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 nine months ended September 30, 1998
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 .
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
INDEX
PART I
Page
Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . 3
Consolidated Balance Sheet at September 30, 1998 . . . . . . 4
Consolidated Statements of Operations for the
nine months ended September 30, 1998 and 1997 . . . . . . 5
Consolidated Statements of Operations for the
three months ended September 30, 1998 and 1997. . . . . . 6
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1998 and 1997 . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . 8
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . . . . . .17
PART II
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .22
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .22
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .22
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .22
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .22
Item 6. Exhibits, and Reports on Form 8-K. . . . . . . . . . . . . .22
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
The following Consolidated Balance Sheet as of September 30,
1998, Consolidated Statements of Operations for the nine months
ended September 30, 1998 and 1997, Consolidated Statements of
Operations for the three months ended September 30, 1998 and 1997,
and Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 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 1997 Annual Report on Form
10-KSB.
CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30,
1998
ASSETS
Investment in real estate:
Land $ 2,411,849
Buildings and improvements 9,743,585
12,155,434
Less accumulated depreciation (3,222,501)
Net investment in real estate 8,932,933
Cash and cash equivalents 760,278
Rent receivable (net of
allowance of $18,000) 105,197
Escrow deposits 237,250
Other assets 130,945
Due from affiliates 35,700
Total Assets $10,202,303
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Mortgage notes payable (Note 3) $ 6,221,906
Accounts payable and accrued expenses 203,803
Tenant security deposits 44,370
Due to affiliates 5,809
Total Liabilities 6,475,888
Investment in Strawberry Fields
Joint Venture - Distributions and
losses in excess of invested
amounts(Note 5) 153,731
MINORITY INTEREST IN SABAL PALM
JOINT VENTURE 814,405
PARTNERS' CAPITAL:
General Partners (38,260)
Limited Partners (9,914.5 limited
partnership units issued and
outstanding) 2,796,539
Total Partners' Capital 2,758,279
Total Liabilities and
Partners' Capital $10,202,303
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended September 30,
(Unaudited)
1998 1997
INCOME
Rental $1,008,800 $ 991,181
Interest 23,440 18,159
Other, primarily tenant
expense reimbursements 158,773 116,353
Total income 1,191,013 1,125,693
EXPENSES
Interest 412,320 421,470
Depreciation 203,083 202,638
Real estate taxes 102,481 107,604
Repairs and maintenance 37,914 26,988
Management fees (Note 4) 70,000 68,687
Other property operating 42,275 50,415
General and administrative 140,107 162,542
Total expenses 1,008,180 1,040,344
Income before minority
and equity interests 182,833 85,349
Minority interest's share of
Sabal Palm's net income (44,335) (17,559)
Equity interest in Strawberry
Fields Joint Venture's
net loss (689,947) (21,171)
Net (loss) income $ (551,449) $ 46,619
Net (loss) income Allocated
to the General Partners $ (5,514) $ 466
Net (loss) income Allocated
to the Limited Partners $ (545,935) $ 46,153
Net income (loss) Per Limited
Partnership Interest
(9,914.5 Units) $ (55.06) $ 4.66
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended September 30,
(Unaudited)
1998 1997
INCOME
Rental $287,463 $294,672
Interest 10,924 6,840
Other, primarily tenant
expense reimbursements 59,005 12,692
Total income 357,392 314,204
EXPENSES
Interest 137,684 140,108
Depreciation 67,731 67,866
Real estate taxes 34,598 35,868
Repairs and maintenance 8,102 9,302
Management fees (Note 4) 17,399 18,699
Other property operating 14,584 19,586
General and administrative 38,499 48,652
Total expenses 318,597 340,081
Income before minority
and equity interests 38,795 (25,877)
Minority interest's share of
Sabal Palm's net loss 5,876 16,658
Equity interest in Strawberry
Fields Joint Venture's
net loss (6,031) (8,256)
Net income (loss) $ 38,640 $(17,475)
Net income (loss) Allocated
to the General Partners $ 386 $ (175)
Net income (loss) Allocated
to the Limited Partners $ 38,254 $(17,300)
Net income (loss) Per Limited
Partnership Interest
(9,914.5 Units) $ 3.86 $ (1.75)
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30,
(Unaudited)
1998 1997
Cash Flows From Operating Activities:
Net (loss) income $(551,449) $46,619
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation 203,083 202,638
Provision for doubtful accounts 3,401 4,500
Equity interest in Strawberry Fields Joint
Venture's net loss 689,947 21,171
Minority Interest's share of Sabal
Palm Joint Venture's net income 44,335 17,559
