-----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, RtFkbw/UK+2zTUxJ+5SsVxN8rFIHug2SGhKJ4OmoCsC3QMAfo/u0taCpuO3YpP+Q O0Jl1BlsnUh+2U2rrp/UuA== 0000736908-01-500025.txt : 20010815 0000736908-01-500025.hdr.sgml : 20010815 ACCESSION NUMBER: 0000736908-01-500025 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRAUVIN REAL ESTATE FUND LP 5 CENTRAL INDEX KEY: 0000762848 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 363432071 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14481 FILM NUMBER: 1710692 BUSINESS ADDRESS: STREET 1: BRAUVIN REAL ESTATE FUNDS STREET 2: 30 N LASALLE FUNDS CITY: CHICAGO STATE: IL ZIP: 60602 BUSINESS PHONE: 3127597660 MAIL ADDRESS: STREET 1: BRAUVIN REAL ESTATE FUNDS STREET 2: 30 N LASALLE ST STE 3100 CITY: CHICAGO STATE: IL ZIP: 60602 10QSB 1 f5.txt BRAUVIN REAL ESTATE FUND 5 10QSB 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 six months ended June 30, 2001 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 0-14481 Brauvin Real Estate Fund L.P. 5 (Name of small business issuer as specified in its charter) Delaware 36-3432071 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 30 North LaSalle Street, Chicago, Illinois 60602 (Address of principal executive offices) (Zip Code) (312)759-7660 (Issuer's telephone number) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filling requirements for the past 90 days. Yes X No . BRAUVIN REAL ESTATE FUND L.P. 5 (a Delaware limited partnership) INDEX PART I Page Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . 3 Consolidated Statement of Net Assets in Liquidation as of June 30, 2001 (Liquidation Basis). . . . . . . . . . . 4 Consolidated Statement of Changes in Net Assets in Liquidation for the period January 1, 2001 to June 30, 2001 (Liquidation Basis). . . . . . . . . . . . . . 5 Consolidated Statement of Changes in Net Assets in Liquidation for the period January 1, 2000 to June 30, 2000 (Liquidation Basis). . . . . . . . . . . . . . 6 Consolidated Statements of Operations for the six months ended June 30, 2001 and 2000 (Liquidation Basis). . . . . . . . . . . . . . . . . . . . . 7 Consolidated Statements of Operations for the three months ended June 30, 2001 and 2000 (Liquidation Basis). . . . . . . . . . . . . . . . . . . . . 8 Notes to Consolidated Financial Statements . . . . . . . . . 9 Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . .18 PART II Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .25 Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .25 Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .25 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .25 Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .25 Item 6. Exhibits, and Reports on Form 8-K. . . . . . . . . . . . . .25 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 PART I - FINANCIAL INFORMATION ITEM 1. Consolidated Financial Statements The following Consolidated Statement of Net Assets in Liquidation as of June 30, 2001 (Liquidation Basis), Consolidated Statement of Changes in Net Assets in Liquidation for the period January 1, 2001 to June 30, 2001 (Liquidation Basis), Consolidated Statement of Changes in Net Assets in Liquidation for the period January 1, 2000 to June 30, 2000 (Liquidation Basis), Consolidated Statements of Operations for the six months ended June 30, 2001 and 2000 (Liquidation Basis) and Consolidated Statements of Operations for the three months ended June 30, 2001 and 2000 (Liquidation Basis) for Brauvin Real Estate Fund L.P. 5 (the "Partnership") are unaudited but reflect, in the opinion of the management, all adjustments necessary to present fairly the information required. All such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's 2000 Annual Report on Form 10-KSB. CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF JUNE 30, 2001 (LIQUIDATION BASIS) (Unaudited) ASSETS Real estate held for sale (Note 2) $8,250,500 Cash and cash equivalents 831,605 Tenant receivable (net of an allowance of $175,300) 88,782 Escrow deposits 335,371 Other assets 374 Total Assets 9,506,632 LIABILITIES Mortgage notes payable (Note 4) 5,851,304 Accounts payable and accrued expenses 146,775 Deferred gain on sale of real estate (Note 2) 942,835 Reserve for estimated costs during the period of liquidation (Note 2) 190,315 Tenant security deposits 27,784 Due to affiliates (Note 5) 5,893 Total Liabilities 7,164,906 MINORITY INTEREST IN SABAL PALM JOINT VENTURE 108,860 SHARE OF ACCUMULATED LOSSES IN EXCESS OF INVESTMENT IN STRAWBERRY FIELDS JOINT VENTURE 137,524 Net Assets in Liquidation $2,095,342 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE PERIOD JANUARY 1, 2001 TO JUNE 30, 2001 (LIQUIDATION BASIS) (Unaudited) Net assets in liquidation at January 1, 2001 $1,908,750 Income from operations 186,592 Net assets in liquidation at June 30, 2001 $2,095,342 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE PERIOD JANUARY 1, 2000 TO JUNE 30, 2000 (LIQUIDATION BASIS) (Unaudited) Net assets in liquidation at January 1, 2000 $1,544,831 Income from operations 153,663 Net assets in liquidation at June 30, 