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 March 31, 1997 [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from N/A to N/A Commission File Number 0-28332 BRAUVIN NET LEASE V, INC. (Exact name of small business issuer in its charter) Maryland 36-3913066 (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) 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 filing requirements for the past 90 days. Yes X No . As of May 14, 1997, the registrant had 1,286,916 shares of Common Stock outstanding. Transitional Small Business Disclosure Format(check one) Yes No X . BRAUVIN NET LEASE V, INC. (a Maryland corporation) INDEX PART I - FINANCIAL INFORMATION Page Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . 3 Consolidated 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 . . . . . . . . . . . . . . . . . . . . . . . 14 PART II - OTHER INFORMATION Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .16 Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .16 Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .16 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .16 Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .16 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .16 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 BRAUVIN NET LEASE V, INC. (a Maryland corporation) 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 Net Lease V, Inc. (the "Fund") are unaudited but reflect, in the opinion of the management, all adjustments necessary to make the consolidated financial statements not misleading. All such adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Fund's 1996 Annual Report on Form 10-KSB. BRAUVIN NET LEASE V, INC. (a Maryland corporation) CONSOLIDATED BALANCE SHEET (Unaudited) March 31, 1997 ASSETS Investment in real estate, at cost: Land $ 3,964,744 Buildings 7,516,323 11,481,067 Less accumulated depreciation (285,013) Net investment in real estate 11,196,054 Cash and cash equivalents 525,475 Organization costs (net of accumulated amortization of $21,583) 13,417 Deferred rent receivable 108,509 Prepaid expenses and deferred acquisition costs 53,206 Total Assets $11,896,661 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $ 10,861 Rents received in advance 70,458 Due to affiliates 57,999 Total Liabilities 139,318 Stockholders' Equity: Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued Common stock, $.01 par value, 9,000,000 shares authorized; 1,299,775 shares issued and outstanding 12,998 Additional paid-in capital 11,865,141 Retained earnings (deficit) (120,796) Total Stockholders' Equity 11,757,343 Total Liabilities and Stockholders' Equity $11,896,661 See notes to consolidated financial statements. BRAUVIN NET LEASE V, INC. (a Maryland corporation) CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended March 31, 1997 and 1996 (Unaudited) 1997 1996 INCOME Rental $ 321,605 $ 228,230 Interest and other 18,314 41,184 Total income 339,919 269,414 EXPENSES Directors fees 7,001 6,999 Advisory fees 43,750 19,048 Management fees 3,386 2,131 General and administrative 21,698 16,331 Acquisition costs 31,378 30,814 Depreciation and amortization 44,207 34,161 Total expenses 151,420 109,484 Net Income $ 188,499 $159,930 Net Income Per Share (based on average shares outstanding of 1,297,934 and 1,237,518, respectively for the three months ended March 31, 1997 and 1996) $ 0.15 $ 0.13 See notes to consolidated financial statements. BRAUVIN NET LEASE V, INC. (a Maryland corporation) 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 $ 188,499 $ 159,930 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of organization costs 1,750 1,750 Depreciation 42,457 32,411 Acquisition costs charged off 31,378 30,814 Increase in deferred rent receivables (23,945) -- Decrease in prepaid expenses and deferred acquisition costs 3,001 3,999 Decrease (increase) in tenant receivables 378 (19,074) Decrease in accounts payable and accrued expenses (10,923) (11,992) Increase in due to affiliates 4,066 6,480 Increase (decrease) in rent received in advance 20,885 (3,000) Net cash provided by operating activities 257,546 201,318 Cash Flows From Investing Activities: Purchase of properties (1,529,287) (23,447) Acquisition costs -- (49,008) Cash used in investing activities (1,529,287) (72,455) Cash Flows From Financing Activities: Issuance of stock 35,891 1,321,538 Selling commissions and other offering costs (34,258) (116,877) Dividends (229,517) (196,106) Net cash (used in) provided by financing activities (227,884) 1,008,555 Net (decrease) increase in cash and cash equivalents (1,499,625) 1,137,418 Cash and cash equivalents at beginning of period 2,025,100 3,058,504 Cash and cash equivalents at end of period $ 525,475 $4,195,922 Supplemental Cash Flow Information: In 1997, Purchase of properties is net of $3,087 of acquisition costs paid in 1996 and reclassified