UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the three months ended March 31, 2006
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-14481
Brauvin Real Estate Fund L.P. 5
(Name of small business issuer as specified in its charter)
Delaware 36-3432071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 North LaSalle Street, Chicago, Illinois 60602
(Address of principal executive offices) (Zip Code)
(312)759-7660
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filling requirements for the past 90 days. Yes X No .
Indicate by check mark whether the registrant is a shell company
(as defined by Rule 12b-2 of the Exchange Act). Yes No X.
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
INDEX
PART I
Page
Item 1. Consolidated Financial Statements 3
Consolidated Statement of Net Assets in Liquidation
as of March 31, 2006 (Liquidation Basis) 4
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2006 to
March 31, 2006 (Liquidation Basis) 5
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2005 to
March 31, 2005 (Liquidation Basis) 6
Consolidated Statements of Operations for the
three months ended March 31, 2006 and
March 31, 2005(Liquidation Basis) 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan
of Operation 18
Item 3. Controls and Procedures . . . . . . . . . . . . 22
PART II
Item 1. Legal Proceedings 23
Item 2. Changes in Securities 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security
Holders 23
Item 5. Other Information 23
Item 6. Exhibits, and Reports on Form 8-K 23
Signatures . . . . . . . . . . . . . . . . .. .. .. .. . . 24
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
The following Consolidated Statement of Net Assets in
Liquidation as of March 31, 2006 (Liquidation Basis),
Consolidated Statement of Changes in Net Assets in Liquidation
for the period January 1, 2006 to March 31, 2006 (Liquidation
Basis), Consolidated Statement of Changes in Net Assets in
Liquidation for the period January 1, 2005 to March 31, 2005
(Liquidation Basis) and Consolidated Statements of Operations for
the three months ended March 31, 2006 and March 31, 2005
(Liquidation Basis) for Brauvin Real Estate Fund L.P. 5 (the
"Partnership") are unaudited but reflect, in the opinion of the
management, all adjustments necessary to present fairly the
information required. All such adjustments are of a normal
recurring nature.
These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Partnership's 2005 Annual Report on Form
10-KSB.
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
MARCH 31, 2006 (LIQUIDATION BASIS)
(Unaudited)
ASSETS
Cash and cash equivalents $3,285,455
Tenant receivable (net of an
allowance of $72,838) 41,133
----------
Total Assets 3,326,588
----------
LIABILITIES
Accounts payable and accrued expenses 32,910
Reserve for estimated costs during
the period of liquidation 111,765
Due to affiliates (Note 4) 178
----------
Total Liabilities 144,853
MINORITY INTEREST IN SABAL PALM
JOINT VENTURE 93,113
----------
Net Assets in Liquidation $3,088,622
==========
See accompanying notes to consolidated financial statements
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN
LIQUIDATION FOR THE PERIOD JANUARY 1, 2006 TO MARCH 31, 2006
(LIQUIDATION BASIS)
(Unaudited)
Net assets in liquidation at January 1, 2006 $3,072,763
Income from operations 15,859
----------
Net assets in liquidation at March 31, 2006 $3,088,622
==========
See accompanying notes to consolidated financial statements
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN
LIQUIDATION FOR THE PERIOD JANUARY 1, 2005 TO MARCH 31, 2005
(LIQUIDATION BASIS)
(Unaudited)
Net assets in liquidation at January 1, 2005 $2,424,275
Loss from operations (48,830)
----------
Net assets in liquidation at March 31, 2005 $2,375,445
==========
See accompanying notes to consolidated financial statements
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2006 and 2005
(LIQUIDATION BASIS)
(Unaudited)
2006 2005
------- ---------
INCOME
Rental $ -- $ 116,517
Interest 29,581 12,621
Other, primarily tenant
expense reimbursements 3,931 35,860
-------- ---------
Total income 33,512 164,998
-------- ---------
EXPENSES
Interest -- 40,676
Real estate taxes -- 24,097
Repairs and maintenance -- 143,392
Management fees (Note 4) 1,677 9,283
Other property operating 558 12,407
Bad debt expense 19,800 5,415
General and administrative 4,555 21,145
-------- ---------
Total expenses 26,590 256,415
-------- ---------
Income (loss) before minority
interest 6,922 (91,417)
Minority interest's
share of Sabal Palm's
net loss 8,937 42,587
-------- --------
Net income (loss) $ 15,859 $(48,830)
======== ========
Net income(loss) allocated
to the General Partners $ 159 $ (488)
======== ========
Net income(loss) allocated
to the Limited Partners $ 15,700 $(48,342)
======== ========
Net income(loss) per
Limited Partnership
Interest (9,914.5 units
outstanding) $ 1.58 $ (4.88)
======== ========
See accompanying notes to consolidated financial statements.
