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, 1997
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.)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
(312) 443-0922
(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. Financial Statements . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheet at March 31, 1997 . . . . . . . . 4
Consolidated Statements of Operations for the
three months ended March 31, 1997 and 1996. . . . . . . . 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996. . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . 7
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . . . . . .15
PART II
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .17
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .17
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .17
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .17
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .17
Item 6. Exhibits,and Reports on Form 8-K . . . . . . . . . . . . . .17
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
The following Consolidated Balance Sheet as of March 31, 1997,
Consolidated Statements of Operations for the three months ended
March 31, 1997 and 1996 and Consolidated Statements of Cash Flows
for the three months ended March 31, 1997 and 1996 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 financial statements should be read in conjunction with the
financial statements and notes thereto included in the
Partnership's 1996 Annual Report on Form 10-KSB.
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31,
1997
ASSETS
Investment in real estate:
Land $ 2,411,849
Buildings and improvements 9,737,955
12,149,804
Less accumulated depreciation (2,816,420)
Net investment in real estate 9,333,384
Investment in Strawberry Fields
Joint Venture(Note 5) 569,618
Cash and cash equivalents 562,500
Rent receivable 84,274
Escrow deposits 99,434
Other assets 163,645
Due from affiliates 5,880
Total Assets $ 10,818,735
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Mortgage notes payable (Note 3) $ 6,389,254
Accounts payable and accrued expenses 82,841
Tenant security deposits 41,733
Due to affiliates 10,084
Total Liabilities 6,523,912
MINORITY INTEREST IN SABAL PALM
JOINT VENTURE 987,818
PARTNERS' CAPITAL:
General Partners (32,773)
Limited Partners (9,914.5 limited
partnership units issued and
outstanding) 3,339,778
Total Partners' Capital 3,307,005
Total Liabilities and
Partners' Capital $ 10,818,735
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
INCOME
Rental $ 398,647 $ 404,057
Interest 4,987 924
Other, primarily tenant
expense reimbursements 50,117 69,846
Total income 453,751 474,827
EXPENSES
Interest 141,550 140,281
Depreciation 67,386 67,137
Real estate taxes 35,868 35,855
Repairs and maintenance 12,522 5,055
Management fees 28,669 28,556
Other property operating 17,414 17,679
General and administrative 50,511 49,320
Total expenses 353,920 343,883
Income before minority
and equity interests 99,831 130,944
Minority interest's share of
Sabal Palm's net income (44,510) (59,829)
Equity interest in Strawberry
Fields Joint Venture's
net loss (7,532) (11,868)
Net income $ 47,789 $ 59,247
Net income Allocated
to the General Partners $ 478 $ 592
Net income Allocated
to the Limited Partners $ 47,311 $ 58,655
Net income Per Limited
Partnership Interest
(9,914.5 Units) $ 4.77 $ 5.92
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
Cash Flows From Operating Activities:
Net income $ 47,789 $59,247
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 67,386 67,137
Provision for doubtful accounts 1,800 12,160
Equity interest in Strawberry Fields Joint
Venture's net loss 7,532 11,868
Minority Interest's share of Sabal
Palm Joint Venture's net income 44,510 59,829
Decrease in rent receivables 23,555 19,398
Decrease in other assets 3,626 6,354
Increase in escrow deposits (40,764) (26,107)
Increase in due from affiliates -- (5,880)
(Decrease) increase in accounts payable
and accrued expenses (37,350) 14,112
Increase (decrease) in due to affiliates 7,976 (43,838)
Decrease in tenant security deposits (634) --
Net cash provided by operating activities 125,426 174,280
Cash Flows From Investing Activities:
Cash distribution to Minority Partner of
Sabal Palm Joint Venture (13,160) (70,500)
Cash used by investing activities (13,160) (70,500)
Cash Flows From Financing Activities:
Repayment of mortgage notes payable (3,103,716) (18,634)
Proceeds from refinancing 3,200,000 --
Payment of loan fees (54,919) --
Net cash provided by (used in)
financing activities 41,365 (18,634)
Net increase in cash and cash
equivalents 153,631 85,146
Cash and cash equivalents at beginning
of period 408,869 142,320
Cash and cash equivalents at end of
period $ 562,500 $ 227,466
Supplemental disclosure of
cash flow information:
Cash paid for interest $ 161,668 $ 115,055
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., Jerome J. Brault, and Cezar M. Froelich.
Brauvin Ventures Inc. is owned by A.G.E. Realty Corporation Inc.
(50%) and by Messrs. Jerome J. Brault (beneficially) (25%) and
Cezar M. 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 Crown Point, Strawberry Fields
and Sabal Palm shopping centers.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the
year ended December 31, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto
included in the Annual Report on Form 10-KSB for the year ended
December 31, 1996.
