-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MnyDUjsY9HUNQEphWc4BFfWh+s7XIt+Zgr1t6ln6dt3Ad81Jyz5pOYQh9Z1QHekH N7jLftV92LODKdbqyDYejA== 0000762848-98-000001.txt : 19981123 0000762848-98-000001.hdr.sgml : 19981123 ACCESSION NUMBER: 0000762848-98-000001 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 DATE AS OF CHANGE: 19981120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRAUVIN REAL ESTATE FUND LP 5 CENTRAL INDEX KEY: 0000762848 STANDARD INDUSTRIAL CLASSIFICATION: 6500 IRS NUMBER: 363432071 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14481 FILM NUMBER: 98752931 BUSINESS ADDRESS: STREET 1: BRAUVIN REAL ESTATE FUNDS STREET 2: 30 N LASALLE FUNDS CITY: CHICAGO STATE: IL ZIP: 60602 BUSINESS PHONE: 3124430922 MAIL ADDRESS: STREET 1: BRAUVIN REAL ESTATE FUNDS STREET 2: 30 N LASALLE ST STE 3100 CITY: CHICAGO STATE: IL ZIP: 60602 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the nine months ended September 30, 1998 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 0-14481 Brauvin Real Estate Fund L.P. 5 (Name of small business issuer as specified in its charter) Delaware 36-3432071 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 30 North LaSalle Street, Chicago, Illinois 60602 (Address of principal executive offices) (Zip Code) (312)759-7660 (Issuer's telephone number) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filling requirements for the past 90 days. Yes X No . BRAUVIN REAL ESTATE FUND L.P. 5 (a Delaware limited partnership) INDEX PART I Page Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . 3 Consolidated Balance Sheet at September 30, 1998 . . . . . . 4 Consolidated Statements of Operations for the nine months ended September 30, 1998 and 1997 . . . . . . 5 Consolidated Statements of Operations for the three months ended September 30, 1998 and 1997. . . . . . 6 Consolidated Statements of Cash Flows for the nine months ended September 30, 1998 and 1997 . . . . . . 7 Notes to Consolidated Financial Statements . . . . . . . . . 8 Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . .17 PART II Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .22 Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .22 Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .22 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .22 Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .22 Item 6. Exhibits, and Reports on Form 8-K. . . . . . . . . . . . . .22 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 PART I - FINANCIAL INFORMATION ITEM 1. Consolidated Financial Statements The following Consolidated Balance Sheet as of September 30, 1998, Consolidated Statements of Operations for the nine months ended September 30, 1998 and 1997, Consolidated Statements of Operations for the three months ended September 30, 1998 and 1997, and Consolidated Statements of Cash Flows for the nine months ended September 30, 1998 and 1997 for Brauvin Real Estate Fund L.P. 5 (the "Partnership") are unaudited but reflect, in the opinion of the management, all adjustments necessary to present fairly the information required. All such adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership's 1997 Annual Report on Form 10-KSB. CONSOLIDATED BALANCE SHEET (Unaudited) September 30, 1998 ASSETS Investment in real estate: Land $ 2,411,849 Buildings and improvements 9,743,585 12,155,434 Less accumulated depreciation (3,222,501) Net investment in real estate 8,932,933 Cash and cash equivalents 760,278 Rent receivable (net of allowance of $18,000) 105,197 Escrow deposits 237,250 Other assets 130,945 Due from affiliates 35,700 Total Assets $10,202,303 LIABILITIES AND PARTNERS' CAPITAL LIABILITIES: Mortgage notes payable (Note 3) $ 6,221,906 Accounts payable and accrued expenses 203,803 Tenant security deposits 44,370 Due to affiliates 5,809 Total Liabilities 6,475,888 Investment in Strawberry Fields Joint Venture - Distributions and losses in excess of invested amounts(Note 5) 153,731 MINORITY INTEREST IN SABAL PALM JOINT VENTURE 814,405 PARTNERS' CAPITAL: General Partners (38,260) Limited Partners (9,914.5 limited partnership units issued and outstanding) 2,796,539 Total Partners' Capital 2,758,279 Total Liabilities and Partners' Capital $10,202,303 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENTS OF OPERATIONS For the nine months ended September 30, (Unaudited) 1998 1997 INCOME Rental $1,008,800 $ 991,181 Interest 23,440 18,159 Other, primarily tenant expense reimbursements 158,773 116,353 Total income 1,191,013 1,125,693 EXPENSES Interest 412,320 421,470 