to land and building in 1997 in conjunction with the acquisition of the related properties. See notes to consolidated financial statements. BRAUVIN NET LEASE V, INC. (a Maryland corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Brauvin Net Lease V, Inc. (the "Fund") is a Maryland corporation formed on October 14, 1993, which operates as a real estate investment trust ("REIT") under federal tax laws. The Fund intends to continue to acquire properties that will be leased to creditworthy corporate operators of nationally or regionally established businesses primarily in the retail and family restaurant sectors. Substantially all of the leases will be on a long-term "triple net" basis generally requiring the corporate tenant to pay both base annual rent with mandatory escalation clauses and all operating expenses. The Fund acquired a Country Harvest Buffet Restaurant during the year ended December 31, 1994; an On the Border Restaurant, a Blockbuster Video, a Chili's Restaurant, a Just for Feet and a Video Watch during the year ended December 31, 1995; and a Pier 1 Imports and a Taylor Rental during the year ended December 31, 1996 and a Jiffy Lube and Firestone facility during the quarter ended March 31, 1997. The advisory agreement provides for Brauvin Realty Advisors V, L.L.C. (the "Advisor"), an affiliate of the Fund, to be the advisor to the Fund. The Fund registered the sale of up to 5,000,000 shares of common stock at $10.00 per share in an initial public offering filed with the Securities and Exchange Commission ("Registration Statement") and the issuance of 500,000 shares pursuant to the Fund's dividend reinvestment plan. On August 8, 1994, the Fund sold the minimum 120,000 shares required under its Registration Statement and commenced its real estate activities. The offering period for the sale of common stock terminated on February 25, 1996. At March 31, 1997, the Fund had sold 1,299,775 shares and the gross proceeds raised were $13,358,479, net of liquidations of $160,750, including $200,000 invested by the Advisor, before reduction for selling commissions and other offering costs. 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 these 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 For the year ended December 31, 1997, the Fund intends to be treated as a REIT under the Internal Revenue Code Sections 856-860. A REIT will generally not be subject to federal income taxation to the extent that it distributes at least 95% of its taxable income to its shareholders and meets certain asset and income tests as well as other requirements. Accordingly, no provision has been made for Federal income taxes in the financial statements. Consolidation of Subsidiary The Fund owns a 100% interest in one qualified REIT subsidiary, Germantown Associates, Inc., which owns one Firestone/JiffyLube property. The accompanying financial statements have consolidated 100% of the assets, liabilities, operations and stockholder's equity of Germantown Associates, Inc. All significant intercompany accounts have been eliminated. Investment in Real Estate The Fund's rental properties are stated at cost including acquisition costs. Depreciation is recorded on a straight-line basis over the estimated economic lives of the properties which approximate 40 years. In 1995, the Fund adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of" (SFAS 121). The Fund has performed an analysis of its long-lived assets, and the Fund's management determined that there were no events or changes in circumstances that indicated that the carrying amount of the assets may not be recoverable at March 31, 1997. Accordingly, no impairment loss has been recorded in the accompanying financial statements. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid 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 Fund could realize in a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. 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; accounts payable and accrued expense, rents received in advance and due to affiliates. Organization Costs Organization costs represent costs incurred in connection with the organization and formation of the Fund. Organization costs are amortized over a period of five years using the straight line method. Deferred Acquisition Costs Deferred acquisition costs represent direct costs incurred in performing due diligence procedures on potential property acquisitions. Such costs are included in the carrying basis of properties when acquired. Costs relating to the unsuccessful acquisition of properties are expensed. (2) RELATED PARTY TRANSACTIONS The Fund is required to pay certain fees to the Advisor or its affiliates pursuant to various agreements set forth in the Prospectus and described below. Pursuant to the terms of the Selling Agreement, Brauvin Securities, Inc. ("BSI"), an affiliate of the