10KSB 1 f5.txt BRAUVIN REAL ESTATE FUND 5 12/31/02 10KSB 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, 2002 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 $1,168,893. 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 2002 FORM 10-KSB ANNUAL REPORT INDEX PART I Page Item 1. Description of Business. . . . . . . . . . . . . . . . . . . 3 Item 2. Description of Properties. . . . . . . . . . . . . . . . . . 6 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .12 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .12 PART II Item 5. Market for the Issuer's Limited Partnership Interests and Related Security Holder Matters. . . . . . . .13 Item 6. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . .13 Item 7. Consolidated Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . .22 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . . . .22 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. . . . . . . . . . . . . . . . . . . . .23 Item 10.Executive Compensation . . . . . . . . . . . . . . . . . . .25 Item 11.Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . .25 Item 12.Certain Relationships and Related Transactions . . . . . . .26 Item 13.Controls and Procedures. . . . . . . . . . . . . . . . . . .27 Item 14.Exhibits, Consolidated Financial Statements and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . .27 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 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 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 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 the tender offer. 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 offer provided such an opportunity. In 2001, Strawberry Joint Venture received an offer to purchase Strawberry Fields for $5.585 million. Syms (a tenant at Strawberry Fields) exercised its right of first refusal on the sale of the property. Accordingly, Strawberry Joint Venture executed a purchase and sale agreement with Syms for $5.585 million in the second quarter of 2001. On July 20, 2001, Strawberry Fields was sold to Syms for the contract price. At closing, Strawberry Joint Venture received net sales proceeds of approximately $299,000. On July 2, 2002, Crown Point was sold for a contract price of $4,800,000. At closing the Partnership received approximately $2,084,000 in net proceeds and recognized a gain on sale of approximately $519,000. 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 $10.28 per square foot in 2002. 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. The following is a summary of the real estate and improvements owned by the Partnership at January 1, 2001, and subsequent transactions related thereto. (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 was 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 was a Food City grocery. Burger King, a division of Grand Metropolitan PLC, was located in one of the out parcel buildings which was also owned by the Partnership. The Partnership purchased Crown Point for $5,341,696 of which approximately $1,775,000 was paid in cash at closing and the balance by assuming an existing first mortgage loan of $3,566,696. 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%, and amortization based on a 20-year term with a maturity of January 1, 2003. On July 2, 2002, Crown Point was sold for a contract price of $4,800,000 and the mortgage was paid in full. After repayment of the mortgage and related sales costs, the Partnership received approximately $2,084,000 in net sales proceeds and recognized a gain on the sale of approximately $519,000. (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 had a 42% interest in the joint venture which owned Strawberry Fields and BREF 4 had a 58% interest in the joint venture which owned 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, Strawberry Joint Venture finalized a refinancing (the "Refinancing") of the first mortgage loan on Strawberry Fields with the lender. Effective October 1, 1998, 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. In 2001, Strawberry Joint Venture received an offer to purchase Strawberry Fields for $5.585 million. Syms (a tenant at Strawberry Fields) exercised its right of first refusal on the sale of the property. Accordingly, 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 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 Sav A Lot and Walgreens. 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 a 56% economic occupancy at December 31, 2002. 