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The financial statements consolidate the accounts of Brauvin
Real Estate Fund L.P. 5 (the "Partnership") and joint ventures in
which the Partnership has a 50% interest or greater.
Additionally, the Partnership had a 42% interest in another joint
venture which, prior to its sale in 2001, was accounted for using
the equity method of accounting.
Brauvin Real Estate Fund L.P. 5 (the "Partnership")
was organized on June 28, 1985. The General Partners of the
Partnership are Brauvin Ventures, Inc. and Jerome J. Brault. On
August 8, 1997, Mr. Cezar M. Froelich resigned as an Individual
General Partner effective 90 days from August 14, 1997. Brauvin
Ventures Inc. is owned by A.G.E. Realty Corporation Inc. (50%)
and by Messrs. Brault (beneficially) (25%) and Froelich (25%).
A. G. Edwards & Sons, Inc. and Brauvin Securities, Inc.,
affiliates of the General Partners, were the selling agents of
the Partnership. The Partnership is managed by an affiliate of
the General Partners.
The Partnership filed a Registration Statement on Form S-11
with the Securities and Exchange Commission, which became
effective on March 1, 1985. The sale of the minimum of
$1,200,000 of limited partnership interests of the Partnership
(the "Units") necessary for the Partnership to commence
operations was achieved on June 28, 1985. The Partnership's
offering closed on February 28, 1986. A total of $9,914,500 of
Units were subscribed for and issued between March 1, 1985 and
February 28, 1986 pursuant to the Partnership's public offering.
Properties owned either directly or indirectly with affiliates
of the Partnership from January 1, 2001 and subsequent
transactions are (a) Crown Point (which was sold in July 2002),
(b) Strawberry Fields (which was sold in July 2001) and (c) Sabal
Palm Shopping Center (which was sold in December 2005).
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 those estimates.
Basis of Presentation
As a result of the July 12, 1999 authorization by a majority
of the Limited Partners to sell the Partnership's properties, the
Partnership has begun the liquidation process and, in accordance
with generally accepted accounting principles, the Partnership's
financial statements for periods subsequent to July 12, 1999 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 in liquidation as of
March 31, 2006.
Accounting Method
The accompanying consolidated financial statements have been
prepared using the accrual method of accounting.
Federal Income Taxes
Under the provisions of the Internal Revenue Code, the
Partnership's income and losses are reportable by the partners on
their respective income tax returns. Accordingly, no provision
is made for Federal income taxes in the financial statements.
Consolidation of Joint Venture Partnership
The Partnership owns a 53% interest in the Sabal Palm Joint
Venture, which owned the Sabal Palm Shopping Center, prior to
its sale in December 2005. The accompanying financial statements
have consolidated 100% of the assets, liabilities, operations
and partners' capital of Sabal Palm Joint Venture. The minority
interest of the consolidated joint venture is adjusted for the
respective joint venture partner's share of income or loss and
any cash contributions from or distributions to the joint
venture partner, Brauvin Real Estate Fund L.P. 4 ("BREF 4").
All significant intercompany balances and transactions have been
eliminated.
On December 7, 2005, the joint venture sold the Sabal Palm
property for a gross sales price of $4,350,000. The joint
venture received net sales proceeds, after repayment of the first
mortgage, of approximately $1,601,000 and recognized a gain on
the sale of $1,189,925. Under the terms of the transaction, the
joint venture was able to bill and retain the 2005 common area
maintenance reimbursements. Accordingly, in late December 2005,
the joint venture billed the Sabal Palm tenants approximately
$75,000 for its common area reimbursement. The joint venture is
making every effort to collect the remaining receivables from the
Sabal Palm tenants.
Investment in Real Estate
Prior to the preparation of the financial statements on the
liquidation basis of accounting, the operating properties
acquired by the Partnership were stated at cost, including
acquisition costs, leasing commissions, and tenant improvements,
and net of impairment losses. Depreciation and amortization
expense were computed on a straight-line basis over approximately
31.5 years and the term of the applicable leases, respectively.
