<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1996
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 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 preceding 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 .
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year $1,519,604.
The aggregate sales price of the limited partnership interests of
the issuer (the "Units") to unaffiliated investors of the issuer
was $9,914,500. This does not reflect market value. This is the
price at which the Units were sold to the public. There is no
current established trading market for these Units, nor have any
Units been sold within the last 60 days prior to this filing.
Portions of the Prospectus of the registrant dated March 1, 1985,
as supplemented, and filed pursuant to Rule 424(b) and 424(c)under
the Securities Act of 1933, as amended, are incorporated by
reference into Parts II and III of this Annual Report on Form
10-KSB.
BRAUVIN REAL ESTATE FUND L.P. 5
1996 FORM 10-KSB ANNUAL REPORT
INDEX
PART I
Page
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . 3
Item 2. Description of Properties. . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .13
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .13
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 . . . . . . . . . . . . . . . . . . . . . . . .14
Item 7. Financial Statements and Supplementary Data. . . . . . . . .21
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . .21
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act. . . . . . . . . . . . . . . . . . . . .22
Item 10. Executive Compensation . . . . . . . . . . . . . . . . . . 24
Item 11. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . .25
Item 12. Certain Relationships and Related Transactions . . . . . . .25
Item 13. Exhibits, Consolidated Financial Statements and
Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . .27
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
PART I
Item 1. Description of Business.
Brauvin Real Estate Fund L.P. 5 (the "Partnership") is a Delaware
limited partnership formed in 1985 whose business has been devoted
exclusively to acquiring, operating, holding for investment and
disposing of existing office buildings, shopping centers and
industrial and retail commercial buildings, all in greater
metropolitan areas.
The General Partners originally intended to dispose of the
Partnership's properties approximately five to eight years after
acquisition of each property, with a view toward liquidation of the
Partnership. Due to current real estate market conditions and
economic trends the General Partners instead believe it to be in
the best interest of the Partnership to retain the properties until
such time as the General Partners reasonably believe it is
appropriate to dispose of the Partnership's properties. In order
to make this determination, the General Partners periodically
evaluate market conditions. However, since the amended and
restated limited partnership agreement (the "Agreement") provides
that the Partnership shall terminate December 31, 2025, unless
sooner terminated, the General Partners shall in no event dispose
of the properties after that date.
As of December 31, 1995, the Partnership had acquired one rental
property, a 42% interest in a joint venture which acquired a second
rental property and a 53% interest in a joint venture which
acquired a third rental property. A fourth rental property which
the Partnership had acquired a 54% interest in a joint venture was
foreclosed upon on May 15, 1995 and the joint venture was
terminated and dissolved in 1996. The Partnership will not
purchase any additional properties. Operations currently consist
of operating the real estate properties which have been managed by
Brauvin Management Company (an affiliate of the General Partners).
The focus of property management activities has been improvement in
the economic performance of the properties with the goal of
maximizing value to the Partnership upon disposition.
The Partnership has no employees.
Market Conditions/Competition
The Partnership faces active competition in all aspects of its
business and must compete with entities which own properties
similar in type to those owned by the Partnership. Competition
exists in such areas as attracting and retaining creditworthy
tenants, financing capital improvements and eventually selling
properties. Many of the factors affecting the ability of the
Partnership to compete are beyond the Partnership's control, such
as softened markets caused by an oversupply of similar rental
facilities, declining performance in the economy in which a
property is located, population shifts, reduced availability and
increased cost of financing, changes in zoning laws or changes in
patterns of the needs of users. The marketability of the
properties may also be affected by prevailing interest rates and
existing tax laws. The Partnership may be required to retain
ownership of its properties for periods shorter or longer than
anticipated at acquisition or it may refinance, sell or otherwise
dispose of certain properties at times or on terms and conditions
that are less advantageous than would otherwise be the case if such
unfavorable economic or market conditions did not exist.
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. Non-anchor tenant average rental rates,
expressed per square foot per year, have increased at the Crown
Point property located in Kingsport, Tennessee, from approximately
$8.90 per square foot in 1993 to approximately $10.30 per square
foot in 1996. However, the Partnership has not benefitted greatly
from these increases due to the existence of several leases that
were negotiated in prior years. The average rental rates for non-
anchor tenants at Sabal Palm in Palm Bay, Florida have declined
from approximately $13.71 per square foot in 1993 to approximately
$11.73 per square foot in 1996. Similarly, the average rental
rates for non-anchor tenants at Strawberry Fields in West Palm
Beach, Florida have declined from approximately $12.21 per square
foot in 1993 to approximately $7.60 per square foot in 1996.
The Partnership, by virtue of its ownership of real estate, is
subject to federal and state laws and regulations covering various
environmental issues. Management of the Partnership retains the
services of third parties who hold themselves out to be experts in
the field to assess a wide range of environmental issues and
conduct tests for environmental contamination. Management believes
that all real estate owned by the Partnership is in full compliance
with applicable environmental laws and regulations.
Item 2. Description of Properties.
The following is a discussion of the rental properties owned and
operated by the Partnership. For the purpose of the information
disclosed in this section, the following terms are defined as
follows:
Occupancy Rate: The occupancy rate is defined as the occupied
square footage at December 31, divided by the total square
footage excluding square footage of outparcels, if any.
Average Annual Base Rent Per Square Foot: The average annual
base rent per square foot is defined as the total effective base
rental income for the year divided by the average square feet
occupied excluding outparcels, if any.
Average Square Feet Occupied: The average square feet occupied
is calculated by averaging the occupied square feet at the
beginning of the year with the occupied square feet at the end
of the year excluding outparcels, if any.
In the opinion of the General Partners, the Partnership has
provided for adequate insurance coverage of its real estate
investment properties.
During the year ended December 31, 1996, the Partnership owned
the properties described below:
(a) Crown Point Shopping Center ("Crown Point")
On September 12, 1985, the Partnership acquired Crown Point, an
approximately 71,500 square foot shopping center located in
Kingsport, Sullivan County, Tennessee. Crown Point is composed of
a main building, constructed in two phases, and two outparcel
buildings of approximately 6,500 square feet. Phase I of Crown
Point and one outparcel building were completed in 1984. Phase II
of Crown Point and the other outparcel building were completed in
1985. The anchor tenant is a Food City grocery. Burger King, a
division of Grand Metropolitan PLC, is located on one of the
outparcel buildings which is also owned by the Partnership. Crown
Point was 98% occupied at December 31, 1996.
The Partnership purchased Crown Point for $5,341,696 consisting
of approximately $1,775,000 paid in cash at closing and the balance
by assuming an existing first mortgage loan of $3,566,696. The
lender provided the first mortgage loan through the sale of tax-
exempt bonds. The loan had a 30-year term and bore interest at the
rate of 9.69% per annum. The lender had the option to call this
loan on December 1, 1994 or on any subsequent fifth anniversary
thereof. On November 22, 1994, NationsBank of Tennessee, (the
"Lender") exercised the right to call all amounts due as of March
1, 1995. On March 1, 1995, a Forbearance Agreement was executed
between the Partnership and the Lender where the Lender agreed to
forbear from pursuing remedies with respect to defaults through and
including September 1, 1995 (the "First Forbearance Period").
