10KSB 1 f5.txt BRAUVIN REAL ESTATE FUND LP 5 12/31/01 10-KSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB [X]Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2001 or [ ]Transition Report Under 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 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 Exchange Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g)of the Exchange 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 filing requirements for the past 90 days. Yes X No . Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year $1,294,680. The aggregate sales price of the limited partnership interests of the issuer (the "Units") to unaffiliated investors of the issuer was $9,914,500. This does not reflect market value. This is the price at which the Units were sold to the public. There is no current established trading market for these Units, nor have any Units been sold within the last 60 days prior to this filing. Portions of the Prospectus of the registrant dated March 1, 1985, as supplemented, and filed pursuant to Rule 424(b) and 424(c)under the Securities Act of 1933, as amended, are incorporated by reference into Parts II and III of this Annual Report on Form 10-KSB. BRAUVIN REAL ESTATE FUND L.P. 5 2001 FORM 10-KSB ANNUAL REPORT INDEX PART I Page Item 1. Description of Business. . . . . . . . . . . . . . . . . . . 3 Item 2. Description of Properties. . . . . . . . . . . . . . . . . . 7 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .14 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .14 PART II Item 5. Market for the Issuer's Limited Partnership Interests and Related Security Holder Matters. . . . . . . .15 Item 6. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . .15 Item 7. Consolidated Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . .24 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . . . .24 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. . . . . . . . . . . . . . . . . . . . .26 Item 10.Executive Compensation . . . . . . . . . . . . . . . . . . .28 Item 11.Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . .28 Item 12.Certain Relationships and Related Transactions . . . . . . .29 Item 13.Exhibits, Consolidated Financial Statements and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . .30 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 BRAUVIN REAL ESTATE FUND L.P. 5 (a Delaware limited partnership) PART I Item 1. Description of Business. Brauvin Real Estate Fund L.P. 5 (the "Partnership") is a Delaware limited partnership formed in 1985 whose business has been devoted exclusively to acquiring, operating, holding for investment and disposing of existing office buildings, shopping centers and industrial and retail commercial buildings, all in greater metropolitan areas. The General Partners originally intended to dispose of the Partnership's properties approximately five to eight years after acquisition of each property, with a view toward liquidation of the Partnership. Due to the past real estate market conditions and economic trends in the areas where the Partnership's properties are located, the General Partners believed it to be in the best interest of the Partnership to retain the properties until such time as the General Partners reasonably believed it was appropriate to dispose of the Partnership's properties. In order to make this determination, the General Partners periodically evaluated market conditions. In 1998, the General Partners notified the Limited Partners that they will explore various alternatives to sell the Partnership's assets. In this regard, the Partnership engaged a nationally known appraisal firm to value the Partnership's assets. Additionally, this firm is assisting the General Partners in determining the appropriate method and timing for the disposition of the Partnership's assets. 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. The amended and restated limited partnership agreement (the "Agreement") provides that the Partnership shall terminate December 31, 2025, unless sooner terminated. The General Partners shall in no event dispose of the properties after that date. As of December 31, 1998, the Partnership had acquired one rental property, a 42% interest in a joint venture which acquired a second rental property and a 53% interest in a joint venture which acquired a third rental property. A fourth rental property which the Partnership had acquired a 54% interest in a joint venture was foreclosed upon on May 15, 1995 and the joint venture was terminated and dissolved in 1996. The Partnership will not purchase any additional properties. Operations currently consist of operating the real estate properties which have been managed by Brauvin Management Company (an affiliate of the General Partners). The focus of property management activities has been improvement in the economic performance of the properties with the goal of maximizing value to the Partnership upon disposition. On December 10, 1998, the Partnership received notice that an unsolicited tender offer to purchase up to 25% of the outstanding limited partnership interests of the Partnership (the "Units") was to commence with a tender price of $80 per Unit. The offer was being made, in part, by an entity that owned a nominal economic interest in the Partnership and terminated on January 15, 1999. As a result of this unsolicited tender offer approximately 609 economic interests in the Partnership were transferred. On May 12, 1999, the Partnership received notice that an unsolicited tender offer to purchase up to approximately 25% of the outstanding Units was to commence with a tender price of $170 per Unit. The offer was made, in part, by an entity that owned a nominal economic interest in the Partnership and expired on June 25, 1999. As a result of this unsolicited tender offer approximately 777 economic interests in the Partnership were transferred. On June 20, 2001, the Partnership received an unsolicited tender offer to purchase up to 4,950 of the outstanding Units for $100 per Unit. The offer was made by a group that currently beneficially owns the economic interests with respect to approximately 14.5% of the outstanding Units. The offer period expired on August 17, 2001. Subsequent to August 17, 2001 the tender offer was increased to $120 per unit and the term was extended to October 1, 2001. As of October 1, 2001, 404 economic interests were transferred as a result of this tender offer. Upon completion of the Offer, the purchasers held an aggregate of approximately 1,842 economic interests, or approximately 19% of the outstanding total Units. The General Partners remained neutral as to the particular merits or risks associated with these tender offers. The General Partners cautioned that the ultimate amount actually received by each Limited Partner will be affected by items including, but not limited to, the timing of the liquidation of the assets, changes in market conditions, necessary Partnership reserves and the sales prices that can be negotiated. The General Partners further informed the Limited Partners that, for those investors who were primarily interested in liquidating their Units immediately, the tender offers provided such an opportunity. 