-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JQjHg5iXRD++ErAaTp4rfX7Y3KrKFuev5O45UJa6peduPgv8d24fPwbBej0+yvrH gwHfaVwJQ63z6HVcBD3HQg== 0000736908-97-000005.txt : 19970815 0000736908-97-000005.hdr.sgml : 19970815 ACCESSION NUMBER: 0000736908-97-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRAUVIN REAL ESTATE FUND LP 4 CENTRAL INDEX KEY: 0000736908 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 363304339 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13402 FILM NUMBER: 97663407 BUSINESS ADDRESS: STREET 1: 150 S WACKER DR CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3124430922 MAIL ADDRESS: STREET 1: 150 S WACKER DR STREET 2: SUITE 3200 CITY: CHICAGO STATE: IL ZIP: 60606 10QSB 1 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 June 30, 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 0-13402 Brauvin Real Estate Fund L.P. 4 (Name of small business issuer as specified in its charter) Delaware 36-3304339 (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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . INDEX PART I Page Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . 3 Consolidated Balance Sheet at June 30, 1997. . . . . . . . . 4 Consolidated Statements of Operations for the six months ended June 30, 1997 and 1996. . . . . . . . . . . 5 Consolidated Statements of Operations for the three months ended June 30, 1997 and 1996. . . . . . . . . . 6 Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1996. . . . . . . . . . . 7 Notes to Consolidated Financial Statements . . . . . . . . . 8 Item 2. Managements Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . . . . . .18 PART II Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .23 Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .23 Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .23 Item 4. Submission of Matters to Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .23 Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .23 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .23 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 PART I - FINANCIAL INFORMATION ITEM 1. Consolidated Financial Statements The following Consolidated Balance Sheet as of June 30, 1997, Consolidated Statements of Operations for the six months ended June 30, 1997 and 1996, Consolidated Statements of Operations for the three months ended June 30, 1997 and 1996, and Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1996 for Brauvin Real Estate Fund L.P. 4 (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) June 30, 1997 ASSETS Investment in real estate: Land $ 4,035,301 Buildings and improvements 15,700,232 19,735,533 Less accumulated depreciation (5,081,714) Net investment in real estate 14,653,819 Investment in Sabal Palm Joint Venture (Note 5) 977,525 Cash and cash equivalents 921,222 Rent receivable (net of allowance of $29,611) 140,072 Escrow deposits 38,422 Other assets 61,589 Total Assets $16,792,649 LIABILITIES AND PARTNERS' CAPITAL LIABILITIES: Mortgage notes payable (Note 3) $11,481,298 Accounts payable and accrued expenses 282,721 Tenant security deposits 49,323 Due to affiliates 25,213 Total Liabilities 11,838,555 MINORITY INTEREST IN STRAWBERRY JOINT VENTURE 564,235 PARTNERS' CAPITAL: General Partners (16,305) Limited Partners (9,550 limited partnership units issued and outstanding) 4,406,164 Total Partners' Capital 4,389,859 Total Liabilities and Partners' Capital $16,792,649 See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF OPERATIONS For the six months ended June 30, 1997 and 1996 (Unaudited) 1997 1996 INCOME Rental $ 892,676 $ 905,929 Interest 18,657 17,386 Other, primarily tenant expense reimbursements 204,755 126,647 Total income 1,116,088 1,049,962 EXPENSES Interest 479,727 492,194 Depreciation 221,358 224,705 Real estate taxes 122,905 137,580 Repairs and maintenance 16,653 15,600 Management fees 67,029 66,498 Other property operating 51,653 55,712 General and administrative 158,887 153,658 Total expenses 1,118,212 1,145,947 Loss before minority and equity interests in joint ventures (2,124) (95,985) Minority interest's share of Strawberry Joint Venture's net loss 12,915 21,166 Equity interest in Sabal Palm Joint Venture's net income 34,217 39,157 Net income (loss) $ 45,008 $ (35,662) Net income (loss) allocated to: General Partners $ 450 $ (357) Limited Partners $ 44,558 $ (35,305) Net income (loss) per Limited Partnership Interest (9,550 units outstanding) $ 4.67 $ (3.70) See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended June 30, 1997 and 1996 (Unaudited) 1997 1996 INCOME Rental $448,821 $431,507 Interest 10,212 9,050 Other, primarily tenant expense reimbursements 119,508 53,421 Total income 578,541 493,978 EXPENSES Interest 239,128 243,476 Depreciation 109,410 114,347 Real estate taxes 56,731 67,080 Repairs and maintenance 8,169 8,172 Management fees 34,363 28,770 Other property operating 26,647 26,029 General and administrative 77,034 85,835 Total expenses 551,482 573,709 Income (loss) before minority and equity interests in joint ventures 27,059 (79,731) Minority interest's share of Strawberry Joint Venture's net loss 5,383 9,298 Equity interest in Sabal Palm Joint Venture's net income (10,293) (20,672) Net income (loss) $ 22,149 $(91,105) Net income (loss) allocated to: General Partners $ 221 $ (911) Limited Partners $ 21,928 $(90,194) Net income per Limited Partnership Interest (9,550 units outstanding) $ 2.30 $ (9.44) See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS For the six months June 30, 1997 and 1996 (Unaudited) 1997 1996 Cash Flows From Operating Activities: Net income (loss) $ 45,008 $(35,662) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 221,358 224,705 Provision for doubtful accounts 22,987 36,213 Minority interest's share of Strawberry Joint Venture's net loss (12,915) (21,166) Equity interest in Sabal Palm Joint Venture net income (34,217) (39,157) (Increase) decrease in rent receivable (37,229) 58,284 Increase in escrow deposits (29,180) (114,469) Decrease in due from affiliates -- 52,901 Increase in other assets (30,037) (2,666) Increase in accounts payable and accrued expenses 119,690 137,503 Increase in due to affiliates 12,154 -- Increase in tenant security deposits 526 7,300 Net cash provided by operating activities 278,145 303,786 Cash Flows From Investing Activities: Capital expenditures (6,902) (11,347) Distribution from Sabal Palm Joint Venture 13,160 70,500 Net cash provided by investing activities 6,258 59,153 Cash Flows From Financing Activities: Repayment of mortgage notes payable (1,058,174) (146,005) Loan fees (24,605) -- Proceeds from mortgage note payable 875,000 -- Net cash used in financing activities (207,779) (146,005) Net increase in cash and cash equivalents 76,624 216,934 Cash and cash equivalents at beginning of year 844,598 508,304 Cash and cash equivalents at end of period $921,222 $725,238 Supplemental disclosure of cash flow information: Cash paid for interest $477,809 $485,782 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. 4 (the "Partnership") is a Delaware limited partnership organized for the purpose of acquiring, operating, holding for investment and disposing of existing office buildings, medical office centers, shopping centers and industrial and retail commercial buildings of a general purpose nature, all in metropolitan areas. 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 April 30, 1984 and filed a Registration Statement on Form S-11 with the Securities and Exchange Commission which became effective on February 16, 1984. 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 April 30, 1984. The Partnership's offering closed on December 31, 1984. A total of $9,550,000 of Units were subscribed for and issued between February 16, 1984 and December 31, 1984 pursuant to the Partnership's public offering. The Partnership has acquired directly or through joint ventures the land and buildings underlying Fortune Professional Building, Raleigh Springs Marketplace, Strawberry Fields Shopping Center and Sabal Palm Shopping Center. 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 six month period ended June 30, 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 58% equity interest in an affiliated joint venture ("Strawberry Joint Venture") which acquired Strawberry Fields Shopping Center ("Strawberry Fields"). The accompanying consolidated financial statements have consolidated 100% of the assets, liabilities, operations and partners' capital of Strawberry Joint Venture. In 1994 the Partnership and its joint venture partner Brauvin Real Estate Fund L.P. 5 ("BREF 5") contributed cash to Strawberry Joint Venture to cover cash flow operating deficiencies. The minority interest in the consolidated joint venture is adjusted for the joint venture partner's share of income or loss and any cash contributions or cash disbursements from the joint venture partner. All intercompany items and transactions have been eliminated. Investment in Joint Venture Partnership The Partnership owns a 47% equity