All of the Partnership's properties were subject to liens under
first mortgages.
Subsequent to the adoption of the liquidation basis of
accounting (see Note 2), the Partnership adjusted its investment
in real estate to estimated net realizable value, which is
recorded as real estate held for sale. Additionally, the
Partnership suspended recording any further depreciation expense.
The Partnership has adopted Statement of Financial Accounting
Standards No. 141, "Business Combinations" ("SFAS 141"). SFAS
141 requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. In July 2001, the FASB issued
Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"), which is effective
January 1, 2002. SFAS 142 requires, among other things, the
discontinuance of goodwill amortization. In addition, the
standard includes provisions for the reclassification of certain
existing 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.
The Partnership has adopted Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 retains
the recognition and measurement requirements of its predecessor,
but resolves significant implementation issues. In addition, it
applies to a segment of a business accounted for as a
discontinued operation.
SFAS 144 has not had a significant impact on the
Partnership's financial statements.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt
instruments with an original maturity within three months from
date
of purchase.
The Partnership maintains its cash in bank deposit accounts,
which, at times, may exceed federally insured limits. The
Partnership has not experienced any losses in such accounts.
Management believes the Partnership is not exposed to any
significant credit risk related to cash or cash equivalents.
Tenant Receivables
Tenant 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 of $72,838 at
March 31, 2006 is based on specific identification of
uncollectible accounts and the Partnership'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, "Disclosures
About Fair Value of Financial Instruments". The estimated fair
value amounts have been determined by using available market
information and appropriate valuation methodologies. However,
considerable judgement is necessarily required in interpreting
market data to develop estimates of fair value.
The fair value estimates are based on information available to
management as of March 31, 2006, but may not necessarily be
indicative of the amounts that the Partnership could realize in a
current market exchange. The use of different assumptions and/or
estimation methodologies may have a material effect on the
estimated fair value amounts.
In connection with the adoption of the liquidation basis of
accounting, assets were adjusted to their net realizable values
and liabilities were adjusted to estimated settlement amounts,
which approximate their fair value at March 31, 2006.
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 Partnership effective January 1,
2001. The Partnership had no derivatives in 2006 and 2005.
Variable Interest Entities
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 Partnership does not own any "special
purpose entities" (as defined). The adoption of FIN 46 has not
had a significant impact on the Partnership's financial
statements.
Liabilities and Equity Characteristics
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 entity classifies and measures certain financial instruments
with characteristics of both liabilities and equity. The
adoption of SFAS 150 has not had a significant impact on the
Partnership's financial statements.
Recent Accounting Pronouncements
During 2005, FASB issued Interpretation No. 47, "Accounting
for Conditional Asset Retirement Obligations" ("FIN 47") which is
effective for the Partnership's year ended December 31, 2005.
FIN 47 is an interpretation of FASB Statement No. 143 "Asset
Retirement Obligations. Under this standard, a company must
record a liability for a conditional asset retirement obligation
if the fair value of the obligation can be reasonably estimated.
The adoption of FIN 47 did not have a material effect on the
Partnership's consolidated financial statements.
SFAS No. 153, "Exchanges of Nonmonetary Assets-an amendment
of APB Opinion 29" issued by FASB in December 2004, generally
requires exchanges of productive assets to be accounted for at
fair value rather than carryover basis unless the transactions
lack commercial substance. SFAS No. 153 is effective for
nonmonetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. The adoption of this statement did not have
a material impact on the Partnership's financial position or
results of operations.
In May 2005, SFAS No. 154, "Accounting Changes and Error
Corrections" was issued by FASB. SFAS No. 154 replaces APB
Opinion No. 20, "Accounting Changes" and SFAS No. 3, "Reporting
Accounting Changes in Interim Financial Statements." This
statement requires voluntary changes in accounting policies to be
accounted for retrospectively with prior periods to be restated
as if the newly adopted policy had always been used. The
provisions of SFAS No. 154 could have an impact on prior year
financial statements if the Partnership has a change in
accounting policy.
In June 2005, FASB ratified its consensus in EITF Issue 04-
05, "Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights" (Issue 04-
05). Issue 04-05 is effective for all new or modified
partnerships after June 29, 2005 and for all new partnerships
after December 31, 2005. The adoption of Issue 04-05 did not
have an impact on the Partnership's financial statements.
