<PAGE>
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, 1999
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 0-13402
Brauvin Real Estate Fund L.P. 4
(Name of small business issuer in its charter)
Delaware 36-3304339
(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 preceding 12 months
(or for such shorter period that the issuer 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 issuer'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 $2,220,885.
The aggregate sales price of the limited partnership interests of the
issuer (the "Units") to unaffiliated investors of the issuer was
$9,550,000. 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 February 16, 1984, and
filed pursuant to Rule 424(b) 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. 4
1999 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. . . . . . . . . . . . . . . . . . . . . .14
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . . . .14
PART II
Item 5. Market for the Issuer's Limited Partnership
Interests and Related Security Holder Matters. . . . . . . .14
Item 6. Management's Discussion and Analysis or Plan of
Operation. . . . . . . . . . . . . . . . . . . . . . . . . .15
Item 7. Financial Statements and Supplementary Data. . . . . . . . .23
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . .23
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act. . . . . . . . . . . . . . . . . . . . .24
Item 10. Executive Compensation . . . . . . . . . . . . . . . . . . .26
Item 11. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . .26
Item 12. Certain Relationships and Related Transactions . . . . . . .27
Item 13. Exhibits, Consolidated Financial Statements and
Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . .28
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
PART I
Item 1. Description of Business.
Brauvin Real Estate Fund L.P. 4 (the "Partnership") is a
Delaware limited partnership formed in April 1984 for the purpose
of acquiring, operating, holding for investment and disposing of
existing office buildings, medical office centers, shopping centers
and industrial and retail commercial buildings of a general purpose
nature, all in metropolitan areas. At December 31, 1999, the
Partnership had two rental properties, a 58% interest in a joint
venture which owns a third rental property and a 47% interest in a
joint venture which owns a fourth rental property.
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 were exploring 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 will assist the General Partners in
determining the appropriate method and timing for the disposition
of the Partnership's assets.
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 the Partnership's properties, either on an individual
or group basis, and to subsequently liquidate the Partnership. The
solicitation, which was approved by the Limited Partners in the
third quarter of 1999, stated that the Partnership's properties may
be sold individually or in any combination provided that the total
sales price for the properties included in the transaction equals
or exceeds 70% of the aggregate appraised value for such
properties, which valuation was conducted by an independent third
party appraisal firm.
The Partnership intends to sell the properties under a closed
bid process which will include identification of target buyers with
proven financing ability and performance of certain evaluations of
the properties, such as environmental testing. Potential buyers
will be requested to sign confidentiality agreements to safeguard
the Partnership's confidential proprietary information. The
General Partners have determined that each bid must be all cash,
completely unconditional and accompanied by a substantial deposit.
The limited partnership agreement (the "Agreement") provides
that the Partnership shall terminate December 31, 2010, unless
sooner terminated, the General Partners shall in no event dispose
of the properties after that date.
On December 10, 1998, the Partnership received notice that an
unsolicited tender offer to purchase up to 25% of the outstanding
limited partnership interests of the Partnership (the "Units") was
to commence with a tender price of $120 per Unit. The offer was
made, in part, by an entity that owned a nominal economic interest
in the Partnership and terminated on January 15, 1999. As a result
of this unsolicited tender offer approximately 1,092 economic
interests in the Partnership were transferred.
On May 12, 1999, the Partnership received notice that an
unsolicited tender offer to purchase up to approximately 25% of the
outstanding Units was to commence with a tender price of $170 per
Unit. The offer was made, in part, by an entity that owned a
nominal economic interest in the Partnership and to expired on June
25, 1999. As a result of this unsolicited tender offer
approximately 551 economic interests were transferred.
The General Partners remained neutral as to the particular
merits or risks associated with these tender offers. The General
Partners believed an informed determination of the true value of
the Units could be made after the receipt of the appraisals. 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 are primarily interested in
liquidating their Units immediately, the tender offer provided such
an opportunity.
The Partnership has no employees.
The Partnership utilized its proceeds available for investment
towards the acquisition of properties. However, in seeking
disposition opportunities, the Partnership will be competing for
the sale of its properties with many established and experienced
firms, as well as individuals and entities who own single
properties similar to those owned by the Partnership. The
Partnership, therefore, expects keen competition in connection with
the sale of its properties.
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. Average rental rates for non-anchor tenants,
expressed per square foot per year, have fallen at the Memphis,
Tennessee, Raleigh Square property from approximately $12.00 per
square foot in 1993 to approximately $9.12 per square foot in 1999.
The Albuquerque, New Mexico office market strengthened a bit over
the last two years. Average rental rates at the Fortune property
have increased during this period from $10.16 per square foot in
1995 to $11.31 per square foot in 1999. The average rental rates
for non-anchor tenants at Sabal Palm in Palm Bay, Florida have
increased from approximately $10.88 per square foot in 1995 to
$11.25 per square foot in 1999. However, Winn Dixie moved out and
will likely effect renewal rate and frequency of local tenants. At
Strawberry Fields in West Palm Beach, Florida, the average spot
rental rates have declined from approximately $12.21 per square
foot in 1993 to approximately $6.93 per square foot in 1999.
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 rentable
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.
As of December 31, 1999, the Partnership owned the properties
described below:
(a) Raleigh Springs Marketplace ("Raleigh Springs")
On June 26, 1985, the Partnership acquired Raleigh Springs, an
approximately 114,000 square foot community shopping center located
in Memphis, Tennessee. Raleigh Springs was constructed in two
phases. Phase I was completed during 1984 and Phase II was
completed in 1985. Raleigh Springs was 93% occupied at December
31, 1999. The national anchor tenant is Toys "R" Us.
The Partnership purchased Raleigh Springs for $7,486,800,
consisting of $2,300,000 in cash at closing (plus or minus
prorations) and the assumption of an existing first mortgage loan
on Phase I of $5,186,800. In November 1992, the Partnership
negotiated a modification of the terms of the mortgage on Raleigh
Springs with the lender (the "Modified Loan"). The interest rate
was reduced from 12.75% to 10.00% effective October 1992. The
Modified Loan included the August, September and October 1992
mortgage payments. Since November 1992 and through September
1999, principal and interest payments were based on a 25-year
amortization schedule. The Partnership negotiated a extension of
the terms of the mortgage on Raleigh Springs on August 26, 1999
through October 1, 2000. The outstanding mortgage balance
encumbered by the property was $4,668,932 at December 31, 1999.