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, the Strawberry Joint Venture received net sales proceeds of approximately $299,000. The Partnership has no employees. Market Conditions/Competition The Partnership faces active competition in all aspects of its business and must compete with entities which own properties similar in type to those owned by the Partnership. Competition exists in such areas as attracting and retaining creditworthy tenants, financing capital improvements and eventually selling properties. Many of the factors affecting the ability of the Partnership to compete are beyond the Partnership's control, such as softened markets caused by an oversupply of similar rental facilities, declining performance in the economy in which a property is located, population shifts, reduced availability and increased cost of financing, changes in zoning laws or changes in patterns of the needs of users. The marketability of the properties may also be affected by prevailing interest rates and existing tax laws. The Partnership has retained ownership of its properties for periods longer than anticipated at acquisition. Market conditions have weakened in several markets resulting in lower cash flows than were originally anticipated. The Partnership strives to maximize economic occupancy and, as such, must adjust rents to attract and retain tenants. One measure of a market's relative strength or weakness is the current rental rate demanded by non-anchor tenants. These rates are for tenants who generally sign leases of three to five years and are an indicator of the "spot" rental market. The average rental rates for non-anchor tenants at Sabal Palm in Palm Bay, Florida have decreased from approximately $10.88 per square foot in 1995 to approximately $9.38 per square foot in 2001. Non-anchor tenant average rental rates, expressed per square foot per year, have increased at the Crown Point property located in Kingsport, Tennessee, from approximately $8.90 per square foot in 1993 to approximately $11.80 per square foot in 2001. However, the Partnership has not benefitted greatly from that increase due to the existence of several leases that were negotiated in prior years. The Partnership, by virtue of its ownership of real estate, is subject to federal and state laws and regulations covering various environmental issues. Management of the Partnership retains the services of third parties who hold themselves out to be experts in the field to assess a wide range of environmental issues and conduct tests for environmental contamination. Management believes that all real estate owned by the Partnership is in full compliance with applicable environmental laws and regulations. Item 2. Description of Properties. The following is a discussion of the rental properties owned and operated by the Partnership. For the purpose of the information disclosed in this section, the following terms are defined as follows: Occupancy Rate: The occupancy rate is defined as the occupied square footage at December 31, divided by the total square footage excluding square footage of outparcels, if any. Average Annual Base Rent Per Square Foot: The average annual base rent per square foot is defined as the total effective base rental income for the year divided by the average square feet occupied excluding outparcels, if any. Average Square Feet Occupied: The average square feet occupied is calculated by averaging the occupied square feet at the beginning of the year with the occupied square feet at the end of the year excluding outparcels, if any. In the opinion of the General Partners, the Partnership has provided for adequate insurance coverage of its real estate investment properties. During the year ended December 31, 2001, the Partnership owned the properties described below: (a) Crown Point Shopping Center ("Crown Point") On September 12, 1985, the Partnership acquired Crown Point, an approximately 71,500 square foot shopping center located in Kingsport, Sullivan County, Tennessee. Crown Point is composed of a main building, constructed in two phases, and two out parcel buildings of approximately 6,500 square feet. Phase I of Crown Point and one out parcel building were completed in 1984. Phase II of Crown Point and the other out parcel building were completed in 1985. The anchor tenant is a Food City grocery. Burger King, a division of Grand Metropolitan PLC, is located in one of the out parcel buildings which is also owned by the Partnership. Crown Point was 84% occupied at December 31, 2001. The Partnership purchased Crown Point for $5,341,696 consisting of approximately $1,775,000 paid in cash at closing and the balance by assuming an existing first mortgage loan of $3,566,696. The lender provided the first mortgage loan through the sale of tax- exempt bonds. The loan had a 30-year term and bore interest at the rate of 9.69% per annum. On December 28, 1995, the loan balance was paid in full when the Crown Point property 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%. The outstanding mortgage balance encumbered by the property is $2,750,895 at December 31, 2001. The outstanding mortgage balance is currently being amortized based on a twenty year term and has a maturity of January 1, 2003. The occupancy rate and average annual base rent per square foot at December 31, 2001 and 2000 were as follows: 2001 2000 Occupancy Rate 84% 84% Average Annual Base Rent Per Square Foot $8.30 $7.96 Crown Point has one tenant who individually occupies ten percent or more of the rentable square footage. The following is a summary of the tenant rent roll at December 31, 2001: Annual Lease Square Base Expiration Renewal Nature of Tenant Feet Rent Date Options Business Food City 39,652 $257,738 8/2004 5/5 yrs ea. Food Store Others 20,467 241,537 Various Various Vacant 11,333 -- 71,452 $499,275 The Partnership has accepted an offer for the acquisition of Crown Point in the amount of $4,800,000. This price is below the 1998 appraised value of $5.95 million. The General Partners believe that the decrease in the value of the property is the result of a significant tenant that had occupied approximately 17% of the center and then vacated at the end of 1999. The carrying value of this property on December 31, 2001 is approximately $4,662,000 based on the purchase agreement price of $4,800,000. The purchase agreement was executed on February 1, 2002 with a third party, and the due diligence period expires on April 5, 2002. (b) Strawberry Fields Shopping Center ("Strawberry Fields") On December 12, 1985, the Partnership and Brauvin Real Estate Fund L.P. 4 ("BREF 4"), an affiliated public real estate limited partnership, formed a joint venture (the "Strawberry Joint Venture") to purchase Strawberry Fields located in West Palm Beach, Florida for $9,875,000. The Partnership has a 42% interest in the joint venture which owns Strawberry Fields and BREF 4 has a 58% interest in the joint venture which owns Strawberry Fields. The purchase was funded with $3,875,000 cash at closing and $6,000,000 from the proceeds of a first mortgage loan. In February 1993, the Strawberry Joint Venture finalized a refinancing (the "Refinancing") of the first mortgage loan on Strawberry Fields with the lender. Effective October 1, 1998, the Strawberry Joint Venture and the Strawberry Lender agreed to modify and extend the first mortgage loan. As of October 1, 1998 and through the extended maturity date, April 1, 2002, the interest rate was reduced from 9% to 7% with principal amortization changed from a ten year period to an eighteen year period. Strawberry Fields is a neighborhood retail development constructed on an 11.87 acre site in 1985. Strawberry Fields was initially anchored by Florida Choice, a combination food, drug and general merchandise chain. In 1987, the Kroger Company ("Kroger") purchased Family Mart, the original lessee, and renamed the store. Kroger then closed the Florida Choice store in November 1988; however, the original lease terms remained in effect and Kroger continued to pay rent. Although Kroger is obligated to continue to pay rent through March 31, 2005, the Strawberry Joint Venture located and approved a sublease for a replacement tenant, Syms, a national discount clothing retailer, to sublease the space for the remainder of the original lease term. Strawberry Fields' main building contains 103,614 square feet of retail space and is complemented by two outparcel sites plus an older 5,400 square foot Uniroyal tire and automotive outlet. The outparcel sites are leased to Taco Bell, a division of Tricon Global, and Flagler National Bank. The Partnership received three bids on Strawberry Fields during the latter part of 1999. After negotiation the Strawberry Joint Venture accepted the high bid of $5.43 million and entered into a contract for sale. However, the prospective purchaser terminated its interest in the property during its due diligence period. Subsequent to this deal falling away the Strawberry Joint Venture received another offer for $5.35 million. However, although the offer exceeded the November, 1998 appraised value of $4.8 million, the offer, after transaction costs, was below the mortgage balance at the time. The Strawberry Joint Venture accepted the initial high bid in part because the property's underlying mortgage loan was coming due and the Strawberry Lender indicated that it would not extend the maturity. However, in the second quarter of 2000, the Strawberry Joint Venture was successful in extending the loan for a two year period. This extension allowed the Partnership to continue to market the property and seek a greater sales price. 