During the First Forbearance Period the terms and conditions of the
mortgage remained unchanged. Effective September 1, 1995, the
Lender agreed to further forebear from pursuing remedies with
respect to defaults through and including December 1, 1995 (the
"Second Forbearance Period"). During the Second Forbearance Period
the terms and conditions of the mortgage also remained unchanged.
Subsequent to December 1, 1995, the Lender verbally agreed to
forebear from pursuing remedies with respect to defaults through
December 31, 1995 in light of the ongoing refinancing negotiations
with NationsBanc Mortgage Capital Corporation, a Texas corporation
with principal offices in Charlotte, North Carolina. On December
28, 1995, the loan balance was paid in full when Crown Point was
refinanced with NationsBanc Mortgage Capital Corporation. The
refinancing resulted in a $3,275,000 non-recourse loan with a fixed
interest rate of 7.55%. The outstanding mortgage balance encumbered
by the property is $3,208,267 at December 31, 1996. The outstanding
mortgage balance is currently being amortized based on a twenty
year term and has a maturity of January 1, 2003.
The occupancy rate and average annual base rent per square foot
at December 31, 1996 and 1995 are as follows:
1996 1995
Occupancy Rate 98% 98%
Average Annual Base
Rent Per Square Foot $ 7.19 $ 6.73
Crown Point 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, 1996:
Annual Lease
Square Base Expiration Renewal Nature of
Tenant Feet Rent Date Options Business
Food City 39,652 $257,738 8/2004 5/5 yrs ea. Food Store
Contel
Cellular 12,800 64,000 8/99 None Telecom-
munication
Services
Others 17,800 183,380 Various Various
Vacant 1,200 --
71,452 $505,118
(b) Strawberry Fields Shopping Center ("Strawberry Fields")
On December 12, 1985, the Partnership and Brauvin Real Estate
Fund L.P. 4 ("BREF 4"), an affiliated public real estate limited
partnership, formed a joint venture (the "Strawberry Joint
Venture") to purchase Strawberry Fields located in West Palm Beach,
Florida for $9,875,000. The Partnership has a 42% interest in the
joint venture which owns Strawberry Fields and BREF 4 has a 58%
interest in the joint venture which owns Strawberry Fields. The
purchase was funded with $3,875,000 cash at closing and $6,000,000
from the proceeds of a first mortgage loan.
In February 1993, the Strawberry Joint Venture finalized a
refinancing of the first mortgage loan on Strawberry Fields (the
"Refinancing") 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 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. From November 1, 1997 through the maturity date, December
1, 1998, the interest rate will revert to the original 9.0% rate.
The outstanding mortgage balance encumbered by the property is
$5,799,617 at December 31, 1996.
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 101,614 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 PepsiCo, and Flagler National
Bank. Strawberry Fields was 87% occupied at December 31, 1996.
With the exception of Florida Choice, 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, 1996 and 1995 are as follows:
1996 1995
Occupancy Rate 87% 83%
Average Annual Base
Rent Per Square Foot $7.49 $7.47
Strawberry Fields has one tenant which individually occupies ten
percent or more of the rentable square footage. The following is
a summary of the tenant rent roll at December 31, 1996:
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 35,939 273,235 Various Various
Vacant 13,375 --
103,614 $653,335
(1) Includes Syms and Florida Choice base rent.
(c) Sabal Palm Square ("Sabal Palm")
On October 31, 1986, the Partnership and BREF 4 formed a joint
venture to purchase Sabal Palm, a shopping center in Palm Bay,
Florida, for $5,924,000. The Partnership has a 53% interest in the
joint venture which owns Sabal Palm and BREF 4 has a 47% interest
in the joint venture which owns Sabal Palm. The purchase was
funded with $2,724,000 cash at closing and a $3,200,000 interim
loan. On February 19, 1987, the joint venture obtained a first
mortgage loan in the amount of $3,200,000 from an unaffiliated
lender. The loan was payable with interest only at 9.5% per annum
until February 1992 and now requires payments of principal and
interest based on a 30-year amortization schedule. The outstanding
mortgage balance encumbered by the property is $3,084,703 at
December 31, 1996.
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 principle 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.
The Partnership consolidated the Sabal Palm Joint Venture and has
recorded a minority interest balance to recognize the 47% interest
of BREF 4.
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 was 92%
occupied at December 31, 1996.
The occupancy rate and average annual base rental per square foot
at December 31, 1996 and 1995 are as follows:
1996 1995
Occupancy Rate 92% 99%
Average Annual Base
Rental Per Square Foot $6.37 $6.59
Sabal Palm has two tenants which individually occupy ten percent
or more of the net rentable square feet. The following is a
summary of the tenant rent roll at December 31, 1996:
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 27,025 317,042 Various Various
Vacant 6,925 --
88,933 $540,700
Prior to May 1995 the Partnership owned a joint venture interest
in the following:
The Annex of Schaumburg (the "Annex")
On December 31, 1986, the Partnership and Brauvin Income
Properties L.P. 6 ("BIP 6") formed a joint venture (the "Annex
Joint Venture") to purchase the Annex, a shopping center located in
Schaumburg, Illinois, for approximately $8,358,000. The
Partnership had a 54% interest in the Annex Joint Venture and BIP
6 had a 46% interest. The Partnership consolidated the Annex Joint
Venture and recorded a minority interest balance to recognize the
46% interest of BIP 6. The purchase was funded with approximately
$3,158,000 cash at closing and $5,200,000 from the proceeds of an
interim loan.
At the date of acquisition, the Annex was encumbered with an
existing first mortgage loan of approximately $4,356,600, which
bore interest at a rate of 13% per annum. The outstanding
principal balance was due on February 1, 1994. As this loan was
non-prepayable, the joint venture deposited approximately
$4,356,600 with Stewart Title Company (the "Title Company") and
paid a fee of approximately $293,000 to the Title Company in 1986
to service this loan.
On January 31, 1994, the Annex Joint Venture entered into a
Reliance Agreement (the "Agreement") with the Title Company and
agreed to, on behalf of the Title Company, by the lender, John
Hancock Mutual Life Insurance Company: (i) make a $1,000,000
paydown on the loan;(ii) pay the Lender an administrative fee of
1.5% of the loan balance, after the $1,000,000 paydown; and (iii)
issue title insurance as required. As a condition to the Annex
Joint Venture's agreement with the Title Company, the Title Company
agreed to pay the Annex Joint Venture $5,000 per month commencing
February 1, 1994 through January 31, 1995 and $6,000 per month
thereafter. The Title Company also agreed to equally share with
the Annex Joint Venture the 2.5% interest savings after the 1.5%
administrative fee was paid, which the Annex Joint Venture was
expected to have been received upon maturity of the Agreement. In
February 1994, the Title Company paid the Lender the $1,000,000
paydown, as required in the Agreement. In 1995 and 1994, the Annex
received $5,000 and $55,000, respectively, from the Title Company,
which was recorded as a reduction of interest expense on the
property. The remaining amounts due from the Title Company were
offset against amounts owed to the Title Company. The Partnership
will not receive any additional payments under the Agreement.