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 matured 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 failed to timely pay its rental obligation for November and December 2001 and January through March 2002. On August 7, 2000, Sabal Palm was given notice that Walgreens will vacate the space prior to its lease termination of April 30, 2005. Walgreens moved out, however, it remains liable for rental payments under its lease with Sabal Palm. The joint venture and Walgreens have reached an agreement with a subtenant for the occupancy of this space through the initial term ending in April 2005. Subsequently, the joint venture entered into a new direct lease with the replacement tenant for this space through June 30, 2007. This center has proved very difficult to sell. The Partnership is continuing to market this property for sale. Due to the nonpayment of Winn-Dixie's rental obligations, the joint venture did not make its mortgage payments for Sabal Palm in November and December 2001 and January through March 2002 thus resulting in a default on its loan. However, the lender took no foreclosure action and the twelve month extension (as detailed below) with the lender included the joint venture's payment of all past due amounts thus curing the default. The outstanding mortgage balance encumbered by the property was $2,975,621 at December 31, 2002. The economic occupancy rate and average annual base rent per square foot at December 31, 2002 and 2001 were as follows: 2002 2001 Occupancy Rate 56% 84% Average Annual Base Rent Per Square Foot $5.29 $5.94 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, 2002: Annual Lease Square Base Expiration Renewal Nature of Tenant Feet Rent Date Options Business Sav A Lot 14,350 $ 15,009 10/2012 5/5 yrs ea. Food Store Walgreens 13,000 81,252 4/2005(a) 2/5 yrs ea. Drug Store Others 22,625 232,598 Various Various Vacant 38,958 -- 88,933 $328,859 (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. 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. 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. On March 17, 2003, the joint venture obtained a loan commitment from AmSouth Bank in the amount of $3,250,000. The loan proposal provides for payment of interest only for a 24-month term subject to various tests to be met at a six-month period from close and a nine-month period from close. If these tests are not met the joint venture will be required to reduce the principal outstanding by a cumulative amount ranging from $250,000 to $500,000. 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 which could be substantial. 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, 2002, there were approximately 631 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 2002 and 2001. 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 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 the tender offer. 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 offer provided such an opportunity. The General Partners 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 the mailing process, 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 with 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. The Partnership continues to market its primary asset for sale. Property Status Crown Point On December 28, 1995, the outstanding 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 was approximately $4,662,000 based on the purchase contract price of $4,800,000. This contract was executed on February 1, 2002 and was subject to a 45 day due diligence period. In March 2002, the proposed purchaser requested and the Partnership granted an extension of the proposed purchaser's due diligence. The property was sold July 2, 2002 for a contract price of $4,800,000. After repayment of the mortgage and related sales costs the Partnership received approximately $2,084,000 in net sales proceeds. Strawberry Fields Joint Venture In 2001, the Strawberry Fields 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 Fields 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 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 matured 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. On August 7, 2000, Sabal Palm was given notice that Walgreens will vacate the space prior to its lease termination of April 30, 2005. Walgreens moved out, however, it remains liable for rental payments under its lease with Sabal Palm. The joint venture and Walgreens reached an agreement with a subtenant for the occupancy of this space through the initial term ending in April 2005. Subsequently, the joint venture entered into a new direct lease with the replacement tenant for this space through June 30, 2007. In the second quarter of 1998, Winn-Dixie vacated its space at the center. Winn-Dixie failed to timely pay its rental obligation for November and December 2001 and January through March, 2002. As a result of Winn-Dixie's lease default, in the third quarter of 2001, Sabal Palm recorded an adjustment to liquidation basis 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. Due to non-payment of Winn-Dixie's rental obligations, the joint venture did not make its mortgage payments for Sabal Palm in November and December 2001 and January through March 2002 thus resulting in a default on its loan. In April 2002, the joint venture and the lender agreed to a twelve month extension of the existing mortgage loan. The loan extension was subject to the lease termination of Winn-Dixie and Winn-Dixie's payment of a $300,000 termination fee and payment of all past due amount thus curing the default. 