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, the Strawberry Joint Venture received net sales proceeds of approximately $299,000. (c)Sabal Palm Square ("Sabal Palm") On October 31, 1986, the Partnership and BREF 4 formed a joint venture to purchase Sabal Palm, a shopping center in Palm Bay, Florida, for $5,924,000. The Partnership has a 53% interest and BREF 4 has a 47% interest in the joint venture which owns Sabal Palm. The purchase was funded with $2,724,000 cash at closing and a $3,200,000 interim loan. On February 19, 1987, the joint venture obtained a first mortgage loan in the amount of $3,200,000 collateralized by Sabal Palm from an unaffiliated lender. The loan was payable with interest only at 9.5% per annum until February 1992, and 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 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, was used to retire Sabal Palm's existing mortgage from Lincoln National Pension Insurance Company. The outstanding mortgage balance encumbered by the property was $3,028,386 at December 31, 2001. Sabal Palm is a neighborhood shopping center consisting of approximately 89,000 square feet of retail space situated on approximately 9.7 acres of land. Sabal Palm was constructed in 1985 and is anchored by a Winn Dixie food store and Walgreens. Winn Dixie completed an approximately 6,500 square foot expansion in the fourth quarter of 1992. Sabal Palm has several outparcels, which are not owned by the Partnership, but which add to the center's appearance and customer activity. Sabal Palm had an 84% economic occupancy at December 31, 2001. In the second quarter of 1998, Winn-Dixie vacated its space at the center. Winn-Dixie remains liable for the rental payments under its lease at Sabal Palm until April 2005. Winn-Dixie failed to timely pay its rental obligation for November and December 2001 and from January through March 2002, and is currently in default. The Partnership has filed suit against Winn Dixie and is pursuing its legal remedies against the tenant. On August 7, 2000, Sabal Palm was given notice that Walgreens will vacate the space prior to its termination of the lease in April 30, 2025. The General Partners are considering potential lease buyout and potential releasing strategies for these tenants. The economic occupancy rate and average annual base rent per square foot at December 31, 2001 and 2000 were as follows: 2001 2000 Occupancy Rate 84% 86% Average Annual Base Rent Per Square Foot $5.94 $5.11 Sabal Palm has two tenants that individually occupy ten percent or more of the rentable square footage. The following is a summary of the tenant rent roll at December 31, 2001: Annual Lease Square Base Expiration Renewal Nature of Tenant Feet Rent Date Options Business Winn-Dixie 41,983 $186,982 4/2005 5/5 yrs ea. Food Store Walgreens 13,000 81,252 4/2025(a) 2/5 yrs ea. Drug Store Others 19,325 181,243 Various Various Vacant 14,625 -- 88,933 $449,477 (a) Tenant has a right to terminate lease at April, 2005. In total, Sabal Palm has received six offers on the property from unaffiliated parties ranging in price from $2.2 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 $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. As a result of the two vacant 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 have Winn-Dixie "buy out" its remaining lease obligation at a discount and to use the proceeds to split its space into smaller more leaseable units in an effort to sublease either or both of the "dark" anchors. The Partnership has made material progress in this regard; but, no definitive conclusion has been reached. To the extent the Partnership is successful replacing Winn Dixie with smaller tenants, the redemizing of the anchor space will require a substantial investment by the Partnership into the property. Any such investment will be evaluated on the benefits to the Partnership including the increased potential value to the Partnership and the likelihood that the property will be sold sooner. In addition, the Partnership has approached the lender regarding allowing Winn-Dixie to buy out its lease and a potential extension of the loan maturity. In the third quarter of 2001, the Partnership received notification that the lender would not agree to the Partnership's request. As a result of the lender rejecting the Partnership's request and Winn-Dixie's current lease default, in the third quarter of 2001, Sabal Palm recorded an adjustment to the liquidation basis of accounting of $114,367 related to an other than temporary decline in the value of real estate for Sabal Palm. In the fourth quarter of 2001, Sabal Palm recorded a further adjustment to liquidation basis of $7,508 related to an other than temporary decline in the value of real estate at Sabal Palm. As of December 31, 2001, the Partnership has adjusted the carrying value of this property to the approximate outstanding mortgage loan. In April 2002, the joint venture and the lender agreed to a twelve month extension of the existing loan. The loan extension was subject to the lease termination of Winn-Dixie and Winn-Dixie's payment of a termination fee. As a requirement of the extension, the joint venture and the lender agreed to use the proceeds from the termination to redemize the former Winn-Dixie space into three spaces as well as certain other improvements to the center. The joint venture has signed a lease with Sav A Lot a national grocery chain for 14,350 square feet (one of the demized spaces). In addition, the joint venture is in lease negotiations with a potential retail tenant for 10,675 square feet in another one of the demized spaces. However, at this time, there can be no assurance that the joint venture and this potential tenant will execute the lease as the terms are presented. Further, Walgreens has approached the joint venture with a proposal to sublease their space in the center to another retail tenant. The joint venture is currently reviewing this proposal. Risks of Ownership The possibility exists that the tenants of the Partnership's properties may be unable to fulfill their obligations pursuant to the terms of the leases, including making base rent payments or percentage rent payments to the Partnership. Such defaults by one or more of the tenants could have an adverse effect on the financial situation of the Partnership. Furthermore, the Partnership may be unable to replace these tenants due to competition in the market at the time any vacancy occurs. Additionally, there are costs to the Partnership when replacing tenants such as leasing commissions and tenant improvements. Such improvements may require expenditure of Partnership funds otherwise available for distribution. Item 3. Legal Proceedings. None. Item 4. Submission of Matters to a Vote of Security Holders. None. PART II Item 5. Market for the Issuer's Limited Partnership Interests and Related Security Holder Matters. At December 31, 2001, there were approximately 605 Limited Partners in the Partnership. There is currently no established public trading market for the Units and it is not anticipated that a public market for the Units will develop. Bid prices quoted by "partnership exchanges" vary widely and are not considered a reliable indication of market value. Neither the Partnership nor Brauvin Ventures, Inc. (the "Corporate General Partner") will redeem or repurchase outstanding Units. Pursuant to the terms of the Agreement, there are restrictions on the ability of the Limited Partners to transfer their Units. In all cases, the General Partners must consent to any substitution of a Limited Partner. There were no cash distributions to Limited Partners for 2001 and 2000. Item 6. Management's Discussion and Analysis or Plan of Operation. General Certain statements in this Annual 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 and in the section entitled "Description of Business." 