2000 $1,698,494 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENTS OF OPERATIONS For the six months ended June 30, 2001 and 2000 (Liquidation Basis) (Unaudited) 2001 2000 INCOME Rental $575,108 $606,744 Interest 19,367 21,881 Other, primarily tenant expense reimbursements 70,188 33,204 Total income 664,663 661,829 EXPENSES Interest 243,915 250,308 Real estate taxes 67,308 67,655 Repairs and maintenance 38,261 16,355 Management fees (Note 5) 40,774 44,063 Other property operating 40,522 42,132 Bad debt expense 500 (1,000) General and administrative 105,828 102,234 Total expenses 537,108 521,747 Income before minority and equity interests 127,555 140,082 Minority interest's share of Sabal Palm's net income (2,019) (37,590) Equity interest in Strawberry Fields Joint Venture's net income 61,056 51,171 Net income $186,592 $153,663 Net income allocated to the General Partners $ 1,866 $ 1,537 Net income allocated to the Limited Partners $184,726 $152,126 Net income per Limited Partnership Interest (9,914.5 units outstanding) $ 18.63 $ 15.34 See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended June 30, 2001 and 2000 (Liquidation Basis) (Unaudited) 2001 2000 INCOME Rental $266,776 $240,060 Interest 8,081 13,311 Other, primarily tenant expense reimbursements 34,296 13,986 Total income 309,153 267,357 EXPENSES Interest 121,972 124,794 Real estate taxes 33,358 33,828 Repairs and maintenance 19,931 3,169 Management fees (Note 5) 19,309 18,347 Other property operating 15,784 17,558 Bad debt expense 200 (7,600) General and administrative 43,322 61,916 Total expenses 253,876 252,012 Income before minority and equity interests 55,277 15,345 Minority interest's share of Sabal Palm's net loss 958 8,914 Equity interest in Strawberry Fields Joint Venture's net income 25,431 23,801 Net income $ 81,666 $ 48,060 Net income allocated to the General Partners $ 817 $ 481 Net income allocated to the Limited Partners $ 80,849 $ 47,579 Net income per Limited Partnership Interest (9,914.5 units outstanding) $ 8.15 $ 4.80 See accompanying notes to consolidated financial statements. (1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Brauvin Real Estate Fund L.P. 5 (the "Partnership") was organized on June 28, 1985. The General Partners of the Partnership are Brauvin Ventures, Inc. and Jerome J. Brault. On August 8, 1997, Mr. Cezar M. Froelich resigned as an Individual General Partner effective 90 days from August 14, 1997. Brauvin Ventures Inc. is owned by A.G.E. Realty Corporation Inc. (50%) and by Messrs. Brault (beneficially) (25%) and Froelich (25%). A. G. Edwards & Sons, Inc. and Brauvin Securities, Inc., affiliates of the General Partners, were the selling agents of the Partnership. The Partnership is managed by an affiliate of the General Partners. The Partnership was formed on June 28, 1985 and filed a Registration Statement on Form S-11 with the Securities and Exchange Commission which became effective on March 1, 1985. The sale of the minimum of $1,200,000 of limited partnership interests of the Partnership (the "Units") necessary for the Partnership to commence operations was achieved on June 28, 1985. The Partnership's offering closed on February 28, 1986. A total of $9,914,500 of Units were subscribed for and issued between March 1, 1985 and February 28, 1986 pursuant to the Partnership's public offering. The Partnership has acquired directly or through joint ventures the land and buildings underlying Crown Point, Strawberry Fields and Sabal Palm shopping centers. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Management's Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Basis of Presentation As a result of the July 12, 1999 authorization by a majority of the Limited Partners to sell the Partnership's properties the Partnership has begun the liquidation process and, in accordance with accounting principles generally accepted in the United States of America, the Partnership's financial statements for periods subsequent to July 12, 1999 have been prepared on a liquidation basis. Accordingly, the carrying value of the assets is presented at estimated net realizable amounts and all liabilities are presented at estimated settlement amounts, including estimated costs associated with carrying out the liquidation. Preparation of the financial statements on a liquidation basis requires significant assumptions by management, including the estimate of liquidation costs and the resolution of any contingent liabilities. There may be differences between the assumptions and the actual results because events and circumstances frequently do not occur as expected. Those differences, if any, could result in a change in the net assets recorded in the statement of net assets as of June 30, 2001. Accounting Method The accompanying consolidated financial statements have been prepared using the accrual method of accounting. 