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 was in lease negotiations with a potential tenant to lease approximately 10,675 square feet (another one of the demized spaces). However, the tenant has withdrawn from the negotiations. In total, Sabal Palm has received six offers on the property ranging in price from $2.2 million to $3.4 million. On March 17, 2003, the joint venture obtained a loan commitment from AmSouth Bank in the amount of $3,250,000. The loan proposal provides for payment of interest only for a 24-month term subject to various tests to be met at a six-month period from close and a nine-month period from close. If these tests are not met the joint venture will be required to reduce the principal outstanding by a cumulative amount ranging from $250,000 to $500,000 depending on the test. 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 values 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 consolidated statement of net assets as of December 31, 2002. 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 31,2002 and 2001 The Partnership generated net income of $425,000 for the year ended December 31, 2002 as compared to a net income of $456,000 for the same period in 2001. The $31,000 decrease in net income is primarily the result of a decrease in total income of $126,000 and an increase in total expenses of $101,000. Minority interest share in Sabal Palm's net loss decreased $72,000 and equity interest in Strawberry's net income decreased $372,000. In addition, adjustment to liquidation basis decreased $122,000 and gain on sale of property increased $519,000. Total income for the year ended December 31, 2002 was $1,169,000 as compared to $1,295,000 for the same period in 2001. The $126,000 decrease in total income was primarily a result of a $358,000 decrease in rental income, a $9,000 decrease in interest income and a $59,000 decrease in other income offset by and increase in lease termination fees of $300,000. Rental and other income decreased primarily as a result of the sale of Crown Point in July 2002. Interest income decreased as a result of the decline in interest rates. The lease termination fee was the result of the Winn-Dixie lease buy-out at Sabal Palm. Total expenses for the year ended December 31, 2002 were $1,277,000 as compared to $1,176,000 for the same period in 2001. The $101,000 increase in total expense was primarily a result of a $192,000 increase in general and administrative expense, a $127,000 increase in repairs and maintenance and a $22,000 increase in operating expense offset by a $97,000 decrease in interest expense, a $113,000 decrease in bad debt expense, and a $27,000 decrease in real estate tax expense. General and administrative expense increased primarily as a result of a $112,000 increase in salary expense related to the accrual of estimated costs for the liquidation of the partnership, a $64,000 increase in professional fees as a result of leasing commissions paid to various brokers for leasing space at Sabal Palm, and a $11,000 increase in insurance expense. Repairs and maintenance increased primarily as a result of a $125,000 increase in repairs and maintenance at the Sabal Palm shopping center for expenses related to the Sav A Lot build out. Operating expense increased primarily as a result of a $30,000 increase in miscellaneous expense at Sabal Palm as a result of the loan extension fee. Interest expense decreased as primarily as a result of a $90,000 decrease in interest expense at Crown Point as a result of the sale of Crown Point in July 2002. Bad debt expense decreased as a result of the collection of an allowance for certain tenant items that had been previously estimated to be uncollectible. Real estate tax expense decreased as a result of the sale of Crown Point in July 2002. 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. 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 69) 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 42) 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 36) 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. 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 2002 and 2001. 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 by Brauvin/Crown Point L.P. are to be made first to the GP in an amount equal to: (a) any tax liability caused by its allocation of Profits or income; and (b) any filing fees or accounting fees incurred in connection herewith and then to the LP until it receives the an amount equal to the value of its capital contribution plus an annual compounded return on its original investment of 25% per annum. 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. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer and Chief Financial Officer, of the corporate general partner, have reviewed and evaluated the effectiveness of the Partnership's disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-14(c) and 15d- 14(c)) as of a date within 90 days before the filing date of this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Partnership's current disclosure controls and procedures are effective and timely, providing all material information relating to the Partenrship required to be disclosed in reports filed or submitted under the Exchange Act. Changes in Internal Controls There have not been any significant changes in the Partnership's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. We are not aware of any significant deficiencies or material weaknesses, therefore no corrective actions were taken. Item 14. 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 2002 will be sent to the Limited Partners subsequent to this filing. 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 11, 2003 CERTIFICATION FOR SARBANES-OXLEY SECTION 302(A) CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER OF BRAUVIN VENTURES, INC. CORPORATE GENERAL PARTNER OF BRAUVIN REAL ESTATE FUND L.P. 5 I, Jerome J. Brault, Chief Executive Officer of the Company, certify that: 1. I have reviewed this annual report on Form 10-KSB of Brauvin Real Estate Fund L.P. 5; 2. Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the consolidated financial condition, results of operations and statement of changes in net assets in liquidation of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could aversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. BY: Brauvin Ventures, Inc. Corporate General Partner of Brauvin Real Estate Fund L.P. 5 BY:/s/ Jerome J. Brault Jerome J. Brault Chairman of the Board of Directors, President and Chief Executive Officer DATE: April 11, 2003 CERTIFICATION FOR SARBANES-OXLEY SECTION 302(A) CERTIFICATE OF THE CHIEF FINANCIAL OFFICER OF BRAUVIN VENTURES, INC. CORPORATE GENERAL PARTNER OF BRAUVIN REAL ESTATE FUND L.P. 5 I, Thomas E. Murphy, Chief Financial Officer of the Company, certify that: 1. I have reviewed this annual report on Form 10-KSB of Brauvin Real Estate Fund L.P 5.; 2. Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the consolidated financial condition, results of operations and statement of changes in net assets in liquidation of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could aversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. BY: Brauvin Ventures, Inc. Corporate General Partner of Brauvin Real Estate Fund L.P. 5 BY:/s/ Thomas E. Murphy Thomas E. Murphy Chief Financial Officer and Treasurer DATE: April 11, 2003 Exhibit 99 SECTION 906 CERTIFICATION The following statement is provided by the undersigned to accompany the Annual Report on Form 10-KSB for the year ended December 31, 2002, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed pursuant to any provisions of the Securities Exchange Act of 1934 or any other securities law: Each of the undersigned certifies that the foregoing Report on Form 10-KSB fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m) and that the information contained in the Form 10-KSB fairly presents, in all material respects, the financial condition and results of operations of Brauvin Real Estate Fund L.P. 5. BY: Brauvin Ventures, Inc. Corporate General Partner of Brauvin Real Estate Fund L.P. 5 BY: /s/ Jerome J. Brault Jerome J. Brault Chairman of the Board of Directors and President DATE: April 11, 2003 BY: /s/ Thomas E. Murphy Thomas E. Murphy Chief Financial Officer And Treasurer DATE: April 11, 2003 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Independent Auditors' Report . . . . . . . . . . . . . . . F-2 Consolidated Statement of Net Assets in Liquidation as of December 31, 2002 (Liquidation Basis) . . . . . . . . F-3 Consolidated Statement of Changes in Net Assets in Liquidation for the year ended December 31, 2002 (Liquidation Basis) . . . . . . . . . . F-4 Consolidated Statement of Changes in Net Assets in Liquidation for the year ended December 31, 2001 (Liquidation Basis) . . . . . . . . . . F-5 Consolidated Statements of Operations for the years ended December 31, 2002 and 2001 (Liquidation Basis). . . . . . . F-6 Notes to Consolidated Financial Statements . . . . . . . . F-7 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, 2002, and for the years ended December 31, 2002 and 2001 as listed in the index to the 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 audits. We conducted our audits 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 audits provide 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, 2002, and the results of their operations for the years ended December 31, 2002 and 2001 in conformity with U.S. generally accepted accounting principles. /s/ Altschuler, Melvoin and Glasser LLP Chicago, Illinois February 6, 2003, except for Note 8 which is as of March 17, 2003. BRAUVIN REAL ESTATE FUND L.P. 5 (a Delaware limited partnership) CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF DECEMBER 31, 2002 ASSETS Real estate held for sale $3,028,375 Cash and cash equivalents 3,005,434 Tenant receivables 21,533 Escrow deposits 287,218 Other assets 25,644 Total Assets 6,368,204 LIABILITIES Mortgage note payable (Note 4) 2,975,621 Accounts payable and accrued expenses 76,260 Reserve for estimated costs during the period of liquidation (Note 2) 306,415 Tenant security deposits 19,097 Due to affiliates 21,049 Total Liabilities 3,398,442 MINORITY INTEREST IN SABAL PALM JOINT VENTURE 179,856 Net Assets in Liquidation $2,789,906 See accompanying notes to consolidated financial statements. BRAUVIN REAL ESTATE FUND L.P. 5 (a Delaware limited partnership) CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE YEAR ENDED DECEMBER 31, 2002 (LIQUIDATION BASIS) Net assets in liquidation at January 1, 2002 $2,364,416 Gain on sale of property 518,797 Loss from operations (93,307) Net assets in liquidation at December 31, 2002 $2,789,906 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE YEAR ENDED 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 STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 (LIQUIDATION BASIS) 2002 2001 INCOME Rental $ 734,566 $1,092,287 Interest 18,252 27,479 Lease termination fee 300,000 -- Other, primarily tenant expense reimbursements 116,075 174,914 Total income 1,168,893 1,294,680 EXPENSES Interest 390,628 488,164 Real estate taxes 112,131 138,941 Repairs and maintenance 194,211 66,877 Management fees (Note 5) 73,124 77,156 Other property operating 96,103 73,850 Bad debt(recovery)expense (34,824) 77,595 General and administrative 445,506 253,594 Total expenses 1,276,879 1,176,177 (Loss)income before minority and equity interests (107,986) 118,503 Minority interest's share of Sabal Palm's net loss 13,320 85,214 Equity interest in Strawberry Fields Joint Venture's net income 1,359 373,824 (Loss)income before adjustment to liquidation basis and gain on sale of property (93,307) 577,541 Gain on sale of property 518,797 -- Adjustment to liquidation basis -- (121,875) Net income $ 425,490 $ 455,666 Net income allocated to the General Partners $ 4,255 $ 4,557 Net income allocated to the Limited Partners $ 421,235 $ 451,109 Net income per Limited Partnership Interest (9,914.5 units outstanding) $ 42.49 $ 45.50 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, 2002 and 2001 (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. Brauvin Real Estate Fund L.P. 5 (the "Partnership") was organized on June 28, 1985. The General Partners of the Partnership are Brauvin Ventures, Inc. and Jerome J. Brault. On August 8, 1997, Mr. Cezar M. Froelich resigned as an Individual General Partner effective 90 days from August 14, 1997. Brauvin Ventures Inc. is owned by A.G.E. Realty Corporation Inc. (50%) and by Messrs. Brault (beneficially) (25%) and Froelich (25%). A. G. Edwards & Sons, Inc. and Brauvin Securities, Inc., affiliates of the General Partners, were the selling agents of the Partnership. The Partnership is managed by an affiliate of the General Partners. The Partnership filed a Registration Statement on Form S-11 with the Securities and Exchange Commission, which became effective on March 1, 1985. The sale of the minimum of $1,200,000 of limited partnership interests of the Partnership (the "Units") necessary for the Partnership to commence operations was achieved on June 28, 1985. The Partnership's offering closed on February 28, 1986. A total of $9,914,500 of Units were subscribed for and issued between March 1, 1985 and February 28, 1986 pursuant to the Partnership's public offering. Properties acquired by the Partnership either directly or indirectly through joint ventures were: (a) Crown Point (which was sold in July 2002), (b) Strawberry Fields (which was sold in July 2001) and (c) Sabal Palm Shopping Center. 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, 2002. 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 had one special purpose entity ("SPE"), Brauvin/Crown Point L.P., which was 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. On July 2, 2002, Crown Point, which was owned by the SPE, was sold for a contract price of $4,800,000. Net proceeds to the Partnership, after repayment of the mortgage, and payment of costs of the sale, were approximately $2,084,000. In connection with the sale, the Partnership recognized a gain of $518,787. 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 owned a 42% equity interest in Strawberry Fields Joint Venture which until the property was sold in July 2001, owned Strawberry Fields (Note 6). The accompanying financial statements include the operations of 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. The Partnership's remaining property is subject to a lien under a first mortgage (see Note 4). 