The revised promissory note payable bore interest at a rate of
10% per annum, with monthly payments of principal and interest
based upon a 30-year amortization schedule of $45,630 commencing
December 1, 1989. The remaining principal balance of approximately
$5,023,000 matured on November 1, 1994. The note was
collateralized by a first mortgage lien on the Annex. Interest
paid approximated $17,700 in 1995.
The Annex Joint Venture did not make its monthly mortgage
payments that were due to AUSA Life Insurance Company, Inc.
("AUSA") on July 1, 1994, August 1, 1994, September 1, 1994 or
October 1, 1994. In addition, the Annex Joint Venture did not
repay the mortgage loan which matured November 1, 1994, at which
time the entire amount of principal and accrued interest became due
and payable. On August 11, 1994, the Annex Joint Venture received
a notice of default from AUSA demanding the payments due July 1,
1994 and August 1, 1994.
On August 23, 1994, the Annex Joint Venture filed a voluntary
petition for bankruptcy (Chapter 11) in the United States
Bankruptcy Court in the Northern District of Illinois. On February
10, 1995, the Bankruptcy Court ordered the dismissal of the
voluntary petition for bankruptcy and AUSA filed a motion for
appointment of a receiver against the Annex Joint Venture. On
February 17, 1995, the motion was granted and an order was issued.
The receiver had full power and authority to operate, manage and
conserve the Annex pursuant to the order. On February 15, 1995,
the Annex Joint Venture received an amended notice of mortgage
foreclosure from AUSA. The Annex Joint Venture did not file an
answer to the amended foreclosure that was due March 17, 1995. On
April 3, 1995, a judgement of foreclosure and sale was entered into
against the Annex Joint Venture. A sheriff's sale of the Annex was
held on May 10, 1995 and on May 15, 1995 title was transferred to
AUSA, in satisfaction of the Partnership's obligation on the
promissory note payable.
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.
On August 23, 1994, the Annex Joint Venture filed a voluntary
petition for bankruptcy (Chapter 11) in the United States
Bankruptcy Court in the Northern District of Illinois. On February
10, 1995, the Bankruptcy Court ordered the dismissal of the
voluntary petition for bankruptcy and AUSA filed a motion for
appointment of a receiver against the Joint Venture. On February
17, 1995, the motion was granted and an order was issued. The
receiver had full power and authority to operate, manage and
conserve the Annex pursuant to the order. On February 15, 1995,
the Joint Venture received an amended notice of mortgage
foreclosure from AUSA. The Joint Venture did not file an answer
to the amended foreclosure that was due on March 17, 1995. On
April 3, 1995, a judgement of foreclosure and sale was entered into
against the Joint Venture. A sheriff's sale of the Annex was held
on May 10, 1995 and on May 15, 1995 title was transferred to AUSA,
in satisfaction of the Partnership's obligation on the promissory
note payable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
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PART II
Item 5. Market for the Issuer's Limited Partnership Interests
and Related Security Holder Matters.
At December 31, 1996, there were 800 Limited Partners in the
Partnership. There is currently no established public trading
market for the Units and it is not anticipated that a public market
for the Units will develop. Bid prices quoted by "partnership
exchanges" vary widely and are not considered a reliable indication
of market value. Neither the Partnership nor Brauvin Ventures,
Inc. (the "Corporate General Partner") will redeem or repurchase
outstanding Units.
Pursuant to the terms of the Agreement, there are restrictions
on the ability of the Limited Partners to transfer their Units. In
all cases, the General Partners must consent to any substitution of
a Limited Partner.
There were no cash distributions to Limited Partners for 1996
and 1995.
Item 6. Management's Discussion and Analysis or Plan of Operation.
General
Certain statements in this Annual Report that are not historical
fact constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Discussions
containing forward-looking statements may be found in this section
and in the section entitled "Description of Business." Without
limiting the foregoing, words such as "anticipates," "expects,"
"intends," "plans" and similar expressions are intended to identify
forward-looking statements. These statements are subject to a
number of risks and uncertainties. Actual results could differ
materially from those projected in the forward-looking statements.
The Partnership undertakes no obligation to update these forward-
looking statements to reflect future events or circumstances.
Liquidity and Capital Resources
The Partnership intends to satisfy its short-term liquidity needs
through cash flow from the properties. Long-term liquidity needs
are expected to be satisfied through refinancing of the mortgages
when they mature.
The anchor tenant at Crown Point is Food City. The overall
occupancy level at Crown Point has remained at 98% at December 31,
1996 and 1995. The Partnership is continuing to work to sustain
the occupancy level of Crown Point.
On November 22, 1994, the lender to Crown Point, NationsBank of
Tennessee (the "Lender") exercised the right to call all amounts
due as of March 1, 1995. On March 1, 1995, a Forbearance Agreement
was executed between the Partnership and the Lender where the
Lender agreed to forbear from pursuing remedies with respect to
defaults through and including September 1, 1995 (the "First
Forbearance Period"). During the First Forbearance Period the
terms and conditions of the mortgage remained unchanged. Effective
September 1, 1995, the Lender agreed to further forebear from
pursuing remedies with respect to defaults through and including
December 1, 1995 (the "Second Forbearance Period"). During the
Second Forbearance Period the terms and conditions of the mortgage
also remained unchanged. Subsequent to December 1, 1995, the
Lender verbally agreed to forebear from pursuing remedies with
respect to defaults through December 31, 1995 in light of the
ongoing refinancing negotiations with NationsBanc Mortgage
Corporation, a Texas corporation with principal offices in
Charlotte, North Carolina. On December 28, 1995, the loan balance
was paid in full when Crown Point was refinanced with NationsBanc
Mortgage Capital Corporation. The refinancing resulted in a
$3,275,000 non-recourse loan with a fixed interest rate of 7.55%
and a maturity of January 1, 2003.
The 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. Strawberry Fields generated positive operating
cash flow in 1996 compared to negative operating cash flow in 1995.
The property has shown an improvement due to the occupancy increase
from 78% at December 31, 1994 to 87% at December 31, 1996. 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.
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
and through the maturity date, December 1, 1998, the interest rate
will revert to the original 9.0% rate.
At Sabal Palm, the Partnership and its joint venture partner are
working to improve the occupancy level of Sabal Palm which stood at
92% as of December 31, 1996. Although the Sabal Palm retail market
appears to be overbuilt, the property has continued to generate
positive cash flow since its acquisition in 1986.