Advisor, is entitled to placement charges of 5.50% of the gross proceeds of the Fund's offering, all of which will be re-allowed to placement agents. In addition, BSI is entitled to a marketing and due diligence expense allowance fee equal to 0.50% of the gross proceeds to reimburse marketing and due diligence expenses, some portion of which may be re-allowed to placement agents. Pursuant to the terms of the Advisory Agreement, the Advisor is entitled to receive acquisition fees for services rendered in connection with the selection or acquisition of any property however designated as real estate commissions, selection fees, development fees, or any fees of a similar nature. Such acquisition fees may not exceed the lesser of (a) such compensation as is customarily charged in arm's-length transactions by others rendering similar services as an ongoing business in the same geographic locale and for comparable properties or (b) 3.5% of the gross proceeds of the Fund's offering. The Fund will also reimburse the Advisor an amount estimated to be 0.75% of the gross proceeds of the offering in connection with any expenses attendant to the acquisition of properties whether or not acquired. Pursuant to the terms of the Advisory Agreement, the Advisor was entitled to an annual advisory fee, payable monthly, in an amount equal to 0.60% of the gross proceeds during the offering. Following the termination of the offering, an amount equal to the greater of: (i) .60% of gross proceeds, or (ii) $175,000. Pursuant to the terms of the Management Agreement, Brauvin Management Company ("BMC"), an affiliate of the Advisor, provided leasing and re-leasing services to the Fund in connection with the management of Fund's properties. The property management fee payable to an affiliate of the Advisor shall not exceed the lesser of: (a) fees which are competitive for similar services in the geographical area where the properties are located; or (b) 1% of the gross revenues of each property. Fees, commissions and other expenses incurred and payable to the Advisor or its affiliates for the three months ended March 31, 1997, and 1996 were as follows: 1997 1996 Selling commissions $ -- $ 73,856 Due diligence fees 179 11,606 Advisory fees 43,750 19,048 Dividend reinvestment fees 363 411 Management fees 3,386 2,131 Nonaccountable fees 897 31,413 Acquisition fees and expenses 28,860 67,875 $ 77,435 $206,340 As of March 31, 1997 the Fund had made all payments to affiliates except for $53,913 for advisory fees, $20 for dividend reinvestment fees, $2,625 for acquisition fees and $1,441 for management fees. For the same period in 1996 the Fund made all payments except for $6,500 for advisory fees. (3) DIVIDENDS Below is a table summarizing the dividends declared: Declaration Record Payment Dividend Date(a) Dates Date Rate (b) Amount 5/4/95 1/1/95-3/31/95 5/15/95 .01370 % $ 78,681 8/3/95 4/1/95-6/30/95 8/15/95 .01781 136,467 11/2/95 7/1/95-9/30/95 11/15/95 .01918 169,235 1/25/96 10/1/95-12/31/95 2/15/96 .01918 196,106 5/2/96 1/1/96-3/31/96 5/15/96 .01918 216,247 8/1/96 4/1/96-6/30/96 8/15/96 .01918 227,068 10/31/96 7/1/96-9/30/96 11/15/96 .01918 229,532 1/31/97 10/1/96-12/31/96 2/15/97 .01918 229,517 5/8/97 1/1/97-3/31/97 5/15/97 .01918 224,034 (a) Dividends were declared on a daily basis. (b) The dividend rate is presented on a per day basis. In order to qualify as a REIT, the Fund is required to distribute dividends to its Stockholders in an amount at least equal to 95% of REIT taxable income of the Fund. The Fund intends to make quarterly distributions to satisfy all annual distribution requirements. The dividend reinvestment plan ("Reinvestment Plan") is available to the stockholders so that stockholders, if they so elect, may have their distributions from the Fund invested in shares. The price per share purchased through the Reinvestment Plan shall equal $10 per share with the purchase of partial shares allowed. The Fund has registered 500,000 shares for distribution solely in connection with the Reinvestment Plan. Funds raised through the Reinvestment Plan will be utilized to (i) purchase shares from existing stockholders who have notified the Fund of their desire to sell their shares or held for subsequent redemptions; or (ii) purchase additional properties. The stockholders electing to participate in the Reinvestment Plan will be charged a service charge, in an amount equal to 1% of their distributions, which will be paid to an affiliate of the Advisor to defray the administrative costs of the Reinvestment Plan. At March 31, 1997, there were approximately 29,280 shares purchased through the Reinvestment Plan and approximately, 16,075 shares liquidated. (4) Subsequent Events On May 8, 1997, the Fund declared an ordinary income dividend on a per share basis of $0.001918 per day for each day investors were admitted between January 