UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2007
or
[ ]Transition Report Pursuant to Section 13 or 15(d) of the Se
curities Exchange Act of 1934
For the transition period from _________ to ____________
Commission File Number __________ 0-13402_______________
_____________Brauvin Real Estate Fund L.P. 4_______________
(Name of small business issuer as specified in its charter)
Delaware 36-3304339
(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 issuer was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
..
Indicate by check mark whether registrant is a large accelerated
filer, an accelerated filer or a non-accelerated filer. See
definition of "accelerated filer and large accelerated filer" in
Rule 12b-2 of the Exchange Act. (Check one): Large accelerated
filer [ ] Accelerated filer [ ] Non-accelerated filer [X].
Indicate by check mark whether the registrant is a shell company
(as defined by Rule 12b-2 of the Exchange Act). Yes No X.
INDEX
PART I
Page
Item 1. Financial Statements 3
Consolidated Statement of Net Assets in Liquidation
as of September 30, 2007(Liquidation Basis) 4
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2007 to
September 30, 2007 (Liquidation Basis) 5
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2006 to
September 30, 2006 (Liquidation Basis) 6
Consolidated Statement of Operations for the nine
months ended September 30, 2007 and 2006
(Liquidation Basis) 7
Consolidated Statements of Operations for the
three months ended September 30, 2007 and 2006
(Liquidation Basis) 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis or Plan
of Operation 17
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. 4
(a Delaware limited partnership)
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The following Consolidated Statement of Net Assets in
Liquidation as of September 30, 2007 (Liquidation Basis),
Consolidated Statement of Changes in Net Assets in Liquidation
for the period January 1, 2007 to September 30, 2007 (Liquidation
Basis), Consolidated Statement of Changes in Net Assets in
Liquidation for the period January 1, 2006 to September 30, 2006
(Liquidation Basis, Consolidated Statements of Operations for the
nine months ended September 30, 2007 and 2006 (Liquidation Basis)
and Consolidated Statements of Operations for the three months
ended September 30, 2007 and 2006 (Liquidation Basis) for Brauvin
Real Estate Fund L.P. 4 (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 financial statements should be read in conjunction with
the financial statements and notes thereto included in the
Partnership's 2006 Annual Report on Form 10-KSB.
BRAUVIN REAL ESTATE FUND L.P. 4
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
SEPTEMBER 30, 2007 (LIQUIDATION BASIS)
(Unaudited)
ASSETS
Real estate held for sale $6,026,500
Cash and cash equivalents 391,904
Tenant receivables 8,619
Escrow deposits 200,962
Other assets 38,102
----------
Total Assets 6,666,087
----------
LIABILITIES
Mortgage notes payable (Note 4) 4,400,000
Accounts payable and accrued expenses 95,755
Reserve for estimated costs during
the period of liquidation 129,450
Tenant security deposits 13,090
Due to affiliates 4,049
----------
Total Liabilities 4,642,344
----------
Net Assets in Liquidation $2,023,743
==========
See accompanying notes to consolidated financial statements.
BRAUVIN REAL ESTATE FUND L.P. 4
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
FOR THE PERIOD JANUARY 1, 2007 TO SEPTEMBER 30, 2007
(LIQUIDATION BASIS)
(Unaudited)
Net assets in liquidation at January 1, 2007 $1,970,445
Adjustment to estimated liquidation costs 29,475
Excess revenue over expenses
from operations 23,823
----------
Net assets in liquidation at
September 30, 2007 $2,023,743
==========
Net assets available to:
General Partners $ --
==========
Limited Partners $2,023,743
==========
See accompanying notes to consolidated financial statements.
BRAUVIN REAL ESTATE FUND L.P. 4
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
FOR THE PERIOD JANUARY 1, 2006 TO SEPTEMBER 30, 2006
(LIQUIDATION BASIS)
(Unaudited)
Net assets in liquidation at January 1, 2006
as previously reported $2,092,903
Restatement to eliminate deferred gain 464,312
----------
Net assets in liquidation at January 1, 2006
as restated 2,557,215
Adjustment to estimated liquidation costs (50,325)
Excess (expenses) over revenue from
operations (519,948)
----------
Net assets in liquidation at
September 30, 2006 $1,986,942
==========
Net assets available to
General Partners $ --
==========
Limited Partners $1,986,942
==========
See accompanying notes to consolidated financial statements.