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 principle 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.
The Annex Joint Venture did not make its monthly mortgage
payments that were due to AUSA on July 1, 1994, August 1, 1994,
September 1, 1994 or October 1, 1994. In addition, the Annex Joint
Venture did not repay the mortgage loan which matured November 1,
1994, at which time the entire amount of principal and accrued
interest became due and payable. On August 11, 1994, the Annex
Joint Venture received a notice of default from AUSA demanding the
payments due July 1, 1994 and August 1, 1994.
On August 23, 1994, the Annex Joint Venture filed a voluntary
petition for bankruptcy (Chapter 11) in the United States
Bankruptcy Court in the Northern District of Illinois. On February
10, 1995, the Bankruptcy Court ordered the dismissal of the
voluntary petition for bankruptcy and AUSA filed a motion for
appointment of a receiver against the Annex Joint Venture. On
February 17, 1995, the motion was granted and an order was issued.
The receiver had full power and authority to operate, manage and
conserve the Annex pursuant to the order. On February 15, 1995,
the Annex Joint Venture received an amended notice of mortgage
foreclosure from AUSA. The Annex Joint Venture did not file an
answer to the amended foreclosure that was due March 17, 1995. On
April 3, 1995, a judgement of foreclosure and sale was entered into
against the Annex Joint Venture. On May 15, 1995, title to the
Annex, was transferred to AUSA through a sheriff's sale. As a
result of reversion of the property to the lender, the Annex Joint
Venture recorded a $2,702,083 provision for investment property
impairment to reduce the Annex property to its estimated fair
value. In addition, the Partnership recorded an extraordinary gain
on the extinguishment of debt in the amount of $3,177,788,
including the net reversals of approximately $632,000 of accrued
expenses. A sheriff's sale of the Annex was held on May 10, 1995
and on May 15, 1995 title was transferred to AUSA, in satisfaction
of the Partnership's obligation on the promissory note payable.
In 1994, the Partnership determined that additional impairment
to the value of the Annex had occurred and was the result of
deteriorating market conditions caused by an excess supply of
available space and the court order of dismissal of the voluntary
petition for bankruptcy. As a result of the excess supply of space,
market rates declined causing lower than originally anticipated
rental collections. The property was written down to the
approximate outstanding nonrecourse mortgage balance as of December
31, 1994. A $882,709 provision for investment property impairment
was charged to operations in 1994.
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 market conditions, all beyond the control
of the Partnership and its General Partners, have affected the real
estate industry since the late 1980's and have combined to cause
severe economic hardships for real estate owners. Some of the
specific market conditions are as follows:
The savings and loan crisis resulted in the creation of
the Resolution Trust Corp. (RTC). The RTC sponsored
auctions where large blocks of properties were sold at
distressed prices. The low price paid by the new owners
enabled them to reduce asking rental rates resulting in
significantly lower market rents for all competing
properties.
The emergence of "Category Killer" retailers who occupied
large "Box" spaces in new developments known as "Power
Centers" attracted tenants from the smaller and more
traditional "Community Centers" resulting in increased
vacancies and downward pressure on market rental rates.
The continuing softness in retail sales has resulted in
store closings. This has in turn resulted in increased
vacancies and an overall softness in demand for retail
space which results in downward pressure on market rents.
These conditions have generally adversely impacted the
Partnership's property economics. Rental and occupancy rates have
generally improved over the past year at all remaining properties;
however, they remain below where they were when the properties were
acquired. The specific impact of these economic conditions on 1996
and 1995 results are discussed in the section "Results of
Operations - 1996 Compared to 1995", 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 ("Management" 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 - 1996 Compared to 1995
(Amounts rounded to nearest 000's)
The Partnership had net income of $62,000 in 1996 compared to
net income of $136,000 in 1995. The $74,000 decrease in net income
resulted primarily from the decrease in the Partnership's share of
the Annex income due to its foreclosure on May 15, 1995.
Total income for the Partnership was $1,520,000 in 1996 compared
to $1,902,000 in 1995. The decrease of $382,000 resulted primarily
from the foreclosure of the Annex on May 15, 1995. Total income
for the Annex for the year ended December 31, 1995 was $343,000.
Total income for the remaining properties was $1,520,000 in 1996
compared to $1,559,000 in 1995. The $39,000 decrease resulted
primarily from a decrease in rental income at Sabal Palm. The
decrease in rental income at Sabal Palm was caused by a decrease in
occupancy from 99% at December 31, 1995 to 92% at December 31,
1996.
Total expenses in 1996 were $1,375,000 in 1996 compared to
$4,544,000 in 1995. The $3,169,000 decrease in total expenses
resulted primarily from the $2,702,000 provision for investment
property impairment for the Annex in 1995. Total operating
expenses for the Annex in 1995 were $372,000. Total expenses for
the remaining properties were $1,375,000 in 1996 compared to
$1,470,000 in 1995. The $95,000 decrease in expenses resulted
primarily from a decrease in interest expense at Crown Point.
Interest expense decreased as a result of the refinancing of the
mortgage loan on December 28, 1995 when the interest rate decreased
from 9.69% to 7.55%.
Results of Operations - 1995 Compared to 1994
(Amounts rounded to nearest 000's)
The Partnership had net income of $136,000 in 1995 compared to
a net loss of $803,000 in 1994. The $939,000 increase in net
income resulted primarily from the net difference between the
$3,178,000 gain recognized on the Annex foreclosure and the
$2,702,000 provision for investment property impairment for the
Annex.
In 1995 the Partnership recorded a provision for investment
property impairment for the Annex in the amount of $2,702,000
compared to $883,000 in 1994. The Partnership's share of the
provisions for investment property impairment recorded for the
Annex were $1,459,000 and $477,000, respectively.
The Partnership's total income was $1,902,000 in 1995 compared
to $2,261,000 in 1994, a decrease of $359,000. Rental income and
other income decreased by $197,000 and $162,000, respectively. The
decline in rental income and other income (primarily tenant expense
reimbursements) was primarily the result of the foreclosure of the
Annex on May 15, 1995. Rental income and other income declined at
the Annex by $319,000 and $278,000, respectively, while the other
properties showed an increase of rental income of $122,000 and
tenant expense reimbursements of $116,000.
Total expenses (before provision for impairment) incurred in 1995
were $1,842,000 compared to $2,544,000 in the prior year, a
decrease of $702,000. This decrease (before provision for
impairment) of $702,000 consists primarily from a $212,000 decrease
in mortgage and other interest, a $162,000 decrease in depreciation
and a $320,000 decrease in real estate taxes at the Annex due to
the foreclosure on May 15, 1995.
