<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 three months ended March 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-14481
Brauvin Real Estate Fund L.P. 5
(Name of small business issuer as specified in its charter)
Delaware 36-3432071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 North LaSalle Street, Chicago, Illinois 60602
(Address of principal executive offices) (Zip Code)
(312)759-7660
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of class)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filling
requirements for the past 90 days. Yes X No .
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
INDEX
PART I
Page
Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . 3
Consolidated Statement of Net Assets in Liquidation
as of March 31, 2000 (Liquidation Basis) . . . . . . . . . . 4
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2000 to
March 31, 2000 (Liquidation Basis) . . . . . . . . . . . . . 5
Consolidated Statements of Operations for the
three months ended March 31, 2000 (Liquidation
Basis) and the three months ended March 31, 1999
(Going Concern Basis). . . . . . . . . . . . . . . . . . . . 6
Consolidated Statement of Cash Flows for the
three months ended March 31, 1999 (Going Concern
Basis) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . 8
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . . . . . .18
PART II
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .24
Item 2. Changes in Securities. . . . . . . . . . . . . . . .24
Item 3. Defaults Upon Senior Securities. . . . . . . . . . .24
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .24
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .24
Item 6. Exhibits, and Reports on Form 8-K. . . . . . . . . . . . . .24
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
The following Consolidated Statement of Net Assets in Liquidation
as of March 31, 2000 (Liquidation Basis), Consolidated Statement of
Changes in Net Assets in Liquidation for the period January 1, 2000
to March 31, 2000 (Liquidation Basis), Consolidated Statements of
Operations for the three months ended March 31, 2000 (Liquidation
Basis) and the three months ended March 31, 1999 (Going Concern
Basis) and the Consolidated Statement of Cash Flows for the three
months ended March 31, 1999 (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 1999 Annual Report on Form 10-KSB.
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
MARCH 31, 2000 (LIQUIDATION BASIS)
(Unaudited)
ASSETS
Real estate held for sale $ 8,933,000
Cash and cash equivalents 774,754
Tenant receivable (net of an
allowance of $173,600) 64,735
Escrow deposits 264,803
Due from affiliates 35,700
Other assets 4,519
Total Assets $10,077,511
LIABILITIES
Mortgage notes payable (Note 4) $ 6,029,325
Accounts payable and accrued expenses 156,556
Deferred gain on sale of real estate (Note 2) 1,707,775
Reserve for estimated costs during
the period of liquidation (Note 2) 190,315
Tenant security deposits 25,094
Due to affiliates (Note 5) 6,040
Total Liabilities 8,115,105
MINORITY INTEREST IN SABAL PALM
JOINT VENTURE 42,862
SHARE OF ACCUMULATED LOSSES IN EXCESS
OF INVESTMENT IN STRAWBERRY FIELDS
JOINT VENTURE 269,110
Net Assets in Liquidation $1,650,434
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
JANUARY 1, 2000 TO MARCH 31, 2000
(Unaudited)
Net assets at January 1, 2000
(Liquidation Basis) $1,544,831
Income from operations 105,603
Net assets in liquidation at March 31, 2000 $1,650,434
See accompanying notes to consolidated financial statements
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
(Liquidation (Going Concern
Basis) Basis)
2000 1999
INCOME
Rental $366,684 $414,464
Interest 8,570 8,345
Other, primarily tenant
expense reimbursements 19,218 50,699
Total income 394,472 473,508
EXPENSES
Interest 125,514 134,866
Depreciation -- 58,383
Real estate taxes 33,827 34,377
Repairs and maintenance 13,186 10,902
Management fees (Note 5) 25,716 26,358
Other property operating 24,574 20,737
Bad debt expense 6,600 49,462
General and administrative 40,318 44,951
Total expenses 269,735 380,036
Income before minority
and equity interests 124,737 93,472
Minority interest's share of
Sabal Palm's net income (46,504) (45,088)
Equity interest in Strawberry
Fields Joint Venture's net
income(loss) 27,370 9,664
Net income $105,603 $58,048
Net income Allocated
to the General Partners $ 1,056 $ 580
Net income Allocated
to the Limited Partners $104,547 $57,468
Net income Per Limited
Partnership Interest
(9,914.5 Units) $ 10.54 $ 5.80
See accompanying notes to consolidated financial statements
BRAUVIN REAL ESTATE FUND L.P. 5
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(GOING CONCERN BASIS)
(Unaudited)
Cash Flows From Operating Activities:
Net income $ 58,048
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 58,383
Provision for doubtful accounts 49,462
Equity interest in Strawberry Fields Joint
Venture's net loss (9,664)
Minority Interest's share of Sabal
Palm Joint Venture's net income 45,088
Changes in:
Rent receivables (46,960)
Other assets 7,549
Escrow deposits (20,312)
Accounts payable
and accrued expenses 1,141
Due to affiliates 10,759
Tenant security deposits (8,788)
Net cash provided by operating activities 144,706
