
For the purpose of the following analysis, 2003 information
is presented on the going concern basis.
Results of Operations - 6 months - 2004 Compared to 2003
Total income for the period ended June 30, 2004 was
approximately $653,000. Total expenses were approximately
$39,000 and net income was approximately $613,000.
Total income was approximately $653,000 in 2004 compared to
approximately $611,000 in 2003, an increase of approximately
$41,000. This increase was due to an increase in rental income
of $42,000 offset by a decrease in interest and other income of
$6,000. Real estate tax reimbursement income increased
approximately $5,000. Rental income increased as a result of
the June 18, 2003 acquisition of the three Dollar General stores.
Total expenses incurred in 2004 were approximately $39,000,
compared to approximately $259,000 in 2003, a decrease of
approximately $220,000. The decrease was due primarily to a
$88,000 decrease in depreciation and amortization as a result of
the liquidation basis of accounting. In addition advisory fees
decreased $106,000, directors fees decreased $6,000 and general
and administrative expense decreased $25,000 all as a result of
the expenses being reclassed against the reserve for liquidation.
Partially offsetting the decrease in expenses was an increase in
real estate tax expense of $5,000.
Results of Operations - 3 months - 2004 Compared to 2003
The Fund generated net income of $305,000 for the three
months ended June 30, 2004 as compared to net income of $154,000
for the three months ended June 30, 2003.
Total income for the three months ended June 30, 2004 was
$329,000 as compared to $306,000 for the same three month period
in 2003, an increase of $22,000. The $22,000 increase was due to
an increase in rental income of $20,000, offset by a decrease in
interest and other income of $2,000. Real estate tax
reimbursement income increased approximately $5,000.
For the three months ended June 30, 2004, total expenses were
$24,000 as compared to $154,000 for the same three month period
in 2003, a decrease of $129,000. The decrease was due primarily
to a $43,000 decrease in depreciation and amortization as a
result of the liquidation basis of accounting. In addition
advisory fees decreased $69,000, directors fees decreased $3,000
and general and administrative expense decreased $18,000 all as a
result of the expenses being reclassed against the reserve for
liquidation. Partially offsetting the decrease in expenses was
an increase in real estate tax expense of $5,000.
Item 3. Controls and Procedures
Within 90 days prior to the date of this 2004 Quarterly
Report, we completed an evaluation, under the supervision and
with the participation of management, including our Chief
Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Rule 13a-14 of the Securities
Exchange Act of 1934. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of the
evaluation date.
No significant changes were made to our internal controls or
in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
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 30, 2004.
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, 2004
was submitted for a vote. There were 704,600.7576 shares voted
"FOR" the ratification and 10,406.5810 shares voted "AGAINST",
and 87,019.902 abstained. Based on the number of shares voted
"FOR", Alschuler, Melvoin and Glasser LLP was retained as
independent accountant.
Additionally, the stockholders voted on the dissolution of the
Company pursuant to a plan of liquidation. There were
734,103.1521 shares voted "FOR" this proposal and 26,203.76225
shares voted "AGAINST". Based on the number of shares voted
"FOR" the dissolution of the Company pursuant to the plan of
liquidation was approved.
Item 5. Other Information
None.
Item 6. Exhibits and Reports On Form 8-K
Exhibit 99. Certification of Officers.
SIGNATURES
Pursuant to 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, 2004
By: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
DATE: August 19, 2004
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
OF
BRAUVIN NET LEASE V, INC.
I, Jerome J. Brault, Chief Executive Officer of the Fund, 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 our
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, 2004
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
OF
BRAUVIN NET LEASE V, INC.
I, Thomas E. Murphy, Chief Financial Officer of the Fund, 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 our
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/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
DATE: August 19, 2004
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, 2004, 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.
/s/ Jerome J. Brault
Jerome J. Brault
Chief Executive Officer
DATE: August 19, 2004
/s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
DATE: August 19, 2004