interest in a Sabal Palm Joint Venture (see Note 5). Sabal Palm is reported as an investment in an affiliated joint venture. The accompanying financial statements include the investment in Sabal Palm 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 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 38 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 June 30, 1997. Accordingly, no impairment loss has been recorded in the accompanying financial statements for the period ended June 30, 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 June 30, 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 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 in accordance with paragraph 2, SECTION K of the 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 (the "Preferential Distribution"), as such term is defined in the Agreement. 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 year, then the Limited Partners shall be paid such excess Operating Cash Flow until they have been 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) MORTGAGE NOTES PAYABLE Mortgage notes payable at June 30, 1997 consist of the following: Interest Date 1997 Rate Due Raleigh Springs Marketplace $ 4,878,681 (a)10.0% 10/99 Fortune Professional Building 875,000 (b) 06/99 Strawberry Fields Shopping Center 5,727,617 (c)7.5% 12/98 $11,481,298 (a) Monthly principal and interest payments are based on a 25-year amortization schedule. (b) Prior to June 26, 1997, the Partnership made monthly payments of interest and principal payments based upon a: (i) 25-year amortization schedule plus 100% of Available Cash Flow from July 1, 1992 through June 1, 1993; and (ii) 15-year amortization schedule plus 50% of Available Cash Flow from July 1, 1993 through July 1, 1997. The lender had the option to accelerate the loan maturity July 1 of each year, if the property is not: (i) in good condition and repair; (ii) occupied at a rate that is equal to the prevailing occupancy rate for similar properties in the same locale; and (iii) leased at rental rates which are at least 90% of the prevailing rate for similar properties in the same locale. The property currently meets these standards. Fortune was required to make a balloon mortgage payment in July 1997 of approximately $934,000. On June 26, 1997, Fortune obtained a first mortgage loan in the amount of $875,000 secured by its real estate, from American National Bank and Trust Company. In connection with this first mortgage loan the Partnership was required to pay down approximately $59,000 to release the original mortgage loan and pay loan fees of approximately $24,600. This loan is a floating rate based on American National Bank's prime rate, which at June 30, 1997 was 8.5%. Principal is amortized based on a 15-year amortization period and is payable with interest on a monthly basis. This loan matures on June 30, 1999 at which time a balloon mortgage payment in the amount of approximately $758,300 will be due. (c) In February 1993, the Partnership and Strawberry Joint Venture, finalized a refinancing of the first mortgage loan (the "Refinancing") on Strawberry Fields with the lender. The Refinancing became effective retroactive to October 1992. Due to the Refinancing, the interest rate was reduced to 9% with monthly payments of interest only from October 1992 through November 1995. The Strawberry Joint Venture has the option to extend the term of the loan and make monthly payments of principal and interest from December 1995 through November 1998, if it is not in default of the terms of the Refinancing. On September 18, 1995, the Strawberry Joint Venture notified 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 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. From November 1, 1997 through the maturity date, December 1, 1998, the interest rate will revert to the original 9.0% rate. (4) TRANSACTIONS WITH AFFILIATES Fees and other expenses paid to the General Partners or their affiliates for the six months ended June 30, 1997 and 1996 were as follows: 1997 1996 Management fees $ 51,197 $62,693 Reimbursable office expenses 56,236 52,500 Legal fees 270 257 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 $6,908 for legal services, $12,425 for management fees and $5,880 was due to an affiliate at June 30, 1997, representing an advance made from Brauvin Real Estate Fund L.P. 5. (5) EQUITY INVESTMENT The Partnership owns a 47% interest in Sabal Palm Joint Venture ("Sabal Palm") and accounts for its investment under the equity