<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the six months ended September 30, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-14481
Brauvin Real Estate Fund L.P. 5
(Name of small business issuer as specified in its charter)
Delaware 36-3432071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 North LaSalle Street, Chicago, Illinois 60602
(Address of principal executive offices) (Zip Code)
(312)759-7660
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of class)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filling
requirements for the past 90 days. Yes X No .
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
INDEX
PART I
Page
Item 1. Consolidated Financial Statements. 4
Consolidated Statement of Net Assets in Liquidation
as of September 30, 1999 (Liquidation Basis) and
Balance Sheet at December 31, 1998
(Going Concern Basis).. . . . . . . . . . . . . . . . 5
Consolidated Statement of Changes in Net Assets in
Liquidation for the period July 12, 1999 to
September 30, 1999 (Liquidation Basis) . . . .. . . . 6
Consolidated Statements of Operations for the period
January 1, 1999 to July 12, 1999 and for the nine months
ended September 30, 1998
(Going Concern Basis). . . . . . . . . . . . . . . . . 7
Consolidated Statements of Operations for the period
July 1, 1999 thru July 12, 1999 and for the three
months ended September 30,1998
(Going Concern Basis) . . . . . . . . . . . . . . . . 8
Consolidated Statements of Partners' Capital for the
period January 1, 1998 to July 12, 1999
(Going Concern Basis). . . . . . . . . . . . . . . . . 9
Consolidated Statements of Cash Flows for the period
January 1, 1999 to July 12, 1999 and for the nine
months ended September 30, 1998
(Going Concern Basis). . . . . . . . . . . . . . . . . 10
Notes to Consolidated Financial Statements . . . . . . 11
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . . . 21
PART II
Item 1. Legal Proceedings. . . . . . . . . 28
Item 2. Changes in Securities. . . . . . . 28
Item 3. Defaults Upon Senior Securities. . 28
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . 28
Item 5. Other Information. . . . . . . . . 28
Item 6. Exhibits, and Reports on Form 8-K. 28
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . 29
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Except for the December 31, 1998 Consolidated Balance Sheet
(Going Concern Basis), the following Consolidated Statement of Net
Assets in Liquidation as of September 30, 1999 (Liquidation
Basis),Consolidated Statement of Changes in Net Assets in
Liquidation for the period July 12, 1999 to September 30, 1999
(Liquidation Basis), Consolidated Statements of Operations for the
period January 1, 1999 to July 12, 1999 and for the nine months
ended September 30, 1998 (Going Concern Basis), Consolidated
Statements of Operations for the period July 1, 1999 to July 12,
1999 and the three months ended September 30, 1998 (Going Concern
Basis), Consolidated Statement of Partners' Capital for the period
January 1, 1998 to July 12, 1999 (Going Concern Basis) and the
Consolidated Statements of Cash Flows for the period January 1,
1999 thru July 12, 1999 and for the nine months ended September 30,
1998 (Going Concern Basis) for Brauvin Real Estate Fund L.P. 5 (the
"Partnership") are unaudited but reflect, in the opinion of the
management, all adjustments necessary to present fairly the
information required. All such adjustments are of a normal
recurring nature.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the
Partnership's 1998 Annual Report on Form 10-KSB.