Depreciation 203,083 202,638 Real estate taxes 102,481 107,604 Repairs and maintenance 37,914 26,988 Management fees (Note 4) 70,000 68,687 Other property operating 42,275 50,415 General and administrative 140,107 162,542 Total expenses 1,008,180 1,040,344 Income before minority and equity interests 182,833 85,349 Minority interest's share of Sabal Palm's net income (44,335) (17,559) Equity interest in Strawberry Fields Joint Venture's net loss (689,947) (21,171) Net (loss) income $ (551,449) $ 46,619 Net (loss) income Allocated to the General Partners $ (5,514) $ 466 Net (loss) income Allocated to the Limited Partners $ (545,935) $ 46,153 Net income (loss) Per Limited Partnership Interest (9,914.5 Units) $ (55.06) $ 4.66 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended September 30, (Unaudited) 1998 1997 INCOME Rental $287,463 $294,672 Interest 10,924 6,840 Other, primarily tenant expense reimbursements 59,005 12,692 Total income 357,392 314,204 EXPENSES Interest 137,684 140,108 Depreciation 67,731 67,866 Real estate taxes 34,598 35,868 Repairs and maintenance 8,102 9,302 Management fees (Note 4) 17,399 18,699 Other property operating 14,584 19,586 General and administrative 38,499 48,652 Total expenses 318,597 340,081 Income before minority and equity interests 38,795 (25,877) Minority interest's share of Sabal Palm's net loss 5,876 16,658 Equity interest in Strawberry Fields Joint Venture's net loss (6,031) (8,256) Net income (loss) $ 38,640 $(17,475) Net income (loss) Allocated to the General Partners $ 386 $ (175) Net income (loss) Allocated to the Limited Partners $ 38,254 $(17,300) Net income (loss) Per Limited Partnership Interest (9,914.5 Units) $ 3.86 $ (1.75) See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, (Unaudited) 1998 1997 Cash Flows From Operating Activities: Net (loss) income $(551,449) $46,619 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation 203,083 202,638 Provision for doubtful accounts 3,401 4,500 Equity interest in Strawberry Fields Joint Venture's net loss 689,947 21,171 Minority Interest's share of Sabal Palm Joint Venture's net income 44,335 17,559 Change in rent receivables (2,773) 18,611 Change in other assets 9,086 13,919 Change in escrow deposits (118,497) (121,269) Change in due from affiliate -- 5,880 Change in accounts payable and accrued expenses 93,126 103,029 Change in due to affiliates (2,140) 5,939 Change in tenant security deposits 637 1,366 Net cash provided by operating activities 368,756 319,962 Cash Flows From Investing Activities: Capital expenditures (1,320) (4,310) Cash distribution to Minority Partner of Sabal Palm Joint Venture (79,900) (13,160) Cash used in investing activities (81,220) (17,470) Cash Flows From Financing Activities: Repayment of mortgage notes payable (87,651) (3,155,088) Proceeds from refinancing -- 3,200,000 Payment of loan fees -- (55,605) Net cash used in financing activities (87,651) (10,693) Net increase in cash and cash equivalents 199,885 291,799 Cash and cash equivalents at beginning of period 560,393 408,869 Cash and cash equivalents at end of period $760,278 $ 700,668 Supplemental disclosure of cash flow information: Cash paid for interest $391,000 $ 402,701 See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Brauvin Real Estate Fund L.P. 5 (the "Partnership") was organized on June 28, 1985. The General Partners of the Partnership are Brauvin Ventures, Inc. and Jerome J. Brault. On August 8, 1997, Mr. Cezar M. Froelich resigned as an Individual General Partner effective 90 days from August 14, 1997. Brauvin Ventures Inc. is owned by A.G.E. Realty Corporation Inc. (50%) and by Messrs. Brault (beneficially) (25%) and Froelich (25%). A. G. Edwards & Sons, Inc. and Brauvin Securities, Inc., affiliates of the General Partners, were the selling agents of the Partnership. The Partnership is managed by an affiliate of the General Partners. The Partnership was formed on June 28, 1985 and filed a Registration Statement on Form S-11 with the Securities and Exchange Commission which became effective on March 1, 1985. The sale of the minimum of $1,200,000 of limited partnership interests of the Partnership (the "Units") necessary for the Partnership to commence operations was achieved on June 28, 1985. The Partnership's offering closed on February 28, 1986. A total of $9,914,500 of Units were subscribed for and issued between March 1, 1985 and February 28, 1986 pursuant to the Partnership's public offering. The Partnership has acquired directly or through joint ventures the land and buildings underlying the Crown Point, Strawberry Fields and Sabal Palm shopping centers. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Management's Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Accounting Method The accompanying consolidated financial statements have been prepared using the accrual method of accounting. Rental Income Rental income is recognized on a straight line basis over the life of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are credited or charged, as applicable, to deferred rent receivable. Federal Income Taxes Under the provisions of the Internal Revenue Code, the Partnership's income and losses are reportable by the partners on their respective income tax returns. Accordingly, no provision is made for Federal income taxes in the consolidated financial statements. Consolidation of Special Purpose Entity The Partnership has one special purpose entity ("SPE"), Brauvin/Crown Point L.P., which is owned 99% by the Partnership and 1% by an affiliate of the General Partners. Distributions from the SPE are subordinated to the Partnership which effectively precludes any distributions from the SPE to affiliates of the General Partners. The creation of the SPE did not affect the Partnership's economic ownership of the property. Furthermore, this change in ownership structure had no material effect on the financial statements of the Partnership. Consolidation of Joint Venture Partnership The Partnership owns a 53% interest in the Sabal Palm Joint Venture which owns Sabal Palm Shopping Center. The accompanying financial statements have consolidated 100% of the assets, liabilities, operations and partners' capital of Sabal Palm Joint Venture. The minority interests of the consolidated joint venture are adjusted for the respective joint venture partner's share of income or loss and any cash contributions from or distributions to the joint venture partner, if any. All intercompany items and transactions have been eliminated. Investment in Joint Venture Partnership The Partnership owns a 42% equity interest in the Strawberry Fields Joint Venture (see Note 5). Strawberry Fields is reported as an investment in an affiliated joint venture. The accompanying financial statements include the investment in Strawberry Fields Joint Venture using the equity method of accounting. Investment in Real Estate The Partnership's rental properties are stated at cost including acquisition costs, leasing commissions, tenant improvements and are net of provision for impairment. Depreciation and amortization are recorded on a straight-line basis over the estimated economic lives of the properties, which approximate 31.5 years, and the term of the applicable leases, respectively. All of the Partnership's properties are subject to liens under first mortgages (see Note 3). In 1995, the Partnership adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS 121). In conjunction with the adoption of SFAS 121, the Partnership performed an analysis of its long-lived assets, and the Partnership's management determined that there were no events or changes in circumstances that indicated that the carrying amount of the assets may not be recoverable at September 30, 1998 and December 31, 1997. Accordingly, no impairment loss has been recorded in the accompanying financial statements for the nine months ended September 30, 1998 and the year ended December 31, 1997. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid debt instruments with an original maturity within three months from date of purchase. Estimated Fair Value of Financial Instruments Disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of Statement of Financial Accounting Standards No. 107, "Disclosure About Fair Value of Financial Instruments." The estimated fair value amounts have been determined by using available market information and appropriate valuation methodologies. However, considerable judgement is necessarily required in interpreting market data to develop estimates of fair value. The fair value estimates presented herein are based on information available to management as of September 30, 1998, 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. The carrying amounts of the following items are reasonable estimates of fair value: cash and cash equivalents; rent receivable; escrow deposits; accounts payable and accrued expenses; tenant security deposits; and due to/from affiliates. (2) PARTNERSHIP AGREEMENT The Partnership Agreement (the "Agreement") provides that 99% of the net profits and losses from operations of the