method. The following are condensed financial statements for Sabal Palm Joint Venture: June 30, 1997 Land, building and personal property, net $4,919,513 Other assets 484,991 $5,404,504 Mortgage note payable $3,194,996 Other liabilities 125,996 3,320,992 Partners' capital 2,083,512 $5,404,504 Six months ended June 30, 1997 1996 Rental income $374,610 $396,020 Other income 52,245 12,795 426,855 408,815 Mortgage and other interest 153,848 149,987 Depreciation 67,644 67,312 Operating and administrative expenses 132,560 108,204 354,052 325,503 Net income $ 72,803 $ 83,312 (6) SUBSEQUENT EVENT Withdrawal of General Partner On August 8, 1997, Mr. Cezar M. Froelich notified the Managing General Partner of the Partnership of his decision to resign and withdraw as an Individual General Partner of the Partnership as of such date and subject to the terms of the Agreement. This resignation will become effective 90 days from August 14, 1997 (the date of notice to the Limited Partners). The Managing General Partner does not believe that Mr. Froelich's resignation will have an adverse effect on the operations of the Partnership. Mr. Froelich has advised management of the Partnership that his resignation was not the result of a disagreement on any matter related to the Partnership's operations, policies or practices. 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 Fortune at June 30, 1997 was 86%, compared to 82% at December 31, 1996 and 96% at June 30, 1996. The Partnership is continuing to work to improve the occupancy level of Fortune. Fortune operated at a positive cash flow for the six months ended June 30, 1997. The Partnership is currently marketing the property for sale. To date, the Partnership has received no substantive offers, however subsequent to the end of the quarter the Partnership changed selling brokers in an effort to obtain more national exposure for this property. The occupancy level at Raleigh at June 30, 1997 was 78% compared to 80% at December 31, 1996 and 75% at June 30, 1996. Raleigh operated at a positive cash flow for the six months ended June 30, 1997. The occupancy level at Strawberry Fields at June 30, 1997 was 88% compared to 87% at December 31, 1996 and 90% at June 30, 1996. Strawberry Fields operated at a positive cash flow for the six months ended June 30, 1997. At Sabal Palm, the Partnership and its joint venture partner are continuing to work to improve the occupancy level, which stood at 95% at June 30, 1997, compared to 99% at December 31, 1996 and 97% at June 30, 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. Additionally, at Sabal Palm the largest vacancy at the center was subdivided and a new tenant moved into the larger portion of this space during the quarter ended on June 30, 1997. Sabal Palm's largest anchor tenant has engaged engineers to review the prospect of moving their store from Sabal Palm to another center approximately two miles south. They claim they are looking into the feasibility of expanding from a 40,000 sq. ft. store to a 60,000 sq. ft. store. Management has notified them that Sabal Palm could accommodate them by expanding the four suites directly south of their store to provide them with the desired space. 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. Fortune was required to make a balloon mortgage payment in July 1997 of approximately $934,000. On June 26, 1997, Fortune obtained a first mortgage loan in the amount of $875,000 secured by its real estate, from American National Bank and Trust Company. In connection with this first mortgage loan the Partnership was required to pay down approximately $59,000 to release the original mortgage loan and pay loan fees of approximately $24,600. This loan is a floating rate based on American National Bank's prime rate, which at June 30, 1997 was 8.5%. Principal is amortized based on a 15-year amortization period and is payable with interest on a monthly basis. This loan matures on June 30, 1999 at which time a balloon mortgage payment in the amount of approximately $758,300 will be due. 