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 December 10, 1998, the Partnership received notice that an unsolicited tender offer to purchase up to 25% of the outstanding limited partnership interests of the Partnership (the "Units") was to commence with a tender price of $80 per Unit. The offer was being made, in part, by an entity that owned a nominal economic interest in the Partnership and terminated on January 15, 1999. As a result of this unsolicited tender offer approximately 609 economic interests in the Partnership were transferred. On May 12, 1999, the Partnership received notice that an unsolicited tender offer to purchase up to approximately 25% of the outstanding Units was to commence with a tender price of $170 per Unit. The offer was made, in part, by an entity that owned a nominal economic interest in the Partnership and expired on June 25, 1999. As a result of this unsolicited tender offer approximately 777 economic interests in the Partnership were transferred. On June 20, 2001, the Partnership received an unsolicited tender offer to purchase up to 4,950 of the outstanding Units for $100 per Unit. The offer was made by a group that currently beneficially owns the economic interests with respect to approximately 14.5% of the outstanding Units. The offer period expired on August 17, 2001. Subsequent to August 17, 2001 the tender offer was increased to $120 per unit and the term was extended to October 1, 2001. As of October 1, 2001, 404 economic interests were transferred as a result of this tender offer. Upon completion of the Offer, the purchasers held an aggregate of approximately 1,842 economic interests, or approximately 19% of the outstanding total Units. The General Partners remained neutral as to the particular merits or risks associated with these tender offers. The General Partners cautioned that the ultimate amount actually received by each Limited Partner will be affected by items including, but not limited to, the timing of the liquidation of the assets, changes in market conditions, necessary Partnership reserves and the sales prices that can be negotiated. The General Partners further informed the Limited Partners that, for those investors who were primarily interested in liquidating their Units immediately, the tender offers 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. In 2001, over 1,000 potential investors were contacted regarding the sale of the properties. Of this group, approximately 180 became registered potential buyers for the properties. Combined withe prior periods, there have been approximately 300 potential buyers. In addition, the properties are listed on the Internet at Loopnet.com, the largest commercial real estate website in the nation. Property Status The anchor tenant at Crown Point is Food City. The overall occupancy level at Crown Point was 84% at December 31, 2001 and 84% at December 31, 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. The carrying value of this property on December 31, 2001 is approximately $4,662,000 based on the purchase contract price of $4,800,000. This contract was executed on February 1, 2002 and is subject to a 45 day due diligence period. 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, the Strawberry Joint Venture received net sales proceeds of approximately $299,000. 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 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. Winn-Dixie failed to timely pay its rental obligation for November and December of 2001 and January through March, 2002. Winn-Dixie is currently in default and the Partnership is pursuing its legal remedies against the tenant. On August 7, 2000 Sabal Palm was given notice that Walgreens will vacate the space prior to its lease termination of April 30, 2025. The General Partners are considering potential lease buyout and potential releasing strategies for these tenants. In total, Sabal Palm has received six offers on the property ranging in price from $2.2 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 $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. As a result of the two vacant 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 have Winn-Dixie "buy out" its remaining lease obligation at a discount and to use the proceeds to split its space into smaller more leaseable units in an effort to sublease either or both of the "dark" anchors. The Partnership has made material progress in this regard; but, no definitive conclusion has been reached. To the extent the Partnership is successful replacing Winn-Dixie with smaller tenants, the redemizing of the anchor space will require a substantial investment by the Partnership into the property. Any such investment will be evaluated on the benefits to the Partnership including the increased potential value to the Partnership and the likelihood that the property will be sold sooner. In addition, the Partnership has approached the lender regarding allowing Winn-Dixie to buy out its lease and a potential extension of the loan maturity. In the third quarter of 2001, the Partnership received notification that the lender would not agree to the Partnership's request. As a result of the lender rejecting the Partnership's request and Winn-Dixie's current lease default, in the third quarter of 2001, Sabal Palm recorded an adjustment to the liquidation basis of accounting of $114,367 related to an other than temporary decline in the value of real estate for Sabal Palm. In the fourth quarter of 2001, Sabal Palm recorded a further adjustment to the liquidation basis of accounting of $7,508 related to an other than temporary decline in the value of real estate at Sabal Palm. In April 2002, the joint venture and the lender agreed to a twelve month extension of the existing loan. The loan extension was subject to the lease termination of Winn-Dixie and Winn-Dixie's payment of a termination fee. As a requirement of the extension, the joint venture and the lender agreed to use the proceeds from the termination to redemize the former Winn-Dixie space into three spaces as well as certain other improvements to the center. The joint venture has signed a lease with Sav A Lot a national grocery chain for 14,350 square feet (one of the demized spaces). In addition, the joint venture is in lease negotiations with a potential retail tenant for 10,675 square feet in another one of the demized spaces. However, at this time, there can be no assurance that the joint venture and this potential tenant will execute the lease as the terms are presented. Further, Walgreens has approached the joint venture with a proposal to sublease their space in the center to another retail tenant. The joint venture is currently reviewing this proposal. Due to the nonpayment of Winn-Dixie's rental obligations, the Partnership did not make its mortgage payments for Sabal Palm in November and December 2001 and January through March 2002, as a result, the Partnership is currently in default on its loan. However, the lender has taken no action and the twelve month extension currently being contemplated with the lender will include the Partnership's payment of all past due amounts. 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 generally accepted accounting principles, the Partnership's financial statements for periods subsequent to July 12, 1999 have been prepared on the liquidation basis of accounting. Accordingly, the carrying values of the assets are presented at net realizable amounts and liabilities are presented at estimated settlement amounts, including estimated costs associated with carrying out the liquidation. Preparation of the financial statements on the liquidation basis of accounting 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 December 31, 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. In particular, the retenanting of Sabal Palm, if successful, will require an additional capital investment by the Partnership. 