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
SEPTEMBER 30, 1999 AND BALANCE SHEET AT DECEMBER 31, 1998
(Liquidation (Going Concern
Basis) Basis)
September 30, December 31,
1999 1998
(Unaudited)
ASSETS
Land -- $ 2,111,857
Buildings and improvements -- 8,543,619
-- 10,655,476
Less: Accumulated depreciation -- (3,281,844)
Net investment in real estate -- 7,373,632
Real estate held for sale $ 8,933,000 --
Cash and cash equivalents 742,293 803,207
Rent receivables 32,783 108,639
Due from affiliates 35,700 35,700
Escrow and other deposits 281,168 171,001
Other assets 18,077 109,840
Total Assets $ 10,043,021 $ 8,602,019
LIABILITIES AND PARTNERS' CAPITAL
Mortgage notes payable (Note 4) $ 6,096,326 $ 6,191,254
Accounts payable and accrued expenses 199,361 156,158
Deferred gain on sale of real estate 1,707,775 --
Reserve for estimated costs during
the liquidation period 390,315 --
Tenant security deposits 26,081 44,981
Due to affiliates 4,682 5,078
Total Liabilities 8,424,540 6,397,471
Investment in Strawberry Fields
Joint Venture(Note 6) 326,180 352,620
Minority Interest in Sabal Palm
Joint Venture 42,128 104,327
Net Assets in Liquidation $ 1,250,173
PARTNERS' CAPITAL
General Partners (48,367)
Limited Partners 1,795,968
Total Partners Capital 1,747,601
Total Liabilities and Partners' Capital $ 8,602,019
See accompanying notes to consolidated financial statements
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS) FOR THE PERIOD
JULY 12, 1999 TO SEPTEMBER 30, 1999
(Unaudited)
Net assets at July 12, 1999
(Going Concern Basis) $ 1,735,426
Income from operations 3,273
Adjustments to liquidation basis (488,526)
Net assets in liquidation at September 30, 1999 $ 1,250,173
See accompanying notes to consolidated financial statements
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Going Concern Basis)
(Unaudited)
January 1, 1999 Nine Months
to ended
July 12, 1999 September 30, 1998
INCOME:
Rental $779,347 $ 1,008,800
Interest 18,798 23,440
Other 114,607 158,773
Total income 912,752 1,191,013
EXPENSES:
Interest 314,526 412,320
Depreciation 135,993 203,083
Real estate taxes 80,432 102,481
Repairs and maintenance 56,974 37,914
Management fees (Note 5) 49,425 70,000
Other property operating 52,441 42,275
General and administrative 232,884 140,107
Total expenses 922,675 1,008,180
(Loss)income before minority
and equity interests (9,923) 182,833
Minority interest's share of
Sabal Palm's net income (26,189) (44,335)
Equity interest in Strawberry Fields
Joint Venture's net income (loss) 23,937 (689,947)
Net loss $(12,175) $ (551,449)
Net loss allocated to the
General Partners $ (122) $ (5,514)
Net loss allocated to the
Limited Partners $(12,053) $ (545,935)
Net loss per Limited Partnership
interest (9,914.5 Units) $ (1.22) $ (55.06)
See accompanying notes to consolidated financial statements
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Going Concern Basis)
(Unaudited)
July 1, 1999 Three Months
to ended
July 12, 1999 September 30, 1998
INCOME:
Rental $ 88,131 $ 287,463
Interest 2,305 10,924
Other 16,399 59,005
Total income 106,835 357,392
EXPENSES:
Interest 44,668 137,684
Depreciation 19,378 67,731
Real estate taxes 11,678 34,598
Repairs and maintenance 42,267 8,102
Management fees (Note 5) 4,490 17,399
Other property operating 8,325 14,584
General and administrative 43,236 38,499
Total expenses 174,042 318,597
(Loss) income before minority
and equity interests (67,207) 38,795
Minority interest's share of
Sabal Palm's net loss 5,929 5,876
Equity interest in Strawberry Fields
Joint Venture's net loss (2,839) (6,031)
Net (loss) income $(64,117) $ 38,640
Net (loss) income allocated to the
General Partners $ (641) $ 386
Net (loss) income allocated to the
Limited Partners $(63,476) $ 38,254
Net (loss) income per Limited Partnership
interest (9,914.5 Units) $ (6.40) $ 3.86
See accompanying notes to consolidated financial statements
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the Period January 1, 1998 to July 12, 1999
(Going Concern Basis)
(Unaudited)
General Limited
Partners Partners* Total
Balance, January 1, 1998 $(32,746) $3,342,474 $3,309,728
Net loss (15,621) (1,546,506) (1,562,127)
Balance, December 31, 1998 (48,367) 1,795,968 1,747,601
Net loss (122) (12,053) (12,175)
Balance, July 12, 1999 $(48,489) $1,783,915 $1,735,426
* Total Units outstanding at July 12, 1999 and December 31, 1998
were 9,914.50.