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.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
On December 6, 1996, the Partnership dismissed Ernst & Young LLP
as its independent accountant. Ernst & Young LLP's report on the
financial statements for either of the past two years did not
contain an adverse opinion or disclaimer of opinion and was not
modified as to uncertainty, audit scope or accounting principles.
The decision to change the Partnership's accountant was made at the
recommendation of the General Partners to reduce the costs
associated with the audit. In the Partnership's fiscal years ended
1994 and 1995 and the subsequent interim period preceding the
dismissal there were no disagreements with Ernst & Young LLP on any
matter of accounting principles or practices, financial statement
disclosure or audit scope or procedure which would have caused
Ernst & Young LLP to make reference to the matter in their report.
There were no reportable events as that term is described in Item
304(a)(1)(iv)(B) of Regulation S-B.
On December 6, 1996, the Partnership engaged Deloitte & Touche
LLP as its independent accountant. The decision to engage Deloitte
& Touche LLP was made following consideration by the General
Partners. Neither the Partnership (nor someone on its behalf)
consulted Deloitte & Touche LLP regarding: (i) the application of
accounting principles to a specific transaction, either completed
or proposed, or the type of audit opinion that might be rendered on
the Partnership's financial statements; or (ii) any matter that was
either the subject of a disagreement or a reportable event.
<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
Mr. Cezar M. Froelich, 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. Robert J. Herleth. . . . . . . . . . . Vice President and Director
Mr. David W. Mesker. . . . . . . . . . . . . . . . . . . . . .Director
Mr. B. Allen Aynessazian . . . . . . . . . . . . . . . . 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 63) chairman of the board of directors,
director and president of Brauvin Ventures, Inc. Since 1979, he has
been a shareholder, president and 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 eight
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., Brauvin Securities Inc, Brauvin Net Lease V, Inc.
and Brauvin Net Realty,Inc. Mr. Brault received a B.S. in Business
from DePaul University, Chicago, Illinois in 1959.
Mr. CEZAR M. FROELICH (age 51) is a principal with the Chicago
law firm of Shefsky & Froelich Ltd., which acts as counsel to the
General Partners, the Partnership and certain of their affiliates.
His practice has been primarily in the fields of securities and real
estate and he has acted as legal counsel to various public and
private real estate limited partnerships, mortgage pools and real
estate investment trusts. Mr. Froelich is an individual general
partner in six other affiliated public limited partnerships and a
shareholder in Brauvin Management Company and Brauvin Financial Inc.
Mr. Froelich resigned as a director of the corporate general partner
in December 1994, but he remains an individual general partner.
MR. JAMES L. BRAULT (age 36) is vice president and secretary of
Brauvin Ventures Inc. He is an officer of various Brauvin entities,
which act as the general partners of seven publicly registered real
estate programs. Mr. Brault is executive vice president, assistant
secretary and is responsible for the overall operations of Brauvin
Management Company. He is a director of Brauvin Net Lease V, Inc.
and Brauvin Net Realty, 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
organization and 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. ROBERT J. HERLETH (age 44) is a Vice President and Director
of Brauvin Realty Partners, Inc., Brauvin Ventures, Inc., and
Brauvin 6, Inc. He joined A.G. Edwards & Sons, Inc. in 1980 and
presently serves as a Vice President of A.G.E. Realty Corp. Mr.
Herleth is also a director and officer of Gull-AGE Capital Group and
its subsidiaries.
Mr. DAVID W. MESKER (age 65) is a Director of Brauvin Realty
Partners, Inc., Brauvin Ventures, Inc. and Brauvin 6, Inc. Mr.
Mesker is presently a Senior Vice President of A.G. Edwards & Sons,
Inc. and a Director and officer of Gull-AGE Capital Group and its
subsidiaries.
Mr. B. ALLEN AYNESSAZIAN (age 32) is the Treasurer and Chief
Financial Officer of Brauvin Ventures, Inc. He is the Chief
Financial Officer of various Brauvin publicly registered real estate
programs. He is responsible for the overall financial accounting
of Brauvin Management Company, Brauvin Financial Inc. and related
partnerships. He is responsible for Partnership's accounting and
financial reporting to regulatory agencies. He joined the Brauvin
organization in August 1996. Prior to that time, he was the Chief
Financial Officer of Giordano's Enterprises, a privately held,
40-restaurant, family-style pizza chain in the Chicago metropolitan
area where he worked since 1989. While at Giordano's, Mr.
Aynessazian was responsible for all accounting functions, lease
negotiations and financings of new restaurants, equipment and
general corporate debt. From 1987 to 1989, Mr. Aynessazian worked
in the accounting compliance and tax department of KPMG Peat
Marwick. Mr. Aynessazian is a certified public accountant.
Item 10. Executive Compensation.
(a & b) The Partnership is required to pay certain fees, make
distributions and allocate a share of the profits and losses of the
Partnership to the Corporate General Partner or other affiliates as
described under the caption "Compensation Table" on pages 11 to 13
of the Partnership's Prospectus, as supplemented, and the sections
of the Agreement entitled "Distributions of Operating Cash Flow,"
"Allocation of Profits, Losses and Deductions," "Distribution of Net
Sale or Refinancing Proceeds" and "Compensation of General Partners
and Their Affiliates" on pages A-9 to A-13 of the Agreement attached
as Exhibit A to the Partnership's Prospectus. The relationship of
the Corporate General Partner (and its directors and officers) to
its affiliates is set forth above in Item 9. Reference is also made
to Notes 2 and 4 of the Notes to Consolidated Financial Statements
filed with this annual report for a description of such
distributions and allocations.
The General Partners received a share of Partnership income or
loss for 1996 and 1995.
An affiliate of the General Partners of the Partnership 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 of the Partnership do not, individually or as a
group, own any Units.
(c) The Partnership is not aware of any arrangements, the
operations of which may result in a change of control of
the Partnership.
No officer or director of the Corporate General Partner possesses
a right to acquire beneficial ownership of Units. The General
Partners will share in the profits, losses and distributions of the
Partnership as outlined in Item 10, "Executive Compensation."
Item 12. Certain Relationships and Related Transactions.
(a & b) The Partnership is entitled to engage in various
transactions involving affiliates of the Corporate General Partner
of the Partnership, as described in the section of the Partnership's
Prospectus, as supplemented, entitled "Compensation Table" and
"Conflicts of Interest" at pages 11 to 16 and the section of the
Agreement entitled "Rights, Duties and Obligations of General
Partners" at pages A-15 to A-18 of the Agreement. The relationship
of the Corporate General Partner to its affiliates is set forth in
Item 10. Cezar M. Froelich is an individual general partner of the
Partnership and is also 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 4 of the
Notes to Consolidated Financial Statements filed with this annual
report for a summary of transactions paid to affiliates.