BRAUVIN REAL ESTATE FUND L.P. 4
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 and 2006
(LIQUIDATION BASIS)
(Unaudited)
2007 2006
-------- ---------
INCOME
Rental $562,367 $ 532,044
Interest 4,732 16,336
Other, primarily tenant
expense reimbursements 94,629 120,348
-------- ----------
Total income 661,728 668,728
-------- ----------
EXPENSES
Interest 255,463 240,356
Real estate taxes 88,363 83,367
Repairs and maintenance 36,512 20,309
Management fees (Note 5) 39,356 37,676
Other property operating 40,893 30,164
General and administrative 177,318 765,479
-------- ----------
Total expenses 637,905 1,177,351
-------- ----------
Excess revenue over (expenses)
before equity interests 23,823 (508,623)
Equity interest in Sabal
Palm Joint Venture's
excess (expenses) over
revenue -- (11,325)
-------- ----------
Excess revenue over (expenses)
from operations $ 23,823 $(519,948)
======== =========
See accompanying notes to consolidated financial statements.
BRAUVIN REAL ESTATE FUND L.P. 4
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 and 2006
(LIQUIDATION BASIS)
(Unaudited)
2007 2006
-------- --------
INCOME
Rental $187,970 $173,704
Interest 1,183 6,079
Other, primarily tenant
expense reimbursements 29,689 32,111
-------- --------
Total income 218,842 211,894
-------- --------
EXPENSES
Interest 87,019 84,244
Real estate taxes 29,440 25,984
Repairs and maintenance 4,861 12,343
Management fees (Note 5) 12,741 11,211
Other property operating 16,444 9,065
General and administrative 50,174 247,462
-------- --------
Total expenses 200,679 390,309
-------- --------
Excess expenses over revenue
from operations $ 18,163 $(178,415)
======== =========
See accompanying notes to consolidated financial statements.
BRAUVIN REAL ESTATE FUND L.P. 4
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements consolidate the accounts of Brauvin
Real Estate Fund L.P. 4 (the "Partnership") and Brauvin Raleigh,
LLC in addition to a 47% interest in another joint venture, which
is accounted for using the equity method of accounting.
The Partnership is a Delaware limited partnership organized
for the purpose of acquiring, operating, holding for investment
and disposing of existing office buildings, medical office
centers, shopping centers and industrial and retail commercial
buildings of a general purpose nature, all in metropolitan areas.
The General Partners of the Partnership are Brauvin Ventures,
Inc. and Jerome J. Brault. Mr. Cezar M. Froelich resigned as a
director of the corporate general partner in December 1994, and
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 General Partners of the Partnership filed a Registration
Statement on Form S-11 with the Securities and Exchange
Commission which became effective on February 16, 1984. 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 April 30, 1984 and the
Partnership was formed. The Partnership's offering closed on
December 31, 1984. A total of $9,550,000 of Units were
subscribed and issued between February 16, 1984 and December 31,
1984 pursuant to the Partnership's public offering.
Properties acquired by the Partnership either directly or
indirectly through affiliated joint ventures were: (a) Fortune
Professional Building (which was sold February 2003); (b) Raleigh
Springs Marketplace; (c) Strawberry Fields Shopping Center(which
was sold in July 2001) and (d) Sabal Palm Shopping Center(which
was sold in December 2005).
SUMMARY OF 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. Estimates significant to the financial statements
include the value used for real estate held for sale, and the
reserve for estimated costs during the period of liquidation.
Management has estimated that the remaining property will be sold
and the Partnership will liquidate by the end of 2007. 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 assets are presented at their
net realizable amounts and liabilities are presented at estimated
settlement amounts, including estimated costs associated with
carrying out the liquidation. Preparation of the financial
statements on a liquidation basis 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 September 30, 2007.
Estimated Liquidation Costs
Estimated costs expected to be incurred during the remaining
liquidation period through December 31, 2007 include legal fees,
insurance costs and other administrative items. Such costs do
not include costs associated with leasing available space at
Raleigh Springs.
Actual results could differ materially from these estimates.
On a regular basis an evaluation is made of the assumptions,
judgments and estimates and changes are recorded, as appropriate.
Accounting Method
The accompanying consolidated financial statements have been
prepared in accordance with the liquidation basis of accounting.
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 net realizable value. An allowance for doubtful
accounts of $46,389 is based on specific identification of
uncollectible accounts and the Partnership's historical
collection experience.
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.
Principles of Consolidation
The Partnership has one affiliate, Brauvin Raleigh, L.L.C.
which is owned 100% by the Partnership. The accounts of the
Partnership have been consolidated with its wholly owned
subsidiary in the accompanying financial statements. All
significant intercompany balances and transactions have been
eliminated upon consolidation.