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 financial statements.
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 a 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 March 31, 1997. Accordingly,
no impairment loss has been recorded in the accompanying financial
statements for the periods ended March 31, 1997 and 1996.
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 March 31, 1997, 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. Although management is
not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements
since that date, and current estimates of fair value may differ
significantly from amounts presented herein.
The carrying amounts of the following items are reasonable
estimates of fair value: cash and cash equivalents; escrow
deposits; accounts payable and accrued expenses and due to/from
affiliates.
Reclassifications
Certain reclassifications have been made to the consolidated 1996
financial statements to conform to classifications adopted in 1997.
(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.
(3) MORTGAGES NOTES PAYABLE
Mortgages payable at March 31, 1997 consist of the following:
Interest Date
1997 Rate Due
Crown Point Shopping
Center (a) $3,189,254 7.55% 1/03
Sabal Palm Square
Shopping Center (b) 3,200,000 8.93% 3/02
$6,389,254
(a) On December 28, 1995, Crown Point was refinanced with
NationsBanc Mortgage Capital Corporation. The refinancing resulted
in a $3,275,000 non-recourse loan with a fixed interest rate of
7.55%, 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 the Crown Point
property. Furthermore, this change in ownership structure had no
material effect on the financial statements of the Partnership.
(b) 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
were used to retire Sabal Palm's existing mortgage from Lincoln
National Pension Insurance Company.
(4) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid to the General Partners or its
affiliates for the period ended March 31, 1997 and 1996 were as
follows:
1997 1996
Management fees $20,536 $ 28,556
Reimbursable office
expenses 21,979 19,033
Legal fees 187 4,480
The Partnership believes the amounts paid to affiliates are
representative of amounts which would have been paid to independent
parties for similar services. The Partnership had made all
payments to affiliates, except for $1,951 for legal services and
$8,133 for management fees as of March 31, 1997. An amount of
$5,880 due from affiliates at March 31, 1997 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:
March 31,
1997
Land, building and personal
property, net $7,151,172
Other assets 88,592
$7,239,764
Mortgage note payable $5,763,617
Other liabilities 118,342
5,881,959
Partners' capital 1,357,805
$7,239,764
Three months ended March 31,
1997 1996
Rental income $ 200,079 $ 207,031
Other income 20,708 65
220,787 207,096
Mortgage and other
interest 109,109 114,901
Depreciation 51,407 50,010
Operating and
administrative expenses 78,205 70,441
238,721 235,352
Net loss $ (17,934) $ (28,256)
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. 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 the properties. Long-term liquidity needs
are expected to be satisfied through modification of the mortgages
at more favorable interest rates.
The occupancy level at Crown Point at March 31, 1997, December
31, 1996 and March 31, 1996 was 98%. The Partnership is continuing
to work to sustain the occupancy level of Crown Point. Crown Point
operated at a positive cash flow for the three months ended March
31, 1997.
At Sabal Palm the occupancy level at March 31, 1997 and December
31, 1996 was 92% compared to 99% at March 31, 1996. Although the
Sabal Palm retail market appears to be overbuilt, the property has
operated at a positive cash flow since its acquisition in 1986.
Strawberry Fields operated at a positive cash flow for the three
months ended March 31, 1997. The occupancy level at Strawberry
Fields at March 31, 1997 was 88% compared to 87% at December 31,
1996 and 83% at March 31, 1996.
The General Partners of the Partnership expect to distribute
proceeds from operations, 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 refinancings
or sale proceeds. These cash needs include, among other things,
maintenance of working capital reserves in compliance with the
partnership agreement as well as payments for major repairs, tenant
improvements and leasing commissions in support of real estate
operations.
Results of Operations - Three Months Ended March 31, 1997 and 1996
(Amounts rounded to 000's)
The Partnership generated net income of $48,000 for the three
months ended March 31, 1997 as compared to net income of $59,000
for the same three month period in 1996. The $11,000 decrease in
net income resulted primarily from the net of a $21,000 decrease in
total income, a $10,000 increase in total expenses and a $16,000
decrease in the minority interest share of Sabal Palm's net income.
Total income for the three months ended March 31, 1997 was
$454,000 as compared to $475,000 for the same three month period in
1996, a decrease of $21,000. The $21,000 decrease resulted
primarily from a decrease in the occupancy at Sabal Palm from 99%
at March 31, 1996 to 92% at March 31, 1997.
For the three months ended March 31, 1997, total expenses were
$354,000 as compared to $344,000 for the same three month period in
1996, a increase of $10,000. The $10,000 increase in total
expenses resulted primarily from an increase in repairs and
maintenance at Sabal Palm, in an effort to attract new potential
tenants into the center.
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: May 14, 1997
BY: /s/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer
And Treasurer
DATE: May 14, 1997