See accompanying notes to consolidated financial statements
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period January 1, 1999 to July 12, 1999
and for the nine months ended September 30, 1998
(Going Concern Basis)
(Unaudited)
1999 1998
Cash Flows From Operating Activities:
Net loss $ (12,175) $ (551,449)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 135,993 203,083
Provision for doubtful accounts 93,200 3,401
Equity interest in Strawberry Fields Joint
Venture's net (income) loss (23,937) 689,947
Minority Interest's share of Sabal
Palm Joint Venture's net income 26,189 44,335
Changes in:
Rent receivables (134,034) (2,773)
Escrow deposits (79,306) (118,497)
Other assets (4,983) 9,086
Accounts payable and accrued expenses 52,911 93,126
Due to affiliates 1,135 (2,140)
Tenant security deposits (6,288) 637
Net cash provided by operating activities 48,705 368,756
Cash Flows From Investing Activities:
Capital expenditures -- (1,320)
Cash distribution to Minority Partner of
Sabal Palm Joint Venture (67,680) (79,900)
Cash used in investing activities (67,680) (81,220)
Cash Flows From Financing Activities:
Repayment of mortgage notes payable (74,198) (87,651)
Net cash used in financing activities (74,198) (87,651)
Net (decrease) increase in
cash and cash equivalents (93,173) 199,885
Cash and cash equivalents at
beginning of period 803,207 560,393
Cash and cash equivalents at end
of period $ 710,034 $ 760,278
Supplemental disclosure of cash flow information:
Cash paid for interest $ 298,094 $ 391,000
See accompanying notes to consolidated financial statements
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Brauvin Real Estate Fund L.P. 5 (the "Partnership") was organized
on June 28, 1985. The General Partners of the Partnership are
Brauvin Ventures, Inc. and Jerome J. Brault. On August 8, 1997,
Mr. Cezar M. Froelich resigned as an Individual General Partner
effective 90 days from August 14, 1997. Brauvin Ventures Inc. is
owned by A.G.E. Realty Corporation Inc. (50%) and by Messrs. Brault
(beneficially) (25%) and Froelich (25%). A. G. Edwards & Sons,
Inc. and Brauvin Securities, Inc., affiliates of the General
Partners, were the selling agents of the Partnership. The
Partnership is managed by an affiliate of the General Partners.
The Partnership was formed on June 28, 1985 and filed a
Registration Statement on Form S-11 with the Securities and
Exchange Commission which became effective on March 1, 1985. The
sale of the minimum of $1,200,000 of limited partnership interests
of the Partnership (the "Units") necessary for the Partnership to
commence operations was achieved on June 28, 1985. The
Partnership's offering closed on February 28, 1986. A total of
$9,914,500 of Units were subscribed for and issued between March 1,
1985 and February 28, 1986 pursuant to the Partnership's public
offering.
The Partnership has acquired directly or through joint ventures
the land and buildings underlying 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.
Basis of Presentation
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. 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 September 30, 1999.
Accounting Method
The accompanying consolidated financial statements have been
prepared using the accrual method of accounting.
Rental Income
Prior to the preparation of the financial statements on a
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 Special Purpose Entity
The Partnership has one special purpose entity ("SPE"),
Brauvin/Crown Point L.P., which is owned 99% by the Partnership
and 1% by an affiliate of the General Partners. Distributions from
the SPE are subordinated to the Partnership which effectively
precludes any distributions from the SPE to affiliates of the
General Partners. The creation of the SPE did not affect the
Partnership's economic ownership of the property. Furthermore,
this change in ownership structure had no material effect on the
financial statements of the Partnership.
Consolidation of Joint Venture Partnership
The Partnership owns a 53% interest in the Sabal Palm Joint
Venture which owns Sabal Palm Shopping Center. The accompanying
financial statements have consolidated 100% of the assets,
liabilities, operations and partners' capital of Sabal Palm Joint
Venture. The minority interests of the consolidated joint venture
is adjusted for the respective joint venture partner's share of
income or loss and any cash contributions from or distributions to
the joint venture partner, 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 6). 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
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 an allowance
for impairment. Depreciation and amortization expense is computed
on a straight-line basis over approximately 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 4).
The Partnership provided an allowance for impairment 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 fourth quarter of 1998, the Partnership recorded an
impairment of $1,499,958 related to an other than temporary decline
in the value of real estate for the Sabal Palm Joint Venture. This
allowance has 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, "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, 1998, but
may not necessarily be indicative of the amounts that the
Partnership could realize in a current market exchange. The use of
different assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
The carrying amounts of the following items are reasonable
estimates of fair value: cash and cash equivalents; rent
receivable; escrow deposits; accounts payable and accrued expenses;
tenant security deposits and due to/from affiliates.