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. The Partnership maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. The Partnership has not experienced any losses in such accounts. Management believes the Partnership is not exposed to any significant credit risk related to cash or cash equivalents. Tenant Receivables Tenant receivables are comprised of (a) billed but uncollected amounts due for monthly rents and other charges and (b) estimated unbilled amounts due for tenant reimbursement of common area maintenance charges and property taxes. Receivables are recorded at management's estimate of the amounts that will ultimately be collected. An allowance for doubtful accounts of $5,733 at December 31, 2002 is based on specific identification of uncollectible accounts and the Partnership's historical collection experience. 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, 2002, 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, 2002. Derivatives and Hedging Instruments 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 Partnership had no derivatives in 2002 and 2001. Recent Accounting Pronouncements 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 intangibles reassessment of the useful lives of existing 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. Application of the statements to future acquisitions, if any, could result in the recognition, upon acquisition of additional intangible assets(acquired in-place lease origination costs and acquired above market leases) and liabilities (acquired below market leases), which would be amortized over the remaining terms of the acquired leases. 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 143 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 was 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. In April 2002, FASB issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, Amendment of FASB No. 13, and Technical Corrections" ("SFAS 145"). Generally, the rescission of FASB No. 4, "Reporting Gains and Losses from Extinguishment of Debt" would require that debt extinguishment costs are to no longer be treated as extraordinary items. The amendment to FASB No. 13, "Accounting for Leases" requires sale-leaseback accounting for certain lease modifications that have the economic effects that are similar to sale-leaseback transactions. This statement is generally effective for the year ending December 31, 2003. In November 2002, FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45). FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued and clarifies that a guarantor is required to recognize, at inception of the guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of FIN 45 are applicable to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for periods ending after December 15, 2002. In January 2003, FASB issued interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). FIN 46 addresses consolidation by business enterprises of certain variable interest entities in which the equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 applies to variable interest entities created after January 31, 2003 and to such entities in which the interest was acquired prior to February 1, 2003 for fiscal years and interim periods beginning after June 15, 2003. The Partnership does not believe that the adoption of SFAS 143, 144,and 145 and FIN 45 and 46 will have a significant impact on its financial statements. (2) ADJUSTMENT TO LIQUIDATION BASIS On July 12, 1999, in accordance with the liquidation basis of accounting, assets were adjusted to estimated net realizable value and liabilities were adjusted to estimated settlement amounts, including estimated costs associated with carrying out the liquidation. In the second quarter of 2001, the Partnership recorded reductions in real estate held for sale and deferred gain of $259,350 related to other than temporary decline in the value of real estate for the Crown Point property. In 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. As a result of the contract for sale of Crown Point(which was sold in July, 2002), the Partnership's investment in real estate held for sale and the deferred gain on sale of real estate were each increased $21,692 in the second quarter of 2002. In July, 2002 the Partnership's investment in real estate held for sale and the deferred gain on the sale or real estate were reduced by $4,683,192 and $525,777, respectively as a result of the Crown Point sale. (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, 2002 equaled $15,043,779. (4) MORTGAGE NOTE PAYABLE Mortgage note payable at December 31, 2002 consists of the following: Interest Date Balance Rate Due Sabal Palm Square Shopping Center $2,975,621 8.93% 4/03 $2,975,621 Sabal Palm Square Shopping Center Sabal Palm Square Shopping Center serves as collateral under its respective nonrecourse debt obligation. The First Mortgage Loan bears interest at the rate of 8.93% per annum, is amortized over a 25-year period, required monthly payments of principal and interest of approximately $26,700 and matured 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. On