(2) ADJUSTMENT TO LIQUIDATION BASIS
On July 12, 1999, 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) PARTNERSHIP AGREEMENT
The Partnership Agreement (the "Agreement") provides that 99%
of the net profits and losses from operations of the Partnership
for each fiscal year shall be allocated to the Limited Partners
and 1% of net profits and losses from operations shall be
allocated to the General Partners. The net profit of the
Partnership from the sale or other disposition of a Partnership
property shall be allocated as follows: first, there shall be
allocated to the General Partners the greater of: (i) 1% of such
net profits; or (ii) the amount distributable to the General
Partners as Net Sale Proceeds from such sale or other
disposition, as defined in the Partnership Agreement; and second,
all remaining profits shall be allocated to the Limited Partners.
The net loss of the Partnership from any sale or other
disposition of a Partnership property shall be allocated as
follows: 99% of such net loss shall be allocated to the Limited
Partners and 1% of such net loss shall be allocated to the
General Partners.
The Agreement provides that distributions of Operating Cash
Flow, as defined in the Agreement, shall be distributed 99% to
the Limited Partners and 1% to the General Partners. The receipt
by the General Partners of such 1% of Operating Cash Flow shall
be subordinated to the receipt by the Limited Partners of
Operating Cash Flow equal to a 10% per annum, cumulative,
non-compounded return on Adjusted Investment, as such term is
defined in the Agreement (the "Preferential Distribution"). In
the event the full Preferential Distribution is not made in any
year (herein referred to as a "Preferential Distribution
Deficiency") and Operating Cash Flow is available in following
years in excess of the Preferential Distribution for said years,
then the Limited Partners shall be paid such excess Operating
Cash Flow until they have been paid any unpaid Preferential
Distribution Deficiency from prior years. Net Sale Proceeds, as
defined in the Agreement, received by the Partnership shall be
distributed as follows: (a) first, to the Limited Partners until
such time as the Limited Partners have been paid an amount equal
to the amount of their Adjusted Investment; (b) second, to the
Limited Partners until such time as the Limited Partners have
been paid an amount equal to any unpaid Preferential Distribution
Deficiency; and (c) third, 85% of any remaining Net Sale Proceeds
to the Limited Partners, and the remaining 15% of the Net Sale
Proceeds to the General Partners. The Preferential Distribution
Deficiency at March 31, 2006 equaled $18,265,998.
(4) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid or payable to the General
Partners or its affiliates for the three months ended March 31,
2006 and 2005 were as follows:
2006 2005
-------- -------
Management fees $ 1,677 $ 9,283
Reimbursable office
expenses 19,800 19,800
As of March 31, 2006, the Partnership had made all payments
to affiliates, except for management fees of $178.
(5) COMMITMENTS AND CONTINGENCIES
In late February 2006, the Internal Revenue Service informed
the Partnership that it was being assessed penalties in the
amount of $188,800 for late filing and failure to electronically
file its 2004 partnership tax return. The Partnership out-
sourced these activities to a third party vendor. This vendor
had successfully completed the Partnership's 2003 tax filings
and, prior to the notice from the Internal Revenue Service, the
Partnership believed that the vendor had also successfully filed
its 2004 tax returns. The Partnership appealed these penalties.
The Partnership did not record any provision for this item in
2005 or 2006.
On May 1, 2006 the Partnership received a notice from the
Internal Revenue Service that all the penalties related to the
2004 late filings and failure to file electronically have been
waived.
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. Discussions containing forward-looking statements may be
found in this section and in the section entitled "Description of
Business." Without limiting the foregoing, words such as
"anticipates", "expects", "intends", "plans" and similar
expressions are intended to identify forward-looking statements.
These statements are subject to a number of risks and
uncertainties. Actual results could differ materially from those
projected in the forward-looking statements. The Partnership
undertakes no obligation to update these forward-looking
statements to reflect future events or circumstances.
Liquidity and Capital Resources
The Partnership's mortgage note payable was satisfied through
the sale of Sabal Palm.
In 1999, the Partnership solicited and received the votes of
the Limited Partners to approve a sale of all of the
Partnership's properties, either on an individual or group basis,
and to subsequently liquidate the Partnership. The solicitation,
which was approved by the Limited Partners in the third quarter
of 1999, stated that the Partnership's properties may be sold
individually or in any combination provided that the total sales
price for the properties included in the transaction equals or
exceeds 70% of the aggregate appraised value for such properties,
which valuation was conducted by an independent third party
appraisal firm.