Investment in Joint Venture Partnership
The Partnership owned a 47% equity interest in Sabal Palm
Joint Venture (see Note 6). Sabal Palm was reported as an
investment in an affiliated joint venture. The Partnership
recorded its proportionate share of income and loss from joint
venture operations.
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. In 2006, the joint venture distributed
all of its cash to its partners and liquidated.
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, tenant improvements and
net of impairment. Depreciation and amortization expense were
computed on a straight-line basis over approximately 31.5 years
and the term of the applicable leases, respectively. The
Partnership's remaining property is subject to a lien under a
first mortgage (see Note 4).
Subsequent to the adoption of the liquidation basis of
accounting, 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.
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.
Estimated Fair Value of Financial Instruments
In connection with the adoption of the liquidation basis of
accounting assets were adjusted to net realizable value, and
liabilities were adjusted to estimated settlement amounts.
Derivatives and Hedging Instruments
The Partnership has a derivative which is valued at fair
market value. The fair market value of the derivative, the
interest rate cap in Note 4, is not material.
Restatement
Under liquidation basis of accounting, there is no basis for
retaining the deferral for gain recognition which was required
under the going concern accounting principle. Net assets
available for liquidation at January 1, 2006 have been restated
to increase the net assets available for liquidation by $464,312,
the amount of the previously recorded deferred gain.
(2) 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
in accordance with paragraph 2, section K of the 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 their Adjusted Investment (the
"Preferential Distribution"), as such term is defined in the
Agreement. 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 year, 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.
At September 30, 2007, the Preferential Distribution
Deficiency exceeded the potential liquidation value of the
remaining Partnership assets.
(3) REAL ESTATE HELD FOR SALE
As a result of the adoption of the liquidation basis of
accounting (Note 1) the Partnership adjusted its real estate
holdings to net realizable value.
At September 30, 2007, the amount in real estate held for sale
represents the Partnership's estimated value (net of closing
costs) for the Raleigh Springs Market Place.
(4) MORTGAGE NOTE PAYABLE
On March 11, 2002, the Partnership accepted a proposal to
modify the Raleigh Springs Marketplace mortgage loan. Under the
terms of the proposal, the maturity date was extended to April 1,
2007. The loan, which continued to bear interest at 10% per
annum, required monthly installments of principal and interest of
$46,839 (based upon a 25 year amortization schedule) with a final
payment of unpaid interest and principal on April 1, 2007.
On November 17, 2005, the Partnership paid off the prior loan
(in the amount of $3,910,423) from the proceeds from a new first
mortgage loan ("First Mortgage") in the amount of $4,400,000.
This loan requires payments of interest only and has a twelve-
month maturity. In addition, the Partnership had the ability to
extend this loan for an additional twelve-month period (with the
payment of an additional fee of $11,000). Interest is payable
based on the LIBOR rate plus 2.25%. On September 30, 2007 and
September 30, 2006 the interest rate was approximately 8.00% and
7.58%, respectively. The Partnership has requested an extension
of the facility through March 9, 2008. The lender is currently
considering the proposal and there can be no assurance that the
loan will be extended.
The Partnership was also required to purchase interest rate
caps with one year maturity at a cost of $5,000 and $2,000 at
December 15, 2006 and 2005, respectively. The interest rate caps
fixed the LIBOR rate at 6.45%. The notional amount of the
interest rate cap agreements are identical to the notional amount
of the mortgage loan. The fair market value of the interest rate
cap agreements at September 30, 2007 and December 31, 2006 is $0.
The First Mortgage also required the establishment of a
$300,000 escrow that can be used for the payment of tenant
improvements and leasing commissions. The Partnership has been
reimbursed approximately $229,000 from the escrow account for
improvements related to the Marty's buildout.
The First Mortgage lender also required the Partnership to
create a special purpose entity, Brauvin Raleigh LLC, which is
fully owned by the Partnership. The Partnership transferred its
ownership interest in the Raleigh Springs Marketplace to the
special purpose entity. The Partnership was also required to
enter into a limited guaranty agreement. Primarily, under the
terms of the guaranty agreement the Partnership will not be
personally liable unless the Partnership or Brauvin Raleigh LLC
commit fraud by misapplication or misappropriation of cash
receipts.
Raleigh Springs Marketplace serves as collateral under the
respective non recourse debt obligation.
(5) TRANSACTIONS WITH AFFILIATES
Fees and other expenses incurred or payable to the General
Partners or their affiliates for the nine months ended September
30, 2007 and 2006 were as follows:
2007 2006
------- -------
Management fees $39,356 $37,676
Reimbursable office expenses 88,425 71,050
As of September 30, 2007, the Partnership had made all
payments to affiliates except for $4,049 for management fees.
