SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) February 20, 1997 Brauvin Net Lease V, Inc. (Exact name of registrant as specified in its charter) Maryland 0-28332 36-3913066 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification organization) Number) 150 South Wacker Drive, Suite 3200, Chicago, Illinois 60606 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (312) 443-0922 Not Applicable (Former name or former address, if changed since last report) Item 2. Acquisition or Disposition of Assets Capitalized terms not otherwise defined herein will have the same meaning as in the prospectus of Brauvin Net Lease V, Inc. (the "Company") dated February 25, 1994 as supplemented to date (the "Prospectus"). Jiffy Lube & Firestone Facilities - East Norriton Township, Pennsylvania On February 20, 1997, effective as of January 20, 1997 the Company, through a wholly-owned subsidiary intended to qualify as a qualified REIT subsidiary purchased the land and two buildings (the "Property") consisting of a 6,580 square foot building underlying a Firestone Tire & Service Center facility (the "Firestone Facility") and a 2,440 square foot building underlying a Jiffy Lube oil change facility (the "Jiffy Lube Facility"), located in East Norriton Township from Germantown Associates, L.P., an unaffiliated party, for $1,450,000 plus closing costs. The Firestone Facility has been leased to Bridgestone/Firestone Inc. ("Firestone") for an initial term of 25 years ending January 31, 2013. The Jiffy Lube Facility has been leased to Jiffy Lube International of Maryland, Inc. for an initial term of 20 years ending May 8, 2007. Both the Firestone Facility and the Jiffy Lube Facility will be operated by the respective lessees and the Company will be a landlord only and will not participate in the operations of the facilities. Bridgestone/Firestone, Inc. Bridgestone/Firestone, Inc., based in Nashville, Tennessee, develops, manufactures, markets and retails tires for almost every kind of motorized vehicle. Firestone has approximately 1500 Firestone Tire & Service Centers nationwide which sell automotive aftermarket tires and services the undercarriage needs of the average vehicle owner. Firestone Tire & Service Centers are usually free-standing buildings predominately located near or in suburbs of metropolitan areas. Bridgestone/Firestone is the principal subsidiary of Bridgestone Corporation, listed on the Tokyo Stock Exchange, the world's largest tire and rubber company. Jiffy Lube International of Maryland, Inc. Jiffy Lube International of Maryland, Inc. ("Jiffy Lube") is a wholly-owned subsidiary of Jiffy Lube International, Inc. ("Jiffy Lube International"). Jiffy Lube International, 100% owned by Pennzoil Corporation (a NYSE listed company), is the guarantor on the lease and the nation's largest operator of quick automotive lubrication service centers. As of December 31, 1996, Jiffy Lube International operated or franchised 1,403 Jiffy Lube International service units throughout the United States. Jiffy Lube International service centers are usually free-standing buildings predominately located near or in suburbs of metropolitan areas. The Property The Property is located on a parcel of land in a regional shopping district on Germantown Pike near the intersection of Germantown Pike and Dekalb Pike, a major intersection in eastern Montgomery County, Pennsylvania. Montgomery County is the wealthiest county in the State of Pennsylvania on a per capita basis. The Property consists of two free-standing buildings, the Firestone Facility of 6,580 square feet and the Jiffy Lube Facility of 2,440 square feet on an approximately 1.49 acre lot. Approximately $1,070,068 of the basis of the Property is anticipated to be allocated to building and $441,985 to land including acquisition fees and closing costs. For Federal tax purposes, depreciation will be based on MACRS schedule of 39 years. Terms of the Acquisition The purchase price of the Property was $1,450,000 and was paid in cash at closing. The purchase price was supported by an MAI appraisal. The Company acquired fee simple title to the Property. The aggregate fees paid to the Advisor in connection with the acquisition was $50,750. The Company, through its wholly-owned subsidiary, also agreed to indemnify the seller against claims which may be brought against the seller by a potential purchaser of the Property. The Leases The Firestone Facility is leased to Firestone (the "Firestone Lease"), under an initial twenty five year lease with two five year options. The Firestone Lease requires Firestone to pay a minimum base rent each month in the amount of $7,975. In addition to rental payments, Firestone is required to pay directly or indirectly for all expenses related to the Firestone Facility and its pro-rata share of expenses relating to the common area between the Firestone Facility and the Jiffy Lube Facility including real estate taxes, insurance premiums and