-----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, LvFD/QDj1RS96z7gbzAeWvIBilypcpR/I5zekYUcc8IFh95+8Sh/kSRHxsdoHT5W 0RiYS7HZk3OtKA7WrFVDrA== 0000810587-97-000024.txt : 19970520 0000810587-97-000024.hdr.sgml : 19970520 ACCESSION NUMBER: 0000810587-97-000024 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRAUVIN REAL ESTATE FUND LP 5 CENTRAL INDEX KEY: 0000762848 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 363432071 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14481 FILM NUMBER: 97609817 BUSINESS ADDRESS: STREET 1: 150 S WACKER DR CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3124430922 MAIL ADDRESS: STREET 1: 150 S WACKER DR STREET 2: SUITE 3200 CITY: CHICAGO STATE: IL ZIP: 60606 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the three months ended March 31, 1997 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 0-14481 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.) 150 South Wacker Drive, Chicago, Illinois 60606 (Address of principal executive offices) (Zip Code) (312) 443-0922 (Issuer's telephone number) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the 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. Financial Statements . . . . . . . . . . . . . . . . . . . . 3 Consolidated Balance Sheet at March 31, 1997 . . . . . . . . 4 Consolidated Statements of Operations for the three months ended March 31, 1997 and 1996. . . . . . . . 5 Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996. . . . . . . . 6 Notes to Consolidated Financial Statements . . . . . . . . . 7 Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . .15 PART II Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .17 Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .17 Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .17 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .17 Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .17 Item 6. Exhibits,and Reports on Form 8-K . . . . . . . . . . . . . .17 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 PART I - FINANCIAL INFORMATION ITEM 1. Consolidated Financial Statements The following Consolidated Balance Sheet as of March 31, 1997, Consolidated Statements of Operations for the three months ended March 31, 1997 and 1996 and Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996 for Brauvin Real Estate Fund L.P. 5 (the "Partnership") are unaudited but reflect, in the opinion of the management, all adjustments necessary to present fairly the information required. All such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's 1996 Annual Report on Form 10-KSB. CONSOLIDATED BALANCE SHEET (Unaudited) March 31, 1997 ASSETS Investment in real estate: Land $ 2,411,849 Buildings and improvements 9,737,955 12,149,804 Less accumulated depreciation (2,816,420) Net investment in real estate 9,333,384 Investment in Strawberry Fields Joint Venture(Note 5) 569,618 Cash and cash equivalents 562,500 Rent receivable 84,274 Escrow deposits 99,434 Other assets 163,645 Due from affiliates 5,880 Total Assets $ 10,818,735 LIABILITIES AND PARTNERS' CAPITAL LIABILITIES: Mortgage notes payable (Note 3) $ 6,389,254 Accounts payable and accrued expenses 82,841 Tenant security deposits 41,733 Due to affiliates 10,084 Total Liabilities 6,523,912 MINORITY INTEREST IN SABAL PALM JOINT VENTURE 987,818 PARTNERS' CAPITAL: General Partners (32,773) Limited Partners (9,914.5 limited partnership units issued and outstanding) 3,339,778 Total Partners' Capital 3,307,005 Total Liabilities and Partners' Capital $ 10,818,735 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended March 31, 1997 and 1996 (Unaudited) 1997 1996 INCOME Rental $ 398,647 $ 404,057 Interest 4,987 924 Other, primarily tenant expense reimbursements 50,117 69,846 Total income 453,751 474,827 EXPENSES Interest 141,550 140,281 Depreciation 67,386 67,137 Real estate taxes 35,868 35,855 Repairs and maintenance 12,522 5,055 Management fees 28,669 28,556 Other property operating 17,414 17,679 General and administrative 50,511 49,320 Total expenses 353,920 343,883 Income before minority and equity interests 99,831 130,944 Minority interest's share of Sabal Palm's net income (44,510) (59,829) Equity interest in Strawberry Fields Joint Venture's net loss (7,532) (11,868) Net income $ 47,789 $ 59,247 Net income Allocated to the General Partners $ 478 $ 592 Net income Allocated to the Limited Partners $ 47,311 $ 58,655 Net income Per Limited Partnership Interest (9,914.5 Units) $ 4.77 $ 5.92 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended March 31, 1997 and 1996 (Unaudited) 1997 1996 Cash Flows From Operating Activities: Net income $ 47,789 $59,247 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 67,386 67,137 Provision for doubtful accounts 1,800 12,160 Equity interest in Strawberry Fields Joint Venture's net loss 7,532 11,868 Minority Interest's share of Sabal Palm Joint Venture's net income 44,510 59,829 Decrease in rent receivables 23,555 19,398 Decrease in other assets 3,626 6,354 Increase in escrow deposits (40,764) (26,107) Increase in due from affiliates -- (5,880) (Decrease) increase in accounts payable and accrued expenses (37,350) 14,112 Increase (decrease) in due to affiliates 7,976 (43,838) Decrease in tenant security deposits (634) -- Net cash provided by operating activities 125,426 174,280 Cash Flows From Investing Activities: Cash distribution to Minority Partner of Sabal Palm Joint Venture (13,160) (70,500) Cash used by investing activities (13,160) (70,500) Cash Flows From Financing Activities: Repayment of mortgage notes payable (3,103,716) (18,634) Proceeds from refinancing 3,200,000 -- Payment of loan fees (54,919) -- Net cash provided by (used in) financing activities 41,365 (18,634) Net increase in cash and cash equivalents 153,631 85,146 Cash and cash equivalents at beginning of period 408,869 142,320 Cash and cash equivalents at end of period $ 562,500 $ 227,466 Supplemental disclosure of cash flow information: Cash paid for interest $ 161,668 $ 115,055 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., Jerome J. Brault, and Cezar M. Froelich. Brauvin Ventures Inc. is owned by A.G.E. Realty Corporation Inc. (50%) and by Messrs. Jerome J. Brault (beneficially) (25%) and Cezar M. Froelich (25%). A. G. Edwards & Sons, Inc. and Brauvin Securities, Inc., affiliates of the General Partners, were the selling agents of the Partnership. The Partnership is managed by an affiliate of the General Partners. The Partnership was formed on June 28, 1985 and filed a Registration Statement on Form S-11 with the Securities and Exchange Commission which became effective on March 1, 1985. The sale of the minimum of $1,200,000 of limited partnership interests of the Partnership (the "Units") necessary for the Partnership to commence operations was achieved on June 28, 1985. The Partnership's offering closed on February 28, 1986. A total of $9,914,500 of Units were subscribed for and issued between March 1, 1985 and February 28, 1986 pursuant to the Partnership's public offering. The Partnership has acquired directly or through joint ventures the land and buildings underlying Crown Point, Strawberry Fields and Sabal Palm shopping centers. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-KSB for the year ended December 31, 1996. Management's Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Accounting Method The accompanying consolidated financial statements have been prepared using the accrual method of accounting. Rental Income Rental income is recognized on a straight line basis over the life of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are credited or charged, as applicable, to deferred rent receivable. Federal Income Taxes Under the provisions of the Internal Revenue Code, the Partnership's income and losses are reportable by the partners on their respective income tax returns. Accordingly, no provision is made for Federal income taxes in the financial statements. Consolidation of Joint Venture Partnership The Partnership owns a 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 a 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 March 31, 1997. Accordingly, no impairment loss has been recorded in the accompanying financial statements for the periods ended March 31, 1997 and 1996. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid debt instruments with an original maturity within three months from date of purchase. Estimated Fair Value of Financial Instruments Disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of Statement of Financial Accounting Standards No. 107, "Disclosure About Fair Value of Financial Instruments." The estimated fair value amounts have been determined by using available market information and appropriate valuation methodologies. However, considerable judgement is necessarily required in interpreting market data to develop estimates of fair value. The fair value estimates presented herein are based on information available to management as of March 31, 1997, but may not necessarily be indicative of the amounts that the Partnership could realize in a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and current estimates of fair value may differ significantly from amounts presented herein. The carrying amounts of the following items are reasonable estimates of fair value: cash and cash equivalents; escrow deposits; accounts payable and accrued expenses and due to/from affiliates. Reclassifications Certain reclassifications have been made to the consolidated 1996 financial statements to conform to classifications adopted in 1997. (2) PARTNERSHIP AGREEMENT The Partnership Agreement (the "Agreement") provides that 99% of the net profits and losses from operations of the Partnership for each fiscal year shall be allocated to the Limited Partners and 1% of net profits and losses from operations shall be allocated to the General Partners. The net profit of the Partnership from the sale or other disposition of a Partnership property shall be allocated as follows: first, there shall be allocated to the General Partners the greater of: (i) 1% of such net profits; or (ii) the amount distributable to the General Partners as Net Sale Proceeds from such sale or other disposition, 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. (3) MORTGAGES NOTES PAYABLE Mortgages payable at March 31, 1997 consist of the following: Interest Date 1997 Rate Due Crown Point Shopping Center (a) $3,189,254 7.55% 1/03 Sabal Palm Square Shopping Center (b) 3,200,000 8.93% 3/02 $6,389,254 (a) On December 28, 1995, 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%, 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 the Crown Point property. Furthermore, this change in ownership structure had no material effect on the financial statements of the Partnership. (b) Sabal Palm was required to make a balloon mortgage payment in February 1997. Prior to the scheduled maturity of the First Mortgage Loan, the lender granted Sabal Palm an extension until April 1, 1997. On March 31, 1997, Sabal Palm obtained a first mortgage loan in the amount of $3,200,000 (the "First Mortgage Loan") secured by its real estate, from NationsBanc