(6) EQUITY INVESTMENT
The Partnership owned a 47% interest in Sabal Palm Joint
Venture ("Sabal Palm") and accounted for its investment under the
equity method.
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. In 2006, the joint
venture distributed all of its cash to its partners and
liquidated.
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. 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 intends to satisfy its short-term liquidity
needs through cash flow from its remaining property. Mortgage
notes payable are expected to be satisfied through a property
sale.
The General Partners determined to pursue the disposition of
the Partnership's assets. In 1999, the Partnership solicited and
received the votes of the Limited Partners to approve a sale of
all 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 intends to sell Raleigh Springs late in 2007
or early 2008 under a closed bid process which will include
identification of target buyers with proven financing ability and
performance of certain evaluations of the properties, such as
environmental testing. Potential buyers will be requested to
sign confidentiality agreements to safeguard the Partnership's
confidential proprietary information. The General Partners have
determined that each bid must be all cash, completely
unconditional and accompanied by a substantial deposit.
Subsequent to the end of the second quarter, the property was
listed for sale with a national broker that has experience in the
Memphis Market. The initial marketing has generated significant
interest in the property. The Partnership has negotiated a
contract for the sale of the property with an unaffiliated third
party. The buyer is currently in its due diligence investigation
period. If the buyer deems the property to be satisfactory, the
contract calls for the sale to be completed by year end 2007.
However, there is no assurance that this sale will be completed
under the terms or timing currently anticipated.
The Partnership has requested an extension of the Raleigh
facility through March 9, 2008. The lender is currently
considering the proposal and there can be no assurance that the
loan will be extended.
Property Status
Raleigh Springs Marketplace
In the fourth quarter of 2001, the Partnership leased 13,400
square feet of space to Sav A Lot, a national grocery chain. In
the third quarter of 2004, Sav A Lot exercised its first option
and extended the lease maturity through 2008. In the first
quarter of 2004, the Partnership reached an agreement in
principle with AJ Wright, a national clothing retailer, to take
approximately 25,000 square feet of the space then leased to Toys
"R" Us. The Partnership negotiated a lease with the tenant that
required substantial reconfiguration to the existing space and
tenant improvements. This lease was subject to a successful
termination and buyout of the existing Toys "R" Us lease. The
Partnership reached an agreement with Toys "R" Us for the
termination and a substantial buyout payment by Toys "R" Us to
the Partnership (such payment in the amount of $1,400,000 having
been received in September 2004). The Partnership anticipated
the payment would cover all of the conversion and tenant build
out costs required by the new tenant. The buyout of the lease was
subject to the approval of the property's lender and the lender
agreed to the transaction. In addition in 2004, the Partnership
leased approximately 10,000 square feet to the Veterans
Administration (the "VA"). The VA lease also required a
significant build out. The Partnership has incurred the cost of
the build out and funded the expense through a portion of the
Toys "R" Us lease buyout. In addition, the VA will make
additional lease payments to the Partnership in an amount that
will amortize the cost of the improvements over a five-year
period. AJ Wright and the VA took occupancy in the fourth quarter
of 2004.
In the first quarter of 2006, the Partnership received an
expression of interest in leasing the remaining space that was
the former Toys "R" Us (approximately 11,000 square feet). In
the second quarter of 2006, the Partnership and Marty's, LLC (a
regional retailer of mens fashion clothing) executed a lease
agreement. The tenant required significant improvements to be
made to the space prior to its occupancy. The Partnership
primarily paid for these improvements through the use of the
escrow funds held by the First Mortgage lender (as detailed
above) and available cash on hand. Marty's began its occupancy
in mid November 2006 and has begun paying rent in April 2007. A
tenant that had occupied approximately 4,800 square feet (or 4.2%
of the center) filed for bankruptcy and has terminated its lease.
During the fourth quarter, the Partnership expanded the expanded
the lease space with the VA by 600 square feet. In addition, the
Partnership has a verbal indication from Sav A Lot that it
intends to exercise its five year renewal option.
The Partnership has made a number of cosmetic repairs and
improvements to Raleigh Springs to improve its marketability for
sale. These improvements included painting and repair of the
sign band as well as minor parking lot repairs and a full parking
lot reseal and restriping. In addition, Sav A Lot has recently
requested permission to upgrade its signage at the property.
The Partnership has negotiated a contract for the sale of the
property with an unaffiliated third party. The buyer is
currently in its due diligence investigation period. If the
buyer deems the property to be satisfactory, the contract calls
for the sale to be completed by year end 2007. However, there is
no assurance that this sale will be completed under the terms or
timing currently anticipated.