Change in rent receivables (2,773) 18,611
Change in other assets 9,086 13,919
Change in escrow deposits (118,497) (121,269)
Change in due from affiliate -- 5,880
Change in accounts payable
and accrued expenses 93,126 103,029
Change in due to affiliates (2,140) 5,939
Change in tenant security deposits 637 1,366
Net cash provided by operating activities 368,756 319,962
Cash Flows From Investing Activities:
Capital expenditures (1,320) (4,310)
Cash distribution to Minority Partner of
Sabal Palm Joint Venture (79,900) (13,160)
Cash used in investing activities (81,220) (17,470)
Cash Flows From Financing Activities:
Repayment of mortgage notes payable (87,651) (3,155,088)
Proceeds from refinancing -- 3,200,000
Payment of loan fees -- (55,605)
Net cash used in financing activities (87,651) (10,693)
Net increase in cash and cash equivalents 199,885 291,799
Cash and cash equivalents at beginning
of period 560,393 408,869
Cash and cash equivalents at end of
period $760,278 $ 700,668
Supplemental disclosure of
cash flow information:
Cash paid for interest $391,000 $ 402,701
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
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 was formed on June 28, 1985 and 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.
The Partnership has acquired directly or through joint ventures
the land and buildings underlying the Crown Point, Strawberry
Fields and Sabal Palm shopping centers.
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. Actual results could differ from those estimates.
Accounting Method
The accompanying consolidated financial statements have been
prepared using the accrual method of accounting.
Rental Income
Rental income is recognized on a straight line basis over the
life of the related leases. Differences between rental income
earned and amounts due per the respective lease agreements are
credited or charged, as applicable, to deferred rent receivable.
Federal Income Taxes
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 consolidated financial
statements.
Consolidation of Special Purpose Entity
The Partnership has one special purpose entity ("SPE"),
Brauvin/Crown Point L.P., which is owned 99% by the Partnership
and 1% by an affiliate of the General Partners. Distributions from
the SPE are subordinated to the Partnership which effectively
precludes any distributions from the SPE to affiliates of the
General Partners. The creation of the SPE did not affect the
Partnership's economic ownership of the property. Furthermore,
this change in ownership structure had no material effect on the
financial statements of the Partnership.
Consolidation of Joint Venture Partnership
The Partnership owns a 53% interest in the Sabal Palm Joint
Venture which owns Sabal Palm Shopping Center. The accompanying
financial statements have consolidated 100% of the assets,
liabilities, operations and partners' capital of Sabal Palm Joint
Venture. The minority interests of the consolidated joint venture
are 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, if any. All intercompany items and
transactions have been eliminated.
Investment in Joint Venture Partnership
The Partnership owns a 42% equity interest in the Strawberry
Fields Joint Venture (see Note 5). Strawberry Fields is reported
as an investment in an affiliated joint venture. The accompanying
financial statements include the investment in Strawberry Fields
Joint Venture using the equity method of accounting.
Investment in Real Estate
The Partnership's rental properties are stated at cost including
acquisition costs, leasing commissions, tenant improvements and are
net of provision for impairment. Depreciation and amortization are
recorded on a straight-line basis over the estimated economic lives
of the properties, which approximate 31.5 years, and the term of
the applicable leases, respectively. All of the Partnership's
properties are subject to liens under first mortgages (see Note 3).
In 1995, the Partnership adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(SFAS 121). In conjunction with the adoption of SFAS 121, the
Partnership performed an analysis of its long-lived assets, and the
Partnership'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, 1998 and
December 31, 1997. Accordingly, no impairment loss has been
recorded in the accompanying financial statements for the nine
months ended September 30, 1998 and the year ended December 31,
1997.
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.
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, 1998, 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.
The carrying amounts of the following items are reasonable
estimates of fair value: cash and cash equivalents; rent
receivable; escrow deposits; accounts payable and accrued expenses;
tenant security deposits; and due to/from affiliates.
(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, 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 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 September 30, 1998 equaled $10,582,245.
