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, 1996 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 0-28332 Brauvin Net Lease V, Inc. (Exact name of small business issuer as specified 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, including area code) (Former name, former address and former fiscal year, if changed since last report) 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 . The aggregate market value of Common Stock held by nonaffiliates as of November 13, 1996 was $12,989,979. As of November 13, 1996, the issuer had 1,298,999 shares of common stock outstanding. Transitional Small Business Disclosure Format: Yes No X . INDEX Page PART I Financial Information Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . .3 Balance Sheet at September 30, 1996. . . . . . . . . . . . . .4 Statements of Income for the Nine Months Ended September 30, 1996 and 1995. . . . . . . . . . . . . . .5 Statements of Income for the Three Months Ended September 30, 1996 and 1995. . . . . . . . . . . . . . .6 Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995. . . . . . . . . . . . . . .7 Notes to Financial Statements. . . . . . . . . . . . . . . . .8 Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . . 11 PART II Other Information Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 14 Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . 14 Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . 14 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . 14 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 14 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements The following Balance Sheet as of September 30, 1996, Statements of Income for the nine and three months ended September 30, 1996 and 1995 and Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 for Brauvin Net Lease V, Inc. (the "Fund") are unaudited but reflect, in the opinion of the management, all adjustments necessary to make the financial statements not misleading. 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 Fund's 1995 Annual Report on Form 10-K. BALANCE SHEET September 30, 1996 (Unaudited) ASSETS Investment in real estate, at cost: Land $ 3,176,192 Buildings 6,064,576 9,240,768 Less: Accumulated depreciation (202,987) Net investment in real estate 9,037,781 Cash and cash equivalents 2,692,076 Organization costs (net of accumulated amortization of $18,083) 16,917 Tenant receivables 69,792 Prepaid expenses and deferred acquisition costs 111,294 Total Assets $11,927,860 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $ 18,000 Due to affiliates 56,557 Prepaid rent 12,292 Total Liabilities 86,849 Stockholders' Equity: Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued -- Common stock, $.01 par value, 9,000,000 shares authorized; 1,298,999 shares issued and outstanding 12,990 Additional paid-in capital 11,894,714 Accumulated deficit (66,693) Total Stockholders' Equity 11,841,011 Total Liabilities and Stockholders' Equity $11,927,860 See notes to financial statements. STATEMENTS OF INCOME For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 INCOME Rental $750,274 $424,378 Interest 118,364 102,499 Total Income 868,638 526,877 EXPENSES Directors fees 16,999 17,742 Advisory fees 114,631 38,418 Management fees 6,799 4,340 General and administrative 78,748 42,777 Acquisition costs 38,306 17,081 Depreciation and amortization 111,632 67,834 Total Expenses 367,115 188,192 Net Income $501,523 $338,685 Net Income Per Share $ 0.39 $ 0.42 See notes to financial statements. STATEMENTS OF INCOME For the Three Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 INCOME Rental $268,479 $199,959 Interest 32,929 23,180 Total Income 301,408 223,139 EXPENSES Directors fees 5,001 5,740 Advisory fees 76,041 14,903 Management fees 2,132 2,092 General and administrative 14,781 16,863 Acquisition costs 7,404 4,926 Depreciation and amortization 39,652 32,496 Total Expenses 145,011 77,020 Net Income $156,397 $146,119 Net Income Per Share $ 0.12 $ 0.15 See notes to financial statements. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 Cash flows from operating activities Net income $ 501,523 $ 338,685 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of organization costs 5,250 5,250 Depreciation 106,382 62,584 Acquisition costs charged off 38,306 17,081 Changes in operating assets and liabilities: Decrease in prepaid expenses 5,999 5,742 Increase in tenant receivables (69,792) (527) Decrease in accounts payable and accrued expenses (500) (8,986) (Decrease) increase in prepaid rent (7,000) 22,292 Increase (decrease) in due to affiliates 56,538 (8,271) Net cash provided by operating activities 636,706 433,850 Cash flows from investing activities Purchase of properties (1,456,083) (6,837,363) Acquisition costs (95,328) (19,587) Cash used in investing activities (1,551,411) (6,856,950) Cash flows from financing activities Issuance of stock, net of liquidations 1,311,985 5,671,887 Selling commissions and other offering costs (639,421) (511,209) Dividends (124,287) (251,148) Net cash provided by financing activities 548,277 4,909,530 Net decrease in cash and cash equivalents (366,428) (1,513,570) Cash and cash equivalents at beginning of period 3,058,504 3,455,715 Cash and cash equivalents at end of period $2,692,076 $1,942,145 See notes to financial statements. NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. Organization and Business 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 acquires properties that are leased to creditworthy corporate operators of nationally or regionally established businesses primarily in the retail and family restaurant sectors. Substantially all of the leases are 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 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. 2. Significant Accounting Policies Federal Income Taxes 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 stockholders 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. Earnings Per Share For the nine months ended September 30, 1996 and 1995, net income per share is based on the average shares outstanding of 1,270,712 and 811,632, respectively, and net income of $501,523 and $338,685, respectively. For the three months ended September 30, 1996 and 1995, net income per share is based on the average shares outstanding of 1,305,203 and 957,770, respectively, and net income of $156,397 and $146,119, respectively. Reclassifications Certain amounts in the 1995 financial statements have been reclassified to conform to the 1996 presentation. This has not affected the previously reported results of operations. 3. Related Party Transactions Fees, commissions and other expenses incurred and payable to the Advisor or its affiliates for the nine months ended September 30, 1996 and 1995 were as follows: 1996 1995 Incurred Payable Incurred Payable Selling commissions $ 78,652 $ -- $315,351 $18,544 Due diligence fees 12,042 -- 28,982 -- Advisory fees 114,631 56,537 38,418 -- Dividend reinvestment fees 1,291 20 562 20 Management fees 6,799 -- 4,340 -- Nonaccountable fees 35,218 -- 141,955 -- Acquisition fees and expenses 164,625 -- 261,202 -- $413,258 $56,557 $790,810 $18,564 4. Dividends Below is a table summarizing the dividends declared: Declaration Record Payment Dividend Date(a) Dates Date Rate (b) Amount 11/01/94 07/01/94-09/30/94 11/15/94 .08525% $ 13,566 02/03/95 10/01/94-12/31/94 02/15/95 .01096 36,000 05/04/95 01/01/95-03/31/95 05/15/95 .01370 78,681 08/03/95 04/01/95-06/30/95 08/15/95 .01781 136,467 11/02/95 07/01/95-09/30/95 11/15/95 .01918 169,235 01/25/96 10/01/95-12/31/95 02/15/96 .01918 196,106 05/02/96 01/01/96-03/31/96 05/15/96 .01918 216,247 08/01/96 04/01/96-06/30/96 08/15/96 .01918 227,068 10/31/96 07/01/96-09/30/96 11/15/96 .01918 229,621 (a) Dividends were declared on a daily basis. (b) The dividend rate is presented on a per day basis. 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 and make additional cash contributions. The price per share purchased through the Reinvestment Plan shall equal $10 per share with the purchase of partial shares allowed. 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. As of September 30, 1996, there were approximately 22,106 shares purchased through the Reinvestment Plan and approximately 9,675 shares were liquidated with proceeds from the Reinvestment Plan. 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. Item 2. Management's Discussion and Analysis or Plan of Operation. Liquidity and Capital Resources The Fund commenced an offering to the public on February 25, 1994 of 5,500,000 shares, 500,000 of which were available through the dividend reinvestment plan (the "Reinvestment Plan"). The offering closed on February 25, 1996 having received $12,865,680 in gross proceeds with an additional $124,309 of shares purchased by stockholders through the Reinvestment Plan, net of liquidations through September 30, 1996. As of September 30, 1996, the Fund had received $11,907,704 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. The Fund purchased one property during the nine months ended September 30, 1996. Except for certain acquisition costs related to the foregoing property, at September 30, 1996 the Fund had no material capital commitments. In the opinion of management of the Fund, each property is adequately covered by insurance. At September 30, 1996, approximately $2,500,000 of proceeds from the sale of common stock and from the Reinvestment Plan is available and is intended for investment in real estate. Cash Flows The Fund's cash