Sabal Palm Shopping Center
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. In 2006, the joint
venture distributed all of its cash to its partners and
liquidated.
Results of Operations
The Partnership's revenue and expenses are affected primarily
by the operations of its last remaining property. 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.
The General Partners conduct an in-depth assessment of the
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 are 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 are
unsuccessful, management of the Partnership considers the
possibility of reverting the properties to the first mortgage
lender. Foreclosure proceedings may require 6 to 24 months to
conclude.
Results of Operations - Nine months ended September 30, 2007 and
2006 (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 an excess of revenue over expenses
of $24,000 for the period ended September 30, 2007 as compared to
an excess of expenses over revenue of $520,000 for the same
period in 2006. The $544,000 increase in excess of revenue over
expenses is primarily a result of a decrease in total expenses of
$539,000 reduced by a decrease in total income of $7,000. The
Partnership's share of Sabal Palms net loss decreased $11,000.
Total income for the period ended September 30, 2007 was
$662,000 as compared to $669,000 for the same period in 2006.
The $7,000 decrease in total revenue was primarily a result of
decreases in other primarily tenant expense reimbursements and
interest income of approximately $26,000 and $11,000,
respectively. Other primarily tenant expense reimbursements
decreased $26,000 from 2006 to 2007 as a result of certain
tenants at Raleigh Springs Marketplace reimbursing the
Partnership for tenant improvement items completed in 2006, while
no such work was done in 2007. Offsetting the decrease in other
primarily tenant expense reimbursements was an increase in rental
income of $30,000, which was the result of increased occupancy at
the Raleigh in 2007.
Total expenses for the period ended September 30, 2007 were
$638,000 as compared to $1,177,000 for the same period in 2006.
The $539,000 decrease in total expense was due to a decrease in
general and administrative expense of $588,000 relating to the
Marty's buildout at Raleigh Springs Marketplace, offset by an
increase in repairs and maintenance of $16,000 relating to the
parking lot repairs and resurfacing at Raleigh Springs.
Additionally, interest expense increased $15,000 which relates to
higher interest rates in 2007 when compared to 2006.
Results of Operations - Three months ended September 30, 2007 and
2006 (Liquidation Basis)
The Partnership generated excess expenses over revenues of
$18,000 for the period ended September 30, 2007 as compared to
excess of expenses over revenue of $178,000 for the same period
in 2006. The $196,000 decrease in excess expenses over revenues
is primarily a result of a decrease in total expenses of $189,000
and increase in total income of $7,000.
Total income for the period ended September 30, 2007 was
$219,000 as compared to $212,000 for the same period in 2006.
The increase in total income is primarily a result of an increase
in rental income of $14,000, which was relates to an increased
occupancy at the Raleigh in 2007. Partially offsetting the
increase in rental revenue was a decrease in interest income of
$5,000 and a decrease in other primarily tenant expense
reimbursements of $2,000 from 2006 to 2007.
Total expenses for the period ended September 30, 2007 were
$201,000 as compared to $390,000 for the same period in 2006.
The $189,000 decrease in total expense was due to a decrease in
general and administrative expense of $197,000 and a decrease in
repairs and maintenance of $7,000, partially offset by increases
in operating expense of $7,000, real estate tax expense of $3,000
and interest expense of $3,000. The decrease in general and
administrative expense relates to the costs of the Marty's
buildout at Raleigh Springs Marketplace in 2006. Repairs and
maintenance expense increased as a result of the parking lot
repairs and resurfacing at Raleigh Springs Marketplace.
ITEM 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our 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 the 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. We are not aware of any significant
deficiencies or material weaknesses, therefore no corrective
actions were taken.
BRAUVIN REAL ESTATE FUND L.P. 4
(a Delaware limited partnership)
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
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. 4
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors and President
DATE: November 14, 2007
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer and
Treasurer
DATE: November 14, 2007
CERTIFICATION FOR SARBANES-OXLEY SECTION 302(A)
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
I, Jerome J. Brault, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Brauvin Real Estate Fund L.P. 4;
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) 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
c) 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. 4
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors and President
DATE: November 14, 2007
CERTIFICATION FOR SARBANES-OXLEY SECTION 302(A)
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
I, Thomas E. Murphy, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Brauvin Real Estate Fund L.P 4.;
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) 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
c) 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. 4
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer and
Treasurer
DATE: November 14, 2007
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, 2007, 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. 4.
BY: Brauvin Ventures, Inc.
Corporate General Partner of
Brauvin Real Estate Fund L.P. 4
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors and President
DATE: November 14, 2007
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer and
Treasurer
DATE: November 14, 2007