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 for the years ended December 31, 2001 and 2000 The Partnership generated net income of $456,000 for the year ended December 31, 2001 as compared to a net income of $364,000 for the same period in 2000. The $92,000 increase in net income is primarily the result of a decrease in total income of $79,000 offset by an increase in total expenses of $243,000. Minority interest share in Sabal Palm's net loss increased $138,000 and equity interest in Strawberry's net income increased $276,000. Total income for the year ended December 31, 2001 was $1,295,000 as compared to $1,374,000 for the same period in 2000. The $79,000 decrease in total income was primarily a result of a $27,000 decrease in rental income, a $20,000 decrease in interest income and a $32,000 decrease 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. Interest income decreased as a result of the decline in interest rates. The decrease in other income was the result of a correction in the year 2000 relating to prior year's billings for certain tenants at the Partnership's shopping centers. Total expenses for the year ended December 31, 2001 were $1,176,000 as compared to $1,055,000 for the same period in 2000. The $121,000 increase in total expense was primarily a result of a $78,000 increase in bad debt expense and a $38,000 increase in repairs and maintenance. The increase in bad debt expense was primarily due to the Partnership recording an allowance for bad debts of approximately $76,000 from Winn-Dixie at the Sabal Palm property. The $38,000 increase in repairs and maintenance was due to a $17,000 increase at Crown Point and an $11,000 increase at Sabal Palm. The increase at Sabal Palm was mainly due to roof repairs. The increase at Crown Point was mainly due to parking lot repairs. Results of Operations for the year ended December 31, 2000 (Liquidation Basis) and the period January 1, 1999 thru July 12, 1999 (Going Concern Basis) and July 13, 1999 thru December 31, 1999 (Liquidation Basis) As a result of the Partnership's adoption of the liquidation basis of accounting, and in accordance with generally accepted accounting principles, the Partnership's financial statements for periods subsequent to July 12, 1999 have been prepared on a liquidation basis. Prior to the adoption of the liquidation basis of accounting, the Partnership recorded rental income 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 were credited or charged, as applicable, to deferred rent receivable. Upon adoption of the liquidation basis of accounting, the Partnership wrote off the remaining deferred rent receivable and ceased recording credits or charges to rental income to reflect straight lining of the related leases. Prior to the adoption of the liquidation basis of accounting depreciation was recorded on a straight line basis over the estimated economic lives of the properties. Upon the adoption of the liquidation basis of accounting, real estate held for sale was adjusted to estimated net realizable value and no depreciation expense has been recorded. The Partnership generated net income of $364,000 for the year ended December 31, 2000 as compared to a net loss of $203,000 for the same period in 1999. The $567,000 increase in net income is primarily a result of the adoption of the liquidation basis of accounting in 1999. Total income for the year ended December 31, 2000 was $1,374,000 as compared to $1,439,000 for the same period in 1999. The $65,000 decrease in total income was primarily a result of a $121,000 decrease in rental income. Rental income decreased primarily as a result of a decline in average occupancy at Sabal Palm Shopping Center. Total expenses for the year ended December 31, 2000 were $1,055,000 as compared to $1,421,000 for the same period in 1999. The $366,000 decrease in total expenses was primarily a result of the cessation of depreciation expense in July 1999 as a result of the adoption of the liquidation basis of accounting. Additionally, contributing to the decline in expenses was a decline of $93,000 in repairs and maintenance primarily relating to a 1999 project to improve the appearance of the Crown Point Shopping Center. Further, general and administrative expenses declined $107,000 between the periods primarily as a result of a decline in bad debt expense. Item 7. Consolidated Financial Statements and Supplementary Data. See Index to Consolidated Financial Statements on Page F-1 of this Form 10-KSB for consolidated financial statements where applicable. The financial information required in Item 310(b) of Regulation S-B is not applicable. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. On November 6, 2001 the Partnership dismissed Deloitte & Touche LLP as its independent accountant. Deloitte & Touche LLP's report on the financial statements for either of the past two years did not contain an adverse opinion or disclaimer of opinion and was not modified as to uncertainty, audit scope or accounting principles. In the Partnership's fiscal years ended 1999 and 2000 and the subsequent interim period preceding the dismissal there were no disagreements with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which would have caused Deloitte & Touche LLP to make reference to the matter in their report. There were no reportable events as that term is described in Item 304(a)(1)(iv)(B) of Regulation S-B. On November 7, 2001, the Partnership engaged Altschuler, Melvoin and Glasser LLP as its independent accountant. Neither the Partnership (nor someone on its behalf) consulted Altschuler, Melvoin and Glasser LLP regarding: (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Partnership's financial statements; or (ii) any matter that was either the subject of a disagreement or a reportable event. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of The Exchange Act. The General Partners of the Partnership are: Brauvin Ventures, Inc., an Illinois corporation Mr. Jerome J. Brault, individually Brauvin Ventures, Inc. was formed under the laws of the State of Illinois in 1983, with its issued and outstanding shares being owned by A.G.E. Realty Corporation, Inc. (50%), and Messrs. Jerome J. Brault (beneficially) (25%) and Cezar M. Froelich (25%). The principal officers and directors of the Corporate General Partner are: Mr. Jerome J. Brault . . . . .Chairman of the Board of Directors, Director and President Mr. James L. Brault. . . . . . . . . . . .Vice President and Secretary Mr. Thomas E. Murphy . . . . . . . . . . . . . . . . . . Treasurer and Chief Financial Officer The business experience during the past five years of the General Partners, officers and directors is as follows: MR. JEROME J. BRAULT (age 68) chairman of the board of directors, president and chief executive officer of the Corporate General Partner, as well as a principal shareholder of the Corporate General Partner. He is a member and manager of Brauvin Real Estate Funds, L.L.C. He is a member of Brauvin Capital Trust L.L.C. Since 1979, he has been a shareholder, president and a director of Brauvin/Chicago, Ltd. He is an officer, director and one of the principal shareholders of various Brauvin entities which act as the general partners of four other publicly registered real estate programs. He is an officer, director and one of the principal shareholders of Brauvin Associates, Inc., Brauvin Management Company, Brauvin Advisory Services, Inc. and Brauvin Securities, Inc., Illinois companies engaged in the real estate and securities businesses. He is a director, president and chief executive officer of Brauvin Net Lease V, Inc. He is the chief executive officer of Brauvin Capital Trust, Inc. Mr. Brault received a B.S. in Business from DePaul University, Chicago, Illinois in 1959. MR. JAMES L. BRAULT (age 41) is a vice president and secretary and is responsible for the overall operations of the Corporate General Partner and other affiliates of the Corporate General Partner. He is an officer of various Brauvin