flows during the nine months ended September 30, 1996 resulted principally from financing activities relating to the issuance of stock, which generated $1,311,985, net of liquidations of $96,750, less costs related thereto such as selling commissions and other costs aggregating $124,287 and dividends to stockholders of $639,421. Cash flows provided by operating activities were $636,706 due principally to cash generated from property operations. Cash flows used in investing activities were $1,551,411 relating principally to the acquisition of the Pier One Imports store purchased during the nine months ended September 30, 1996. The Fund anticipates that operating activities will continue to provide sources of cash as the Fund invests available proceeds in real estate. The Fund's cash flows during the nine months ended September 30, 1995, resulted principally from financing activities relating to the issuance of stock, which generated $5,671,887, less costs related thereto such as selling commissions and other costs aggregating $511,209 and dividends to stockholders of $251,148. Cash flows provided by operating activities were $433,850 due principally to cash generated from property operations. Cash flows used in investing activities were $6,837,363 relating principally to the acquisition of an On The Border restaurant, a Blockbuster Video store, a Chili's restaurant, a Just For Feet store and a Video Watch store. Results of Operations Results of operations for the nine months ended September 30, 1996 reflected rental income of $750,274. Rental income for the six properties held for the entire nine months was $686,303. Total income was $868,638 which consisted primarily of rental income and interest income earned on cash and cash equivalents in interest bearing accounts. Total expenses were $367,115 and net income was $501,523. Results of operations for the nine months ended September 30, 1995 reflected rental income of $424,378. Total rental income for the single property held for the entire nine months was $75,938. Total income was $526,877 which consisted primarily of rental income and interest income earned on cash and cash equivalents in interest bearing accounts. Total expenses were $188,192 and net income was $338,685 at September 30, 1995. Results of operations for the three months ended September 30, 1996 reflected rental income of $268,479. All properties were held for the three months ended September 30, 1996. Total income was $301,408 which consisted primarily of rental income and interest income earned on cash and cash equivalents in interest bearing accounts. Total expenses were $145,011 and net income was $156,397. Results of operations for the three months ended September 30, 1995 reflected rental income of $199,959. Total rental income for the properties held for the entire three months was $183,090. Total income was $223,139 which consisted primarily of rental income and interest income earned on cash and cash equivalents in interest bearing accounts. Total expenses were $77,020 and net income was $146,119 at September 30, 1995. On May 3, 1996, the Fund purchased a 10,843 square foot building and the underlying land which is occupied by a Pier One Imports store (the "Pier One Property") located in Sioux Falls, South Dakota, from an unaffiliated party, for $1,375,000 plus closing costs. The Pier One Property is leased to Pier One Imports, Inc. under a triple net lease, for ten years with two five-year extension options. The lease requires a minimum base rent each month in the amount of $13,046. On May 6, 1996, the Fund received a notice, dated April 30, 1996, which stated that the On The Border restaurant, located in Stafford, Texas, would discontinue its operations on May 29, 1996. However, Brinker Texas, L.P., the property's lease guarantor (and a wholly-owned subsidiary of Brinker International) has stated its intention to honor the lease and work with the Fund to remedy this situation. The Fund will contemplate various alternatives including subleasing the facility or "swapping" the asset for an operating property. At this point in time, the Fund does not anticipate that this situation will adversely effect the Fund's cash flow, as rent is currently paid on the lease. The Fund qualifies as a REIT under Sections 856-860 of the Internal Revenue Code, as amended (the "Code"). In order to qualify, the Fund is required to make distributions of an amount not less than 95% of its REIT taxable income during the year. 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. BRAUVIN NET LEASE V, INC. BY: /s/ James L. Brault James L. Brault Executive Vice President and Secretary DATE: November 13, 1996 BY: /s/ B. Allen Aynessazian B. Allen Aynessazian Chief Financial Officer DATE: November 13, 1996