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 September 30, 2005
[ ] 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 November 15, 2005, 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 September 30, 2005 (Liquidation Basis) 4
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2005 to
September 30, 2005 (Liquidation Basis) 5
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2004 to
September 30, 2004 (Liquidation Basis) 6
Consolidated Statements of Operations for the
nine months ended September 30, 2005 (Liquidation
Basis)and September 30, 2004 (Liquidation Basis) 7
Consolidated Statements of Operations for the
three months ended September 30, 2005 (Liquidation
Basis)and September 30, 2004 (Liquidation Basis) 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis or Plan
of Operation 21
Item 3. Controls and Procedures 24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 2. Changes in Securities 25
Item 3. Defaults Upon Senior Securities. 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K . . . . . . .. 25
Signatures 26
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 September 30, 2005 (Liquidation Basis),
Consolidated Statement of Changes in Net Assets in Liquidation
for the period January 1, 2005 to September 30, 2005 (Liquidation
Basis), Consolidated Statement of Changes in Net Assets in
Liquidation for the period January 1, 2004 to September 30, 2004
(Liquidation Basis), Consolidated Statements of Operations for
the nine months ended September 30, 2005 (Liquidation Basis) and
September 30, 2004 (Liquidation Basis), Consolidated Statements
of Operations for the three months ended September 30, 2005
(Liquidation Basis) and September 30, 2004 (Liquidation 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 2004 Annual Report on Form 10-KSB.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
SEPTEMBER 30, 2005 (LIQUIDATION BASIS)
(Unaudited)
ASSETS
Real estate held for sale $7,135,178
Cash and cash equivalents 2,729,905
Prepaid expenses 5,980
Tenant receivables 2,253
----------
Total Assets 9,873,316
----------
LIABILITIES
Accounts payable and accrued expenses 55,836
Deferred gain on sale of real estate 2,017,826
Prepaid rent 8,850
Reserve for estimated costs during
the period of liquidation 233,922
Tenant security deposits 9,794
Due to affiliates 660
----------
Total Liabilities 2,326,888
----------
Net Assets in Liquidation $7,546,428
==========
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, 2005 TO SEPTEMBER 30, 2005
(LIQUIDATION BASIS)
(Unaudited)
Net assets in liquidation at January 1, 2005 $10,353,918
Income from operations 603,213
Gain on sale of property 2,378,646
Dividends (5,789,349)
-----------
Net assets in liquidation at
September 30, 2005 $ 7,546,428
===========
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 SEPTEMBER 30, 2004
(LIQUIDATION BASIS)
(Unaudited)
Net assets in liquidation at January 1, 2004 $9,671,560
Income from operations 889,500
Dividends (770,830)
----------
Net assets in liquidation at
September 30, 2004 $9,790,230
==========
See accompanying notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (LIQUIDATION BASIS)
AND SEPTEMBER 30, 2004 (LIQUIDATION BASIS)
(Unaudited)
SEPTEMBER 30, SEPTEMBER 30,
2005 2004
---------- --------
INCOME
Rental $ 708,774 $970,474
Lease termination fee 62,068 --
Other charges to tenants 39,980 26,854
Interest 15,610 --
---------- --------
Total income 826,432 997,328
---------- --------
EXPENSES
Directors' fees 6,000 --
Advisory fees 72,555 --
Management fees 8,501 9,883
Real estate tax 31,646 24,964
General and administrative 104,517 72,981
---------- --------
Total expenses 223,219 107,828
---------- --------
Income before gain on
sale of property 603,213 889,500
Gain on sale of property 2,378,646 --
---------- --------
Net income $2,981,859 $889,500
========== ========
Net income per Share
(Based on weighted
average shares outstanding
of 1,286,163) $ 2.32 $ 0.69
========== ========
See accompanying notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005
(LIQUIDATION BASIS) AND
SEPTEMBER 30, 2004 (LIQUIDATION BASIS)
(Unaudited)
SEPTEMBER 30, SEPTEMBER 30,
2005 2004
---------- -----------
INCOME
Rental $ 178,358 $323,936
Lease termination fees 62,068 --
Other charges to tenants 2,771 20,892
Interest 7,646 --
---------- --------
Total income 250,843 344,828
---------- --------
EXPENSES
Directors' fees 6,000 --
Advisory fees 72,555 --
Management fees 2,604 3,430
Real Estate Tax 3,376 20,262
General and administrative 80,330 44,770
---------- --------
Total expenses 164,865 68,462
---------- --------
Income before gain on
sale of property 85,978 276,366
Gain on sale of property 958,579 --
---------- --------
Net income $1,044,557 $276,366
========== ========
Net income per Share
(Based on weighted
average shares outstanding
of 1,286,163) $ 0.81 $ 0.21
========== ========
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 Chili's Restaurant was sold during the
year ended December 31, 2004. The Jiffy Lube and Firestone
facility, the Country Harvest Buffet Restaurant and the Pier 1
Imports were sold during the nine months ended September 30,
2005.