(3) MORTGAGES NOTES PAYABLE
Mortgages payable at September 30, 1998 consist of the following:
Interest Date
1998 Rate Due
Crown Point Shopping
Center (a) $3,067,346 7.55% 1/03
Sabal Palm Square
Shopping Center (b) 3,154,560 8.93% 3/02
$6,221,906
Each shopping center serves as collateral under its respective
nonrecourse debt obligation.
Maturities of the mortgages payable are as follows:
1998 $ 30,630
1999 128,086
2000 137,877
2001 150,124
2002 3,138,289
Thereafter 2,636,900
$6,221,906
(a) On December 28, 1995, the acquisition loan balance was paid
in full when Crown Point Shopping Center ("Crown Point") was
refinanced by NationsBanc Mortgage Capital Corporation (the
"Successor Lender"). The refinancing resulted in a $3,275,000 non-
recourse loan with a fixed interest rate of 7.55%, and amortization
based on a twenty year term with a maturity of January 1, 2003.
As a precondition to the new financing, the Successor Lender
required that ownership of the property reside in a single purpose
entity ("SPE"). To accommodate the lender's requirements,
ownership of the property was transferred to the SPE, Brauvin/Crown
Point L.P., which is owned 99% by the Partnership and 1% by an
affiliate of the General Partners. Distributions of Brauvin/Crown
Point L.P. are subordinated to the Partnership which effectively
precludes any distributions from the SPE to affiliates of the
General Partners. The creation of Brauvin/Crown Point L.P. did not
affect the Partnership's economic ownership of Crown Point.
Furthermore, this change in ownership structure had no material
effect on the financial statements of the Partnership.
The carrying value of Crown Point at September 30, 1998 was
approximately $4,183,000.
(b) On February 19, 1987, the Partnership and its joint venture
partner obtained a first mortgage loan secured by the Sabal Palm
Shopping Center ("Sabal Palm") in the amount of $3,200,000 from an
unaffiliated lender. The loan was payable with interest only at
9.5% per annum until February 1992 and then required payments of
principal and interest based on a 30-year amortization schedule
with a balloon mortgage payment in February 1997. Prior to the
scheduled maturity of this loan, the lender granted Sabal Palm an
extension until April 1, 1997. On March 31, 1997, Sabal Palm
obtained a new first mortgage loan in the amount of $3,200,000 (the
"First Mortgage Loan") secured by its real estate, from NationsBanc
Mortgage Capital Corporation. The First Mortgage Loan bears
interest at the rate of 8.93% per annum, is amortized over a 25-
year period, requires monthly payments of principal and interest of
approximately $26,700 and matures on March 26, 2002. A portion of
the proceeds of the First Mortgage Loan, approximately $3,077,000,
was used to retire Sabal Palm's existing mortgage from Lincoln
National Pension Insurance Company. The outstanding mortgage
balance encumbered by the property is $3,154,560 at September 30,
1998.
In the first quarter of 1998, the Partnership became aware that
both Winn-Dixie and Walgreens may vacate their respective spaces at
Sabal Palm prior to their lease termination dates. In the second
quarter of 1998, Winn-Dixie vacated its space at the center.
Walgreens has not given official notice that they will vacate their
space prior to their lease termination, the General Partners,
however, believe that there is a likelihood that this tenant will
vacate. The General Partners are working to determine the most
beneficial steps to be taken by the Partnership. Winn-Dixie
remains liable for rental payments under its lease at Sabal Palm
until April 2005.
The carrying value of Sabal Palm approximated $4,750,000 at
September 30, 1998.
(4) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid or payable to the General Partners
or its affiliates for the nine months ended September 30, 1998 and
1997 were as follows:
1998 1997
Management fees $70,000 $62,401
Reimbursable office
expenses 69,300 69,991
Legal fees -- 377
The Partnership believes the amounts paid to affiliates are
representative of amounts which would have been paid to independent
parties for similar services. As of September 30, 1998, the
Partnership had made all payments to affiliates, except for
management fees of $4,048 and legal fees of $1,761. An amount of
$35,700 due from affiliates at September 30, 1998 represented an
advance made to Strawberry Fields.