The occupancy rate and average annual base rent per square foot
at December 31, 1999 and 1998 were as follows:
1999 1998
Occupancy Rate 93% 95%
Average Annual Base
Rent Per Square Foot $8.16 $8.39
Raleigh Springs has one tenant which occupies ten percent or more
of the rentable square footage. The following is a summary of the
tenant rent roll at December 31, 1999:
Annual Lease
Square Base Expiration Renewal Nature of
Tenant Feet Rent Date Options Business
Toys "R" Us 36,416 $218,496 10/2017 10/5 yrs ea. Toy Store
Others 71,854 655,259 Various Various
Vacant 6,000 --
114,270 $883,755
T.J. Maxx, a former anchor tenant, vacated its space in January
1996 but continued to pay rent through its lease expiration, March
31, 1996. During the third quarter of 1996 a health group signed
a $9.00 per square foot lease for approximately 40% of the T.J.
Maxx space. The remaining space has been leased to a carpet supplier.
Due to the vacancy of the remaining T.J. Maxx space, which is
approximately 5% of the center, cash flow from Raleigh Springs
has decreased. Management of the Partnership continues to
actively market this space to alleviate this situation.
(b) Fortune Professional Building ("Fortune")
On September 15, 1985, the Partnership acquired an 80% equity
interest in Fortune, a two-story, approximately 28,000 square foot
office building located in Albuquerque, New Mexico. The
Partnership purchased its 80% equity interest in Fortune for
$1,888,000, consisting of approximately $768,000 in cash at closing
and the assumption of 80% of the existing $1,400,000 first mortgage
loan obtained from United of Omaha Life Insurance Company, the
terms of which were modified in November 1989 and again in November
1991. The outstanding mortgage balance was being amortized based
on a 15-year rate plus 50% of Available Cash Flow from the
property. This mortgage was scheduled to mature in July 1997 with
a required balloon mortgage payment of approximately $934,000.
On June 26, 1997, the Partnership obtained a first mortgage
loan in the amount of $875,000, secured by Fortune, from American
National Bank and Trust Company (the "Replacement Loan"). In
connection with the funding of the Replacement Loan, the
Partnership was required to reduce the principal balance of the
original mortgage loan by approximately $59,000, out of cash and
cash equivalents, to release the original mortgage loan and pay
loan fees of approximately $24,600. The Replacement Loan has a
floating interest rate based on American National Bank's prime
rate, which at December 31, 1999 was 8.5%. Principal is being
amortized based on a 15-year amortization period and is payable
with interest on a monthly basis. The Replacement Loan matures on
June 30, 2000 at which time a balloon mortgage payment in the
amount of approximately $699,968 will be due. The outstanding
balance of the Replacement Loan was $729,140 at December 31, 1999.
Fortune was 89% occupied at December 31, 1999. Management of
the Partnership is actively marketing the vacant space.
Fortune was constructed in 1982 by the previous owner,
Rademacher, Peixotto and Bradford ("RP&B"), a New Mexico general
partnership. RP&B originally retained a 20% minority interest in
Fortune. Pursuant to the purchase agreement, the Partnership
received 80% of the cash flow after the payment of Fortune's debt
service and RP&B guaranteed a $69,120 annual return through
September 15, 1987. In 1987, the Partnership instituted legal
proceedings against RP&B for failing to fulfill its obligations to
the Partnership, as discussed above, and RP&B was removed as
manager of Fortune. The Partnership subsequently negotiated a
settlement of the litigation in 1988 whereby RP&B assigned its 20%
interest in Fortune to the Partnership.
The occupancy rate and average annual base rent per square foot
at December 31, 1999 and 1998 were as follows:
1999 1998
Occupancy Rate 89% 80%
Average Annual Base
Rent Per Square Foot $12.14 $10.34
Fortune has no tenants which individually occupy ten percent or
more of the rentable square footage. The following is a summary of
the tenant rent roll at December 31, 1999:
Annual Lease
Square Base Expiration Renewal
Tenant Feet Rent Date Options
Others 26,400 $298,629 Various Various
Vacant 3,200 --
29,600 $298,629
(c) Strawberry Fields Shopping Center ("Strawberry Fields")
On December 12, 1985, the Partnership and Brauvin Real Estate
Fund L.P. 5 ("BREF 5"), an affiliated public real estate limited
partnership, formed a joint venture (the "Strawberry Joint
Venture") to purchase Strawberry Fields located in West Palm Beach,
Florida for $9,875,000. The Partnership has a 58% interest and
BREF 5 has a 42% interest in the joint venture which owns
Strawberry Fields. The purchase was funded with $3,875,000 cash at
closing and $6,000,000 from the proceeds of a first mortgage loan.
In February 1993, the Strawberry Joint Venture finalized a
refinancing (the "Refinancing") of the first mortgage loan on
Strawberry Fields with the lender. The Refinancing became
effective retroactive to October 1992. Due to the Refinancing, the
interest rate was reduced to 9% with monthly payments of interest
only from October 1992 through November 1995. The Partnership had
the option to extend the term of the loan and make monthly payments
of principal and interest from December 1995 through November 1998,
if it was not in default of the terms of the Refinancing. On
September 18, 1995, the Strawberry Joint Venture notified 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 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. Commencing November 1, 1997, the interest rate reverted
to the original 9.0% rate.
Effective October 1, 1998, the Strawberry Joint Venture and the
Strawberry Lender agreed to modify and extend the first mortgage
loan. As of October 1, 1998 and through the extended maturity
date, May 1, 2000, the interest rate has been reduced from 9% to 7%
with principal amortization changed from a ten year period to an
eighteen year period. The outstanding mortgage balance encumbered
by the property was $5,293,389 at December 31, 1999.
Strawberry Fields is a neighborhood retail development
constructed on an 11.87 acre site in 1985. Strawberry Fields was
initially anchored by Florida Choice, a combination food, drug and
general merchandise chain. In 1987, the Kroger Company ("Kroger")
purchased Family Mart, the original lessee, and renamed the store.
Kroger then closed the Florida Choice store in November 1988;
however, the original lease terms remained in effect and Kroger
continued to pay rent. Although Kroger is obligated to continue to
pay rent through March 31, 2005, the Strawberry Joint Venture has
located and approved a sublease for a replacement tenant, Syms, a
national discount clothing retailer, to sublease the space for the
remainder of the original lease term. Strawberry Fields' main
building contains 103,614 square feet of retail space and is
complemented by two outparcel sites plus an older 5,400 square foot
Uniroyal tire and automotive outlet. The outparcel sites are
leased to Taco Bell, a division of Tricon Global, and Flagler
National Bank. Strawberry Fields was 91% occupied at December 31,
1999.