Cash Flows From Investing Activities:
Cash distribution to Minority Partner of
Sabal Palm Joint Venture (70,500)
Cash used in investing activities (70,500)
Cash Flows From Financing Activities:
Repayment of mortgage notes payable (32,035)
Net cash used in financing activities (32,035)
Net increase in cash and cash equivalents 42,171
Cash and cash equivalents at beginning
of period 803,207
Cash and cash equivalents at end of
period $ 845,378
Supplemental disclosure of
cash flow information:
Cash paid for interest $ 127,519
See accompanying notes to consolidated financial statements
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 the Partnership's properties the
Partnership has begun the liquidation process and, in accordance
with generally accepted accounting principles, the Partnership's
financial statements for periods subsequent to July 12, 1999 have
been prepared on a liquidation basis. Accordingly, the carrying
value of the assets is presented at estimated 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 March 31, 2000.
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 the
liquidation basis, rental income was recognized on a straight line
basis over the life of the related leases. Differences between
rental income earned and amounts due per the respective lease
agreements were credited or charged, as applicable, to deferred
rent receivable.
Federal Income Taxes
Under the provisions of the Internal Revenue Code, the
Partnership's income and losses are reportable by the partners on
their respective income tax returns. Accordingly, no provision is
made for Federal income taxes in the financial statements.
Consolidation of 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 (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 at estimated net realizable value using the equity
method of accounting on a liquidation basis.
Investment in Real Estate
Prior to the preparation of the financial statements on the
liquidation basis, the operating properties acquired by the
Partnership were stated at cost including acquisition costs,
leasing commissions, tenant improvements and net of impairment.
Depreciation and amortization 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 records 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 March 31, 2000,
except as disclosed below.
In the fourth quarter of 1998, the Partnership recorded
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
impairment 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, "Disclosures About Fair
Value of Financial Instruments". The estimated fair value amounts
have been determined by using available market information and
appropriate valuation methodologies. However, considerable
judgement is necessarily required in interpreting market data to
develop estimates of fair value.
The fair value estimates presented herein are based on
information available to management as of March 31, 200, but may
not necessarily be indicative of the amounts that the Partnership
could realize in a current market exchange. The use of different
assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
In connection with the adoption of the liquidation basis of
accounting, assets were adjusted to net realizable value and
liabilities were adjusted to estimated settlement amounts, which
approximates their fair value at March 31, 2000.
(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 $300,940 which was included
in the December 31, 1999 statement of changes in net assets in
liquidation. Significant changes in the carrying value of assets
and liabilities are summarized as follows:
Increase in real estate held for sale (a) $1,707,775
Reduction to investment in real estate (12,414)
Write-off of deferred rent receivable (5,984)
Write-off of mortgage costs (92,227)
Increase in deferred gain on sale
of real estate (1,707,775)
Estimated liquidation costs (190,315)
Total adjustment to liquidation basis $ (300,940)
(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 March 31, 2000 equaled $12,317,286.
(4) MORTGAGE NOTES PAYABLE
Mortgage notes payable at March 31, 2000 consist of the
following:
Interest Date
2000 Rate Due
Crown Point Shopping
Center (a) $2,930,868 7.55% 1/03
Sabal Palm Square
Shopping Center (b) 3,098,457 8.93% 4/02
$6,029,325
Each shopping center serves as collateral under its respective
nonrecourse debt obligation.
Maturities of the mortgage notes payable are as follows:
2000 $ 104,050
2001 150,124
2002 3,138,251
2003 2,636,900
$6,029,325
(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 March 31, 2000 was
approximately $5,782,750.
(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 $3,150,250 at March
31, 2000.
(5) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid or payable to the General Partners
or its affiliates for the three months ended March 31, 2000 and
1999 were as follows:
2000 1999
Management fees $25,716 $26,358
Reimbursable office
expenses 23,146 23,100
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 March 31, 2000, the
Partnership had made all payments to affiliates, except for
management fees of $6,040. An amount of $35,700 due from
affiliates at March 31, 2000 represents an advance made to
Strawberry Fields.