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, 2005, 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. On
June 30, 2004 the stockholders also approved the plan of
liquidation.
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 September 30, 2005.
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 owned a 100% interest in one qualified REIT
subsidiary, Germantown Associates, Inc., which owned 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.
In April, 2005, the Firestone/Jiffy Lube property was sold to an
unaffiliated third party.
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 September 30, 2005.
Accordingly, no impairment loss has been recorded in the
accompanying financial statements for the period ended September
30, 2005.
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.
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 September 30, 2005, 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 September 30, 2005.
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 2005 and 2004.
Recent Accounting Pronouncements
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 for calendar year end entities, is effective as of
December 31, 2003. 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 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.
(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 2004 and February 2005, and renewed it on the same terms for
one year.
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 nine months ended September
30, 2005 and 2004 were as follows:
2005 2004
-------- --------
Advisory fees $108,747 $108,747
Reimbursable office expenses 12,150 12,150
Management fees 8,501 9,883
-------- --------
$129,398 $130,780
======== ========
As of September 30, 2005 the Fund made all payments to affiliates
except for $660 for management fees.
(4) DIVIDENDS
Below is a table summarizing the dividends declared since
January 1, 2003:
Annualized
Declaration Record Payment Dividend
Date Dates Date(a) Rate (b) Amount
1/23/03 10/1/02-12/31/02 1/30/03 6.94% $225,000
5/08/03 1/1/03-3/31/03 5/15/03 8.00% 253,708
8/07/03 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
5/06/04 1/1/04-3/31/04 5/15/04 8.00% 255,827
8/05/04 4/1/04-6/30/04 8/15/04 8.00% 255,657
11/04/04 7/1/04-9/30/04 11/15/04 8.00% 258,639
1/27/05 10/1/04-12/31/04 1/31/05 53.00% 1,715,649
5/04/05 1/1/05-3/31/05 5/15/05 81.15% 2,573,700
8/04/05 4/1/05-6/30/05 8/15/05 46.78% 1,500,001
11/03/05 7/1/05-9/30/05 11/15/05 140.74% 4,562,448
(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. On
January 31, 2005 checks were issued in the amount of $266,437 and
$1,449,212 for a total of $1,715,649. On May 15, 2005, checks
were issued in the amount of $253,700 and $2,320,000 for a total
of $2,573,700. Included in the 2005 dividend figures was return
of capital distributions totaling $9,587,100 ($1,526,000
distributed in January, $2,320,000 in May, $1,355,400 in August,
and $4,385,700 in November).
(b) Based on outstanding shares at the original offer price.
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 had registered 200,000 shares for
distribution solely in connection with the Reinvestment Plan. At
March 31, 2005 there were approximately 68,797 shares purchased
through the Reinvestment Plan. Effective February 13, 2001, the
Board of Directors discontinued the Dividend Reinvestment Plan.
Subsequently, dividends have been paid in cash.
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.
(5) PROPERTY SALE
On December 17, 2004 the Fund sold the Chili's Restaurant
property to an unaffiliated third party for a sales price of
$1,535,000. The net proceeds received were approximately
$1,526,000.
In January 2005, the Fund entered into an agreement to sell
the Jiffy Lube and Firestone property to an unaffiliated buyer.
The property was sold for $2,405,000 on April 22, 2005, net
proceeds received by the Fund at closing was approximately
$2,327,000.
In the first quarter of 2005, the Fund entered into an
agreement to sell the Lynwood, Washington property now leased to
Oriental Buffet restaurant. Subsequent to the end of the first
quarter, the purchaser completed its due diligence investigation.
The property was sold for $1,430,000 on June 15, 2005, net
proceeds received by the Fund at closing were approximately
$1,355,000.
On September 12, 2005 the Fund sold the Pier 1 Imports
property to an unaffiliated third party for the sale price of
$2,300,000. The net proceeds received were approximately
$2,242,000.
(6) SUBSEQUENT EVENT
In the second quarter of 2005, the Fund entered into an
agreement to sell the Taylor Rental property located in
Jacksonville, Florida. Subsequent to the end of the quarter, the
purchaser completed its due diligence investigation and its
earnest money is now at risk. The purchaser did not want the
current lease in place upon the sale of the property, therefore
subsequent to the end of the due diligence period the Fund and
the tenant agreed to a lease termination. After the lease
termination was effective, but before the property was scheduled
to close the potential purchaser died. Although we believe that
the earnest money was at risk prior to the purchaser's demise
will be released to the Fund, the estate of the purchaser is
contesting the release of the earnest money. The Fund has
commenced litigation to obtain the release.