Partnership for each fiscal year shall be allocated to the Limited Partners and 1% of net profits and losses from operations shall be allocated to the General Partners. The net profit of the Partnership from the sale or other disposition of a Partnership property shall be allocated as follows: first, there shall be allocated to the General Partners the greater of: (i) 1% of such net profits; or (ii) the amount distributable to the General Partners as Net Sale Proceeds from such sale or other disposition, as defined in the Partnership Agreement; and second, all remaining profits shall be allocated to the Limited Partners. The net loss of the Partnership from any sale or other disposition of a Partnership property shall be allocated as follows: 99% of such net loss shall be allocated to the Limited Partners and 1% of such net loss shall be allocated to the General Partners. The Agreement provides that distributions of Operating Cash Flow, as defined in the Agreement, shall be distributed 99% to the Limited Partners and 1% to the General Partners. The receipt by the General Partners of such 1% of Operating Cash Flow shall be subordinated to the receipt by the Limited Partners of Operating Cash Flow equal to a 10% per annum, cumulative, non-compounded return on Adjusted Investment, as such term is defined in the Agreement (the "Preferential Distribution"). In the event the full Preferential Distribution is not made in any year (herein referred to as a "Preferential Distribution Deficiency") and Operating Cash Flow is available in following years in excess of the Preferential Distribution for said years, then the Limited Partners shall be paid such excess Operating Cash Flow until they have paid any unpaid Preferential Distribution Deficiency from prior years. Net Sale Proceeds, as defined in the Agreement, received by the Partnership shall be distributed as follows: (a) first, to the Limited Partners until such time as the Limited Partners have been paid an amount equal to the amount of their Adjusted Investment; (b) second, to the Limited Partners until such time as the Limited Partners have been paid an amount equal to any unpaid Preferential Distribution Deficiency; and (c) third, 85% of any remaining Net Sale Proceeds to the Limited Partners, and the remaining 15% of the Net Sale Proceeds to the General Partners. The Preferential Distribution Deficiency at September 30, 1998 equaled $10,582,245. (3) MORTGAGES NOTES PAYABLE Mortgages payable at September 30, 1998 consist of the following: Interest Date 1998 Rate Due Crown Point Shopping Center (a) $3,067,346 7.55% 1/03 Sabal Palm Square Shopping Center (b) 3,154,560 8.93% 3/02 $6,221,906 Each shopping center serves as collateral under its respective nonrecourse debt obligation. Maturities of the mortgages payable are as follows: 1998 $ 30,630 1999 128,086 2000 137,877 2001 150,124 2002 3,138,289 Thereafter 2,636,900 $6,221,906 (a) On December 28, 1995, the acquisition loan balance was paid in full when Crown Point Shopping Center ("Crown Point") was refinanced by NationsBanc Mortgage Capital Corporation (the "Successor Lender"). The refinancing resulted in a $3,275,000 non- recourse loan with a fixed interest rate of 7.55%, and amortization based on a twenty year term with a maturity of January 1, 2003. As a precondition to the new financing, the Successor Lender required that ownership of the property reside in a single purpose entity ("SPE"). To accommodate the lender's requirements, ownership of the property was transferred to the SPE, Brauvin/Crown Point L.P., which is owned 99% by the Partnership and 1% by an affiliate of the General Partners. Distributions of Brauvin/Crown Point L.P. are subordinated to the Partnership which effectively precludes any distributions from the SPE to affiliates of the General Partners. The creation of Brauvin/Crown Point L.P. did not affect the Partnership's economic ownership of Crown Point. Furthermore, this change in ownership structure had no material effect on the financial statements of the Partnership. The carrying value of Crown Point at September 30, 1998 was approximately $4,183,000. (b) On February 19, 1987, the Partnership and its joint venture partner obtained a first mortgage loan secured by the Sabal Palm Shopping Center ("Sabal Palm") in the amount of $3,200,000 from an unaffiliated lender. The loan was payable with interest only at 9.5% per annum until February 1992 and then required payments of principal and interest based on a 30-year amortization schedule with a balloon mortgage payment