(2) 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 $488,526 which is included
in the September 30, 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) $1,707,775
Write-off of deferred rent receivable (5,984)
Write-off of mortgage points (92,227)
Increase in deferred gain on sale
of real estate (1,707,775)
Estimated liquidation costs (390,315)
Total adjustment to liquidation basis $ (488,526)
(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, as defined in the Partnership
Agreement; and second, all remaining profits shall be allocated to
the Limited Partners. The net loss of the Partnership from any
sale or other disposition of a Partnership property shall be
allocated as follows: 99% of such net loss shall be allocated to
the Limited Partners and 1% of such net loss shall be allocated to
the General Partners.
The Agreement provides that distributions of Operating Cash
Flow, as defined in the Agreement, shall be distributed 99% to the
Limited Partners and 1% to the General Partners. The receipt by
the General Partners of such 1% of Operating Cash Flow shall be
subordinated to the receipt by the Limited Partners of Operating
Cash Flow equal to a 10% per annum, cumulative, non-compounded
return on Adjusted Investment, as such term is defined in the
Agreement (the "Preferential Distribution"). In the event the full
Preferential Distribution is not made in any year (herein referred
to as a "Preferential Distribution Deficiency") and Operating Cash
Flow is available in following years in excess of the Preferential
Distribution for said years, then the Limited Partners shall be
paid such excess Operating Cash Flow until they have paid any
unpaid Preferential Distribution Deficiency from prior years. Net
Sale Proceeds, as defined in the Agreement, received by the
Partnership shall be distributed as follows: (a) first, to the
Limited Partners until such time as the Limited Partners have been
paid an amount equal to the amount of their Adjusted Investment;
(b) second, to the Limited Partners until such time as the Limited
Partners have been paid an amount equal to any unpaid Preferential
Distribution Deficiency; and (c) third, 85% of any remaining Net
Sale Proceeds to the Limited Partners, and the remaining 15% of the
Net Sale Proceeds to the General Partners. The Preferential
Distribution Deficiency at September 30, 1999 equaled $11,821,560.
(4) MORTGAGE NOTES PAYABLE
Mortgage notes payable at September 30, 1999 consist of the
following:
Interest Date
1999 Rate Due
Crown Point Shopping
Center (a) $2,978,083 7.55% 1/03
Sabal Palm Square
Shopping Center (b) 3,118,243 8.93% 3/02
$6,096,326
Each shopping center serves as collateral under its respective
nonrecourse debt obligation.
Maturities of the mortgage notes payable are as follows:
1999 $ 33,158
2000 137,877
2001 150,124
2002 3,138,289
2003 2,636,878
$6,096,326
(a) On December 28, 1995, the acquisition loan balance was paid
in full when Crown Point was refinanced by NationsBanc Mortgage
Capital Corporation. The refinancing resulted in a $3,275,000 non-
recourse loan with a fixed interest rate of 7.55%, and amortization
based on a 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 July 12, 1999 was
approximately $4,075,000.
(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.
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.
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 carrying value of Sabal Palm approximated $3,163,000 at July
12, 1999.
(5) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid or payable to the General Partners
or its affiliates for the nine months ended September 30, 1999 and
1998 were as follows:
1999 1998
Management fees $63,862 $70,000
Reimbursable office
expenses 59,426 69,300
The Partnership believes the amounts paid to affiliates are
representative of amounts which would have been paid to independent
parties for similar services. As of September 30, 1999, the
Partnership had made all payments to affiliates, except for
management fees of $4,682. An amount of $35,700 due from
affiliates at September 30, 1999 represents an advance made to
Strawberry Fields Joint Venture.
(6) 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:
(Liquidation (Going Concern
Basis) Basis)
September 30, 1999 December 31, 1998
Land and buildings, net $ -- $4,760,592
Real estate held for sale 4,661,500 --
Other assets 165,781 89,461
$4,827,281 $4,850,053
Mortgage notes payable $5,334,651 $5,454,205
Other liabilities 267,679 233,848
5,602,330 5,688,053
Net liabilities in liquidation $ 775,049
Partners' capital (838,000)
$4,850,053
GOING CONCERN BASIS
January 1, 1999 January 1, 1998
to to
July 12,1999 September 30, 1998
Rental income $ 457,095 $ 599,267
Interest income 89 --
Other income 48,653 94,134
505,837 693,401
Expenses:
Mortgage and other interest 220,647 377,336
Depreciation 91,952 136,689
Loss on value impairment -- 1,564,101
Operating and
administrative 136,245 258,005
448,844 2,336,131
Net income (loss) $ 56,993 $(1,642,730)
In the second and fourth quarters of 1998, the joint venture
recorded impairments 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 allowance were
allocated to land and building based on the original acquisition
percentages.