The Partnership sold the remaining investment under a closed
bid process which included identification of target buyers with
proven financing ability and performance of certain evaluations
of the property, such as environmental testing. Potential buyers
were requested to sign confidentiality agreements to safeguard
the Partnership's confidential proprietary information. The
General Partners determined that each bid must have been all
cash, completely unconditional and accompanied by a substantial
deposit.
Property Status
Sabal Palm
On December 7, 2005, the joint venture sold the Sabal Palm
property for a gross sales price of $4,350,000. The joint
venture received net sales proceeds, after repayment of the first
mortgage, of approximately $1,601,000 and recognized a gain on
the sale of $1,189,925. Under the terms of the transaction, the
joint venture was able to bill and retain the 2005 common area
maintenance reimbursements. Accordingly, in late December 2005,
the joint venture billed the Sabal Palm tenants approximately
$75,000 for its common area reimbursement. The joint venture is
making every effort to collect the remaining receivables from the
Sabal Palm tenants.
As a result of the July 1999 authorization by a majority of
the Limited Partners to sell the Partnership's properties, the
Partnership begun the liquidation process and, in accordance with
generally accepted accounting principles, the Partnership's
financial statements for periods subsequent to July 12, 1999 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 March 31, 2006.
The General Partners expect to distribute proceeds from the
sale of real estate to Limited Partners in a manner that is
consistent with the investment objectives of the Partnership.
Subject to the collection of the remaining tenant receivables,
the General Partners expect to make a final distribution to the
Limited Partners prior to the end of the second quarter of 2006.
Results of Operations
The Partnership's revenue and expenses were affected primarily
by the operations of the properties. Property operations, and in
particular the components of income, demand for space and rental
rates are, to a large extent, determined by local and national
market conditions.
These conditions have generally adversely impacted the
Partnership's property economics. Rental and occupancy rates
were generally below where they were when the properties were
acquired.
The General Partners conducted an in-depth assessment of each
property's physical condition as well as a demographic analysis
to assess opportunities for increasing occupancy and rental rates
and decreasing operating costs. In all instances, decisions
concerning restructuring of loan terms, reversions and subsequent
operation of the property were made with the intent of maximizing
the potential proceeds to the Partnership and, therefore, return
of investment and income to Limited Partners.
In certain instances and under limited circumstances,
management of the Partnership entered into negotiations with
lenders for the purpose of restructuring the terms of loans to
provide for debt service levels that could be supported by
operations of the properties. When negotiations were
unsuccessful, management of the Partnership considered the
possibility of reverting the properties to the first mortgage
lender.
An affiliate of the Partnership and the General Partners was
assigned responsibility for day-to-day management of the
properties. The affiliate receives a combined management and
leasing fee which cannot exceed 6% of gross revenues generated by
the properties. Management fee rates are determined by the
extent of services provided by the affiliate versus services that
may be provided by third parties, i.e., independent leasing
agents. In all instances, fees paid by the Partnership to the
property management affiliate are, in the General Partners
opinion, comparable to fees that would be paid to independent
third parties.
Results of Operations - Three months ended March 31, 2006 and
2005 (Liquidation Basis)
As a result of the Partnership's adoption of the liquidation
basis of accounting, and in accordance with generally accepted
accounting principles, the Partnership's financial statements for
periods subsequent to July 12, 1999 have been prepared on a
liquidation basis.
The Partnership generated a net income of $16,000 for the
three months ended March 31, 2006 as compared to a net loss of
$49,000 for the same period in 2005.
Total income for the three months ended March 31, 2006 was
$34,000 as compared to $165,000 for the same period in 2005. The
$131,000 decrease in total income was primarily a result of a
$117,000 decrease in rental income and a $32,000 decrease in
other income. Interest income increased $17,000. Rental income
decreased as a result of the sale of Sabal Palm.
Total expenses for the three months ended March 31, 2006 were
$27,000 as compared to $256,000 for the same period in 2005. The
$230,000 decrease in expense is primarily the result of the sale
of the Sabal Palm property.
Results of Operations - Three months ended March 31, 2005 and
2004
(Liquidation Basis)
The Partnership generated a net loss of $49,000 for the three
months ended March 31, 2005 as compared to a net loss of $33,000
for the same period in 2004.