On January 27, 2000, the Partnership executed a contract to
sell Strawberry Fields to an unaffiliated third party in the
approximate amount of $5,430,000 subject to certain due diligence
contingencies. The Partnership anticipates closing this
transaction in the second quarter of 2000. Subsequently, the potential
purchaser has rescinded their offer.
With the exception of Kroger, all leases at Strawberry Fields
are net with each tenant paying its pro rata share of operating
expenses. Local tenant leases and outparcel ground leases provide
for the base rent to be increased in accordance with the Consumer
Price Index. Even though Florida Choice has vacated the space and
the space has been sublet to Syms it is still required to pay any
increases in property taxes and insurance above the level incurred
in 1986 (the first year of operation). Syms is not required to
share in the operating expenses.
The occupancy rate and average annual base rent per square foot
at December 31, 1999 and 1998 were as follows:
1999 1998
Occupancy Rate 91% 86%
Average Annual Base
Rent Per Square Foot $7.42 $7.36
Strawberry Fields has one tenant which occupies ten percent or
more of the rentable square footage. The following is a summary of
the tenant rent roll at December 31, 1999:
Annual Lease
Square Base Expiration Renewal Nature of
Tenant Feet Rent Date Options Business
Florida Choice (1)
(sublet by Syms) 54,300 $380,100 3/2005 8/5 yrs ea. Discount
Clothing
Others 47,016 326,002 Various Various
Vacant 11,098 --
112,414 $706,102
(1) Includes Syms and Florida Choice base rent.
(d) Sabal Palm Square ("Sabal Palm")
On October 31, 1986, the Partnership and BREF 5 formed a joint
venture to purchase Sabal Palm, a shopping center in Palm Bay,
Florida, for $5,924,000. The Partnership has a 47% interest and
BREF 5 has a 53% 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 interest only at 9.5% per annum until February 1992,
and required payments of principal and interest based on a 30 year
amortization schedule.
Sabal Palm was required to make a balloon mortgage payment in
February 1997. Prior to the scheduled maturity of the First
Mortgage Loan, the lender granted Sabal Palm an extension until
April 1, 1997. On March 31, 1997, Sabal Palm obtained a first
mortgage loan in the amount of $3,200,000 (the "First Mortgage
Loan"), secured by its real estate, from NationsBanc Mortgage
Capital Corporation. The First Mortgage Loan bears interest at the
rate of 8.93% per annum, is amortized over a 25-year period,
requires monthly payments of principal and interest of
approximately $26,700 and matures on March 26, 2002. A portion of
the proceeds of the First Mortgage Loan, approximately $3,077,000,
was used to retire Sabal Palm's existing mortgage from Lincoln
National Pension Insurance Company. The outstanding mortgage
balance encumbered by the property was $3,108,455 at December 31,
1999.
Sabal Palm is a neighborhood shopping center consisting of
approximately 89,000 square feet of retail space situated on
approximately 9.7 acres of land. Sabal Palm was constructed in
1985 and is anchored by a Winn Dixie food store and Walgreens.
Winn Dixie completed an approximately 6,500 square foot expansion
in the fourth quarter of 1992. Sabal Palm has several outparcels,
which are not owned by the Partnership, but which add to the
center's appearance and customer activity. Sabal Palm had an 81%
economic occupancy at December 31, 1999.
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. Winn-
Dixie remains liable for rental payments under its lease at Sabal
Palm until April 2005.
Walgreens has not given official notice that they will vacate
the 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.
The occupancy rate and average annual base rent per square foot
at December 31, 1999 and 1998 were as follows:
1999 1998
Occupancy Rate 81% 96%
Average Annual Base
Rent Per Square Foot $6.43 $6.56
Sabal Palm has two tenants which individually occupy ten
percent or more of the rentable square footage. The following is
a summary of the tenant rent roll at December 31, 1999:
Annual Lease
Square Base Expiration Renewal Nature of
Tenant Feet Rent Date Options Business
Winn-Dixie 41,983 $142,406 4/2005 5/5 yrs ea. Food Store
Walgreens 13,000 81,252 4/2025 2/5 yrs ea. Drug Store
Others 28,450 320,143 Various Various
Vacant 5,500 --
88,933 $543,801
Risks of Ownership
The possibility exists that the tenants of the Partnership's
properties may be unable to fulfill their obligations pursuant to
the terms of the leases, including making base rent payments or
percentage rent payments to the Partnership. Such defaults by one
or more of the tenants could have an adverse effect on the
financial situation of the Partnership. Furthermore, the
Partnership may be unable to replace these tenants due to
competition in the market at the time any vacancy occurs.
Additionally, there are costs to the Partnership when replacing
tenants such as leasing commissions and tenant improvements. Such
improvements may require expenditure of Partnership funds otherwise
available for distribution.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5.Market for the Issuer's Limited Partnership Interests
and Related Security Holder Matters.
At December 31, 1999, there were approximately 663 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 in 1999
and 1998.
<PAGE>
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.
Year 2000
The "Year 2000" problem concerned the inability of computer
technology systems to correctly identify and process date sensitive
information beyond December 31, 1999. Many computers
automatically add the "19" prefix to the last two digits the
computer reads for the year when date information is needed in
computer software programs. Thus when a date beginning on January
1, 2000 is entered into a computer, the computer may interpret this
date as the year "1900" rather than "2000".
The computer information technology systems which support the
Partnership consists of a network of personal computers linked to
a server built using hardware and software from mainstream
suppliers. These systems do not have equipment that contains
embedded microprocessors, which may also pose a potential Year 2000
problem. Additionally, there is no internally generated software
coding to correct as all of the software is purchased and licensed
from external providers.
The Partnership utilizes two main software packages that
contain date sensitive information, (i) accounting and (ii)
investor relations. In 1997, a program was initiated and completed
to convert from the existing accounting software to a new software
program that is Year 2000 compliant. In 1998, the investor
relations software was also updated to a new software program that
is Year 2000 compliant. All costs associated with these
conversions were expensed by the Partnership as incurred, and were
not material. Management does not believe that any further
expenditures will be necessary for the systems to be Year 2000
compliant. However, additional personal computers may be purchased
from time to time to replace existing machines.
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 were converted
and will not have an adverse effect on the Partnership.
The Partnership has not experienced any material adverse impact
on its operations or its relationships with tenants, vendors or
others.
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 property sales.