(5) EQUITY INVESTMENT
The Partnership owns a 42% interest in Strawberry Fields Joint
Venture, located in West Palm Beach, Florida, and accounts for its
investment under the equity method. The following are condensed
financial statements for Strawberry Fields Joint Venture:
September 30,
1998
Land, building and personal
property, net $5,304,935
Other assets 140,506
$5,445,441
Mortgage note payable $5,492,686
Other liabilities 317,207
5,809,893
Partners' capital (364,452)
$5,445,441
For the nine months ended September 30,
1998 1997
Rental income $ 599,267 $ 595,705
Other income 94,134 63,056
693,401 658,761
Mortgage and other interest 377,336 324,626
Depreciation 136,689 151,631
Loss on value impairment 1,564,101 --
Operating and
administrative expenses 258,005 232,910
2,336,131 709,167
Net loss $(1,642,730) $ (50,406)
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.
Year 2000
In 1997, the Partnership initiated the conversion from its
existing accounting software to a program that is year 2000
compliant. Management has determined that the year 2000 issue will
not pose significant operational problems for its computer system.
All costs associated with this conversion are being expensed as
incurred, and are not material.
Also in 1997, management of the Partnership initiated formal
communications with all of its significant third party vendors,
service providers and financial institutions to determine the
extent to which the Partnership is vulnerable to those third
parties failure to remedy their own year 2000 issue. There can be
no guarantee that the systems of these third parties will be timely
converted and would not have an adverse effect on the Partnership.
Liquidity and Capital Resources
The Partnership intends to satisfy its short-term liquidity needs
through cash flow from the properties. Long-term liquidity needs
are expected to be satisfied through refinancing of the mortgages
when they mature.
The anchor tenant at Crown Point is Food City. The overall
occupancy level at Crown Point at September 30, 1998 was 94%,
compared to 100% at December 31, 1997 and 100% at September 30,
1997. The Partnership is working to improve the occupancy level of
Crown Point.
The occupancy level at Strawberry Fields at September 30, 1998
was 87%, compared to 86% at December 31, 1997 and 90% at September
30, 1997. Strawberry had a negative cash flow for the nine months
ended September 30, 1998.
On September 18, 1995, the Strawberry Fields Joint Venture
notified the Lutheran Brotherhood (the "Strawberry Lender") that it
would exercise its option to extend the term of the Strawberry
Fields loan from the original maturity of November 1, 1995 to
December 1, 1998. The terms of the extension called for all
provisions of the loan to remain the same except for an additional
monthly principal payment of $12,500. Effective November 1, 1995,
the Strawberry Fields Joint Venture and the Strawberry Lender
agreed to modify the loan by reducing the interest rate to 7.5% for
November 1, 1995 through October 31, 1997 and by reducing the
monthly principal payment to $12,000. As of November 1, 1997 and
through the maturity date, December 1, 1998, the interest rate
reverted to the original 9.0% rate.
Effective October 1, 1998, the Strawberry Fields Joint Venture
and the Strawberry Lender agreed to modify and extend the first
mortgage loan. As of October 1, 1998 and through the extended
maturity date, December 1, 1999, the interest rate has been reduced
from 9% to 7% with principal amortization changed from a ten year
period to an eighteen year period.
At Sabal Palm, the Partnership and its joint venture partner are
working to improve the occupancy level of Sabal Palm which stood at
96% as of September 30, 1998. Although the Sabal Palm retail
market appears to be over built, the occupancy level of the
building has stayed relatively constant and it has generated
positive cash flow since its acquisition in 1986.
In addition, in the first quarter of 1998, the Partnership
became aware that both Winn-Dixie and Walgreens may vacate their
respective spaces at Sabal Palm prior to their lease termination
dates. In the second quarter of 1998, Winn-Dixie vacated its space
at the center. Walgreens has not given official notice that they
will vacate their space prior to the lease termination, the General
Partners, however, believe that there is a likelihood that this
tenant will vacate. The General Partners are working to determine
the most beneficial steps to be taken by the Partnership.
Winn-Dixie remains liable for rental payments under its lease at Sabal
Palm until April 2005.