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 Special Purpose Entity The Partnership has one special purpose entity ("SPE"), Brauvin/Crown Point L.P., which is owned 99% by the Partnership and 1% by an affiliate of the General Partners. Distributions from the SPE are subordinated to the Partnership which effectively precludes any distributions from the SPE to affiliates of the General Partners. The creation of the SPE did not affect the Partnership's economic ownership of the property. Furthermore, this change in ownership structure had no material effect on the financial statements of the Partnership. Consolidation of Joint Venture Partnership The Partnership owns a 53% interest in the Sabal Palm Joint Venture which owns Sabal Palm Shopping Center. The accompanying financial statements have consolidated 100% of the assets, liabilities, operations and partners' capital of Sabal Palm Joint Venture. The minority interests of the consolidated joint venture is adjusted for the respective joint venture partner's share of income or loss and any cash contributions from or distributions to the joint venture partner, if any. All intercompany items and transactions have been eliminated. Investment in Joint Venture Partnership The Partnership owns a 42% equity interest in a Strawberry Fields Joint Venture (Note 6). Strawberry Fields is reported as an investment in an affiliated joint venture. The accompanying financial statements include the investment in Strawberry Fields Joint Venture at estimated net realizable value using the equity method of accounting on a liquidation basis. Investment in Real Estate Prior to the preparation of the financial statements on the liquidation basis, the operating properties acquired by the Partnership were stated at cost including acquisition costs, leasing commissions, tenant improvements and net of impairment. Depreciation and amortization expense is computed on a straight-line basis over approximately 31.5 years and the term of the applicable leases, respectively. All of the Partnership's properties are subject to liens under first mortgages (see Note 4). The Partnership records impairment to reduce the cost basis of real estate to its estimated fair value when the real estate is judged to have suffered an impairment that is other than temporary. The Partnership has performed an analysis of its long-lived assets, and the Partnership's management determined that except for items discussed in note 2, there were no events or changes in circumstances that indicated that the carrying amount of the assets may not be recoverable at June 30, 2001. 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, "Disclosures 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, 2001, 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. In connection with the adoption of the liquidation basis of accounting, assets were adjusted to net realizable value and liabilities were adjusted to estimated settlement amounts, which approximates their fair value at June 30, 2001. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), which requires that all derivatives be recognized as assets and liabilities in the balance sheet and be measured at fair value. SFAS 133 also requires changes in fair value of derivatives to be recorded each period in current earnings or comprehensive income depending on the intended use of the derivatives. In June, 2000, the FASB issued SFAS 138, which amends the accounting and reporting standards of SFAS 133 for certain derivatives and certain hedging activities. SFAS 133 and SFAS 138 were adopted by the Partnership effective January 1, 2001. The adoption of SFAS 133 and SFAS 138 did not have an impact on the financial position, results of operations and cash flows of the Partnership. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"). SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which is effective January 1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. The Partnership does not believe that the adoption of SFAS 141 and SFAS 142 will have a significant impact on its financial statements. (2) ADJUSTMENT TO LIQUIDATION BASIS On July 12, 1999, in accordance with the liquidation basis of accounting, assets were adjusted to estimated net realizable value and liabilities were adjusted to estimated settlement amounts, including estimated costs associated with carrying out the liquidation. In the second quarter of 2001, the Partnership recorded reductions in real estate held for sale and deferred gain of $259,350 related to other than temporary decline in the value of real estate for the Crown Point property. In management's judgement there are no other adjustments in real estate held for sale in 2001. (3) PARTNERSHIP AGREEMENT The Partnership Agreement (the "Agreement") provides that 99% of the net profits and losses from operations of the Partnership for each fiscal year shall be allocated to the Limited Partners and 1% of net profits and losses from operations shall be allocated to the General Partners. The net profit of the Partnership from the sale or other disposition of a Partnership property shall be allocated as follows: first, there shall be allocated to the General Partners the greater of: (i) 1% of such net profits; or (ii) the amount distributable