Fortune was required to make a balloon mortgage payment in July
1997 of approximately $934,000. On June 26, 1997, the Partnership
obtained the Replacement Loan in the amount of $875,000 secured by
Fortune, from American National Bank and Trust Company. In
connection with the funding of the Replacement Loan, the
Partnership was required to reduce the outstanding principal
balance of the original mortgage loan by approximately $59,000, out
of cash and cash equivalents, to release the original mortgage loan
and pay loan fees of approximately $33,000. The Replacement Loan
has a floating interest rate based on American National Bank's
prime rate, which at December 31, 1999 was 8.5%. Principal is
being amortized based on a 15-year amortization period and is
payable with interest on a monthly basis. The Replacement Loan has
been extended through June 30, 2000. The occupancy level at
Fortune at December 31, 1999 was 89%, compared to 80% at December
31, 1998.
Raleigh Springs has continued to generate a positive cash flow
despite losing T.J. Maxx, an anchor tenant, which occupied 21% of
the total space. In November 1996, Methodist Hospital entered into
a lease for approximately 9,500 square feet. The remaining space
has been leased to a carpet supplier. The occupancy rate at
Raleigh at December 31, 1999 was 93%, compared to 95% at December
31, 1998.
In November 1992, the Partnership negotiated a modification of
the terms of the mortgage on Raleigh Springs with the lender (the
"Modified Loan"). In October 1992, the interest rate was reduced
from 12.75% to 10.00%. Since November 1992 and through September
1999, principal and interest payments were based on a 25-year
amortization schedule. The Modified Loan capitalized the August,
September and October 1992 mortgage payments with the final payment
due on October 1, 2000. The Partnership is current on its mortgage
payments for the Raleigh Springs loan.
The Strawberry Joint Venture secured a replacement tenant,
Syms, a national discount clothing retailer, to sublease the Kroger
space at Strawberry Fields. Syms opened for business in October
1992 and has signed a sublease for the remainder of the original
lease term which expires March 31, 2005. Customer traffic at
Strawberry Fields has increased with the draw of Syms, making
vacant space more marketable. The Strawberry Joint Venture is
aggressively marketing the property having engaged a prominent
local brokerage firm to assist the Strawberry Joint Venture's on-
site leasing representative in the marketing of the shopping
center. The occupancy rate at Strawberry Fields at December 31,
1999 was 91%, compared to 86% at December 31, 1998.
On September 18, 1995, the Strawberry Joint Venture notified
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 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 the interest rate reverted to the original 9.0%
rate.
Effective October 1, 1998, the Strawberry Joint Venture and the
Strawberry Lender agreed to modify and extend the first mortgage
loan. As of October 1, 1998 and through the extended maturity
date, May 1, 2000, the interest rate was reduced from 9% to 7% with
principal amortization changed from a ten year period to an
eighteen year period.
In the second and fourth quarters of 1998, the Partnership
recorded an impairment of $1,564,101 and $504,935, respectively,
related to other than temporary declines in the value of real
estate for the Strawberry Fields property. These impairments were
allocated to land and building based on the original acquisition
percentages.
Sabal Palm was required to make a balloon mortgage payment in
February 1997. Prior to the scheduled maturity of the First
Mortgage Loan, the lender granted Sabal Palm an extension until
April 1, 1997. On June 30, 1997, Sabal Palm obtained a first
mortgage loan in the amount of $3,200,000 (the "First Mortgage
Loan") secured by its real estate, from NationsBanc Mortgage
Capital Corporation. The First Mortgage Loan bears interest at the
rate of 8.93% per annum, is amortized over a 25-year period,
requires monthly payments of principal and interest of
approximately $26,700 and matures on March 26, 2002. A portion of
the proceeds of the First Mortgage Loan, approximately $3,077,000
was used to retire Sabal Palm's existing mortgage from Lincoln
National Pension Insurance Company.
In the 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. Winn-
Dixie remains liable for rental payments under its lease at Sabal
Palm until April 2005.
Walgreens has not given official notice that they will vacate
the 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.
In the fourth quarter of 1998, Sabal Palm recorded an
impairment of $1,499,958 related to an other than temporary decline
in the value of real estate for Sabal Palm. This impairment has
been allocated to the land and building based on the original
acquisition percentages.
On December 10, 1998, the Partnership received notice that an
unsolicited tender offer to purchase up to 25% of the outstanding
Units was to commence with a tender price of $120 per Unit. The
offer was made, in part, by an entity that owned a nominal economic
interest in the Partnership and to terminated on January 15, 1999.
As a result of this unsolicited tender offer approximately 1,092
economic interests in the Partnership were transferred.
On May 12, 1999, the Partnership received notice that an
unsolicited tender offer to purchase up to approximately 25% of the
outstanding Units was to commence with a tender price of $170 per
Unit. The offer was made, in part, by an entity that owned a
nominal economic interest in the Partnership and expired on June
25, 1999. As a result of this unsolicited tender offer
approximately 551 economic interests in the Partnership were
transferred.
The General Partners remained neutral as to the particular
merits or risks associated with the tender offer. The General
Partners believed an informed determination of the true value of
the Units could be made after the receipt of the appraisals. 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 are primarily interested in
liquidating their Units immediately, the tender offer provided such
an opportunity.
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 will assist the General Partners in
determining the appropriate method and timing for the disposition
of the Partnership's assets.
The General Partners determined to pursue 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 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.
As a result of this 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 a liquidation basis. Accordingly, the carrying value
of the assets is presented at net realizable amounts and all
liabilities are presented at estimated settlement amounts,
including estimated costs associated with carrying out the
liquidation. Preparation of the financial statements on a
liquidation basis requires significant assumptions by management,
including the estimate of liquidation costs and the resolution of
any contingent liabilities. There may be differences between the
assumptions and the actual results because events and circumstances
frequently do not occur as expected. Those differences, if any,
could result in a change in the net assets recorded in the
statement of net assets as of December 31, 1999.
On January 27, 2000, the Partnership executed a contract to
sell Strawberry Fields to an unaffiliated third party in the
approximate amount of $5,430,000 subject to certain due diligence
contingencies. The Partnership anticipates closing this
transaction in the second quarter of 2000. Subsequently, the potential
purchaser rescinded their offer.
The General Partners expect to distribute proceeds from
operating cash flow, if any, and from the sale of real estate to
Limited Partners in a manner that is consistent with the investment
objectives of the Partnership. Management of the Partnership
believes that cash needs may arise from time to time which will
have the effect of reducing distributions to Limited Partners to
amounts less than would be available from refinancing or sale
proceeds. These cash needs include, among other things,
maintenance of working capital reserves in compliance with the
Agreement as well as payments for major repairs, tenant
improvements and leasing commissions in support of real estate
operations.
Results of Operations
The Partnership's revenue and expenses are affected primarily
by the operations of the properties. Property operations, and in
particular the components of income, demand for space and rental
rates are, to a large extent, determined by local and national
market conditions.