August 7, 2000, Sabal Palm was given notice that Walgreens would vacate the space prior to its lease termination of April 30, 2005. Walgreens moved out, however, it remains liable for rental payments under its lease with Sabal Palm. The joint venture and Walgreens reached an agreement with a subtenant for the occupancy of this space through the initial term ending in April 2005. Subsequently, the joint venture entered into a new direct lease with the replacement tenant for this space through June 30, 2007. In the second quarter of 1998, Winn-Dixie vacated its space at the center. Winn-Dixie failed to timely pay its rental obligation for November and December 2001 and January through March 2002. Due to non-payment of Winn-Dixie's rental obligations, the joint venture did not make its mortgage payments for Sabal Palm in November and December 2001 and January through March 2002 thus resulting in a default on its loan. In April 2002, the joint venture and the lender agreed to a twelve month extension of the existing mortgage loan. The loan extension was subject to the lease termination of Winn-Dixie and Winn-Dixie's payment of a $300,000 termination fee and payment of all past due amount thus curing the default. 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 was in lease negotiations with a potential tenant to lease approximately 10,675 square feet (another one of the demized spaces). However, the tenant has withdrawn from the negotiations. On March 17, 2003, the joint venture obtained a loan commitment from AmSouth Bank in the amount of $3,250,000. The loan proposal provides for payment of interest only for a 24-month term subject to various tests to be met at a six-month period from close and a nine-month period from close. If these tests are not met the joint venture will be required to reduce the principal outstanding by a cumulative amount ranging from $250,000 to $500,000 depending on the test. The carrying value of Sabal Palm approximated $3,028,000 at December 31, 2002. Crown Point On December 28, 1995, an 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 by Brauvin/Crown Point L.P. are to be made first to the General Partner in an amount equal to:(a) any tax liability caused by its allocation of Profits or income: and (b) any filing fees or accounting fees incurred in connection herewith; and then to the Limited Partner until it receives an amount equal to the value of its Capital Contribution plus an annual compounded return on tits original investment of 25% per annum. 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 consolidated financial statements of the Partnership. On July 2, 2002, Crown Point was sold for a contract price of $4,800,000 and the mortgage was paid in full. (5) TRANSACTIONS WITH AFFILIATES Fees and other expenses paid or payable to the General Partners or their affiliates for the years ended December 31, 2002 and 2001 were as follows: 2002 2001 Management fees $73,124 $77,156 Reimbursable office expenses $100,735 96,367 As of December 31, 2002, the Partnership had made all payments to affiliates, except for management fees of $21,049. (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 ending December 31, 2003 $315,389 2004 279,624 2005 204,125 2006 155,908 2007 108,161 Thereafter 424,198 Total $1,487,405 Contingent rental income (based upon tenant sales above certain amounts) approximated $14,460 and $40,655, in 2002 and 2001, respectively. Minimum rentals received from Winn-Dixie and Walgreens, the anchor tenants of Sabal, approximated 17.1% and 7.4%, respectively, of rental income for the year ended December 31, 2001. Minimum rentals received from Sav A Lot and Walgreens, the anchor tenants of Sabal, approximated 2.0% and 11.1%, respectively, of rental income for the year ended December 31, 2002. (7) EQUITY INVESTMENT The Partnership owned a 42% interest in Strawberry Fields Joint Venture, located in West Palm Beach, Florida, and accounted for its investment under the equity method. The following is condensed statement of operations for Strawberry Fields Joint Venture: Liquidation Basis For the period January 1, 2001 to July 20, 2001 Rental income $458,587 Other income 63,268 521,855 Mortgage and other interest 197,377 Operating and administrative expenses 154,716 352,093 Income before gain on sale 169,762 Gain on sale 720,295 Net income $890,057 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 March 17, 2003, the Sabal Palm Joint Venture obtained a loan commitment from AmSouth Bank in the amount of $3,250,000. The loan proposal provides for payment of interest only for a 24-month term subject to various tests to be met at a six-month period from close and a nine-month period from close. If these tests are not met the joint venture will be required to reduce the principal outstanding by a cumulative amount ranging from $250,000 to $500,000 depending on the test. 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