Item 2. Management's Discussion and Analysis or Plan of Operation.
General
Certain statements in this Quarterly Report that are not
historical fact constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Without limiting the foregoing, words such as "anticipates",
"expects", "intends", "plans" and similar expressions are intended
to identify forward-looking statements. These statements are
subject to a number of risks and uncertainties. Actual results
could differ materially from those projected in the forward-looking
statements. The Partnership undertakes no obligation to update
these forward-looking statements to reflect future events or
circumstances.
Year 2000
The "Year 2000" problem concerns 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 Partnership's computer information technology systems
consists of a network of personal computers linked to a server
built using hardware and software from mainstream suppliers. The
Partnership does not own any equipment that contains embedded
microprocessors, which may also pose a potential Year 2000 problem.
Additionally, the Partnership has no internally generated software
coding to correct as all of the Partnership's software is purchased
and licensed from external providers. These external providers
have assured management that their systems are, or will be, Year
2000 compliant.
The Partnership has two main software packages that contain date
sensitive information, (i) accounting and (ii) investor relations.
In 1997, the Partnership initiated and completed the conversion
from its 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. Management has determined that the Year 2000 issue
will not pose significant operational problems for its remaining
computer software systems. All costs associated with these
conversions are expensed as incurred, and are not material.
Management does not believe that any further expenditures will be
necessary for the Partnership 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 will be timely
converted and would not have an adverse effect on the Partnership.
The most reasonably likely worst case scenario for the
Partnership with respect to the Year 2000 issue would be the
inability of certain tenants to timely make their rental payments
beginning in January 2000. This could result in the Partnership
temporarily suffering a depletion of the Partnership's cash
reserves as expenses will need to be paid while the cash flows from
revenues are delayed. The Partnership has no formal Year 2000
contingency plan.
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.
The anchor tenant at Crown Point is Food City. The overall
occupancy level at Crown Point remained 94% at September 30, 1999
when compared to 94% at September 30, 1998. The Partnership is
continuing to work to improve the occupancy level of Crown Point.
On December 28, 1995, the loan balance of the acquisition
financing was paid in full when the Crown Point property was
refinanced with NationsBanc Mortgage Capital Corporation. The
refinancing resulted in a $3,275,000 non-recourse loan with a fixed
interest rate of 7.55% and a maturity of January 1, 2003.
The Strawberry Fields 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 property has shown an
improvement due to the occupancy increase from 78% at December 31,
1994 to 92% at September 30, 1999. The Strawberry Fields Joint
Venture is aggressively marketing the property having engaged a
prominent local brokerage firm to assist the Strawberry Fields
Joint Venture's on-site leasing representative in the marketing of
the shopping center.
On September 18, 1995, the Strawberry Fields 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 Fields Joint Venture
and the Strawberry Lender agreed to modify and extend the first
mortgage loan. As of October 1, 1998 and through the extended
maturity date, December 1, 1999, the interest rate has been reduced
from 9% to 7% with principal amortization changed from a ten year
period to an eighteen year period. The outstanding mortgage
balance encumbered by the property was $5,334,700 at September 30,
1999.
In the second and fourth quarters of 1998, the joint venture
partnership recorded impairments 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 allowance
were allocated to land and building based on the original
acquisition percentages.
At Sabal Palm, the Partnership and its joint venture partner are
working to improve the economic occupancy level of Sabal Palm which
stood at 92% as of September 30, 1999. Although the Sabal Palm
retail market appears to be overbuilt, the economic occupancy level
of the building has stayed relatively constant and it has generated
positive cash flow since its acquisition in 1986.
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.
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.
In the fourth quarter of 1998, the joint venture recorded an
impairment of $1,499,958 related to an other than temporary decline
in the value of real estate for Sabal Palm. This allowance 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 $80 per Unit. The
offer was being made, in part, by an entity that owned a nominal
economic interest in the Partnership and was scheduled to terminate
on January 15, 1999. As a result of this unsolicited tender offer
approximately 609 economic interests in the Partnership are to be
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 was scheduled to
expire on June 25, 1999.