to the General Partners as Net Sale Proceeds from such sale or other disposition, as defined in the Partnership Agreement; and second, all remaining profits shall be allocated to the Limited Partners. The net loss of the Partnership from any sale or other disposition of a Partnership property shall be allocated as follows: 99% of such net loss shall be allocated to the Limited Partners and 1% of such net loss shall be allocated to the General Partners. The Agreement provides that distributions of Operating Cash Flow, as defined in the Agreement, shall be distributed 99% to the Limited Partners and 1% to the General Partners. The receipt by the General Partners of such 1% of Operating Cash Flow shall be subordinated to the receipt by the Limited Partners of Operating Cash Flow equal to a 10% per annum, cumulative, non-compounded return on Adjusted Investment, as such term is defined in the Agreement (the "Preferential Distribution"). In the event the full Preferential Distribution is not made in any year (herein referred to as a "Preferential Distribution Deficiency") and Operating Cash Flow is available in following years in excess of the Preferential Distribution for said years, then the Limited Partners shall be paid such excess Operating Cash Flow until they have paid any unpaid Preferential Distribution Deficiency from prior years. Net Sale Proceeds, as defined in the Agreement, received by the Partnership shall be distributed as follows: (a) first, to the Limited Partners until such time as the Limited Partners have been paid an amount equal to the amount of their Adjusted Investment; (b) second, to the Limited Partners until such time as the Limited Partners have been paid an amount equal to any unpaid Preferential Distribution Deficiency; and (c) third, 85% of any remaining Net Sale Proceeds to the Limited Partners, and the remaining 15% of the Net Sale Proceeds to the General Partners. The Preferential Distribution Deficiency at June 30, 2001 equaled $13,556,601. (4) MORTGAGE NOTES PAYABLE Mortgage notes payable at June 30, 2001 consist of the following: Interest Date 2001 Rate Due Crown Point Shopping Center (a) $2,804,756 7.55% 1/03 Sabal Palm Square Shopping Center (b) 3,046,548 8.93% 4/02 $5,851,304 Each shopping center serves as collateral under its respective nonrecourse debt obligation. Maturities of the mortgage notes payable are as follows: 2001 $ 76,169 2002 3,138,251 2003 2,636,884 $5,851,304 (a) On December 28, 1995, the acquisition loan balance was paid in full when Crown Point was refinanced by NationsBanc Mortgage Capital Corporation. The refinancing resulted in a $3,275,000 non- recourse loan with a fixed interest rate of 7.55%, and amortization based on a twenty year term with a maturity of January 1, 2003. As a precondition to the financing, the successor lender required that ownership of the property reside in a single purpose entity ("SPE"). To accommodate the lender's requirements, ownership of the property was transferred to the SPE, Brauvin/Crown Point L.P., which is owned 99% by the Partnership and 1% by an affiliate of the General Partners. Distributions of Brauvin/Crown Point L.P. are subordinated to the Partnership which effectively precludes any distributions from the SPE to affiliates of the General Partners. The creation of Brauvin/Crown Point L.P. did not affect the Partnership's economic ownership of the Crown Point property. Furthermore, this change in ownership structure had no material effect on the financial statements of the Partnership. The carrying value of Crown Point at June 30, 2001 was approximately $5,100,000. (b) On February 19, 1987, the Partnership and its joint venture partner obtained a first mortgage loan in the amount of $3,200,000 from an unaffiliated lender. The loan was payable with interest only at 9.5% per annum until February 1992 and then required payments of principal and interest based on a 30-year amortization schedule. Sabal Palm was required to make a balloon mortgage payment in February 1997. Prior to the scheduled maturity, the lender granted Sabal Palm an extension until April 1, 1997. On June 30, 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, was used to retire Sabal Palm's existing mortgage from Lincoln National Pension Insurance Company. In the second quarter of 1998, Winn-Dixie vacated its space at the center. Winn-Dixie remains liable for rental payments under its lease at Sabal Palm until April 2005. On August 7, 2000 Sabal Palm was given official notice that Walgreens will vacate the space prior to their lease termination of April 30, 2025. The General Partners are considering potential lease buyout and potential releasing strategies for these tenants. The carrying value of Sabal Palm approximated $3,150,000 at June 30, 2001. (5) TRANSACTIONS WITH AFFILIATES Fees and other expenses paid or payable to the General Partners or its affiliates for the six months ended June 30, 2001 and 2000 were as follows: 2001 2000 Management fees $40,774 $44,063 Reimbursable office expenses 45,157 43,373 The Partnership believes the