Sabal Palm was required to make a balloon mortgage payment in
February 1997. Prior to the scheduled maturity of the First
Mortgage Loan, the lender granted Sabal Palm an extension until
April 1, 1997. On March 31, 1997, Sabal Palm obtained a first
mortgage loan in the amount of $3,200,000 (the "First Mortgage
Loan"), secured by its real estate, from NationsBanc Mortgage
Capital Corporation. The First Mortgage Loan bears interest at the
rate of 8.93% per annum, is amortized over a 25-year period,
requires monthly payments of principal and interest of
approximately $26,700 and matures on March 26, 2002. A portion of
the proceeds of the First Mortgage Loan, approximately $3,077,000,
was used to retire Sabal Palm's existing mortgage from Lincoln
National Pension Insurance Company.
The Partnership has engaged a nationally known appraisal firm to
value the Partnership's assets. Additionally, this firm will
assist the General Partners in determining the appropriate method
and timing for the disposition of the Partnership's assets. The
appraisal of the assets is expected to be completed by the end of
the calendar year.
The General Partners expect to distribute proceeds from operating
cash flow, if any, and from the sale of real estate to Limited
Partners in a manner that is consistent with the investment
objectives of the Partnership. Management of the Partnership
believes that cash needs may arise from time to time which will
have the effect of reducing distributions to Limited Partners to
amounts less than would be available from refinancing or sale
proceeds. These cash needs include, among other things,
maintenance of working capital reserves in compliance with the
Agreement as well as payments for major repairs, tenant
improvements and leasing commissions in support of real estate
operations.
Results of Operations - Nine months Ended September 30, 1998 and
1997
(Amounts rounded to 000's)
The Partnership generated net loss of $551,000 for the nine
months ended September 30, 1998 as compared to net income of
$47,000 for the same nine month period in 1997. The $598,000
decrease resulted primarily from the Partnership's equity interest
in the Strawberry Fields Joint Venture.
Total income for the nine months ended September 30, 1998 was
$1,191,000 as compared to $1,126,000 for the same nine month period
in 1997, an increase of $65,000. The $65,000 increase resulted
primarily from an increase of $35,000 in tenant reimbursement
revenue at Sabal Palm. Additionally, an increase in the occupancy
rate at Sabal Palm from 95% at September 30, 1997 to 96% at
September 30, 1998 also generated additional rental income of
$16,000.
For the nine months ended September 30, 1998, total expenses were
$1,008,000 as compared to $1,040,000 for the same nine month period
in 1997, a decrease of $32,000. The $32,000 decrease in total
expense resulted primarily from a decrease in general and
administrative expense due to lower insurance expenses at the
Partnership's properties. Also contributing to the decrease in
general and administrative expense was a bad debt recovery at Crown
Point.
The Partnership's equity interest in the Strawberry Fields Joint
Venture net loss contributed heavily to the decline in the
Partnership's net income for the nine months ended September 30,
1998 when compared to the same nine month period in 1997. In the
second quarter of 1998 the Strawberry Fields Joint venture recorded
a provision for impairment on an other than temporary decline in
the value of real estate of approximately $1,564,000. The
Partnership's share of this item is approximately $657,000.
Results of Operations - Three months Ended September 30, 1998 and
1997
(Amounts rounded to 000's)
The Partnership generated net income of $39,000 for the three
months ended September 30, 1998 as compared to net loss of $17,000
for the same three month period in 1997. The $56,000 increase
resulted primarily from an increase in tenant reimbursement at
Sabal Palm. The increase in net income also resulted from a
decrease in general and administrative expense which was mainly
caused by a bad debt recovery at Crown Point.
Total income for the three months ended September 30, 1998 was
$357,000 as compared to $314,000 for the same three month period in
1997, an increase of $43,000. The $43,000 increase resulted from
an increase of $37,000 in the tenant reimbursements earned at Sabal
Palm and an increase of $12,000 in the tenant reimbursements earned
at Crown Point. Partially offsetting the increase in tenant
reimbursements was a decrease in rental income of $6,000 at Crown
Point, which resulted from a lower occupancy rate of 94% at
September 30, 1998 as compared to 100% at September 30, 1997.
For the three months ended September 30, 1998, total expenses
were $319,000 as compared to $340,000 for the same three month
period in 1997, a decrease of $21,000. The $21,000 decrease in
total expenses resulted primarily from a decrease in general and
administrative expense which is a result of a bad debt recovery at
Crown Point.
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 27. Financial Data Schedule
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: November 13, 1998
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
And Treasurer
DATE: November 13, 1998