The General Partners remained neutral as to the particular merits
or risks associated with all of the tender offer to the Limited
Partners. 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 offers provided such an
opportunity.
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, and began the registration and solicitation
process for the authorization of the Limited Partners for the sale
of all or substantially all of the Partnership's properties. That
solicitation was accomplished by written notice directed by U.S.
mail to each Limited Partner at the address shown on the
Partnership's records, in accordance with the rules of the
Securities and Exchange Commission and the requirements of the
Partnership Agreement.
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. 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 September 30, 1999. The Partnership
has begun the liquidation process and is actively marketing the
properties for sale.
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 - For the period January 1, 1999 to July 12,
1999 and the nine months ended September 30, 1998
(Amounts rounded to nearest $000's)
The Partnership generated net loss of $12,000 for the period
January 1, 1999 to July 12, 1999 as compared to net loss of
$551,000 for the nine months ended September 30, 1998. The
increase of $539,000 in net income resulted primarily from a
decrease of $278,000 in total income and a decrease of $85,000 in
total expense.
Total income for the period January 1, 1999 to July 12, 1999 was
$913,000 as compared to $1,191,000 for the nine months ended
September 30, 1998, a decrease of $278,000. The $278,000 decrease
resulted primarily from the Partnership's July 12, 1999 adoption of
the liquidation basis of accounting, therefore seven months of
operating income were included in the 1999 period compared to nine
months in the 1998 period.
Total expenses for the period January 1, 1999 to July 12, 1999
was $923,000 compared to $1,008,000 for the nine months ended
September 30, 1998, a decrease of $85,000. The decrease of $85,000
in expenses resulted primarily from the Partnership's July 12, 1999
adoption of the liquidation basis of accounting, therefore seven
months of operating expenses were included in the 1999 period
compared to nine months in the 1998 period.
Results of Operations - For the period July 1, 1999 to July 12,
1999 and the three months ended September 30, 1998
(Amounts rounded to nearest $000's)
The Partnership generated net loss of $64,000 for the period July
1, 1999 to July 12, 1999 as compared to net income of $39,000 for
the three month period ended on September 30 ,1998. The $103,000
decrease in net income resulted primarily primarily from a decrease
of $251,000 in total income and a decrease of $145,000 in total
expense.
Total income for the period July 1, 1999 to July 12, 1999 was
$107,000 as compared to $358,000 for the three months ended
September 30, 1998, a decrease of $251,000. The $251,000 decrease
resulted primarily from the Partnership's July 12, 1999 adoption of
the liquidation basis of accounting, therefore one month of
operating income was included in the 1999 period compared to three
months in the 1998 period.
Total expenses for the period July 1, 1999 to July 12, 1999 was
$174,000 compared to $319,000 for the three months ended September
30, 1998, a decrease of $145,000. The decrease of $145,000 in
expenses resulted primarily from the Partnership's July 12, 1999
adoption of the liquidation basis of accounting, therefore one
month of operating expenses were included in the 1999 period
compared to three months in the 1998 period.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters To a Vote of Security
Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
Exhibit 27. Financial Data Schedule
Form 8-K.
On July 15, 1999, the Partnership filed a Form 8-K
to report the results of the solicitation of the
Limited Partnership for the sale of the
Partnership's assets. The Limited Partners, by a
majority vote, have approved the plan to sell the
Partnership's assets.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BY: Brauvin Ventures, Inc.
Corporate General Partner of
Brauvin Real Estate Fund L.P. 5
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors and President
DATE: November 15, 1999
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
And Treasurer
DATE: November 15, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 742,293
<SECURITIES> 0
<RECEIVABLES> 32,783
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,933,000 <F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,043,021
<CURRENT-LIABILITIES> 0
<BONDS> 6,096,326 <F2>
0
0
<COMMON> 1,250,173 <F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 912,752 <F4>
<CGS> 0
<TOTAL-COSTS> 608,149 <F5>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 314,526
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,175)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> "PP&E" REPRESENTS REAL ESTATE HELD FOR SALE
<F2> "BONDS" REPRESENTS MORTGAGE PAYABLE
<F3> "COMMON" REPRESENTS NET ASSETS IN LIQUIDATION
<F4> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F5> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES LESS INTEREST
EXPENSE
</FN>
</TABLE>