amounts paid to affiliates are representative of amounts which would have been paid to independent parties for similar services. As of June 30, 2001, the Partnership had made all payments to affiliates, except for management fees of $5,893. (6) EQUITY INVESTMENT The Partnership owns a 42% interest in Strawberry Fields Joint Venture, located in West Palm Beach, Florida, and accounts for its investment under the equity method. The following are condensed financial statements for Strawberry Fields Joint Venture: (Liquidation Basis) June 30, 2001 Real estate held for sale $5,426,875 Other assets 164,986 5,591,861 Mortgage note payable 5,030,107 Deferred gain on the sale of real estate 758,235 Other liabilities 129,385 5,917,727 Net liabilities in liquidation $ 325,866 For the six months ended June 30, Liquidation Basis 2001 2000 Rental income $415,464 $409,707 Other income 42,803 34,800 458,267 444,507 Mortgage and other interest 177,387 183,547 Operating and administrative expenses 135,509 139,126 312,896 322,673 Net income $145,371 $121,834 In 2001, the Strawberry Joint Venture received an offer to purchase Strawberry Fields for $5.585 million. In addition, Syms exercised its right of first refusal on the sale of the property. Accordingly, the Strawberry Joint Venture executed a purchase and sale agreement with Syms for $5.585 million in the second quarter of 2001. On July 20, 2001, Strawberry Fields was sold to Syms for the contract price. At closing Strawberry Joint Venture received net sales proceeds of approximately $299,000. 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. 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. Mortgage notes payable are expected to be satisfied through property sales. On June 20, 2001, the General Partners received an unsolicited tender offer to purchase up to 4,950 of the outstanding Limited Partnership Units of the Partnership for $100 per Unit. The offer is being made by a group that currently beneficially owns the economic interests with respect to approximately 14.5% of the outstanding Units. The offer period is scheduled to expire on August 17, 2001. The General Partners remained neutral as to the particular merits and risks associated with this tender offer to the Limited Partners. The General Partners further informed the Limited Partners that, for those investors who are primarily interested in liquidating their Units immediately, the tender offer provided such an opportunity. The General Partners have determined to pursue the disposition of the Partnership's assets. In 1999, the Partnership solicited and received the votes of the Limited Partners to approve a sale of all of the Partnership's properties, either on an individual or group basis, and to subsequently liquidate the Partnership. The solicitation, which was approved by the Limited Partners in the third quarter of 1999, stated that the Partnership's properties may be sold individually or in any combination provided that the total sales price for the properties included in the transaction equals or exceeds 70% of the aggregate appraised value for such properties, which valuation was conducted by an independent third party appraisal firm. The Partnership intends to sell the properties under a closed bid process which will include identification of target buyers with proven financing ability and performance of certain evaluations of the properties, such as environmental testing. Potential buyers will be requested to sign confidentiality agreements to safeguard the Partnership's confidential proprietary information. The General Partners have determined that each bid must be all cash, completely unconditional and accompanied by a substantial deposit. To date over 250 potential purchasers have been contacted regarding the sale of the properties. Of those contacted, approximately 120 potential buyers have registered to receive packages on one or more of the properties. In addition, the properties are listed on the Internet at Loopnet.com, the largest commercial real estate website in the nation. The anchor tenant at Crown Point is Food City. The overall occupancy level at Crown Point was 91% at June 30, 2001 compared to 84% at December 31, 2000 and 85% at June 30, 2000. On December 28, 1995, the loan balance of the acquisition financing was paid in full when Crown Point was refinanced with NationsBanc Mortgage Capital Corporation. The refinancing resulted in a $3,275,000 non-recourse loan with a fixed interest rate of 7.55% and a maturity of January 1, 2003. During the second quarter of 2001, the Partnership received several offers to purchase the Crown Point Shopping Center, the most attractive offer is at a purchase price of $5,250,000. The Partnership is currently negotiating this offer further. There can be no assurance that this offer and negotiation will lead to a successful sale. The carrying value of this property on June 30, 2001 is approximately $5,100,000 based on management's best estimate of the current market for this property. The Partnership continues to market this property for sale. The