On November 9, 2005 the Fund sold the Taylor Rental property
to an unaffiliated third party for the sale price of $800,000.
The net sales proceeds received were approximately $754,000.
Further, on October 18, 2005, the Fund sold the Blockbuster
Video property in Lakewood, Colorado. The property was sold for
a sale price of $1,425,000. The net proceeds received by the
fund at closing was approximately $1,389,000.
Additionally, the Fund has entered into a contract with a
third party for the sale of the Lake Charles, Louisiana Dollar
General property. The buyer is currently conducting its due
diligence on the asset and there can be no assurance that the
transaction will be consummated.
Finally, the Fund has reached an agreement to sell the
Hollywood Video located in Beloit, Wisconsin. The Fund is
currently negotiating a sale contract with the buyer for this
property. There can be no assurance that this transaction will
be consummated.
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 September 30, 2005, 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 December 17, 2004 the Fund sold the Chili's Restaurant
property to an unaffiliated third party for a sales price of
$1,535,000. The net proceeds received were approximately
$1,526,000.
On April 22, 2005, the Fund sold the Jiffy Lube and Firestone
property to an unaffiliated party for a sales price of
$2,405,000, net proceeds received from the Fund at closing was
approximately $2,327,000.
On June 15, 2005, the Fund sold the Lynwood, Washington
property now leased to Oriental Buffet to an unaffiliated party
for an adjusted sales price of $1,430,000, net proceeds received
from the Fund at closing was approximately $1,355,000.
On September 12, 2005, the Fund sold the Pier 1 Imports to an
unaffiliated party for an adjusted sales price of $2,300,000, net
proceeds received from the Fund at closing was approximately
$2,242,000.
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.
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 on June 30, 2004. 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.
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 September 30, 2005.
Results of Operations - 9 months - 2005 Compared to 2004
Total income for the nine month period ended September 30,
2005 was approximately $826,000. Total expenses were
approximately $223,000. Gain on sale of property was
approximately $2,379,000 and net income was approximately
$2,982,000.
Total income was approximately $826,000 in 2005 compared to
approximately $997,000 in 2004, a decrease of approximately
$171,000. This decrease was due to a decrease in rental income
of approximately $262,000 offset by an increase in lease
termination fees of $62,000, an increase in interest and other
income of $16,000 and an increase in other tenant income of
$13,000. Rental income decreased as a result of the property
sales. Lease termination fees increased as a result of the
agreement to terminate the lease at the Taylor Rental property.
The increase in other charges to tenants corresponds to an
increase in real estate tax expense.
Total expenses incurred in 2005 were approximately $223,000,
compared to approximately $108,000 in 2004, an increase of
approximately $115,000. The increase in expense was due to an
increase in advisory fees of $73,000, an increase in general and
administrative expense of $32,000, an increase in real estate tax
expense of $7,000 and an increase in directors' fees of $6,000,
partially offset by a decrease in management fees of $1,000. The
increase in advisory fees, general and administrative expense and
directors' fees is the result of an increase in the reserve for
estimated costs during the period of liquidation. Management
fees decreased as a result of the property sales.
Results of Operations - 3 months - 2005 Compared to 2004
Total income for the three month period ended September 30,
2005 was approximately $251,000. Total expenses were
approximately $165,000. Gain on sale of property was
approximately $959,000 and net income was approximately
$1,045,000.
Total income was approximately $251,000 in 2005 compared to
approximately $345,000 in 2004, a decrease of approximately
$94,000. This decrease was due to a decrease in rental income of
approximately $146,000, which was partially offset by an increase
in lease termination fees of $62,000. Rental income decreased as
a result of the property sales. Lease termination fees increased
as a result of the lease termination at the Taylor Rental
property.
Total expenses incurred in 2005 were approximately $165,000,
compared to approximately $68,000 in 2004, an increase of
approximately $96,000. The increase in expense was due to an
increase in advisory fees of $73,000, an increase in general and
administrative expense of $36,000 and an increase in directors'
fees of $6,000, partially offset by a decrease in management fees
of $1,000. The increase in advisory fees, general and
administrative expense and directors' fees is the result of an
increase in the reserve for estimated costs during the period of
liquidation. Management fees decreased as a result of the
property sales.
Item 3. Controls and Procedures
Within 90 days prior to the date of this 2005 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.
None.
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: November 15, 2005
By: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
DATE: November 15, 2005
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: November 15, 2005
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: November 15, 2005
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, 2005, 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: November 15, 2005
/s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
DATE: November 15, 2005