repairs and maintenance costs related to the Firestone Facility. The Jiffy Lube Facility is leased to Jiffy Lube (the "Jiffy Lube Lease"), under an initial twenty year lease with two five year options. The Jiffy Lube Lease requires Jiffy Lube to pay a minimum base rent each month in the amount of $6,570. In addition to rental payments, Jiffy Lube is required to pay directly or indirectly for all expenses related to the Jiffy Lube Facility and its pro-rata share of expenses relating to the common area between the Firestone Facility and the Jiffy Lube Facility including real estate taxes, insurance premiums and repairs and maintenance costs related to the Jiffy Lube Facility. Risk of Ownership The possibility exists that Jiffy Lube and/or Firestone may be unable to fulfill their respective obligations pursuant to the terms of their respective leases, including making base rent payments to the Company. Furthermore, the Company may be unable to successfully locate a substitute tenant(s) due to the fact the that buildings have been designed primarily to house the current operations of each tenant. Thus, the Property may not be readily marketable to a new tenant without substantial capital improvements or remodeling. Such improvement may require the expenditure of Company funds otherwise available for distribution or require the sale of the Property. See "Risk Factors" in the Prospectus. Item 7. Financial Statements and Exhibits (a)(1) Financial Information Summary financial information regarding the tenants at the Property are not currently available and will be filed by the Company not later than sixty days after the date of the report. Item 7. Financial Statements and Exhibits (2) Forecasted Financial Information BRAUVIN NET LEASE V, INC. FORECASTED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDING FEBRUARY 28, 1998 (INCLUDING ALL ACQUISITIONS) (Unaudited) INCOME: Rental (Note 1) $ 1,310,026 Interest 14,078 Total Income 1,324,104 EXPENSES (Note 2): Director fees 16,000 Advisory fees 175,000 General and administrative 93,000 Management Fees (Note 3) 12,325 Total Expenses 296,325 Operating Cash Flow 1,027,779 Less: Depreciation (Note 4) 188,410 Net Income $ 839,369 See Notes to Forecasted Statement of Operations. BRAUVIN NET LEASE V, INC. NOTES TO FORECASTED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDING FEBRUARY 28, 1998 (INCLUDING ALL ACQUISITIONS) (Unaudited) 1. Rental Income Forecasted rental income is based on monthly rent billed to all tenants of approximately $102,710. Forecasted rental income includes the monthly rent of the Company's acquisitions of one Country Harvest Buffet restaurant, acquired November 21, 1994, one On The Border restaurant, acquired January 9, 1995, one Blockbuster Video store, acquired January 31, 1995, one Chili's restaurant, acquired April 13, 1995, one Just For Feet store, acquired June 15, 1995, one Video Watch store, acquired July 31, 1995, one Pier One Imports store, acquired May 3, 1996, one Taylor Rental store, acquired November 22, 1996, and one Firestone and Jiffy Lube store, acquired on February 20, 1997 (the "Firestone/Jiffy Lube Property") (collectively, the "Properties"). Forecasted rental income is recognized on a straight-line basis over the life of the related leases. Differences between rental income earned and amounts due the respective lease agreements are credited or charged as applicable to deferred rent receivable. 2. Property Operating Expenses The Properties are each triple net leased to the respective tenant, by which the tenant is responsible for paying all real estate taxes, insurance premiums and repairs and maintenance costs. The Company is, therefore, not responsible for operating expenses attendant to the ownership of the Properties except for management fees. Pursuant to the terms of the Pier One store lease, the Company is responsible for the roof and structural components of the building and parking lot excluding normal maintenance. 3. Management Fee Expense A management fee is payable to an affiliate of the Company in the amount of 1% of gross revenues derived from the operations of the Properties. 4. Depreciation For presenting forecasted depreciation, approximately $7,485,237 of the basis of the Properties will be allocated to building and $3,946,501 to land. Tax basis depreciation will be based on MACRS 39 years. Book depreciation is recorded on a straight-line basis over a period of 40 years. 