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 - Six Months Ended June 30, 1997 and 1996 (Amounts rounded to 000's) The Partnership generated net income of $45,000 for the six months ended June 30, 1997 as compared to net loss of $36,000 for the same six month period in 1996. The $81,000 increase in net income resulted primarily from a $66,000 increase in total income and a $28,000 decrease in total expenses. Total income for the six months ended June 30, 1997 was $1,116,000 as compared to $1,050,000 for the same six month period in 1996, an increase of $66,000. The $66,000 increase resulted primarily from an increase in reimbursable expenses at Raleigh. Partially offsetting the increase in tenant reimbursements is a decrease in rental income of $13,000 as a result of T.J. Maxx vacating its space in January 1996. Although T.J. Maxx vacated its space in January 1996 they continued to pay rent until March 31, 1996, honoring their lease, while no such payments have been made in 1997. For the six months ended June 30, 1997 total expenses were $1,118,000 as compared to $1,146,000 for the same six month period in 1996, a decrease of $28,000. The decrease in total expenses is primarily a result of a decline in real estate taxes and interest expense. Real estate tax expense was $123,000 for the six months ended June 30, 1997 compared to $138,000 for the six months ended June 30, 1996. The decrease in real estate taxes is a result of management's successful effort to appeal the tax assessments at certain of the Partnership's properties. Interest expense for the six months ended June 30, 1997 was $480,000 compared to $492,000 for the period ended in 1996, a decline of $12,000. Interest expense declined as a result reduced principal outstanding in 1997 as compared to 1996. Results of Operations - Three Months Ended June 30, 1997 and 1996 (Amounts rounded to 000's) The Partnership generated net income of $22,000 for the three months ended June 30, 1997 as compared to a net loss of $91,000 for the same three month period in 1996. The $113,000 increase in net income resulted primarily from a $85,000 increase in total income and a $22,000 decrease in total expenses. Total income for the three months ended June 30, 1997 was $579,000 as compared to $494,000 for the same three month period in 1996, an increase of $85,000. The increase in total income was a result of an increase in tenant reimbursable expenses and an increase in rental income. Tenant reimbursement income for the three months ended June 30, 1997 was $205,000 as compared to $127,000 for the three months ended June 30, 1996, an increase of $78,000. The $78,000 increase in tenant reimbursable income was primarily from an increase in reimbursable expenses at Raleigh. Rental income increased primarily as a result of the release of a portion of the vacated T.J. Maxx space beginning in November, 1996 while no such tenant was in place for the three months ended June 30, 1996. For the three months ended June 30, 1997 total expenses were $551,000 as compared to $574,000 for the same three month period in 1996, a decrease of $23,000. The decrease in total expenses is primarily a result of a decline in real estate taxes expense. Real estate tax expense was $57,000 for the three months ended June 30, 1997 compared to $67,000 for the three months ended June 30, 1996. The decrease in real estate taxes is a result of management's successful effort to appeal the tax assessments at certain of the Partnership's properties. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings. On June 12, 1997, a lawsuit was filed in the SecondJudicial District Court in and for Bernalillo County, New Mexico, styled Cooney Watson & Associates, Inc. v. Brauvin Ventures, Inc. a/k/a Brauvin Real Estate Fund IV, Docket No. CV-97-05161. The lawsuit claims negligence, breach of contract, breach of duty of good faith and fair dealing, and constructive eviction. The Partnership denies all allegations set forth in the complaint and is vigorously defending against them. 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. 4 BY: /s/ Jerome J. Brault Jerome J. Brault Chairman of the Board of Directors and President DATE: August 14, 1997 BY: /s/ B. Allen Aynessazian B. Allen Aynessazian Chief Financial Officer and Treasurer DATE: August 14, 1997 EX-27 2
5 6-MOS DEC-31-1997 JUN-30-1997 921,222 977,525 140,072 0 0 0 19,735,533 5,081,714 16,792,649 357,257 11,481,298 0 0 4,389,859 0 16,792,649 0 1,116,088 0 1,118,212 (47,132) 0 0 0 0 0 0 0 0 45,008 0 0 "SECURITIES" REPRESENTS INVESTMENT IN JOINT VENTURE "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND BUILDING] "BONDS" REPRESENTS MORTGAGES PAYABLE. "COMMON" REPRESENTS TOTAL PARTNERS' CAPITAL "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER INCOME "TOTAL COSTS" REPRESENTS TOTAL EXPENSES LESS INTEREST EXPENSE "OTHER EXPENSES" REPRESENTS EQUITY AND MINORITY INTEREST IN JOINT VENTURES' NET INCOME/LOSS
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