in February 1997. Prior to the scheduled maturity of this loan, the lender granted Sabal Palm an extension until April 1, 1997. On March 31, 1997, Sabal Palm obtained a new first mortgage loan in the amount of $3,200,000 (the "First Mortgage Loan") secured by its real estate, from NationsBanc Mortgage Capital Corporation. The First Mortgage Loan bears interest at the rate of 8.93% per annum, is amortized over a 25- year period, requires monthly payments of principal and interest of approximately $26,700 and matures on March 26, 2002. A portion of the proceeds of the First Mortgage Loan, approximately $3,077,000, was used to retire Sabal Palm's existing mortgage from Lincoln National Pension Insurance Company. The outstanding mortgage balance encumbered by the property is $3,154,560 at September 30, 1998. In the first quarter of 1998, the Partnership became aware that both Winn-Dixie and Walgreens may vacate their respective spaces at Sabal Palm prior to their lease termination dates. In the second quarter of 1998, Winn-Dixie vacated its space at the center. Walgreens has not given official notice that they will vacate their space prior to their lease termination, the General Partners, however, believe that there is a likelihood that this tenant will vacate. The General Partners are working to determine the most beneficial steps to be taken by the Partnership. Winn-Dixie remains liable for rental payments under its lease at Sabal Palm until April 2005. The carrying value of Sabal Palm approximated $4,750,000 at September 30, 1998. (4) TRANSACTIONS WITH AFFILIATES Fees and other expenses paid or payable to the General Partners or its affiliates for the nine months ended September 30, 1998 and 1997 were as follows: 1998 1997 Management fees $70,000 $62,401 Reimbursable office expenses 69,300 69,991 Legal fees -- 377 The Partnership believes the amounts paid to affiliates are representative of amounts which would have been paid to independent parties for similar services. As of September 30, 1998, the Partnership had made all payments to affiliates, except for management fees of $4,048 and legal fees of $1,761. An amount of $35,700 due from affiliates at September 30, 1998 represented an advance made to Strawberry Fields. (5) EQUITY INVESTMENT The Partnership owns a 42% interest in Strawberry Fields Joint Venture, located in West Palm Beach, Florida, and accounts for its investment under the equity method. The following are condensed financial statements for Strawberry Fields Joint Venture: September 30, 1998 Land, building and personal property, net $5,304,935 Other assets 140,506 $5,445,441 Mortgage note payable $5,492,686 Other liabilities 317,207 5,809,893 Partners' capital (364,452) $5,445,441 For the nine months ended September 30, 1998 1997 Rental income $ 599,267 $ 595,705 Other income 94,134 63,056 693,401 658,761 Mortgage and other interest 377,336 324,626 Depreciation 136,689 151,631 Loss on value impairment 1,564,101 -- Operating and administrative expenses 258,005 232,910 2,336,131 709,167 Net loss $(1,642,730) $ (50,406) ITEM 2. Management's Discussion and Analysis or Plan of Operation. General Certain statements in this Quarterly Report that are not historical fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Without limiting the foregoing, words such as "anticipates", "expects", "intends", "plans" and similar expressions are intended to identify forward-looking statements. These statements are subject to a number of risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. The Partnership undertakes no obligation to update these forward-looking statements to reflect future events or circumstances. Year 2000 In 1997, the Partnership initiated the conversion from its existing accounting software to a program that is year 2000 compliant. Management has determined that the year 2000 issue will not pose significant operational problems for its computer system. All costs associated with this conversion are being expensed as incurred, and are not material. Also in 1997, management of the Partnership initiated formal communications with all of its significant third party vendors, service providers and financial institutions to determine the extent to which the Partnership is vulnerable to those third parties failure to remedy their own year 2000 issue. There can be no guarantee that the systems of these third parties will be timely converted and would not have an adverse effect on the Partnership. Liquidity and Capital Resources The Partnership intends to satisfy its short-term