These conditions have generally adversely impacted the
Partnership's property economics. The specific impact of these
economic conditions on 1999 and 1998 results are discussed in the
section "Results of Operations January 1, 1999 to July 12, 1999 and
the year ended December 31, 1998", below.
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 period from January 1, 1999 to July
12, 1999 and the year ended December 31, 1998
As a result of the July 12, 1999 authorization by a majority of
the Limited Partners to sell all of the Partnership's existing
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 a liquidation basis.
Prior to the adoption of the liquidation basis of accounting,
the Partnership recorded rental income on a straight line basis
over the life of the related leases. Differences between rental
income earned and amounts due per the respective lease agreements
were credited or charged, as applicable, to deferred rent
receivable. Upon adoption of the liquidation basis of accounting,
the Partnership wrote off the remaining deferred rent receivable
and ceased recording credits or charges to rental income to reflect
straight lining of the related leases.
Additionally, prior to the adoption of the liquidation basis of
accounting depreciation was recorded on a straight line basis over
the estimated economic lives of the properties. Upon the adoption
of the liquidation basis of accounting, real estate held for sale
was adjusted to estimated net realizable value and no depreciation
expense has been recorded.
Results of Operations - 1998 Compared to 1997
(Amounts rounded to nearest 000's)
The Partnership generated a net loss of $2,022,000 for the year
ended December 31, 1998 as compared to net loss of $119,000 for the
same period in 1997. The $1,903,000 increase in net loss resulted
primarily from a $80,000 decrease in total income, a $1,992,000
increase in total expenses and a $678,000 decrease in the share of
Sabal Palm's income. Partially offsetting these items was a
$848,000 increase in the minority interest's share of the
Strawberry Fields loss.
Total income for the year ended December 31, 1998 was
$2,116,000 as compared to $2,196,000 for the same period in 1997,
a decrease of $80,000. The $80,000 decrease resulted primarily
from a decrease in rental income which is related to a slightly
lower average occupancy for the year ended December 31, 1998 when
compared to the period ended December 31, 1997.
For the year ended December 31, 1998, total expenses were
$4,361,000 as compared to $2,368,000 for the same period in 1997,
an increase of $1,993,000. The increase in total expenses is
primarily a result of increases in the provision for impairment and
interest expense. The provision for impairment at Strawberry
Fields was $2,069,000 for 1998 compared to $0 for 1997, an increase
of $2,069,000. Interest expense was $1,036,000 for 1998 compared
to $1,000,000 for 1997, an increase of $36,000. This increase was
caused primarily by the increase in the interest rate at Fortune
from 3% to 8.5% during the first ten months of 1998. In addition,
interest expense also increased as a result of the interest rate
for Strawberry's mortgage loan reverting to 9% from 7.5% in
November 1997 and through September 1998. General and
administrative expenses were $310,000 for 1998 compared to $371,000
for 1997, a decrease of $61,000. This decrease was due primarily
to a decrease in bad debt and property insurance expenses.
Item 7. 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.
None.
<PAGE>
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 66) 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 39) 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 a manager of Brauvin Real Estate Funds, L.L.C.,
Brauvin Capital Trust, L.L.C. and BA/Brauvin L.L.C. 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 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 33) 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 Associates, Inc., Brauvin Management Company, Brauvin
Financial, Inc., Brauvin Securities, Inc. and Brauvin Net Lease V,
Inc. He is the treasurer, chief financial officer and secretary of
Brauvin Capital Trust, Inc. He is responsible for the Partnership's
accounting and financial reporting to regulatory agencies. He
joined the Brauvin organization in July 1994. Prior to joining the
Brauvin organization he was in the accounting department of
Zell/Merrill Lynch and First Capital Real Estate Funds where he was
responsible for the preparation of the accounting and financial
reporting for several real estate limited partnerships and
corporations. Mr. Murphy received a B.S. in Accounting from
Northern Illinois University in 1988. Mr. Murphy is a Certified
Public Accountant and is a member of the Illinois Certified Public
Accountants Society.
Item 10. Executive Compensation.
(a & b) The Partnership is required to pay certain fees, make
distributions and allocate a share of the profits and losses of the
Partnership to the Corporate General Partner as described under the
caption "Compensation Table" on pages 10 to 12 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-12 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 an allocation of the Partnership's
net loss for 1999 and 1998.
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 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,
as described in the section of the Partnership's Prospectus, as
supplemented, entitled "Compensation Table" and "Conflicts of
Interest" at pages 10 to 15 and the section of the Agreement
entitled "Rights, Duties and Obligations of General Partners" at
pages A-14 to A-17. The relationship of the Corporate General
Partner to its affiliates is set forth in Item 9. 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 for a summary of transactions with affiliates.
(c) Not applicable.
(d) There have been no transactions with promoters.
Item 13. Exhibits, Consolidated Financial Statements and Reports
on Form 8-K.
(a) The following documents are filed as part of this report:
(1) (2) Consolidated Financial Statements. (See Index to
Consolidated Financial Statements filed with this
annual report).
(3) Exhibits required by the Securities and Exchange
Commission Regulation S-B Item 601:
Exhibit No. Description
*3.(a) Restated Limited Partnership
Agreement
*3.(b) Articles of Incorporation of Brauvin
Ventures, Inc.
*3.(c) By-Laws of Brauvin Ventures, Inc.
*3.(d) Amendment to the Certificate of
Limited Partnership of the
Partnership
*10.(a) Escrow Agreement
*10.(b)(1) Management Agreement
21. Subsidiaries of the registrant
27. Financial Data Schedule
*28. Pages 10-15, A-9 to A-12 and A-14 to
A-17 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. 2-88609) 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 1999 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. 4
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: March 30, 2000
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report . . . . . . . . . . . . . F-2
Consolidated Statement of Net Assets in Liquidation
as of December 31, 1999 . . . . . . . . . . . . . . . . . F-3
Consolidated Statement of Changes in Net Assets
in Liquidation (Liquidation Basis) for the period
July 12, 1999 to December 31, 1999 . . . . . . . . . . . . F-4
Consolidated Statements of Operations July 13, 1999 to
December 31, 1999 (Liquidation Basis), January 1, 1999
to July 12, 1999 (Going Concern Basis) and year ended
December 31, 1998 . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Partners' Capital, for
the period January 1, 1999 to July 12, 1999
and the year ended December 31, 1998 . . . . . . . . . F-6
Consolidated Statement of Cash Flows for the year ended
December 31, 1998 . . . . . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . F-8
All other schedules provided for in Item 13 (a) of Form 10-KSB are
either not required, not applicable, or immaterial.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Brauvin Real Estate Fund L.P. 4
We have audited the accompanying financial statements as of
December 31, 1999, and for the years ended December 31, 1999 and
1998 as listed in the index to consolidated financial statements.