As a precondition to the new financing at Crown Point, the lender
required that ownership of the property reside in a single purpose
entity ("SPE"). To accommodate the lender's requirements, ownership
of the property was transferred to the SPE, Brauvin/Crown Point
L.P., which is owned 99% by the Partnership and 1% by an affiliate
of the General Partners. Distributions of Brauvin/Crown Point L.P.
are subordinated to the Partnership which effectively precludes any
distributions from the SPE to affiliates of the General Partners.
The creation of Brauvin/Crown Point L.P. did not affect the
Partnership's economic ownership of the Crown Point property.
Furthermore, this change in ownership structure had no material
effect on the financial statements of the Partnership.
(c) Not applicable
(d) There have been no transactions with promoters.
<PAGE>
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
**16. Letter of Change in Certifying
Accountant
27. Financial Data Schedule
*28. Pages 11-16, A-9 to A-13 and A-15 to
A-18 of the Partnership's Prospectus
and the Agreement dated March 1,
1985, as supplemented.
* Incorporated by reference from the exhibits filed with the
Partnership's registration statement (File No. 2-95633) on Form S-11
filed under the Securities Act of 1933.
** Incorporated by reference from exhibit 16 filed with the Fund's
Form 8-K/A filed on December 12, 1996.
(b) No portions of the annual report have been incorporated by
reference in this Form 10-KSB.
(c) Form 8-K. On December 6, 1996, the Partnership dismissed
Ernst & Young LLP as its independent accountant. Additionally,
on December 6, 1996 the Partnership engaged Deloitte & Touche LLP
to be its independent accountant. This Form 8-K was dated
December 6, 1996 and filed on December 12, 1996.
(d) An annual report for the fiscal year 1996 will be sent to
the Limited Partners subsequent to this filing.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRAUVIN REAL ESTATE FUND L.P. 5
BY: Brauvin Ventures, Inc.
Corporate General Partner
By: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors and President
By: /s/ James L. Brault
James L. Brault
Vice President and Secretary
By: /s/ Robert J. Herleth
Robert J. Herleth
Vice President and Director
By: /s/ David W. Mesker
David W. Mesker
Director
By: /s/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer and
Treasurer
INDIVIDUAL GENERAL PARTNERS
/s/ Jerome J. Brault
Jerome J. Brault
/s/ Cezar M. Froelich
Cezar M. Froelich
Dated: 3/31/97
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report . . . . . . . . . . . . . . . . . . .F-2
Report of Independent Auditors . . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheet, December 31, 1996. . . . . . . . . . F-4
Consolidated Statements of Operations, for the years
ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . .F-5
Consolidated Statements of Partners' Capital, for the
years ended December 31, 1996 and 1995 . . . . . . . . . . . . .F-6
Consolidated Statements of Cash Flows, for the years
ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . .F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . .F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Brauvin Real Estate Fund L.P. 5
We have audited the accompanying consolidated balance sheet of
Brauvin Real Estate Fund L.P. 5 (a limited partnership) and
subsidiary as of December 31, 1996, and the related consolidated
statements of operations, partners' capital, and cash flows for
the year then ended. These consolidated financial statements are
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit. The consolidated
financial statements of the Partnership for the year ended
December 31, 1995 were audited by other auditors whose report,
dated March 8, 1996, expressed an unqualified opinion on those
statements.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such 1996 consolidated financial statements
present fairly, in all material respects, the financial position
of Brauvin Real Estate Fund L.P. 5 and subsidiary at December 31,
1996, and the results of their operations and their cash flows
for the year then ended in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 10, 1997
(March 31, 1997 as to Note 3)
<PAGE>
Report of Independent Auditors
To the Partners of
Brauvin Real Estate Fund L.P. 5
We have audited the accompanying statements of operations, partners'
capital, and cash flows of Brauvin Real Estate Fund L.P. 5 for the
year ended December 31, 1995. These financial statements are the
responsibility of the Partnership's management. Our responsibility
is to express an opinion on these financial statements based on our
audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the results of operations and cash
flows of Brauvin Real Estate Fund L.P. 5 for the year ended
December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Chicago, Illinois
March 8, 1996
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
CONSOLIDATED BALANCE SHEET
December 31,
1996
ASSETS
Investment in real estate:
Land $ 2,411,849
Buildings and improvements 9,737,955
12,149,804
Less accumulated depreciation (2,749,034)
Net investment in real estate 9,400,770
Investment in Strawberry Fields
Joint Venture(Note 7) 577,150
Cash and cash equivalents 408,869
Rent receivable 109,629
Escrow deposits 58,670
Other assets 112,352
Due from affiliates 5,880
Total Assets $10,673,320
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Mortgage notes payable (Note 3) $ 6,292,970
Accounts payable and accrued expenses 120,188
Tenant security deposits 42,367
Due to affiliates 2,108
Total Liabilities 6,457,633
MINORITY INTEREST IN SABAL PALM
JOINT VENTURE 956,468
PARTNERS' CAPITAL:
General Partners (33,251)
Limited Partners (9,914.5 limited
partnership units issued and
outstanding) 3,292,470
Total Partners' Capital 3,259,219
Total Liabilities and
Partners' Capital $10,673,320
See accompanying notes to consolidated financial statements
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996 and 1995
1996 1995
INCOME
Rental (Note 6) $ 1,272,271 $1,511,959
Interest 8,940 8,295
Other, primarily expense
reimbursements 238,393 381,942
Total income 1,519,604 1,902,196
EXPENSES
Interest 556,684 625,674
Depreciation 269,212 263,909
Real estate taxes 147,060 255,500
Repairs and maintenance 32,332 59,737
Management fees 91,330 101,685
Other property operating 59,690 137,103
General and administrative 218,632 398,801
Provision for investment
property impairment -- 2,702,083
Total expenses 1,374,940 4,544,492
Income (loss) before minority and
equity interests and
extraordinary item 144,664 (2,642,296)
Minority interest's share of:
Sabal Palm's net income (48,858) (66,435)
Annex's net income -- (231,115)
Equity interest in Strawberry Fields
Joint Venture's net loss (33,340) (101,689)
Income (loss) before extraordinary
item 62,466 (3,041,535)
Extraordinary gain on
extinguishment of Annex debt -- 3,177,788
Net income $ 62,466 $ 136,253
Net income Allocated
to the General Partners $ 625 $ 1,363
Net income Allocated
to the Limited Partners $ 61,841 $ 134,890
Net income (loss) Per Limited
Partnership Interest Before
Extraordinary Gain
(9,914.5 Units) $ 6.24 $ (303.71)
Net income Per Limited
Partnership Interest
(9,914.5 Units) $ 6.24 $ 13.61
See accompanying notes to consolidated financial statements
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1996 and 1995
General Limited
Partners Partners Total
Balance, January 1, 1995 $(35,239) $3,095,739 $3,060,500
Net income 1,363 134,890 136,253
Balance, December 31, 1995 (33,876) 3,230,629 3,196,753
Net income 625 61,841 62,466
Balance, December 31, 1996 $(33,251) $3,292,470 $3,259,219
See accompanying notes to consolidated financial statements
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996 and 1995
1996 1995
Cash Flows From Operating Activities:
Net income $ 62,466 $ 136,253