liquidity needs through cash flow from the properties. Long-term liquidity needs are expected to be satisfied through refinancing of the mortgages when they mature. The anchor tenant at Crown Point is Food City. The overall occupancy level at Crown Point at September 30, 1998 was 94%, compared to 100% at December 31, 1997 and 100% at September 30, 1997. The Partnership is working to improve the occupancy level of Crown Point. The occupancy level at Strawberry Fields at September 30, 1998 was 87%, compared to 86% at December 31, 1997 and 90% at September 30, 1997. Strawberry had a negative cash flow for the nine months ended September 30, 1998. On September 18, 1995, the Strawberry Fields Joint Venture notified the Lutheran Brotherhood (the "Strawberry Lender") that it would exercise its option to extend the term of the Strawberry Fields loan from the original maturity of November 1, 1995 to December 1, 1998. The terms of the extension called for all provisions of the loan to remain the same except for an additional monthly principal payment of $12,500. Effective November 1, 1995, the Strawberry Fields Joint Venture and the Strawberry Lender agreed to modify the loan by reducing the interest rate to 7.5% for November 1, 1995 through October 31, 1997 and by reducing the monthly principal payment to $12,000. As of November 1, 1997 and through the maturity date, December 1, 1998, the interest rate reverted to the original 9.0% rate. Effective October 1, 1998, the Strawberry Fields 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, December 1, 1999, the interest rate has been reduced from 9% to 7% with principal amortization changed from a ten year period to an eighteen year period. At Sabal Palm, the Partnership and its joint venture partner are working to improve the occupancy level of Sabal Palm which stood at 96% as of September 30, 1998. Although the Sabal Palm retail market appears to be over built, the occupancy level of the building has stayed relatively constant and it has generated positive cash flow since its acquisition in 1986. In addition, in the first quarter of 1998, the Partnership became aware that both Winn-Dixie and Walgreens may vacate their respective spaces at Sabal Palm prior to their lease termination dates. In the second quarter of 1998, Winn-Dixie vacated its space at the center. Walgreens has not given official notice that they will vacate their space prior to the lease termination, the General Partners, however, believe that there is a likelihood that this tenant will vacate. The General Partners are working to determine the most beneficial steps to be taken by the Partnership. Winn-Dixie remains liable for rental payments under its lease at Sabal Palm until April 2005. Sabal Palm was required to make a balloon mortgage payment in February 1997. Prior to the scheduled maturity of the First Mortgage Loan, the lender granted Sabal Palm an extension until April 1, 1997. On March 31, 1997, Sabal Palm obtained a first mortgage loan in the amount of $3,200,000 (the "First Mortgage Loan"), secured by its real estate, from NationsBanc Mortgage Capital Corporation. The First Mortgage Loan bears interest at the rate of 8.93% per annum, is amortized over a 25-year period, requires monthly payments of principal and interest of approximately $26,700 and matures on March 26, 2002. A portion of the proceeds of the First Mortgage Loan, approximately $3,077,000, was used to retire Sabal Palm's existing mortgage from Lincoln National Pension Insurance Company. The Partnership has engaged a nationally known appraisal firm to value the Partnership's assets. Additionally, this firm will assist the General Partners in determining the appropriate method and timing for the disposition of the Partnership's assets. The appraisal of the assets is expected to be completed by the end of the calendar year. The General Partners expect to distribute proceeds from operating cash flow, if any, and from the sale of real estate to Limited Partners in a manner that is consistent with the investment objectives of the Partnership. Management of the Partnership believes that cash needs may arise from time to time which will have the effect of reducing distributions to Limited Partners to amounts less than would be available from refinancing or sale proceeds. These cash needs include, among other things, maintenance of working capital reserves in compliance with the Agreement as well as payments for major repairs, tenant improvements and leasing commissions in support of real estate operations. Results