entities which act as the general partners of four other publicly registered real estate programs. Mr. Brault is executive vice president and assistant secretary and is responsible for the overall operations of Brauvin Management Company. He is also an executive vice president and secretary of Brauvin Net Lease V, Inc. He is a manager of Brauvin Real Estate Funds, L.L.C., Brauvin Capital Trust, L.L.C. and BA/Brauvin L.L.C. He is the president of Brauvin Capital Trust, Inc. Prior to joining the Brauvin organization in May 1989, he was a Vice President of the Commercial Real Estate Division of the First National Bank of Chicago ("First Chicago"), based in their Washington, D.C. office. Mr. Brault joined First Chicago in 1983 and his responsibilities included the origination and management of commercial real estate loans, as well as the direct management of a loan portfolio in excess of $150 million. Mr. Brault received a B.A. in Economics from Williams College, Williamstown, Massachusetts in 1983 and an M.B.A. in Finance and Investments from George Washington University, Washington, D.C. in 1987. Mr. Brault is the son of Mr. Jerome J. Brault. MR. THOMAS E. MURPHY (age 35) is the treasurer and chief financial officer of the Corporate General Partner and other affiliates of the Corporate General Partner. He is the chief financial officer of various Brauvin entities which act as the general partners of four other publicly registered real estate programs. Mr. Murphy is also the chief financial officer of Brauvin Management Company, Brauvin Financial, Inc., Brauvin Securities, Inc. and Brauvin Net Lease V, Inc. He is the treasurer, chief financial officer and secretary of Brauvin Capital Trust, Inc. He is responsible for the Partnership's accounting and financial reporting to regulatory agencies. He joined the Brauvin organization in July 1994. Prior to joining the Brauvin organization he was in the accounting department of Zell/Merrill Lynch and First Capital Real Estate Funds where he was responsible for the preparation of the accounting and financial reporting for several real estate limited partnerships and corporations. Mr. Murphy received a B.S. in Accounting from Northern Illinois University in 1988. Mr. Murphy is a Certified Public Accountant and is a member of the Illinois Certified Public Accountants Society. Item 10. Executive Compensation. (a & b) The Partnership is required to pay certain fees, make distributions and allocate a share of the profits and losses of the Partnership to the Corporate General Partner or other affiliates as described under the caption "Compensation Table" on pages 11 to 13 of the Partnership's Prospectus, as supplemented, and the sections of the Agreement entitled "Distributions of Operating Cash Flow", "Allocation of Profits, Losses and Deductions", "Distribution of Net Sale or Refinancing Proceeds" and "Compensation of General Partners and Their Affiliates" on pages A-9 to A-13 of the Agreement attached as Exhibit A to the Partnership's Prospectus. The relationship of the Corporate General Partner (and its directors and officers) to its affiliates is set forth above in Item 9. Reference is also made to Notes 3 and 5 of the Notes to Consolidated Financial Statements filed with this annual report for a description of such distributions and allocations. The General Partners received a share of Partnership income or loss for 2001 and 2000. An affiliate of the General Partners is reimbursed for its direct expenses relating to the administration of the Partnership. The Partnership does not have any employees and therefore there is no compensation paid. (c - h) Not applicable. Item 11. Security Ownership of Certain Beneficial Owners and Management. (a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding voting Units of the Partnership. (b) The officers and directors of the Corporate General Partner do not, individually or as a group, own any Units. (c) The Partnership is not aware of any arrangements, the operations of which may result in a change of control of the Partnership. No officer or director of the Corporate General Partner possesses a right to acquire beneficial ownership of Units. The General Partners will share in the profits, losses and distributions of the Partnership as outlined in Item 10, "Executive Compensation." Item 12. Certain Relationships and Related Transactions. (a & b) The Partnership is entitled to engage in various transactions involving affiliates of the Corporate General Partner of the Partnership, as described in the section of the Partnership's Prospectus, as supplemented, entitled "Compensation Table" and "Conflicts of Interest" at pages 11 to 16 and the section of the Agreement entitled "Rights, Duties and Obligations of General Partners" at pages A-15 to A-18 of the Agreement. The relationship of the Corporate General Partner to its affiliates is set forth in Item 10. Cezar M. Froelich resigned as an individual general partner of the Partnership effective 90 days after August 14, 1997 but remains a shareholder of the Corporate General Partner. He is also a principal of the law firm of Shefsky & Froelich Ltd., which firm acted as securities and real estate counsel to the Partnership. Reference is made to Note 5 of the Notes to Consolidated Financial Statements filed with this annual report for a summary of transactions with affiliates. As a precondition to the financing at Crown Point, the 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 in 1995 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. (c) Not applicable. (d) There have been no transactions with promoters. Item 13. Exhibits, Consolidated Financial Statements and Reports on Form 8-K. (a) The following documents are filed as part of this report: (1) (2) Consolidated Financial Statements. (See Index to Consolidated Financial Statements filed with this annual report). (3) Exhibits required by the Securities and Exchange Commission Regulation S-B Item 601: Exhibit No. Description *3.(a) Restated Limited Partnership Agreement *3.(b) Articles of Incorporation of Brauvin Ventures, Inc. *3.(c) By-Laws of Brauvin Ventures, Inc. *3.(d) Amendment to the Certificate of Limited Partnership of the Partnership *10.(a) Escrow Agreement *10.(b)(1) Management Agreement 21. Subsidiaries of the registrant *28. Pages 11-16, A-9 to A-13 and A-15 to A-18 of the Partnership's Prospectus and the Agreement dated March 1, 1985, as supplemented. * Incorporated by reference from the exhibits filed with the Partnership's registration statement (File No. 2-95633) on Form S-11 filed under the Securities Act of 1933. (b) No portions of the annual report have been incorporated by reference in this Form 10-KSB. (c) Form 8-K. None. (d) An annual report for the fiscal year 2000 will be sent to the Limited Partners subsequent to this filing. (e) Reports on Form 8-K. On November 6, 2001, the Partnership dismissed Deloitte & Touche LLP as its independent accountant. Additionally on November 7, 2001 the Partnership engaged Altschuler, Melvoin and Glasser LLP as its independent accountant. This Form 8-K was dated November 6, 2001 and filed on November 14, 2001. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BRAUVIN REAL ESTATE FUND L.P. 5 BY: Brauvin Ventures, Inc. Corporate General Partner By: /s/ Jerome J. Brault Jerome J. Brault Chairman of the Board of Directors and President By: /s/ James L. Brault James L. Brault Vice President and Secretary By: /s/ Thomas E. Murphy Thomas E. Murphy Chief Financial Officer and Treasurer INDIVIDUAL GENERAL PARTNER /s/ Jerome J. Brault Jerome J. Brault Dated: April 29, 2002 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Independent Auditors' Report . . . . . . . . . . . . . . . F-2 Independent Auditors' Report . . . . . . . . . . . . . . . F-3 Consolidated Statement of Net Assets in Liquidation as of December 31, 2001 (Liquidation Basis) . . . . . . . . F-4 Consolidated Statement of Changes in Net Assets in Liquidation for the period January 1, 2001 to December 31, 2001 (Liquidation Basis) . . . . . . . . . . F-5 Consolidated Statement of Changes in Net Assets in Liquidation for the period January 1, 2000 to December 31, 2000 (Liquidation Basis) . . . . . . . . . . F-6 Consolidated Statements of Operations for the years ended December 31, 2001 and 2000 (Liquidation Basis). . . . . . . F-7 Notes to Consolidated Financial Statements . . . . . . . . F-8 All other schedules provided for in Item 13 (a) of Form 10-KSB are either not required, not applicable, or immaterial. INDEPENDENT AUDITORS' REPORT Partners of Brauvin Real Estate Fund L.P. 5 We have audited the accompanying consolidated financial statements of Brauvin Real Estate Fund L.P. 5, as of December 31, 2001, and for the year then ended as listed in the index to consolidated financial statements. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Brauvin Real Estate Fund L.P. 5 and subsidiary at December 31, 2001, and the results of their operations for the year then ended in conformity with generally accepted accounting principles. /s/ Altschuler, Melvoin and Glasser LLP Chicago, Illinois February 8, 2002, except as to Note 4 which is as of April 23, 2002 INDEPENDENT AUDITORS' REPORT To the Partners of Brauvin Real Estate Fund L.P. 5 We have audited the accompanying consolidated financial statements of Brauvin Real Estate Fund L.P. 5 and subsidiary for the year ended December 31, 2000 as listed in the index to consolidated financial statements. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the results of operations of Brauvin Real Estate Fund L.P. 5 and subsidiary for the year ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Chicago, Illinois April 23, 2001 BRAUVIN REAL ESTATE FUND L.P. 5 (a Delaware limited partnership) CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF DECEMBER 31, 2001 ASSETS Real estate held for sale $ 7,689,875 Cash and cash equivalents 869,045 Tenant receivables 71,298 Investment in Strawberry Fields joint venture 175,244 Escrow deposits 276,694 Other assets 27,931 Total Assets 9,110,087 LIABILITIES Mortgage notes payable (Note 4) 5,779,281 Accounts payable and accrued expenses 170,727 Deferred gain on sale of real estate (Note 2) 504,085 Reserve for estimated costs during the period of liquidation (Note 2) 190,315 Tenant security deposits 29,806 Due to affiliates 5,181 Total Liabilities 6,679,395 MINORITY INTEREST IN SABAL PALM JOINT VENTURE 66,276 Net Assets in Liquidation $ 2,364,416 See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE PERIOD JANUARY 1, 2001 TO DECEMBER 31, 2001 (LIQUIDATION BASIS) Net assets in liquidation at January 1, 2001 $1,908,750 Income from operations 455,666 Net assets in liquidation at December 31, 2001 $2,364,416 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE PERIOD JANUARY 1, 2000 TO DECEMBER 31, 2000 (LIQUIDATION BASIS) Net assets in liquidation at January 1, 2000 $1,544,831 Income from operations 363,919 Net assets in liquidation at December 31, 2000 $1,908,750 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 (LIQUIDATION BASIS) 2001 2000 INCOME Rental $1,092,287 $1,119,627 Interest 27,479 47,294 Other, primarily tenant expense reimbursements 174,914 207,209 Total income 1,294,680 1,374,130 EXPENSES Interest 488,164 499,393 Real estate taxes 138,941 134,613 Repairs and maintenance 66,877 29,346 Management fees (Note 5) 77,156 87,995 Other property operating 73,850 77,703 Bad debt expense 77,595 -- General and administrative 253,594 225,917 Total expenses 1,176,177 1,054,967 Income before minority and equity interests 118,503 319,163 Minority interest's share of Sabal Palm's net loss (income) 85,214 (53,144) Equity interest in Strawberry Fields Joint Venture's net income 373,824 97,900 Income before adjustment to liquidation basis 577,541 363,919 Adjustment to liquidation basis (121,875) -- Net income $ 455,666 $ 363,919 Net income allocated to the General Partners $ 4,557 $ 3,639 Net income allocated to the Limited Partners $ 451,109 $ 360,280 Net income per Limited Partnership Interest (9,914.5 units outstanding) $ 45.50 $ 36.34 See accompanying notes to consolidated financial statements. BRAUVIN REAL ESTATE FUND L.P. 5 (a Delaware limited partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2001 and 2000 (1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION The financial statements consolidate the accounts of Brauvin Real Estate Fund L.P. 5 (the "Partnership") and joint ventures in which the Partnership has a 50% interest or greater. Additionally, the Partnership has a 42% interest in another joint venture which is accounted for using the equity method of accounting. 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 general partners of the Partnership 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 and the Partnership was formed. 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. Properties acquired by the Partnership either directly or indirectly through joint ventures are: (a) Crown Point, (b) Strawberry Fields (which was sold in July 2001) and (c) Sabal Palm shopping centers. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Management's Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from 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 generally accepted accounting principles, the Partnership's financial statements for periods subsequent to July 12, 1999 have been prepared on the liquidation basis of accounting. Accordingly, the carrying values of the assets are presented at estimated net realizable amounts and liabilities are presented at estimated settlement amounts, including estimated costs associated with carrying out the liquidation. Preparation of financial statements on the liquidation basis of accounting 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 December 31, 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. The creation of the SPE did not affect the Partnership's economic ownership of the property. 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 Brauvin Real Estate Fund L.P. 4 ("BREF 4"). All significant intercompany balances and transactions have been eliminated. Investment in Joint Venture The Partnership owns a 42% equity interest in Strawberry Fields Joint Venture (Note 7). 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 of accounting, 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 were 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 charges 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 there were no events or changes in circumstances that indicated that the carrying amount of the assets may not be recoverable at December 31, 2001, except as detailed in Note 2. Subsequent to the adoption of the liquidation basis of accounting (see Note 2), the Partnership adjusted its investment in real estate to estimated net realizable value, which is recorded as real estate held for sale. Additionally, the Partnership suspended recording any further depreciation expense. 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 December 31, 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 December 31, 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. In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"), which is effective for years beginning after June 15, 2002. SFAS requires recognition of a liability and associated asset for the fair value of costs arising from legal obligations associated with the retirement of tangible long-lived assets. The asset is to be allocated to expense over its estimated useful life. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which is effective for fiscal years beginning after December 15, 2001. SFAS 144 supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 144 retains the recognition and measurement requirements of SFAS 121, but resolves significant SFAS 121 implementation issues. In addition, it applies to a segment of a business accounted for as a discontinued operation (which was formerly covered by portions of Accounting Principles Board Opinion No. 30). The Partnership does not believe that the adoption of SFAS 141, 142, 143 and 144 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 2000, the Partnership recorded a reduction in real estate held for sale of $423,150 net of real estate improvements of $82,440 related to other than temporary decline in the value of real estate for the Crown Point property. 