(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 Basis)
March 31,
2000
Real estate held for sale $5,195,750
Other assets 161,064
5,356,814
Mortgage note payable 5,251,400
Deferred gain on the sale of
real estate 527,110
Other liabilities 217,469
5,995,979
Net liabilities in liquidation $ 639,165
For the three months ended March 31,
Liquidation Basis Going Concern Basis
2000 1999
Rental income $205,144 $205,307
Other income 19,776 19,836
224,920 225,143
Mortgage and
other interest 92,145 94,993
Depreciation -- 39,408
Operating and
administrative expenses 67,609 67,732
159,754 202,133
Net income $ 65,166 $ 23,010
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
impairments were allocated to land and building based on the
original acquisition percentages.
On January 27, 2000, the joint venture partnership executed a
contract to sell Strawberry Fields to an unaffiliated third party
in the approximate amount of $5,430,000 subject to certain due
diligence contingencies. The Partnership anticipated closing this
transaction in the second quarter of 2000. Subsequently, the
potential purchaser rescinded their offer and the joint venture
continues to market the property for sale.
As of March 31, 2000, the joint venture partnership adjusted its
investment in real estate to an offer that was presented for the sale
of Strawberry Fields. However, the joint venture partnership has not
yet agreed to the terms of this offer. The effect of this adjustment
was a reduction in the real estate held for sale of $80,000, and a
reduction in the deferred gain on the sale of real estate of $80,000.
<PAGE>
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 concerned the inability of computer
technology systems to correctly identify and process date sensitive
information beyond December 31, 1999. Many computers
automatically add the "19" prefix to the last two digits the
computer reads for the year when date information is needed in
computer software programs. Thus when a date beginning on January
1, 2000 is entered into a computer, the computer may interpret this
date as the year "1900" rather than "2000".
The computer information technology systems which support the
Partnership consist of a network of personal computers linked to a
server built using hardware and software from mainstream suppliers.
These systems do not have equipment that contains embedded
microprocessors, which may also pose a potential Year 2000 problem.
Additionally, there is no internally generated software coding to
correct as all of the software is purchased and licensed from
external providers.
The Partnership utilizes two main software packages that
contain date sensitive information, (i) accounting and (ii)
investor relations. In 1997, a program was initiated and completed
to convert from the existing accounting software to a new software
program that is Year 2000 compliant. In 1998, the investor
relations software was also updated to a new software program that
is Year 2000 compliant. All costs associated with these
conversions were expensed by the Partnership as incurred, and were
not material. Management does not believe that any further
expenditures will be necessary for the systems to be Year 2000
compliant. However, additional personal computers may be purchased
from time to time to replace existing machines.
Also in 1997, management of the Partnership initiated formal
communications with all of its significant third party vendors,
service providers and financial institutions to determine the
extent to which the Partnership is vulnerable to those third
parties failure to remedy their own Year 2000 issue. There can be
no guarantee that the systems of these third parties were converted
and will not have an adverse effect on the Partnership.
The Partnership has not experienced any material adverse impact
on its operations or its relationships with tenants, vendors or
others.
Liquidity and Capital Resources
The Partnership intends to satisfy its short-term liquidity
needs through cash flow from the properties. Mortgage notes
payable are expected to be satisfied through property sales.
The anchor tenant at Crown Point is Food City. The overall
occupancy level at Crown Point decreased to 82% at March 31, 2000
when compared to 88% at March 31, 1999. 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 89% at December 31,
1999 to 90% at March 31, 2000. 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, May 1, 2000, the interest rate has been reduced from
9% to 7% with principal amortization changed from a ten year period
to an eighteen year period. The outstanding mortgage balance
encumbered by the property was $5,251,400 at March 31, 2000.
Subsequent to May 1, 2000, the Strawberry Fields lender orally
agreed to extend, under the existing terms, the maturity of the
mortgage loan for an additional three years. The Strawberry Fields
lender is currently preparing the necessary paper work to finalize
the extension.
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 79% as of March 31, 2000. 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.
In 1998, the General Partners notified the Limited Partners
that they are 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.
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 were
transferred.
On May 12, 1999, 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 $170 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 expire on
June 25, 1999. As a result of this unsolicited tender offer
approximately 777 economic interests in the Partnership were
transferred.
The General Partners remained neutral as to the particular
merits or risks associated with the tender offers 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 offer provided such
an opportunity.