These consolidated financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. 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, such consolidated financial statements present
fairly, in all material respects, the financial position of Brauvin
Real Estate Fund L.P. 4 and subsidiary at December 31, 1999, and
the results of their operations for the years ended December 31,
1999 and 1998 and their cash flows for the year ended December 31,
1998 in conformity with generally accepted accounting principles.
As discussed in Notes 1 and 2 to the consolidated financial
statements, on July 12, 1999 the Partnership received approval by
the Partners to sell substantially all of its assets. As a
result, the Partnership changed its basis of accounting from the
going concern basis to the liquidation basis.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 16, 2000
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
DECEMBER 31, 1999
ASSETS
Real estate held for sale $13,487,250
Investment in Sabal
Joint Venture (Note 7) 32,548
Cash and cash equivalents 1,035,498
Tenant Receivables 99,101
Escrow deposits 7,162
Other assets 21,337
Total Assets 14,682,896
LIABILITIES
Mortgage notes payable (Note 4) 10,691,461
Accounts payable and accrued expenses 221,092
Deferred gain on sale of real estate (Note 2) 1,656,422
Reserve for estimated costs during
the period of liquidation (Note 2) 189,875
Tenant security deposits 67,366
Due to affiliates 42,719
Total Liabilities 12,868,935
MINORITY INTEREST IN
STRAWBERRY JOINT VENTURE (296,480)
Net Assets in Liquidation $ 2,110,441
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS) FOR THE PERIOD
July 12, 1999 to December 31, 1999
Net assets at July 12, 1999 $2,270,262
(Going Concern Basis)
Income from operations 47,478
Adjustment to liquidation basis (207,299)
Net assets in liquidation at
December 31, 1999 $2,110,441
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Liquidation (Going Concern (Going
Basis) Basis) Concern Basis)
July 13, 1999 January 1, For the
to 1999 to year ended
December 31,1999 July 12,1999 December 31,1998
INCOME
Rental (Note 6) $ 811,679 $1,124,439 $ 1,810,474
Interest 16,558 19,432 32,897
Other, primarily
expense reimbursements 41,739 207,038 272,390
Total income 869,976 1,350,909 2,115,761
EXPENSES
Interest 383,631 538,962 1,036,329
Depreciation -- 239,233 413,739
Real estate taxes 120,187 145,635 247,535
Repairs and maintenance 29,021 33,680 52,232
Management fees (Note 5) 49,063 77,431 122,181
Other property operating 50,809 59,969 109,212
Impairment -- -- 2,069,036
General and administrative 108,026 191,511 310,483
Total expenses 740,737 1,286,421 4,360,747
Income(loss) before minority
and equity interests
in joint ventures 129,239 64,488 (2,244,986)
Minority interest's
share of Strawberry Joint
Venture's net(income)loss (32,203) (23,937) 888,836
Equity interest in Sabal
Palm Joint Venture's
net income (loss) (49,558) 26,189 (665,743)
Income (loss) before adjustment
to liquidation basis 47,478 66,740 (2,021,893)
Adjustment to liquidation
basis (207,299) -- --
Net (loss) income $(159,821) $ 66,740 $(2,021,893)
Net (loss) income allocated to:
General Partners $ (1,598) $ 667 $ (20,219)
Limited Partners $(158,223) $ 66,073 $(2,001,674)
Net (loss) income per Limited
Partnership Interest (9,550
units outstanding) $ (16.57) $ 6.92 $ (209.60)
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the period January 1, 1999 to July 12, 1999 and the year
ended December 31, 1998
General Limited
Partners Partners* Total
Balance, January 1, 1998 $(17,949) $4,243,364 $4,225,415
Net loss from
operations (20,219) (2,001,674) (2,021,893)
Balance, December 31, 1998 (38,168) 2,241,690 2,203,522
Net income from
operations 667 66,073 66,740
Balance, July 12, 1999 $(37,501) $2,307,763 $2,270,262
* Total Units outstanding at July 12, 1999 and December 31, 1998
were 9,550.
In connection with the July 12, 1999 authorization of the Limited
Partners to sell the Partnership's assets, the Partnership adopted
the liquidation basis of accounting as explained in Notes 1 and 2.
The presentation format used in 1998 is, therefore, no longer
applicable. The effect of the change in adopting the liquidation
basis is reflected in the Consolidated Statement of Changes in Net
Assets in Liquidation.
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS
For the for the year ended December 31, 1998
Cash Flows From Operating Activities:
Net loss $(2,021,893)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation 413,739
Provision for doubtful accounts 54,473
Minority interest's share of Strawberry
Joint Venture's net loss (888,836)
Equity interest in Sabal Palm
Joint Venture net loss 665,743
Provision for impairment 2,069,036
Changes in:
Rent receivable (69,311)
Escrow deposits (7,640)
Other assets 25,110
Accounts payable and
accrued expenses (31,042)
Tenant security deposits 21,503
Due to affiliates (1,410)
Net cash provided by
operating activities 229,472
Cash Flows From Investing Activities:
Capital expenditures (61,484)
Distribution from Sabal Palm Joint
Venture 79,900
Net cash provided by
investing activities 18,416
Cash Flows From Financing Activities:
Repayment of mortgage notes payable (336,505)
Net cash used in financing activities (336,505)
Net decrease in cash and
cash equivalents (88,617)
Cash and cash equivalents at
beginning of year 841,230
Cash and cash equivalents at
end of year $ 752,613
Supplemental disclosure of
cash flow information:
Cash paid for interest $1,022,456
See accompanying notes to consolidated financial statements
<PAGE>
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Brauvin Real Estate Fund L.P. 4 (the "Partnership") is a
Delaware limited partnership organized for the purpose of
acquiring, operating, holding for investment and disposing of
existing office buildings, medical office centers, shopping centers
and industrial and retail commercial buildings of a general purpose
nature, all in metropolitan areas. The General Partners of the
Partnership are Brauvin Ventures, Inc. and Jerome J. Brault. Mr.
Cezar M. Froelich resigned as a director of the corporate general
partner in December 1994, and 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 April 30, 1984 and filed a
Registration Statement on Form S-11 with the Securities and
Exchange Commission which became effective on February 16, 1984.
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 April 30, 1984.
The Partnership's offering closed on December 31, 1984. A total of
$9,550,000 of Units were subscribed and issued between February 16,
1984 and December 31, 1984 pursuant to the Partnership's public
offering.