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on extinguishment of debt -- (3,177,788)
Provision for investment property impairment -- 2,702,083
Depreciation 269,212 263,909
Provision for doubtful accounts -- 19,756
Equity interest in Strawberry Fields Joint
Venture's net loss 33,340 101,689
Minority Interest's share of Sabal
Palm Joint Venture's net income 48,858 66,435
Minority Interest's share of the Annex
Joint Venture's net income -- 231,115
Decrease (increase)in rent receivables 27,643 (111,389)
Increase in other assets (3,086) (16,980)
Decrease in escrow deposits 36,879 67,383
(Increase) decrease in due from affiliates (5,880) 587
Increase (decrease) in accounts payable
and accrued expenses 40,807 (138,377)
(Decrease) increase in due to affiliates (50,625) 219,253
Increase in tenant security deposits 1,382 6,811
Net cash provided by operating activities 460,996 370,740
Cash Flows From Investing Activities:
Capital expenditures (3,003) (28,916)
Cash distribution to Minority Partner of
Sabal Palm Joint Venture (96,350) (82,250)
Cash used by investing activities (99,353) (111,166)
Cash Flows From Financing Activities:
Repayment of mortgage notes payable (95,094) (3,418,796)
Proceeds from refinancing -- 3,275,000
Payment of loan fees -- (79,747)
Repayment of note payable -- (18,504)
Decrease in deposits with title company -- 18,504
Net cash used in financing activities (95,094) (223,543)
Net increase in cash and cash
equivalents 266,549 36,031
Cash and cash equivalents at beginning
of year 142,320 106,289
Cash and cash equivalents at end of year $ 408,869 $ 142,320
Supplemental disclosure of Non-cash Financing Activities:
Gain on extinguishment of mortgage payable -- $ 4,895,883
Supplemental disclosure of cash flow information:
Cash paid for interest $ 519,112 $ 652,831
See accompanying notes to consolidated financial statements
BRAUVIN REAL ESTATE FUND L.P. 5
(a delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1996 and 1995
(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
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 Partnership owned
a 54% interest in the Annex, a shopping center, which was foreclosed
upon on May 15, 1995 (see Note 5). The accompanying financial
statements have consolidated 100% of the assets, liabilities,
operations and partners' capital of Sabal Palm Joint Venture and the
Annex Joint Venture. The minority interests of the consolidated
joint ventures 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 7). Strawberry Fields is reported as an
investment in an affiliated joint venture. The accompanying
financial statements include the investment in Strawberry Fields
Joint Venture 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 December 31, 1996.
Accordingly, no impairment loss has been recorded in the
accompanying financial statements for the years ended December 31,
1996 and 1995, except as noted in Note 5.
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 December 31, 1996, 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.
The mortgage notes payable at December 31, 1996 have a fair value
of approximately $6,100,000 based upon the current refinancing of
Sabal Palm and current interest rates offered for debt of similar
instruments in the market.
Reclassifications
Certain reclassifications have been made to the consolidated 1995
financial statements to conform to classifications adopted in 1996.
(2) PARTNERSHIP AGREEMENT
The Partnership Agreement (the "Agreement") provides that 99% of
the net profits and losses from operations of the Partnership for
each fiscal year shall be allocated to the Limited Partners and 1%
of net profits and losses from operations shall be allocated to the
General Partners. The net profit of the Partnership from the sale
or other disposition of a Partnership property shall be allocated
as follows: first, there shall be allocated to the General Partners
the greater of: (i) 1% of such net profits; or (ii) the amount
distributable to the General Partners as Net Sale Proceeds from such
sale or other disposition, as defined in the Partnership Agreement;
and second, all remaining profits shall be allocated to the Limited
Partners. The net loss of the Partnership from any sale or other
disposition of a Partnership property shall be allocated as follows:
99% of such net loss shall be allocated to the Limited Partners and
1% of such net loss shall be allocated to the General Partners.
The Agreement provides that distributions of Operating Cash Flow,
as defined in the Agreement, shall be distributed 99% to the Limited
Partners and 1% to the General Partners. The receipt by the General
Partners of such 1% of Operating Cash Flow shall be subordinated to
the receipt by the Limited Partners of Operating Cash Flow equal to
a 10% per annum, cumulative, non-compounded return on Adjusted
Investment, as such term is defined in the Agreement (the
"Preferential Distribution"). In the event the full Preferential
Distribution is not made in any year (herein referred to as a
"Preferential Distribution Deficiency") and Operating Cash Flow is
available in following years in excess of the Preferential
Distribution for said years, then the Limited Partners shall be paid
such excess Operating Cash Flow until they have paid any unpaid
Preferential Distribution Deficiency from prior years. Net Sale
Proceeds, as defined in the Agreement, received by the Partnership
shall be distributed as follows: (a) first, to the Limited Partners
until such time as the Limited Partners have been paid an amount
equal to the amount of their Adjusted Investment; (b) second, to the
Limited Partners until such time as the Limited Partners have been
paid an amount equal to any unpaid Preferential Distribution
Deficiency; and (c) third, 85% of any remaining Net Sale Proceeds
to the Limited Partners, and the remaining 15% of the Net Sale
Proceeds to the General Partners. The Preferential Distribution
Deficiency at December 31, 1996 equaled $8,847,204.
(3) MORTGAGES NOTES PAYABLE
Mortgages payable at December 31, 1996 consist of the following:
Interest Date
1996 Rate Due
Crown Point Shopping
Center (a) $3,208,267 7.55% 1/03
Sabal Palm Square
Shopping Center (b) 3,084,703 9.50% 2/97
$6,292,970
Each shopping center serves as collateral under its respective
nonrecourse debt obligation.
Maturities of the mortgages payable are as follows:
1997 $3,162,950
1998 84,364
1999 90,959
2000 98,068
2001 105,734
Thereafter 2,750,895
$6,292,970
(a) On November 22, 1994, the lender to Crown Point, NationsBank
of Tennessee (the "Lender") exercised the right to call all amounts
due as of March 1, 1995. On March 1, 1995, a Forbearance Agreement
was executed between the Partnership and the Lender where the Lender
agreed to forbear from pursuing remedies with respect to defaults
through and including September 1, 1995 (the "First Forbearance
Period"). During the First Forbearance Period the terms and
conditions of the mortgage remained unchanged. Effective September
1, 1995, the Lender agreed to further forebear from pursuing
remedies with respect to defaults through and including December 1,
1995 (the "Second Forbearance Period"). During the Second
Forbearance Period the terms and conditions of the mortgage also
remained unchanged. Subsequent to December 1, 1995, the Lender
verbally agreed to forebear from pursuing remedies with respect to
defaults through December 31, 1995 in light of the ongoing
refinancing negotiations with NationsBanc Mortgage Corporation, a
Texas corporation with principal offices in Charlotte, North
Carolina (the "Successor Lender"). On December 28, 1995, the loan
balance was paid in full when Crown Point was refinanced with
NationsBanc Mortgage Capital Corporation. The refinancing resulted
in a $3,275,000 non-recourse loan with a fixed interest rate of
7.55%, 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.