General Partners believe that a contributing factor in the below appraised value offers, that the Partnership has received, is that a significant tenant that occupied approximately 17% of the center vacated during the end of 1999. The General Partners believe this drop in occupancy is reflected in the offers received to date. In order to combat this development, the Partnership reconfigured the vacated space into three smaller units. One of the units has since been leased and we are currently marketing the other two spaces. Once these have been released, we anticipate we will receive more attractive offers. In 2001, the Strawberry Joint Venture received an offer to purchase Strawberry Fields for $5.585 million. In addition, Syms exercised its right of first refusal on the sale of the property. Accordingly, the Strawberry Joint Venture executed a purchase and sale agreement with Syms for $5.585 million in the second quarter of 2001. On July 20, 2001, Strawberry Fields was sold to Syms for the contract price. At closing Strawberry Joint Venture received net sales proceeds of approximately $299,000. The Sabal Palm 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 was used to retire Sabal Palm's existing mortgage from Lincoln National Pension Insurance Company. In the second quarter of 1998, Winn-Dixie vacated its space at the center. Winn-Dixie remains liable for rental payments under its lease at Sabal Palm until April 2005. On August 7, 2000 Sabal Palm was given official notice that Walgreens will vacate the space prior to their lease termination of April 30, 2025. The General Partners are considering potential lease buyout and potential releasing strategies for these tenants. In the fourth quarter of 1998, Sabal Palm recorded an impairment of $1,499,958 related to an other than temporary decline in the value of real estate for Sabal Palm. This impairment has been allocated to the land and building based on the original acquisition percentages. In total, Sabal Palm has received six offers on the property ranging in price from $2.5 million to $3.4 million. After negotiation Sabal Palm accepted the highest offer and completed negotiating the sale contract in June 2000. The buyer had a 60 day due diligence period. The buyer terminated the contract within the due diligence period. In September 2000, Sabal Palm completed negotiating a new contract for the sale of the property. The new sale price was $3,360,000. The $3.36 million proposed sales price exceeded the November, 1998 appraised value of $3.25 million. The potential purchaser had a 60 day due diligence period. This buyer also terminated the contract within the due diligence period. This $3.36 million offer was assessed by management as an estimate of net realizable value on June 30, 2001. As a result of the two dark anchor spaces representing more than 55,000 square feet of space or 62% of the property this center has proved very difficult to sell. The Partnership is continuing to market this property for sale. In addition, the Partnership is reviewing a number of potential possibilities to sublease either or both of the dark anchors. However, Winn-Dixie and Walgreens have been selective in their review of potential subtenants so as to restrict potential competition. As a result of the July 1999 authorization by a majority of the Limited Partners to sell the Partnership's properties, the Partnership has begun the liquidation process and, in accordance with accounting principles generally accepted in the United States of America, the Partnership's financial statements for periods subsequent to July 12, 1999 have been prepared on a liquidation basis. Accordingly, the carrying value of the assets is presented at estimated net realizable amounts and all liabilities are presented at estimated settlement amounts, including estimated costs associated with carrying out the liquidation. Preparation of the financial statements on a liquidation basis requires significant assumptions by management, including the estimate of liquidation costs and the resolution of any contingent liabilities. There may be differences between the assumptions and the actual results because events and circumstances frequently do not occur as expected. Those differences, if any, could result in a change in the net assets recorded in the statement of net assets as of June 30, 2001. The General Partners expect to distribute proceeds from operating cash flow, 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 refinancing or sale proceeds. These cash needs include, among other things, maintenance of working capital reserves in compliance with the Agreement as well as payments for major repairs, tenant improvements and leasing commissions in support of real estate operations. Results of Operations The Partnership's revenue and expenses are affected primarily by the operations of the properties. Property operations, and in particular the components of income, demand for space and rental rates are, to a large extent, determined by local and national market conditions. These conditions have