Total income for the three months ended March 31, 2005 was
$165,000 as compared to $131,000 for the same period in 2004.
The $34,000 increase in total income was primarily a result of a
$21,000 increase in rental income and a $6,000 increase in other
income. Interest income increased $7,000. Rental income
increased as a result of an increase in occupancy at Sabal during
the three months ended March 31, 2005 compared to the three
months ended March 31, 2004.
Total expenses for the three months ended March 31, 2005 were
$256,000 as compared to $187,000 for the same period in 2004.
The $70,000 increase in expense is the result of a $102,000
increase in repairs and maintenance, an $8,000 increase in
interest expense, a $2,000 increase in management fees, offset by
a $39,000 decrease in general and administrative expense and a
$3,000 decrease in bad debt expense. Repairs and maintenance
increased primarily as a result of roof repairs at the Sabal Palm
property. General and administrative expenses decreased
primarily as a result of paying leasing commissions during the
three months ended March 31, 2004.The Partnership generated a net
loss of $33,000 for the three months ended March 31, 2004 as
compared to a net loss of $197,000 for the same period in 2003.
Item 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Chief Executive Officer and Chief Financial Officer, of
the corporate general partner, have reviewed and evaluated the
effectiveness of the Partnership's disclosure controls and
procedures (as defined in Exchange Act Rules 240.13a-14(c) and
15d-14(c)) as of a date within 90 days before the filing date of
this quarterly report. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that
the Partnership's current disclosure controls and procedures are
effective and timely, providing all material information relating
to the Partnership required to be disclosed in reports filed or
submitted under the Exchange Act.
Changes in Internal Controls
There have not been any significant changes in the
Partnership's internal controls or in other factors that could
significantly affect these controls subsequent to the date of
their evaluation. The Chief Executive Officer and Chief
Financial Officer are not aware of any significant deficiencies
or material weaknesses, therefore no corrective actions were
taken.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters To a Vote of Security
Holders.
None.
ITEM 5. Other Information.
In late February 2006, the Internal Revenue Service informed
the Partnership that it was being assessed penalties in the
amount of $188,800 for late filing and failure to electronically
file its 2004 partnership tax return. The Partnership out-
sourced these activities to a third party vendor. This vendor
had successfully completed the Partnership's 2003 tax filings
and, prior to the notice from the Internal Revenue Service, the
Partnership believed that the vendor had also successfully filed
its 2004 tax returns. The Partnership appealed these penalties.
The Partnership did not record any provision for this item in
2005 or 2006.
On May 1, 2006 the Partnership received a notice from the
Internal Revenue Service that all the penalties related to the
2004 late filings and failure to file electronically have been
waived.
ITEM 6. Exhibits and Reports on Form 8-K.
Exhibit 99. Certification of Officers
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BY: Brauvin Ventures, Inc.
Corporate General Partner of
Brauvin Real Estate Fund L.P. 5
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors and President
DATE: May 17, 2006
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
And Treasurer
DATE: May 17, 2006
CERTIFICATION FOR SARBANES-OXLEY SECTION 302(A)
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
OF
BRAUVIN VENTURES, INC.
CORPORATE GENERAL PARTNER
OF
BRAUVIN REAL ESTATE FUND L.P. 5
I, Jerome J. Brault, Chief Executive Officer of the Company,
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Brauvin Real Estate Fund L.P. 5;
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: Brauvin Ventures, Inc.
Corporate General Partner of
Brauvin Real Estate Fund L.P. 5
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors, President and Chief
Executive Officer
DATE: May 17, 2006
CERTIFICATION FOR SARBANES-OXLEY SECTION 302(A)
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
OF
BRAUVIN VENTURES, INC.
CORPORATE GENERAL PARTNER
OF
BRAUVIN REAL ESTATE FUND L.P. 5
I, Thomas E. Murphy, Chief Financial Officer of the Company,
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Brauvin Real Estate Fund L.P 5.;
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: Brauvin Ventures, Inc.
Corporate General Partner of
Brauvin Real Estate Fund L.P. 5
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer and
Treasurer
DATE: May 17, 2006
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 March 31, 2006, 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 Real Estate Fund L.P. 5.
BY: Brauvin Ventures, Inc.
Corporate General Partner of
Brauvin Real Estate Fund L.P. 5
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors and President
DATE: May 17, 2006
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
And Treasurer
DATE: May 17, 2006