The carrying value of Crown Point at December 31, 1996 was
approximately $4,418,000.
(b) On February 19, 1987, the Partnership and its joint venture
partner obtained a first mortgage loan in the amount of $3,200,000
from an unaffiliated lender. The loan was payable with interest
only at 9.5% per annum until February 1992 and now requires payments
of principal and interest based on a 30-year amortization schedule.
The outstanding mortgage balance encumbered by the property is
$3,084,703 at December 31, 1996.
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
principle 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.
The carrying value of Sabal Palm approximated $4,983,000 at
December 31, 1996.
(4) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid to the General Partners or its
affiliates for the years ended December 31, 1996 and 1995 were as
follows:
1996 1995
Management fees $91,330 $ 94,180
Reimbursable office
expenses 82,225 92,770
Legal fees 4,832 2,589
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 $2,108 and $2,728 for legal services, as
of December 31, 1996 and 1995 respectively. An amount of $5,880 due
from affiliates at December 31, 1996 represented an advance made to
Strawberry Fields.
(5) INVESTMENT IN THE ANNEX
On December 31, 1986, the Partnership and Brauvin Income
Properties L.P. 6 ("BIP 6") formed a joint venture (the "Annex Joint
Venture") to purchase the Annex, a shopping center located in
Schaumburg, Illinois, for approximately $8,358,000. The Partnership
had a 54% interest in the Annex and BIP 6 had a 46% interest. The
Partnership consolidated the Annex joint venture and recorded a
minority interest balance to recognize the 46% interest of BIP 6.
The purchase was funded with approximately $3,158,000 cash at
closing and $5,200,000 from the proceeds of an interim loan.
At the date of acquisition, the Annex was encumbered with an
existing first mortgage loan of approximately $4,356,600. The
outstanding principal balance was due on February 1, 1994. As this
loan was non-prepayable, the joint venture deposited approximately
$4,356,600 with Stewart Title Company (the "Title Company") and paid
a fee of approximately $293,000 to the Title Company in 1986 to
service this loan.
On January 31, 1994, the Annex Joint Venture entered into a
Reliance Agreement (the "Agreement") with the Title Company and
agreed to, on behalf of the Title Company, by the lender, John
Hancock Mutual Life Insurance Company (i) make a $1,000,000 paydown
on the loan;(ii) pay the Lender an administrative fee of 1.5% of the
loan balance, after the $1,000,000 paydown; and (iii) issue title
insurance as required. As a condition to the Annex Joint Venture's
agreement with the Title Company, the Title Company agreed to pay
the Annex Joint Venture $5,000 per month commencing February 1, 1994
through January 31, 1995 and $6,000 per month thereafter. The Title
Company also agreed to equally share with the Annex Joint Venture
the 2.5% interest savings after the 1.5% administrative fee was
paid, which the Annex Joint Venture was expected to receive upon
maturity of the Agreement. In February 1994, the Title Company paid
the Lender the $1,000,000 paydown, as required in the Agreement.
In 1995 and 1994, the Annex received $5,000 and $55,000,
respectively, from the Title Company, which was recorded as a
reduction of interest expense on the property. The remaining
amounts due from the Title Company were offset against amounts owed
to the Title Company. The Partnership will not receive any
additional payments under the Agreement.
On May 15, 1995, title to the Annex, was transferred to the
lender through a sheriff's sale. As a result of reversion of the
property to the lender, the Annex Joint Venture recorded a
$2,702,083 provision for investment property impairment to reduce
the Annex property to its estimated fair value. In addition, the
Partnership recorded an extraordinary gain on the extinguishment of
debt in the amount of $3,177,788, including the net reversals of
approximately $632,000 of accrued expenses.
The Annex Joint Venture ceased operations on May 15, 1995, paid
final administrative expenses, and had no other available cash to
provide final distributions. The Annex Joint Venture partnership
agreement provides for the dissolution of the Annex Joint Venture
upon mutual agreement of the Partnership and BIP 6. Accordingly,
the Partnership and BIP 6 had agreed to dissolve and have formally
terminated the Annex Joint Venture in 1996.
(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:
1997 $1,017,370
1998 896,076
1999 716,652
2000 639,717
2001 614,391
Thereafter 3,233,086
Total $7,117,292
Contingent rental income approximated $134,000 and $144,000, in
1996 and 1995, respectively.
Collection of future rental income under these lease agreements
is subject to the financial stability of the underlying tenants.
Minimum rentals received from Food City, the anchor tenant of Crown
Point, approximated 20.3% and 24.8% of rental income for the years
ended December 31, 1996 and 1995, respectively. Minimum rentals
received from Winn Dixie and Walgreens, the anchor tenants of Sabal,
approximated 11.2% and 13.7% of rental income and 6.4% and 7.7% of
rental income for the years ended December 31, 1996 and 1995,
respectively.
<PAGE>
(7) EQUITY INVESTMENT
The Partnership owns a 42% interest in Strawberry Fields Joint
Venture, located in West Palm Beach, Florida, and accounts for its
investment under the equity method. The following are condensed
financial statements for Strawberry Fields Joint Venture:
December 31,
1996
Land, building and personal
property, net $7,202,578
Other assets 60,367
$7,262,945
Mortgage note payable $5,799,617
Other liabilities 87,588
5,887,205
Partners' capital 1,375,740
$7,262,945
Years Ended December 31,
1996 1995
Rental income $ 774,907 $ 724,255
Other income 81,237 65,549
856,144 789,804
Mortgage and other
interest 446,588 533,317
Depreciation 200,298 199,364
Operating and
administrative expenses 288,635 299,240
935,521 1,031,921
Net loss $ (79,377) $ (242,117)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 408,869
<SECURITIES> 577,150 <F1>
<RECEIVABLES> 109,629
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 12,149,804 <F2>
<DEPRECIATION> 2,749,034
<TOTAL-ASSETS> 10,673,320
<CURRENT-LIABILITIES> 0
<BONDS> 6,292,970 <F3>
0
0
<COMMON> 3,259,219 <F4>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,673,320
<SALES> 0
<TOTAL-REVENUES> 1,519,604 <F5>
<CGS> 0
<TOTAL-COSTS> 818,256 <F6>
<OTHER-EXPENSES> 82,198 <F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 556,684
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,466
<EPS-PRIMARY> 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 EXPENSE
<F7> "OTHER EXPENSES" REPRESENTS INTEREST IN JOINT VENTURES' NET
INCOME/LOSS
</FN>
</TABLE>