The Partnership has acquired directly or through joint ventures
the land and buildings underlying Fortune Professional Building,
Raleigh Springs Marketplace, Strawberry Fields Shopping Center and
Sabal Palm Shopping Center.
<PAGE>
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 a liquidation basis. Accordingly, the carrying
value of the assets is presented at net realizable amounts and all
liabilities are presented at estimated settlement amounts,
including estimated costs associated with carrying out the
liquidation. Preparation of the financial statements on a
liquidation basis requires significant assumptions by management,
including the estimate of liquidation costs and the resolution of
any contingent liabilities. There may be differences between the
assumptions and the actual results because events and circumstances
frequently do not occur as expected. Those differences, if any,
could result in a change in the net assets recorded in the
statement of net assets as of December 31, 1999.
Accounting Method
The accompanying consolidated financial statements have been
prepared using the accrual method of accounting.
Rental Income
Prior to the presentation of the financial statements on the
liquidation basis, rental income was 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 were 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 58% equity interest in an affiliated
joint venture ("Strawberry Joint Venture") which acquired
Strawberry Fields Shopping Center ("Strawberry Fields"). The
accompanying consolidated financial statements have consolidated
100% of the assets, liabilities, operations and partners' capital
of Strawberry Joint Venture. The minority interest in the
consolidated joint venture is adjusted for the joint venture
partner's share of income or loss and any cash contributions or
cash disbursements from the joint venture partner, Brauvin Real
Estate Fund L.P. 5 ("BREF 5"). All intercompany items and
transactions have been eliminated.
Investment in Joint Venture Partnership
The Partnership owns a 47% equity interest in Sabal Palm Joint
Venture (see Note 7). Sabal Palm is reported as an investment in
an affiliated joint venture. The accompanying financial statements
include the investment in Sabal Palm Joint Venture at estimated net
realizable value using the equity method of accounting.
Investment in Real Estate
Prior to the preparation of the financial statements on a
liquidation basis, the operating properties acquired by the
Partnership were stated at cost including acquisition costs,
leasing commissions, tenant improvements and net of impairment.
Depreciation and amortization were recorded on a straight-line
basis over the estimated economic lives of the properties, which
approximate 38 years, and the term of the applicable leases,
respectively. All of the Partnership's properties are subject to
liens under first mortgages (see Note 4).
Subsequent to the adoption of the liquidation basis of
accounting, the Partnership adjusted its investments 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.
Prior to the adoption of the liquidation basis of accounting,
the Partnership recorded impairments to reduce the cost basis of
real estate to its estimated fair value when the real estate is
judged to have suffered an impairment that is other than temporary.
The Partnership has performed an analysis of its long-lived assets,
and the Partnership's management determined that there were no
events or changes in circumstances that indicated that the carrying
amount of the assets may not be recoverable at December 31, 1998,
except as disclosed below.
In the second and fourth quarters of 1998, the Partnership
recorded an impairment of $1,564,101 and $504,935, respectively,
related to an other than temporary decline in the value of real
estate for the Strawberry Fields property. These impairments have
been allocated to land and building based on the original
acquisition percentages.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt
instruments with an original maturity within three months from date
of purchase.
Estimated Fair Value of Financial Instruments
Disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments". The estimated fair value amounts
have been determined by using available market information and
appropriate valuation methodologies. However, considerable
judgement is necessarily required in interpreting market data to
develop estimates of fair value.
The fair value estimates presented herein are based on
information available to management as of December 31, 1999 and
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.
In connection with the adoption of the liquidation basis of
accounting, which approximates fair value at December 31, 1999,
(Note 2), assets were adjusted to net realizable value, and
liabilities were adjusted to estimated settlement amounts.
(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. The net adjustment required to convert from the going
concern (historical cost) basis to the liquidation basis of
accounting was a decrease in assets of $207,299 which is included
in the December 31, 1999 statement of changes in net assets in
liquidation. Significant changes in the carrying value of assets
and liabilities are summarized as follows:
Increase in real estate held for sale (a) $1,656,422
Decrease in value of real estate (1,524)
Write-off of deferred rent receivable (14,240)
Write-off of mortgage points (1,660)
Increase in deferred gain on sale
of real estate (1,656,422)
Estimated liquidation costs (189,875)
Total adjustment to liquidation basis $(207,299)
(a) Net of estimated closing costs.
(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 in accordance with paragraph 2,
SECTION K of 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 (the "Preferential Distribution"), as
such term is defined in the Agreement. 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 year, then the Limited Partners shall be paid
such excess Operating Cash Flow until they have been 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.
At December 31, 1999, the Preferential Distribution Deficiency
equaled $12,546,315.
(4) MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1999 consist of the
following:
Interest Date
1999 Rate Due
Raleigh Springs
Marketplace $ 4,668,932 (a)10% 10/00
Fortune Professional
Building 729,140 (b)8.5% 06/00
Strawberry Fields
Shopping Center 5,293,389 (c)7% 05/00
$10,691,461
Raleigh Springs Marketplace, Fortune Office Building and
Strawberry Fields serve as collateral under the respective
nonrecourse debt obligations.
(a) Monthly principal and interest payments are based on a 25-
year amortization schedule.
The carrying value of Raleigh at December 31, 1999 was
approximately $6,611,500.
(b) Prior to June 26, 1997, the Partnership made monthly
payments of interest and principal payments based upon a: (i) 25-
year amortization schedule plus 100% of Available Cash Flow from
July 1, 1992 through June 1, 1993; and (ii) 15-year amortization
schedule plus 50% of Available Cash Flow from July 1, 1993 through
July 1, 1997.
The lender had the option to accelerate the loan maturity July
1 of each year, if the property was not: (i) in good condition and
repair; (ii) occupied at a rate that is equal to the prevailing
occupancy rate for similar properties in the same locale; and (iii)
leased at rental rates which are at least 90% of the prevailing
rate for similar properties in the same locale. The Partnership
was required to make a balloon mortgage payment in July 1997 of
approximately $934,000.
On June 26, 1997, the Partnership obtained a first mortgage
loan in the amount of $875,000 secured by Fortune, from American
National Bank and Trust Company (the "Replacement Loan"). In
connection with the funding of the Replacement Loan, the
Partnership was required to reduce the principal balance of the
original loan by approximately $59,000, out of cash and cash
equivalents, to release the original mortgage loan and pay loan
fees of approximately $33,000. The Replacement Loan has a floating
interest rate based on American National Bank's prime rate, which
at December 31, 1999 was 8.5%. Principal is being amortized based
on a 15-year amortization period and is payable with interest on a
monthly basis. As of December 31, 1999, the Partnership was in
violation of the debt service coverage ratio. Subsequent to the
year end, the Partnership received a waiver of this covenant
violation from the mortgage lender for the period ended December
31, 1999.