of Operations - Nine months Ended September 30, 1998 and 1997 (Amounts rounded to 000's) The Partnership generated net loss of $551,000 for the nine months ended September 30, 1998 as compared to net income of $47,000 for the same nine month period in 1997. The $598,000 decrease resulted primarily from the Partnership's equity interest in the Strawberry Fields Joint Venture. Total income for the nine months ended September 30, 1998 was $1,191,000 as compared to $1,126,000 for the same nine month period in 1997, an increase of $65,000. The $65,000 increase resulted primarily from an increase of $35,000 in tenant reimbursement revenue at Sabal Palm. Additionally, an increase in the occupancy rate at Sabal Palm from 95% at September 30, 1997 to 96% at September 30, 1998 also generated additional rental income of $16,000. For the nine months ended September 30, 1998, total expenses were $1,008,000 as compared to $1,040,000 for the same nine month period in 1997, a decrease of $32,000. The $32,000 decrease in total expense resulted primarily from a decrease in general and administrative expense due to lower insurance expenses at the Partnership's properties. Also contributing to the decrease in general and administrative expense was a bad debt recovery at Crown Point. The Partnership's equity interest in the Strawberry Fields Joint Venture net loss contributed heavily to the decline in the Partnership's net income for the nine months ended September 30, 1998 when compared to the same nine month period in 1997. In the second quarter of 1998 the Strawberry Fields Joint venture recorded a provision for impairment on an other than temporary decline in the value of real estate of approximately $1,564,000. The Partnership's share of this item is approximately $657,000. Results of Operations - Three months Ended September 30, 1998 and 1997 (Amounts rounded to 000's) The Partnership generated net income of $39,000 for the three months ended September 30, 1998 as compared to net loss of $17,000 for the same three month period in 1997. The $56,000 increase resulted primarily from an increase in tenant reimbursement at Sabal Palm. The increase in net income also resulted from a decrease in general and administrative expense which was mainly caused by a bad debt recovery at Crown Point. Total income for the three months ended September 30, 1998 was $357,000 as compared to $314,000 for the same three month period in 1997, an increase of $43,000. The $43,000 increase resulted from an increase of $37,000 in the tenant reimbursements earned at Sabal Palm and an increase of $12,000 in the tenant reimbursements earned at Crown Point. Partially offsetting the increase in tenant reimbursements was a decrease in rental income of $6,000 at Crown Point, which resulted from a lower occupancy rate of 94% at September 30, 1998 as compared to 100% at September 30, 1997. For the three months ended September 30, 1998, total expenses were $319,000 as compared to $340,000 for the same three month period in 1997, a decrease of $21,000. The $21,000 decrease in total expenses resulted primarily from a decrease in general and administrative expense which is a result of a bad debt recovery at Crown Point. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings. None. ITEM 2. Changes in Securities. None. ITEM 3. Defaults Upon Senior Securities. None. ITEM 4. Submission of Matters To a Vote of Security Holders. None. ITEM 5. Other Information. None. ITEM 6. Exhibits and Reports on Form 8-K. Exhibit 27. Financial Data Schedule SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BY: Brauvin Ventures, Inc. Corporate General Partner of Brauvin Real Estate Fund L.P. 5 BY: /s/ Jerome J. Brault Jerome J. Brault Chairman of the Board of Directors and President DATE: November 13, 1998 BY: /s/ Thomas E. Murphy Thomas E. Murphy Chief Financial Officer And Treasurer DATE: November 13, 1998 EX-27 2
5 9-MOS DEC-31-1998 SEP-30-1998 760,278 0 105,197 0 0 0 12,155,434 3,222,501 10,202,303 253,982 6,221,906 0 0 2,758,279 0 10,202,303 0 1,191,013 0 595,860 734,282 0 412,320 0 0 0 0 0 0 (551,449) 0 0 "SECURITIES" REPRESENTS INVESTMENT IN JOINT VENTURE "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND BUILDING] "BONDS" REPRESENTS MORTGAGES PAYABLE "COMMON" REPRESENTS TOTAL PARTNERS CAPITAL "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER INCOME "TOTAL COSTS" REPRESENTS TOTAL EXPENSES LESS INTEREST EXPENSE "OTHER EXPENSES" REPRESENTS INTEREST IN JOINT VENTURES' NET INCOME/LOSS
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