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 the third quarter of 2001, the Partnership recorded a reduction in real estate held for sale and an increase in the adjustment to liquidation basis in the amount of $114,367 related to other than temporary decline in the value of real estate for the Sabal Palm property. In the fourth quarter of 2001, the Partnership recorded a reduction in real estate held for sale and an increase in the adjustment to liquidation basis in the amount of $7,508 related to other than temporary decline in the value of real estate for the Sabal Palm property. In the fourth quarter of 2001, the Partnership recorded a reduction in real estate held for sale and deferred gain of $438,750 related to other than temporary decline in the value of real estate for the Crown Point property. (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 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 December 31, 2001 equaled $14,052,327. (4) MORTGAGE NOTES PAYABLE Mortgage notes payable at December 31, 2001 consist of the following: Interest Date Rate Due Crown Point Shopping Center (a) $2,750,895 7.55% 1/03 Sabal Palm Square Shopping Center (b) 3,028,386 8.93% 3/02 $5,779,281 Each shopping center serves as collateral under its respective nonrecourse debt obligation. Maturities of the mortgage notes payable are as follows: 2002 $3,138,251 2003 2,641,030 $5,779,281 (a) On December 28, 1995, the acquisition loan was paid in full when the Crown Point loan 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 20-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 December 31, 2001 was approximately $4,662,000. (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 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, 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. Winn-Dixie failed to timely pay its rental obligation for November and December 2001, and is currently in default. On August 7, 2000 Sabal Palm was given official notice that Walgreens will vacate the space prior to its lease termination of April 30, 2025. Walgreens remains current on its rental obligations. The General Partners are considering potential lease buyout and potential releasing strategies for these tenants. The Partnership has approached the lender regarding allowing Winn-Dixie to buy out its lease and a potential extension of the loan maturity. In the third quarter of 2001, the Partnership received notification that the lender would not agree to the Partnership's request. In April 2002, the joint venture and the lender agreed to a twelve month extension of the existing loan. The loan extension was subject to the lease termination of Winn-Dixie and Winn-Dixie's payment of a termination fee. As a requirement of the extension, the joint venture and the lender agreed to use the proceeds from the termination to redemize the former Winn-Dixie space into three spaces as well as certain other improvements to the center. The joint venture has signed a lease with Sav A Lot a national grocery chain for 14,350 square feet (one of the demized spaces). In addition, the joint venture is in lease negotiations with a potential retail tenant for 10,675 square feet in another one of the demized spaces. However, at this time, there can be no assurance that the joint venture and this potential tenant will execute the lease as the terms are presented. Further, Walgreens has approached the joint venture with a proposal to sublease their space in the center to another retail tenant. The joint venture is currently reviewing this proposal. As a result of the nonpayment of Winn-Dixie's rental obligations, the Partnership did not make its mortgage payments for Sabal Palm in November and December 2001 and January through March 2002. The carrying value of Sabal Palm approximated $3,028,000 at December 31, 2001. (5) TRANSACTIONS WITH AFFILIATES Fees and other expenses paid or payable to the General Partners or their affiliates for the years ended December 31, 2001 and 2000 were as follows: 2001 2000 Management fees $77,156 $87,995 Reimbursable office expenses 96,367 88,173 As of December 31, 2001, the Partnership had made all payments to affiliates, except for management fees of $5,181. (6) OPERATING LEASES The Partnership is the lessor in operating lease agreements with tenants at its various properties. The minimum future rental income to be received on these operating leases (excluding escalation amounts) is as follows: Years ended December 31, 2002 $1,054,774 2003 942,555 2004 701,488 2005 255,146 2006 171,460 Thereafter 1,729,108 Total $4,854,531 Contingent rental income (based upon tenant sales above certain amounts) approximated $40,655 and $139,581, in 2001 and 2000, respectively. Collection of future rental income under these lease agreements is subject to the financial stability of the underlying tenants. Minimum rentals received from Food City, the anchor tenant of Crown Point, approximated 23.6% and 26.3% of rental income for the years ended December 31, 2001 and 2000, respectively. Minimum rentals received from Winn Dixie and Walgreens, the anchor tenants of Sabal, approximated 17.1% and 14.5% of rental income and 7.4% and 8.3% of rental income for the years ended December 31, 2001 and 2000, respectively. (7) 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) December 31, 2001 Cash and cash equivalents $ 420,483 Other assets 337 420,820 Other liabilities 2,000 2,000 Net assets in liquidation $ 418,820 Liquidation Basis For the period January 1, 2001 Year ended to July 20, December 31, 2001 2000 Rental income $458,587 $813,883 Other income 63,268 77,417 521,855 891,300 Mortgage and other interest 197,377 364,068 Operating and administrative expenses 154,716 294,137 352,093 658,205 Income before gain on sale 169,762 233,095 Gain on sale 720,295 -- Net income $890,057 $233,095 The Partnership received three bids on Strawberry Fields during the latter part of 1999. After negotiation the Joint Venture accepted the high bid of $5.43 million and entered into a contract for sale. However, the prospective purchaser terminated its interest in the property during its due diligence period. Subsequently, the Joint Venture received another offer for $5.35 million. However, although the offer exceeded the November, 1998 appraised value of $4.8 million, the offer, after transaction costs, was below the mortgage balance at the time. The Joint Venture accepted the initial high bid in part because the property's underlying mortgage loan was coming due; and the lender indicated that it would not extend the maturity. However, in the second quarter of 2000, the Strawberry Joint Venture was successful in extending the loan for a two year period. This extension allowed the Partnership to continue to market the property and seek a greater sales price. On January 27, 2000, the Partnership executed a contract to sell Strawberry Fields to an unaffiliated third party in the approximate amount of $5,430,000 subject to certain due diligence contingencies. Subsequently, the potential purchaser rescinded its offer. In 2001, the Joint Venture received an offer to purchase Strawberry Fields for $5.585 million. In addition, Syms (a tenant at Strawberry Fields) exercised its right of first refusal on the sale of the property. Accordingly, the 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, the Strawberry Joint Venture received net sales proceeds of approximately $299,000. (8) SUBSEQUENT EVENT On February 1, 2002, the Partnership entered into an agreement to sell the Crown Point property for an aggregate consideration of $4,800,000. The agreement provides the prospective buyer a 45 day period to review the property and make a final determination if the property will be acquired by the prospective purchaser. Accordingly, there can be no assurance that the purchase will be consummated. EXHIBIT INDEX Exhibit (21) Subsidiaries of the Registrant Exhibit 21 Name of Subsidiary State of Formation Brauvin Strawberry Fields Joint Venture Florida Brauvin Sabal Palm Joint Venture Florida Brauvin/Crown Point L.P. Delaware