The carrying value of Fortune at December 31, 1999 was
approximately $1,600,000.
(c) In February 1993, the Partnership and Strawberry Joint
Venture, finalized a refinancing of the first mortgage loan (the
"Refinancing") on Strawberry Fields with the lender. The
Refinancing became effective retroactive to October 1992. Due to
the Refinancing, the interest rate was reduced to 9% with monthly
payments of interest only from October 1992 through November 1995.
The Strawberry Joint Venture had the option to extend the term of
the loan and make monthly payments of principal and interest from
December 1995 through November 1998, if it is not in default of the
terms of the Refinancing. On September 18, 1995, the Strawberry
Joint Venture notified 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 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. Commencing November 1,
1997 the interest rate reverted to the original 9.0% rate.
Effective October 1, 1998, the Strawberry Joint Venture and the
Strawberry Lender agreed to modify and extend the first mortgage
loan. As of October 1, 1998 and through the extended maturity
date, May 1,2000, the interest rate has been reduced from 9% to 7%
with principal amortization changed from a ten year period to an
eighteen year period.
The carrying value of Strawberry Fields at December 31, 1999
was approximately $5,275,750.
The Partnership is required to make balloon mortgage payments
for Raleigh Springs Marketplace in the amount of approximately
$4,595,000 on October 1, 2000, Fortune Office Building in the
amount of approximately $704,800 on June 30, 2000 and for
Strawberry Fields in the amount of approximately $5,237,200 on May
1, 2000.
(5) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid or payable to the General Partners
or their affiliates for the years ended December 31, 1999 and 1998
were as follows:
1999 1998
Management fees $118,576 $122,181
Reimbursable office expenses 118,624 112,500
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 $7,019 for management fees, as of
December 31, 1999. An amount of $35,700 was due to an affiliate at
December 31, 1999, representing an advance made from BREF 5.
(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:
Year ended December 31,
2000 2,015,149
2001 1,308,283
2002 927,557
2003 782,122
2004 672,204
Thereafter 2,954,275
Total $8,659,590
Collection of future rental income under these lease agreements
is subject to the financial stability of the underlying tenants.
Rental income received from Toys "R" Us at Raleigh and Florida
Choice (including the Syms sublease) at Strawberry Fields
approximate 11.2% and 19.6%, respectively, of rental income for the
Partnership for the year ended December 31, 1999. Rental income
received from Toys "R" Us at Raleigh and Florida Choice (including
the Syms sublease) at Strawberry Fields approximate 12.1% and
21.0%, respectively, of rental income of the Partnership for the
year ended December 31, 1998.
<PAGE>
(7) EQUITY INVESTMENT
The Partnership owns a 47% interest in Sabal Palm Joint Venture
("Sabal Palm") and accounts for its investment under the equity
method. The following are condensed financial statements for Sabal
Palm:
Liquidation Basis
December 31,
1999
Real estate held for sale $3,150,250
Other assets 96,273
3,246,523
Mortgage note payable 3,108,455
Other liabilities 65,146
3,173,601
Net Assets in liquidation $ 72,922
Liquidation Basis Going Concern Bais
July 12, 1999 January 1, 1999 January 1, 1998
to to to
December 31, 1999 July 12, 1999 December 31, 1998
Rental income $212,844 $456,740 $ 690,779
Other income (1,664) 52,694 71,363
211,180 509,434 762,142
Mortgage and
other interest 118,956 173,479 302,382
Depreciation -- 61,065 128,662
Impairment 12,414 -- 1,499,958
Operating and
administrative expenses 136,085 219,169 247,614
267,455 453,713 2,178,616
Income (loss)before adjustment
to liquidation basis (56,275) 55,721 (1,416,474)
Adjustment to liquidation
basis (49,167) - --
Net income(loss) $(105,442) $ 55,721 $(1,416,474)
Sabal Palm was required to make a balloon mortgage payment in
February 1997. Prior to the scheduled maturity of the First
Mortgage Loan, the lender granted Sabal Palm an extension until
April 1, 1997. On June 30, 1997, Sabal Palm obtained a first
mortgage loan in the amount of $3,200,000 (the "First Mortgage
Loan") secured by its real estate, from NationsBanc Mortgage
Capital Corporation. The First Mortgage Loan bears interest at the
rate of 8.93% per annum, is amortized over a 25-year period,
requires monthly payments of principal and interest of
approximately $26,700 and matures on March 26, 2002. A portion of
the proceeds of the First Mortgage Loan, approximately $3,077,000,
was used to retire Sabal Palm's existing mortgage from Lincoln
National Pension Insurance Company.
In the 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. Winn-
Dixie remains liable for rental payments under its lease at Sabal
Palm until April 2005.
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.
In the fourth quarter of 1998, Sabal Palm recorded an impairment
of $1,499,958 related to an other than temporary decline in the
value of real estate for the Sabal Palm property. This impairment
was allocated to the land and building based on the original
acquisition percentages.
<PAGE>
EXHIBIT INDEX
Exhibit (21) Subsidiaries of the Registrant
Exhibit (27) Financial Data Schedule
<PAGE>
Exhibit 21
Name of Subsidiary State of Formation
Brauvin Strawberry Fields
Joint Venture Florida
Brauvin Sabal Palm Joint Venture Florida
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,035,498
<SECURITIES> 32,548 <F1>
<RECEIVABLES> 99,101
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 13,487,250 <F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,682,896
<CURRENT-LIABILITIES> 0
<BONDS> 10,691,461 <F3>
0
0
<COMMON> 0 <F4>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 2,220,885 <F5>
<CGS> 0
<TOTAL-COSTS> 1,104,565 <F6>
<OTHER-EXPENSES> 79,509 <F7>
<LOSS-PROVISION> 207,299
<INTEREST-EXPENSE> 922,593
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93,081)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> "SECURITIES" REPRESENTS INVESTMENT IN JOINT VENTURE
<F2> "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND
BUILDING]
<F3> "BONDS" REPRESENTS MORTGAGES PAYABLE
<F4> "COMMON" REPRESENTS TOTAL PARTNERS' CAPITAL
<F5> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F6> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES LESS INTEREST
<F7> "OTHER EXPENSES" REPRESENTS EQUITY AND MINORITY INTEREST
IN JOINT VENTURES' NET INCOME/LOSS
</FN>
</TABLE>