5. Taxable Income The Company intends to qualify as a real estate investment trust and therefore is required to distribute substantially all of its taxable income to its stockholders. Item 7. Financial Statements and Exhibits (b) Pro Forma Financial Statements. The pro forma information included herein is presented for the year ended December 31, 1995 and as of and for the nine months ended September 30, 1996, corresponding to the period of the Company's annual and quarterly financial statements most recently filed with the Securities and Exchange Commission. BRAUVIN NET LEASE V, INC. PRO FORMA STATEMENT OF INCOME For the Year Ended December 31, 1995 (Unaudited) On The Border, On The Border, Blockbuster Blockbuster Video, Chili's, Video, Chili's, Just For Feet, Just For Feet, Video Watch, Video Watch, Pier One Pier One and Taylor and Taylor All Rental Rental Firestone Properties Historical Pro Forma Pro Forma Jiffy Lube Pro Forma Results Adjustments Results Adjustments Results INCOME: Rental (Note 4) $631,467 $502,328 $1,133,795 $174,540 $1,308,335 Interest (Note 5) 130,545 (91,836) 38,709 (37,801) 908 Total Income 762,012 410,492 1,172,504 136,739 1,309,243 EXPENSES: Directors' fees 19,743 -- 19,743 -- 19,743 Advisory fees 55,525 -- 55,525 -- 55,525 Management fees (Note 6) 6,386 4,241 10,627 1,745 12,372 General and administrative 63,082 -- 63,082 -- 63,082 Acquisition costs 21,678 -- 21,678 -- 21,678 Depreciation and amortization 101,908 59,750 161,658 26,752 188,410 Total Expenses 268,322 63,991 332,313 28,497 360,810 Net Income $493,690 $346,501 $840,191 $108,242 $948,433 Net Income per Share (Note 7) $ 0.56 $ 0.28 $ 0.67 $ 0.09 $ 0.76 The historical results distribution per weighted average share outstanding (883,012 shares for the period ended December 31, 1995) is $.48. The pro forma distribution (all Properties, excluding Firestone/Jiffy Lube Property) and the pro forma distribution (all Properties), calculated assuming that 1,249,968 shares were outstanding (the minimum number of shares necessary to provide proceeds sufficient for the Company to acquire all Properties), is $0.64 per share and $0.72 per share, respectively. The historical results distribution per share is based on actual distributions paid in 1995 and the pro forma distributions assume distributions of 95% of the real estate investment trust taxable income and that the "Net Income" equals real estate investment trust taxable income for the period. The pro forma results distribution would be taxable as ordinary income. See Notes to Pro Forma Financial Statements. BRAUVIN NET LEASE V, INC. NOTES TO PRO FORMA FINANCIAL STATEMENTS DECEMBER 31, 1995 (UNAUDITED) 1. Basis of Presentation The unaudited pro forma financial statements are based upon the Company's audited financial statements for the year ended December 31, 1995 with pro forma adjustments based on (1) the acquisitions of one On The Border restaurant, one Blockbuster Video store, one Chili's restaurant, one Just For Feet store, one Video Watch store, one Pier One Imports store, and one Taylor rental store; and (2) the acquisition of one Firestone/Jiffy Lube store (the "Firestone/ Jiffy Lube Property") (collectively, the "Properties"). The pro forma adjustments reflect the financial effect of the acquisitions as if they had been consummated on January 1, 1995. These adjustments are described in detail by the following footnotes. 2. Investment Properties The Firestone/Jiffy Lube Property is stated at its purchase price plus acquisition fees and closing costs. Depreciation is recorded on a straight-line basis over a period of 40 years. 3. Cash and Cash Equivalents The pro forma adjustments represent the amount of cash used in acquiring the Firestone/Jiffy Lube Property. It is assumed that sufficient funds were available for the acquisitions at the commencement of operations although funds were raised through February, 1996. 4. Rental Income The pro forma adjustments assume that the Properties were acquired on January 1, 1995 and twelve months of rental income has been recognized in 1995. Proforma rental income is recognized on a straight-line basis over the life of the related leases. Differences between rental income earned and amounts due the respective lease agreements are credited or charged as applicable to deferred rent receivable. 5. Interest Income The pro forma adjustment to reduce interest income assumes that the funds used in acquiring the Properties were not invested in 2.5% interest-bearing deposits throughout the period. 6. Management Fees A management fee is payable to an affiliate of the Company in the amount of 1% of gross revenues derived from the operations of the Properties. 7. Earnings Per Share The historical results earnings per share per weighted average share is calculated based on 883,012 shares for the year ended December 31, 1995. The earnings per share pro forma results (all Properties, excluding Firestone/Jiffy Lube Property only) and the pro forma results (all Properties) is calculated assuming the shares outstanding at December 31, 1995 were a sufficient number of shares (1,249,968 shares) to acquire all Properties. BRAUVIN NET LEASE V, INC. PRO FORMA BALANCE SHEET September 30, 1996 (Unaudited) Historical Pro Forma Pro Forma Results Adjustments Results ASSETS Investment in real estate, at cost (Note 2): Land $ 3,176,192 $ 770,309 $ 3,946,501 Buildings 6,064,576 1,420,661 7,485,237 Total investment 9,240,768 2,190,970 11,431,738 Less: accumulated