generally adversely impacted the Partnership's property economics. Rental and occupancy rates have generally been below where they were when the properties were acquired. The General Partners conduct an in-depth assessment of each property's physical condition as well as a demographic analysis to assess opportunities for increasing occupancy and rental rates and decreasing operating costs. In all instances, decisions concerning restructuring of loan terms, reversions and subsequent operation of the property are made with the intent of maximizing the potential proceeds to the Partnership and, therefore, return of investment and income to Limited Partners. In certain instances and under limited circumstances, management of the Partnership entered into negotiations with lenders for the purpose of restructuring the terms of loans to provide for debt service levels that could be supported by operations of the properties. When negotiations are unsuccessful, management of the Partnership considers the possibility of reverting the properties to the first mortgage lender. Foreclosure proceedings may require 6 to 24 months to conclude. An affiliate of the Partnership and the General Partners is assigned responsibility for day-to-day management of the properties. The affiliate receives a combined management and leasing fee which cannot exceed 6% of gross revenues generated by the properties. Management fee rates are determined by the extent of services provided by the affiliate versus services that may be provided by third parties, i.e., independent leasing agents. In all instances, fees paid by the Partnership to the property management affiliate are, in the General Partners opinion, comparable to fees that would be paid to independent third parties. Results of Operations - Six months ended June 30, 2001 and 2000 (Liquidation Basis) As a result of the Partnership's adoption of the liquidation basis of accounting, and in accordance with accounting principles generally accepted in the United States of America, the Partnership's financial statements for periods subsequent to July 12, 1999 have been prepared on a liquidation basis. The Partnership generated net income of $187,000 for the period ended June 30, 2001 as compared to net income of $154,000 for the same period in 2000. Total income for the period ended June 30, 2001 was $665,000 as compared to $662,000 for the same period in 2000. The $3,000 increase in total income was primarily a result of a $32,000 decrease in rental income offset by a $37,000 increase in other income. Rental income decreased primarily as a result of a decline in percentage rents earned which related to a vacated anchor tenant at Sabal Palm. Other income increased as a result of increased occupancy at Sabal Palm and Crown Point. The economic occupancy at Sabal Palm increased to 91% at June 30, 2001 compared to 89% at June 30, 2000. The occupancy at Crown Point increased to 91% at June 30, 2001 compared to 85% at June 30, 2000. Total expenses for the period ended June 30, 2001 were $537,000 as compared to $522,000 for the same period in 2000. The $15,000 increase in expense is the result of a $22,000 increase in repairs and maintenance expense offset by a decrease in interest expense of $6,000. Repairs and maintenance expense increased primarily due to roof repairs at Sabal Palm. Results of Operations - Three months ended June 30, 2001 and 2000 (Liquidation Basis) The Partnership generated net income of $82,000 for the period ended June 30, 2001 as compared to net income of $48,000 for the same period in 2000. Total income for the period ended June 30, 2001 was $309,000 as compared to $267,000 for the same period in 2000. The $42,000 increase in total income was a result of an $27,000 increase in rental income and an $20,000 increase in other income offset by a $5,000 decrease in interest income. These increases primarily relate to increased occupancy at Sabal Palm and Crown Point. The economic occupancy at Sabal Palm increased to 91% at June 30, 2001 compared to 89% at June 30, 2000. The occupancy at Crown Point increased to 91% at June 30, 2001 compared to 85% at June 30, 2000. Total expenses for the period ended June 30, 2001 were $254,000 as compared to $252,000 for the same period in 2000. The $2,000 decrease in expense is the result of a $17,000 increase in repairs and maintenance expense offset by a $19,000 decrease in general and administrative expense. Repairs and maintenance expense increased primarily due to roof repairs at Sabal Palm. The decrease in general and administrative expense is primarily due to decrease in professional fees. 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. None. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BY: Brauvin Ventures, Inc. Corporate General Partner of Brauvin Real Estate Fund L.P. 5 BY: /s/ Jerome J. Brault Jerome J. Brault Chairman of the Board of Directors and President DATE: August 14, 2001 BY: /s/ Thomas E. Murphy Thomas E. Murphy Chief Financial Officer And Treasurer DATE: August 14, 2001 -----END PRIVACY-ENHANCED MESSAGE-----