1, 1997 and March 31, 1997. The dividend aggregated $224,034 payable to stockholders of record on March 31, 1997 and will be paid on May 15, 1997. Item 2. Management's Discussion and Analysis or Plan of Operations. Liquidity and Capital Resources As of March 31, 1997, the Fund had received $11,878,138 in connection with the sale of shares, net of selling commissions and other offering costs, including $200,000 paid by the Advisor for a share of stock as disclosed in the prospectus and liquidations of $160,750. The Fund acquired one property during the year ended December 31, 1994 for $900,000 plus closing costs, acquired five properties during the year ended December 31, 1995 for $6,511,400 plus closing costs and acquired two properties during the year ended December 31, 1996 for $2,025,000 plus closing costs. On February 20, 1997, effective as of January 20, 1997, the Fund purchased a property leased to Bridgestone/Firestone Inc. and to Jiffy Lube International of Maryland, Inc. for $1,450,000 plus closing costs. Upon the acquisition of the Firestone and Jiffy Lube property, the Fund has invested all the proceeds of the offering allocable to investments in real estate. The Fund has no material capital commitments. In the opinion of management of the Fund, each property is adequately covered by insurance. For further information, refer to the financial statements and footnotes thereto included in the Annual Report on Form 10-KSB for the year ended December 31, 1996. Compliance with 95% REIT taxable income test The Fund is required, under the Code, to make distributions of an amount not less than 95% of its REIT taxable income during the year. In accordance with the Fund's intent to maintain its qualification as a REIT under the Code, the Fund intends to manage its dividend distributions to approximate earnings during the year to which they relate. Cash Flows During the three months ended March 31, 1997, cash provided by operating activities was $257,546 relating to property operations. Cash flows from investing activities of $1,529,287 related to the acquisition of one property, as discussed above. Cash flows used in financing activities were $227,884 relating principally to dividends paid. The Fund anticipates that operating activities will continue to provide sources of cash. The Fund's cash flows during the three months ended March 31, 1996 resulted principally from financing activities relating to the issuance of stock, which generated $1,321,538 less costs related thereto such as selling commissions and other costs aggregating $116,877 and dividends to stockholders of $196,106. Cash flows provided by operating activities were $201,318 due principally to cash generated from property operations. Cash flows used in investing activities were $72,455 relating principally to the acquisition of the Pier 1 Imports property purchased subsequent to March 31, 1996. Results of Operations (Amounts rounded to nearest $000's) The Fund generated net income of $188,000 for the three months ended March 31, 1997 as compared to net income of $160,000 for the same three month period in 1996. Total income for the three months ended March 31, 1997 was $340,000 as compared to $270,000 for the same three month period in 1996, an increase of $70,000. The $70,000 increase resulted primarily from additional rental income received from the nine properties held during the three months ended March 31, 1997 as compared to six properties held during the same three month period in 1996. For the three months ended March 31, 1997 total expenses were $151,000 as compared to $109,000 for the same three month period in 1996, an increase of $42,000. The increase was due primarily to advisory fees increasing approximately $25,000. Advisory fees increased pursuant to the terms of the Advisory Agreement, the Advisor was entitled to an annual advisory fee, payable monthly, in an amount equal to 0.60% of the gross proceeds during the offering. Following the termination of the offering, an amount equal to the greater of: (i) .60% of gross proceeds, or (ii) $175,000. Other expenses have increased such as depreciation in the amount of $10,000 due to the increased number of properties which were held for the three months ended March 31, 1997 as compared to the same three month period in 1996. 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 On March 7, 1997 and amended on April 30, 1997 the Fund filed a Form 8-K and a Form 8-K/A, respectively, to report the Fund's purchase of the Firestone/Jiffy Lube Facility and providing tenant summarized financial information. 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. BRAUVIN NET LEASE V, INC. BY: /s/ James L. Brault James L. Brault Executive Vice President and Secretary DATE: May 15, 1997 BY: /s/ B. Allen Aynessazian B. Allen Aynessazian Chief Financial Officer DATE: May 15, 1997