The General Partners determined to pursue the disposition of
the Partnership's assets. In 1999, the Partnership solicited and
received the votes of the Limited Partners to approve a sale of all
of the Partnership's properties, either on an individual or group
basis, and to subsequently liquidate the Partnership. The
solicitation, which was approved by the Limited Partners in the
third quarter of 1999, stated that the Partnership's properties may
be sold individually or in any combination provided that the total
sales price for the properties included in the transaction equals
or exceeds 70% of the aggregate appraised value for such
properties, which valuation was conducted by an independent third
party appraisal firm.
The Partnership intends to sell the properties under a closed
bid process which will include identification of target buyers with
proven financing ability and performance of certain evaluations of
the properties, such as environmental testing. Potential buyers
will be requested to sign confidentiality agreements to safeguard
the Partnership's confidential proprietary information. The
General Partners have determined that each bid must be all cash,
completely unconditional and accompanied by a substantial deposit.
As a result of this authorization by a majority of the Limited
Partners to sell the Partnership's properties, the Partnership has
begun the liquidation process and, in accordance with generally
accepted accounting principles, the Partnership's financial
statements for periods subsequent to July 12, 1999 have been
prepared on a liquidation basis. Accordingly, the carrying value
of the assets is presented at estimated 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 March 31, 2000.
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 - Three Months Ended March 31, 2000
(Liquidation Basis) and the Three Months Ended March 31, 1999
(Going Concern Basis)
(Amounts rounded to 000's)
The Partnership generated net income of $106,000 for the three
months ended March 31, 2000 as compared to net income of $58,000
for the same period in 1999. The $48,000 increase in net income
resulted primarily from the net of a $80,000 decrease in total
income, a $110,000 decrease in total expenses, a $1,000 increase in
Sabal Palm Joint Venture's minority interest in net income and a
$18,000 increase in the equity interest in Strawberry Fields Joint
Venture net income.
Total income for the three months ended March 31, 2000 was
$394,000 as compared to $474,000 for the same period in 1999, a
decrease of $80,000. The $80,000 decrease resulted primarily from
the Partnership's adoption of the liquidation basis of accounting
in July, 1999. Prior to the adoption of the liquidation basis of
accounting, the Partnership recorded rental income on a straight
line basis over the life of the related leases. Differences
between rental income earned and amounts due per the respective
lease agreements were credited or charged, as applicable, to
deferred rent receivable. Upon adoption of the liquidation basis
of accounting, the Partnership wrote off the remaining deferred
rent receivable and ceased recording credits or charges to rental
income to reflect straight lining of the related leases. Rental
income also declined as a result of a decrease in the occupancy at
the Sabal Palm Shopping Center to 79% at March 31, 2000 from 92% at
March 31, 1999.
For the three months ended March 31, 2000, total expenses were
$270,000 as compared to $380,000 for the same period in 1999, a
decrease of $110,000. The $110,000 decrease in total expenses
resulted primarily from the Partnership's adoption of the
liquidation basis of accounting in July 1999. Prior to the
adoption of the liquidation basis of accounting depreciation was
recorded on a straight line basis over the estimated economic lives
of the properties. Upon the adoption of the liquidation basis of
accounting, real estate held for sale was adjusted to estimated net
realizable value and no depreciation expense has been recorded.
<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
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BY: Brauvin Ventures, Inc.
Corporate General Partner of
Brauvin Real Estate Fund L.P. 5
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors and President
DATE: May 19, 2000
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer
And Treasurer
DATE: May 19, 2000
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 774,754
<SECURITIES> 0 <F1>
<RECEIVABLES> 64,735
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,933,000 <F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,077,511
<CURRENT-LIABILITIES> 156,556
<BONDS> 6,029,325 <F3>
0
0
<COMMON> 0 <F4>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 394,472 <F5>
<CGS> 0
<TOTAL-COSTS> 144,221 <F6>
<OTHER-EXPENSES> 19,134 <F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125,514
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 105,603
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> "SECURITIES" REPRESENTS INVESTMENT IN JOINT VENTURE
<F2> "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND
BUILDING]
<F3> "BONDS" REPRESENTS MORTGAGES PAYABLE
<F4> "COMMON" REPRESENTS TOTAL PARTNERS CAPITAL
<F5> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F6> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES LESS INTEREST
EXPENSE
<F7> "OTHER EXPENSES" REPRESENTS INTEREST IN JOINT VENTURES'
NET INCOME/LOSS
</FN>
</TABLE>