depreciation (202,987) -- (202,987) Net investment in real estate 9,037,781 2,190,970 11,228,751 Cash and cash equivalents (Note 3) 2,692,076 (2,190,970) 501,106 Organization costs 16,917 -- 16,917 Tenant receivables 69,792 -- 69,792 Prepaid expenses and deferred acquisition costs 111,294 -- 111,294 Total Assets $11,927,860 $ -- $11,927,860 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable and accrued expenses $ 18,000 $ -- $ 18,000 Prepaid rent 12,292 -- 12,292 Due to affiliates 56,557 -- 56,557 Total Liabilities 86,849 -- 86,849 Stockholders' Equity Preferred stock -- -- -- Common stock 12,990 -- 12,990 Additional paid-in capital 11,894,714 -- 11,894,714 Retained earnings (66,693) -- (66,693) Total Stockholders' Equity 11,841,011 -- 11,841,011 Total Liabilities & Stockholders' Equity $11,927,860 $ -- $11,927,860 See Notes to Pro Forma Financial Statements. BRAUVIN NET LEASE V, INC. PRO FORMA STATEMENT OF INCOME For the Nine Months Ended September 30, 1996 (Unaudited) Pier One Pier One and Taylor and Taylor All Rental Rental Firestone Properties Historical Pro Forma Pro Forma Jiffy Lube Pro Forma Results Adjustments Results Adjustments Results INCOME: Rental (Note 4) $750,274 $105,755 $ 856,029 $130,905 $ 986,934 Interest (Note 5) 118,364 (28,048) 90,316 (28,351) 61,965 Total Income 868,638 77,707 946,345 102,554 1,048,899 EXPENSES: Directors' fees 16,999 -- 16,999 -- 16,999 Advisory fees 114,631 -- 114,631 -- 114,631 Management fees (Note 6) 6,799 1,057 7,856 1,309 9,165 General and administrative 78,748 -- 78,748 -- 78,748 Acquisition costs 38,306 -- 38,306 -- 38,306 Depreciation and amortization 111,632 14,096 125,728 20,064 145,792 Total Expenses 367,115 15,153 382,268 21,373 403,641 Net Income $501,523 $ 62,554 $564,077 $81,181 $645,258 Net Income per Share (Note 7) $ 0.39 $ 0.05 $ 0.44 $ 0.06 $ 0.51 The historical results distribution, the pro forma distribution (all Properties, excluding the Firestone/Jiffy Lube Property) and the pro forma distribution (all Properties) per weighted average shares outstanding (assumed to be 1,270,712 shares for the period ending September 30, 1996) is $0.53 per share, $0.42 per share and $0.48 per share, respectively. The pro forma distributions are calculated using the weighted average shares outstanding at September 30, 1996. The historical results distribution per share is based on actual distributions paid in 1996 and the pro forma distributions assume distributions of 95% of the real estate investment trust taxable income and that the "Net Income" equals real estate investment trust taxable income for the period. The pro forma results distribution would be taxable as ordinary income. See Notes to Pro Forma Financial Statements. BRAUVIN NET LEASE V, INC. NOTES TO PRO FORMA FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED) 1. Basis of Presentation The unaudited pro forma financial statements are based upon the Company's unaudited financial statements for the nine months ended September 30, 1996 with pro forma adjustments based on the acquisition of one Pier One Imports store, one Taylor Rental store and one Firestone/Jiffy Lube store (the "Firestone/Jiffy Lube Property") (collectively, the "Properties"). The pro forma adjustments reflect the financial effect of the acquisitions as if they had been consummated on January 1, 1996. These adjustments are described in detail by the following footnotes. 2. Investment Properties The Taylor rental and Firestone/Jiffy Lube stores are stated at their purchase price plus acquisition fees and estimated closing costs. Depreciation is recorded on a straight-line basis over a period of 40 years. 3. Cash and Cash Equivalents The pro forma adjustments represent the amount of cash used in acquiring the Taylor rental and Firestone/Jiffy Lube stores. 4. Rental Income The pro forma adjustments assume that the Properties were acquired on January 1, 1996 and that nine months of rental income has been recognized in 1996. Proforma rental income is recognized on a straight-line basis over the life of the related leases. Differences between rental income earned and amounts due the respective lease agreements are credited or charged as applicable to deferred rent receivable. 5. Interest Income The pro forma adjustment to reduce interest income assumes that the funds used in acquiring the Properties were not invested in 2.5% interest-bearing deposits throughout the three month period. 6. Management Fees A management fee is payable to an affiliate of the Company in the amount of 1% of gross revenues derived from the operations of the Properties. 7. Earnings Per Share The historical results and the pro forma results earnings per share per weighted average share are calculated based upon 1,270,712 shares for the period ending September 30, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized. BRAUVIN NET LEASE V, INC. By: /s/ Jerome J. Brault Jerome J. Brault President and Chief Executive Officer Dated: March 5, 1997