Mortgage Capital Corporation. The First Mortgage Loan bears interest at the rate of 8.93% per annum, is amortized over a 25-year period, requires monthly payments of principal and interest of approximately $26,700 and matures on March 26, 2002. A portion of the proceeds of the First Mortgage Loan, approximately $3,077,000 were used to retire Sabal Palm's existing mortgage from Lincoln National Pension Insurance Company. (4) TRANSACTIONS WITH AFFILIATES Fees and other expenses paid to the General Partners or its affiliates for the period ended March 31, 1997 and 1996 were as follows: 1997 1996 Management fees $20,536 $ 28,556 Reimbursable office expenses 21,979 19,033 Legal fees 187 4,480 The Partnership believes the amounts paid to affiliates are representative of amounts which would have been paid to independent parties for similar services. The Partnership had made all payments to affiliates, except for $1,951 for legal services and $8,133 for management fees as of March 31, 1997. An amount of $5,880 due from affiliates at March 31, 1997 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: March 31, 1997 Land, building and personal property, net $7,151,172 Other assets 88,592 $7,239,764 Mortgage note payable $5,763,617 Other liabilities 118,342 5,881,959 Partners' capital 1,357,805 $7,239,764 Three months ended March 31, 1997 1996 Rental income $ 200,079 $ 207,031 Other income 20,708 65 220,787 207,096 Mortgage and other interest 109,109 114,901 Depreciation 51,407 50,010 Operating and administrative expenses 78,205 70,441 238,721 235,352 Net loss $ (17,934) $ (28,256) ITEM 2. Management's Discussion and Analysis or Plan of Operation. General Certain statements in this Quarterly Report that are not historical fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Discussions containing forward-looking statements may be found in this section. Without limiting the foregoing, words such as "anticipates," "expects," "intends," "plans" and similar expressions are intended to identify forward-looking statements. These statements are subject to a number of risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. The Partnership undertakes no obligation to update these forward-looking statements to reflect future events or circumstances. Liquidity and Capital Resources The Partnership intends to satisfy its short-term liquidity needs through cash flow from the properties. Long-term liquidity needs are expected to be satisfied through modification of the mortgages at more favorable interest rates. The occupancy level at Crown Point at March 31, 1997, December 31, 1996 and March 31, 1996 was 98%. The Partnership is continuing to work to sustain the occupancy level of Crown Point. Crown Point operated at a positive cash flow for the three months ended March 31, 1997. At Sabal Palm the occupancy level at March 31, 1997 and December 31, 1996 was 92% compared to 99% at March 31, 1996. Although the Sabal Palm retail market appears to be overbuilt, the property has operated at a positive cash flow since its acquisition in 1986. Strawberry Fields operated at a positive cash flow for the three months ended March 31, 1997. The occupancy level at Strawberry Fields at March 31, 1997 was 88% compared to 87% at December 31, 1996 and 83% at March 31, 1996. The General Partners of the Partnership expect to distribute proceeds from operations, if any, and from the sale of real estate, to Limited Partners in a manner that is consistent with the investment objectives of the Partnership. Management of the Partnership believes that cash needs may arise from time to time which will have the effect of reducing distributions to Limited Partners to amounts less than would be available from refinancings or sale proceeds. These cash needs include, among other things, maintenance of working capital reserves in compliance with the partnership agreement as well as payments for major repairs, tenant improvements and leasing commissions in support of real estate operations. Results of Operations - Three Months Ended March 31, 1997 and 1996 (Amounts rounded to 000's) The Partnership generated net income of $48,000 for the three months ended March 31, 1997 as compared to net income of $59,000 for the same three month period in 1996. The $11,000 decrease in net income resulted primarily from the net of a $21,000 decrease in total income, a $10,000 increase in total expenses and a $16,000 decrease in the minority interest share of Sabal Palm's net income. Total income for the three months ended March 31, 1997 was $454,000 as compared to $475,000 for the same three month period in 1996, a decrease of $21,000. The $21,000 decrease resulted primarily from a decrease in the occupancy at Sabal Palm from 99% at March 31, 1996 to 92% at March 31, 1997. For the three months ended March 31, 1997, total expenses were $354,000 as compared to $344,000 for the same three month period in 1996, a increase of $10,000. The $10,000 increase in total expenses resulted primarily from an increase in repairs and maintenance at Sabal Palm, in an effort to attract new potential tenants into the center. 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: May 14, 1997 BY: /s/ B. Allen Aynessazian B. Allen Aynessazian Chief Financial Officer And Treasurer DATE: May 14, 1997 EX-27 2
5 3-MOS DEC-31-1997 MAR-31-1997 562,500 569,618 84,274 0 0 0 12,149,804 2,816,420 10,818,735 82,841 6,389,254 0 0 3,307,005 0 10,818,735 0 453,751 0 212,370 52,042 0 141,550 0 0 0 0 0 0 47,789 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
-----END PRIVACY-ENHANCED MESSAGE-----